Simple Stock Trading Formulas Quotes

“Larry Connors, in his book Short Term Trading Strategies That Work: A Quantified Guide to Trading Stocks and ETFs, writes: “As a general rule, many people like to buy stocks when they’ve been beaten down over a long period of time. You’ll see people “bottom-fishing” stocks as they are plunging lower under their 200-day moving average however once a stock drops under its 200-day moving average, you’re better off buying stocks in a longer term uptrend than in a longer term down trend.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“Questions to ask when analyzing a business Business - How does the company make money? - Does it seem like it should be a good business? Is it competitive? Do suppliers have too much power? Do customers value the product? Are there substitutes? - Without looking at financials, how does the company seem like it has done against competitors in its industry in terms of executing on its vision? - What reputation does the management team have? Do they seem honest? Straightforward? Valuation - What is the company's P/E multiple? Is it high or low for its industry? For the overall market right now? Why might the stock be trading at this valuation? - What is the company's free-cash flow yield? Is this a relevant metric given the stage the company is in? How does it compare to similar companies? - Is the company growing faster or more slowly than other companies with similar multiples? - Based on the number alone, does the company seem to have a rich valuation or a cheap valuation? Why might this be the case? Financials - What has been the trajectory of revenue growth over the past ten years? Why? What is it expected to do in the future? - How has the company's industry been growing? Is the company gaining or losing share in its industry? - What is the company’s level of profit margins? How does it compare to other companies in its industry? - How have margins varied over the past ten years? Why? - What percentage  of the company's costs are fixed costs versus variable costs? - What is the company's historical return on capital? Why is it high/low? What does this say about the quality of the business? - What is the trend in returns on capital? Why? What does this say about the returns the company will have to make on its future investments? - What is the company's dividend policy? Why? If they are paying no dividend or a small dividend, is there a danger that the company's management will waste shareholder's money? Technical - How have the company's shares performed against the overall market and its industry over the past twelve months? - What seems to be driving this under/over performance? - What key news events are likely to impact the stock in the future? - Do mutual funds and other large institutional investors seem to be buying or selling the shares? Sentiment and Expectations - What are the consensus earnings estimates for the next quarter and year? Do they seem aggressive or conservative? - Does consensus opinion seem overly bullish or bearish about the company's future prospects? - What insight do you have that the market might be missing that will cause the shares to appreciate?”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“one approach is to screen for companies that have lower P/E, P/B, and FCF yields than the overall stock market, an ROE that is consistently above 15%, and a performance over the past year that is at or above the level of the overall market.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“Being a successful stock trader is as much about having a good strategy as it is about doing great research or having great insight. People should understand that they are not Wall Street analysts.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“1)  Watch for any stock that makes a 50% increase in price within an 8 week period. 2)  The stock must have a 20-day average volume level of 100,000 shares traded daily at the time of entry. 3)  Enter on the next available price high as price climbs higher.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“For Longs: 1)  The Bollinger Bands constrict within the lines of the Keltner Channel, indicating price contraction within the trading range (snake coil), and the Chaikin Oscillator is below the zero baseline.   2)  When the Chaikin oscillator passes back up through the zero baseline, this indicates that the stock is under accumulation and you should go long (the "rattle" indicating that an upside breakout move is about to happen). For Shorts: 1)  The Bollinger Bands constrict within the lines of the Keltner Channel, indicating price contraction within the trading range (snake coil), and the Chaikin Oscillator is above the zero baseline. 2)  When the Chaikin Oscillator passes back down through the zero baseline, this indicates that the stock is under distribution and you should go short (the "rattle" that a downside breakout move is about to happen).”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“The steps of the rattlesnake volatility formula are: 1)  Overlay Bollinger Bands on a price chart with a 20 period, 2 standard-deviation setting. 2)  Overlay Keltner Channels on the price chart with the Bollinger Bands, but set a 20-period setting. 3)  At the bottom of the chart, input the Chaikin Oscillator to monitor the flow of money in and out of the the stock and set at a 21-period setting.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“Three of the most important are the growth rate of earnings, the capital efficiency of the business (a measure of how much money they need to invest in order to get an additional $1 in earnings), and the balance sheet of the company.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“As a reminder, free cash flow is a company's cash flow from operations (CFO) minus capital expenditures.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“look at the dividend yield, which is the annual dividends per share divided by the stock price. This can be interpreted as the percentage of your initial investment that you will receive in income every year. For instance, if you are paying $20 for a stock and it has paid a $1 annual dividend for the past couple of years, you will get 5% of your money back every year.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“Price to Book (P/B). The "Book value" of a company is an accounting measure of the net investments it has made over its lifetime. The simplest way to think of it is as the total equity investment in the company to date, including initial capital from shareholders and reinvested profits in the course of the business' history.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“Price to Sales (P/S). Just as it sounds, calculate this by dividing the price a company's shares sell for versus its revenue per share. There are two ways to calculate this ratio. Financial sites such as Yahoo! Finance will give you a company's market capitalization. "Market cap" for short, this is the price per share of the company multiplied by its total number of shares outstanding and is a measure of how much the total company is worth. You can divide the market capitalization by the annual revenue for the company, which you can find on the income statement. You can also calculate the sales per share first by dividing the total revenue by the number of shares outstanding, and then divide this by the stock price. P/S ratios can be useful for companies that currently have negative earnings. Care should be taken not to inappropriately compare ratios across industries, however, as the P/S ratio will depend on the nature of the business. A retailer like Wal-Mart that has extremely low profit margins will have a much smaller P/S ratio than a manufacturer like Apple.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“The most common of these is the price to earnings ratio, or PE (commonly said "P" to "E," "PE Multiple," or just "Multiple"). To calculate this important ratio, simply find the price per share of a stock and divide it by its earnings per share (which you can find from the bottom line of the income statement or from just about any financial website). This ratio is of limited use on its own, but it can be very useful when compared to: 1. The average multiple the company has traded at in its past 2. The average multiple for stocks in the overall market 3. The average multiple for companies in its industry.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“The future return for stocks can be estimated as the dividend yield plus the growth rate in dividends plus any expected change in the dividend yield (the latter accounts for a change in stock market valuation). Using the dividend growth rate over the past twenty years of roughly 4% and a current dividend yield of 2.1%, this would mean that you could expect stocks to return roughly 6% a year over the next ten years or so.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“Some of the biggest news events that drive the prices of individual stocks are earnings announcements. In the US, companies announce their financial results every three months.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“Academic surveys of research done over the past twenty years have shown that actively managed funds as a whole underperform the stock market by a level equal to their fees, implying that the average investor would have been much better off with a low-cost index fund or ETF.”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks

“Extensive research on mutual fund returns has confirmed that professional investors fail to beat a passive index of all stocks over time:”
― Billy Williams, Simple Stock Trading Formulas: How to Make Money Trading Stocks