Stocks

Investors intend to be long term owners of stocks because they use value analysis. DuPont analysis is a framework for analyzing fundamental performance of companies, and is a useful technique to decompose the different drivers of return on equity (ROE). There are three major financial metrics that can drive ROE: profitability, efficiency and leverage. Dupont analysis helps investors to focus on the key metrics of financial performance separately to compare similar firms and identify strengths or weaknesses.

Combining fundamental analysis with machine-learning powered forecasting algorithms, DATAMIMO runs the analysis and prediction on a real-time basis for many S&P 500 company stocks, and helps build stock portfolios with investor-personalized balance between profit and risk management. Monte-Carlo simulations and perturbation theory are applied into models to estimate the impact of uncertainties in the stock market. There is no perfect stock investment strategy that is valid all the time, however, technical financial stock analysis guides your decisions and minimizes the risks, augmented by both finance theory and quantum mechanics approximation.

Investors also need to avoid falling into prey of their own behavior biases such as Representativeness, Familiarity, Endorsement Effect, Naive Diversification, Inertia, Option Confusion and Power of Defaults. 

Other common behavior bias for individual investor are Loss Aversion, Tax Motivation for stock trading.

Louis and Chan in 2003 provides extensive study on the under-pinning mechanism and validate Warren Buffett’s value investing strategy because persistence growth rate is rare. The absence of persistent growth rate may be caused by the competitive pressures and this pressures will eventually correct the excessive high or excessive low profitability growth.