Stock Market investment: Non financial fundamental analysis

This course blends data analysis and ratio metrics with qualitative questions on dividend policy, competitive advantage, and sustainability to uncover how disclosures like 10-Qs influence a company's bottom line.

Startups burn cash to build prototypes and attract customers before a finished product earns revenue. They run negative profits with inconsistent cash flow and rely on capital at cheap valuations.

The growth stage drives rising revenue and profits as a startup scales, with profits reinvested to expand and few dividends, while shares trade at low valuations before surging.

Explore the mature stage of growth, where revenue and profits peak and stabilize as markets saturate, and dividends provide a stable cash flow in cash-cow companies.

Identify why firms enter the decline stage as they lose relevance and shareholder value declines. Use J. C. Penney to illustrate declining revenue, profits, and the risk of rights issues.

Explain the dividend payout ratio as a share of net profit, typical around 30%, and why some firms pay over 100% due to one-time events, expected recovery, or debt-financed dividends.

Dividends vary with the business lifecycle: no dividends in early growth, possible in high growth for some, and more likely in mature stage, with decline sometimes paying dividends.

Explore rate of return and dividend policy, comparing cash dividends versus reinvestment in high growth vs mature companies, and why firms should return or reinvest cash to maximize shareholder value.

Explore power in business using Porter's five forces framework to analyze substitutes, entrants, rivals, buyers, and suppliers, and assess how these factors shape a company's market power.

Analyze buyer and supplier power by examining buying concentration, supplier concentration, and how large buyers influence prices, margins, and supplier choices in the market.

Evaluate how switching costs and product differentiation shape buyer and supplier power, influencing prices, competition, and investment considerations in non-financial fundamental analysis.

Explore how buyer and supplier profitability and price sensitivity shape purchasing power and pass-through of costs, illustrating when buyers can resist price increases or press suppliers for bargains.

Understand how substitute products and buyer power influence competition, illustrated by iPhone versus Android choices and price negotiations over chip costs inside devices.

Explore how new entrants affect competition by examining economies of scale, fixed costs, and the minimum efficient scale that determines entry feasibility.

New entrants face brand identity dominance from Coke and Pepsi, high capital requirements, and protected drug patents that deter entry, while buyer and supplier power in convenience stores shape profits.

Explore how access to channels, distributor relationships, and essential resources (factory equipment, property rights, and exclusive rights) shapes entry barriers for new market entrants.

Public policy affects a new entrant establishing a business; licensing and regulations may block entry, while incumbents like Uber show how policy and joint operations defend market share.

Explore rivalry power in stock market investment, showing how industrial growth, capacity overhang, and price wars shape competitive dynamics, mergers, and profitability in cyclical and seasonal industries.

Analyze how rivalry rises when competitor diversity is low and a cutthroat entrant triggers a price war, and why exit barriers keep specialized manufacturers operating at a loss.

Analyze how a company builds a moat using a resource framework by examining its finite financial, human, and organizational resources, including cash, assets, customer relationships, and culture.

Ask whether a resource is valuable, rare, hard to imitate, and non-substitutable to determine its contribution to a company's competitive advantage and value.

Use a flow chart to assess whether a resource is valuable, rare, hard to imitate, and non-substitutable, yielding competitive parity, competitive advantage, or sustained competitive advantage.

Do not be discouraged if a company lacks a sustainable advantage; it's rare and parity often exists. Identify resources that are valuable, useful, rare, hard to imitate, and not substitutable.

Spot overlooked market niches left by giants A, B, and C and invest in a small firm like D that captures those leftover segments, a strategy for outsized returns.

Analyze Activision Blizzard as a game developer and publisher relying on proprietary gaming systems and intellectual property, with titles like World of Warcraft and Call of Duty, plus console licensing.

Examine how under armour leverages moisture-wicking fabric technology, licensing, and outfitting agreements with athletes to differentiate products, while outsourcing manufacturing and branding goodwill shape its competitive position.

General Motors' integrated design, manufacturing, and financing model, including its Buick, Cadillac, Chevrolet, and GMC brands, and the role of dealers and incentives in pricing strategy.

Non financial fundamental analysis relies on qualitative factors, is slow and time consuming, requires extensive reading of disclosures and building business acumen, with limited objectivity and subjective forecasts.

assess a company's lifecycle stages, funding needs, cash flow use, and dividend policy. evaluate bargaining power, rivalry, buyers, suppliers, and valuable, rare, inimitable resources for sustainable competitive advantage.