Individual Term Project - Daniel Figueroa

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Individual Term Paper: Systematic Value Investing

Daniel Figueroa

Pepperdine University

DESC 656.44: Quantitative Analysis for Business Operations

Instructor: Dr. Owen P. Hall, Jr.

December 3, 2009


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Individual Term Paper: Systematic Value Investing Strategy

Table of Contents

Introduction..........................................................................................................................4

Market Outlook....................................................................................................................4Forecasting Method.........................................................................................................5

Analyze Stock....................................................................................................................10Positions Sizing.................................................................................................................16In Summary.......................................................................................................................19

Table of Figures & Tables:

Figure 1 (Chart: VEU)........................................................................................................6Figure 2 (Chart: VTI)...........................................................................................................7Figure 3 (Advisory Sentiment Chart)..................................................................................8Figure 4 (U.S. Industry Bell Curve)....................................................................................9Figure 5 (Chart: XLV).........................................................................................................9Figure 6 (Chart: EMS - Eyeballing)..................................................................................10Figure 7 (Chart: EMS Regression Trend Line)..............................................................11Figure 8 (Chart: EMS 10m EMA)..................................................................................11Figure 9 (Probability Chart: EMS)....................................................................................14Figure 10 (Probability Chart: EMS)..................................................................................15

Table 1 (Markets)................................................................................................................5Table 2 (Intrinsic Value: EMS).........................................................................................12Table 3 (Risk Tolerance Beta Weight)...........................................................................17Table 4 (Existing Portfolio)...............................................................................................18Table 5 (New Portfolio).....................................................................................................19

Table of Appendix:Appendix A (Correlation between VTI & VEU)..............................................................20Appendix B (EMS Bearish Break-out)............................................................................21Appendix C (Correlation between EMS & XLV).............................................................22Appendix D (NPV of EPS)................................................................................................23Appendix E (NPV of FFCF)..............................................................................................24Appendix F (Key Fundamental Ratios for EMS)..............................................................25Appendix G (Portfolio Betas)............................................................................................26

Executive Summary

The objective of this paper is to illustrate the process of opening a new stock

position within an existing portfolio, utilizing a systematic value investing strategy. This

strategy is unique in so that it was designed to utilize many of the quant analysis methods

learned throughout the trimester. The investment strategy is broken down into four main

tasks as illustrated below:

Market Outlook Identify Sector Analyze Stock Position Sizing

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The market outlook identifies where the market is as in relation to where it has

been over the past months. Looking at both the global and U.S. equity markets with the

use of exponential moving averages, a bullish trend emerges. From there the healthcare

sector was chosen using technical analysis. Of all the stocks in the healthcare sector,Emergency Medical Services Corp (NYSE: EMS) was chosen due to its bullish technical

indicators and its strong key fundamentals. Some of the tools utilized in the analysis

consisted of forecasts: moving averages and regression lines, simple regression, factor

analysis and net present value.

Once the stock was chosen, stop-losses and a target were determined using

standard deviations for probabilities. The next step in the process was to determine the

desired portfolio beta and identify the position size for EMS. The last step performed

was to calculate how many share of EMS were to be purchased.

Using this strategy the value investor, with conservative growth tolerance, would

purchase 167 shares of EMS. The investor would expect less volatility than the stock

market as a whole and would be proactive in managing risk. The investor should expect

to lose a maximum of $1,250.83 if the position goes completely against him. This would

be an expected portfolio drawdown of 1%.

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Introduction

The objective of this paper is to illustrate the process of opening a new stock

position within an existing portfolio, utilizing a systematic value investing strategy. Thisstrategy is unique in so that it was designed to utilize many of the quant analysis methods

learned throughout the trimester. Explanations of the formulas for the tools used are not

within the scope of this paper, identifying how to use quant tools is of most importance.

