Henry Chien

Henry Chien

I teach individual investors how to do fundamental stock investing

Operating as usual

20/12/2023

Comps comps comps.

Why do we use comps for stock investing?

It widens our perspective, fast. More perspective = better decisions.

It also helps us have guardrails on our assumptions, so we also make better judgements of a company’s earnings potential, and its valuation.

Comp sheets allow you to make a fast, informed assessment of a stock’s potential, to help you decide if it’s worth buying or not. They are used all the time by professional investors.

We give our course-takers these pre-built templates (connected to data APIs) so they can make fast, better informed decisions on the stocks they are researching!

03/11/2023

Was just sharing this w/ course-takers-

Paycom ($PAYC) is an example of the value of fundamental analysis.

The stock sold off -30% on lowered rev. guidance. The sell-off was so aggressive because $PAYC was super richly valued...



You had to dig into the metrics.

$PAYC capitalizes expense more aggressively than $PCTY.

That's why adj. EBITDA margins were so much higher.

$PAYC was trading at 54x (vs. PCTY 42x) FCF per share - way more expensive.

That's one reason it sold off so much.

02/11/2023

For the past 30-days, I took a break from "simulated pleasures"

-drinking / alcohol
-social media scrolling
-media (movies, etc.)
-newspapers

And replaced with daily meditation.
I wanted to reset my mindset to embrace reality + work.
(dopamine reset)

And...
it totally works!!

31/10/2023

You know what's exciting?
A QUALITY BUSINESS

This week we're showing learners exactly how to recognize quality with fundamental research + financial analysis!

Case study of MSCI (high-quality)
Case study of TWOU (financial warning signs)

28/10/2023

Three accountants at the final interview for a company position.

Task: Calculate the firm's taxable income.

Accountant:
1 - Calculates $5 million
2 - Asks for more info, $5.1M
3 - Asks "How much do you want to show?"

Accountant #3 got the job immediately.

This is a joke :)

27/10/2023

I was reviewing 2U (TWOU) yesterday for the course - it's a classic short example:

Warnings:
-Change disclosure requirements
-Aggressive revenue recognition

Negative signs:
-Slowing growth
-Negative leverage
-Non-scalable business
-Unclear returns
-Lots of capital raises

26/10/2023

Your basic framework for considering investment options.

Define your goals: return expectations, risk, and constraints.
Review options: every investment has risk, reward, and volatility.

Consider portfolio effects (correlation between investments)

Allocate accordingly.

25/10/2023

With the 1-year treasury rate at 5.45% (risk-free), you should have your excess cash (no liquidity needs, etc.) getting this type of return at the very least.

You can get it at different banks (even Apple) or even buy the bills directly from the Treasury.

03/10/2023

The essential questions for an investment plan:

Risk tolerance
-Volatility (price variation) and loss tolerance

Return objectives
-Target returns (annualized)

Time horizon
-Time to hold investment

Constraints/liquidity
-Liquidity needs
-Tax implications

Others:
-Leverage use
-Drawdown limits

02/10/2023

I am putting together a review of investment software tools to create walkthroughs and templates for my course learners.

I've been using Koyfin and FinSheet (API to GoogleSheets). I want to give TIKR a look as well.

There's also a service that provides financial models for retail but I forgot what it was called...

Any others I'm missing? Let me know if there's any good investment software tools I'm missing!

Why GameStop's Stock Exploded from an Investment Perspective 15/09/2023

Wonder why Gamestop’s exploded from an investment perspective?

It's a combination of:

-Attractive valuation
-Fundamental catalysts
-Extreme short interest
-Converging fund flows

Created an explosive stock!
I break it all down here.

Enjoy!

Why GameStop's Stock Exploded from an Investment Perspective GameStop’s extraordinary rise in 2021 captivated the world’s markets. It marked a new generation’s stock market. The stock of a struggling retailer turned into the beacon of rebellion— the internet generation versus the entrenched elite. The rise rattled the stock market’s clearing systems...

13/09/2023

As an equity research analyst, I interacted with 100+ analysts and investors on Wall Street.

Here’s what I noticed about the most successful:

(Caveat that it is hard to confirm actual performance. I consider them successful if they are in growing funds and managing money for many years)

They have fun! (this was unexpected).

It didn’t matter whether it was value, growth, or long/short factor neutral. When talking shop about stocks, there are lots of laughs and a joy to the work. “That stock didn’t work…oops”

They have an eye for detail (this was expected).

Noticed this with the hedge fund guys and gals. They catch little changes in the financial model. Sometimes, it can be extreme - “What do you think of this 10bps margin change?”

They have perspective (this comes with experience).

The PMs tend to have this quality. Some of the best calls feel this way - “I bought gold miners when the Fed announced unlimited QE.”

They take a high-level view and don’t get too caught up in the emotions of the market.

I’m sure there are plenty of other qualities that make investors successful.

These are just a few that stood out to me!

