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Stock Selection By Relative Index

2011/9/28 18:58:00 38

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The market has experienced a strong wave recently.

Fall

The Shanghai Composite Index dropped from 3067 to 2676, with a drop of nearly 400 points.

After a big fall, some people began to look for reasons for entering the market.

Financial indicators are commonly used by people, and the relative indexes such as P / E ratio and market rate are more popular.

Every time a sharp fall occurs, we are used to comparing these indicators with the previous period.

Is it suitable for stock selection with relative indicators?

One.

market price

In relative indicators, market price is a very important parameter.

Test bid

The market price is the trading price of the stock in the two tier market.

There are many factors that affect stock prices, among which the most important ones are: 1.

Capital supply and demand, if the amount of money supply is large, the increase of share price is relatively easy.

This has just explained the trend of the 09 year market from the capital side.

The supply and demand of stocks, if the growth rate of stock supply is less than the growth of capital supply, then the impact of capital diversion will be reduced.

Market sentiment affects stock prices.

For example, if the majority of people in the market accept the expectation of moderate inflation, the strength of centralized buying will probably push the share price up.

Some expected existence will affect the evolution of the market share price.

The size of capital stock.

Consider the direction of total market value.

list

If the company is worth its value, the size of the equity will also affect the share price.

It is also normal for small cap stocks to have a high share price.

Two.

Calculation of denominator size

Relative indicators are indispensable for the establishment of denominator.

The profitability and net assets of enterprises are important determinants of these relative indicators.

According to relative indicators, the biggest disadvantage lies in the use of past parameters.

In terms of price earnings ratio, denominator is the earnings per share of listed companies.

For example, if the earnings per share is 0.1 yuan this year, the current price in the two tier market is 1 yuan, and the P / E ratio is ten times, which is attractive.

However, due to poor management, the profitability of enterprises has a serious downward trend. By next year, the price earnings ratio will drop to 20 times or even higher.

Then, ten times earnings this year will not be underestimated.

There will be similar problems in the net market rate.

There are different answers to the valuation of net assets per share if different methods are used. The choice of asset prices will also have an important impact on the final valuation.

The prediction of asset prices in different years may produce different results, and the inflation period may be overestimated.

If we look at the problem from the height of inflation expectations to the fall of inflation, the net market rate will rise from low to high.

From this perspective, stock selection with relative indicators has certain limitations.

At present, the media has many summaries about the low price earnings ratio and the low net market share. At this time, whether these stocks are really underestimated should be studied in the light of the changes in the macro situation and the profitability of enterprises.