GIX Manual Jan 2022

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Section 0 - Overview of Growth Investing
© 2022 Beyond Insights Sdn. Bhd. All Rights Reserved. 0-1

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Create your Financial Success and Time Freedom by Investing and Trading Wisely
Welcome to your program with Beyond Insights.
Whether this is your very first step, second step or eleventh step – we are committed to be with you for the rest of your
journey to become a successful investor and trader, if you are committed to your own success. We know and believe
Success in investing and trading is not just about how smart you are, it is more about your commitment and your desire to
create a meaningful life with your wealth.
You see, most of us spent more than 10 years on academic education, in order to learn the skills to earn a decent living.
The good news is that you don’t have to spend another 10 years to learn proper investing and trading – because we are
here to provide you the information and guidance you need in the most concise and effective manner. Nevertheless, you
will have to set the expectations on yourself to put in the effort to practice and execute what you have learned – because
nothing beats your own hands-on experience!
Investing & Trading Successfully is a journey of character building as it requires discipline to follow through what you have
learnt and to follow the rules. It is also like a sport – the more you practice, the better and faster you can do it. So do
commit to join the coaching sessions and participate in online discussions, student booster sessions and buddy group
gatherings, that’s how you can accelerate your results.
All the best!

From Beyond Insights Team
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Learning objectives
 Learn the skill to filter (shortlist) high growth companies.
 Learn how to review a company’s track record.
 Learn how to evaluate the value of a company using valuation methods.
 Learn how to estimate the buy price with margin of safety
 Learn how to decide when to buy, when to sell and how much stock to buy.
 Learn how to key in the orders into the broker platform.
 Learn how to monitor your live investment positions after you have bought it.

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Content
 Section 1 – Filter growth stocks.
 Section 2 – Review past performance.
 Section 3 – Evaluate Company valuation
 Section 4 – Estimate Max Buy Price.
 Section 5 – Decide on timing & quantity.
 Section 6 – Order entry.
 Section 7 – Monitor position.
 Section 8 – Appendices.

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How would you choose a Good Stock?

EXERCISE
1.
2.
3.

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Growth investing strategy high level overview
6000
1. Filter growth stocks
2. Review past performance Fundamental
Filter
Review Evaluate
3. Evaluate valuation Analysis
4. Estimate Max Buy Price
Estimate
5. Decide on timing & quantity Technical
6. Order entry Analysis
7. Monitor position FA & TA
Monitor

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Why is Fundamental Analysis important?

 Fundamental Analysis covers the Qualitative & Quantitative analysis of a
company.
 There are several advantages of conducting Fundamental Analysis.

o Determine a company’s Value.
o Understand the Potential of a company.
o Provides Conviction to invest.

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Advantage of Fundamental + Technical Analysis

Fundamental Analysis Technical Analysis
Is this the right timing?
Is this a good company to invest in? How do I know I need to exit?
Is this the best one?
Is this the right price? Exit?

Enter?
What the risks are?
By combining Fundamental Analysis and Technical Analysis, we can buy a GOOD / GREAT company at the
RIGHT price, and the most APPROPRIATE TIMING.
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What drives a Company’s Fundamental Value?

 The value of a company will grow depending on these basic criteria :-
o Profitability
o Growth
o Sustainability
 In the short term, the Share Price may not reflect the Fair value due to many
factors.
 However, in the long run, share price does tend to reflect the company value.

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Section 1 – Filter
for growth stocks

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Learning objectives
 Learn the structured process to filter(shortlist) the best high growth stocks.
 Understand the main filter criteria and rationale behind it.
 Learn how to use the Stock Screening tool to filter the stocks and analyse the
quantitative data of a company.

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Step 1 – Filter high growth stocks

There are 3 major aspects to identify high growth stocks.
 1.1 – Basic filter 6000
o Basic elements to filter for good quality stock.

Filter
 1.2 – Profitability Review Evaluate
o Measure how good a company is at making profit.
Estimate
 1.3 – Earnings Growth
o Measure the capability of growing the profit year after year.
Monitor

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#1.1 Basic Filter

Filter Criteria
 Market Capitalization ≥ 2 billion
 Country USA
 Analyst Recommendation Buy or Better

Good Very Good
 Institutional Ownership > 60% > 80%
 Average Volume > 1 million

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Why High Market Capitalization
 Higher liquidity / volume.

_____________________
o More Institutional Funds participation.
o Less manipulation.
 More availability in CFD & Options.
 More Analyst
________ Coverage.

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Analyst Recommendations
 Financial firms & Investment banks employ full  Category A
time analyst to help them analyze & decide if a 1 Strong Buy
stock is worth investing.
2 Buy
 You can check the published summary of Analyst
Ratings
research 3 Hold
 Ratings graded in numbers are one of the more 4 Sell
popular ways of summarising Analyst
recommendations. Refer to section 4 for other 5 Strong Sell
classifications of Analyst recommendations.  Only Select stocks under
 Stock screening software can use this to filter high rating 1 & 2.
vs poorly rated stocks  Avoid stocks with rating 4&5
in the last 3 months.
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Institutional Ownership
Institutional Ownership means the amount of shares held by Large Financial Institutions
Institution Retail Investor

 Company holding large amount of shares in  Individual Investor.
listed companies  Managing his/her own funds.
 Private fund management firms & ETF
providers : e.g. Vanguard, Black Rock, SSA.  Usually hold fewer shares.
 Retirement & Insurance scheme fund
management
 Holds large amount of shares.
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Why High Institutional Ownership

High Institutional Ownership due to:
 It is important to have ____
o Institutions employed many full time analysts to analyse potential companies to invest.
o High Institutional Ownership shows strong _______

interest in the company.
o Changes to institutional ownership may be an indicator of major buying or selling

activities.
o High trading volume can cause large movements in share price.

