Short Term Trading Week Starting: 5th Sept

Originally posted by SaberX ↑

Good post @952i - appreciate the insight. Just a question but why does Economic Value reduce the market cap by cash, debt and 'other assets' which i assume is intangibles to get a EV? I thought if one was trying to get the EV of a company one would reduce things which are harder to liquidate or quantify i.e. intangibles, fixed assets (which may not realise book value etc) and if anything you would keept debt (as unless you default it has to be paid) and most importantly cash would form part of your EV? For example, looking into the RDG tip , I would note cash of 13m for 30 June 2016 indicates over 632m shares issued a $0.02 value. Therefore at $0.04 one is currently paying a net $0.02 for the value of the recurring operations which seemed to make 5m NPAT for the year or $9m net operating cash flow. So I would have thought when calculating value one would break down into pieces such as that?

Perhaps an example with RDG or ARM as to your EV analysis and thought process when assessing it back at the relevant prices they were tipped to assist some of us to better understand the rationale? For JCS for example how would you arrive at 4.6m (a rough explanation since I'm sure there is far more depth to your calculations/mechanics). Is there a formula per se to calculate fundamental value essentially if one knows cash and potential recurring profits/revenue etc?

One thing I struggle with is short of experience is there somewhere where one can consult a rough back of the envelope guide as to what sort of price to earnings ratio most industry groups should trade at? So that for newbies who were to say calculate earnings at $0.50 a share, would we apply 5 x earnings if it was construction, mining, or 10 x if it was healthcare and so forth, before contrasting to current SP? i know it sounds stupid but how do you self-rationalise if 'someone will pay more than i will'? any method to the madness?

Sorry, I guess I've literally just asked how you conduct your investment/trading plan and processes... but just so many questions to feed the curious mind.

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Hey mate,
Firstly sorry for late response I've had quite a long week. But im glad to see everyone else pitch in and give you a hand together, with so many perspectives from quality posters I'm sure everyones had a lot to learn and gain...I would TU all of them but it would seriously spam everyones notifications.

EV is essentially what you're paying for the business itself. Funny I had no clue what EV was a couple months ago until @SectorLead taught me back on one of the weekend threads. He may be able to link you as it went into a quite deep effective discussion which covered alot of what you are looking for.

For JCS I arrived at the $4.6m
They have 333,656,900 shares on issue.
At 2.1c that gives an MC of $7m
They have $2.4m cash so EV = 7-2.4 = $4.6m which is how much cash I would need to buy out JCS at this price.
May sound confusing but this should help - http://www.investopedia.com/terms/e/enterprisevalue.asp

Just reading the other posts on this thread "Sometimes imagining the light at the end of the tunnel can be daunting. Especially when you don't know if you well successfully "click" somewhere up there down the track" I can assure you, you arent alone I've been doing this properly for less than a year and things will eventually click. I havent "clicked" just yet but I'm improving but still continue to question "is there light" "will I click".
Some recent changes I've made that has helped:
1. Have a trading plan. I stopped buying or selling unless I've planned out the buy and sell(price, quantity, stop, volumes, support/resistance) nights before hand. Impulse decisions always end up nasty.
2. Keep losses as small as possible unless you have years of experience in the market. Unfortunately alot of the times you will cut a loser to watch it take a U-turn but sooner or later you will cop the mother of all losses.
3. Ignoring HC noise for losing picks, you need to have your own strategy and reason for buying a stock, as soon as your reason is proven wrong by price then its time to leave. Not to be persuaded to hold due to some HC comments "treeshake" "headings to $1 soon" "cheap at this price".
4. Patience - both when buying and selling. No rush to buy. Have a diary and note down everytime you couldve bought a stock cheaper than your entry price, and try reduce that statistic as much as possible each month. Fomo is enemy.

Anyways here are some pictures of wisdom:

Wish you best of luck as I can resonate with some of your struggles. Keep grinding away and things will work out.