What is Investment Analysis?

Investment analysis is a comprehensive

term. As a result, it includes a wide variety
of calculations and assessments that
analyze market trends, investments and
financial industries. Meanwhile, analysts
may use a variety of metrics including past
returns, yield potential, price movement
and more to help them make better
investment decisions.
What is Investment Analysis?
• Investment analysis is a broad term for many different
methods of evaluating investments, industry sectors, and
economic trends. It can include charting past returns to
predict future performance, selecting the type of
investment that best suits an investor's needs, or
evaluating individual securities such as stocks and bonds
to determine their risks, yield potential, or price
movements.
Bottom-up Investment Process
• Bottom-up analysis assesses individual stocks by using
their merits. For example, these merits include pricing
power, management competence and valuation. However,
this investment analysis method doesn’t focus on market
or economic cycles to determine asset allocations.
Instead, this method looks at the best companies and
stocks regardless of the state of the economy and market.
Top down investment process
• Top-Down analysis examines the economic, market and
industry trends before making a more specific investment
decision. For instance, say an analyst evaluates different
industries and found that technologies outperformed
financials. Consequently, they may decide to allocate their
portfolio with greater weight in financials than
technologies. They will then seek out the best-performing
companies within the financial sector.
Technical Analysis
Human Behavior Study
• In technical analysis for our investment in stock or bonds,
we study the changing prices and charts. There are lots of
factors which affect the rise or fall in the price. But one is
the major factor is the want of human. Suppose, a person
sells his stock, it means, he wants to sell. Now, his wants
are affected with his family, relatives, friends, his habits,
his society and his own willpower. Suppose, a person
buys his stock, it means, he wants to buy. Now, his wants
are again affected with same people and his habits and
willpower. Now, one can say, a person will buy if prices
will rise or he will sell when prices will fall without affecting
the other human beings.
Historical Prices Analysis
• An investor should analysis all past prices of
same stock. If you see past record of same stock,
you can expect its future prices. It will not 100%
correct but, trend helps you for better decision.
This technical analysis does not apply on stock
market but it applies everywhere. In IT sector,
when google rank a web-page through his page
rank. It has 200 signals. One of them is past
history of the website. It is must for beginner
investors to study past prices of same share or
same company's shares.
Understanding of All Tools for Technical Analysis

PriceFields
First tool is price fields which you have to understand. In
stock market, there is not a single price. There will have
open price, high price, low price, close price, volume price,
bid price and ask price. To know its correct meaning is
necessary for analysis.
Charts
Whole theory of technical analysis is on chart.
Chart is the image of the history of past prices of
same stock. When we have studied the price field.
We try to create relationship in these prices in
whole trend by representing it on charts. So,
understand different charts.

Line chart - Simple lines for showing trend of price.

Bar chart - Bars of showing high, close, open and
low price of stock in different periods.
Support and Resistance
In this word, there are two big powers. One is
support and other is resistance. Support power is
of buyer. Buyer always want to support to
decrease prices. Because, they get stock at cheap
rates. But other power is of seller. This power
name is resistance. Seller always tries to best to
stop of decreasing prices. So, there are lots of
computer software who represent the relationship
between support power and resistance power. By
studying it, investor will go to pro-level and take
best decision.
 Traders' Remorse
• When buyer break the resistance power of sellers, it will
create traders' remorse. It means, it is success of support
over resistance power. So, seller has to make new
resistance power. In the chart, they have to make the
point. So, your investment decision will be more
optimized.
Trends
• In the stock market, different buyers and different sellers
buy and sells for different purposes everyday. If we collect
all these data, we can make its trend. Trend means
direction of changing of prices. Whether prices are
decreasing or increasing.
Moving Average
• In the stock market, different buyers and different sellers
buy and sells for different purposes everyday. If we collect
all these data, we can make its trend. Trend means
direction of changing of prices. Whether prices are
decreasing or increasing.
Fundamental analysis
• fundamental analysis is a method of assessing
the intrinsic value of a security by analyzing various
macroeconomic and microeconomic factors. The ultimate
goal of fundamental analysis is to quantify the intrinsic
value of a security. Its intrinsic value can then be
compared to its current market price to help with
investment decisions.
Types of fundamental analysis
Qualitative Fundamental Analysis
• Quality of management
• Corporate governance
• Some investors might think a business is better off being
managed by its promoters and owners as they have built
it from the ground up and understand everything about
the business.
• Other investors might believe the business is better off
being managed by experts in respective fields. This will
help the company take tough decisions and always be on
top of the game.
Quantitative Fundamental Analysis
• Balance Sheet
• Cash flow statements
• Profit and Loss (P&L) statements.
Price-Earnings Ratio (P/E)
A price-earnings ratio shows the correlation
between the price of one share of a stock and the
earnings-per-share that the company reports over
a period. This period is generally one year. It
illustrates the amount of money each investor is
putting into the firm for every dollar of earnings the
company posts. You can calculate the P/E ratio by
dividing the stock’s market value per share. Often,
investors will compare one stock’s P/E to other
stock’s P/E in the same industry to determine the
value of the stocks. Usually, investors consider
lower P/E ratios favorable.
Earnings Per Share
• Earnings per share indicates how efficiently revenues
filters down to investors. To calculate a company’s
earnings-per-share investors should take earnings
remaining for shareholders divided by the number of
outstanding shares. If a company has high earnings per
share, investors may identify them as a profitable firm.
Book Value
Investors may use the price-to-book ratio to identify high-
growth companies that are undervalued. While the book
value of a company is the total number of assets minus
total liabilities, you can calculate the P/B by taking the
market price of a company’s stock and dividing by the book
value of equity. If a company has a low P/B ratio, it’s
viewed as undervalued.
Dividend Yield
• The dividend yield is the relationship between a
company’s dividend payments and stock price. To
calculate the dividend yield you will divide the annual
dividend by the current stock price. You can then compare
one company’s dividend yield to another. Investors may
select companies with higher dividend yields if they are
seeking to invest in companies with high dividend
payments.
Return on Equity (ROE)
• Essentially, the return on equity (ROE) reveals the
company’s efficiency at turning shareholder investments
into profits. ROE takes the net income from a firms’
income statement and the shareholders’ equity from its
balance sheet. Therefore, if a company liquidates its
assets to pay off debt, ROE is the amount that’s left over
for shareholders.