The investment strategy to open a new position is broken down into four main tasks as

illustrated below:

Market Outlook Identify Sector Analyze Stock Position Sizing

Each main task will include its own underline assumptions. However, the overallstrategy has its own main assumptions. This paper assumes:

That the investor is interested in opening a new long, unlevered, position.

It assumes that the investor will only be watching the market on a monthly basis.

Desires to minimize draw-downs.

It assumes that no traditional sector diversification is desired.

Lastly, that the objective is to use a safe systematic strategy, not create the holygrail of investment strategies.

Because this paper focuses on entering a new position it will not include portfolio

performance. This paper also does not provide expected returns because CAPM is not

utilized. Nor does this paper provide back-testing because doing so tends to shape a

strategy towards unpredictable capital gains and away from risk management. This paper

does use the portfolios beta to match the investors known risk tolerance. It will focus

on being proactive in managing risk and reactive to responding to market conditions.

Market Outlook

This paper uses a liberal top-down analysis. A top-down analysis is described as:

An investment approach that involves looking at the "big

picture" in the economy and financial world and then

breaking those components down into finer details. Afterlooking at the big picture conditions around the world, the

different industrial sectors are analyzed in order to select

those that are forecasted to outperform the market. From

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this point, the stocks of specific companies are furtheranalyzed and those that are believed to be successful are

chosen as investments (Investopedia, 2009)

The use of the word liberal in the earlier statement is used because this paper will

factor in some underline market assumptions. Due to the accessibility and liquidity with

exchanges for stock market indices, the paper assumes weak-form market efficiency.

This means that all known economic fundamental factors are priced into the market

indices. The technical analysis used in this section is not to beat the market, but simply

identify where the market is as in relation to where it has been i.e. a map. The trend

identification takes into consideration Newtons First Law of Motion that an object in

motion will remain in motion unless acted upon by another force.

Normally an investor should look at a minimum of the five markets, as listed in

the table below:

Market Ticker Description

Bonds IEF iShares Barclays 7-10 Year Treasury

Commodities DBC PowerShares DB Commodity Index Tracking

Real Estate VNQ Vanguard REIT Index ETF

Total US Stock Market VTI Vanguard Total Stock Market ETF

Total World Stock Market VEU Vanguard FTSE All-World excluding - US ETFTable 1 (Markets)

For brevity and purposes of this paper we will only analyze the Total World Stock

Market, which excludes the U.S., and the Total U.S. Stock Market. The main market

outlook task is broken down into three subtasks as illustrated below:

Forecasting Method Analyze Markets Sector Selection

Forecasting Method

Since the paper assumes all known economic fundamental data is incorporated

into the indices prices, it then only has to determine if the stock market is in a bullish or

bearish trend. To do so this strategy will utilize technical analysis with a 10 month

exponential moving average as the forecasting tool.

The 10 month (m) exponential moving average1 (EMA) is represented on the

charts as a green line. To establish whether the market is bearish or bullish, this paper

uses an end-of-month close, moving average crossover. If the monthly close is above the

1 The exponential moving average is based off industry standards and not optimized for mean absolutedeviation.

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10m EMA, it is assumed the market is in a bullish trend. If the monthly close is below

the 10m EMA it is assumed the market is in a bearish trend.

The charts are setup to display 5 years worth of monthly data. Each month is

represented by 1 bar. This setup will help reduce noise, being that the objective is toperform investment analysis on a monthly basis using a systematic strategy.

Analyze Markets

As stated prior, this paper will only analyze two markets the Total World Stock

Market (VEU), which excludes the U.S., and the Total U.S. Stock Market (VTI). Since

there is a high correlation between VTI and VEU, VTI will only be analyzed if VEU is

found to be in a bullish trend.

