Stocks & Options Magazine Issue 2
What’s in Warren Buffett’s Stock Portfolio?
Stocks & Options Magazine Contents
jeff@digitalpublishingservice.co.uk http://stocksandoptionsmagazine.com
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From The Editor
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Warren Buffett’s Portfolio
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Compound Returns
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Call & Put Options
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Leap Options Wells Fargo Exceptional Trading Systems
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Ten Best Indicators
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Finding LSE Winners
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Plus 500 ltd.
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What’s in Warren Buffett’s Stock Portfolio?
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> Warren Buffett
And 50 years with Berkshire Hathaway
Warren Edward Buffett will be 85 years old on August 30, 2015. No matter what happens now he will always be seen as the most successful investor of the 20th century and one of the greatest of all time. Buffett is the chairman, CEO and largest shareholder of US based Berkshire Hathaway, a US business conglomerate, and is ranked among the world's wealthiest and most influential people. Buffett is often referred to as the "Sage of Omaha" and is noted for his guiding belief in value investing and for frugality in his personal life. He has also pledged to give away 99 percent of his fortune to philanthropic causes, mainly through the Gates Foundation. Berkshire Hathaway Inc. is a holding company that manages a portfolio of subsidiaries including household names
such as Dairy Queen, Fruit of the Loom, Helzberg Diamonds and FlightSafety International. It also owns large slices of a plethora of other businesses such as Heinz, Mars, American Express, Coca-Cola, Wells Fargo and IBM. Berkshire Hathaway grew by an average book value of 19.7% for its shareholders for the last 49 years (compared to 9.8% from the S&P 500 with dividends included for the same period), while employing large amounts of capital, and minimal debt.
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> Warren Buffett The Berkshire Hathaway portfolio is therefore extremely diverse covering confectionery, retail, railroad, home furnishings, manufacturers of vacuum cleaners, jewellery, newspaper publishing, manufacture and distribution of uniforms, healthcare and several regional electric and gas utilities.
Berkshire Hathaway is listed as the fifth largest public company in the world. On August 14, 2014, the price of the company's 'A' shares hit $200,000 per share for the first time in its history. The Berkshire Hathaway portfolio has most recently been listed as:
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> Warren Buffett
The Annual Letter and AGM Famously, each year, Berkshire Hathaway holds an annual general meeting which has taken on rock concert qualities. It is preceded by a personal letter from Warren Buffett written in his capacity as head of the business. The short video below gives a flavour of the AGM which this year is also a celebration of its 50th year:
Warren Buffett at Berkshire Hathaway’s AGM
Bill Gates said “Warren Buffett Just Wrote His Best Annual Letter Ever” Warren Buffett and Bill Gates are longstanding firm friends and fellow philanthropists. Gates also credits Buffett with having taught him a huge amount about business and investment. Gates is also a shareholder and board member at Berkshire Hathaway. Having read all 50 of Warren’s letters Gates said that the 2015 letter was the “most important one he has ever written”. The letter itself is divided into three parts. First, it is, as would be expected, a comment on the performance of the Berkshire
Hathaway during 2014. Then, in homage to the 50th anniversary of his purchase of the company, there is a section about the history of his leadership of the company. Then Buffett’s long term and never to be underestimated, colleague Charlie Munger, gives his own excellent take on the business. I saw the whole document as an absolute delight but, if you are short of time, I recommend that you at least read the 50 year review. As Gates said “It is fascinating even if you have
> Warren Buffett
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never read annual reports and know nothing about the company�. The whole letter can be accessed below: 2015 letter to shareholders: http://www.berkshirehathaway.com/letters/2014ltr.pdf Hear Bill Gates speak about Warren Buffett, Berkshire Hathaway and this year’s letter:
Hear Warren Buffett and Bill Gates talking together;
Finally, you may want to see the Berkshire Hathaway AGM guide: AGM Meeting guide: http://www.berkshirehathaway.com/meet01/VisGuide2015.pdf
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>Dr David Paul of VectorVest UK
Albert Einstein’s favourite formula
“Compound interest is the eighth wonder of the world. Those who understand it, earn it … those who don’t … pay it.”
