Financial Invesment - Eng

Investments
Phd. Luu Thu Quang

Banking University of HCM
Study plan: link
Chapter 1. Overview of Investments

Chapter 2. Equities investment
Chapter 3. Bond investment
Chapter 4. Derivative and others
Chapter 5. Technical analysis
Reference books
 Fundementals of investments: valuation and management, second edition, Charles J.Corrado
and Bradford D.Jodan
 Securities analysis, Benjamin Graham and David L. Dodd
 The intelligent investor, Benjamin Graham
 common stock and uncommon profits, Philip A. Fisher
 How to make money in stocks, William J. O’Neil
 The SnowBall
 The Warren Buffett Way, Robert G. Hagstrom
 Warren Buffett and George Soros, Mark Tier
 The Tao of Warren Buffett, Mary Buffett and David Clark
 Warren Buffett and interpretation of financial statement, Mary Buffett and David Clark
 Rule 1, Phil Town
 The theory of investment value, John Burr Williams
Chapter 1: Overview of investments
1. Investment definition
2. Types of financial investment
3. Financial investment process
4. Methods of analysis
5. Investment methods
Investment definition
According to Malkiel (2007), Investment is a method of buying assets to make a profit in
the form of reasonably predictable income (such as share dividends, bond dividends or rental
income) and/or the value of the investment will increase later. a long time. (Random walk on Wall
street)
“An investment operation is one which, upon thorough analysis, promise safety of principal and a
satisfactory return” p54, Security Analysis, Benjamin Graham & David Dodd
“Investment, in finance, the purchase of a financial product or other item of value with an
expectation of favorable future return. In general terms, investment means the use money in the
hope of making more money”, InvestorWords
“The investment process is almost like waiting for the paint to dry or the grass to grow. If you feel
excited, take $ 800 to Las Vegas " - Paul Samuelson (Forbes 7/2015)
Investment definition
 From the writer's perspective: Financial investment is a plan
whereby investors use idle funds to trade appropriate
financial instruments, based on careful analysis, with a
reasonable degree of risk tolerance to make a satisfactory
profit in order to achieve your financial goals.
Why we need investment?
 Financial Freedom
 Take advantage of compound

interest
 Without investing your free

cash flow, you will be guilty
to humanity
 Most of the world's

billionaire assets are in the
form of stock
Mistakes in investment
 Realizing profits too early: This is a classic mistake when new investors realize
profit too hastily just to make a small profit. Meanwhile, the momentum of
market growth has just begun, the profits can still be greater and it is clear that
new investors missed the big wave just because they were too impatient. CNBC's
advice is to be patient with the investments that are yielding profits before
realizing profits. Sometimes, big waves last for several years and not many
investors have the patience to wait for this opportunity. Quite simply, because
many investors thought, "This stock has rallied so hard, it can't go up anymore.“
 "Fear" to cut losses: CNBC stated that this is the second classic mistake when
new investors go wrong but still do not accept. CNBC's advice is never to be
patient with losses. Bad investors often take the reason why the market is falling
against their expectations, but the reality is that the market is always right.
Thinking like "This stock went down too deep, it cannot go down further" is
incorrect, the stock may still go down further.
 Herd effect: CNBC believes that new investors are often influenced by other
investors, or by market movements. They mistakenly believe that if a stock is
bought by more people, the quality of the stock is good. The herd investment is
often compared as gamble. When making small profits from gambling, people
often mistakenly make this profit too easily and start being affected by
psychology. Then suddenly, the player lost all their money and didn't understand
what was going on.
 Listen to celebrities: It is not wrong to seek professional advice, but listening

them absolutely is not recommended. CNBC believes that when a well-known
investor publicly declares his or her remarks, it is not merely to the mutual benefit
of the market or to prove its worth. Behind the public statements of investors
always come with personal purposes, so be careful with statements like this.
 Poor in time management: Investors should find important information about
the corporates as quickly as possible and should not be affected much from
surrounding opinions. time management is forgetting unnecessary information or
un-useful elements. The future is made by the decisions of current investors.
Therefore, worries about the past such as "should be like this and that" only waste
time, but time means money.
 Forget your strengths: A common mistake that inexperienced investors often

make is making non-professional deals. Some new investors have little success in
the stock market, so they think they can make a profit with the real estate market,
currency, gold ... As a result, many people have to receive an expensive lesson.
CNBC recommends that investors focus on what you have been doing well,
making the investment results in that field more successful than ever. Human
ability is limited, being professional in one thing is always better than doing many
things but not having high efficiency. This is the best way for investors to build
their long-term career.
Types of financial investment
 Equities: common stock and preferred stock
 Interest bearing instrument: money market instruments, fixed-income
securities (bond).
 Derivatives and others
1. Options
2. Future
3. Private Equity
4. Hedge Fund, ETF
5. Gold and Forex
6. Real estate
7. Commodities
8. Cryptocurrency
Investment process
 Determine investment objectives: profits and risks

 Asset allocation
 Seeking about the law on investment
 Looking for investment opportunities
 Analysis of investment opportunities
 Market timing
 Disbursement
 Track investments and take profits or cut losses
Investment process of VPO fund
investment method
 Fundamental analysis: handling economic information, information of the
business answer two questions
1. Answer the question why?
2. Good stocks or bad stocks?
 Technical analysis: working with prices and volumes and care about
1. Answer questions How?
2. Stocks increase and stocks decrease
 Quantitative analysis: use mathematical models to predict macro factors,

revenue, profits, stock prices of the company ...
Investment Strategies
 Value Investing Strategy
 Growth Investing Strategy
 Quantitative Analysis Strategy
 Growth at a reasonable price Strategy
 Income Investing Strategy
 CANSLIM
 Dogs of the Dow
 Strategy based on Technical Analysis (Trading)
 Strategy based on portfolio investment
Value Investing Strategy
Value investing is an investment strategy that involves picking stocks
that appear to be trading for less than their intrinsic or book value. ...
Value investors use financial analysis, don't follow the herd, and are
long-term investors of quality companies
Low P/E
Pricing
Growth Investing
DEFINITION of 'Growth Investing'
A strategy whereby an investor seeks out stocks with what they deem
good growth potential. In most cases a growth stock is defined as a company
whose earnings are expected to grow at an above-average rate compared to its
industry or the overall market.
INVESTOPEDIA EXPLAINS 'Growth Investing'
Growth investors often call growth investing a capital growth strategy,

since investors seek to maximize their capital gains.
Although it is often said that growth investing and value investing are
diametrically opposed, a better way to view these two strategies is to consider
a quote by Warren Buffett: "growth and value investing are joined at the hip".
Another very famous investor, Peter Lynch, pioneered a hybrid of growth and
value investing with what is now commonly referred to as a "growth at a
reasonable price (GARP)" strategy.
GARP
DEFINITION of 'Growth At A Reasonable Price - GARP'
An equity investment strategy that seeks to combine tenets of both growth investing and value
investing to find individual stocks. GARP investors look for companies that are showing consistent
earnings growth above broad market levels (a tenet of growth investing ) while excluding companies that
have very high valuations (value investing). The overarching goal is to avoid the extremes of either
growth or value investing; this typically leads GARP investors to growth-oriented stocks with relatively
low price/earnings (P/E) multiples in normal market conditions.
INVESTOPEDIA EXPLAINS 'Growth At A Reasonable Price - GARP'
GARP investing was popularized by legendary Fidelity manager Peter Lynch. While the style may
not have rigid boundaries for including or excluding stocks, a fundamental metric that serves as a solid
benchmark is the price/earnings growth (PEG) ratio. The PEG shows the ratio between a company's P/E
ratio (valuation) and its expected earnings growth rate over the next several years. A GARP investor
would seek out stocks that have a PEG of 1 or less, which shows that P/E ratios are in line with expected
earnings growth. This helps to uncover stocks that are trading at reasonable prices.
In a bear market or other downturn in stocks, one could expect the returns of GARP investors to be
higher than those of pure growth investors, but subpar to strict value investors who generally purchase
shares at P/Es under broad market multiples.
Dogs of the Dow
 An article by H.G. Schneider was published in the Journal of Finance in
1951 The investing strategy which focuses on Dogs of the Dow was
popularized by Michael Higgins in his book, "Beating the Dow". The
strategy's simplicity is one of its most attractive attributes. The Dogs of
the Dow are the 10 of the 30 companies in the
Dow Jones Industrial Average (DJIA) with the highest dividend yield. In
the Dogs of the Dow strategy, the investor shuffles around his or her
portfolio, adjusting it so that it is always equally allocated in each of these
10 stocks.
 Typically, such an investor would need to completely rid his or her

portfolio of about three to four stocks every year and replace them with
different ones. The stocks are usually replaced because their dividend
yields have fallen out of the top 10, or occasionally, because they have
been removed from the DJIA altogether.
CANSLIM
 CANSLIM, created by Investor's Business Daily William J. O'Neil, is a
system for selecting growth stocks using a combination of fundamental
and technical analysis techniques. CAN SLIM is a bullish strategy for fast
markets as the goal is to get into high-growth stocks before the
institutional funds are fully invested.
 C - Current quarterly earnings per share has increased sharply from the

same quarters' earnings reported in the prior year. Generally investors
using CANSLIM want EPS growth of over 20%, but the higher the better.
 A - Annual earnings increases over the last five years. Here again the
annual EPS growth is ideally over 20% over the last 3-5 years.
 N - New products, management, or new events/information that pushes
the company's stock to new highs. This type of headline news can cause
short-term excitement, propelling a surge of optimism within the market
and subsequent price appreciation
CANSLIM
 S - Scarce supply coupled with strong demand for a stock creates excess demand.
This is an environment in which stock prices can soar. Companies acquiring (
re-purchasing) their own stock reduces market supply and can indicate their
expectation of increased demand, along with insider confidence in the firm.
 L - Laggard stocks are preferred within the same industry. Use the
relative strength index (RSI) as a guide. The RSI ranges from zero to 100. A RSI
indication above 30 suggests a buying opportunity (bullish), while above 70
signifies a chance to sell (bearish).
 I - Pick stocks, which have institutional sponsorship by a few institutions with
recent above average performance. For example, this could be a recently public
company, still supported by a small handful of well known private equity firms.
Be cautious of stocks that are over owned by institutions as you want to get in
before the big money is fully invested.
 M - Determining market direction by reviewing market averages daily. A market
average measures the overall price level of a given market, as defined by a
specified group of stocks, such as the Dow Jones Industrial Average.
Chapter 2: Equity investment
1. Economy analysis
2. Industry analysis
3. Company analysis
4. Stock valuation
Content limited in:
 The lecture only focuses on common stock analysis.

 Students should research and expand the content of preferred stock
analysis
Equity investment
1. Buy a good / great company
"Buying a great company at a reasonable price is much better than buying a

good company at a great price."
2. With cheap / reasonable price
3. Hold for a reasonable amount of time
a. Temporary sale
b. Always on sale
Fundamental model
 Top-Down Model
 Bottom-Up Model
Top_down model
Application for organization: when the analyst focuses on the economy
and industry, if these two factors are not stable, they will not invest.
Econo
my
Industry
Firms
Bottom_up model
Application: prioritizing the search for under-value stocks; suitable for

individual investors.
Econo
my
Industry
Firm
The Purpose of economy analysis
 Supporting investors make decisions in allocating capital between
countries
 The distribution of investment instruments in each country
 Observing the advantages and disadvantages of the investment
environment in each country.
 Find the industries that will benefit the most in the current and future
macro contexts
 Observing the influence of macro factors on the stock market
Investment environment
Investment environment is a combination of economic, social, cultural,

legal, financial and infrastructure factors that directly or indirectly
affect investors' investment activities.
Sharpe Ratio
Analysis the important macroeconomic
factors
Analyzing the change in past and present, thereby making future
forecasts of following macro factors:
Macro indicators, including: GDP, inflation, unemployment, exchange
rate, interest rate, public debt, bad debt, ICOR, investment (FDI, FII, ODA,
Government investment, private sector investment ), consumption, budget,
import and export, BOP ...
Policies and laws: monetary policy, fiscal policy, policies to attract
investment capital, new legal documents ...
Social lifestyle (Lifestyles): way of life, way of working, consumption,
education, entertainment ...
Technology trends (Digital Transformation)
ICOR of Vietnam (2000-2015)
Source: Nguyễn Đức Thành, Phạm Văn Đại(2016),

Báo cáo kinh tế thường niên 2016, Viện Nghiên cứu
Kinh tế
Industry analysis objectives
Analytical objectives:
1. Choose suitable industries for investment
2. Understanding the situation of the industry and forecast the growth of these
industries in the future.
Industry analysis objectives (cont)
Taken steps to achieve the goal:
Step 1. Select the industry for investment: based on two criteria
- The average growth rate of the industry compared to the growth rate of GDP:
+ Industry classification
+ Statistics of industry growth (at least 5 years) and averaged by weight.
+ Compare the average growth rate with the GDP growth rate forecasted
above and select industries with higher growth rates.
- The compatibility of the industry with the current period of the economy:
Based on the sectors that have just been selected at the first criterion, we
consider and select the industries with adaptability and development in
the current economy stage.
Industry analysis objectives (cont)
Step 2. Identifying the situation of the industry and forecast
the growth of these industries in the future.
- Using Michael Porter model to analyze the situation of the

industry
- Based on the analysis results from step 1, make a final

prediction about the future growth of the industry.
Industry classification criteria
 Based on major systems such as: ISIC (UN), NAICS (USA), UK SIC
(UK), ICB (Dow Jones and FTSE), GICS (Morgan Stanley and Standard
& Poor's), VSIC 2007 (Vietnam) ...
 Based on the company's main business. The main business activity is the
one that brings the main revenue for the company for a long time.
ISIC: International Standard Industrial Classification
VSIC 2007
Cấp 1 Tên ngành
A NÔNG NGHIỆP, LÂM NGHIỆP VÀ THUỶ SẢN

