hi i'm jimmy in this video we're going
to run through how we can effectively
use the news about a particular stock
to help improve the investments that we
ultimately put inside our investment
portfolio now to try to make this whole
process a bit more realistic
i'm going to use intel stock as a real
life example of
how we can find how we can identify the
most important
factors that we need to pay attention to
when considering an investment
now i personally own shares of intel and
frankly that's why i'm using it as an
example
since this is the exact process i used
when analyzing intel the first time
now we can reuse this process on any
stock or any potential investment that
we're considering
okay so let's jump right in so when we
consider how much news comes out
about our company well it might be
tricky to figure out
which news articles are the most
important and which ones do we
ultimately have to pay attention to
just looking at these headlines over the
past two weeks or so
for intel well we could look at this and
let's say we decided to read
all of the news articles not only would
that be a decent waste of time
but we're likely to get to the end of
that whole process and realize
that we're more confused if we were than
when we first started
because which ones at the end of the day
are the most important ones
now with that being said the first step
is to try to figure out what are some of
the key
factors that ultimately drive the price
of the stock
so this is a one year chart of intel
stock and
we might notice that there are some key
points in time
that really drive the direction of the
overall stock price
now i'm using a one-year chart for this
illustration and
this can work in intel's case but many
times it makes sense to look at longer
term charts i'll show you an example
in a second one year works for intel
because we can see that there are
various points in time where there were
very dramatic changes
in the stock price for some reason one
example
is right here clearly at that point
something happened
now there's a ton of different factors
that could drive a giant move like this
it could be earnings came out maybe a
big news event maybe something the
company did maybe a big acquisition or
issuing shares or buying bag shares or
maybe it's something a competitor did
or it could even be that the stock
market had a really good day or really
bad day
in this case a really bad day now in
this case this particular drop
was tied to intel's earnings and in that
particular earnings report
they beat their expected earnings but
the headlines that were dominating the
news
of that time was that intel was delaying
the manufacturing of both their 10
nanometer chip
and their seven nanometer chip and this
is just a couple examples of the
headlines that were
out when those earnings were announced
the stock was down big
despite beating earnings but it was
primarily focused every all the
headlines
seem to focus on the fact that their
chips are being delayed and clearly we
can see that investors thought this was
a very
big deal because when we go back to the
stock chart here well the stock
pulled back dramatically now i'm not
suggesting
that we look at every jump or drop
in a stock price and analyze
what happened on that particular jump
ultimately the goal is to identify the
big picture trends
of the stock and pay attention to some
of the more dramatic
big dips or jumps in the stock price and
that's why i mentioned before
that sometimes using a longer term chart
makes more sense
because if you zoom in too much well a
lot of moves look
very dramatic relative to a very short
history but over the long term
it can smooth things out a bit one
example of that is
3m stock over the past year now when we
look at this stock chart we might look
at this and sure
there are a few big jumps and drops that
could be worth paying attention to
but i would argue that over the past
year the broad
trend for 3m stock was a trend higher
but what if we were to shift over to a
five year chart
well now suddenly there appears to be
three
very obvious trends when looking at 3m
stock from a bigger picture perspective
and if we were to look at the news that
was around in the weeks leading up to
maybe the week or two
after the turns happened for each of
these major trends
well in doing that we're going to
identify the real drivers
ultimately of this stock now again i'm
not suggesting that we ignore
the dramatic drop jumps and drops but in
the case of 3m
sure there's a couple that we could look
at but overall over the past
five years maybe there's 10 points in
time
that we should really be paying
attention to so that's just
10 key points we're looking at over five
years
so already we've narrowed down what we
have to do by a decent amount
okay now shifting back to intel stock
and looking at some of the more recent
trend and the two trends that i think do
a good job of showing us
an example of how this works is this
trend higher
and then this recent turn lower and we
want to make sure
that these trends aren't tied to the
overall stock market
or the overall direction of the industry
so over the first climb higher here
well intel stock during that time period
was up about 49
and the s p 500 during that very same
time period was up about 12
the semiconductor etf smh is a ticker
for that that's a van
x semiconductor etf well they were up
about 20
so clearly we can see that during this
time period intel