George Best, the famous UK soccer player, summed it all up when he said, “I spent a lot of money on booze, birds and fast cars. The rest I just squandered.”
The famous quotation from Albert Einstein came to mind this week as a friend asked for a loan. He is a person that’s made much more money than I over the years. He has started and sold several fine businesses for large amounts of money. You may have noted in your own life that no matter how much you earn, you find a way to spend it.
The most recent big spender is the boxer Floyd Mayweather who, based on his pay cheques, became one of the highest earning sports stars in the US. After a bout of reckless spending where he routinely carried a wad of one million dollars in his back pack for emergency purchases, he ended up broke.
Dozens of lottery winners have joined the ranks of Willie Nelson, Mike Tyson and Billy Joel. These people have all made or won millions, only to blow it all and eventually become bankrupt.
He would fight, earn money, blow the money, fight, earn etc. with no income whatsoever beyond the fighting. Does this strike a chord with anyone reading? I have long been aware of the “Salary
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>Dr David Paul of VectorVest UK Treadmill” where every month the cash comes in, and within a few hours, the standing orders come through and suddenly it’s all gone. This process repeats and repeats, as every month it’s the same old story. Just working and paying and working and paying. The point is that in this life there are only two ways to make money. You can work for it or you can get your money to work for you.
this way of thinking early on in my investing career. This person had only earned a modest wage throughout his life, but through investing 15% of the modest salary, retired early and wealthy. I am greatly in his debt and if it wasn’t for that initial chance encounter, I would probably be like the friend who needed help during the week. In the history of Man, no one has ever become rich by working for a salary.
Whether you acknowledge the fact or not, all employed people are financial traders. You trade your time for money and there are only a certain number of hours in a week. Also your employer will never pay you any more than what it takes to keep you sitting behind that desk. If he did, he would be a poor business man and that’s unlikely.
I define Financial Independence as the absence from financial worries and independence from the need to work if I so desire. This can only be achieved if the income you receive from your investments exceeds that of your salary. It will take a few brave decisions and a deep breath to take the first steps.
The only way to break out of the salary treadmill is to get your money to work for you. Open your wallet and find a 50 pound note. Have a long look at the note. In your hands observe a servant that will work for you and your heirs forever if you decide to invest it? If you blow it, then it’s gone forever and someone else gets to make the choice.
Let’s list these steps.
I was very lucky in that I was mentored in
How much of a lump sum can you start to invest now? How much can you commit to saving of your Gross monthly pay cheque? I suggest 15% as a minimum. Make your savings work hard and achieve a growth rate of well in excess of inflation. VectorVest can show you how to build Financial Independence in quality US or UK listed companies with safe and steady incomes and how to benefit from compound returns as Mr. Einstein quotes above. You either earn it or pay it. The decision to get started is yours alone to make. Click on the panel to the left to get started.
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>Bill Poulos – Call options
Control A $500,000 House With Just $5,000) To demonstrate how call and put options work, meet Suzie & Sammy.
https://youtu.be/EfmTWu2yn5Q
Suzie is selling her house for $500,000 in a neighbourhood that has a nearby parcel of land that is for sale as well. There are two parties interested in the land. Peter plans to develop the land into a beautiful park and bird sanctuary, and Harry plans to build a low-cost housing development. Now Sammy comes along and is interested in buying Suzie’s house for a cash deal, but he has a problem – he won’t have the cash available for three months. So he’s of course worried that the house will be sold to someone else in the meantime.
11 So he decides to offer Suzie $5,000 (the option premium) right now if she’ll take the house off the market and give him the option (a “call option”) to buy the house for $500,000 (the “strike price”) anytime within the next three months (the “expiration date”). If he does not elect to buy the house, Suzie keeps the $5,000 premium and Sammy walks away from the deal. If he does elect to buy the house (or “exercises the option”), Suzie still gets to keep the $5,000 and he pays Suzie $500,000 for the house. Now three things could happen in this story.
