GuruFocus Tutorial

- Idea Generation and Idea Validation

http://www.gurufocus.com

Created: Dec. 2009

Updated: May. 2013
What Can GuruFocus
Do For You?
Stock Markets Covered:
US Markets (> 10,000 stocks)
Canadian Markets (> 3,800 stocks) Released in Jan. 2013
UK/Ireland (> 3,400 stocks. Release date: Feb. 2013)
European Markets (non-UK/Ireland) (> 20,000 stocks. Release date: March 2013)
Australian/New Zealand (> 2000 stocks. Release date: April 2013)
Asia (> 2000 stocks. Release date: May 2013)

Stock Idea Generation Part I

All-In-One Stock Screener
Guru Stock Picks and Holdings
Insider Buys
Value Investing Screeners
Monthly Newsletters

Stock Idea Validation Part II

Financial Strength and Business Quality
What Gurus are doing with the stock
What Insiders are doing with the stock
Valuation:
Absolute valuation DCF Model
Historical valuation 10-year P/E, P/B, P/S ratios
Relative valuation Comparable companies
Warning signs

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Region, Country Coverage
Region/Country # of Companies Covered Country # of Companies Covered Stock Exchanges Covered
USA 8809 USA 8809 NYSE, NASD, AMEX, OTC
Canada 3910 Canada 3910 TSX, TSXV
UK/Ireland 1680 UK 1597 LSE
Ireland 83 IRE
Europe (Non-UK) 4564 France 830 XPAR
Germany 793 XTER, FRA, HAM, MUN, DUS
Poland 776 WAR
Sweden 363 OSTO
Italy 285 MIL
Switzerland 280 XSWX
Norway 185 OSL
Denmark 178 OCSE
Spain 171 XAMS, XMCE
Belgium 167 XBRU
Netherlands 154 WBO
Greece 134 ATH
Finland 127 OHEL
Portugal 57 XLIS
Lithuania 33 OVSE
Latvia 31 ORSE
Asia 14467 China, HongKong 4514 SZSE, SHSE, HKSE
Japan 3551 OSE, TSE, JAS
Korea, South 1841 XKRX
Taiwan 1747 TPE, ROCO
Malaysia 942 XKLS
Singapore 655 SGX
Thailand 580 BKK
Turkey 387 IST
Philippines 250 PHS
Australia/NZ 2059 Australia 1921 ASX
New zealand 138 NZSE 3
 Feature/Region Coverage

Europe Australia
Features US Canada UK/IRE (Non-UK) Asia /NZ

Guru Trades/Portfolios X X X X X X

Insider Trades X X

Short Positions X X

Key Ratios X X X X X X

10-Y Financial Data X X X X X X

Value Strategies and Screeners X X X X X X

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Part I

Stock Idea Generation Part I

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 All-In-One Stock Screener
All-In-One Screener - The only screener you will need to do all the screening you
want
Covers all stock markets released (US, Canadian, UK, European, etc.)
More than 130 filters can be combined in any way you want:
Fundamental: Industry, market cap, ROA, ROE, predictability, Altman Z-score, Piotroski F-
score, financial strength, institutional ownership, insider ownership, warning signs, etc.
Valuation ratios: P/E, P/B, P/S, P/FCF, PEG, Shiller P/E, EV/EBIT, EV/EBITDA, Price/DCF,
etc.
Profitability: Margins, margin percentiles, margin growth rates
Growth in revenue, EBITDA, EPS, book value, assets, etc.
Historical valuation: Percent above/below historical valuation ratios and prices, 52-week,
3-year, 5-year low/highs
Valuation percentiles across industry
Price: Beta, volume, changes
Dividends: Yield, payout, dividend growth rate
Gurus: Gurus trades, holdings, aggregated portfolios
Insiders: CEO/CFO buys filters by shares, costs, insider cluster, time, etc.
Filter in a specific list of stocks of your interest.
Customize and save. Bring up next time in one click.
Download in Excel.
Save results as portfolios and observe performances.
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 All-In-One Screener
Global coverage

Screening are clicks

only

Multiple tabs in
results area

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Who Are the Gurus?
CEOs of Investment Companies
Warren Buffett, Prem Watsa, etc.

