Tag: Equity Analysis

Using Implied Volatility to Predict Equity/ETF Returns

During a discussion with an knowledgeable options trader, I was told the significance of interpreting the "Implied Volatility Skew" for stocks and given a paper to read for homework. To get a basic understanding of Implied Volatility Skew see this link here. The paper I was told to read was "What Does Individual Option Volatility Smirk Tell Us About Future Equity Returns" by Yuhang Xing, Xiaoyan Zhang and Rui Zhao. In their paper they show empirically, using their SKEW measure, allowed one to p

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GET FREE FINANCIAL DATA W/ PYTHON (EARNINGS ESTIMATES-FROM YAHOO FINANCE)

Today I present a simple function to extract Earnings Estimates from Yahoo Finance. If you have any questions feel free to leave it in the comments. This code uses Python 3 on Windows 8.1 but could be easily adapted for Python 2 by changing the 'urllib' import. First we import the necessary packages into our programming environment. I also suppress warnings for the deprecation warning for the Pandas "Dataframe.convert_objects()"method within the scraper function that follows. This function t

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Could SPY ETF Component Participation Have Alerted Us to Sell (Hedge) Prior to the Recent Market Downturn?

This is the Python Code version of a guest post presented here on RectitudeMarket.com. If you would like to read the analysis without the Python code please click the link above. To market pundits and casual observers the recent correction in equity markets appeared as a surprise. Overall headline economic data was positive at best and mixed at worst. Domestically, capital markets had been looking ‘ok’ while most of the major volatility was taking place abroad in emerging markets, and commodity

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Guest Post Previously Featured on RectitudeMarket.com (09/02/2015)

**Note: This post already appeared as a guest post on rectitudemarket.com. The reason I'm posting this article when it is 'outdated', is twofold. 1) I think it's beneficial to review previous works especially when one has the benefit of hindsight. This helps us determine the accuracy and bias of the research presented. 2) I further introduce the concept of conditional cumulative returns, which adds insight to what happens to our securities' returns given some other event occurring. In this case,

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Was David Woo Right; Was the Selloff Exacerbated by Risk Parity Strategies?

Today after the close Bloomberg TV had David Woo, Managing Director and Head of Global Rates and Currencies Research at Bank of America/Merrill Lynch, on to provide some insight regarding recent market action. More specifically, he addressed how Chinese and American markets are linked. He dropped a lot of gems during his segment but one point really struck a chord with me. He said that the recent selloff has likely been exacerbated by "Risk Parity Guys". If you're unfamiliar with 'risk parity'

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Composite Macro ETF Cumulative Return Momentum (08.16.2015)

Here are the updated ETF components I'm using to construct the ETF composites. Last 504 Trading Days Composite ETF Cumulative Returns Last 252 Trading Days Composite ETF Cumulative Returns Last 126 Trading Days Composite ETF Cumulative Returns Last 63 Trading Days Composite ETF Cumulative Returns last 21 Trading days Composite ETF Cumulative Returns Last 10 Trading days Composite ETF Cumulative Returns Blog RSS #block-yui_3_17_2_4_1439677863749_22267

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Price Dispersion as a Smart Money Indicator

Before I get into the topic at hand, let me say I have not seen the following stock price data interpreted or studied like I am about to show you. As far as I am aware my approach is unique in that it is not overly complicated, can be generalized across a large cross section of asset class ETFs, and makes intuitive sense regarding market structure. Before I introduce the chart it is important that I clarify some definitions. What is Price Dispersion? I'm sure this may have many meanings amon

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Composite Equity ETF Analysis (8/10/2015)

While I continue to update the ICC Valuation methodology I plan to post more of the custom charts I use to gain insight into current market structure, momentum, and relative value. Updated Composite ETF List Best vs Worst Performing ETF Composite L/252 Days Best vs Worst Performing ETF Composite L/63 Days Best vs Worst Performing ETF Composite L/21 Days BarPlot Cumulative Returns L/4 Weeks Z - Score Average Risk-Adjusted Returns L/21 Days

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COMPOSITE SECTOR ETF VALUATION REPORT [7.6.2015]

Check out the updated IPython notebook by following the link. In this update we see the interest rate sensitive sectors like Financials, Real Estate, Utilities may be offering a good tactical buying opportunity.

