Stock Market Math: Essential Formulas for Selecting and Managing Stock and Risk

ISBN-13: 9781501515811 / Angielski / Miękka / 2017 / 283 str.

Michael Thomsett

Recenzje

I am thankful Michael Thomsett was able to bring clarity and context to investment performance measurement. It's a foreign language to so many but vital to our ability to save and retire. A great read for anyone interested in the markets.

--Jakob Rohn, Co-founder, WorkN and Board Member, Delta Data

Michael Thomsett has done it again--simple, practical and actionable advice for anyone seeking to understand how the stock market works while limiting downside risk. An essential encyclopedia of market knowledge presented with simplicity. A "must read" reference for anyone interested in the stock market.

--Gary Lynch, CEO & Founder, The Risk Project, LLC

Score another winner for Michael Thomsett! In Stock Market Math the education guru is back, big time--providing us with the blueprints for success. With a writing style that is at once comprehensive, yet easy to understand, Thomsett's trademark ability to "make the complex simple" is on full display. Filled with wisdom, Thomsett's book tackles concepts that will appeal to investors at every level. Beginners will enjoy his breakdown of investment building blocks, while seasoned pros will appreciate his deeper dive into the material. Yet all will take something away from Thomsett's book--and that something is the ability to take higher and more consistent profits out of the stock market.

--Michael Stoppa, Author, The Options Alchemist

Spis treści

Chapter 1: Rates of Return on Investment: What Goes In, What Comes Out  1

Judging the Outcome – What Did You Expect?  2

The Basic Equation: Return on Cash Invested  4

Calculating Option Trading Returns  10

Taxes and Investment Return  13

Conclusion  17

Chapter 2: Returns on Capital: Putting Cash to Work  19

Calculating Returns from the Corporate View  19

Calculating Average Net Worth  22

Net Worth Versus Total Capitalization  24

Preferred Stock as Hybrid Capitalization  27

The Importance of “Use of Capital”  31

Conclusion  33

Chapter 3: Leverage and Risk Analysis: Maximizing Other People’s Money  35

Calculating the Cost of Money  35

Annualized Return  38

Leverage-Based Risk—the P/E Ratio as a Way to Quantify  40

Using Options as a Form of Leverage  44

Conclusion  48

Chapter 4: Long-Term Trends: Patience Rewarded  49

A Realistic View: Long-Term Returns and Annual Rates  50

Total Net Annualized Return  53

Carryover Losses and Net Return  56

Realistic Expectations: Inflation and Taxes  58

Compound Return Calculations  60

Other Cash Flow Trends  63

Return Formulas  65

Useful Return Shortcuts  70

Estimating the Value of Deposits over Time  72

Conclusion  76

Chapter 5: Core Earnings and Net Worth Adjustments: Making the Numbers

Real  77

The Problem with Today’s Accounting Rules  78

Flaws in the GAAP System – a Passive Approach to Reporting  80

Examples of Material Expenses  82

Balance Sheet Problems – Inaccurate Valuation  84

Recalculating the Key Ratios  85

Recalculating Net Worth  89

Finding Core Earnings – Comparative Analysis  92

Conclusion  93

Chapter 6: Fundamentals: Balance Sheet Tests You Need to Know  95

The Nature of Fundamental Analysis  96

Basics of the Balance Sheet  98

Working Capital Tests  101

Accounts Receivable Tests  105

Inventory Tests  108

Long-Term Asset Tests  110

Capitalization  112

Tangible and Total Book Value  116

Chapter 7: Fundamentals: Operating Statement Tests You Need to Know  121

The Basics of the Operating Statement  123

Revenue Trends  128

Earnings Trends  129

Revenue Compared to Direct Costs and Expenses  131

Conclusion  138

Chapter 8: Market Trend Calculations  139

Index Weighting  139

Breadth of the Market  143

Short Interest Ratio  146

New Highs and New Lows  148

Put/Call Ratio  151

Mutual Fund Ratios  152

Chapter 9: Price Indicators  159

The Basics of Technical Analysis  159

The Random Walk Hypothesis and the Efficient Market Theory  162

Basic Price Calculations  165

Chart Patterns and Interpretations  167

Technical Tests of Market Sentiment  171

Breadth of Trading  171

Chapter 10: Volume Indicators  175

Change in Volume  176

On Balance Volume (OBV)  178

Accumulation/Distribution (A/D)  180

Money Flow Index (MFI)  183

Large Block Ratio  186

Conclusion  187

Chapter 11: Momentum Oscillators and Moving Averages  189

Overview, Momentum Oscillators  189

Relative Strength Index (RSI)  192

Moving Average Convergence Divergence (MACD)  195

Stochastic Oscillator  197

Moving Averages  199

Bollinger Bands (BB)  201

Conclusion  204

Chapter 12: Combined Testing: Merging Price and Financial Tests  205

Effective Use of Combined Analysis  206

Valid Versus Invalid Forms of Testing  208

Identifying Important Combined Tests  209

Additional Price-Based Combined Tests  211

The Oddities of Hybrid Analysis  215

Appendix A Stock Market Formulas: Summarizing the Essentials  219

Appendix B: Excel Program Entries: Automating the Formulas  247

Index  267

O autorze

Michael C. Thomsett, Business and investment writer