Running a simple regression on VTI and VEU, with VEU being the independent

variable, VTI has a coefficient of 0.76. Of that correlation, 85% of the volatility can be

explained by the relationship between the two. (Appendix A)

Analyze VEU

Below is the chart for Total World Stock Market (VEU):

Figure 1 (Chart: VEU)1

1 "Total World Stock Market (VEU)." Chart. Total World Stock Market (VEU). Thinkorswim. Web. Nov.2009. https://www.thinkorswim.com/tos/client/index.jsp

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The last monthly bar clearly closed above the 10m EMA. This means it is

forecasted that the international stock market will likely continue in a bullish direction.

As a result it may be safe to enter new positions given further research.

Analyze VTI

Below is the chart for the Total U.S. Stock Market (VTI):

Figure 2(Chart: VTI)1

The last monthly bar clearly closed above the 10m EMA. This means it is

forecasted that the U.S. stock market will likely continue in a bullish direction. As a

result it may be safe to enter new positions given further research.

Analyze Market Sentiment

Sentiment indicators are used in technical analysis to quantify the levels of

optimism or pessimism present in the market (Investopedia, 2009). The advisory

sentiment indicator is a judgmental system used to quantify a qualitative response from a

sample of financial advisors on whether being bullish or bearish. Below is the advisor

bullish/bearish sentiment chart:

1 " Total U.S. Stock Market (VTI)." Chart. Total U.S. Stock Market (VTI). Thinkorswim. Web. Nov. 2009.https://www.thinkorswim.com/tos/client/index.jsp

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Figure 3 (Advisory Sentiment Chart)1

Currently 50% of financial advisors are bullish, while only 19% are

bearish. This means there is a sense of optimism in the market, but being that it is below

60% it is not euphoric or resemblance of a bubble. As a result todays market conditions

may be sustainable. It may also be safe to enter new positions given further research.

This sentiment indicator may also be used for identifying a method of entering a

position. If the bullish sentiment is trending down or low, it may be best to dollar cost

average into a position since pricing may stay low or drop. If bullish sentiment is

trending up, it may be best to enter on a lump sum basis to keep average cost low. It may

also be best to sit on the sideline if the bullish sentiment is extremely high. For this paper

we will only consider a lump sum deposit.

Sector SelectionTo select a sector this paper uses the U.S. Industry Bell Curve. The criteria for

this strategy will be to find an industry that is not bearish or over-bought. Preferably it

would be between the 40% and 70% range.

1 "Advisor Sentiment Chart."Advisor Sentiment Chart. Investors Intelligence. Web. Nov. 2009.http://www.investorsintelligence.com/x/default.html

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Figure 4 (U.S. Industry Bell Curve)1

For brevity of the paper the Healthcare (HEAL) industry was selected for further

analysis. It has a bullish percentage score of 59% which falls within the desired criteria.

A search for healthcare exchange traded funds (ETF) reveals a Spyder fund as a

candidate. Below is the chart for Healthcare SPDR ETF (XLV):

Figure 5 (Chart: XLV)2

The last monthly bar clearly closed above the 10m EMA. This means the forecast

is that the healthcare sector will continue in a bullish direction. As a result it may be safe

to enter new positions within this sector, given further research.

1 " U.S. Industry Bell Curve." U.S. Industry Bell Curve. Investors Intelligence. Web. Nov. 2009.http://www.investorsintelligence.com/x/default.html2 " Healthcare SPDR ETF (XLV)." Chart.Healthcare SPDR ETF (XLV). Thinkorswim. Web. Nov. 2009.https://www.thinkorswim.com/tos/client/index.jsp

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Using the eyeballing method the stock appears to be in an upward trend. This

means it would be advisable to continue analyzing with a regression trend line.

The next forecasting tool is the regression trend line. While regression trend lines

are typically performed on scatter plots, it is performed on this bar chart using end-of-month data.

Figure 7(Chart: EMS Regression Trend Line)1

As predicted prior via the eyeballing method, EMS is verified as being in an

upward trend by the regression trend line. This means it would be advisable to continue

analyzing with a 10m EMA.