B KHAI KHOÁNG
D SẢN XUẤT VÀ PHÂN PHỐI ĐIỆN, KHÍ ĐỐT, NƯỚC NÓNG, HƠI NƯỚC VÀ ĐIỀU HOÀ KHÔNG KHÍ
E CUNG CẤP NƯỚC; HOẠT ĐỘNG QUẢN LÝ VÀ XỬ LÝ RÁC THẢI, NƯỚC THẢI
F XÂY DỰNG
G BÁN BUÔN VÀ BÁN LẺ; SỬA CHỮA Ô TÔ, MÔ TÔ, XE MÁY VÀ XE CÓ ĐỘNG CƠ KHÁC
H VẬN TẢI KHO BÃI
I DỊCH VỤ LƯU TRÚ VÀ ĂN UỐNG
J THÔNG TIN VÀ TRUYỀN THÔNG
K HOẠT ĐỘNG TÀI CHÍNH, NGÂN HÀNG VÀ BẢO HIỂM
L HOẠT ĐỘNG KINH DOANH BẤT ĐỘNG SẢN
M HOẠT ĐỘNG CHUYÊN MÔN, KHOA HỌC VÀ CÔNG NGHỆ
N HOẠT ĐỘNG HÀNH CHÍNH VÀ DỊCH VỤ HỖ TRỢ
HOẠT ĐỘNG CỦA ĐẢNG CỘNG SẢN, TỔ CHỨC CHÍNH TRỊ - XÃ HỘI, QUẢN LÝ NHÀ NƯỚC, AN NINH QUỐC PHÒNG; BẢO ĐẢM XÃ HỘI BẮT
O
BUỘC
P GIÁO DỤC VÀ ĐÀO TẠO

Q Y TẾ VÀ HOẠT ĐỘNG TRỢ GIÚP XÃ HỘI
R NGHỆ THUẬT, VUI CHƠI VÀ GIẢI TRÍ
S HOẠT ĐỘNG DỊCH VỤ KHÁC
HOẠT ĐỘNG LÀM THUÊ CÁC CÔNG VIỆC TRONG CÁC HỘ GIA ĐÌNH, SẢN XUẤT SẢN PHẨM VẬT CHẤT VÀ DỊCH VỤ TỰ TIÊU DÙNG CỦA HỘ
T
GIA ĐÌNH
U HOẠT ĐỘNG CỦA CÁC TỔ CHỨC VÀ CƠ QUAN QUỐC TẾ
21
Trần Tuấn Vinh
Trần Tuấn Vinh
Trần Tuấn Vinh
Industry classification at HOSE
 Principle
 List
Industry analysis models
 Michael Porter model
 SWOT analysis
Industry analysis models
Trần Tuấn Vinh

Trần Tuấn Vinh
Trần Tuấn Vinh
SWOT analysis for bún đậu mắm tôm
industry (Group discussion)
Michael Porter
Year of birth: 1947

Michael Porter is a well-known professor in the field
of competitive strategy; As an official professor of
Harvard Business School; He has made positive
contributions to America's business sector in particular,
and the world in general.
Author of 17 books and more than 125 articles on
competitive strategy and economic development.
Michael E.Porter model
Analytical objectives
The goal of sector/industry analysis based on the MP model is to find out:

 Which factors effect on the level of competition of the industry?
 These factors as well as the influence of these factors on: Profits and
turnover of the industry; The development ability of the industry in the
future
Threat of new entrants
a. At present, the industry you are analyzing has any barriers to prevent other
competitors from entering (note: It is not necessarily that an industry always
have barriers)?
b. Is the ability to penetrate these barriers high or low?
c. And how is their cost for penetrating in the industry you are analyzing?
d. How do their penetration affect the revenue and profit of businesses in the
industry?
Bargaining power of buyers
a. Who are customers of the industry that you are analyzing?
b. What are the characteristics of these customers?
c. How does their pressure create on the industry?
d. How does this affect future revenues, profits, and growth of the
industry?
What are the characteristics of these buyer?
 Do buyers have a high concentration or purchase a large volume of goods in the
total sales of enterprises in the industry?
 Are bought products occupies a large proportion of their total costs?
 Is the product of the industry that you are analyzing has highly heterogeneity to
buyers?
 When the buyer no longer wants to use the products in the industry. Is the switch
cost high or low?
 Is the profit of customers when buying products high or low?
 The threat of not consuming products from buyer is high or low?
 How important is the product to the quality of the buyer's product / service?
 How much is the buyer understanding of industry products?
Bargaining power of suppliers
a. At the moment, who are the suppliers in the industry?
b. What are the characteristics of these vendors?
c. How does the pressure of suppliers create for the industry?
d. How does this affect future revenues, profits, and industry growth?
What are the characteristics of these suppliers?
 Is the supplier one or more dominant and highly concentrated companies?
 Do supplier products have to compete with substitute products?
 The businesses in the industry you are analyzing are not important customers of
the supplier, is it correct?
 Is the supplier's product an important input for your industry?
 Are there any distinct characteristics of product which create the conversion
cost?
 Do the supplier have ability to integrate with the businesses in the industry you
are analyzing
Threat of substitute products
 What substitute product in the industry?
 What are the differences between analyzing products and substitute
products?
 How do substitutes impact on analyzing products?
 How does this affect sales, profits, and industry growth?
Rivalry among existing competitors
a.How is the intensity of competition among businesses in the industry
(high or low, fast or slow)?
b.How does this affect sales, profits and development prospects of
businesses in the industry?
How is the intensity of competition among businesses in the
industry (high or low, fast or slow)?
 Number and size of firms in the industry: 1. How many businesses are you
analyzing in your industry? 2. What is the size of these businesses? 3. How does
this affect the competitiveness of businesses in the industry?
 Speed and growth of the industry: 1. What is the current growth rate of the
industry? Is this number high or low? 2. what stage is the industry at in a growth
process (newly formed, fast growing or about to saturate)? 3. How does this
affect the competitiveness of businesses in the industry?
 Fixed cost or warehousing costs: 1. how many percentage of warehouse cost on
total cost? 2. Do products of companies bear the storage costs? And is this cost
high or low? 3. How does this affect the competitiveness of businesses in the
industry?
Productivity increases rapidly by large investments: 1. How is the industry applying

science and technology? 2. What is the growth rate of the industry? 3. How does this
affect the competitiveness of businesses in the industry?
Characteristic of the product and conversion costs: 1. Does the industry's product
show unique characteristic or display high conversion costs? 2. How does this affect
the competitiveness of businesses in the industry?
Barriers to exit the industry: 1. is it easy or difficult for companies to withdraw

from the industry? 2. What factors will prevent firms when they decide to withdraw
from the industry? 3. How do these affect the competitiveness of firms in the
industry?
How is the succeed determination of firm in the industry? 1. How are these
determinations expressed externally by actions? 2. How do these affect the
competitiveness of companies in the industry?
Analyzing the 5-forces model for online
sales
Company analysis
1. Non-financial analysis
2. Financial analysis
Warren Buffett
Warren Buffett is one of the most
successful and famous investors of all
time. Buffett is known as the “Prophet
of Omaha,”
Starting business very early, Buffett

has earned more than $ 50,000 at 16
year olds. Currently, he is the
chairman and CEO of Berkshire
Hathaway
Warren Buffett
 An investor, just a little better
than average, knows how to
spend less than he earns, will
not be able to "avoid" the
wealth in the future.
 Một nhà đầu tư, chỉ cần tốt hơn

trung bình một chút thôi, mà
biết chi tiêu ít hơn số anh ta
kiếm được, sẽ không thể nào
“tránh được” sự giàu có tất yếu
trong tương lai.
Warren Buffett
 “You Can't Produce a Baby in
One Month by Getting Nine
Women Pregnant'”
 “The stock market is a device

for transferring money from
the impatient to the patient.”
 “You don't need to be a rocket

scientist. Investing is not a
game where the guy with the
160 IQ beats the guy with a
130 IQ”
Warren Buffett's 4 stock investing
principles
 Evaluate top management for honesty and competence
 Look for companies with favorable long-term prospects
 Invest in stable stocks
 Buying the stock of the company at reasonably priced
Philip Fisher
In 1931, he founded the fund management
company names Fisher & Company. Fisher
managed the company until his retirement in
1999 at the age of 91.
Fisher is one of the people who greatly

influenced the investment philosophy of Warren
Buffett
Philip Fisher's investment philosophy
Focus on quality management and characteristics of the business.
 Important management qualities of a company include: comprehensive

management, careful accounting, good long-term prospects, openness to change,
excellent financial control, and good human policies.
 Key business characteristics will include: growth orientation, high profits,
commitment to research and development, good sales distribution systems,
industry leadership and own monopoly products or services.
Benjamin Graham
He is also considered the father of value
investment. Benjamin Graham is often
referred as Warren Buffett's teacher.
Graham's ideas and investment methods are

summarized in two classic books, "Securities
Analysis" and "The Intelligent Investor"
Benjamin Graham's investment philosophy
 The principle of value investment is that investor only accept a price that lower
than intrinsic value.
 Graham believed in fundamental analysis and searched for companies which own
good balance sheets or low debt, above-average returns and abundant cash flow.
Non-financial analysis
The excellent company is one that has:

 Excellent product or service
 Excellent business system
Excellent product or service
 There are specific characteristics (design or function) that make it easy

for customers to identify
 High competitiveness with other firms in the same industry: market share
and advantages
 The potential market in the future does not shrink: do customers tend to
consume more products?
Competitive ability
 What is competitive ability? (is a combination of factors that can help the
company to rise beyond competitors in selling more products and gaining
market share)
 What drives a highly competitive product? (with specific characteristics,

diversify designs or low prices)
 What factors are the competitiveness of a product expressed through?

Five competitive advantages
Type of competitive
No Concept Example
advantages
you are willing to pay more for the product
1 Trademark because you believe in its quality

License of
2 A company with patents or license
invention
A company that has the power to dominate the
3 Fee market will allow it to charge people who need
that product or service.
A company owns a product that customers
4 Convert fee convert to another product, will cost a lot of
money
The price of the product is very low that make its
5 Price competitors can not win.

Potential market
 What is the potential market? (total future payment demand for goods or
services)
 What factors affect the potential market? (technology, consumption

trends, per capita income, integration trend ...)
Excellent business system
 Reflected through Marketing activities
 Reflect through research, innovation and new product development
 Reflecting through transparency in accounting activities and information
disclosure
 Reflecting through the strategic changes to adapt to the new environment.
 Reflected through the company's culture
 Ability to accomplish the goals set by the board of directors
 Loyalty of senior managers to the company
Avoid companies with agency problems
 According to the agency problem theory, the lower the dividend
payment companies, the lower the debt ratio and the lower the
ownership rate of the Executive Board, the more serious the agency
problem will be.
 Case study - Coteccons
 Reasonable ESOP policy

Some important financial ratios of the company
Ratios Formula
Solvency Ratio
Working capital
Working capital
= "Current assets and short-term investments“ - “current liabilities"
Working capital / Total assets Working capital / Total assets
Current ratio = "Current assets and short-term investments" / “Current liabilities"

= "Current assets and short-term investments" - "Inventories" / "Current
Quick ratio
liabilities"
EFFICIENCY RATIOS
Net (credit) Sales/Average Accounts Receivable—gives a measure of how quickly

Accounts receivable turnover
credit sales are turned into cash
Cost of Goods Sold for the Year/Average Inventory. Higher ratios—over six or
Annual inventory turnover
seven times per year—are generally thought to be better
Inventory/Total Assets. Shows the portion of assets tied up in inventory.