In Scenario 1, Peter buys the nearby parcel of land to build the beautiful park and bird sanctuary. This, of course, will increase the value of Suzie’s home to say $600,000. In which case, Sammy will be very happy to exercise his option to buy the house for $500,000.
12 In Scenario 2, Harry buys the nearby parcel of land to build the low-cost housing development. This, of course, will decrease the value of Suzie’s home to say $400,000. In which case Sammy will not exercise his option to buy at $500,000 and just walk away from the deal, having lost only $5,000.
Then there’s Scenario 3, where neither party buys the nearby parcel of land. Suzie’s house is still worth $500,000 and Sammy can elect to exercise his option to buy the house for $500,000 or not and simply walk away from the deal, losing only $5,000.
In effect, Sammy is controlling a $500,000 asset for three months for only $5,000. No matter what happens during that time, the most he can lose is $5,000. Suzie, on the other hand, is happy to take the $5,000 as she had no guarantee anyone else would buy the house at her asking price nor did she feel the nearby parcel of land would sell anytime soon.
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Here’s a footnote to the story. Depending on the circumstances, if Suzie felt she was likely to attract another buyer in the near term, she would have demanded more than $5,000 from Sammy to take the house off the market for 3 months. Likewise with call options, the more the underlying asset is perceived to appreciate, the higher the premium demanded by the market for the call option. So now let’s define this in trading terms and look at an actual example trade. A call option is a contract between two parties to exchange a stock at a strike price by a predetermined date. One party, the buyer of the call, has the right, but not an obligation, to buy the stock at the strike price by the future date, while the other party, the seller of the call, has the obligation to sell the stock to the buyer at the strike price if the buyer exercises the option.
14 For example, if a stock is trading at $50 and you think it’s going to go up to $60, you might buy a $55 call option for say, 20 cents. If the stock rose to $60, that would allow you to buy the stock at $55 even though it is valued at $60, netting you a $4.80 profit on each share. On the other hand, the person that sold you the call would be obligated to sell you the stock at $55 at a loss of $4.80. If the stock never rises above $55 by expiration date, the call expires worthless and the call buyer is out 20 cents, and the call seller keeps the 20 cents.
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> Leap Call options
https://youtu.be/KgqP-FhQI9E This video is part of The Motley Fool's "Ask a Fool" series. If you have a question about stocks, investing, a specific company, managing your money, or any other aspect of the financial world? Simply email AskAFool@fool.com and the guys there will do their best to answer it for you!
We are continuing to gather the contact details of subscribers who may be interested in forming a global investment club with us. If that’s you click on the link to the right to get in touch.
> Stock Analysis – The Wells Fargo Company
The business is best known as a US Bank although it is actually a diversified financial services company providing services such as banking, insurance, investments, mortgage banking, investment banking, retail banking, brokerage, and consumer finance. Sales / Market Capitalisation Information WFC has annual sales of $47,903,000,000. Sales Growth, based on the last twelve months is 3.00% per year. This is considered to be poor. The company has 5,149,000,000 shares of stock outstanding. Its Market Capitalisation is $289,076,000,000. Market Capitalisation is calculated by multiplying price by the shares outstanding. Capital Appreciation WFC has a current (04/06/2015) share price
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of $56.14. Therefore, unusually, it is at a price that exactly reflects its calculated value which is also $56.14 per share. This value is computed from forecasts of earnings per share and earnings growth as well as profitability, the interest rate, and inflation rate. The long term price appreciation potential of WFC is forecast as being better than the average of most other stocks in the US markets. The forecast looks three years ahead. WFC stock is a relatively safe stock to own. This conclusion arises from an analysis of the predictions made by the business in respect of its own financial performance
> Stock Analysis – The Wells Fargo Company in respect of its profitability, debt to equity ratio, sales growth and price volatility. In addition, the consistency of getting such forecasts right is taken into account.
