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© 2000 Arthur Andersen All rights reserved.
“A GPS in the Stock Market Jungle”
An Introduction to StockPointer©
for Investment Advisors
2007
Claude Morel
Senior Partner
Copyright © 2001 StockPointer©
EVA© is a registered Trademark of Stern Stewart & Co.
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“A GPS in the Stock Market Jungle”Contents
The basic Concepts behind StockPointer– EVA
– Economic Performance Performance Index (EPI)
– Intrinsic Value
– Future Growth Value
The StockPointer Functions– SPreport – EVA Executive Summary
– SPiX – Top 10, 20, 40, 80 or 100 stocks
– PfScan – Portfolio Analyzer
– MktScan – Market Analyzer
– SPfilter – Customized Evaluation Criterion
The value of StockPointer for an Investment Professional– Business Development
– Account Management
– Client Relationship
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“A GPS in the Stock Market Jungle”What is EVA?
''EVA © analysis is at the heart of understanding how companies create shareholder wealth. Most importantly, it helps investors measure and understand those factors that create or destroy value.'‘
Steven Einhorn, Global Investment Research, Goldman, Sachs & Co.
EVA (Economic Value Added) is a measure that takes the Cost of Capital out of the Net Operating Profit, in order to
have a real picture of the financial performance of a company, in face of its shareholders.
EVA is an estimate of the true “Economic Profit”, or the amount by which Net Operating Profit After Tax exceeds or
falls short of the required minimum rate of return that shareholders and lenders could get by investing in other
securities of comparable risk.
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“A GPS in the Stock Market Jungle”What is StockPointer ?
“EVA© is today’s hottest financial idea and getting hotter”
Fortune magazine
StockPointer© is a Web-based offering which provides key metrics and valuation graphics
using the EVA method in order to allow investments managers to rapidly detect stock investment opportunities.
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“A GPS in the Stock Market Jungle”How does StockPointer work?
Financial reports + figures
captured in the footnotes
Formatting
Validating
Enrichment
Transmitting
Internet
Adjust. NOPAT & CAPITAL
Data Management
Security & Access
Utilities & Administration
Reports Production
File server
StockPointer©
5600 US Stocks1200 Canadian Stocks
Intrinsic Value
SPiX –Top 40
Specific Analysis
Adjustments to NOPAT et CI
Reports & Graphs
Economic PerformanceMarket Performance
Accounting Performance
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“A GPS in the Stock Market Jungle”
The Enron Case: Difficult to mask EVA compared to Net Income and EPS1
1 Stern Stewart & Co.
Net income showed great Results
…while EVA showed not so great
What a customer will like about his Advisor using StockPointer ?
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“A GPS in the Stock Market Jungle”
EVA change explains market price more significantly than other typical measures1
1 Stern Stewart & Co.
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“A GPS in the Stock Market Jungle”StockPointer key Metrics To invest only in companies that create wealth for the shareholders
and are not overvalued by the market
Economic Performance Stock Price Evaluation
Identify the companies that properly manage their capital in the best
interest of their shareholders and generate a return that is higher than expected for a similar level of risk
Wealth Creation (or EVA) becomes criteria #1
Insure that stock is not over-priced compared to the company’s
Intrinsic Value
EVA-$ = NOPAT-$ – Cost of Capital-$
= ROC-$ – COC-$
= (ROC-%-COC-%) x Capital
> 0 if and only if ROC > COC
Performance Index = ROC / COC
Intrinsic Value = NPV of future EVA’s
Performance Index > 1 0.4 < P\IV < 2.5
« Better to invest in an economically sound company at the reasonable price than invest in a poor company at a cheap price »
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“A GPS in the Stock Market Jungle”
To align the risk associated with a portfolio with the degree of tolerance that the end-customer is
comfortable with
Level of risk associated with a stock
Adjust the desired level of risk of the overall portfolio using the Future Growth Value (FGV) calculation for each of its stocks
FGV = Market Value of Company – Current Operations Value
= MV – NPV of future Profits
= or < 0 for minimum risk
FGV < Acceptable Risk level
Other risk factors include:
- Sector over-weighting compared to Top-80
- P/IV too good to be true
- Profit and EVA going in different directions
StockPointer key Metrics
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“A GPS in the Stock Market Jungle”
SPiX-Top 100-US vs S&P 500
StockPointer really works
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“A GPS in the Stock Market Jungle”StockPointer Functions
Login/Logout
Individual Stock Basic Report
SPreport
Portfolio Analyser
PfScan
Market Analyser
MktScan
Best Cad/US Stocks
SPiX
Customize requests
SPfilter
IV Scenario Building
SPiV
PDF Printout
Feature+
Excel Export
Feature+
