“a gps in the stock market jungle” © 2000 arthur andersen all rights reserved. an introduction...

© 2000 Arthur Andersen All rights reserved.

“A GPS in the Stock Market Jungle”

An Introduction to StockPointer©

for Investment Advisors

2007

Claude Morel

Senior Partner

Copyright © 2001 StockPointer©

EVA© is a registered Trademark of Stern Stewart & Co.

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“A GPS in the Stock Market Jungle”Contents

The basic Concepts behind StockPointer– EVA

– Economic Performance Performance Index (EPI)

– Intrinsic Value

– Future Growth Value

The StockPointer Functions– SPreport – EVA Executive Summary

– SPiX – Top 10, 20, 40, 80 or 100 stocks

– PfScan – Portfolio Analyzer

– MktScan – Market Analyzer

– SPfilter – Customized Evaluation Criterion

The value of StockPointer for an Investment Professional– Business Development

– Account Management

– Client Relationship

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“A GPS in the Stock Market Jungle”What is EVA?

''EVA © analysis is at the heart of understanding how companies create shareholder wealth. Most importantly, it helps investors measure and understand those factors that create or destroy value.'‘

Steven Einhorn, Global Investment Research, Goldman, Sachs & Co.

EVA (Economic Value Added) is a measure that takes the Cost of Capital out of the Net Operating Profit, in order to

have a real picture of the financial performance of a company, in face of its shareholders.

EVA is an estimate of the true “Economic Profit”, or the amount by which Net Operating Profit After Tax exceeds or

falls short of the required minimum rate of return that shareholders and lenders could get by investing in other

securities of comparable risk.

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“A GPS in the Stock Market Jungle”What is StockPointer ?

“EVA© is today’s hottest financial idea and getting hotter”

Fortune magazine

StockPointer© is a Web-based offering which provides key metrics and valuation graphics

using the EVA method in order to allow investments managers to rapidly detect stock investment opportunities.

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“A GPS in the Stock Market Jungle”How does StockPointer work?

Financial reports + figures

captured in the footnotes

Formatting

Validating

Enrichment

Transmitting

Internet

Adjust. NOPAT & CAPITAL

Data Management

Security & Access

Utilities & Administration

Reports Production

File server

StockPointer©

5600 US Stocks1200 Canadian Stocks

Intrinsic Value

SPiX –Top 40

Specific Analysis

Adjustments to NOPAT et CI

Reports & Graphs

Economic PerformanceMarket Performance

Accounting Performance

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The Enron Case: Difficult to mask EVA compared to Net Income and EPS1

1 Stern Stewart & Co.

Net income showed great Results

…while EVA showed not so great

What a customer will like about his Advisor using StockPointer ?

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EVA change explains market price more significantly than other typical measures1

1 Stern Stewart & Co.

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“A GPS in the Stock Market Jungle”StockPointer key Metrics To invest only in companies that create wealth for the shareholders

and are not overvalued by the market

Economic Performance Stock Price Evaluation

Identify the companies that properly manage their capital in the best

interest of their shareholders and generate a return that is higher than expected for a similar level of risk

Wealth Creation (or EVA) becomes criteria #1

Insure that stock is not over-priced compared to the company’s

Intrinsic Value

EVA-$ = NOPAT-$ – Cost of Capital-$

= ROC-$ – COC-$

= (ROC-%-COC-%) x Capital

> 0 if and only if ROC > COC

Performance Index = ROC / COC

Intrinsic Value = NPV of future EVA’s

Performance Index > 1 0.4 < P\IV < 2.5

« Better to invest in an economically sound company at the reasonable price than invest in a poor company at a cheap price »

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To align the risk associated with a portfolio with the degree of tolerance that the end-customer is

comfortable with

Level of risk associated with a stock

Adjust the desired level of risk of the overall portfolio using the Future Growth Value (FGV) calculation for each of its stocks

FGV = Market Value of Company – Current Operations Value

= MV – NPV of future Profits

= or < 0 for minimum risk

FGV < Acceptable Risk level

Other risk factors include:

- Sector over-weighting compared to Top-80

- P/IV too good to be true

- Profit and EVA going in different directions

StockPointer key Metrics

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SPiX-Top 100-US vs S&P 500

StockPointer really works

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“A GPS in the Stock Market Jungle”StockPointer Functions

