Have you ever wondered how those recommended prices work which wall street publish? How could some companies like JP Morgan recommend share prices of $68, while another such as the Berkshire Hathaway can recommend a price like $50 for the same share?
They use magic spreadsheets like the small one below :)
I will illuminate the tricks of the trade and enlarge the picture from the very bottom to the very top. I will discuss the share analysis techniques that allow JP Morgan and others to form a view on the value of shares (and crypto).
I will start with a short introduction from the two main streams of thought on analysing shares,
- Technical Analysis
- Fundamental Analysis
Technical Analysis
This is mainly the study of charting patterns, using indicators such as the Moving Averages, Trendlines and points of support and resistance. It uses visual aids to help in predicting where a share will go. The time horizon is generally very short, which can vary from minutes to seconds up to a few weeks.
Fundamental Analysis
This is mainly placing a value on a company using financial indicators such as the companies' balance sheet, cash flow statements and income statements. The time frame these analysis focus on is very long, typically from at least a year to a decade. It places a value on the company using current metrics of value such as the Net Asset Value (NAV) or earnings per share.
I hope you enjoyed the intro and I will continue and expand on Fundamental Analysis first in the next few posts before moving onto Technical Analysis. We will eventually value a share company, a few of the more prominent cryptos such as ETH and Steemit itself. I will of course share all my spreadsheets :)
If you have any questions feel free to share in the comments below.
Kind regards,
Tinus