Inventory to assets ratio
Generally, a lower ratio is considered better
LEVERAGE RATIOS
Debt/Owners' Equity—indicates the relative mix of the
company's investor-supplied capital. A company is generally
Debt to equity ratio
considered safer if it has a low debt to equity ratio. In
general, debt should be between 50 and 80 percent of equity.
Debt/Total Assets—measures the portion of a company's
capital that is provided by borrowing. A debt ratio greater
Debt ratio
than 1.0 means the company has negative net worth, and is
technically bankrupt
Net Fixed Assets/Tangible Net Worth—indicates how much
Fixed to worth ratio of the owner's equity has been invested in fixed assets, i.e.,
plant and equipment
Earnings before Interest and Taxes/Interest Expense—
indicates how comfortably the company can handle its
Interest coverage interest payments. In general, a higher interest coverage ratio
means that the small business is able to take on additional
debt
Cost ratio
Cost of goods sold to sales
Selling expenses to sales
Management expense to sales

PROFITABILITY RATIOS
Gross Profits/Net Sales—measures the margin on sales the company
Gross profitability is achieving. It can be an indication of manufacturing efficiency, or
marketing effectiveness
Net Income/Net Sales—measures the overall profitability of the
Net profitability company. In general terms, net profitability shows the effectiveness
of management
Net Income/Total Assets—indicates how effectively the company is
deploying its assets. A very low return on asset, or ROA, usually
Return on assets
indicates inefficient management, whereas a high ROA means
efficient management
Net Income/Owners' Equity—indicates how well the company is
utilizing its equity investment. If this ratio is too low, it can indicate
Return on investment poor management performance or a highly conservative business
approach. On the other hand, a high ROI can mean that management
is doing a good job, or that the firm is undercapitalized
Net Income/Number of Shares Outstanding—states a corporation's
EPS(cb)
profits on a per-share basis.
Net Sales/Total Assets—measures a company's ability to use assets to
Investment turnover generate sales. a very low figure may mean that the company
maintains too many assets or has not deployed its assets well
P/E Closing price at the end of the reporting period/Basic EPS"
Retention Ratio (Net Income− Dividends Distributed)/Net Income

Stock valuation
"If you buy things at a much lower price than they are, and you buy in
bulk, you basically don't lose money.“
"The first thing I do is evaluating the firm value without even knowing
the price of the stock. Therefore I am not influenced by the stock price
in setting my valuation.“
-Warren Buffett-
Stock valuation
1. Basic issues of stock valuation
2. Pricing Methods
3. General evaluation
Basic knowledge of stock valuation
Stock valuation is the determining the intrinsic value or fair value of stock
to serve the following tasks:
Make investment decisions to buy, sell, or hold
M&A
Equitisation
Issuing and listing of stocks

The necessary of stock valuation
Firm Ticker Intrinsic value Task Market price
1. Vietcombank VCB 100,000 IPO 50,000
2. Bia Sài Gòn SABECO 70,000 IPO 30,000
3. Tài chính Dấu khí PVFC 51,000 IPO 15,700
4. Đạm Phú Mỹ DMP 100,000 List 27,900
5. Điện Quang DQC 290,000 List 9,400
6. Nhà Từ Liêm NTL 270,000 List 28,900
(09/09/2008, Source: www.ssc.gov.vn, www.vse.org.vn)

Cognition
Buying shares without knowing their true value, just like a fool going to the
market, will surely buy at high price.
Determining true values based on data that is too short and unstable will
certainly be inaccurate.
Long term and steady data but are generated by a bad company is a terrible
accident, all you do becomes meaningless.
The important issue of pricing is that you must first have a good company.
Notes about pricing
The valuation here is a subjective one, the result of the valuation depends on
the appraiser
The valuation is not immutable, it depends on the change of information and
time
The outcome of a valuation is never 100% certain, because valuation is an
estimate of what will happen in the future and the estimate is never absolutely
true.
The more complex the pricing model is, with the estimation of many
variables, not necessarily a true outcome; because the estimation error will be
very large due to the estimation of many variables.
The valuation results are not as important as the pricing process
Stock Pricing models
Based on perspective: Based on perspective: Based on perspective:

Firm value includes entire Compared to the value of Firm value is the value of
intangible and tangible other firms cash flow that firm earns
assets in the future.
Market Ratio Valuation
Assets Valuation (Relative Valuation) Discount Cash Flow
1.P/E Model (DCF)
1. Dividend (DDM)
2.P/B
2. Free Cash Flow To
3.P/S
Equity Discount Model
(FCFE)
3. Free Cash Flow To
Firm Discount Model
Trần Tuấn Vinh (FCFF)
Asset Valuation
1. The general formula
2. Identify the variables
3. Used case
4. Limitations of the model

The general formula
1. Firm value = Net asset value + Goodwill

2. Price per share = Firm value / Total number of outstanding shares
Identify the variables
1. Net asset value
2. Goodwill
3. Total number of outstanding shares

Net asset value
Formula:
Net asset value = Total assets have been revaluated – Total
liabilities
In which:
1. Total revaluated assets are all existing assets of firm at the time of
valuation and based on market prices.
2. Total Liabilities is the entire debt of the firm at the time of valuation
Note:
* For equitized enterprises: Net asset value is the State's capital value to be
re-evaluated
Total number of outstanding shares
Total number of outstanding shares = number of issued shares –

number of treasury shares
number of issued shares = charter capital/par value
Note:
* In some financial statement, charter capital is common stock/Owner investment/capital
contributed
Identify the Goodwill
 Average profit rate of firm (Rcty) = Earning after tax (EAT) in n consecutive
years ( n = from 3 to 5 years) / Shareholders’ equity of n consecutive years
 Average profit rate of total firm in industry (Rngành) = EAT of all firms in n
consecutive years / Shareholders’ equity of all firms in n consecutive years
 Goodwill = Average shareholders’ equity of all firms in n consecutive years x

(Rcty – Rngành)
Firm X 2005 2006 2007 Total
247,883,250,12 468,269,225,41 844,206,663,91
Total assets
1 0 7
149,864,904,94 167,953,623,24 222,465,665,69
Total liabilities
6 8 6
Shareholders’ 101,768,345,17 300,315,602,16 621,740,998,22
1,023,824,945,558
equity 5 2 1
* Outstanding shares of firm X: 12,859,288 150,020,149,67
EAT 22,355,326,660 46,615,992,666 218,991,469,002
6
EAT 2005 2006 2007 Tổng cộng
Firm A 29,775,349,292 31,580,640,884 27,494,786,533 88,850,776,709
Firm B 7,810,800,674 25,057,489,277 38,527,776,279 71,396,066,230
Firm C 3,110,482,337 6,059,543,812 7,497,951,882 16,667,978,031
Total 176,914,820,970
Shareholders’
equity 2005 2006 2007 Tổng cộng
Firm A 102,521,799,980 113,399,110,185 162,944,885,674 378,865,795,839
Firm B 28,180,284,009 72,079,343,289 285,894,452,617 386,154,079,915
Firm C 22,123,392,200 53,254,590,760 112,430,523,036 187,808,505,996
Total 952,828,381,750
1. Average profit rate of firm X = 218,991,469,002 / 1,023,824,945,558 = 21.39 %
2. Average profit rate of total firm in industry = 176,914,820,970 / 952,828,381,750 =

18.57 %
3. Goodwill = (1,023,824,945,558 / 3) x (21.39 % - 18.57 %) = 9,623,954,488
4. Value of firm X = 844,206,663,917 - 222,465,665,696 + 9,623,954,488 =

631,364,952,709
5. Price per share = 631,364,952,709 / 12,859,288 = 49,098

Goodwill (Circular 202/2011/TT_BTC)
The value The

The average ratio
of state capital interest rate
The value of EAT
of Goodwill = in accounting
books at
x to state capital - of 5 year
Government
of a state firm in 3 consecutive
the time bonds
years
of valuation or more
Goodwill of a joint stock company
Applying Circular 202 to determine Goodwill of joint stock companies by:
1. Replace the State capital with the shareholders’ equity.
2. Replace the average EAT ratio of State capital in three years with average
ROE of firm in 3 years
Goodwill of a joint stock company
The value The

of shareholders’ Average ROE interest rate
The value
equity
of Goodwill
of a joint
= in accounting x in
3 consecutive
- of 5 year
Government
books at years bonds
stock company
the time or more
of valuation
Used case
Asset valuation model commonly used in Equitisation to determine the

firm value.
Only few investors use this model to evaluate stock. However, if we want
to use this model for investment, we must add the adjusted value of real estate
to match the situation in Vietnam.
Assets Valuation (for Investment)
Firm value =
Total assets
- Total liabilities
+ Goodwills
+ adjusted value of real estate
Example
Identify the stock value of company X by the asset valuation method. Know
that X has the following figures:
1. X has the land use rights of 150 m2 on Dong Khoi Street, District 1, Ho Chi
Minh City, the book value of this land is 60,000,000,000 VND. According to
market, actual price is 100,000,000,000 VND.
2. X has the following financial statements (Next slide)
The interest rate of 5-year government bonds is 9%

VND mil VND mil
V
VND mil N
D
mi
l
Key
2017 2018 2019 Average No
1 Total assets 770,000

ROE 11.9% 12% 10.4% 11.4%
2 Total liabilities 481,000
3 Goodwills 6,936
Adjusted value of real
Shareholders’ equity 289,000 4 estate 40,000
5 Firm value xxxxxxxxx

Average ROE in 3
consecutive years 11.4% 6 Outstanding shares 11,000,000
5-year government
7 Price per share
bonds interest rate 9%
Business advantages 6,936
Limitations of the asset valuation model
Only focusing on the events happening in the past and the present, without
considering the changes of firm in future.
Only considering separately the firm without attaching its value to the
interaction of other firms.
Relative Valuation or Multipliers
1. P/E
2. P/B
3. P/S
P/E
Indicators Firm A Firm B
EPS 5000/share/year 8000/share/year
Market price 60,000 ?

P/E
General fomula:
P(A) = EPS(A) x P/E*
In which:
P(A): Intrinsic value of Firm A
EPS(A): EPS of firm A
P/E*: P/E used for valuation (note: this is not the firm's current P / E)
P/E
Steps:
1. Find P/E for valuation: Industry P/E or Internal P/E or Average P/E in
the past (note: choose only one of the above P/E)
2. Calculate current EPS
3. Calculate the real value of the stock

Find P/E for valuation
 Industry P/E or;

 Intrinsic P/E or;
 Historical average P/E or;
 P/E is calculated based on the average interest of the market
Find industry P/E: EAT
Outstand
searching real data of Market
ing Capitalization
Firms in price
at least 3 companies in industry
shares
the industry, ideally 10
(3)
companies. (1) (2) (4)=(1)*(2)
Firm A P(A) a LN(A) P(A)*a

Firm B P(B) b LN(B) P(B)*b
Firm C P(C) c LN(C) P(C)*c
Firm D P(D) d LN(D) P(D)*d
Firm E P(E) e LN(E) P(E)*e
Total N M
Industry P/E = M/N
Or find intrinsic P/E :
P0 = D1/(r-g) = D0 x (1+g)/(r-g)
P0/EPS0 = (D0/EPS0)x (1+g)/(r-g)
= (1-b)x(1+g)/(r-g)
Intrinsic P/E = (1-b)x(1+g)/(r-g)

b: Retention Ratio
g: growth rate of dividend
r: discount rate
g = b x ROE (common stock/ROCE)

b= 1- (Dividend rate x charter capital/EAT)
Or find average Year 1 Year 2 Year 3 Average

P/E : Data at least (1) (2) (3) (4)={(1)+2)+3)}/3
from one year, Jan P/E(1.1) P/E(2.1) P/E(3.1) P/E(1)
preferably 3-5 years Feb P/E(1.2) P/E(2.2) P/E(3.2) P/E(2)
Mar P/E(1.3) P/E(2.3) P/E(3.3) P/E(3)
Apr P/E(1.4) P/E(2.4) P/E(3.4) P/E(4)
May P/E(1.5) P/E(2.5) P/E(3.5) P/E(5)
Jun P/E(1.6) P/E(2.6) P/E(3.6) P/E(6)
Jul P/E(1.7) P/E(2.7) P/E(3.7) P/E(7)
Aug P/E(1.8) P/E(2.8) P/E(3.8) P/E(8)
Sep P/E(1.9) P/E(2.9) P/E(3.9) P/E(9)
Oct P/E(1.10) P/E(2.10) P/E(3.10) P/E(10)
Nov P/E(1.11) P/E(2.11) P/E(3.11) P/E(11)
Dec P/E(1.12) P/E(2.12) P/E(3.12) P/E(12)
Average P/E of the firm [P/E(1)+…+P/E(12)]/12
Currently, some professional investors calculate P/E for valuation based on

perspective:
Return on Investment Stocks = Average market yield
And:Return on Investment Stocks = EPS / market price (P)
Infer: EPS/P = Average market yield
Infer: P/E = 1/Average market yield
Example: Average market yield 9%, infer accepted P/E = 1/9% = 11.2
Current EPS
General fomula
EAT – Dividend of preferred share - welfare Funds
EPS =
Nbq
Nbq: The average outstanding shares

Current EPS
∑NixTi
Nbq =
365 (or 12)
Ni : Number of outstanding shares in period

i
Ti : Duration of period i
Current EPS
1.Case of Seasonal equity offering (SEO)

Company X earns 10 billion VND in 2007. On Jan 1, 2007 X has 1
million outstanding shares. On July 1, 2007, X issues 100,000 additional
common shares at the price of 20,000 VND/share. Calculate EPS?
Nbq = (1x6 + 1.1x6)/12 = 1.05 Mil

EPS = 10 bil / 1.05 mil = 9524 VND
Current EPS
2. In case of issuing stocks to reward or pay dividend.
Company X earns 10 billion VND in 2007. On Jan 1, 2007, X has 1

million shares outstanding. On July 1, 2007, X issues 100,000 additional
common shares to pay dividend. Calculate EPS?
Nbq = 1 mil + 0.1 mil = 1.1 mil