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How do Bank Stocks Perform During Periods of Rising Rates? (Python Code Version)

This is the Python version of a guest article that originally appeared on RectitudeMarket.com. In this version I include the Python code used to generate the anaylsis. This subject has garnered a healthy debate among market participants in recent weeks. Conventional wisdom says that banks and the financial sector overall should benefit from a rising rate environment. The story goes that bank profitability is inextricably linked to `Net Interest Margin (NIM)`. If rates are rising, it is assumed

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Composite Sector ETF Valuation Report [6.15.2015]

Check out the updated IPython Notebook where I take a look at changes and trends in ETF valuations using the Implied Cost of Capital model. To learn more about the model and the methodology used see here and here. For reference here is a Table of Contents, but due to some technical issues the TOC is not working properly on the nbviewer.org page. I'll keep working to fix it for the next issue.

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COMPOSITE SECTOR ETF VALUATION UPDATED [5.24.2015]

Check out my updated IPython Notebook where I take a look at changes and trends in ETF valuations using the Implied Cost of Capital model. To learn more about the model and the methodology used see here and here. Composite Sector ETF Valuation updated [5.24.2015]

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Composite Sector ETF Valuation updated [5.10.2015]

Check out my updated IPython Notebook where I take a look at changes and trends in ETF valuations using the Implied Cost of Capital model. To learn more about the model and the methodology used see here and here. Composite Sector ETF Valuation updated [5.10.2015]

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Sector ETF Valuation Using the Implied Cost of Capital (ICC) Model

This post is part of a series examining the ICC model's use as a valuation tool. I first introduced the topic in this post, where I outlined the following: * how I calculate the ICC formula for use in this sector ETF relative valuation model * my assumptions for the model * expected model output and sanity check * why and how I use the model results to enhance my investing Recently I expanded on the subject by detailing the Python code I use to run the analysis along with my interpretation

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How I use Implied Cost of Capital (ICC) as a market valuation tool

What is Implied Cost of Capital? I love the intuition behind the model although I don't use it as proxy for expected returns. I use it as a relative value measure to identify analyst/institutional sentiment between different market sectors at a point in time. The actual calculation of the measure can be somewhat complex and involved. The below equation is the common form of the ICC model. As an active trader my primary concern is practical application and implementation so I simplified an

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Why I bought back into RDC ( UPDATED 3.15.2015 )

I'm going to keep this relatively short and sweet. Back in late December 2014 I bought ( RDC ) at a cost basis of ~$20 for the following reasons: * The bulk of RDC's most critical assets are contracted through 2015 and into 2016 * Strongest balance sheet (lowest debt leverage) compared to other offshore drillers in the industry * Management team considered best in industry * Long term buyers appeared to defend the $20 share price level * At ~$20 the price to book is an absurd 0.5! Simply

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Is Canada a short?

In previous blog posts, I've discussed my bearish stance on the Canadian economy as expressed through ( EWC, FXC ) due to the collapse in global oil prices. My original hypothesis was Canada is a resource/energy based economy and declining oil prices would make the 'expensive' oil produced in the oil sands less attractive economically from a producer/investment standpoint. Let's explore that thesis a little more and see if it's validated by facts. Alberta, Canada contains the 'oil sands' depos

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What I'm Watching ( Week of 12.15.14 )

Canada iShares ( EWC ) Canadian assets are facing major headwinds in the current environment. 1. The fall in global oil prices hurt producers' bottom line. Alberta is bracing for a decline in GDP into next year as a result. Click for links to articles. Quarter of new Canadian oil projects vulnerable if oil falls below US$80: IEA With oil trading below US$60, provinces brace for impact of global oil price shock The above chart shows that there are some producers' breakeven Oil price as low

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What I Saw ( Week of 12.8.14 )

Tuesday of this week I expressed a mildly bearish sentiment regarding the broad market. Based on stock market internals including weakening market participation, the duration and velocity of the near vertical bounce off of the October lows it seemed increasingly likely that we would see some profit taking and some sort of correction. Let's see if this estimation was validated by the market. I would say it looks like market participants did decide it was a good time for profit taking/risk reduct

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What I'm Watching ( Week of 12-8-14 )

How long does equity optimism last without correction? Over the weekend I examined the market internals and came away mildly bearish at these levels. Extreme optimism and lack of participation among the broad indexes make this a week ripe for profit taking and I've been aggressive with my trailing stops etc during the last 2 trading sessions. When will OIL finally bounce? Have investors finally capitulated? I'm short oil via the Inverse ETF SCO ( wish I had more size ) however this has been a