performed quite well they outperformed
both the stock market and their industry
so clearly whatever motivated that move
higher was important to them or was
important to what drives the business
now the downturn over the past couple
months well intel was down about 20
percent
the s p 500 during that same time period
was down about one half of one percent
so
we'll call that flat and then the
semiconductor etf well they were down
about 12
so clearly it it could be partially
market related
since the industry is down but they did
worst in the industry in general
and the real question is why what drove
this stock lower so if we were to focus
for a moment on the uptrend
if we were to pull up the news around
the bottom of that uptrend well
heading into the bottom some of the big
news that came out for intel
was that microsoft was going to go out
and start manufacturing some of their
own chips some of their server chips
and clearly this was bad news for intel
since currently
intel is the provider of much of
microsoft's chips
so that was one of the reasons that the
stock was heading lower
and then as the stock began to bottom
and started to head higher
well a lot of the news and i'm just
looking at the headlines for now
a lot of the news was focusing on the
fact that intel was considering
outsourcing part of their production of
both their 10
and 7 nanometer chips and this helped
the stock a bit and shortly after that
well intel announced that they were
replacing their ceo with the former ceo
out of vmware and the market reacted to
this
by pushing the stock higher and we'll
come back to this one in a second
because up near the peak well intel had
announced that they had recently come
out with their new 10 nanometer chip
and the stock did okay initially but
shortly after that the stock began to
head lower
because the chips were highly
anticipated and they didn't
sure they performed better than intel's
previous chips but they did not perform
as well as intel
as investors were hoping that they would
and importantly
they didn't stack up to amd's chips amd
is one of intel's big competitors that
also produces chips
and amd's really been the leader in
recent years for coming up with the most
innovative products
a uh intel is having trouble catching up
to what they're doing
and this brings us to how to interpret
the news that we've accumulated
over this particular time period so i
think it's important for us to recognize
that oftentimes the same themes keep
repeating themselves
for the case of intel well initially
intel was having trouble manufacturing
their chips their chips were going to be
delayed
then they began to consider outsourcing
their chips
implying that the chips were going to
hopefully be produced faster
the stock started to rally intel gets a
new ceo
in theory a new ceo that wasn't really a
finance ceo their old ceo was more of a
money guy
than he was a manufacturing guy or
really a semiconductor guy
and the new guy in theory should do much
better the stock continued to rally
then a new their new chip comes out
everybody's holding their breath it
doesn't do that well the stock drops
so when going through this exercise it
becomes much more obvious no matter what
company we're looking at
it becomes much more obvious what are
the key factors
that are ultimately driving the stock
and what investors are looking for and
ultimately what would we define as the
most
important factor for what would make
this investment a successful investment
in the case of an investment in intel
well it's intel's ability
to increase the quality of their
products and how fast can they do it
oftentimes i've seen investors that
invest in amd and not
intel say well amd is uh they
produce a better chip therefore they're
a better investment and frankly i sort
of agree that intel produces a better
chip
and they're producing they're selling it
for less money
but there are two major thoughts that i
think we should consider when looking at
these two investments side-by-side
investment uh
investment in amd investment in intel
and first is
just because amd has a better chip right
now doesn't mean they will always have
the better chip there was a time that
intel had the best ship out there and
then they got replaced
that is sort of the nature of
competitive business and the second
point to consider is what we pay for
each stock
let's say we just like the semiconductor
industry in general we don't really care
what we pay well if that's the case just
buy an etf
but if we're looking at individual
stocks and we're trying to pick the
better investment
surely the cost of that investment
should be a consideration just as one
example
if we were to look at amd right now
right now amd has a pe multiple
of 55x and intel is trading at about 12x
which means for every dollar of profit
that each company earns
if we buy amd we have to pay 55
for their one dollar of earnings and we
have to pay twelve dollars for intel's
one dollar of earnings so clearly that's
going to play a role
as to what makes the better investment
hey sorry for the quick interruption
it's still me jimmy
this time it's editor jimmy so when i
was editing this video
i went to go over to get a screenshot
from yahoo finance for amd
to show their price to earnings multiple
when i did this is what i got so yahoo
finance says amd's pe multiple at 31x
but i just said it was 55x
so i want to take a real quick second
and clarify why it's such a difference