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Sector performance
 Top performing sectors in the last 5 years:
1. __________________
2. __________________
3. __________________
4. __________________

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Which Sectors and Industries should you choose?

Always start with a Sector and an Industry that you can understand, so that you can evaluate the
following:
 Business Model.
 Growth Opportunities.
 Top Risk.
 News that may affect the company share price.

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3 major financial statements (simplified)

Income Statement Balance Sheet Cash Flow Statement
Revenue Liabilities
…
Operating Cash Flow ***
Assets ___________
- xxx ___________ …
__________ Investing Cash Flow
- xxx Cost __________ …
__________ Shareholders’
- xxx __________
Equity
_____________
Financing Cash Flow
…
Net Income (Earnings) _____________
Net Cash Flow ***
 Reports a company’s financial  Reveals company’s assets,  Tracks company’s activities that
performance for the period of liabilities & shareholders/owners’ involve cash for the period of
reporting. equity as of a specific date. reporting.
 Breaks down source of revenue  A Snapshot of the financial  Identifies the sources and
and costs for further analysis. standing of a company. destinations of cash.
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Income Statement
(Shows whether the company is making money)
Revenue
- Cost of Revenue Sugar
Gross Income (A)

- Operating Expenses
Operating Income (B)
- Interests & Taxes
Net Income (C)

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Balance Sheet
(Shows the company’s financial standing as of a specific date)
Assets Liabilities
Fixed Asset: • _______________
• _______________ • _______________
• _______________ • _______________
• _______________ • _______________
• _______________
Current Asset: Shareholders’

• _______________ Equity
• _______________ • _______________
• _______________ • _______________
• _______________
• _______________

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How do you know a company is profitable?

Income Statement Annual Report
EPS (Earnings per Share)

Number of Shares (B)
Net Income (A) $300k = 100k
EPS =
=
= $3.0
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Exercise/Quiz: Which company would you invest?
Company A Company B
Earnings per share = $1 Earnings per share = $2
$5
Equity per share = ______ $20
Equity per share = ______
$𝟏 $𝟐
ROE
_______ 20%
= ___________ 10%
ROE = _____________
$𝟓 _______ $𝟐𝟎
Note: Equity per share refers to Company's total shareholders' equity (as stated in balance sheet,
© 2022 Beyond Insights Sdn. Bhd. All Rights Reserved. includes retained earnings) divided by the total number of share outstandings. 1-15
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How do you know whether the returns are good?
Income Statement Return on Equity Balance Sheet

𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆 (𝑨)
ROE = Total
𝑻𝒐𝒕𝒂𝒍 𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔 𝑬𝒒𝒖𝒊𝒕𝒚 (𝑪)
$𝟑𝟎𝟎𝒌 Liabilities
= $1mil
$𝟏𝒎𝒊𝒍
= 30% Total
Total Shareholder
Assets (D) s’ Equity (C)
Net Income (A) $300k $2mil $1mil
Return on Assets
𝑵𝒆𝒕 𝑰𝒏𝒄𝒐𝒎𝒆 (𝑨)
ROA =
𝑻𝒐𝒕𝒂𝒍 𝑨𝒔𝒔𝒆𝒕𝒔 (𝑫)
$𝟑𝟎𝟎𝒌
=
$𝟐𝒎𝒊𝒍
= 15%
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#1.2 Profitability – Why is Profitability important?

=$2m

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Assets
Liabilities
ROE & ROA
Shareholders’
Equity
Return On Equity (ROE) Return On Asset (ROA)
 ROE indicates the company’s efficiency in  ROA indicates the company’s efficiency in
generating income using shareholders funds generating income using both the
(capital) . shareholders’ funds and liabilities (e.g. loans).
 Investors are mainly concerned about the
return a company can generate for every $1  Since Total Assets = Shareholder funds +
they invest. It is measured by ROE. Liabilities, it also measures the company’s
efficiency in using its assets to generate
 The higher the ROE, the better, because it income.
shows that the company is earning more
income using less capital. However need to  When ROE is higher than ROA, it indicates
check if it is financed through too much debt that the company may be using debt to
by checking the ROA also. finance its business.
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Profitability criteria
Refer to Process Map
 ROE (Return on Equity)
 ROA (Return on Asset)

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How does a company make more money?

Income Statement  Positive EPS growth means that the company
is making more money year on year.
Revenue
- Cost of Revenue Sugar  EPS Growth is one of the main factors driving
Gross Income (A) stock price growth in the long run.
- Operating Expenses  4 main factors for earnings growth:
______________ o Revenue Growth (more solid growth).
_______________________ o Raw Material cost goes down.
- Interests & Taxes
o Operations Efficiency improvement.
Net Income (C) o Tax Reduction.

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#1.3 EPS Growth

Year Ending EPS
Forecasted EPS 0.20 EPS Growth
Dec ’20 0.80 = 25%
Growth 0.80 this year
Next 5 years Dec ’21 1.00
= 15% * Assume now is Jan 2022 0.20 EPS Growth
= 20%
* This means that the Dec ’22 1.20 1.00 Next year
EPS is estimated to
grow at an average of Dec ’23
15% per year, over the Dec ’24
next 5 years. Dec ’25
Dec ’26
Note: Most companies typically project a lower growth rate for next 5 years
compared to next year because there are more uncertainties in the longer period.
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Exercise: Which company would you invest in?