Although WFC is therefore probably a good stock to own going forward, like any other stock, timing of entry must be judged properly. Such a judgement must also take into account what is happening in the market in general. At present, WFC stands only just above the threshold that we use when judging whether to enter a stock position. However, at the time of writing the overall conditions in the market would give us cause for caution. Our thinking, in terms of the stock itself rather than general market conditions, is based on assessments of the direction and strength of its current price trend based on the one day, one week, one quarter and one year charts. An assessment also has to be made in respect of the likelihood of a continuance of the trends uncovered. Based on its price, value, and forecasts and forecasting consistency other commentators have adjudged this as a stock to Buy. However, general conditions alter their view to being one of Hold. The general view of a price at which this stock should be protected or even shorted is calculated at $52.38 per share. This price level takes into account the current three month trend and the fundamentals of the business. The self-predicted rate of earnings growth for WFC is 4.00% per annum. The company has a very good record in terms of making such forecasts. The company predicts earnings of $4.39 per share going forward.
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This gives a price to earnings ratio (P/E) of around 12.79. This reflects the amount of dollars needed to buy one dollar of earnings. This P/E ratio is well below the average of most stocks in the US markets which is closer to a P/E Ratio of 40. The Earnings Yield or EY of WFC reflects earnings per share as a percent of Price. EY is related to P/E via the formula, EY = 100 / (P/E), and may be used in place of P/E as a measure of valuation. WFC has an EY of 7.82 percent. This is very good compared to the current average of most US stocks which is 2.53 percent for most stocks. GPE (Growth to P/E Ratio): GPE is another measure used for stock valuation. This compares the earnings growth rate to the P/E Ratio. WFC has a GPE rating of 0.32. High growth stocks are believed to be able to justify high P/E Ratios. A stock is commonly considered to be undervalued when GPE is greater than 1.00 and overvalued when GPE is below 1.00. Therefore, WFC may be considered to be currently undervalued. Dividend Information WFC pays an annual dividend of $1.50 per share giving a Dividend Yield of 2.67 percent, well above the average of 1.39 percent. In addition, the degree of safety in respect of the dividend continuing scores very highly indeed. Further, the forecast dividend growth rate at 20 percent is hugely above the average of 1.39 percent.
> Fundamental Investing
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> Wendy Kirkland – Options Trading
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Prepare to be amazed!
Wendy Kirkland is a successful published author specialising in stock trading as well as being a hugely successful trader in her own right. Wendy and her husband live in Ashville, North Carolina and they originally ran a gift shop. Life was good and settled until the store was flooded in a heavy storm. With no flood insurance they were in big trouble and needed an alternative source of income and they needed it quickly! A friend introduced Wendy to options trading and, in her own words, she became obsessed. To begin with Wendy read books, watched the financial news and took courses. She went on to become very good and the income soon began to exceed what the gift shop could ever have given them and they began trading on a full time basis. In 2009, Wendy wrote Options Trading in Your Spare Time after successfully trading options for around seven years. In 2010, she created the P3 Trading System, a strategy that zeroed in on a chart pattern that pinpointed when a stock was ready to significantly pop up in value. While searching for a guaranteed trading pattern, to refine the P3 system, Wendy had
> Wendy Kirkland – Options Trading
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a “duh forehead slapping” moment. She could not believe that she had missed seeing something so obvious—something that was right under her nose since she began trading seven years earlier. Wendy explains. Back when she began studying option trading she had been about three trading instruments: Stocks Indexes, and... ETF or Exchange Traded Funds.