first i shot this video a couple days
ago and amd's price was about 80
per share so that explains some of the
difference but frankly that's a small
amount of it
the real difference comes from their
earnings per share so their fourth
quarter earnings per share
on yahoo finance this is what they have
the past four quarters looking like
from an earnings per share basis but
they have for the fourth quarter they
have
a dollar 45 where i used 52 cents per
share
and the reason for that difference is
that i got that from amd
that almost dollar difference per share
came from a
1.3 billion dollar offset
in their taxes so this is a one-time
charge that won't happen again
so amd in their press release for that
quarter's earnings
removed that from the overall
calculation
so if they removed it i figure it's
smart for us to remove it that is why
the priced earnings multiple is
questionable
on yahoo i think that they should have
used what amd came out and used okay
sorry about that back to the show
now ultimately our question is how can
we use this information
to help improve our overall investment
portfolio
and personally when i bought shares of
intel i bought them right around 45
dollars per share
my thought process was that intel needed
to ramp up their production
they need to ramp up their production
speed and ultimately the quality of
their products
so they needed to get more competitive
with amd's products and they needed to
do it faster
now our question is do we have do they
have a reasonable chance of doing that
and because of their size and their
current position in the market
well yes i think it is very possible
that they have a shot
with the new ceo i think that the ceo
getting replaced
well i was very excited to see that
happen because
that knowing what we know about what
drives the stock which is ultimately the
production
the successful production of their chips
i think the new ceo
puts them in a better position to
achieve that production and we only know
that because we did this type of
research
and i'm not too concerned about the
recent pullback in this stock
because ultimately the time it takes to
produce a chip is a couple years
the seat the new ceo has been there for
a couple months
so the fact that the new chip came out
and was
lackluster in performance relative to
what people were hoping for
to me i'm not sure that's a fair
reflection of the new management team
as much as that is a reflection of the
previous management team
if i was the new ceo of the company and
i had a choice
delay this chip or delay this chip or
release it
i would have released it as is don't
worry about it we're working on our next
chips
so as a long-term investor i'm happy to
see the new management team in place the
new ceo he also brought in
a bit less than half of the current
upper management of intel
so a lot of this whole crew has been
there for less than a year
so i think over the long run with their
cash position they have a huge cash
position right now
they have more cash than amd has
produced in the past couple years
on revenue combined so intel has the
potential
the ability to go out and ramp up their
production their r d
everything that they need to get this
process in place if they do that then i
think that over the long run intel
could do quite well now with the process
that we went through for understanding
what is ultimately driving a stock again
this applies to any company that we're
looking at
the answer might not always be as clear
as it is with intel if it's not
we got to go back further in time go
back the past five years past 10 years
but generally if we're watching the big
picture
well this can tell us which news
articles are important to actually jump
in and read
let's say it's something tied to our
overall key drivers
well then we want to understand what
exactly is happening and by paying
attention to these key drivers and
watching the big picture
it also helps narrow down what we have
to figure out
to determine what we have to figure out
if the company's a good investment or
not
so in the case of intel the ultimately
the question is
do we think intel can turn around their
production if they don't let's
let's pretend they spend the next five
years floundering around and they don't
really get anywhere from a production
standpoint
well it's likely that this investment
will be a very unproductive investment
and we will know exactly why that
happened and if they do figure it out
and the news starts to come out pile up
that hey they came out with a better
chip and a better chip and they're
starting to catch amd
the stock is likely to take off history
has proven that for us
now of course the key to being able to
understand the key drivers of a stock
is that we first understand the basics
of how the business works
therefore when we read the news we'll
actually have an idea of what the
company does and how it operates
now i actually did a video where i go
through the eight steps of how to
research a company
and in that video i go through where to
find the basic information about a
company which
information is most important to start
reading and ultimately
how to learn about the company to see if
it's worth buying today
so if you're curious perhaps that's a
good next video for you to watch i got a
link right here i got a link in the
description below
and thank you so much for sticking with
me all the way to the end of the video
i really appreciate it thank you and
i'll see in the next video