A B
Equity Equity
per share per share
($1) ($1)
EPS EPS
= $0.30 = $0.20
ROE = 30% ROE = 20%
EPS Growth = 10% EPS Growth = 30%
What is the EPS forecast for the next 5 years for company A and B?
Which year does company B overtake company A?
This Year 1 2 3 4 5
A: EPS 10% Growth $0.30
B: EPS 30% Growth $0.20

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Why is EPS Growth important?

EPS
$1.20
$1.20
Projected EPS in 5 Years
(starting from EPS = 0.3)
$1.10 30.00%
$1.00
$1.00
$0.90
$0.80
$0.80
20.00%
$0.70
$0.60
$0.60
$0.50
10.00%
$0.40
$0.40
$0.30 0.00%
$0.20
$0.20 Year
0 1 2 3 4 5

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Earnings Growth criteria
Refer to Process Map
 EPS Growth This Year
 EPS Growth Next Year
 EPS Growth Next 5 Years

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Understand the company

 From filter results , read and understand the nature of business of the
companies before making investment decisions

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Section 2 – Review
[Past performance]

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Learning objectives
 Understand the importance of reviewing past performance (track record).
 Learn the process of reviewing a company’s past performance.
 Learn how to study the key financial statistics.

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Step 2 – Review past performance

Why do we need to Review past performance?
6000
Filter
Review Evaluate
Estimate
 Ensure the company is healthy.
 Ensure the company is growing consistently. Monitor

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Step 2 – Review past performance

 New investors should start with companies that shows consistency.
 Track Record is important to assess the consistency of the company performance. A single year result may
not be sustainable.
 Look at the last 10 years’ track record on the following categories to see how the company performed in
good and bad economic times.
 It is more important to assess whether the company is growing consistently in the recent years.
Basic
 Revenue (Sales) Growth
 Operating Income/Profit Refer to

Growth Process Map
 EPS Trend
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Basic Revenue / Sales Growth

 Revenue / Sales growth = Growth in company’s revenue or sales.
 Main determinant of a company’s growth.
growing 5% for the past 5 years .

 Make sure it is __________

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Basic Operating Income Growth

 Operating Income = Income earned from a company’s ongoing core business
operations (exclude other income such as from investments or selling fixed
assets).
 An indicator of the business’s profitability from it’s core operation.
Revenue
- Cost of Revenue
Gross Income (A)
- Operating Expenses
- Interests & Taxes
Net Income (C)
>= 5% growth for the past 5 years.
 Make sure it is ____________

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Basic EPS Trend

 A growing Year over Year EPS means that the company is making more and
more money over the years for each share.
 Make sure EPS Trend is consistently growing 10% for the past 5 years.
_____________________
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Why do we look at Revenue Growth, Operating Income

Growth and EPS Trend as a whole?

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Section 3 – Evaluate
[Valuation]

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Learning objectives
 Understand valuation methods and their limitations.
 To assess the valuation in a quick manner to determine whether it is

Overvalued, Fairly Valued or Under-Valued.

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Step 3 - Evaluation
 After reviewing the company’s past performance, you
should not buy straight away as the company could be over-
valued now. 6000
 How do you determine the right price to buy? Filter

o You can assess the valuation in a quick manner to determine whether it is Review Evaluate
:-
Estimate
• Over-valued
• Fairly Valued
• Under-Valued
o To forecast for a longer period (e.g. 3 years), you will need to use other
method to establish the right price to invest. (Covered in Company Monitor
Insights Workshop)

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How do you know whether a company is over valued?

 There are many valuation methods. Here are a few popular ones :
o PE ratio
• a simple measure of value which uses last 1 year EPS.
o Forward PE ratio
• a simple measure of value which uses next 1 year EPS estimate.
o PEG ratio
• a simple measure of value which uses the next 5 years growth rate.
o Intrinsic Value (typically used in Value Investing) – Not part of Growth Investing Scope
• It uses a Discounted Cash Flow (DCF) method.
 However, all the above methods have limitations, especially when applied to
growth stocks. Therefore, we need a better method to assess valuation for
growth stocks.
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PE Ratio
 PE ratio gives investors a quick idea of the multiple (times) they are paying for each $1 of
most recent year earnings.
 It’s a commonly used way to assess whether a company is over-valued, under-valued or
𝑷𝒓𝒊𝒄𝒆 𝒐𝒇 𝒂 𝒔𝒕𝒐𝒄𝒌
fairly valued. PE =
𝑳𝒂𝒔𝒕 𝟒 𝒒𝒕𝒓 𝑬𝑷𝑺 (𝑬𝒂𝒓𝒏𝒊𝒏𝒈𝒔 𝑷𝒆𝒓 𝑺𝒉𝒂𝒓𝒆)
15 Why?
 Common standard use for fair value = ______
 This is because the average PE ratio of the S&P500 for the last few decades is about 15.
However this interpretation is highly limited. E.g.
o Value investors typically prefer low PE ratios, however a lower PE can also mean the company
command a lower valuation due to slower growth, inconsistencies in earnings or doubt of future
sustainability.
o High growth stocks typically command a higher PE, justified by future earnings growth.
20
 Forward PE uses next 1 year EPS estimate instead of the last 1 year EPS.

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PEG Ratio
 Current PE Ratio only considers the past 12 months EPS, and does not provide a fair
assessment of the valuation of companies with strong growth because of the rapid EPS
growth.
 PEG ratio overcomes this limitation of simplistic PE ratio by factoring in the projected
growth rate.
PEG Ratio = Current PE
Next 5 years growth Rate 20% EPS Growth
 Here are the most commonly used benchmarks and are more conservative. However
they need to be adjusted based on economic condition/trend.
o PEG ratio = 1 is considered fair value for high growth companies
1.2 to 1.5 is typically
o PEG ratio < 1 (Undervalued), PEG ratio > 1 (overvalued) however a range between __________
acceptable in a growing economy.
o PEG ratio > 2 (Significantly overvalued).

