Combining Technical & Fundamental Analysis to Consistently Beat the Markets Webinar for the MTA Wednesday 15 th August 2012 Presented By: Mick Pavey (Full-Time Investor & Founder of DIY-Investors) Note: All Share-price Graphs Shown by Courtesy of Sharescope (Ionic Information) 1
Disclaimer The information provided and views expressed by Mick Pavey in this webinar are given for educational purposes. By attending this webinar, you accept that it does not constitute actual or implied investment advice. Moreover, you agree that you will take independent financial advice and/or rely on your own judgements in any investment decisions that you make. See also the terms & Conditions of the DIY-Investors.com website which also apply to this webinar. 2
First A 60 second Introduction Mick Pavey Farm Management Career (10 years) Chartered Surveyor (25 years) Investing in stocks & shares for 17 years Been an active DIY-Investor for 14 years My Passion for Investing - Past 5 years Author of Picking Winning Shares (ISBN: 978-0-9564899-0-6), available on Amazon Founded Runs regular DIY-Investors MeetUp Groups in UK Became a Full-Time Investor in 2011 In 2012 started delivering Courses for DIY-Investors ( Picking Winning Shares at Heathrow, London) 3
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey Technical Analysts Fundamental Analysts 4
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey Why not take the best of both Worlds? Technical Analysts Fundamental Analysts Use Both to Consistently Beat the Market! 5
Combining Fundamental & Technical Analysis My Framework for Picking Winning Shares (see p. 89 of Picking Winning Shares ) 6
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey So how do I approach this? Probably the best way to illustrate my approach is to give a few examples We ll look at: Data Mining for Recovery Stocks on the US Market (featuring 2 stocks) A Large UK retail recovery stock Another example of a cyclical (recovery) industrial stock in the UK A large growth stock (UK) A small growth stock (UK) 7
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey - 2 yrs Finding Recovery Stocks - 1 yr Now % Drop (Price) Let s set up a few criteria to find shares starting to recover 8
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey As a starting point, I would choose (say): 1. Price down by over 75% in past 2yrs 2. Price up by (say) 10% in past 10 days 3. MCAP above $20m but below $1,000m 4. PSR below (say) 0.5 Let s see what list this set of criteria gives us (using Sharescope) The Key Point here is that I m using a mixture of TA & Fundamental criteria in the selection process. 9
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey 10
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey Having got a shortlist of recovery candidates, l scan the graphs looking for possible candidates to check in more detail. Let s have a look at the 9 stocks in the (filtered) list above 11
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey Dollars 1 day candles James River Coal Co Ord 20 15 20 15 James River Coal Company (JRCC) 10 10 5 5 2.65 10 Volume (Daily) - M's 10 1124k 1/7/11 Aug Sep Oct Nov Dec '12 Feb Mar Apr May Jun Jul Aug 26/9/12 0 On Balance Vol. (Daily) - M's 0-44.9m 100 100 20 RSI (Wilder - Daily) 50 50 +53.0 +14.0 14 -DI/+DI, ADX (Daily) +20.0 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk Chart (c) ShareScope Worth checking! Cents 1 day candles 0 300 Alliance Healthcare Services Inc Ord 0 300 Alliance Healthcare (AIQ) 200 200 100 115 198k 2000 Volume (Daily) - th's 2000 20/6/11 Aug Sep Oct Nov Dec '12 Feb Mar Apr May Jun Jul Aug 12/9/12 10 On Balance Vol. (Daily) - M's 10 +6.7m 100 100 20 RSI (Wilder - Daily) 50 50 +61.3 +30.0 14 -DI/+DI, ADX (Daily) +51.0 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk Chart (c) ShareScope 12