Stocks, she says are obvious; Apple Inc. (AAPL), Google, Pfizer and thousands of others fall into this category. This is where she focused most attention during those early trading years. Indexes, she went on to say, are usually funds based on something larger. An example would be the S&P 100 Index (OEX) which is based on only 100 of the top S&P stocks or Volatility Index (VIX) which is a summary Index of the S&P 500. ETFs, on the other hand, are, she notes, a basket of stocks that often have a theme or connection. A medical ETF might incorporate stocks from cancer research, medical supply and billing, hospitals, nursing and hospice care companies. Other ETFs might be sector or industry related. The first ETFs she learned about were the SPY, DIA, and QQQs. The QQQs is a type of ETF that is essentially a collection of stocks based on a major index, the NASDAQ. Somewhat embarrassingly, Wendy had seen the chart of the QQQs run across her TV screen and would, for example see it close up by say 0.06 cents for the day and simply thought “So what”. A volatile stock like Apple offers daily moves up or down that can range anywhere from $1‐10 with huge profit potential, so what was the big deal about a 0.06 cent move on the day? And so, for seven years, Wendy traded options on stocks almost exclusively. Then one day, while doing some back testing of the P3 System squeeze pattern on stocks and ETFs in different time frames, she made a huge, yet accidental, discovery. What she discovered in that moment was that the QQQs have a combination of special elements that make it both lucrative and steadier than most other forms of options trading! The rest, as they say, is history. Watch the video below to understand the full significance of Wendy’s discovery and check out her website at http://wendykirkland.net Check out Wendy’s video below:
> Wendy Kirkland – Options Trading
Follow this link to access the FREE Wendy Kirkland Trading course which includes the other videos that are referred to in the above video and a free 25 page eBook: http://www.tradewins.com/Promo%20Emails/MERIT/MERIT_PreLaunch.html
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> Indicators
By Bill Poulos
No one can predict the future. But in the right hands, a good technical indicator can be a powerful tool for predicting what will happen next in the market. Trouble is, there are over 300 technical indicators to choose from. Talk about information overload! More is not always better. So in this article, I’ll reveal my 10 favourite technical indicators, why I like these 10, and how to use them to improve your trading results. We believe, as Einstein said, that, “Everything should be made as simple as possible, but not simpler.” Keeping it simple, here are our top 10 choices of technical analysis indicators, why we like them, and what they’re used for. 1. Simple Moving Average (SMA) There are several types of moving
averages available to meet differing market analysis needs. As the name indicates, it is an “average” and its direction shows if the tendencies of buyers are long or short. In general, we prefer the five-period for the shorter-term average and 50-period for longer-term. One of our favourites, and one of the most commonly used by traders, is the simple moving average. It is the most basic type of moving average. Generally, when you hear the term “moving average”, it is in reference to a simple moving average. Used for identifying trends and support and resistance. 2. Exponential Moving Average (EMA) The exponential moving average is similar to a simple moving average, except that more weight is given to the latest data. Be sure to check out our video on
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> Indicators ‘Exponential Moving Averages Explained Simply In two Minutes’. Used for identifying trends and support and resistance.
may not want to buy an overbought issue or sell an oversold issue. Used for identifying overbought and oversold markets and to trigger entry.
3. Fibonacci Retracement The Fibonacci retracement is based on a sequence of numbers that is found in mathematics and nature itself. It is one of the indicators that is widely used by technical analysts and traders of stocks, futures, ETFs, and Forex. The Fibonacci retracement is the potential distance that a financial asset may retrace before resuming its ongoing trend. The indicator is used to draw a horizontal line at two extreme points, which is typically a swing high/low and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%, adding horizontal lines at each level. The horizontal lines act as support and resistance. Check out this example of how the pattern can be useful for swing traders to identify reversals on a chart. Used for resistance.
identifying
support
and
4. Stochastic Oscillator The stochastic indicator shows when issues are overbought and oversold. You
5. Moving Average Convergence / Divergence The MACD is supposed to reveal changes in the strength, direction, momentum, and duration of a trend in a stock’s price. It utilizes a fast moving average and a slow moving average, indicating entry and exit points that occur when the faster moving average crosses the slower moving average. Used for identifying trends and to trigger entry. 6. Average True Range (ATR) The ATR was originally developed for commodities, but the indicator can also be used for stocks and indexes. It is used to determine price volatility and it can also be used to set profit targets and protective stops. Learn more about and how to calculate the ATR. Used for identifying stops, targets and volatility.
