Role of Analyst - Buying and selling of stock, Investing in Stock Markets Video Lecture | Investing in Stock Markets - B Com

good eye fellow investors 55% of scp-500
companies have reported earnings and I
always like to dig into them to see
what's going on what sector is doing
well what sector is not doing well and
what is the perception Wall Street has
about the future that's very interesting
because it shows you how to position
yourself and what to take advantage and
what to be afraid of let's dig into the
earnings let's dig into Wall Street's
expectations estimations and
recommendations so scp-500 earnings grew
4.7 percent in q3 2017 which is a good
growth rate 5% growth rate I would
immediately sign for them however if you
look at the distribution of that growth
the highest growth percentage comes from
energy where earnings have grown at 136
percent thanks to high oil prices
information technology continues to grow
earnings Amazon really added to that
number real estate is doing extremely
well stable growth materials of course
with oil and increased in commodity
prices healthcare consumer staples slow
growth industry industrials negative
growth consumer discretionary negative
growth telecom negative utilities very
bad and finite financials are the worst
because of the Hurricanes and the losses
that insurers suffered so going on to
the insurers they suffered losses and
you can see the stock price declining
while the Hurricanes were hitting the
coast and now the stock price is higher
how can that be 1 the losses weren't as
big as the estimates were - and this
really shows how a once loss is the
others gain and that's unfortunate but
analysts now expect that thanks to the
Hurricanes insurers will be able to
raise prices and therefore have higher
earnings in the future I don't know if
you agree with that but it's that's how
Wall Street works what's very
interesting about insurers is that their
stock prices have been going nothing but
up since the crisis so either they are
now overvalued or investors overreacted
in the 2009 crisis and avoided insurers
for no reason in the post-crisis era
nevertheless deep market knowledge is
needed for estimating such investments
you really have to dig into the risks of
what they are insuring going back to
earnings now let's look at estimated
earnings Wall Street analysts estimate
2018 sp500 earnings to grow at eleven
point four percent that's a huge
estimate and this positive estimate
leads to Wall Street's favorite
valuation metric forward earnings I bet
you see a lot of forward earnings
everywhere mentioned what is the forward
price earnings ratio does using the
future expected 12 months per means if
you listen to my recommended Jack Bogle
video he says that Wall Street likes to
look at future earnings because those
are usually higher and bring to lower
valuations and makes easier to sell a
stock with a lower valuation
however he loves to look at past
earnings let's look at what happened and
what is actually here not at what might
happen in the future and I'll show you
why when I was digging through earnings
back in February 2017 the estimated
growth for sp500 earnings for 2017 was
11.1% 11.1% is much higher than the four
point seven percent that actually
happened during this quarter and you can
see here that financial were estimated
at 10.2 percent
nobody estimated a hurricane this shows
how analysts really always take the past
assume no shocks are very very positive
and then give forward interpretation you
really have to look at analyst
recommendations mind two with two grains
of salt and really do your own due
diligence and be a little bit more
pessimistic than Wall Street analysts
here is why if you look at the buy and
sell recommendations you can see that
they are all skewed to the positive just
five to six percent of recommendations
ourselves some recommendations should be
50%
of the market because 50% is going to
outperform 50% is going to underperform
so you see the yellow columns here those
are the whole recommendations so we must
think of hope the same as cell
recommendations when issued by a Wall
Street analyst because Wall Street
analysts as I said are not allowed to be
negative you get fired very soon the
only thing left is them to do YouTube
videos not surprisingly additionally
here most negative recommendations hold
and sell our utilities and telecom
services the ones that had the lowest
earnings growth if you remember our our
video from a few days ago with Richard
Tyler said that the losers usually I'll
perform the winners later
so telecom utilities low growth low
earnings declining earnings the losers
will according to history scientific
history outperform the winners however
analysts are recommending to sell them
and by IT because that's the thing
everybody's recommending and I don't
lose my job if I recommend what
everybody else is doing
that's how Wall Street works you have to
be smarter in the long term to take
advantage of that and not to be taken
advantage from Wall Street that's how it
works so to conclude don't really look
at forward earnings that's just a
potential look at what happened to
insurers and financials 10 percent
expected and now we have a decline so
really really try to figure out more in
the long term because Wall Street looks
at the past few quarters into the next
one two quarters and replicates it over
and over again nobody looks at what will
happen five quarters from now and that's
very important and nobody looks at the
average number of hurricanes hitting the
coast they just looked nothing happened
last two years nothing will happen in
the next two years however if you try to
find the pattern look at the long term
you can see the average and then you can
see ok if took hurricanes three coming
ensure stocks will be low then it's time
to buy
if there is no hurricanes for a long
time earnings will be high but it will
be probably time to sell however that's
random walk completely sell you know
what I said is wrong because it's
completely random nobody knows what
nature will bring however you can be
smart about investing with such related
investments if you buy when it's cheap
and when company won't go bankrupt you
can expect great returns in the future
higher probability of returns
thank you for watching looking forward
to comments and I'll see you in the next
video