EPS = 10 bil/1.1 mil = 9091 VND
Note: In case of dividend payment or reward by new shares, it must be

retroactive to the beginning of the year
Exercise
Company A has a net profit of VND 80 billion in 2007. On Jan 1, 2007,

the company has 7 million outstanding common shares and 3 million preferred
shares with 10% dividend, face value is VND 10,000. On March 30, 2007, the
company issued 10% of its shares to pay dividends. And on July 1, 2007, the
company issued 3 million additional shares at the price of 20,000 VND.
Calculate EPS?
Nbq = {(7 mil + 10%x7 mil)x6 + [3 mil + (7 mil + 10%x7 mil)]x6}/12

= 9.2 mil
EPS = (80 bil – 3 mil x 10% x 10,000)/9.2 mil = 8,370 VND
Exercise
Year 2010
Firm A Firm B Firm C
1. Market price 90,000 86,000 86,000
2. EAT 18,000,000,000 50,000,000,000 33,000,000,000
3. Outstanding share 4,000,000 8,000,000 6,000,000
Firm X
Year 2010
Charter capital 30,000,000,000
EAT 6,000,000,000
Please determine the
Par value 10,000
intrinsic price of X by P/E.
Calculate industry P/E
Market Outstanding
Firm EAT Market capitalization
price share
A 90,000 4,000,000 18,000,000,000 360,000,000,000
B 86,000 8,000,000 50,000,000,000 688,000,000,000
C 86,000 6,000,000 33,000,000,000 516,000,000,000
Total 101,000,000,000 1,564,000,000,000
Industry P/E 15.49

Year 2010
EPS 2,000
Industry P/E 15.49
Intrinsic price 30,980

Discount Cash Flow Model
1. Dividend discount cash flow

(DDM)
2. Free Cash Flow To Equity
Discount Model (FCFE)
3. Free Cash Flow To Firm
Discount Model (FCFF)
General formula of DCF model
n
CF1 CF2 CFn CFt
P 0
 1
(1  ke )

(1  ke ) 2
 ... 
(1  ke ) n
  (1  k )
t 1 e
t
CFt: Expected cash flow that will generate in year t (It may be
dividends paid, cash from liquidating assets, cash flow of equity, cash
flow of the firm ...)
ke : The discount rate which represents the expected return of the

investor relative to the corresponding risk of cash flow. Standing from
enterprise perspective, this is the capital cost.
Identify discount rate (ke)
 By CAPM model
 By Gordon model
 By WACC
 Based on the expected interest rate of each individual investor
By CAPM model
R j  R f  ( Rm  R f )  j
Rj : Is the required return rate for stock j (or cost of equity)

Rf : Risk free rate.
Rm : Market return.
 j beta coefficient of stock j.
TSSL Market TSSL of A
Year (RM) (RA) RM – Rbq RA - Rbq (RM – Rbq)2
[1] [2] [3] [4] [5] [6] = [4] x [5] [7]
1 40.00 45.00 27.25 29.25 797.06 742.56
2 -5.00 -3.00 -17.75 -18.75 332.81 315.06
3 7.00 9.00 -5.75 -6.75 38.81 33.06
4 20.00 22.00 7.25 6.25 45.31 52.56
5 15.00 16.00 2.25 0.25 0.56 5.06
6 -7.00 -9.00 -19.75 -24.75 488.81 390.06
7 -5.00 -1.00 -17.75 -16.75 297.31 315.06
8 -9.00 -7.00 -21.75 -22.75 494.81 473.06
9 14.00 17.00 1.25 1.25 1.56 1.56
10 13.00 15.00 0.25 -0.75 -0.19 0.06
11 30.00 35.00 17.25 19.25 332.06 297.56
12 40.00 50.00 27.25 34.25 933.31 742.56
Average (Rbq) 12.75 15.75

Total 3,762.25 3,368.25
COV = 3,762.25 /12 313.52 Note: We also use monthly or daily data to
Var = 3368.25 /12 280.69 calculate Beta
Beta (A) = COV / VAR 1.12
By Gordon model
P0 = D0 x (1+g) / (r – g)
Infer: r = [D0 x (1+g) + P0 x g] / P0
P0: Current Stock Price

D0: Current year dividend
r: Discount rate
g: The growth rate of dividend
By Weighted Average Cost of Capital
(WACC)
ke = WACC
 Assume a firm Photon limited that needs to raise capital to buy
machinery, land for office space and recruit more staff to conduct
day to day business activities. Let’s say that the firm decided that it
needs an amount of $ 1 million for the same. The firm can raise
capital through 2 sources – Equity and Debt.
 It issues 50,000 shares at $ 10 each and raises $ 500,000 through

equity. As investors expect a return of 7 %, the cost of equity is 7
%.
 For the remaining $ 500,000, firm issues 5000 bonds at $ 100 each.
The bondholders expect a return of 6%, hence Photon’s cost of
debt will be 6 %.
 Additionally, let’s assume the effective tax rate is 35%.
Based on expected return rate of each
other investor
r = Max(inflation, interest rate, risk free rate…) + investment risk
premium
Warent Buffet follows this method

Drawn from industry and company
qualitative analysis. This is an
emotional part, it display the
experience of the analyst
Discount Cash Flow Model (DCF)
 Dividend discount cash flow (DDM)

 Free Cash Flow To Equity Discount Model (FCFE)
 Free Cash Flow To Firm Discount Model (FCFF)
Dividend discount cash flow (DDM)
This model is constructed from the point of view: when buying stocks, we
will hold for long and the only cash flow we get is dividends. So the value of
the stock is the present value of the dividend stream
DDM is suitable for the following
companies:
 Company is in the steady growth period

 Company has policy which spend most of EAT to pay dividends
 Company has a lower dividend growth rate than the discount rate
The model with a defined holding period (Multiple-Year Holding Period)
D: Dividend
ke: Required rate of return

The model with infinity period:

General formula:
The model with infinity period
1. Infinite Period DDM (The Gordon Growth Model). Assume the future
dividend stream will grow at a constant rate, g, for an infinite
period
Year 0 (Present) Year 1 Year 2 …….. Year n

Dividend 1,000 1,050 1,103 N/A
g 5% 5% 5% …….. 5%
Ke 16% 16% 16% 16% 16%
V V = 1050/(16% - 5%) = 9,545
2. Constant dividend payout ratio:

V = D/ke
Year 0 (Present) Year 1 Year 2 …….. Year n
Dividend 1,000 1,000 1,000 N/A

g 0% 0% 0% …….. 0%
Ke 16% 16% 16% 16% 16%
V V = 1000/16% = 6,250
3. Multistage Dividend Discount Models
Dividend growth
rate
gs
Stage 1 Stage 2
Stage 3
Ng Nd Time
Stage 1: Dividend growth rate is high and constant
Ng
D0 . (1  g )t
V1  
t 1
(1  ke )t
Stage 2: Dividend growth rate decreases gradually

Nd
Dt
 (1  ke )t
t  Ng  1
V2  Ng
(1  ke )
Stage 3: Dividend growth rate is stable and low
Intrinsic value of firm : V = V1 +V 2 +V 3

Example
Company X expects to pay 2008 dividend of VND 1,500. From 2008 to

2010, each year the dividend is expected to increase 20%. From 2011 to 2013
each year is expected to increase 15%. From 2014 onwards, it is expected to
increase by 5% each year. Choose a discount rate of 10%. Identify the true
value of firm X by dividend discount cash flow model (DDM) ?
Exercise
From 2014
2008 2009 2010 2011 2012 2013 onward
Dividend growth rate 20% 20% 15% 15% 15% 5%

1,50
Dividend 0 1,800 2,160 2,484 2,857 3,285 68,987
Discount rate 10% 10% 10% 10% 10% 10% 10%
1,36
PV 4 1,488 1,623 1,697 1,774 1,854 38,941
Firm value 48,740
V1 = 1500/(1+10%) + 1500x(1+20%)/(1+10%)2 + 1500x(1+20%)2/(1+10%)3 = 4,474

V2 = 2160x(1+15%)/(1+10%)4 + 2160x(1+15%)2 /(1+10%)5 + 2160x(1+15%)3 /(1+10%)6 = 5,325
V3 = [3,285x(1+5%)/(10% - 5%)]/(1+10%)6 = 38,941
V = V1 + V2 + V3 = 48,740
Multistage Dividend Discount Models
is suitable for the following companies:
 It is in a period of high growth and continuing in the next few years, but
then it will slow down to reach a stable level.
 Companies have policy which spend a lot of net profit to pay dividends
(high dividend payout ratio or low retention ratio)
 Companies have a lower dividend growth rate than the discount rate
DCF
Free Cash Flow To Equity Discount Model (FCFE) is the amount of cash a
business generates that is available to be potentially distributed to shareholders
•NI is the firm's net income;

•D&A is the depreciation and amortisation;
•Capex is the capital expenditure;
•ΔWC is the change in working capital;
•Net Borrowing is the difference between debt principals paid and raised;
Example: Calculate FCFE of firm X
2005 2006
1. EAT (net income) 22,355,326,660 46,615,992,666
2. depreciation and amortisation 7,800,337,338 12,221,648,408
3. Capex 13,589,118,867 96,278,146,656
4. Δ working capital (87,153,079,857) 124,107,828,633
5. Net Borrowing (87,335,078,859) 18,088,718,302

FCFE 16,384,546,129 (143,459,615,913)
DCF
The free cash flow to firm (FCFF). FCFF represents the cash available to
investors after a company pays all its business costs, invests in current assets
(e.g., inventory), and invests in long-term assets.
FCFF = FCFE - Net borrowing + Interest*(1-t)
•Net Borrowing is the difference between debt principals paid and raised;
•Interest*(1–t) is the firm's after-tax interest expense
DCF
N
FCFEt FCFFt
N
P0  
P0  t 1 (1  k e ) t t 1 (1  k e )
t
1. P0: Value of firm

1. P0: Value of equity
2. Pper share= (P0-Debt)/ Outstanding shares
2. Pper share= P0 / Outstanding shares
Simple pricing process
 Calculate the current FCFE (or FCFF) and at least 3 years in the past,
calculate the average growth rate. Calculating future cash flows based on
assumption that in the future cash flow will continue to grow at the same
rate as in the past
 Predict the growth rate of FCFE (or FCFF).
 Determine the discount rate
 Make pricing action.

The pricing process under FCFE
1. Calculate current FCFE and 3 past consecutive years
Average
Year 5 Year 4 Year 3 Year 2 Year 1 Year 0
growth rate
1. EAT
2. Depreciation
3. Capex
4. Working capital

change
5. Net borrow
FCFE
2. Predict the growth model of FCFE
This is the most difficult part of pricing, it depends on the analyst's

experience and deep understanding of the company in order to answer the
following three issues:
1. How many stage will the company grow? (Warren Buffett usually
chooses only 2 stages).
2. How many years does each stage last? (Warren Buffett, stage 1: lasts 10
years, stage 2: after the 10th year to infinity).
3. What is the growth rate of FCFE at each stage?

This model is implemented on the assumption that the company grows through 2
stages. Phase 1 lasts 5 years with growth rate t; Phase 2 after the 5th year until infinity with
growth rate g.
Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Previous FCFE FCFE0
Growth rate t t t t t
FCFE FCFE0(1+t)
Discount rate ke ke ke ke ke
PV(FCFE)
FCFE(n)_residual value of FCFE Apply Gordon model: FCFE(n) = FCFE(6)/(ke – g)

from year 6 to infinity
PV(FCFEn) Get FCFE (n) discounted to year 0

Value of equity PV(0) +….+PV(5)+PV(FCFEn)
Outstanding shares N
Intrinsic price of stock Value of equity / N
Year Year Year Year Year Year Year Year Year Year
1 2 3 4 5 6 7 8 9 10
Previous FCFE (Mil USD) 275 316 364 418 481 553 636 732 841 967
Growth rate 15% 15% 15% 15% 15% 15% 15% 15% 15% 15%
FCFE (Mil USD) 316 364 418 481 553 636 732 841 967 1113
Discount rate 9% 9% 9% 9% 9% 9% 9% 9% 9% 9%
470
PV(FCFE) (Mil USD) 290 306 323 341 359 379 400 422 445
Growth rate after Year 10 (g) 5.0%
FCFE (n) _ residual value of = FCFE(11) / (9% - 5%) = FCFE(10)*(1+5%) / (9% - 5%) =29,216
FCFE from year 10 to infinity
PV(FCFEn) (Mil USD) = FCFE(n) / (1+9%)10 = 29,216 / (1+9%)10 = 12,341
Value of equity (Mil USD) = 290+306+323+341+359+379+400+422+445+470+12,34 1= 16,060
Outstanding shares (Mil) 1,000
Intrinsic price of stock (USD) 16.06

Complex pricing process
 Predict the growth model of FCFE (or FCFF). Normally, a 2-stage model
will be applied; however, there are special cases where a multi-stage
model may apply.
 Estimate future FCFE (or FCFF) stream at an early stage by estimating
the components of cash flow; Normally we usually start with revenue
estimation.
 Estimate future FCFE (or FCFF) stream at the last stage by replicating the
simple pricing method
 Identify the discount rate
 Pricing implement
Summary
In the pricing models, calculating the reasonable discount rate and
predicting the reasonable development stage, as well as company's growth rate
through stages will be decisive to the pricing results; Therefore, in order to
enhance the reliability of pricing results, when selecting investment
companies, the following points should be noted:
1. The company is doing business in simple and easy-to-understand

industries
2. The company must have a comparative advantage
3. Good management
4. The company has a long-term operation and stable cash flow growth
Rate of return on equity investments
 If A buys 10 shares at the price of VND 50,000 per share, after 4
years, A will sell 10 shares at the price of VND 70,000 per share.
What is the investor's annual rate of return?
Rate of return on investments
 Option 1:
At the end of 2010, Mr. B bought a house worth VND 4 billion. B can
lease this house for 240 million per year. At the end of 2013, Mr. B
invests 500 million for interior upgrade, then can lease it for 300
million per year. By the end of the 2017 year, B did not rent anymore
and sold a home worth 7 billion. Please calculate the annual rate of
return?
 Option 2:
Mr. B deposits at the bank with the interest rate of 12.5% / year
Which option do you prefer?