Hedge Fund Giants

George Soros, Dan Loeb, David Einhorn, John
Paulson, Tiger Cubs (Maverick, Viking Global,
Lone Pine), etc.

Mutual Fund Managers

Don Yacktman, Bruce Berkowitz, Marty
Whitman
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How Are Gurus Selected?
Investors that have generated long-term
outperformance with large asset bases

Mostly value-oriented
Warren Buffett, Bruce Berkowitz, Seth Klarman

Low portfolio turnover

Some great investors other than value style are

also covered:
Global macro: Paul Tudor Jones, Louis Moore Bacon
Quants: Jim Simons, Steven Cohen, etc.

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Guru Categories
Free Gurus: More than 60 Gurus portfolio and
stock picks are FREE to registered users.

Premium Gurus: Premium Members can access

all the features described here. Free members
have limited access.

Premium Members can suggest new Gurus

(Premium Gurus) that only Premium Members
can access.

Personalize your Guru list.

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Personalize Your Gurus
Personalize your list of Gurus so that you only
see the Gurus you are interested in. Check their
consensus picks, common holdings, etc.

You have the option of turning on/off the other

Gurus.

To avoid confusion and too much information,

the trades and holdings of Premium Gurus will
not show up when you check the Guru trades of
a stock, unless a Guru is in your Personalized
List of Gurus.

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Guru Idea Generation
- Individual Guru Portfolios
Guru quarterly trades
Current portfolio
Real Time Picks Guru trades reported within 2-10 days.
Positions/Picks in a particular industry/market cap
International picks
ETFs
Preferred stocks
Option holdings (calls, puts)
Guru bargains
Value ideas in Gurus portfolios:
Undervalued predictable companies
Low-P/E stocks
Top growth companies
Top dividend-yield companies
Top Insider buys
Guru portfolio reports (PDF) - A comprehensive Guru portfolio
report

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Guru Idea Generation
- Aggregated Guru Portfolio

Guru sector/industry trend Which industries they are going into?

Guru geographic trend Where to invest? Asia? South America?

Guru consensus picks

Guru aggregated holdings Most broadly owned and most weighted

Sector consensus picks/holdings

Guru bargains

Excel download

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Idea Generation From Insider
Trades
Insider Trades

CEO, CFO Buys

Companies that are bought by their CEOs and CFOs

Insider Cluster Buys

Stocks that multiple company officers and directors have bought

Double Buys
Companies that both Gurus and Insiders are buying

Triple Buys
Companies that both Gurus and Insiders are buying, and the company is buying
back shares
Excel Download

Insider Trend
The aggregated trades of Insiders

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Insider Trends
Aggregated Insider trading activities are very good at
predicting the market.

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Proven Value Strategies
Buffett-Munger Screener
Quality stocks young Buffett would buy

Ben Graham Net Current Asset Bargain Screener

Companies Ben Graham would buy, sold at below net cash

Undervalued Predictable Companies

DCF calculation applied to predictable companies, large margin of safety exists

Historical Low P/S Companies

Predictable companies that are sold at historical low P/S ratios
A model portfolio that tracks the performance of the strategy

Historical Low P/B Companies

Predictable companies that are sold at historical low P/S ratios

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 Performance of Value
Strategies
Invest with strategies that have been proven successful over the long term.
* All numbers do not include dividends.

