Sunday, December 4, 2011

An illustrative graph to adopt for stock pitching

10 for 2011 Q3.png
*The above graph is created by Tom Konrad CFA we were talking about stock pitching today during the meeting, I found this amazing graph that fits my interest a lot. As you may know, I am in for everything about energy. But I am not talking purely about energy sectors - what I am saying is, it may be a good idea to start looking at your portfolio (if you have one) and break down to their performance - you would then realize whether you are making the right choice:

1. Choose your benchmark (ex. PBW as above)
2. Pick up ten (or more/less as you want) stocks
3. Trace down their performance by looking at their quarterly financial statement
4. Done!

As you can see, the graph above shows a not very fortunate picture: 5 out of 10 stocks were completely slipping downwards. But, my suggestion is to be very cautious towards holding/selling some of these stocks - because remember, this graph only shows very limited information of the whole company. You definitely want to dig into more details on its exact stock price and more importantly, I would suggest looking around, see what other stocks in the same sector are performing, especially its macro environment and outlook - after all, stock pitching is about investment in future (no matter short-term/long-term), as well as picking up the "comparative advantage".

But still, one question I haven't figured out, how do you choose benchmark(s)?

- Cathy Xuege Lu

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