Investing Perspectives – Making sense of the share market. Practical, independent, common sense insights into share markets and tools to explore them…
Hi, Mal Moore here and Investing Perspectives is my project.
I have been an investor and student of the markets since the 1990’s although my background is electrical and software engineering.
I started working in financial services in the early 2000’s and have worked both as a software engineer building trading systems and as an investment analyst and trader in funds management (my current role). I have built a wide range of software for various financial institutions including: desktop trading applications, conditional order server, options market making engine, futures hedging engine, index prediction tools, and more…
In Investing Perspectives I will share with you some of the lessons I’ve learnt. My goal is to present at least one useful snippet in each post that you can take away and use in your investing toolkit.
I spend too much time analysing companies, talking or writing about the markets and developing financial software (see below). I like to spend my spare time with family or kayaking on Sydney Harbour.
I develop a variety of financial applications for use in stock selection and analysis, and trade timing. Some recent projects are shown below:
Scan is a market scanner for generating shortlists of stocks based on market price action and minimum liquidity (median daily $ turnover). It has multiple scans under each of four categories: trends, reversals, phase, or events. Scan parameters are pre-calculated so there is no waiting for the scan to run. The ‘Prev’ and ‘Next’ buttons enable you to quickly step through the shortlist and visually assess each stock. An entire market’s shortlists can be assessed in only a few minutes. Any stock showing potential can be tagged for further investigation.
C#, ASP.NET, CSS, HTML, C++, SQL Server, Perl
The seasonality tool shows the ‘Annual Performance Profile’. Well known seasonal sayings e.g., “Sell in May and go away”, or “Come back on St Swithin’s Day” are automatically inserted if price action suggests that they are applicable to the security. Each month is shown in a different colour to help distinguish between important periods of the year e.g., reporting season, or end of quarter. If required it can also show the current year to date performance to enable comparisons with an average year. The tool also generates one, two and three month seasonal projections with full statistics (not shown here) based on entering a position on the current date.
C#, ASP.NET, CSS, HTML, SQL Server
The events application is a tool for investigating how security prices respond to events or seasonal factors, in particular those that potentially result in consistent price behaviour time after time. Examples include ex-dividend trading, or seasonal effects such as a ‘Santa rally’. Plots of percentage price change relative to the selected reference price are generated for each given date. It also calculates a range of statistics such as median and mean return, average profit and average loss.
C#, ASP.NET, CSS, HTML, SQL Server, LINQ
Intrinsic Value & Share Price Dynamics
Intrinsic value and share price dynamics is the subject of ongoing investigations.
The chart below is a great example of how price can track intrinsic value. It shows ANZ.AX approaching its full year results release in 2012 and subsequent ex-dividend trading. At the start of the chart intrinsic value is calculated using the previous half year results. As the full year result announcement approaches prices move higher and converge with value. With the release of the results intrinsic value was recalculated and found to be slightly lower. ANZ.AX closed down on the day by approximately the same amount. On the first day of ex-dividend trading both value and traded price fell by the amount of the dividend. Then over the next two weeks price continues lower, as those who bought for the dividend sell, before later recovering and again converging back with value.
Stocks reports are designed to highlight important company financial information. Charts provide an at a glance indication of the trend in key ratios. Key ratios include: return on equity (ROE), earnings per share (EPS) and dividend, intrinsic value and edge (edge being intrinsic value relative to price in %), free cash flow, book value, net tangible assets (NTA) interest cover and debt to equity.
The example report below shows consistent trends higher in EPS, dividend, ROE, value, revenue, and book.