Rate of return on equity investments
At the end of 2012, Mr. G invests in Amazon stock. He bought 10,000 shares,
the price of 1 share was 25,000 VND. Total investment value = 10,000 *
25,000 = 250,000,000. He invested in the medium term.
 At the end of 2013: The company paid 22% cash dividend.

 At the end of 2015: The company paid dividend by stock at a rate of 30%.
 At the end of 2017: The company paid dividend by stock at a rate of 40%.
 At the end of 2018: The company paid 40% cash dividend. And at that time, the stock
increased quite well, up to VND 37,000. Mr. G sold all 18,200 shares
Please calculate the annual rate of return?

Margin
 Margin is the money borrowed from a brokerage firm to purchase
an investment. It is the difference between the total value of
securities held in an investor's account and the loan amount from
the broker.
 Margin ratio is a percentage of the actual capital on the maximum

amount of capital you can buy.
Margin
 Assume that the investor initially pays $ 6,000 to buy $ 10,000
worth of stock (100 shares at $ 100 per share). He borrows $ 4,000
from a broker. How is margin ratio when price drops to $
70/share?. And how much the stock price may drop before
investors receive notice of additional deposits, knowing that
maintenance margin is 30% ?
Margin
Assets Liabilities and Equity
The value of shares 10,000 Borrow from broker 4,000
Equity 6,000
 Initial margin ratio = 6.000/10.000 = 60%

Margin
 when stock price drops to $ 70/share
Assets Liabilities and Equity
The value of shares 7,000 Borrow from broker 4,000
Equity 3,000
 Margin ratio = Equity/ The value of shares = 3.000/7.000 = 43%

Margin
 Call P is the stock price we want to find. Then the value of 100
shares of the investor will be 100*P, and the equity in the account
is 100*P-4,000. The margin ratio will be (100*P-4,000) / 100*P.
The price at which the margin ratio is equal to the maintenance
margin ratio of 0.3 is found by solving the equation:
(100P-4.000)/100*P = 0.3
 P = 57.14$
 This implies that if the share price falls below $ 57.14 per share the
investor will receive a notice of additional deposit from the broker.
Short sale
When Should You Sell a Stock?
 Warren Buffett says that the ideal investment is one that you can
hold onto forever, growing your money for as long as you own it.
Chapter 3: Bond investment
1. Definition and Characteristics of bond

2. Interest rate measurement Methodology
3. Bond pricing
4. Bond interest rate risk measurement
Definition and Characteristics of bond
A bond is a fixed income instrument that represents a loan made by an

investor to a borrower (typically corporate or governmental).
Characteristics:
1. Buyers are creditors of issuing organizations.
2. All bonds have fixed maturity date (Perpetual bonds) and fixed interest
rates.
3. Bond is a financial instrument and freely transferred on the stock
market
Par value
 The nominal price of a bond, specifically stated on the bond

 In English, par value is often expressed as the face value; but they also
use very common words as face amount, principal amount.
 The par value is the basis for the issuer to fulfill the debt repayment
obligations
Time
 Term to Maturity: A bond's term to maturity is the length of time during which
the owner will receive interest payments on the investment. When the bond
reaches maturity the principal is repaid
 Number of payments or payment frequency: Payment frequency can be annual,

semi annual, quarterly, or monthly; the more frequently a bond makes coupon
payments, the higher the bond price.
The maturity of Bond structure
There are 3 types of bond maturity structure:
1. Reach maturity all at once.
2. Reach Maturity by group of serial bonds, this type is issued in a batch but
has different maturity according to predetermined schedule.
3. Balloon maturity refers to a scenario when the final payment to repay a

debt is significantly larger than the previous payments. For example, a
"balloon" bond can callable 3% of the original issuance value each year for
20 years, and then call the remaining of 40% by the maturity year.
In addition, bonds can be called before maturity, in case callable bond.

Coupon rate
 The coupon rate or yield is the amount that investors can expect to
receive in income as they hold the bond. Coupon rates are fixed
when the government or company issues the bond.
 The coupon rate is the yearly amount of interest that will be paid
based on the face or par value of the security.
Convertible bond
 A convertible bond is a fixed-income corporate debt security that
yields interest payments, but can be converted into a predetermined
number of common stock or equity shares. The conversion from
the bond to stock can be done at certain times during the bond's life
and is usually at the discretion of the bondholder.
Convertible bond
 Investors holding convertible bonds have face value of VND
1,000,000, convertible price is VND 50,000/share, market
price of stock is VND 55,000/share. The market price of
bonds is VND 1,120,000. The company requires to buy back
bonds at VND 1,110,000. If you are an investor, which option
would you choose?
A) Convert bonds into common stock

B) Selling bonds to the company
C) Selling bonds on the market
Convertible bond
 A bond has face value of $ 1.000, the convertible price is
USD 40. On the market, one bond is traded at $ 1,200 and
one share traded at $ 48. The company requests to buy
bond back at $ 1.120. which option would investor choose?
A) Convert bonds into common shares

B) Selling bonds to the company
C) Selling bonds on the market
The main risks of investing in bonds
include the following:
 Interest Rate Risk
 Credit Risk
 Inflation Risk
 Liquidity Risk
 Exchange rate risk
 Reinvestment Risk: When interest rates are declining, investors may have
to reinvest their coupon income and their principal at maturity at lower
prevailing rates.
 Tax risk: Profit after tax from bond investment changes when the tax rate
on bond investment changes
Interest Rate Risk
 Rising interest rates are a key risk for bond investors. Generally, rising
interest rates will result in falling bond prices, reflecting the ability of
investors to obtain an attractive rate of interest on their money elsewhere
 Interest rate impacts mainly on fixed-rate bonds, little impacts on floating
interest rates
 The longer the maturity time, the greater the effect of interest rates.
 The lower the coupon rate, the greater the effect of the interest rate.
Credit Risk
 This is the risk that an issuer will be unable to make interest or principal
payments when they are due, and therefore default
We can limit risk by:
 Rating agencies such as Moody’s, Standard & Poors (S&P) and Fitch
assess the credit worthiness of issuers and assign a credit rating based on
their ability to repay its obligations
 Collateral asset or underwriter guarantee
 Carefully analyze the operations of the issuing organization
Global Long-Term
Rating Scale
Moody's S&P Note risk premium
are judged to be of the highest

Aaa AAA quality, subject to the lowest 0
level of credit risk.
Aa1 AA+ 35
are judged to be of high quality and
Aa2 AA 50
are subject to very low credit risk
Aa3 AA- 60
A1 A+ 70
judged to be upper-medium grade
A2 A 80
and are subject to low credit risk
A3 A- 85
Baa1 BBB+ are judged to be medium-grade and 100
subject to moderate credit risk
Baa2 BBB 115
and as such may possess
certain speculative
Baa3 BBB- characteristics. 135
Ba1 BB+ 200

judged to be speculative and are
Ba2 BB 250
subject to substantial credit risk
Ba3 BB- 300
B1 B+ 350
are considered speculative and are
B2 B 400
subject to high credit risk
B3 B- 450
Caa1 CCC+ 600
are judged to be speculative of poor
Caa2 CCC standing and are subject to very 675
high credit risk
Caa3 CCC- 750
Liquidity Risk
 This is the risk that investors may have difficulty finding a buyer when
they want to sell and may be forced to sell at a significant discount to
market value
 Depending on the activity magnitude of the secondary bond market.
 Liquidity risk impacts on institutional investors is stronger than individual
investors (who tend to hold bonds until maturity).
 Bonds tend to be most liquid in the period immediately after issue.
Liquidity risk is usually lower for government bonds than for corporate
bonds. This is because of the extremely large issue sizes of most
government bonds
Inflation Risk
Inflation reduces the purchasing power of a bond’s future coupons and

principal. Inflation may lead to higher interest rates which is negative for bond
prices
Exchange Rate Risk
 Some bonds and other fixed income products also expose the investor to
exchange rate risk (also known as currency risk). This happens when the
investor purchases bonds that have cash flows in a foreign currency
instead of his domestic currency. In such a case, when the investor
receives the foreign currency-denominated cash flow, he will have to
convert the same into his domestic currency at the prevailing exchange
rate exposing him to currency risk.
 This risk affects investment across borders.

Exchange Rate Risk
 Consider a US-based portfolio manager who purchases a bond that
has its cash flows in Euro. Since the managers domestic currency is
US dollars and the bond’s cash flows are in euros, he faces
exchange rate risk, in case the foreign currency (euro) depreciates.
Let’s say each coupon payment is EUR 10,000 and the initial
exchange rate is 1 EUR = 1.5 USD. In that case, he expects to
receive a cash flow of USD 15,000. However, if euro depreciates
and the new exchange rate is 1 EUR = 1.4 USD, then the actual
payment he will receive will be USD 14,000 lower than his
expectations.
Bond interest rate measurement
Nominal interest rate is the interest rate that the issuer commits to pay
to bondholders every year based on face value. This is a fixed interest rate
throughout the term of the bond.
Current yield: Current yield is an investment's annual income (interest
or dividends) divided by the current price of the security. Current yield
represents the return an investor would expect to earn, if the owner purchased
the bond and held it for a year. However, current yield is not the actual return
an investor receives if he holds a bond until maturity.
Yield-to-Maturity: is the discount rate that matches the total present value of
future cash flows is equal to the market price of the bond. In other words, this is the
Internal Rate of Return (IRR) of the bond investment, which is determined by the
formula:
CF CF CF F
P   ....  
1  y (1  y ) 2 (1  y ) n (1  y ) n
CF 1 F
 (1  ) 
y (1  y ) n (1  y ) n
P: market price
CF: Cash flow
F: Face value
y: Yield to maturity
Yield to Maturity (YTM) Approximation Formula:

1.Calculate annual net income (RI)
RI= CF + (Face value-purchase price)/Number of years
2. Calculate the average bond price:
Average bond price=(purchase price + Face value)/2
3. Calculate the yield to maturity
YTM =RI/Average bond price
Calculating YTM by Trial and Error
Method:
A five year coupon bond with 8% coupon rate and maturity value
of Rs.1000 is currently selling at Rs.925.
Its YTM would be calculated as follows:
Bond value at 9% discount rate = 961.10
The present market value of the bond is Rs.925, which lies between Rs.961.10 and Rs.924.18,
therefore, by interpolation,
YTM on Excel
Nguồn: bài giảng của Nguyễn Xuân Thành, Fulbright

Exercise
The XYZ bond has a face value of VND 100,000, interest rate of 10% and a
term of 5 years, is sold at a price
Case 1: VND 90,000.
Case 2: VND 120,000
Calculate the Yield to maturity of the bond for each case.