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Difference between Growth Investing & Value Investing

Growth Investing Value Investing
Stock Looks for high growth stocks with good profitability Focus on stable predictable stocks with consistent cash flow
Selection
Willing to pay some premium to enter. Generally low PE ratio stocks
Typical good opportunity is when market goes into a
correction. Conservative entry.
Usually wait for huge discount which typically happen during
major pullback
Holding Will hold stock as long as growth fundamental is intact and Longer holding period
trend is good. Will only exit if there is a change in fundamentals or better
Average holding period is 3 years deal elsewhere
Dividend Growth stocks typically pays little or no dividend. Dividend payout is an important criteria for selection and
Growth investors focus on capital appreciation rather than income
dividends
Entry/Exit Use chart to time entries & exits Do not use chart to time entries & exits
Valuation Use projected EPS method of valuation Uses Intrinsic Value method of valuation which is
more suitable for companies with steady cash flow)
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Intrinsic Value Method (FYI)
(not part of Growth Investing scope)
 This method is typically used in Value Investing
o It uses a Discounted Cash Flow (DCF) method. A discount rate is applied to future Free cash flows
to determine the value of the cash flow today (Present Value).
o Requires a forecast future of free cash flow to make a present value forecast, however these data
are difficult to obtain/estimate. Typically it is only available for mature companies that are not
involved in mergers/acquisitions and have more predictable earnings trends.
o Companies that are still in the growth stage typically will have less predictable future cash flow
making this valuation less suitable.

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Section 4 - Estimate

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Learning objectives
 Derive a Max Buy Price with a margin of safety
 Leverage on the ratings & target price done by the professional analyst

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Step 4 – Estimate Buy Price

 #4.1 Analyst Ratings
o Use analyst’s ratings to do health check on the company
o Evaluate the impact of news and announcements on the 6000
company.
Filter
 #4.2 Max Buy Price Review Evaluate
o Use analyst target price to derive a conservative Target Price
Estimate
o Set a Max Buy price with the desired return growth
Monitor

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#4.1 Analyst Ratings

 Professional analyst works for brokers, hedge funds and investment banks.
 They are are tasked to collect and analyze information relating to a company, asset
or industry.
 One important output of their work is to issue investment recommendations for the
assets under their coverage
 Instead of recreating their work, we can make use of the analysis done by them.
 Important information from their analysis include:
o Analysts’ Upgrade/Downgrade
o Recent Earnings Result Analysis
 Take note of upcoming earnings dates of the companies and related industry
competitors, on whether they meet, beat or miss analyst consensus forecasts as it
will cause big price movements post-earnings.

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Analysts’ Upgrade/Downgrade
 Check Analysts’ Upgrade/Downgrade
o Ratings
o Price Target Revisions
 Typically major revision happens:

o After company’s earnings announcement.
o After the occurrence of major events (Covid-19 pandemic, US-China trade war, etc.)

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Analyst Recommendations / Ratings

Category A Category B Category C
1 Strong Buy Under- Sector Outperform
weight /
2 Buy Reduce
Outperform
Ratings
3 Hold
Market Perform
4 Sell Over-
weight /
5 Strong Sell Add Underperform
 Only Select stocks under  Refers to whether you should  Refers to the stock’s relative
rating 1 & 2. allocate more or less of this performance to either the
overall market (S&P500) or the
 Avoid stocks with rating 4&5 stock to the portfolio Sector it is in (e.g. Technology).
in the last 3 months.
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(Category B)
H A
Underweight
(should allocate G B e.g. Stock Portfolio
less % of this stock (each stock 1/8 allocation)
in your portfolio) F
C
E
D
Overweight
(can allocate more %
to this stock in your
portfolio)

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(Category C)
Underperform Market Perform Outperform
MA
WMT
SPX
SPX
GT SPX
 Underperform rating means  Market Perform rating means  Outperform rating means the
the stock is expected to have the stock is expected to stock is expected to have
lower performance than the perform inline with the market higher performance than the
market index (S&P500). index (S&P500) – means market index (S&P500)
almost the same performance.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Analysts’ Ratings (Layman Terms)
Buy, Strong Buy, Outperform,

Positive
Overweight/Add
Typical Ratings Terms
Downgrade
Upgrade
Hold, Neutral, Market Perform,
Neutral
In-Line, Equal Weight
Sell, Strong Sell, Underperform,

Negative
Underweight/Reduce

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Analyst Target Price Revision

 If Price target , it is an Upgrade.
 If Price target , it is a Downgrade.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Analyst Ratings and Target Price Revision – MSFT

Analyst Price
Analyst Ratings Target Revision

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
#4.2 : Max Buy Price
Step 1 – Determine Median Analyst Target Price (MATP)
 Another output of analyst’s work we can use is the Price Targets they derived for their principal &
customers. We can leverage on their work instead of calculating it ourselves.
 It’s important to review the latest analyst target prices to gauge whether analyst has a better or weaker
view on the company as some earlier forecast could be outdated especially after latest earnings
announcement.
 Assume the following are the Analyst Target Prices for a stock issued by several analyst. So,
which price should we use?
o We use the Median of the most recent Analyst Target prices (since the latest earnings announcement).
o To Calculate the Median Analyst Target Price / MATP (example below), sort it in ascending order and
take the center number (or the average of the center 2 number if there is even # of analyst) :
𝟒𝟎 𝟒𝟏
Median = 40 Even number of
Median = = 40.5
Odd number of 𝟐
Analyst Target Price Analyst Target Price