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey Dollars 1 day candles Canadian Solar Inc Ord 15 15 Canadian Solar (CSIQ) 10 10 5 1438k 4 Volume (Daily) - M's 4 10/2/11 Apr Jul Oct '12 Apr Jul 12/11/12 On Balance Vol. (Daily) - M's +82.5m 80 80 100 100 20 RSI (Wilder - Daily) +44.3 50 50 +26.0 14 -DI/+DI, ADX (Daily) +34.0 8 -DI/+DI, ADX (Daily) 12 www.sharescope.co.uk Dollars 1 day candles Genco Shipping & Trading Ltd Chart (c) ShareScope Ord 5 2.95 12 Genco Shipping & Trading (GNK) 8 8 4 3.5 1009k 10 Volume (Daily) - M's 10 10/2/11 Apr Jul Oct '12 Apr Jul 12/11/12-47.8m 0 On Balance Vol. (Daily) - M's 0 100 100 20 RSI (Wilder - Daily) +57.6 50 50 +33.0 14 -DI/+DI, ADX (Daily) +50.0 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk Chart (c) ShareScope 13
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey Cents 1 day candles SkyPeople Fruit Juice Inc Ord 300 300 SkyPeople Fruit Juice (SPU) 200 200 95k -5.3m +52.3 +23.0 +42.0 139.836 154 Volume (Daily) - th's 1000 1000 12/5/11 Jun Jul Aug Sep Oct Nov Dec '12 Feb Mar Apr May Jun Jul Aug 12/9/12-4 On Balance Vol. (Daily) - M's -4 100 100 20 RSI (Wilder - Daily) 50 50 14 -DI/+DI, ADX (Daily) 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk Chart (c) ShareScope 30 Dollars 1 day candles Overseas Shipholding Group Inc Ord 30 Overseas Shipholding Group (OSG) 20 20 10 680k 4 Volume (Daily) - M's 4 10/2/11 Apr Jul Oct '12 Apr Jul 12/11/12 +15.6m On Balance Vol. (Daily) - M's 20 20 100 100 20 RSI (Wilder - Daily) +41.1 50 50 +29.0 14 -DI/+DI, ADX (Daily) +32.0 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk Chart (c) ShareScope 10 6.5 14
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey 600 Cents 1 day candles Jaguar Mining Inc Ord 600 Jaguar Mining (JAG) 0 0 200 935k 10 Volume (Daily) - M's 10 23/12/11 Feb Mar Apr May Jun Jul Aug 30/8/12-121.2m On Balance Vol. (Daily) - M's -100-100 100 100 20 RSI (Wilder - Daily) 50 50 +51.0 +30.0 14 -DI/+DI, ADX (Daily) +47.0 50 8 -DI/+DI, ADX (Daily) 50 www.sharescope.co.uk Chart (c) ShareScope 200 110 Cents 1 day candles 200 Excel Maritime Carriers Ltd Ord 200 Excel Maritime Carriers (EXM) 150 150 100 100 50 48 4 Volume (Daily) - M's 4 865k 21/2/12 Mar Apr May Jun Jul Aug 16/8/12 20 On Balance Vol. (Daily) - M's +9.4m 20 100 100 20 RSI (Wilder - Daily) 50 50 +39.4 +30.0 14 -DI/+DI, ADX (Daily) +29.0 50 8 -DI/+DI, ADX (Daily) 50 www.sharescope.co.uk Chart (c) ShareScope 15
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey And Finally Dollars 1 day candles A123 Systems Inc Ord 8 8 A123 Systems Inc 4 4 0.585 Volume (Daily) - M's 20 20 2807k 10/2/11 Apr Jul Oct '12 Apr Jul 12/11/12 On Balance Vol. (Daily) - M's -125.3m 0 0 100 100 20 RSI (Wilder - Daily) +.2 50 50 +29.0 14 -DI/+DI, ADX (Daily) +.0 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk Chart (c) ShareScope 16
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey So, we ve identified 4 candidates of interest. We ll just look at two here James River Coal (JRCC) And SkyPeople Fruit Juice (SPU) 17
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey James River Coal Co (JRCC) Let s go in a bit closer 18
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey 800 Cents 1 day candles James River Coal Co Ord 800 600 600 0 0 265 200 10 Volume (Daily) - M's Bottom Forming? 10 1124k 29/12/11 Feb Mar Apr May Jun Jul Aug 23/8/12-44.9m On Balance Vol. (Daily) - M's -50-50 20 RSI (Wilder - Daily) OBV broken up thro 50 50 +53.0 +14.0 14 -DI/+DI, ADX (Daily) +20.0 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk Possible Double downtrend? Chart (c) ShareScope Let s check the fundamentals 19