The relationship between interest rates and
bond price
Three cases:
1. The purchase price is equal to the face value
2. The purchase price is higher than the face value (Premium Bond)
3. The purchase price is lower than the face value (Discount Bond)
 The relationship between bond yield and bond prices
Due to the low and unchanged bond interest rates. Hence,
market interest rate tends increase, the profit of investing in
bonds is relatively low. No one wants to buy that bond that
makes it devalued.
Coupon interest rate
Factors affecting bond interest rates:

1. Market interest rate
2. Reputation of the issuing organization
3. Term to maturity
Bond pricing
The face value of the bond is only nominal price, the actual value of the
bond may be higher, smaller or equal to the face value, this will depend on the
interest rate level in the market. Therefore, the valuation of bonds is finding
the real value of the bonds, in order to support investors to buy and sell at a
reasonable price or to support the issuer in choosing the issue price.
Bond pricing based on discounted income stream which we receive in

future. In which, the discount rate is the average market interest rate or the
expected interest rate of the investor at the time of valuation.
Bond pricing
 When pricing bonds we must pay special attention to The ex-
coupon date (ex-interest date)
 The ex-coupon date is the first day the bond starts trading without
the coupon attached to it. If the debt security is purchased on or
after the ex-coupon date, the seller retains the right to receive the
next due interest payment, and no coupon is included with the bond
 At Hanoi Stock Exchange (HNX), the ex-coupon date is

determined 14 days before the date of interest payment.
Bond pricing
Coupon bond pricing (receive periodic interest & principal repayment
at maturity)
Or
Bond pricing
A bond with a face value of VND 1 million, with a term of 10
years, interest rate is 10.5% per year, pay interest every 6
months, issued on July 1, 2009. On 1 January 2010, the
market rate was 12.5%. How much is this bond price? Know
that the ex-coupon date is December 31, 2009 and the first
bond interest payment date is January 10, 2010.
Bond pricing
 Educational bond has a face value of VND 200,000 with term of
maturity is 5 years, and gross interest rate is 40%/5 years. Knowing
that this bond has 3 years left to maturity, currently market price is
VND 190,000. and 3-year savings interest rate is 12.5%/year. From
the perspective of yields on bonds and savings are the same, can
you buy this bond?
Bond pricing
• Perpetual bond pricing (indefinitely)
P= I/ R
 Suppose that you buy a perpetual bond that pays indefinitely you $
50-per-year. And you require an investment rate of 12%. The price
of this bond will be: P = I/R = 50/0.12 = 416.67 $.
Bond pricing
 Zero-Coupon Bond: A zero-coupon bond is a debt security that
does not pay interest but instead trades at a deep discount,
rendering a profit at maturity, when the bond is redeemed for its
full face value
Assume that the Bank for Investment and Development of

Vietnam issues 10-year zero coupon bond with the par value
of VND 1,000,000. If the investors require rate of return is
12%, the selling price of this bond will be:
Exercise
 The Government of Vietnam issues bonds with interest paid

in advance, with a term of 15 years and face value of
1,000,000. Assuming investors require a profit ratio of 14%,
what is the selling price of this bond?
Giao dịch trái phiếu
 Giao dịch trên thị trường sơ cấp

 Chủ thể phát hành
Chủ thể phát hành trái phiếu không chỉ bao gồm có các
Công ty, mà còn có Chính phủ Trung ương và Chính phủ địa
phương
Thông thường, chính phủ các nước ủy quyền cho Bộ Tài

chính, Kho bạc hoặc NHTW phát hành trái phiếu theo kế
hoach phân bổ ngân sách hàng năm
Bond price on market
Bond prices depend on the following factors:

 The average interest rate of the market
 Maturity of bond
 Liquidity of bonds
 Reputation of the issuing organization
Relationship between bond prices and market average interest rates:

1. The average market interest rate increases, the price bond decreases.
2. The average market interest rate decreases, the price bond increases.
Relationship between bond price and maturity:

Example: Corporate bonds, par value is VND 100,000, coupon rate is 10%,
annual interest payment.
First case: Assume that average market rate is 11%. Calculate the bond price
with 1 years and 2 left to maturity respectively.
Second case: Assume that average market rate is 9%, Calculate the bond
price with 1 years and 2 left to maturity respectively.
From above results, let draw conclusions

Relationship between bond price and maturity
 If the nominal interest rate is less than the market interest rate, the longer
the term to maturity is, the lower the price is.
 If the nominal interest rate is greater than the market interest rate, the
longer the term to maturity is, the higher the price is.
 If the nominal interest rate is equal to the market interest rate, the bond
price will not depend on the maturity date and be equal to the face value.
Interest rate risk measurement
The measurement of interest rate risk is the measuring of bond price
fluctuations when interest rates change.
People often use the following tools to measure:
 Duration
 Convexity
Duration
 Duration is a measure of the CF CF CF F
P   ....  
sensitivity of the price of a bond to a 1  y (1  y ) 2
(1  y ) n
(1  y ) n
change in interest rates P 1CF 2CF nCF nF

P'   (   ....   )
 To calculate the change in price y (1  y ) 2
(1  y ) 3
(1  y ) n 1
(1  y ) n 1
when the interest rate changes a 
 1 1CF
( 1

2CF
2
 .... 
nCF
n

nF
)
1  y (1  y ) (1  y ) (1  y ) (1  y ) n
small level, we take first derivative 1CF 2CF nCF nF
(   ....   )
of the function P (y) according to y, P 1 (1  y ) 1
(1  y ) 2
(1  y ) n
(1  y ) n
    y
we have: P 1 y P
Infer:
 Call Dm is Duration Macaulay, Dm is
measured as follow: P 1
  Dm  y
1CF 2CF nCF nF
P 1 y
( 1
 2
 ....  n
 )
(1  y ) (1  y ) (1  y ) (1  y ) n
Dm 
P
Duration
 Why is Duration Macaulay the weighted average term to maturity of the
cash flows from a bond?
Call: Replace:
PV(CFt ) CFt /(1  y ) t 1CF 2CF nCF nF
(   ....   )
wt   (1  y )1 (1  y ) 2 (1  y ) n (1  y ) n
PV( Bond ) P Dm 
P
Infer:
T
Dm   t  wt 
t 1
Duration Macaulay is the weighted average term to maturity of the cash flows from a
bond, or is the length of time taken by the investor to recover his invested money in
the bond through coupons and principal repayment
Duration
Illustrative example: a 5-year bond, coupon rate is

6%, bond pays annually, face value is $ 1,000 and
current YTM is 4%
Duration
Trần Tuấn Vinh

Duration
The two bonds have the same value of 100, but have the deferent present value of future
cash flow in different years. Which bond you buy is more beneficial?
Bond 1 Bond 2
Year
% compared
Present value of future Present value of future % compared
to bond
cash stream cash stream to bond value
value
1 50 0.5 0.5 20 0.2 0.2
2 30 0.3 0.6 30 0.3 0.6
3 20 0.2 0.6 50 0.5 1.5
Duration 100 1.7 100 2.3
The nature of Duration is the average time to recover capital of bondholders, so investors
will choose bonds with low Duration
Modified duration (D*m)
Call:
* Dm
D 
m
1 y
infer:
P *
  Dm  y
P
Directly measure price fluctuations by calculating % of price

fluctuation when interest rates change by 1%
Example
A 10% nominal interest rate bond, 3 year term to maturity, face value of
US $ 100, sold for $ 107.87, discount rate of 7%.
Calculate the Duration
If interest rates rise to 7.1%, how will bond prices change?
Example
10
PV (CF1 )   9.35
(1.07)
10
PV (CF2 )   8.73
(1.07) 2
110
PV (CF3 )   89.79
(1.07) 3
Price of bond  9.35  8.73  89.79  107.87
 9.35   8 .73   89.79 

Duration ( Dm )  1*   2*   3* 
 107.87   107.87   107.87 
 2.7458
Example
P
* 2.7458   Dm*  y
Dm   2.5661 P
1.07  –2.5661 * 0.001  0.25661%
0.2566
P   P
100
New price of bond: 0.2566
  $107.87
107,87 – 0.2768 = $107.5932 100
 $0.2768
Benefits of Duration
 Shows the weighed average maturity of bonds

 Measure the fluctuation of bond prices when interest rates change
 Very useful in managing the risk of debt assets
 In addition, it is used to prevent the risk of interest rate fluctuations of an
investment. If the investment time is equal to the Duration, it will limit
the effects of interest rate fluctuations
Convexity
 Khi lãi suất biến động lớn, biến
động giá được tính toán bằng
phương pháp Duration sẽ không
còn chính xác, sai lệch lớn so 2P 1 N
 t * (t  1)CFt 
với giá thực tế
''
P  2 
 y (1  y ) 2
  (1  y )t 
t 1  
 Để nâng độ chính xác của
1  2P
phương pháp Duration,người ta  Convexity 
sử dụng một thông số bổ sung P 2 y
gọi là độ lồi
 Độ lồi được tính bằng cách lấy
đạo hàm bậc 2 của P theo y và
chia cho P
Thay đổi giá theo độ lồi
P  1 
Thay đổi giá tính theo độ lồi    Convexity  (y ) 2 
P 2 
Công thức Taylor: Tính thay đổi giá tính theo Duration và độ lồi
P 1
P

*
 2
  Dm  y    Convexity  (y ) 
2 
 Bai tap convexity
Chapter 4: Derivative securities and
other types of investment
Derivative securities and other types of
investment
1. Derivative securities
a. Options
b. Future
2. Other types of investment
a. Private Equity
b. Hedge Fund, Reit Fund, ETF …
c. Real estate
d. Gold and Forex
e. Commodity
f. Cryptocurrency
What is derivative securities?
 A derivative is a financial security with a value that is reliant upon
or derived from, an underlying asset or group of assets
 Three characteristics of derivative:

- Price of derivative depend on underlying asset
- It is not born by itself
- It is traded independently from the underlying asset
- Không tự sinh ra, chiết suất từ 1 tài sản gốc nào đó (cổ phiếu, trái
phiếu,...)
- Giao dịch độc lập hoàn toàn khỏi tài sản gốc
- Giá của nó phụ thuộc vào giá của tài sản gốc
Options
Concept:
An option contract is a contract that gives the buyer the right but not
the obligation to buy or sell:
- A defined quantity of underlying assets.
- At the time of contract expiry (for European type) or any time before
the expiry date (for US type).
- With a determined price at the time of the contract agreement, called
the strike price.
Two type of Options: call option, put option.

Chicago Board Option Exchange is the world's largest trading platform
Forward contract: hợp đồng kỳ hạn

Call Option
The call option is an option contract which:
- The call option buyer will pay the call option seller a fee (option
premium) and the buyer of the call option will have the right to purchase
(but not obligated) a certain amount of securities at a pre-fixed price (strike
price-exercise price) at the expiration date (European style) or before
expiration date (US style).
- Meanwhile, the seller of the call option receives fee from the
buyer of the call option, therefore they have responsibility to sell a certain
amount of securities at an agreed price at a specified date in the future when
the calls option buyer wants to execute the right to buy.
1 IBM Oct $120 Call at $4
Long call
+
Profit LNb
S1 X
0 S
C S2 S3
ATM
Short Call
ATM
C
LNs S2 S3
S1
0 S
X Loss
Call Option (tt)
LNb: Profit of Call option buyer

LNS: Profit of Call option seller
C: Premium
S: Market price of underlying asset
X: Strike price
LNb = -C if S<X
= SM – (X + C) if S>X
LNS =C if S<X
= (X – S) + C if S>X
Exercise:
Investor A buys a call option of stock XYZ with the amount of 1000
shares, the strike price is 40,000 VND, the premium is 2,000 VND/share,
the expiry date is 11/30/06. Calculate the profitability, profitability ratio of
the investors in the following cases:
a. The market price of XYZ on the maturity date is 60,000
b. The market price of XYZ on the maturity date is 30,000
Known that this is European option style
Put option
Put option is an option contract which:
 - The put option buyer will pay the put option seller a fee (option premium) and
the buyer of the put option will have the right to sell (but not obligated) a certain
amount of securities at a pre-fixed price (strike price-exercise price) at the
expiration date (European style) or before expiration date (US style).
 - Meanwhile, the seller of the put option receives fee from the buyer of the put
option, therefore they have responsibility to buy a certain amount of securities at an
agreed price at a specified date in the future when the put option buyer wants to
execute the right to sell
Long put
Pr X
of
S3 S
0
S1 S2 C
Short Put
+
S1 S2 Profit = C
0 S
X S3
Put Option
LNb: Profit Put option buyer
LNS: Profit of Put option seller
C: Premium
S: Market price of underlying asset
X: Strike price or exercise price
LNb = -C if S > X
= X - (S + C) if S < X
LNS =C if S > X
= (S + C) - X if S < X
Example:
Investor A buys a put option of stock XYZ with the amount of 1000
shares, the strike price is 40,000 VND, the premium is 2,000 VND/share, the
expiry date is 11/30/06. Calculate the profitability, profitability ratio of the
investors, and the investor in CP XYZ in the following cases:
a. The market price of XYZ on the maturity date is 60,000
b. The market price of XYZ on the maturity date is 30,000
Known that this is European option style
Strategy in option
investment
 Protective put strategy
We buy a stock and buy
contemporaneously put option of the
same stock. The purpose is to
minimize potential damage beyond a
certain level.
Strategy in option investment
 Protective put strategy
Example: The investor holds 100 DHG shares at the beginning of the year. By
the end of the year, DHG's price increased to VND 120,000 / share. Investors
are afraid that stock prices will fall after a long period of price increase, so
they decide implement the protective put strategy by buying a put option of
100 DHG at 121,000 VND / share. The premium of the option contract is
80,000 VND
a) What happens if the price of DHG is 100,000 VND, 121,000 VND and
200,000 VND
Strategy in option
investment
 Covered call strategy
We buy a stock and sell
contemporaneously call option of the
same stock. The purpose is to reduce
the damage caused by stock decrease
 Covered call strategy
For example: Dragon Capital is holding 1,000 VCB shares. After holding for a
long time, VCB's stock price surges to VND 90,000 / share. This fund
forecasts that VCB's share price will drop in the near future but does not want
to sell this stock, so it implemented a covered call strategy by selling a call
options on 1000 VCB shares, the exercise price is VND 92,000/ share, the fee
of this contract is 10,000,000 VND
a) What happens if the price of VCB on the market is VND 70,000, VND
125,000 and VND 300,000 respectively.
Strategy in option
investment
 Straddle strategy
A straddle is a strategy accomplished
by holding an equal number of put
and call options with the same strike
price and expiration dates.
Straddle is a useful strategy for
investors who believe the price will
fluctuate in the near future but are not
sure about the direction of
movement.
 Straddle strategy
For example: SSI Fund believes that the price of Masan's stock on the market
will fluctuate strongly in the near future but it is unsure of the direction of
movement, hence SSI decides to implement a two-way Straddle strategy by
buying a call option of 1000 Masan's stock with strike price of 57,000 VND
and premium is 7,000,000 VND. At the same time, buying put option with
strike price of 57,000 VND, premium is 7,500,000 VND. The expiry date of
the two contracts are the same.
a) What happens if the stock price on the market is 10,000 VND, 50,000 VND
and 150,000 VND respectively.
Strategy in option
investment
 Bull Call Spread
In a bull call spread strategy, an
investor simultaneously buys calls at
a specific strike price while also
selling the same number of calls at a
higher strike price. Both call options
will have the same expiration date
and underlying asset.
The motivation for this strategy is

that the investor believes that one
option is overvalued than another.
 Bull Call Spread strategy
There is a call option contract for 100 Vingroup shares at VND 145,000, the
premium is VND 70,000. And there is other call option contract for 100
Vingroup shares at 160,000 VND, the premium is 60,000 VND
An investor who believes that the first option contract is more undervalue than
the second one, therefore he implements a bullish spread strategy by buying
the first call option and selling the second call option.
a) What happens if the price if the stock price in the market is 100,000 VND,
150,000 VND, 300,000 VND and 500,000 VND