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Step 2 – Calculate Max buy price (MBP)

 Objective: We want to make sure that from our buy price, there is enough potential
upside to make “at least” 15 % return.
 Step 1: Check the analyst price targets after most recent earnings.
Step 2: Determine the
Median Analyst Target Price (MATP)
176 185 195 200 202
Median = 195
Last Earnings Step 3: Max Buy Price (MBP) x (1 + 15%) = Median Analyst Target Price (MATP)
20 Dec 2021
Max buy price (MBP) = = = 169.57

( %) .
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Section 5 – Decide
[on Timing & Quantity]

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GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Learning objectives
 Learn how to apply charting skills to determine the right time to buy.
 Learn how to protect your capital through portfolio risk management.
 Fine-tune entry timing based on chart pattern and market sentiment.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
#5 Decide
 Decide on
o Timing – based on the stock chart 6000
• to avoid buying in a downtrend despite meeting the
maximum buy price. Filter
Review Evaluate
o Quantity to Buy
• based on Portfolio Allocation & Risk Management. Estimate
Monitor

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Decide - #5.1 Timing Process

1. Transfer your maximum buy price to the chart.
2. Check the 5 years weekly chart before you buy :-
1. What is the trend?
• Make sure the chart is Trending up or Sideway with strong support.
2. Identify major Support & Resistance.
3. Identify potential entry patterns:
or; or;
A. Rebound strong support B. Trend Reversal C. Rebound EMA

(EMA 20/50 bullish cross-over) (on EMA 20/50 or trendline)
3. Set Buy order slightly above support (horizontal or EMA).

4. Set Stop Loss at > 1 Weekly ATR below support (refer to next slide).
Note: When you get more experience with technical analysis, you can fine-tune your entry
and stop loss distance with technical chart.
®
GROWTH GROWTH
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INVESTING
EXPRESS
Average True Range (ATR)

 In simplest form, True Range is the Candle
Method 1
Calculation Size.
 So Average True Range(n) is the average
Current High candle size for last “n” candles.
 Weekly Average True Range (14) is the
TR Average weekly candle size of last 14 weeks
 ATR is a measure of volatility (how much
Current Low
the price moved within the selected
period).
 ATR will be used to define Stop Loss
distance
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Use 5 years weekly #5 Decide on Timing
candlestick chart
Max buy price

1. Transfer max buy price
2. What is the Trend

Make sure the trend
is up or range bound 5.Enter a buy order
(5 years weekly chart) at/near Support
(horizontal or EMA).
3. Identify major Support
Support & resistance 1 x Weekly ATR(14)
6. Set Stop Loss at
4. Identify potential about 1 Weekly ATR(14)
entry pattern(s) A,B,C below support.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Entry pattern A, B & C If you miss the initial rebound
(B), you can wait for the price to
Use 5 years weekly chart 5. Enter when pullback to EMA20/50 to enter
Max buy price price rebounds
1. Transfer max buy price on EMA 20/50
4. EMA 20 crosses Buy
2. Identify the trend above EMA50
(Bullish)
SL
C
6. Identify
3. Identify potential entry.
major support
& resistance B
ATR(14) = 1.16 Strong support A (advance entry)

Entry(buy) @ C : $36.08
Note: Yellow circle - confirmation candle; Stop Loss : $34.84 (Support – 1 Weekly ATR(14) = $36 – 1.16 ~= $34.84)
Blue circle - entry candle Avoid using Round Number for Entry or Stop Loss
®
GROWTH GROWTH
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INVESTING
EXPRESS
Avoid getting trapped in downtrend
 When you are about to open a position, make sure the trend is up. This will give
you higher probability of success.
Do not enter here although
itDo not enter
rebounds at here although
strong support.
itWait
rebounds at strong support.
till it breaks above the Buy partial only when
Wait till
downtrend line. the
it breaks above
• stock broke above
downtrend line.
the downtrend line
Max buy price AND
• Rebound near
support (horizontal
Even if the stock price or EMA)
drops below buy price,
you should not buy when
it is in a downtrend
Strong support
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Do not buy when the trend is still down
Assume the
max buy price
is $350.
It is safer to buy here because:
• price has broken above
Should not enter at these the downtrend line, AND
points despite the stock price • rebounded near
being below max buy price. EMA 20/50
Wait until it break the
downtrend line

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Investing Entry – Exercise #1

Please identify your entries (assuming max buy price = $320, your starting
point is candle A):
1. Where can be your First Entry: 4
a) Which candle? 5 13
2
b) Where is the support level? 5 6 7 89 12
c) Where is your entry price? 10
34
d) Where is your stop loss price? 1 2
2. Where is your Potential Next Entry (if any): X Y z
a) Which candle? 11
b) Where is the support level? VW V
U
c) Where is your entry price? LM
d) Where is your stop loss price? NOP RS
Q T
C D K J
A J I
E FGH
B
I F
ATR(14) = 11.52
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Decide - #5.2 Risk Management (Overview)

 Net Liquidation Value (NLV) = Cash in your account when you close all positions
 The most important aspect of risk management :
o Ensure no single point of failure that will hurt the account too much.
• Limit the Max Risk per investment to 1% of NLV when hit stop loss.
• Limit exposure over major announcements eg earnings (to reduce gapping risk that can bypass stop loss)
oManage systemic risk (that affects overall market, sector or industry level)
• Limit the concurrent total portfolio (account) risk to 5% (in case all your investments hit stop loss).