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“A GPS in the Stock Market Jungle”Customer Base (Canada)
StockPointer is currently a strategic tool for more than 275 investment professionals in Canada
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“A GPS in the Stock Market Jungle”PfScan© - Testimonies“Reviewing his portfolio with my top client (in terms of assets) based on PfScan convinced him of the great intrinsic value of his holdings”, Gilbert, FBN
“PfScan has been instrumental in consolidating all of one of my
customer’s accounts with me”, Richer, FBN
“PfScan has greatly helped us to tangibly demonstrate the value of our investment model ”, Leblanc, FBN
“Performing economic diagnoses of prospects’ portfolios
has lately been key in closing new clients ”, Viau, FBN
“PfScan has proven to be a very productive marketing tool in our process of creating and monitoring a portfolio model for our IA’s”, Roy, IAVM
“Comparing the intrinsic value of stocks through PfScan has
significantly helped us to put together a US-Stock portfolio
comliant with the objectives of our clients”, Leclaire, RBC
“Portfolio compliancy processes at the branch and firm levels could be much more productive and efficient if PfScan was used throughout the organization”, Bergeron, FBN
“We appreciate very much the added value of StockPointer and particularly its new function PfScan that allows us to capture at a glance the economic value/risk of a portfolio.”,Gendreau ,RPFL
“Just recently I did a PfScan for one of our largest clients- they were so impressed, not only did they approve all of our suggestions within the portfolio, other clients have since called wanting to see a PfScan of their own portfolio!”, Misener,Talbet, IAVM
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“A GPS in the Stock Market Jungle”Most recent Testimonies
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“A GPS in the Stock Market Jungle”Most recent Testimonies
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“A GPS in the Stock Market Jungle”
What will StockPointer do for a Financial Professional?
Develop a special relationship between you and your client– For any impromptu phone call, the SPreport will instantaneously allow you
to have a strong position on any company/stock– The SPreport is the most complete documentation you can give to a
customer in regard to any specific stock– The list of Peers in the SPreport allows comparisons with any other
comparable company or competitor
Business Development & Prospecting– SPiX and SPfilter will help you in the identification of prospect Buys, using a
series of your own (or already defined) specific criteria's– PfScan is the best tool to analyze a current prospect portfolio and see the
winners/losers amongst the included stocks ….then SPiX, PfScan and MktScan will allow you to make appropriate
recommendations, based on the real economic value of a company and on the Market composition and trends
Account Management– SPreport, PfScan and MktScan will be of great support in respecting any
client compliancy rule
© 2000 Arthur Andersen All rights reserved.
“A GPS in the Stock Market Jungle”
Thank You
***********************You can subscribe Now!!!
atwww.stockpointer.ca
User-ID = clientPassword = synchro
© 2000 Arthur Andersen All rights reserved.
“A GPS in the Stock Market Jungle”
Sample Reports
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“A GPS in the Stock Market Jungle”
A sample standard EVA report from StockPointer - Page 1-A
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“A GPS in the Stock Market Jungle”
A sample standard EVA report from StockPointer - Page 1-B
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“A GPS in the Stock Market Jungle”
A sample standard EVA report from StockPointer - Page 2
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“A GPS in the Stock Market Jungle”
A sample standard EVA report from StockPointer - Page 3
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“A GPS in the Stock Market Jungle”
A sample standard EVA report from StockPointer - Page 4
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“A GPS in the Stock Market Jungle”Analyzing a Portfolio: PfScan©
Using a standard Portfolio from a customer…
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“A GPS in the Stock Market Jungle”Analyzing a Portfolio: PfScan©
…to perform a Portfolio assessment
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“A GPS in the Stock Market Jungle”SectorTrends
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Cnd MktScan
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0.5
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-19.0% -14.0% -9.0% -4.0% 1.0% 6.0% 11.0% 16.0%
Indice de risque (- FGV / VE)
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Consommation discrétionnaire
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Technologie de l'information
Télécommunications
Services aux collectivités
Moyenne
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Ind.
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SectorScan
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“A GPS in the Stock Market Jungle”SPfilter