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey James River Coal (JRCC) Key Metrics Low PSR (0.05) Low PTBV (0.16) News-flow? 20
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey James River Coal (JRCC) News-flow The acquisition last year (April 2011) Latest Quarterly Results (9 th August 2012) Decision: Add to my watch-list and do some more research! 21
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey Next, let s look at SkyPeople Fruit Juice (SPU) Cents 1 day candles SkyPeople Fruit Juice Inc Ord 300 300 200 Bottoming? 200 Volume (Daily) - th's 95k -5.3m +52.3 +23.0 +42.0 139.836 154 1000 1000 12/5/11 Jun Jul Aug Sep Oct Nov Dec '12 Feb Mar Apr May Jun Jul Aug 13/9/12-4 On Balance Vol. (Daily) - M's -4 100 100 20 RSI (Wilder - Daily) 50 50 14 -DI/+DI, ADX (Daily) 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk Chart (c) ShareScope 22
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey SPU Price Action in 2012 Cents 1 day candles SkyPeople Fruit Juice Inc Ord 200 200 160 139.836 154 Volume (Daily) - th's 95k 1000 1000 23/12/11 Feb Mar Apr May Jun Jul Aug 31/8/12-5.3m -6 On Balance Vol. (Daily) - M's -6 100 100 20 RSI (Wilder - Daily) 50 50 +52.3 +23.0 14 -DI/+DI, ADX (Daily) +42.0 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk Chart (c) ShareScope 23
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey SkyPeople Fruit Juice (SPU) Key Metrics Anything Jump out at you here? 24
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey SkyPeople Fruit Juice (SPU) Key Metrics MCAP below Net Cash! Low PSR Low PTBV Growing Cash Pile Let s check it out 25
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey SPU Balance Sheet (Assets) 30 th March 2012 26
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey SPU Balance Sheet (Liabilities & Net Tangible Assets) 30 th March 2012 What about Newsflow? 27
Combining TA & Fundamental Analysis to Consistently Beat The Market Mick Pavey So, what about the news-flow for SPU? SPU continues to grow! Trading below net cash, so add to my buy list! End of Case Study 28
UK Case Study 1 - Dixons Retail (LSE: DXNS) 29
Dixons Retail (LSE: DXNS) as at 13 th June 2012 PSR 471.9m = 0.06 8341.8m 30
Dixons Retail PSR Analysis 31
Let s Look at the Technical Analysis Pence 1 day candles Dixons Retail PLC Ord 25 20 25 20 15 13.07 10 10 Volume (Daily) - M's 25m 100 100 13/12/10 Apr Jul Oct '12 Apr 6/7/12 On Balance Vol. (Daily) - M's +166.7m 0 0 0 0 20 RSI (Wilder - Daily) +37.6 80 80-0.876 13, 26 MACD (9 sig - Daily) 0 0 100 100 20(2)%K 9%D Stochastic Osc. (Daily) +18.478 50 50 www.sharescope.co.uk Spot Anything? Chart (c) ShareScope 32
Let s Look at the Technical Analysis Pence 1 day candles Dixons Retail PLC Ord 25 20 25 20 15 13.07 10 Volume (Daily) - M's 25m 100 100 13/12/10 Apr Jul Oct '12 Apr 6/7/12 On Balance Vol. (Daily) - M's +166.7m 0 0 0 0 20 RSI (Wilder - Daily) Positive Divergence! +37.6 80 80-0.876 13, 26 MACD (9 sig - Daily) 0 0 100 100 20(2)%K 9%D Stochastic Osc. (Daily) +18.478 50 50 www.sharescope.co.uk Chart (c) ShareScope 10 33
A Few Other Things Pence 1 day candles Dixons Retail PLC Ord 25 20 Results Due 21.06.2012 25 20 15 Poss Inverted 10 H & S Forming? Volume (Daily) - M's 15.634 25m +166.7m +37.6 +33.0 +42.0 10.573 100 100 14/12/10 Apr Jul Oct '12 Apr 5/7/12 0 0 On Balance Vol. (Daily) - M's 0 0 100 100 20 RSI (Wilder - Daily) 50 50 14 -DI/+DI, ADX (Daily) 50 8 -DI/+DI, ADX (Daily) 50 www.sharescope.co.uk OBV Downtrend Broken! Chart (c) ShareScope 15 13.07 10 34