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> Indicators
9. Relative Strength Index (RSI) The RSI is intended to chart the current and historical strength or weakness of a stock, Forex, option, or other marketbased issue on the closing prices of a recent trading period.
Average True Range (ATR)
The RSI can be calculated using the following formula: RSI = 100 – 100/(1 + RS*) *Where RS = Average of x days’ up closes / Average of x days’ down closes
7. Average Directional Index (ADX) The ADX is used to measure the strength of a trend, not its direction. If you are trading stocks, ETFs or Forex pairs, it’s best to avoid low ADX numbers. If you trade ETFs, in particular, you will want to learn how to use the ADX to give your ETF trading an edge. Used for identifying strength of trend and end of trend.
Used for identifying divergence and short-term direction.
8. Bollinger Bands Created by John Bollinger in the 1980s, Bollinger Bands is a technical analysis tool evolved from the concept of trading bands. They are bands that are plotted on a price chart two standard deviations above and below a simple moving average. The standard deviation is a measure of volatility, so the bands will expand when the price action is more volatile and they will contract during less volatile times. When the price action nears the upper band, the issue is considered to be more overbought and, when it nears the lower band, it is considered to be more oversold.
You can use pivot points to help you quickly and easily identify the trend. Remember not to overcomplicate things. Of course our very own Jeff’s Lines and Rule of Thirds indicators are in the pivot point family of indicators. They are all used for identifying trend changes.
Here, we’ll go on to show you how to trade the market using Bollinger Bands. Used for identifying squeeze play and volatility.
10. Pivot Point A pivot point, which is simply the average of the high, low and closing prices from the previous trading day, is used to determine the overall trend of the market over different time frames.
Post script Remember, sometimes simpler is better, so keep it simple! What are some of your favourite technical analysis indicators? But I’ve got to mention one last thing: All technical indicators are nothing more than tools. There’s an old saying you’ll hear on the golf course whenever golfers blame a bad shot on their clubs: “Blame the archer, not the arrow.”
Forex Trading can be lucrative, easy to do and can leave you with plenty of time to enjoy yourself!
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> From The Blog of Dr David Paul
VectorVest Does The Heavy Lifting
Dr. David Paul of VectorVest The last two months have been marked by the FT100 trading in a 200 point range. The index of the largest 100 shares on the LSE has charted a triangle which seems ready to break soon and thus my title to this entry. The triangle is quite easy to draw and its boundaries defined the high and the low of Friday’s trading. A much broader measure of the LSE, the equally weighted VectorVest Composite, has treaded water all of last week. The Composite is still above the trend line, which defines a “flag” pattern which I have discussed in this blog many times. In the course of the last eight sessions, the market has come back and found support at this trend line three times and that’s positive. This is known as a “break and a kiss”.
The reverse divergence between the Composite and the MACD is still in play, although momentum has fallen over the last week. Both the Primary Wave and the underlying trend are still pointing UP and I
remember the only thing we can do is to act on what’s happening NOW. If I focus and react to what’s happening NOW, then the future will take care of itself. For me, as an end of day trader, the present moment is defined by this daily bar and the trend situation on the VectorVest program. I find this quite easy to do compared with my efforts as an intraday trader. On the FT100, I use a five minute chart and my perception of NOW changes every five minutes. That takes much more focus and I am only capable of keeping up that level of focus for a few hours a day and certainly not each day. I went into last week overweight in building stocks with three out of 11 holdings from that sector. On Monday, I sold out of Redrow (RDW) at a decent profit after holding the share since the day after the election. The decision had nothing to do with RDW but just that I was overweight in that sector and as you
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> From The Blog of Dr David Paul will have seen the share did well since my decision. I am holding Barratt and Persimmons in that sector. I replaced RDW with the Go Ahead Group which is a “Big Hitters” stock that is breaking out of a six month consolidation. As with all things trading related, time will tell.
