How do I read the market letter?

 


The interpretation of the table functions are as follows:

Under A you will find the index which you have selected by purchase, e.g. the S&P 500. B describes which area of the respective index was evaluated for you. All = all companies of the index have been evaluated. TOP 10 = only the top 10 companies within the ranking of the index are indicated. Last 10 and last 20 respectively. Under C you will find the name of the company, e.g., “Apple” or “German Bank” and under D the accompanying stock market symbol, e.g. AAPL or DBK. Columns E and F are the calculated MOS prices (Margin of Safety Price) based on the moderate 5 year development of the company (5 yr mod), or the moderate 10 year development of the company (10 yr mod).

Columns numbered 1 to 5 are the analysed growth rates of the most important five enterprise data within the the last 10, 5, 3 years and the last year. The growth rates for the ROIC, EPS and Sales/turnover as well the Cash Flow (Free Cash Flow) and the BVPS (Book value per share) must go at best more than 10% for each respective time period. Only then it is worth considering purchasing shares of the company. The growth rates of all green fields are higher than 10%, i.e. the more green fields in a row belonging to the analysed companies, the better.

The theory is that an investment should only be considered if all the growth-rate-fields mentioned for all the years and all 5 company figures are green.

In particular it is read as the following: G has a green box that shows the growth rate of the ROIC, in this example within the last 5 years, higher than 10%. H with an orange box indicates the growth rate of ROIC between 5% and 10%. I with a red box indicates the growth rate, example chosen is EPS, is below 5%. J with the name “N/A” indicates that currently at the moment none of the underlying calculations are available.

K with a white box means that for these years no form of the companies base values are published. L with a red box indicates that the debt (Long Term Debt) of the company could not be diminished within 4 years by the current Free Cash Flow. M with an orange box indicates that the debt (Long Term Debt) could be diminished within the next 3 – 4 years by the current Free Cash Flow. N with a green box indicates to the fact that the debt (Long Term Debt) could be diminished within the next 3 years by the current Free Cash Flow. Q is the current price of the stock in the market, highlightedin red which means that this price is higher than any of the calculated MOS prices (Margin of Safety Price) for the moderate development.

This stock would be traded at present in the market as too expensive!

O is the current price of the stock in the market, highlighted in light green which indicates that this price lies below the MOS (Margin of Safety Price) of the 10-year moderate development (10 yr mod – the right one of the both MOS columns).

The stock would be a long-term purchase consideration!

P is the current price of the share in the market, highlighted in dark green which indicates that this price lies at or below the MOS (Margin of Safety Price) of the 5-year moderate development (5 yr mod – the left one of the both MOS columns).

This stock would be a definitive purchase consideration in conjunction with the principles of the Value Investing!