So what of Dixons in recent weeks? 20 Pence 1 day candles Dixons Retail PLC Turnaround seems to be underway 200 day m.a. now turning up. Newsflow Ord encouraging! 20 15 10 Volume (Daily) - M's 15.634 16.27 25m +249.2m +51.0 +18.0 +22.0 10.573 12.324 100 100 10/2/11 Apr Jul Oct '12 Apr Jul 12/11/12 On Balance Vol. (Daily) - M's 0 0 100 100 20 RSI (Wilder - Daily) 50 50 14 -DI/+DI, ADX (Daily) 50 8 -DI/+DI, ADX (Daily) 50 www.sharescope.co.uk Chart (c) ShareScope 10 End of Dixons Case Study 35
UK Case Study 2 - API Group (AIM: API) First Added to my watchlist on 15 th November 2010 (SP = 15.5p, MCAP = 11.89m) 36
80 60 20 So, why do you think I added it to my watchlist? Pence 1 day candles API Group PLC Ord 80 60 20 Volume (Daily) - th's 131k 2000 2000 11/9/07 '08 Jul '09 Jul '10 Jul 4/1/11 On Balance Vol. (Daily) - M's 20 RSI (Wilder - Daily) +29.0m +50.4 80 80 13, 26 MACD (9 sig - Daily) -0.023 0 0 100 100 20(2)%K 9%D Stochastic Osc. (Daily) +50.0 50 50 www.sharescope.co.uk Chart (c) ShareScope 37
Yep Looks like a Double Bottom (shallow) & Low PSR Pence 1 day candles API Group PLC Ord 80 60 20 Added to watchlist on 15 th Nov 2010 80 60 20 131k 5 Volume (Daily) - M's 5 30/3/07 Jul '08 Jul '09 Jul '10 Jul 17/11/10 On Balance Vol. (Daily) - M's 20 RSI (Wilder - Daily) +28.9m +55.4 80 80 PSR 11.89m = 0.15 79.19m 13, 26 MACD (9 sig - Daily) +0.034 0 0 100 100 20(2)%K 9%D Stochastic Osc. (Daily) 50 50 www.sharescope.co.uk =0.0 Also, rising OBV! Chart (c) ShareScope 38
These were the Interim results (6 mths to 30.09.2010) issued 2 nd December 2010 39
The story moves on This is my post on the DIY-Investors Blog (31.01.2011)
Following an RNS on 9 th February 2012, I updated the website entry (14 th February 2012) 41
So what has API been doing recently? Pence 1 day candles API Group PLC 66.33 Ord 60 API 49.706 60 20 131k 5 Volume (Daily) - M's Volume Increases 5 after 9th Feb! 8/12/10 Jan Apr Jul Oct '12 Apr 6/7/12 On Balance Vol. (Daily) - M's +42.1m 100 100 20 RSI (Wilder - Daily) +56.8 50 50 +22.0 14 -DI/+DI, ADX (Daily) +33.0 50 8 -DI/+DI, ADX (Daily) 50 www.sharescope.co.uk Chart (c) ShareScope 20 42
What about the latest results for API (released 29 th May 2012)? 43
So, overall the timeline for my involvement with API looks like this 15 th Nov 2010 - Added to watchlist (SP = 15.5p) 31 st Jan 2011 - Added to DIY-Investors Review List (Buy @ 19.5p) Various Reviews during 2011 and into 2012 12 th June 2012 - Price closed at 60.0p (rise of 287.1% since 15.11.2010) 10 th Aug 2012 - Price closed at 64.75p (rise of 317.7% since 15.11.2010) Prospects? Possible Takeover (putting itself up for sale) see RNS 9 th Feb 2012 Or Organic Growth for next few years? End of UK Case Study 2
Case Study 3 Booker Group (LSE: BOK) Initial Research - July 2009 Booker Group reverse takeover of BlueHeath Holdings plc (2007) 45
This was the Chart for Booker Group, at the end of July 2009 Pence 1 day candles Booker Group PLC Ord 150 100 50 BOK Initial Purchase 29 th July 2009, 14139 shares @ 35.72p -------> 150 86.55 50 37k 500 Volume (Daily) - M's 500 19/4/05 Jul '06 Jul '07 Jul '08 Jul '09 5/8/09-493.2m 0 On Balance Vol. (Daily) - M's 0-500 -500 +52.5 20 RSI (Wilder - Daily) 50 50 100 100 14 -DI/+DI, ADX (Daily) +30.0 100 100 8 -DI/+DI, ADX (Daily) +28.0 www.sharescope.co.uk Chart (c) ShareScope 46
This is the chart for 2yrs or so prior to my purchase 30 20 Pence 1 day candles Booker Group PLC BOK Ord 86.55 Buy@ 35.72p 30 20 10 Volume (Daily) - M's 37k 500 500 15/12/06 Apr Jul Oct '08 Apr Jul Oct '09 Apr 5/8/09 On Balance Vol. (Daily) - M's -493.2m 0 0-500 -500 100 100 20 RSI (Wilder - Daily) +52.5 50 50 +30.0 100 100 14 -DI/+DI, ADX (Daily) +28.0 100 100 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk Chart (c) ShareScope 10 47