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Net Liquidation Value (NLV)

Initial Capital = $10,000
NLV = $10,000 (1% = $100)
Upon Purchase Balance in Account
MSFT (10 units @ $300/unit = $3,000) Cash = $10,000 $7,000 ; NLV = $10,000
AAPL (10 units @ $150/unit = S1,500) Cash = $7,000 $5,500 ; NLV = $10,000
After Purchase Balance in Account

MSFT stock price rose to $310/unit from $300/unit Cash = $5,500 ; NLV = $10,000 $10,100
(Your holdings = 10units ; unrealized gain $100)
AAPL stock price dropped to $145/unit from 150/unit Cash = $5,500 ; NLV = $10,100 $10,050
(Your holdings = 10units ; unrealized loss $50)

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
How to limit losses to 1% Risk (based on Stop Loss)
Step 1:
Calculate 1% Risk of NLV
Step 2:
Calculate Risk per unit
Step 3:
Calculate Quantity to buy

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
STEP 1 – Calculate 1% Risk of NLV

1% Risk = NLV x 1%
NLV (capital) = $10,000
∴1% Risk = $10,000 x 1%

= $100
1. Investment/Trading Templates will facilitate the calculations

2. No need to update the NLV every time - only after ~ 5% change in NLV
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
STEP 2 – Calculate Risk per Unit

Risk per Unit = Entry – Stop Loss
Entry price = 150.31

Support = 150
Check ATR(week) = 3.51 Risk per unit

=150.31 – 146.21
= 4.10
Stop loss = 146.21

SL = Support – 1 weekly ATR
= 150 – 3.51
= 146.49 (or lower)
1. All Entry & SL must not be round number

2. You can move your SL slightly lower than the calculated number
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
STEP 3 – Calculate number of Units

𝐑𝐢𝐬𝐤 𝟏% 𝐨𝐟 𝐍𝐋𝐕
# 𝐨𝐟 𝐮𝐧𝐢𝐭𝐬 =
𝐑𝐢𝐬𝐤 𝐩𝐞𝐫 𝐔𝐧𝐢𝐭
(Rounded
down
from 24.39)
1. If you get decimals, always round down to be conservative

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Exercise
Assume NLV = $10,000
 Entry Price =
 Stop Loss =
 1% Risk of NLV
= NLV x 1% =
 Risk per Unit

= Entry - Stop Loss
=
%
# of Units =
=
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
How to limit to 5% Portfolio RISK
Risk 1%
per 1% 1% 1% 1% 1%
investment
Or
Risk 0.5% 0.5% 0.5% 0.5% 0.5% 0.5%
per 𝟏% 𝐨𝐟 𝐍𝐋𝐕
0.5% 0.5% 0.5% 0.5% 0.5%
investment
(From previous Slide)

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Earnings
1. US listed companies report earning every quarter
2. Earnings announcement timing –
o Before Market Open (BMO) or
o After Market Close (AMC)
3. Stocks can gap up or down depending on results compared to market
expectation
o Gapping can also happen when there is major economic announcement or
events.
4. What do you need to do (to reduce gapping risk) :-
o Do not enter near earnings.
o If in position & Profit is less than 5% by earnings date, exit the investment.
5. Post earnings entry –
o Wait at least 5 trading days after earnings for stock to stabilize on new support.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Steps for pre and post Earnings

Do not enter a new trade Wait at least 5 trading
if less than 2 weeks to days after earnings for
earnings price to stabilize
31 Aug 14 Sept 15 Sept 23 Sept

Exit position at least Earnings Consider to enter
one day before Announcement if the support is
earnings if profit is stable and all entry
less than 5% criteria are met

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Price gap
(A) Closing price

($80.22)
Assume Stop loss = $77.77 (C)

Price drop by
Additional loss $8.42
exceeded 1% risk per unit (10.5%)
(C) – (B)
(B) Opening Price

Gapping % drop is measured ($71.80)
from Previous Day Close (A)
to Next Day Open (B)

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Impact of Gapping on Risk per Investment

 Assume NLV is: USD $10,000 1% Risk (based on Stop Loss)
o Entry: $200,
Risk per unit (based on SL)
o Stop Loss: $195, STOP = $200 – $195 = $5 per unit (SL)
o Gap down opening Price = $180 LOSS
 1% risk : $10,000 x 1% = $100 Max #units to buy:
= $100 / $5 = 20 units
Closing price of
support 200 previous candle
1 ATR
A) Stop loss = 195 With gapping (10%)
B) Gap down (SL will be bypassed)
(bypass GAP
stop loss)
DOWN Loss from 20 units
180 20 units x $20 = $400
Opening price of next (4% loss)
candle
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Section 6 - Order Entry

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Learning objectives
 Learn order types in the broker platform required for investing.
 Platform coverage in Tutorials includes the following, and more:
o Learn overall platform navigation
o Learn how to enter a Buy Order with a Stop Loss in the broker platform.
o Learn how to enter a Buy Order with a Stop Loss and a Profit Target in the broker
platform.
o Learn how to adjust your stop loss as the stock price moves up.
o Learn how to manually close a position.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Step 6 – Order Entry
6000
To purchase a stock, you will need to key in the order
into the broker platform. Filter
Review Evaluate
There are many order types offered by the broker.
Estimate
However, investors only need to focus on a few basic
order types.
Monitor

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Basic Order Types

 Buy Market (MKT) Order
o Buy at the current Market Price (Ask Price)
 Sell Market (MKT) Order

o Sell at the current Market Price (Bid Price)
 Buy Limit (LMT) Order

o Buy at the specific Limit Price or better(below the limit price)
 Sell Limit (LMT) Order (for Profit Taking)

o Sell at the specific Limit Price or better(above the limit price)
 Sell Stop (STP) Order (for Stop Loss)

o Sell at the Market Price when stock price drops below a certain level. (Bid Price)

