Part 1 - Macroeconomics

Stock analysis can generally be divided into fundamental analysis and technical analysis. Each has its own advantages. This time we will mainly talk about fundamental analysis.

So why study the fundamentals?  Research fundamentals is to judge the company's long-term stock price trend direction by calculating the company's valuation, note that it is long-term, Because the short-term rise and fall of stock prices are usually affected by market sentiment and the inflow and outflow of funds, but the long-term is bound to run in the same direction and parallel, it is precisely because of this, fundamental analysis does not need to be pegged to the market, which is more suitable for investors with less time.

Fundamental analysis is often time-consuming and laborious in the first comprehensive analysis of a company. After that, you only need to keep track of some changes in the company's fundamentals, because changes in a company's fundamentals are generally a slow process. To put it simply, the continuous follow-up analysis just mentioned is to pay more attention to the company's announcements. If conditions permit, you can also conduct research on the company, which is even better.

So that's the question?  Having said all that, how do you analyze the fundamentals of a company?  This course will teach you to analyse a company fundamentally from four points of view.

First point: look at the macro situation

Macroeconomic situation refers to the macroeconomic development and its trend. The macroeconomic situation has a very obvious impact on enterprises and directly determines the development of the stock market.  Macroeconomic operation is often subject to cyclical changes due to the impact of various factors.  We can call it economic cycle. Economic cycle is the economic fluctuation caused by the inherent contradiction in economic operation. It is an objective law that does not depend on people's will.  To put it simply, there are business cycles. The stock market is known as the "barometer" of an economy, which typically goes through four phases: boom, recession, bust and recovery. Thus, the stock market changes accordingly when the economy is in different phases of the cycle (above). At this point, if we can capture and take advantage of this change, we can make it easier to invest.

To take a simple example, when the economic cycle is in the boom period, the general economic growth and consumer confidence increase, then the investment enthusiasm will also increase, leading to the improvement of the stock market. At this time, it is the bull market we often say. If the stock is operated boldly, the general return will not be bad;  After the excessive prosperity, the enterprises will have overcapacity and supply exceeds demand, which will inevitably lead to a period of recession. At this time, most enterprises turn profits into losses, and we have to invest in high-profit companies that are in a monopoly position in the industry, which can often reap higher valuation premium;  Sustained recession will lead to recession. At this time, enterprises are often in a difficult situation. 

It is very difficult to find out the specific investment value of enterprises, so it is better to turn the investment target to bonds and other stable financial management tools;  In the continuous recession, the government introduced various preferential policies, market interest rates fell, financing costs reached a low point, raw material prices gradually fell, and corporate profits began to rise. At this time, the economy entered a recovery period, and the stock market also resumed its upward phase.

We should pay attention to the fact that the stock market is people's expectation of the future economic situation. This kind of expectation "absorbs" the relevant information reflected in the economic development process to cause the change of stock price. Therefore, the reaction of the stock market to the fluctuation of the economic cycle is always ahead. We need to have this kind of consciousness when investing.

We analyze the impact of the macroeconomic situation on the stock market, first of all to analyze the state of macroeconomic operations, specifically is the analysis of various economic indicators.  The indicators we are mainly talking about include the economic growth rate, the scale of fixed asset investment, the unemployment rate, the price level, and the value of import and export.

The first is the economic growth rate (RGDP), that is, the growth rate of gross domestic product (GDP). Changes in GDP are the fundamental reflection of a country's economic achievements.  Stimulated by the demand, the resources with low utilization rate were fully utilized, the economic development momentum was good, the GDP continued to rise steadily, and the social aggregate demand and aggregate supply grew in coordination.  With the overall economic growth in this environment, the profits of listed companies continue to rise, dividends and bonuses continue to grow, the business environment continues to improve, production and sales are booming, investment risks are getting smaller and smaller, and the value of the company's stock has been enhanced;  At the same time, people have formed a good expectation for the current economic situation, and along with the continuous growth of GDP, the national income has also been increasing. At this time, the demand for securities investment will be greatly enhanced. Based on the above points, the stock price will be an inevitable trend.

Of course, GDP growth is not necessarily good. When the economy is in a serious imbalance of high growth, then the aggregate demand greatly exceeds the aggregate supply, which will show a very high inflation rate. This is a dilemma for enterprises, and the national real income will be reduced. The economic growth in such an unbalanced state will lead to the decline of the stock market.