11/09/2023

Get the simple step by step to figure out what's most important for a stock's potential (without wasting hours)

10/09/2023

How to read financials to avoid taking excessive risk in your portfolio (without feeling overwhelmed)

09/09/2023

The framework used by hedge funds and investors to recognize a stock opportunity (what ideal stocks look like)

08/09/2023

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Better Investment Decisions: Guide to Fundamental Investing in the Stock Market 08/09/2023

Books I've read that give you a feel for the financial analysis part of investing. Practitioner books (not theory):

Security Analysis
A detailed walkthrough of financial analysis from Benjamin Graham.

It is dated and dense. Still, I remember it was so cool to see things like competition impact the balance sheet and margins.

https://a.co/d/c4ttLVw

The Art of Short Selling
Case studies of short-selling companies about to decline.

I realized there's an art to interpreting cash flows and earnings changes and seeing patterns in the numbers.

I realized here

https://a.co/d/d8IxTfG

Better Investment Decisions
My decade of Wall St. research experience condensed.

With the daily grind of equity research, I started to see stories in the financials of education/business services/industrial sectors.

https://a.co/d/0vVrLaI

Better Investment Decisions: Guide to Fundamental Investing in the Stock Market Better Investment Decisions: Guide to Fundamental Investing in the Stock Market

08/09/2023

I spent 3-4 years struggling to make money with stocks.

Day-trading, merger-arb stuff, chart patterns, cyclical stocks.

Nothing worked, I just lost money over and over.

I realized I needed to learn from someone with experience.

I went to work at BMO in equity research.

There analysts talked about estimates, guidance, and models.

Not “cup and handle” chart patterns.

It started to click - stock prices are all about expectations!

I committed to the learn the fundamental process of real investors.

In a few short years - I went from clueless to picking great ideas like MSCI (+700%, 2016-2021).

Picking a stock can be overwhelming—but it's worth it.

I’m hosting a FREE training to help you pick stocks.

If you want to find great stock ideas in the next 12 months - this is for you!

Join us: https://learn.henrychien.com/free-training

06/09/2023

Observation from a sell-side analyst:

Most investors don’t use complex financial formulas.
Or analyze accounting ratios.

Instead, they’ll use simple financial models to estimate:

Earnings per share
Free cash flow (discounted cash flow)
Returns on invested capital

How to Analyze a Stock (Step-by-Step Fundamental Analysis) 01/09/2023

How to analyze a stock (step-by-step fundamental analysis).

You can create an actionable idea with fundamental analysis.

Three steps to research a stock:

1 - Find out how the business makes money
2 - Identify the market trend
3 - Evaluate the strategy

Put it together into an estimated price.

Yesterday, close to 200 informed investors learned this process.
Miss the issue?

Grab it below ↓

How to Analyze a Stock (Step-by-Step Fundamental Analysis) In this article, I will show you the steps of fundamental analysis in equity research to analyze a stock. Fundamental analysis is how you turn an observation (this is an interesting company) into an actionable idea (what to do with the stock).

How to Read a Stock's Financials (Avoid Excessive Risk) 01/09/2023

When I first started stock investing, I had no financial background.

I was usually overwhelmed by all the metrics in a company’s earnings release.

Even after teaching myself financial models, I was clueless about the meaning of the numbers.

In one of my first notes in equity research, I wrote that a company beat its earnings estimates because “depreciation was higher than expected.”

I remember my boss looked at me like I was an idiot.

I realized I needed to learn the business behind the financials.

After immersing myself in 10Ks and 10Q filings, the numbers started to come to life.

Once I visualized the business behind the financials, the accounting started to make sense.

The income statement was a record of transactions.

The balance sheet was what the business owed and owned.
The cash flow statement showed the movement of cash.

I could now see the movement of cash in the business.

One day, a banker came to us with a potential deal for investors.

A small education company wanted to issue stock to acquire businesses (tuck-in acquisitions).
Could we pitch it to investors?

I pulled up the 10Q and scanned the financial statements.

The business was losing money, its free cash flow was negative, and it had about one-quarter worth of cash left on its balance sheet.

The company was about to go bankrupt!

Needless to say, once we told the banker, the deal didn’t happen.

(It’s hard to pitch a bankrupt company to investors).

Financial statements are not about formulas or accounting terms.

It’s about understanding the business behind the numbers.

I wrote about analyzing stock’s financials (to avoid excessive risk).

You can read it free here:

How to Read a Stock's Financials (Avoid Excessive Risk) In this article, I will show how to read a stock's financials so you can avoid excessive financial risk. I'll show you a simple financial statement analysis with a case study from equity research.

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Videos (show all)

Pre-Webinar Series: Day 3 - Research Stocks
Pre-Webinar Series: Day 2 - Read Financials
Pre-Webinar Series: Day 1 - Finding Stock Opportunities
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I spent 3-4 years struggling to make money with stocks.Day-trading, merger-arb stuff, chart patterns, cyclical stocks.No...