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What I Saw ( Week of 12.1.14 )

1. Do the airline stocks and oil continue to trend strongly in opposite directions? ANSWER: Simply put, mostly yes. The below chart shows the following stocks ( OIL, AAL, ALK, JBLU, UAL ) relative to the broader market ( SPY ) over the last 5 days. Out of the 4 airline stocks chosen here, only ALK underperformed the market. Using OIL as a proxy for oil, investor sentiment is still negative, and some airlines stocks are continuing to benefit from the plunging price. 2. Do we see a continuation

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What I'm Watching ( Week of 12.1.2014 )

1. Do the airline stocks and oil continue to trend strongly in opposite directions? 2. Do we see a continuation of last week's sell off in small caps and does that translate to a mini correction? 3. When risk (high beta small caps/high yield) is sold do we see a continued bid in Utilities and Consumer Staples? 4. Keeping an eye out on high yield bonds ( HYG ) and Investment grade corporate bonds ( LQD ) for clues... What are you watching this week?

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Project Update_iVC Reporting Engine

Still working industriously behind the scenes I thought to take some time and give a progress report. Good news is the iVC Reporting Engine is almost fully operational. I've been able to automate the following processes: Data Collection: I have two methods to obtain public company filings from the SEC via Python scripts. * The primary method I use leverages the excellent services of the free (for now) data provider, Quandl.com. They aggregate and distribute data from several primary sources i

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Walking the Path takes time...

Readers, I have been away somewhat after my declaration of providing more useful and interesting content. Why is that? Am I being hypocritical or something worse? The answer is neither. The essence of the Blackarbs mission is to continuously find ways to add value to investors anywhere and everywhere they may be. Born out of that mission is the iVC report which has helped a few portfolio managers, and private investors (including myself) make prudent well timed investments in value creating st

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Stocks - Post Earnings UPDATE (week of July 21, 2014)

Let's take a look at how the previously graded stocks have performed over the last ~10 days. Please note this is a raw analysis in that these stocks reported at different times last week, so cumulative performance may be affected by the date they reported in addition to other factors. returns comparisons The key take away for me regarding this chart is that most of the returns on this extremely short time scale cluster between +/- 5%. There are a couple relatively 'extreme' movements by this

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Stocks - Pre Earnings Equity Grade (week of 07.21.14)

With the iVC reports showing some preliminary promise, I thought it would be worthwhile to begin tracking any potential predictive ability of the grading system. It's late so it's likely I'll have to update this post with better prose after I get some sleep. See this week's pre-earnings grades below. The reports are available for sale through the shop.

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Why I'm Bullish on Facebook (FB) Long Term

I am bullish on FB because I believe the firm's strategic vision is sound and recent moves have put FB in a position to build on and maintain a competitive advantage well into the future. There are 4 keys to my thesis: 1. FB is the current market leader in the social networking space 2. FB has just begun to monetize its user base and ad platform 3. Whatsapp's potential value is much greater than 19 billion paid 4. Mobile technology industry will continue to grow globally Facebook is the un

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3d Systems_Follow the Leader

I'll keep this short and sweet. 3d systems is still the undisputed king of the mountain in the 3d printing industry. They generate more revenue, more gross profit, more operating profit and more net income than all their competitors. See my updated report which includes their most recent 3rd quarter results and additional analysis. 3d Systems (DDD)_updated for Q32013 from Brian Christopher

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Chipotle Mexican Grill (CMG)_Part 2

Early January 2013, I did a write-up of Chipotle Mexican Grill and my thoughts on its value and whether I would buy it at that level for a long term investment. Based on my initial analysis I concluded that CMG was expensive as a growth company due to several factors. Data trends indicated that operating margins and revenue growth (while still growing) were beginning to level off. Additionally, earnings surprise momentum showed a negative trend indicating positive earnings surprises were less fr

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Chipotle Mexican Grill (CMG)_Part 1

Here is a presentation I produced in early January, where I evaluated the value of buying Chipotle (CMG) stock as a long term investment. It is here for reference for my follow up post in which I update my thesis. Check it out. As always feedback is welcomed. Chipotle Equity Analysis_An Expensive Burrito? from Brian Christopher

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