Common Cents Investment GroupMonday January 27th

Market Cycles & Investment Ratings

AgendaMacro Update – WeiyiMarket UpdatesMarket Cycles – MaxInvestment Ratings – Lindsey

Market Update

http://www.cnbc.com/id/101365510

http://www.cnbc.com/id/101361746

Market Cycles

Max Layman

Disclaimer: past performance does not indicate future success

Market TrendMovement in a certain direction

over time◦Secular – Long time frames◦Primary – Medium time frames◦Secondary – Short time frames

Identified with technical analysis of charts

Secular TrendLasts 5-25 yearsConsists of a series of primary

trends◦Example: Secular Bull Market

Larger primary bull markets Smaller primary bear markets

Primary TrendLasts 1 year or moreBroad support from entire marketTime frame typically talked about

in media (i.e. CNBC)◦2013 was a bull market

+30%

SPY

Secondary TrendLasts few weeks to few months“Market correction”

◦Markets down 4% in last week

Secondary Trend Cycle

http://www.investopedia.com/articles/technical/04/050504.asp

Sector RotationMoney moving from one industry to

another

http://blogs.stockcharts.com/.a/6a0105370026df970c01538decb605970b-pi

Full Recession

Bad time to be unemployedInterest rates fallingProfitable Industries

◦Cyclicals & Transports (near the beginning)

◦Technology

◦Industrials (near the end)http://www.investopedia.com/articles/trading/05/020305.asp

Early RecoveryRising ExpectationsInterest rates bottomed outProfitable industries

◦Industrials (near beginning)

◦Basic Materials

◦Energy (near end)

http://www.investopedia.com/articles/trading/05/020305.asp

Late RecoveryExpectations declineInterest rates rise rapidlyProfitable industries

◦Energy (near beginning)

◦Staples

◦Services (near the end)

http://www.investopedia.com/articles/trading/05/020305.asp

Early Recession

Bad for overall economy, low expectations

Interest rates peakedProfitable industries

◦Services (near the beginning)

◦Utilities

◦Cyclicals & Transports (near the end)http://www.investopedia.com/articles/trading/05/020305.asp

Kandi Technologies [KNDI]Electric Vehicle (EV) technologyRenting cars

◦Cheaper than a taxi◦Return to garages◦Similar to Car2Go

Car vending machine

http://www.youtube.com/watch?v=fiEJPbxL2hI

Kandi Technologies

Investment Ratings

Lindsey Kathmann

Warnings of Investment RatingsQuantity is no guarantee of quality!Analysts opinion is not the end all be

all.2 Warnings:

◦Analysts' ratings do not have clear, standardized meanings.

◦Potential conflicts of interest that you, as an investor, should be aware of in assessing the usefulness to you.

Understanding the LanguageDifferent terms mean different things to different analysts

http://www.marketwatch.com/tools/guide.asp

Understanding Analyst Loyalty

•Some analysts can be unaffiliated but most are affiliated with financial institutions

•Mutual Fund/Hedge Fund • Provide financial advice for intuitional clients whose

investment decisions are usually much different than ordinary investors.

• If the fund has a large holding in a particular stock, they do not want a “Sell” rating, so an analysts may put a “Hold” rating on it. This can cause inflation.

•Analyst Compensation• Compensation can pressure analysts to report

positive research

•Ownership Interest in the Company• Analysts may hold stock in the company and do not

want to see the rating go down.

Key Tips Never rely on a rating alone.

◦ Look at the entire report-not just the one word. The report will include risk factors you can use to help you make a decision.

Analysts differ in quality.◦ Not every analyst is the best. You can look up different analysts

records online.

Is it right for YOU? ◦ Your individual financial need is what matters most. Make sure

you view each rating in terms of your unique financial situation.

Bank of America

(BAC)

Bought:$10.56Sold: $13.87Gain: ~31% over 2 yrs.

SODA STREAM Stock Analysis

Questions???