Monthly Archives: June 2012

Currently Reading

I haven’t posted any spreadsheets this week because I have been focusing on reading through a few more books.

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The first book I read this week was the¬†Motley Fool Investment Guide. I have seen this book sitting on the shelf of my favorite used book store for the last few years, but hadn’t taken a look at the book until now because the clowns on the cover gave me the impression this books was for, well, clowns. But after my sister’s fiancee highly recommended the book, I decided to take a look at it. I was pleasantly surprised to find this book had a nice introduction to fundamental analysis and income statements. Motley Fool was an entertaining review of basic fundamentals and also taught me a few new things.

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I am currently working my way through The Little Book that Still Beats the Market. This is a very simple book written for the complete neophyte and presents an investment system which ranks stocks based on earnings yield and return on capital. The book is very simplistic, but has lead me to think more about stock screens, as well as the merits and drawbacks of mechanical investing.

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The DOW 30: Caterpillar CISCO

CAT

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CSCO

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The DOW 30: 3M Alcoa

MMM

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In order to better understand the major players on the market, I will be looking at the financials for all 30 companies included in the Dow Jones Industrial Average. I will try to do three companies a day, time permitting.

Microsoft Continued

MSFT Cont.

Going back ten years, we see Microsoft’s net earnings as percentage of total revenue increasing, as well as earnings per share generally increasing. I believe the dip seen in earnings per share is caused by unadjusted EPS numbers after a stock split in 1997. The significant difference between Microsoft in the 90’s and 2000’s is found in the net earnings. We see a general increase in the 90’s, but sporadic numbers in the 2000’s. Also, the General and Administration costs are much lower in the 90’s.

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Microsoft

MSFT

Microsoft’s stock price has been sideways since 2001. Looking at the numbers reveals a company with a large gross marginal profit and increasing per share earnings, but Microsoft also has lofty R&D costs, as well as high and rising Sales & Marketing costs.

This week I am learning about interpreting the balance sheet and have added a new section to my spreadsheet to incorporate these numbers. We can see that Microsoft has no short-term debt and also has a current asset to current liability ratio of 1:3, both good signs.

I still have so much to learn about fundamental analysis. Every time I look at another company, I think of new questions to consider. If I keep at it, it should only take a few decades before I know what I am doing!

Tomorrow I will look at the years between 1990 and 2000 to see if we can find any insights into the growth of MSFT during that time.