Login/Logout

Individual Stock Basic Report

SPreport

Portfolio Analyser

PfScan

Market Analyser

MktScan

Best Cad/US Stocks

SPiX

Customize requests

SPfilter

IV Scenario Building

SPiV

PDF Printout

Feature+

Excel Export

Feature+

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“A GPS in the Stock Market Jungle”Customer Base (Canada)

StockPointer is currently a strategic tool for more than 275 investment professionals in Canada

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“A GPS in the Stock Market Jungle”PfScan© - Testimonies“Reviewing his portfolio with my top client (in terms of assets) based on PfScan convinced him of the great intrinsic value of his holdings”, Gilbert, FBN

“PfScan has been instrumental in consolidating all of one of my

customer’s accounts with me”, Richer, FBN

“PfScan has greatly helped us to tangibly demonstrate the value of our investment model ”, Leblanc, FBN

“Performing economic diagnoses of prospects’ portfolios

has lately been key in closing new clients ”, Viau, FBN

“PfScan has proven to be a very productive marketing tool in our process of creating and monitoring a portfolio model for our IA’s”, Roy, IAVM

“Comparing the intrinsic value of stocks through PfScan has

significantly helped us to put together a US-Stock portfolio

comliant with the objectives of our clients”, Leclaire, RBC

“Portfolio compliancy processes at the branch and firm levels could be much more productive and efficient if PfScan was used throughout the organization”, Bergeron, FBN

“We appreciate very much the added value of StockPointer and particularly its new function PfScan that allows us to capture at a glance the economic value/risk of a portfolio.”,Gendreau ,RPFL

“Just recently I did a PfScan for one of our largest clients- they were so impressed, not only did they approve all of our suggestions within the portfolio, other clients have since called wanting to see a PfScan of their own portfolio!”, Misener,Talbet, IAVM

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“A GPS in the Stock Market Jungle”Most recent Testimonies

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“A GPS in the Stock Market Jungle”Most recent Testimonies

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What will StockPointer do for a Financial Professional?

Develop a special relationship between you and your client– For any impromptu phone call, the SPreport will instantaneously allow you

to have a strong position on any company/stock– The SPreport is the most complete documentation you can give to a

customer in regard to any specific stock– The list of Peers in the SPreport allows comparisons with any other

comparable company or competitor

Business Development & Prospecting– SPiX and SPfilter will help you in the identification of prospect Buys, using a

series of your own (or already defined) specific criteria's– PfScan is the best tool to analyze a current prospect portfolio and see the

winners/losers amongst the included stocks ….then SPiX, PfScan and MktScan will allow you to make appropriate

recommendations, based on the real economic value of a company and on the Market composition and trends

Account Management– SPreport, PfScan and MktScan will be of great support in respecting any

client compliancy rule



Thank You

***********************You can subscribe Now!!!

atwww.stockpointer.ca

User-ID = clientPassword = synchro



Sample Reports

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A sample standard EVA report from StockPointer - Page 1-A

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A sample standard EVA report from StockPointer - Page 1-B

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A sample standard EVA report from StockPointer - Page 2

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“A GPS in the Stock Market Jungle”Analyzing a Portfolio: PfScan©

Using a standard Portfolio from a customer…

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“A GPS in the Stock Market Jungle”SectorTrends

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Cnd MktScan

-

0.5

1.0

1.5

2.0

2.5

-19.0% -14.0% -9.0% -4.0% 1.0% 6.0% 11.0% 16.0%

Indice de risque (- FGV / VE)

Indi

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cono

miq

ue (R

OC

/ C

OC

) Énergie

Matériaux

Industrie

Consommation discrétionnaire

Consommation de base

Santé

Finance

Technologie de l'information

Télécommunications

Services aux collectivités

Moyenne

Fin.

Ind.

Cons. base

Mat.

Risque décroissant

Risque croissant

Création de richesse

Destruction de richesse

Moyenne

Ser.

Én.

TI

Tél.

Santé

Cons. disc.

SectorScan

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“A GPS in the Stock Market Jungle”SPfilter

“a gps in the stock market jungle” © 2000 arthur andersen all rights reserved. an introduction...

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