Top 25
Top 25 Historical Top 25 Historical
Buffett-Munger Undervalued
Year S&P 500 Low P/S Ratio Low P/B Ratio
Screener top 25 Predictable
Companies Companies
Companies

2009 24.7% 28.6% 55.7%

2010 11.6% 19.5% 20.2% 16.4% 19%

2011 -0% 6% -3.3% -1.9% -2%

2012 13.4% 11.8% 5% 17.4% 15.9%

2013 (Jan. 19) 4.2% 4.9% 3.2% 2.5% -2.3%

Since Inception 91% 96.1% 32.1% 37.4%

Outperforming the S&P 26.6% 31.7% 0.2% 5.5%

Screener Links Screener Here Screener Here Screener Here Screener Here
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Monthly Newsletters
Ben Graham Net Current Asset Bargain
Newsletter
One net-net is highlighted per month.

Buffett-Munger Bargains
Research reports on one undervalued high
quality stock per month.

Micro-Cap Magic Formula Newsletter

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Other Value Ideas
Broad Market Valuations based on total market
cap/GDP
Shiller P/E Ratios
Global Market Valuation

Other Ideas (See All-In-One screener)

52-week low Guru/Insider stocks

High Dividend Stocks

S&P 500 Grid

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Portfolio Tools
Create and track the performance of
your portfolios
Private or public portfolios
Set up email alerts from:
Price movements
Guru trades

Insider trades

Valuation thresholds

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Excel Downloads
Individual Portfolios
Aggregated Portfolios in Different
Formats
Guru Stock Picks
Insider Trades
Value Screens
Historical Financial Data

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Email Alerts
Opt-in to daily and weekly email
updates.
Follow your favorite Gurus and
receive email alerts.
Set up watch lists and portfolios and
receive email alerts when Gurus or
Insiders trade the stocks.

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Part II

Stock Idea Validation

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 Getting Started with a
Stock
1. Type a symbol in the search box.
2. A dropdown menu appears.
3. Scroll to the page you want to go to.

Search Box

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 Stock Key Information
Warning signs are results
from checklists of 32 items
that cover the areas of
financial strength,
profitability, growth and
valuation of each company.
They provide alerts for what
might go wrong with the
company. Learn more.
Predictability rank: Ranks the
consistency of the business. A
red box around it means the
predictability is on watch.
Valuation Box
Asset
Earning
Combination
of Asset & Growth
Valuation Methods Power How to Calculate
Based
Based
Earnings
Power
Considered
Cash & Cash Equivalents + Short Term Investments
Net Cash X No Total Liabilities
Net Current Asset Cash and Short-Term Investments + (0.75 * Accounts
X No
Value (NCAV) Receivable) + (0.5 * Inventory) - Total Liabilities
Intrinsic Value (DCF
x Yes
Value = (Growth Multiple)*FCF(6 year avg) + 0.8*Total
Projected) Equity(most recent)Details here
SquareRoot of (22.5 * Tangible Book Value * Earnings
Graham Number x No per share)
Median P/S Value X No Historical range traded relative to sales.
PEG * 5-Year Earnings Growth Rate * Earnings. Only
Peter Lynch Fair
X Yes
applies to companies with consistent growth rate
Value between 8% to 25%. If growth rate is higher than 25%,
we use 25%.
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Executive Summary
- Stock Idea Validations
Rank of financial strength, profitability and growth of the company

What Gurus are doing with the stock

What Insiders are doing with it

10-year financial history

Valuations:
Absolute valuation with DCF calculator
Historical valuation history: P/E, P/S, P/B
Relative valuation: how other companies in the same industry are
valued

Comparisons

Peer opinions: how others value this company

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Tab 1 - Summary Ranking of business performance
and valuations relative to its
historical performance and its peers:

1.Financial Strength
2.Profitability
3.Growth
4.Valuation Ratios
5.Dividends

Highlights of financial data

Illustration of Guru trades and

Insider trades with the stock

Mouse over displays pop-ups with

detailed information:

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Tab 1 - Summary
Details of Gurus trades

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TAB 2 - Guru & Insider Trades
& Ownership
Key statistics

Recent and earlier quarter

Guru trades

Premium Gurus trades do not

show up, unless they are in
your personalized list

History button to show holding

history

Insider history

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 Holding History of Gurus
Click on the
history button to
show the holding
history of the
Gurus with this
position.