The exponential moving average is best used when a stock is trending. If the

stock is consolidating sideways, a momentum indicator may be more useful. Since the

regression trend line indicates an upward trend, a 10m EMA may be overlaid on the chart

to identify bullishness.

Figure 8 (Chart: EMS 10m EMA)2

1 " Emergency Medical Services Corp (NYSE: EMS)." Chart.Emergency Medical Services Corp (NYSE:EMS). Thinkorswim. Web. Nov. 2009. https://www.thinkorswim.com/tos/client/index.jsp2 " Emergency Medical Services Corp (NYSE: EMS)." Chart.Emergency Medical Services Corp (NYSE:

EMS). Thinkorswim. Web. Nov. 2009. https://www.thinkorswim.com/tos/client/index.jsp

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As predicted prior via the eyeballing and regression trend line methods, EMS is

verified as being in an upward bullish trend by using a 10m EMA since it did close above

the moving average3. This means it would be advisable to move into analyzing the stocks

fundamentals.

Stock: Fundamental Analysis

A common question asked is why an investor should perform fundamental

analysis on individual stocks and not the market indices. If market efficiency is assumed

with the indices why should it not be assumed with individual stocks? A response would

be that individual stocks hold more unsystematic risk than do an index, thus more

volatile. Also, if an investor buys a stock during what is forecasted to be a short down

turn, and the stock has strong fundamentals, then he is implementing a value investment

strategy. If that same investor does so with a stock with weak fundamentals, then he is

placing a speculative gamble and risks the company filing bankruptcy. This paper will

focus on implementing a value investment strategy.

Before performing fundamental analysis, it is crucial to identify the correlation

between EMS and XLV to ensure that the investment is in the correct sector. Again,

using a simple regression between EMS and XLV, with XLV being the independent

variable, a coefficient of 0.91 is identified. Of that correlation, 19% of the volatility can

be explained by the relationship between the two (Appendix C). Thus, by investing in

EMS one is investing in the healthcare sector.

Now that reasoning for a value investment strategy and correlation has been

established, EMS intrinsic value must be identified. To do this paper implements two

strategies: discounting all future earnings per share (EPS) and discounting all future free

cash flows (FFCF). To do this a net present value calculation is performed. See

Appendix D for the NPV on EPS. See Appendix E for NPV on FFCF.

Ticker Price NPV of EPS Potential Return NPV of FCFF Potential Return

EMS 47.81 64.25 34% 105.23 120%Table 2 (Intrinsic Value: EMS)

3 Note that the bearish trend which ended in July due to the close above the 10m EMA was not confirmeduntil August when the move exceeded 1 trailing standard deviation. See Appendix B

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EMS is currently selling at a discount to both its EPS and FFCF. Table 1

indicates that there may be a potential return between 34% based off EPS and 120%

based of FFCF. This is not to be interpreted as a guaranteed return, but instead akin to a

moving magnet, where current price should gravitate slowly towards that direction.Being that EMS is selling at a discount, this means it would be advisable to analyze the

companys key fundament ratios.

The companys key fundamental ratios can be analyzed using multifactor

analysis. We will analyze EMS ratios against its industrys ratios. The key ratios used

in this strategy as the factors are: P/E, P/S, P/B, P/CF, ROE, D/E and CR. These ratios

along with 3 red flag indicators will be used as the factors. The 3 red flag indicators look

for incongruence with revenues, operating incomes and receivables on an annual basis.

See Appendix F for data.

In order to analyze the data the key ratios and red flags are converted to points.

The points are given based on its performance against constraints1 for the factors. A 1 is

given if it beats the constraint, a 0 if it matches the constraint, and a -1 if it does not meet

the constraints. For example, the factor P/S has a constraint of being less than 2.5. EMS

beats the constraint since it is 0.82, thus given a 1. The industry does not beat the

constraint since it is 8.9, thus given a -1. The factors are then given weights2 based on the

relevance to value investing.