Put
 - Call
parity Arbitrage Strategy: This strategy is conduced by finding out
one option which is overvalued/undervalue than others
Put – Call parity theorem
Market price 110 $

Premium of call option (1 year term, X = 105$) 17 $
Premium of put option (1 year term, X = 105$) 5$
Risk free rate 5%/year
117 ≠ 115  Option mispricing exists. To exploit we can buy

call option and sell call option.
Option pricing
 Factors affecting the premium of option contracts
 Black – Scholes model
C = Premium
S = Current price of underlying asset
K = Strike price
r = Risk free rate
t = The remaining time of the contract
N = Normal distribution
Options market
 Concept
 The foundation and development of the options market
 Options market structure
 Trade on options market

Concept
The options market is the place to issue and trade the option contracts that
have been issued through a system of securities companies as intermediaries.
The foundation and development of the
options market
The options market is setup in Europe and America in the early

eighteenth century.
In the 1900s, a group of companies founded an association of options
brokers and traders to provide trading techniques to investors. The options
market was still the OTC market.
In April 1973, the Chicago Board Options Exchange (CBOE) was
established, It was the first concentrated option market in the world.
At present, the options market is spread all over the world, forming a
24/24 option market.
Options market structure
Over-the-counter options (OTC): This is a market in which buyers and

sellers meet face-to-face to negotiate specific terms in an option contract. It
not allow the buyer to resell the option before maturity.
Listed option market: options that trade on exchanges are called listed
options. Unlike over-the-counter options (OTC), they have standardized strike
prices, expiration dates, settlements, and clearing.
Latest call option Latest put option
Closing Executed
Ticker
price price Jan Feb Mar Jan Feb Mar
Adm Fam 41 1/8 40 1 3/8 3 5/8 r 3/16 7/8 1¼

45 1/2 1½ 2 1/8 3 7/8 r 5¼
50 r 3/8 5/8 s s 12
ALFA. Inc 37 7/8 30 7 7/8 9 1/8 6¾ r r 1/8
35 3 1/8 4½ 3 r ¼ 1/8
40 3/4 1 5/8 2 3/4 7/8 R

Buyer Option trading process Seller
6a 6b
1b 7b
1a 7a
2a 2b
Broker of Broker’s Option Broker’s Broker of
buyer floor EXCHANGE floor seller
representative representative
(3)
5a 3a 3b 5b
8a 4
8b
Clearing Clearing
Member 9a Options 9b Member
of buyer Clearing of seller
Corporati
on
Option trading process
 (1a), (1b): Buyer and seller order their broker to buy or sell an option.
 (2a), (2b): After receiving the investor's order, the broker at the securities
company requires broker’s floor representative to conduct the transaction.
 (3): Price is matched at Exchange.
 (4): Transaction information is reported to the Options Clearing
Corporation (OCC).
Option trading process
 (5a), (5b): Broker’s floor representative announce results to the brokers in

the company
 (6a), (6b): Broker of buyer/seller announce results to investors
 (7a), (7b): The buyer/seller conduct to deposit in security companies
 (8a), (8b): Broker of buyer/seller send deposit to their Clearing Member
 (9a), (9b): Clearing Members send deposit to option clearing corporation
Future
1. Future
2. Future market
Hợp đồng tương lai

Definition
 A futures contract is a legal agreement to buy or sell a particular

commodity asset, or security at a predetermined price at a specified time
in the future. Futures contracts are standardized for quality and quantity
to facilitate trading on a futures exchange. The buyer of a futures contract
is taking on the obligation to buy and receive the underlying asset when
the futures contract expires. The seller of the futures contract is taking on
the obligation to provide and deliver the underlying asset at the expiration
date.
Structure of future contracts
A futures contract has 5 main components:

 Type of underlying asset
 The size of the contract, for example, the size of the bond futures contract
in the US is 100,000 USD
 The contract expiration date; The seller must deliver the goods and the
buyer must pay the money.
 The delivery procedures
 Future price, that the buyer will pay the seller at the time of delivery, has
been agreed in advance by the two parties in the contract.
Future market
1. Concept of Future market

2. Development history of Future market
3. Some big Future markets in the world
4. Trading on the Future market
Concept of Future market
Future market is considered as a trading concentration market of

standardized Future contracts (quantity, price, expiration), through a system of
brokers and clearing companies.
Future market is concentrated market of Forward contract, while Forward
market is currently OTC market (buyer and seller sign agreement).
Development history of Future market
The Future Market is started with the foundation of the Chicago Board
of Trade (CBOT), specializing in trading contracts for agricultural products.
By 1874, Chicago Mercantile Exchange (CME) was established,
specializing in trading futures contracts for all commodities. At present, CME
is the 2nd largest exchange in the world after EUREX (alliance between
Germany and Switzerland).
In the first 120 years, the Future market mainly traded commodities.
Until 1971, Future contracts on securities/currencies were traded.
Today, the Future market has grown in all developed countries to form a
24/24 market
Some big Future markets in the world
USA: CBOT, www.cbot.com
CME, www.cme.com
England: LIFFE, www.liffe.com
Germany: EUREX, www.eurexchange.com
Australia: Sydney Futures Exchange (SFE), www.sfr.com.au
China: Shanghai Futures Exchange, www.shfe.com.cn
Singapore: Singapore Commodity Exchange, www.sicom.com.sg

Singapore International Monetary Exchange, www.sgx.com
Trading on the Future market
 List Price board of futures contract

 Transaction process
 Daily clearing
List Price board of futures contract
Refer: www.webtradingssi.com
Buyer Transaction process Seller
6a 6b
1b
1a 7a
2a 2b
Broker of Broker’s Future Broker’s Broker of
buyer floor Exchange floor seller
representativ representativ
e e
5a 3a 3b 5b
8a 4
8b
Clearing Clearing
Member 9a Future 9b Member
of buyer clearing of seller
center
Transaction process
 (1a), (1b): Buyer and seller order their broker to buy/sell Future.
 (2a), (2b): After receiving the orders of the investor, the brokers of buyer/seller
requires the Broker’s floor representative of trading company to conduct the
transaction.
 (3): Price is matched at Exchange.
 (4): Transaction information is reported to the clearing center.

Transaction process
 (5a), (5b): Broker’s floor representative announce results to the brokers in the
company
 (6a), (6b): Broker of buyer/seller announce results to investors
 (7a), (7b): The buyer/seller conduct to deposit in security companies
 (8a), (8b): Broker of buyer/seller send deposit to their Clearing Member
 (9a), (9b): Clearing Members send deposit to future clearing center

Daily clearing
To trade on the Future market, you must open an account called a Margin
Account.
When trading you must deposit an initial margin in accordance with the
regulations of the Exchange.
And must maintain a minimum margin (Maintenance Margin) in accordance

with the regulations of the Exchange.
Daily, Future Clearing Center will re-evaluate the deposit level according to the
future price fluctuation of the goods, if this margin is lower than the maintenance level,
they will require investors to deposit more (Margin Call).
Size of future is 100 Gold; initial margin: 20% equal 19,000 USD; maintenance margin:10% equal 9,500 USD
Long position Short position
Previous day Current

Date
price price Cash Account Cash Account
Profit/loss Profit/loss
flow balance flow balance
1/8/2009 950 19,000 19,000 19,000 19,000
2/8/2009 950 960 1,000 20,000 (1,000) 18,000
3/8/2009 960 965 500 20,500 (500) 17,500
4/8/2009 965 980 1,500 22,000 (1,500) 16,000
5/8/2009 980 1,000 2,000 24,000 (2,000) 14,000
6/8/2009 1,000 1,020 2,000 26,000 (2,000) 12,000
7/8/2009 1,020 1,040 2,000 28,000 (2,000) 10,000
8/8/2009 1,040 1,080 4,000 32,000 (4,000) 6,000
8/9/2009 1,080 1,070 (1,000) 31,000 1,000 3,500 10,500

An exchange traded fund (ETF) and real estate
investment trust (REIT)
Real estate investment
• The determinants effect on real estate pricing
• Real estate pricing model
Real estate investment
 Xác định mục đích mua nhà
• Ở
• Kinh doanh
• Đầu tư
 Chọn lựa loại bất động sản phù hợp
• Căn hộ
• Nhà phố
 Giá trị của nhà sẽ bị hao mòn, còn đất thì không
Giá trị của căn nhà sẽ bị hao mòn, còn đất thì không. Do đó, một ngôi nhà mới, to,
đẹp nhưng nằm tại khu vực không tốt cũng sẽ có giá trị thấp hơn so với một ngôi
nhà cũ nhưng nằm ở vị trí đẹp
 Lựa chọn thời điểm thích hợp để mua nhà
 Xem sổ đỏ, kiểm tra tính pháp lý
Commodity investment
Cryptocurrency investment
Trần Tuấn Vinh

Technical Analysis (TA)
What are the questions investors often ask?
1. Should I enter the market in this stage?
2. Which stock should I invest?
3. When should I buy?
4. Should I take profit at this price? Or does the market continue to
increase?
5. Should I cut my losses?
Reference books
 James Dicks (2004), Forex Made Easy: 6 ways to trade the Dollars, McGraw-
Hill, USA.
 Nelson Tao (1998), Technical Analysis is not magic, it is not an art, it is not a
science, it is simply your own effort anh discipline, Standard Chartered Bank,
Singapore.
 Martin Pring (1997), Martin Pring’s introdution to technical analysis, McGraw-
Hill, USA.
 Martin J.Pring (2002), How to select stocks using Technical Analysis, McGraw-
Hill, USA.
 Alan Tan (2006), Focus on – Technical Analysis, Reuters.
 John J. Murphy (1998), Technical Analysis of Financial Markets: a
comprehensive guide to trading methods and applications, Prentice-Hall.
 Robert D. Edwards & John Magee (2001), Technical Analysis of Stock Trend,
Amacom Management.
 Martin J. Pring (1991), Technical Analysis Explained, McGraw-Hill, USA
Things to be aware of.
“People have habit, market is created by people; Therefore, the market also has a habit;
knowing the market's habits, we will control the market ”
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analyst is to classify the
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specific habits of marker, in
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order to predict future price
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movements by using
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standardized technical
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analysis facilities.
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Things to be aware of.
 Technical analysis (TA) is an art. Therefore, it is required that the application of
the technical analysis must be flexible in thinking and constantly creative. TA will
become less effective if the analyst is perfectionist and wants everything to be
accurate; The requirement for black and white technical analysis will obviously
make the analyst lose the opportunity to be aware of market movements.
 Trying to use technical analysis to predict exactly future price is a mistake. The
technical analysis only provides signs of the correlation between supply and
demand, thereby affecting the price trend.
Content
Module 1: Basic issues of technical analysis
1. Establishment and development of technical analysis
2. Basic assumptions of technical analysis
3. Definitions of technical analysis
Module 2: The basic Charts
1. Line Chart
2. Bar Chart
3. CandleStick Chart
4. The meaning of the Bar Chart and CandleStick Chart
Content (cont)
Module 3: Dow theory
1. About Dow
2. The basic content of the Dow theory
3. Some applications of Dow theory
3.1 Analyze the short-term trend
3.2 Trendlines
4. Limitations of Dow theory
Module 4: Traditional technical analysis tools
1. Resistance & Support
2. Price Patterns
3. Candlestick Patterns
Content (cont)
Phần 5: Indicators
1. Trailing Indicators: MA, MACD, Bolinger Band, Envelopes, MDS, Parabolic SAR
…
2. Momentum Indicators: RSI, Stochastic, ROC, Momentum …
Module 6: Software
1. Metastock
2. Netdania.com
Module 7: Some notes when applying TA