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 TAB 3 10-Year
Financial History (I)
TAB 3: 10 years and 40
quarters of financial data
Balance sheet
Income statement
Cashflow statement
Per share data
Valuation ratios
Valuations

Graphic display of any

data in the page, overlap
multiple charts

Every row can be clicked

open to display in charts

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TAB 3 10-Year
Financial History (II)
Every row of data can be clicked open to
display a chart like this.

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 TAB 4 Analysis and Historical
Valuation -1
The stock goes through a
checklist of 32 items to
find out:

Severe Warning
Medium Warning Signs
Good Signs

These warning signs are

not necessary bad
indicators. But they are
things you need to be
aware of.

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 TAB 4 Analysis and Historical
Valuation -2
TAB 4 - Historical P/E, P/S,
P/B and dividend yield are
displayed to compare current
valuation with historical
valuation.

The P/E, P/S AND P/B ratios

over the past 10 years are
calculated to find out
historical maximum and
minimums.

Lines are drawn at both the

historical maximum P/E and
minimum P/E.

Similar lines are drawn for

P/S and P/B ratios.

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 TAB 4 - Historical Valuation (II)
Click on the legend; each line
can be turned on/off.

Historical maximum P/E (30.3)

and minimum P/E (10.6) lines
are displayed. These two lines
form a band of historical P/E
ratio movement of WMT.

Historical P/E lines are not

horizontal straight lines
because earnings are
changing.

Historical high P/E (P/E=30.3)

Historical low P/E (P/E=10.6)

In the case of WMT, apparently

the current P/E ratio of 13.9 is
at its low-end P/E ratio as of
today.

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TAB 4 - Historical Valuation (III)

A lot of times P/E is

not a good indicator
of stock value, as
profit margin can vary
over business cycles.

In this case, P/S and

P/B can be good
reference for stock
valuation.

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TAB 5 - Absolute Valuation
DCF Calculator (I)
TAB 5 Intrinsic value calculation with
discounted cash flow model.

All parameters (EPS, growth rate, discount

rate, years to grow, etc.) can be adjusted to
your preferences, and the calculator updates
automatically (see next slide for details).

Margin of safety is calculated automatically.

Default parameters like earnings per share,

growth rate and book value are from the
financial data in TAB 2.

Default terminal growth rate is 4%, and

default discount rate is 12%.

Financial data is given to help users set the

parameters.

Tangible book value displayed.

Intrinsic values of related companies are

calculated automatically with the same
growth rates and discount rate, but their
own earnings per share; the respective
margin of safety is given.

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 Tab 6: Interactive Charts
Draw historical charts of
more than 100 items in:
Balance sheet
Income statement
Cash flow statement
Per share data
Valuation ratios
Valuations

Charts data can be daily,

quarterly, annual or TTM.
Add/delete charts in one
click. Easy to use.

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 Tab 7 Insider Trades
Chart for Insider trades
overview

Detailed list of insider

trades history

Link to the original filings

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TAB 9 Compare: Relative Guru
Trades & Valuation
TAB9 - Compare with
competitors on Guru
trades and market
valuations.

Compare companies
with similar valuation
matrixes.

Type in any
combination of
symbols to compare
with other
companies.

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TAB 10 Fair Value Votes
TAB 10 Fair value
votes of other users

Vote your fair value

votes

Ask other users why

they voted for the
value

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Premium Membership
Premium Members have full access to all
the features described in this
presentation.

7-Day Free Trial

The secured link for signing up:

https://www.gurufocus.com/membership/
upgrade.php

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Premium Membership
Premium Members have full access to the all the
features described in this presentation for stocks
that are traded in the US.

Global membership give access the regions they

subscribe

7-day Free Trial

The Secured link for signing up:

https://www.gurufocus.com/membership/upgrad
e.php
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