A multifactor analysis is performed to identify whether the chosen company is

stronger than its represented industry. If the industry was to be stronger than the

company, then the company would not be a reasonable investment. Another constraint

used to ensure strong fundamentals is that the outcome must be greater than 100. In

EMS case it is both stronger than its sector and greater than 100. This would mean that

an investment in EMS would be reasonable.

1 For brevity of the paper the constraints are not listed.2 Weights are subjectively chosen using a judgmental system.

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Determine Stop-losses

There will be two stop-losses implemented with this strategy. One is intraday,

used for preservation of initial capital. The other is end-of-month, used for capital gains

preservation and change in trend direction.The intraday stop-loss is a point at which the stock has decisively moved against

the position on an intraday basis and actions for preservation of capital should be

implemented. The first task for determining an intraday stop-loss is to set a time horizon.

The time horizon chosen for this model is 2 months1. This keeps volatility within a

predictable timeframe.

The intraday stop-loss for EMS is going to be set on a probability of it touching 1

standard deviation away from it current price. This would mean that there would only be

a 16% chance that the downward move to $40.32 is due to monthly noise fluctuation.

This is illustrated using a probability analysis chart as shown below:

Figure 9 (Probability Chart: EMS)2

With the intraday stop-loss being a standing order, a second stop loss used for

trend direction and capital gains preservation is also to be determined. This is not a

standing order. Instead it should be reviewed on an end-of-month basis.

This end-of-month stop order is a trailing stop that shall be placed on a monthly

basis if the price closes below the 10m EMA. This will preserve capital gains if a change

in trend occurs.

Determine Target

1 This timeframe also matches the price target timeframe.2 " Emergency Medical Services Corp (NYSE: EMS)." Probability Chart.Emergency Medical ServicesCorp (NYSE: EMS). Thinkorswim. Web. Nov. 2009.https://www.thinkorswim.com/tos/client/index.jsp

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The target is not to be considered an expected return, but instead a point at which

new decisions must me made. The target is a point at which the stock has decisively

moved into a favorable position and not determined to be noise fluctuation. Once the

target is hit, the stop should then be moved to a risk free position. The first task fordetermining a target is to set a time horizon. The time horizon chosen for this model is 2

months. As stated prior, this keeps volatility within a predictable timeframe.

The target for EMS is going to be set on a probability of it touching 1 standard

deviation away from it current price. This would mean that there would only be a 16%

chance that the move to $58.40 is due to daily noise fluctuation. This is illustrated using

a probability analysis chart as shown below:

Figure 10(Probability Chart: EMS)

1

While a buy and hold strategy could be implemented since fundamental analysis

was used in determining an appropriate stock, our objective is to minimize draw-downs

and match risk to the investors risk profile. In doing so, once the target of $58.40 is hit,

a standing post-trade2 stop-loss order should be placed at the trade order price of $47.81.

This preserves initial capital and creates a pseudo risk-free trade.

Like the initial trailing stop, the end-of-month stop order shall be placed on a

monthly basis if the price closes below the 10m EMA. This will preserve capital gains if

a change in trend occurs.

1 " Emergency Medical Services Corp (NYSE: EMS)." Probability Chart.Emergency Medical ServicesCorp (NYSE: EMS). Thinkorswim. Web. Nov. 2009.https://www.thinkorswim.com/tos/client/index.jsp2 This is not to be confused with the stop-loss orders set during the initial position opening. This positionvoids those orders, as the target has been met.

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Positions Sizing

Our objective in this section is to open a new long position in EMS. The main

position sizing task is broken down into three subtasks as illustrated below:

Determine Risk Tolerance Determine Portfolio Beta Determine Position SizeWhen devising the position size certain assumptions are made. This paper

assumes the following:

That the portfolio performance will not be benchmarked1; instead it will adhere tothe investors risk tolerance profile.

The investor is adding to a current portfolio.

To preserve capital the investor will not place an initial position with a sizegreater than 10% of the total portfolio.