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Time in Force
(How long do you want the order to be valid)
 GTC Order
o Order is valid until you cancel it.
o However, different platforms may have different order validity periods e.g 3-6 months
after which the order is automatically cancelled.
 DAY Order
o Order is valid for today only.
o Unfilled orders are automatically cancelled after market close.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Basic order types usage scenario (for Entry)

When current price is When current price is
near planned entry far from planned entry
Resistance Resistance
Current Price
Planned Entry
Current Price ≈ Planned Entry
Support Support
When the price is right and you don’t When the price is not right yet,
have to wait for more pull back, and you only want to buy at a
you can buy immediately specific price or lower.
Use “Buy Market” Use “Buy Limit” at specific price

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Basic order types (for Profit Target & Stop loss)
Resistance
Profit Target (~$105) When you plan to sell at Use
a specific price or higher. “Sell Limit”
Current Price
Planned Entry (~$100)

Support
Use Stop Loss (~$98) When price drops to a certain level, Stop price
“Buy Limit” automatically sell at the market price.
*note: avoid using round number in actual trading. Use

We use round number here to simplify the illustration.
“Sell Stop”
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Commonly used order type for
Entry, Profit taking & Stop loss
Resistance  Buy Market (MKT) Order
o Buy at the current Market Price (Ask Price)
Profit Sell Limit $105
 Sell Market (MKT) Order
Time in force o Sell at the current Market Price (Bid Price)
Order is
Day
valid for
 Buy Limit (LMT) Order
Entry Buy Limit $100 GTC today only.
o Buy at the specific Limit Price or better (below the
limit price)
Support
Order is
Stop valid until  Sell Limit (LMT) Order (for Profit Taking)
Sell Stop $98
Loss you cancel it # o Sell at the specific Limit Price or better (above the
limit price)
*note: avoid using round number in actual trading.
We use round number here to simplify the illustration.
 Sell Stop (STP) Order (for Stop Loss)
# Refer IB Search – Times in Force for Orders o Sell at the Market Price when stock price drops
below a certain level. (Bid Price)
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Example 1: Buy Order Entry with Stop Loss order
Set Buy order slightly above support
(horizontal or EMA).
(Buy Order)
Buy Limit Order @ $135.21
Support
1 x Weekly ATR (14)
(Stop Loss)
Sell Stop @ $129.77
Set Stop Loss at about
1 Weekly ATR(14) below support
Parent
Child
When you gain more experience, you can fine-tune the stop loss distance with technical chart.
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Enter now or wait for confirmation?

If price movement is stable If price movement is not stable
 Enter GTC (Good till Cancelled) order  Wait for confirmation of rebound
to buy slightly above support. based on candlestick pattern before
 Attach a stop loss. placing the order.
o E.g. bullish candles appear at support.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Section 7 - Monitor

®
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INVESTING
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EXPRESS
Learning objectives
▪ Learn how to protect your investment profit.
▪ Learn when to manually exit a position.
▪ Learn how to re-enter an investment position after being stopped out.
▪ Learn how to write an effective investment journal.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
#7 Monitor
After you have invested in a company, you need to monitor the
company’s fundamentals and technical chart periodically. This 3 step
process is repeated until an investment position is closed.
▪ #7.1 Protect Profits 6000
• As stock price continues to go up, move your stop loss below the new
significant support (horizontal support or EMA20/50 support).
Filter
▪ #7.2 Manual Exit
• Close the position if Price closes below EMA50 Review Evaluate
• Close partial position if Trend is not healthy (covered in Trend Trading)
• If a position is closed, proceed to journaling. Estimate
▪ #7.3 Review Analyst Ratings post-earnings
▪ Check if there is any downgrade
▪ #7.4 Journaling
• Update key learnings from the past week/month into your investment journal.
Monitor
How to interpret quarterly earnings report & company specific news are covered in
the Company Insights Workshop
®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Step 7 Monitor – (#7.1) Protect profit & (#7.2) Manual exit

AAPL, Weekly Close position when price
close below the support
Support @ 170
SL @ 163.94 ATR 6.0
4
Support @ 153
Support @ 142 SL @ 146.94 ATR 5.8
3
ATR 4.7 SL @ 136.74
2
Support @ 108
SL @ 102.94 1
ATR 4.8

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Step 7 Monitor – (#7.3) Review Analyst Ratings post-earnings
▪ After every earnings, review the latest Analyst ratings for major change.
o Downgrades are unfavourable
• Check for any changes in fundamentals

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Step 7 Monitor – (#7.4) Journaling

▪ Journaling your investments allows you to keep track of your key learnings and become a
better investor over time.
▪ Update key learnings from the past weeks’/months' investments into your journal.
An effective journal includes the following elements (the more relevant details below the
better):
o The stock chart marked with your entry & exit.
o Your investment plan.
o A note of any areas where you need better clarity in decision making. Basic
o Did you follow/break rules?
• Write down what caused you to do that.
o What is your self-talk throughout the holding period?
• When you decided to buy.
• When you moved up stop loss.
• When you closed the position.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Chart with Entry and Exit (Sample - AAPL)

AAPL, Weekly
5
Hit Stop Loss @ 163.94.
4
Support @ 170
Move up Stop Loss @ 163.94
3
Support @ 153
2 Move up Stop Loss @ 146.94
Support @ 142
Move up Stop Loss @ 136.74
Buy on Rebound on EMA50.
1
Support @ 108
Stop Loss @ 102.94

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Investment Plan & Journaling (Sample – AAPL)
4.8