So, quick reaction to chart? 35 Pence 1 day candles Booker Group PLC Ord 86.55 35 30 30 25 25 20 20 15 Volume (Daily) - M's 37k 0 0 2/9/08 Oct Nov Dec '09 Feb Mar Apr May Jun Jul 10/8/09 On Balance Vol. (Daily) - M's -494.5m -600-600 20 RSI (Wilder - Daily) +51.3 80 80 +0.06 13, 26 MACD (9 sig - Daily) 0 0 100 100 20(2)%K 9%D Stochastic Osc. (Daily) 50 50 www.sharescope.co.uk +27.273 Chart (c) ShareScope 15 48
My reading of the Chart for Booker 35 30 Pence 1 day candles Booker Group PLC Price may find support on 50 day moving average! Rising 50 day m. avge. Ord 86.55 35 30 25 25 20 15 Volume (Daily) - M's 37k 0 0 2/9/08 Oct Nov Dec '09 Feb Mar Apr May Jun Jul 10/8/09 On Balance Vol. (Daily) - M's Rising OBV! -494.5m -600-600 20 RSI (Wilder - Daily) +51.3 80 80 +0.06 13, 26 MACD (9 sig - Daily) 0 0 100 100 20(2)%K 9%D Stochastic Osc. (Daily) 50 50 www.sharescope.co.uk Increasing average volume! +27.273 Rising 200 day m.avge. Chart (c) ShareScope 20 15 49
Latest Full Year Results (released 24 th May 2012) Let s look at these in the context of the Sharescope Key Metrics 50
Current Sharescope Key Metrics (as at Friday 10 th August 2012) 51
Past 3 Years Price History for Booker Group Pence 1 day candles Booker Group PLC Ord 80 60 Volume (Daily) - M's BOK Graph shows steady rise in SP 37k 0 0 6/3/09 Jul '10 Jul '11 Jul '12 4/7/12 On Balance Vol. (Daily) - M's -262.7m -0-0 100 100 20 RSI (Wilder - Daily) +60.5 50 50 +27.0 14 -DI/+DI, ADX (Daily) +37.0 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk Chart (c) ShareScope 86.55 60 52
In Summary, Booker has: Grown Steadily since July 2009 (T/O, Profits & Cashflow) Reduced Debt (despite expanding into India) Increased Earnings steadily over past 5 years Increased Dividends over the past 4 years Grown Book Value consistently over past 5 years BOK has been a very steady portfolio member, not exciting BUT very reliable! End of Case Study 3 53
UK Case Study 4 - Mobile Streams (AIM: MOS) My first alert to the DIY-Investors community was in the blog post (14 th March 2012), when MOS closed at 11.875p having shown a clear breakout from downtrend. 54
From the Blog - 14 th March 2012 (cont) 4.3m PSR = 0.28 15.49m 55
56
Mobile Streams Interim Results (Issued: 29 th March 2012) 57
Blog Post Mobile Streams (12 th June 2012) When to sell? 58
Blog Post : 12 th June 2012 (cont.) 59
Mobile Streams - as at Friday 10 th August 2012 Pence 1 day candles Mobile Streams PLC Ord 30 20 18.231 30 25.75 20 10 Volume (Daily) - th's 152k +37.8m +60.2 +26.0 +29.0 Prelims 1000 1000 10/2/11 Apr Jul Oct '12 Apr Jul 12/11/12 On Balance Vol. (Daily) - M's 36 36 100 100 20 RSI (Wilder - Daily) 50 50 50 14 -DI/+DI, ADX (Daily) 50 8 -DI/+DI, ADX (Daily) www.sharescope.co.uk That s about it Prelims 20/9/2012 Chart (c) ShareScope 10 60
As for consistently beating the market? My recent DIY-Investing performance includes: Self Invested Pension Plan (average +46% each year) Company trading account (UK), 89% gain in 20 months Now able to make a living as a full-time investor. 61
A BIG THANK YOU For watching today. I hope you found my ideas interesting. You can find out more about my ideas & methods by: 1. Reading my book Picking Winning Shares (ISBN: 978-0-9564899-0-6, available on Amazon). 2. Checking out my website: (please join our community) 3. Tuning in to my monthly Live Internet TV Broadcast (next one 5 th September at 8pm BST) 4. Attending my investing course Picking Winning Shares at the Holiday Inn, London Heathrow (Saturday 29 th September 2012) Over to Shane for the Questions 62