Available cash for investment equals $10,000. Once a position is opened, no rebalancing of the position shall take place to

maintain weights.

The portfolio consists only of equities.

Non-round lot sizes are acceptable

The portfolio is not required to be fully invested.

It will not use the Capital Asset Pricing Model (CAPM) to project expectedreturns due to the unreliability of predicting expected market returns one year out.

While Beta within itself is designed to predict future volatility of a security or

portfolio in comparison to the total market and is dynamic and unreliable; used in

conjunction with other constraints it becomes useful, thus used in designing this portfolio.

Determine Risk Tolerance

In order to create a functional portfolio, the investors risk tolerance should be

identified. There are six main types of profiles as follows: Cash, Conservative, Moderate

Conservative, Conservative Growth, Moderate Growth and Aggressive Growth. Betas2

are then assigned to the profiles as in the following table:

1 The total U.S. stock market is used as a benchmark against risk, but not performance.2 Betas are subjectively chosen using a judgmental system.

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Risk Tolerance

Desired Beta

Weighted Portfolio

Cash Only 0

Conservative 0.25

Moderate Conservative 0.50

Conservative Growth 0.80Moderate Growth 1.00

Aggressive Growth 1.30Table 3 (Risk Tolerance Beta Weight)

Being that the objective of this paper is to add a position into an existing portfolio,

it will be assumed that such questionnaire has been assessed. The resulting assessment

will be that the investor is conservative growth with a desired beta of 0.80. This means

the investor wishes to be correlated with the market, but slightly less volatile.

Determine Portfolio Beta

The beta weighting of the existing portfolio should now be calculated. This is

needed to determine what the existing portfolio beta is in relation to its desired beta.

When adding the new position to the existing portfolio, it should rebalance the portfolio

beta to the desired point. Below is the table of the current holdings in the portfolio along

with their respective sizes, betas and weighted betas:

BP = (B1)($Position 1 /$Portfolio ) + (B2)(

$Position 2 /$Portfolio ) + (Bn)($Position n /$Portfolio )

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Holdin

g

Position Size Beta1 Weighted Beta

WMT $12,000 0.24 0.03

XOM $14,000 0.46 0.06

ADP $12,000 0.57 0.06UPS $10,000 0.80 0.07

TRC $10,000 1.00 0.09

JOE $9,000 1.13 0.09

CTO $13,000 1.31 0.16

IEP $9,000 1.12 0.09

RX $10,000 1.06 0.10

INTC $9,000 1.16 0.10

Total $108,000 0.86

Table 4 (Existing Portfolio)

Determine Position Size

Since the portfolio beta is 0.86, our goal would be to add EMS to the portfolio in

such a manner that our beta would gravitate towards 0.80. Our other constraint would be

that the position not be larger than 10% of the new portfolio size. For this paper the

investor has $10,000 to ideally add into the portfolio. Thus the new size should be the

lesser of 10% or cash-on-hand. Since $10,000 is less than $18,0002 the new position

should not exceed $10,000.

To determine the required weighted beta for EMS the following calculation is

performed:

WEMS = (BEMS)($Position EMS /$Portfolio )

BEMS = Beta for EMSWEMS = Weighted Beta for EMS

By plugging this formula into the excel table and leaving EMS position at zero it

forces WEMS to be zero. This gives an initial portfolio beta of 0.86. Then the max

position size of $10,000 is entered for EMS size, which yields a portfolio beta of 0.78.

EMS size is then decreased in $1,000 increments to force the desired portfolio beta of

0.80. The resultant size for EMS is $8,000 with a weighted beta of 0.03. This also

1 See Appendix G for betas2 ($108,000 + $10,000) x 10% = $18,000

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changes the weighted beta for each of the existing holdings since the portfolio size is now

$116,000.