I am sitting in my portfolio of shares and, am nervous that many have already achieved significant technical objectives, my portfolio is unleveraged and my strategy is to do my best and sit as long as the underlying trend of the VectorVest Composite remains UP.
Shire had a very good week and looks probable to break much higher soon and reach a new high on takeover speculation.
David Paul
Over the last few weeks at the Monday webcasts I have been illustrating the use of FIB to define targets. In one of these, I noted that the 2.618 extension of the last move on JD Sports was 650 and that’s where the share moved to on Friday. This has been a great investment since the underlying trend of the LSE printed a Confirmed Call BUY signal at the start of the year. Avon Rubber is a “Big Hitters” share that has broken a 52 week high and looks as if it can move much higher. I like the sharp down move which occurred in March. This looks like a classic flush of weak hands prior to a significant move. After the flush, the share has charted a text book rounding bottom or cup and handle formation. Over the last few days the share has pulled back a tad, and that in my view is the handle of the cup. A break of the last high and it should be off to the races. Thanks to all of you who came along to my first “Successful Investors Workshop” in London last week. I tried to pack as much as I could into the evening and would like to thank everyone who contributed with questions and comments.
May 30th 2015
Find out how VectorVest and Dr. David Paul could help your trading – click below:
http://youtu.be/XVcX0J0tJg0
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> Stock Analysis – Plus 500
Plus 500 Ltd Great stock threatened by news?
Plus500 Limited (PLUS.L) Financial (Management) was, by volume, the biggest traded stock in the UK in the first week of June 2015 so we decided to see what was happening. Despite being seen as undervalued the stock has been given a Sell recommendation by several commentators. About Plus 500 Ltd Business: Plus500 Ltd., formerly Investsoft Ltd., is an Israel - based company, which develops and operates an online trading platform for retail customers to trade a contract for difference (CFD) internationally over more than 1,700 different underlying global financial instruments, comprising equities, exchange traded funds (ETF), foreign exchange, indices and
commodities. The Company enables retail customers to trade CFDs in more than 50 countries. Sales / Market Capitalization Information Sales: PLUS.L has annual sales of ÂŁ149,000,000.
> Stock Analysis – Plus 500 PLUS.L has a Sales Growth of 74.00% per year. Sales Per Share (SPS): PLUS.L has annual sales of £1.30 per share. Price to Sales Ratio (P/S): PLUS.L has a P/S of 2.86. Shares: PLUS.L has 114,000,000 shares of stock outstanding. Market Capitalisation: PLUS.L has a Market Capitalisation of £426,000,000. Market Capitalisation is calculated by multiplying price by the shares outstanding. Capital Appreciation PLUS.L has a current Value of £1,197.80p per share. Therefore, it is greatly undervalued compared to its Price of £371.50p per share. The long-term price appreciation potential calculation for PLUS.L is very high. However, all of the positives need to be tempered by a recent news item in which it was reported that the company could lose up to 50% of its UK customers. Plus 500 had to suspend more than half of its UK customer accounts due to new anti-money-laundering checking processes, its house broker has assumed between a third and half of customers could leave. Around 50% of group revenues are derived from customers trading via Plus500's UK
30 subsidiary, with 55% of UK customers impacted until the paper document review process is complete, with the 45% electronically verified customers unaffected.
On a 12-month view, a "preliminary sensitivity analysis" by the broker has indicated that its revenue forecasts could be reduced by 9-14% as Plus500 prioritises higher-revenue customers, leading to 2015 earnings per share forecasts being cut by roughly 20-30%. "Within 2-4 weeks the majority of impacted customers will likely have their proof of address documents (utility bills and bank statements etc.) reviewed and approved.” Although things don’t look too bad for Plus 500 we will let things settle before analysing the stock further or before considering buying it. Dividend Information PLUS.L pays an annual dividend of 27.21p per share. It gives a Dividend Yield therefore of 7.32 percent which is very good indeed. However, recent news could affect revenue, costs and profits. The expectation of the dividend being as high this year could be reduced. In fairness this was not rated as high safety even before this news.