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Section 8 - Appendices

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Useful Links
 Investment Jargon definitions  US Stock market news
o www.investopedia.com (*) o www.marketwatch.com (*)
o www.cnbc.com (*)
 Stock Screening & Analysis
o www.bloomberg.com
o finviz.com (*)
o www.scmp.com (China News)
• Main Screener
o stockrow.com (*) or morningstar.com  Free Stock Charts
• Multiyear study o www.tradingview.com/e (*)
o marketbeat.com (*)  Sector Performance
• Latest Analyst Mean Target Price o http://www.sectorspdr.com/sectorspdr/tools/sect
o www.briefing.com (*) or-tracker
• Latest Stock Split Calendar  Economic Indicators timing & results
o www.stocksplithistory.com • www.forexfactory.com (*)
• Stock Split History  S&P 500 Historical PE ratio
o www.dividend.com • www.multpl.com/
• Upcoming dividend and dividend history

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Dividends
 A dividend is the cash that a company pays out regularly to shareholders
from its Earnings.
 Dividends are Taxable.
 Most US Companies declare their dividends on a Quarterly basis.
 Not all companies pay dividends.
 Is a Company that pays dividends better than a company that doesn’t?
o A company that is undergoing/planning for expansion typically does not pay
dividends to reserve the capital for expansion.
o Avoid looking only for just dividend paying stocks as you will miss a lot of high
growth stocks that don’t pay dividends.
 A Stock Price may drop when dividends are declared. Take note of the ex-
dividend date.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Dividend Entitlement
Ex-Dividend Date: Payout Date:
• If you purchased the stock • The date at which the
prior to the Ex-dividend dividend will be paid to
date, and sold it before the shareholders.
the Ex-dividend Date, you
WILL NOT be a
stockholder on the Record
Date and you WILL NOT
receive the upcoming
declared dividend
Record Date:
payment.
• The date you must be a shareholder to receive the upcoming
declared stock dividend payment.
• The Record Date determines the Ex-dividend Date which is set
two stock market trading days prior to the Record Date.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
F R E E D O M Share buyback
 A company may buy back its own outstanding shares from the public.
 This is a way for the company to return profit to its shareholders.
EPS =
Price = PE x EPS

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
S&P 500 membership criteria

 Location: US Companies – determined by location of assets & revenue, corporate structure, its SEC
filing type and its exchange listings.
 Sector Balance - Companies’ industry classifications contribute to the maintenance of a sector
balance that is in line with the sector composition of the universe of eligible companies within the
defined market cap range.
 Market Capitalization - More than USD 6.1 billion.
 Public float - At least 50% of shares are publicly traded.
 Financial Viability - At least 4 consecutive quarters of positive reported earnings (excluding
extraordinary items and discontinued operations).
 Liquidity – Annual ratio of dollar value to float adjusted market capitalization is at least 1
 Trading activity: Minimum monthly trading volume of 250,000 shares in each for the 6 months
leading to the evaluation date.
 Listing - All companies listed in the NYSE and Nasdaq stock markets.

®
GROWTH GROWTH
INVESTING
INVESTING
EXPRESS
Debt/Equity Ratio Liabilities

Assets
𝑻𝒐𝒕𝒂𝒍 𝑳𝒊𝒂𝒃𝒊𝒍𝒊𝒕𝒊𝒆𝒔
 Debt/Equity Ratio = Shareholders’
Equity
𝑺𝒉𝒂𝒓𝒆𝒉𝒐𝒍𝒅𝒆𝒓𝒔 𝑬𝒒𝒖𝒊𝒕𝒚
 Use this criteria for analysis only, not for shortlisting.

 A high debt/equity ratio generally means that a company has been aggressive in
financing its growth with debt. The interest payable will reduce the earnings, but it
improves the ROE.
 A high debt/equity ratio typically gives high ROE. Therefore, it is important to
consider ROE together with Debt/Equity Ratio or ROA.
 The debt/equity ratio also varies according to industry. e.g.,
o capital-intensive industries such as auto manufacturing tend to have a debt/equity ratio
above 2, whereas personal computer companies have a debt/equity ratio of under 0.5.
o Banks usually have a Debt/Equity ratio above 1.

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Section 0 - Overview of Growth Investing

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All the best!

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How would you choose a Good Stock?

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Growth investing strategy high level overview

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Why is Fundamental Analysis important?

 There are several advantages of conducting Fundamental Analysis.

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Advantage of Fundamental + Technical Analysis

Is this the best one?

Is this the right price? Exit?

What drives a Company’s Fundamental Value?

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 Understand the main filter criteria and rationale behind it.

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Step 1 – Filter high growth stocks

o Basic elements to filter for good quality stock.

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#1.1 Basic Filter

 Market Capitalization ≥ 2 billion

 Analyst Recommendation Buy or Better

 Institutional Ownership > 60% > 80%

 Average Volume > 1 million

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Why High Market Capitalization

 Higher liquidity / volume.

 More availability in CFD & Options.

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Institution Retail Investor

Why High Institutional Ownership

o High Institutional Ownership shows strong _______

o Changes to institutional ownership may be an indicator of major buying or selling

o High trading volume can cause large movements in share price.

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Which Sectors and Industries should you choose?

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3 major financial statements (simplified)

Gross Income (A)

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Current Asset: Shareholders’

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How do you know a company is profitable?

EPS (Earnings per Share)

Exercise/Quiz: Which company would you invest?

How do you know whether the returns are good?

Income Statement Return on Equity Balance Sheet

#1.2 Profitability – Why is Profitability important?

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Return On Equity (ROE) Return On Asset (ROA)

Refer to Process Map

 ROE (Return on Equity)

 ROA (Return on Asset)

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How does a company make more money?

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#1.3 EPS Growth

Exercise: Which company would you invest in?