Holdin

g

Position Size Beta Weighted Beta

WMT $12,000 0.24 0.02

XOM $14,000 0.46 0.06

ADP $12,000 0.57 0.06

UPS $10,000 0.8 0.07

TRC $10,000 1 0.09

JOE $9,000 1.13 0.09

CTO $13,000 1.31 0.15

IEP $9,000 1.12 0.09

RX $10,000 1.06 0.09INTC $9,000 1.16 0.09

EMS $8,000 0.39 0.03

Total $116,000 0.80

Table 5 (New Portfolio)

Once a position size is determined, the required stock shares needed may be

calculated. This is performed by dividing the position size by the price per share. For

EMS it is as follows: $9,000 / $47.81 = 167.33 167 shares.

In Summary

Using this strategy the value investor, with conservative growth tolerance, would

purchase 167 shares of Emergency Medical Services Corp (NYSE: EMS). The investor

would expect less volatility than the stock market as a whole and would be proactive in

managing risk. The investor should expect to lose a maximum of $1,250.831 if the

position goes completely against him. This would be an expected portfolio drawdown of

1%2.

1 $1,250.83 = ($47.81 - $40.32) x 1672 1% = $1,250 / $116,000

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Appendix A (Correlation between VTI & VEU)

Historical Prices for VTI. Yahoo! Finance. Web. Nov. 2009.http://finance.yahoo.com/q/hp?s=VTI

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Appendix B (EMS Bearish Break-out)

" Emergency Medical Services Corp (NYSE: EMS)." Chart.Emergency Medical ServicesCorp (NYSE: EMS). Thinkorswim. Web. Nov. 2009.https://www.thinkorswim.com/tos/client/index.jsp

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Appendix C (Correlation between EMS & XLV)

Historical Prices for EMS. Yahoo! Finance. Web. Nov. 2009.http://finance.yahoo.com/q/hp?s=EMS

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Appendix D (NPV of EPS)

"Price Check Calculator."Price Check Calculator. Smart Money. Web. Nov. 2009.http://www.smartmoney.com/pricecheck/?story=worksheet&nav=dropTab

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Appendix E (NPV of FFCF)

Cash Flows. Value Pro. Web. Nov. 2009. http://www.valuepro.net/cgi/valuate.pl

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Appendix F (Key Fundamental Ratios for EMS)

Key Ratios: EMS. MSN Money. Web. Nov. 2009.http://moneycentral.msn.com/investor/invsub/results/compare.asp?Symbol=EMS

TICKER EMS Industry EMS Industry

Date 11/29/2009 Alt1 Alt2 WeightsP/E 20.2 37.8 -1 -1 50

P/S 0.82 8.9 1 -1 60

P/B 3.2 7.53 0 -1 70

P/CF 12.2 38.4 1 -1 80

ROE 17.8 21.4 1 1 60

D/E 0.71 0.31 -1 0 70

CR 2.7 2.4 1 1 70

Red Flag #1 Red Flag -1 0 85

Red Flag #2 Good 1 0 85

Red Flag #3 Good 1 0 85

CQ Total

Revenue 665.06 235 -135PQ TotalRevenue 379.33

CQ Op. Inc. 55.47

PQ Op. Inc. 54.88

CQ Receivables 464.24

PQ Receivables 552.8

Red Flag #1 CQ 8.34%

Red Flag #1 PQ 14.47%

Red Flag #2 CQ 69.80%

Red Flag #2 PQ 145.73%

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http://moneycentral.msn.com/investor/invsub/results/compare.asp?Symbol=EMShttp://moneycentral.msn.com/investor/invsub/results/compare.asp?Symbol=EMS


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Appendix G (Portfolio Betas)

Investing Stocks. MSN Money. Web. Nov. 2009.http://moneycentral.msn.com/investor/research/newsnap.asp

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http://moneycentral.msn.com/investor/research/newsnap.asphttp://moneycentral.msn.com/investor/research/newsnap.asp


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Individual Term Project - Daniel Figueroa

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