Part 1: Basic issues of technical analysis
1. Establishment and development of technical analysis
2. Basic assumptions of technical analysis
3. Definitions of technical analysis
Establishment and development of technical analysis
The history of Technical Analysis started more than 100 years ago, from a man named Charles H.
Dow who is the father of Dow theory and the Wall Street newspaper.
William Peter Hamilton continued to study and publish the book "The Stock Market Barometer"
in 1922, further confirming the theoretical value of Dow's research.
Schabacker who is considered as the father of Modern Technical Analysis, published the book
names "Stock Market Theory and Practice, Technical Market Analysis and Stock Market Profit".
By the time of Edward and Magee with "Technical Analysis of Stock Trend" (8 editions) and
later John Murphy, Jack Schwager, Martin Pring, ... the new Technical Analysis really developed, and
became a Important theoretical system in investment analysis.
Basic assumptions of technical analysis
These assumptions are considered important assumptions for researchers. And for “TA
believers", these assumption are "creeds“. And only when we believe these things we can
touch technical analysis.
1. Price covers every element of the market, including: published, unpublished

information, expectations of each investor ... Therefore, they only care about signals
from price and do not care to reason why the price increase or decrease.
Price reflects all market

information, including:
Macro and micro information
Business operation information
Fundamental
Psychology of investors analysis is
The known and unknown unnecessary
information
Insider information
…..
The impact of oil prices on gold
2. Price fluctuations follow trends: prices maybe fluctuate randomly in the short term,
but TA followers always believe that prices will follow trends in the long run.
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3. Nature of Human is difficult to change over time. Hence, the market tends to repeat
habits.
Definitions of technical analysis
John Murphy (1986): “Technical analysis studies the market volatility. If the analysts
get three basic types of is the price, volume and open position, they can using graphs for the
purpose of forecasting future price trends
Các định nghĩa về PTKT
“Technical analysis is using the historical data of prices (including closing prices, opening prices,
lowest prices) and trading volume to draw graphs of price and volume through a specialized software;
thereby, finding the habit of price movements in the past, thereby predicting future price trends. Based
on this result a three-step business strategy is proposed:
1. Enter market
2. Take profit
3. Stop loss
Module 2: The basic Charts
1. Line Chart
2. Bar Chart
3. CandleStick Chart
4. The meaning of Bar Chart and CandleStick Chart
Line chart
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Line chart: is a graph

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usually drawn by connecting 200

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closing prices together. Used to

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observe long-term trends, less 165

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used for short-term trading. 145

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Bar Chart
Bar chart: A bar chart commonly
used in Western countries. The bar
graph displays the open, close, highest,
lowest price in a unit of time.
Prices are expressed as a vertical

column. The height of the column
represents the range of price fluctuation
in a unit of time. The left line shows
the opening price, while the right side is
the closing price
Candlesticks
Candlesticks: This was
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11.8
11.7
invented by Japanese 11.6

11.5
merchants long time ago

11.4
11.3
11.2
(18th century). Candlestick 11.1

11.0
is easy to recognize
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10.8
10.7
information and images 10.6

10.5
than other types of charts. 10.4

10.3
10.2
10.1
10.0
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Candlestick
The highest price
The lowest price
Upper shadow
Real body
The opening price
The closing price
The range of price fluctuation: difference

between The highest price and the lowest
price
Candlestick
Bullish candlestick: is usually
colored in blue or white, showing closing
prices higher than opening prices.
Bearish candlestick: is usually
colored in red or black, showing closing
prices lower than opening prices
Candlestick in MetaStock
H1
H1: The closing H3 H3: The closing price is
price is higher than lower than the opening
the opening price in price in the day but
the day and the higher than the closing
closing price in the price in the previous
previous day day
H2
H4
H2: The closing
H4: The closing price
price is higher than
is lower than the
the opening price in
opening price in the
the day but lower
day and the closing
than the closing
price in the previous
price in the previous
day
day
The meaning of prices in Bar Chart and CandleStick Chart
 The opening price reflects the public's reaction to the information before the market
opens. Professional investors rarely trade at this price, because they act based on
positive or cautious view in the market.
 Closing prices are the most important price in a day because this is the price used to
evaluate the account balance to calculate profit and loss.
 The highest price: this is the price that reflects the maximum demand in the day
 The lowest price: this is a price that reflects the maximum supply in the day
 Price fluctuation range: reflects the level of trading enthusiasm of the market dominant
party
Closing price
 Compare to the previous day's closing price
 If today's closing price is higher than yesterday's closing price, then the buying force is
stronger than the selling force.
 If today’s closing price is lower than yesterday’s, the selling force is stronger than the
buying force.
 The greater the difference between the two closing prices is, the stronger the market
dominant party
Closing price
Position of the closing price in the range of price
fluctuation
The price closed near the intraday highest price, buyers dominated
the market at the end of the session.
The price closed near the intraday lowest price, sellers dominated the
market at the end of the session.
The price closed near the midpoint, reflecting that neither party
dominated the market at the end of the day.
Closing price
Correlation between closing and opening prices
If the opening price is near to the lower bound and the closing price is near
to the upper bound, the buyer dominates the market for the whole day.
If the opening price is near the upper bound and the closing price is near to
the lower bound, the seller dominates the market for the whole day.
If the opening and closing prices are near the upper bound, it reflects that
the seller has gradually transferred control of the market to the buyer at the
end of the session.
Closing price
Correlation between closing and opening prices
If the opening and closing prices are near to the lower bound, it reflects that
the buyers have gradually transferred control of the market to the sellers at
the end of the session.
If the opening price is in the middle, the closing price is near the upper
bound, the buyer dominated the market at the end of the session.
If the opening price is in the middle, the closing price is near the lower, the
sellers dominate the market at the end of the session.
If the opening and closing prices are in the middle, neither party control the
market
Analyze the range of price fluctuations
Prices are rising, accompanied by a wide range
of fluctuations, reflecting a stronger buying power.
Prices are falling, accompanied by a widening

range, reflecting a stronger selling power.
Prices are rising, accompanied by a narrowing

fluctuation range, reflecting weaker buying power.
Prices are falling, accompanied by a narrowing

range of volatility, reflecting weaker selling power.
Analyze the range of price fluctuations
The inside day is the day at which the
price range is completely within the price range
of the previous day.
The outside day is the day at which the

price range is completely outside the price range Inside day
of the previous day.
When inside and outside day appear, It

means that current price trend is weakening
Outside day
Some signals of short-term reversal
1. Close_Open
Reversal
2. Reversal Bar
Đóng cửa
Đóng cửa cao hơn
thấp hơn
3. Key Reversal in up trend
Open above last

close
And Close be low

previous Low
3. Key Reversal in down trend
Close above previous High

And Open below last Close
4. Hook Reversal in up trend
4. Hook Reversal in down trend
5. Island Reversal in up trend
Island Reversal or Cluster Island
Reversal
5. Island Reversal or cluster island
reversal in down trend
6. Pivot Point Reversal in up trend
A price column appears with the upper
and lower above in the trend.
Next, an appearance of a price column
with the upper bound lower and a close
below than the lower bound
6. Pivot Point Reversal in down
trend
There is a price column with the upper
and lower bound below in the trend.
Next, a price column appears with the
lower above and close above previous
high.
6. Pivot Point Reversal: complex
Module 3: Dow theory
1. About Dow
2. The basic content of the Dow theory
3. Some applications of Dow theory
3.1 Analyze the short-term trend
3.2 Trend lines
4. Limitations of Dow theory
About Dow
Charles Henry Dow (1851-1902) was an
American journalist who also founded The Wall Street
Journal, which has become one of the most respected
financial publications in the world. He also invented
the Dow Jones Industrial Average as part of his
research into market movements. He developed a
series of principles for understanding and analyzing
market behavior which later became known as Dow
theory, the groundwork for technical analysis.
Dow theory today is written and developed by

three people:
1. William Hamilton (1922), “The Stock Market
Barometer” (
2. S.A Nelson (1903), “The ABC stock Speculation”
3. Robert Rhea (1932)
The basic content of the Dow theory
VNINDEX (334.430, 340.010, 334.430, 340.010, +26.2500)
1200
1. Most stocks follow the basic 1150

1100
1050
1000
market trend. The basic trend of the 950

900
850
800
market is the trend of "average price 750
700
650
index" - reflecting the general trend of a

600
550
500
450
number of blue chips that represent the 400

350
300
250
whole market. 2006 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2007 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008 Mar Apr May Jul Aug Sep Oct Nov Dec 2009 Mar Apr
200
VNM (86.0000, 88.5000, 85.0000, 88.5000, +6.00000)

VNM 220
215
210
205
200
195
190
185
180
175
170
165
160
155
150
145
140
135
130
125
120
115
110
105
100
95
90
85
80
75
70
65
60
55
50
45
40
35
2006 Apr May Jun Jul Aug Sep Oct Nov Dec 2007 Mar Apr May Jun Jul Aug Sep Nov Dec 2008 Mar Apr May Jul Aug Sep Oct Nov Dec 2009 Mar Apr
Primarytrend: lasting from several months to several years;
2. There Are Known for two types: the Bullish market and the Bearish market.
Three kinds of Secondary reaction: A significant decrease in the bull

market or a significant increase in the bear market. This decrease
Market Trends: (increase) generally retreats from 33% -66% (1/3 to 2/3)
compared to the previous movement, lasting from 3 weeks to
primary trend, many months.
secondary reaction, Minor movement: it is the daily price movement and not
and minor important.
movements
Secondary reaction
Minor movement
Primary trend
Receiving Confidence: This phase is recognized
 A primary trend will pass through cumulative buying action by some knowledgeable
through three phases: In a investors who resist the overall opinion of the market.
bull market, these are the
Improving Earnings: companies are getting more and
accumulation phase, the more profitable than before; The speculators enter firstly.
public participation (or big when the trend becomes clear, it will attract the public
participation.
move) phase, and the
rampant speculation phase
Rampant Speculation: appearing the strong buying
action of speculators. By the end of this period, inflation
begin to appear.
VNINDEX (334.430, 340.010, 334.430, 340.010, +26.2500)
1250
1200
1150
1100
1050
1000
950
900
850
800
750
700
650
Speculation 600
550
500
450
400
350
300
Public Participation 250
200
150
Accumulation 100
50
Tran Tuan Vinh (2009)
J A S O N D 2004 M A M J J A S O N D 2005 M A M J J A S O N D 2006 M A M J J A S O N D 2007 M A M J J A

Abandonment of hopes: This phase is recognized through
A primary trend will
pass through three phases: cumulative selling action by some knowledgeable investors who
resist the overall opinion of the market. These investors believe
In a bear market, these are
that market can not raise anymore.
the Abandonment of
hopes, Decreasing
Earnings, and Distress Decreasing Earnings: Profit of companies begin decline;
selling (panic) The public participated in the selling due to bad news from
companies' profits.
Distress selling: The public panic and sell off all stocks
even good stocks.
VNINDEX (418.750, 427.630, 418.440, 426.430, +14.7900) 1250
Tran Tuan Vinh
HET HY VONG
Abandonment 1200
of hopes 1150
1100
1050
1000
Decreasing
LOI Earnings
NHUAN GIAM 950
900
850
800
750
700
650
BAN CANG
Distress THANG
selling
600
550
500
450
400
350
300
250
200
2006 Jul Aug Sep Oct Nov Dec 2007 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008 Mar Apr May Jul Aug Sep Oct Nov Dec 2009 Mar Apr May Jun
4. Dow Theory, stating that higher highs and higher lows describe an uptrend (bull
market) while lower highs and lower lows describe a downtrend (bear market)
Identify bull market:
Bull market
The upward market trend (bull ends
market) begins when it appears a
higher bottom and then a higher peak.
The upward market trend (bull
market) ends when it appears a lower
high and a lower low.
Bull market
starts
Identify bear market:
The downward market trend (bear Bear
market) begins when it appears a lower market
peak and then a lower low. starts
The downward trend (bear market)
Bear
ends when it appears a higher low and a market ends
higher high.
Trendline
Up trendline: is a straight line connecting the bottoms and pointing up.
Trendline
Down trendline: is a straight line connecting vertexes and downwards.
Trendline
Sideway/Non trendline: is a horizontal line connecting vertexes or bottoms together
Trần Tuấn Vinh
Application
Draw a trend line:
B1: Determine the market trend follow Dow theory: An uptrend begins with a
higher low followed by a higher peak. The downtrend begins with a lower peak and
then a lower low.
B2: Draw a temporary trend line by connecting two bottoms for the uptrend and
two downward peaks for the downtrend.
B3: The trend line is confirmed when a third peak (for downtrend) or a third
bottom (for an uptrend) is tangent with the temporary trend line.
KDC (65.0000, 65.0000, 64.0000, 64.0000, +0.000)
Resisitance
P P P 75
70
65
60
55
50
45
40
O
Trendline 35
30
25
20
15
10
r 2009 February March April May June July August September November December 2010 February April
Trendline
There are 2 situations when the trend line is broken
1. Forming a new trend in contrast to the old trend, called a reversal
Trendline
There are 2 situations when the trend line is broken
2. 2. Just a temporary interruption of the current trend, then it will continue
Trendline
The intensity of the trend line
 A trend line that is easy to be broken, is called a weak trend line.
 A trend line that is hard to be broken, is called a strong trend line
 The strength of the trend line depends on three factors: the length of time, the number of
price contacts and the slope of the trend line.
 A strong trend line has a long time, or many price contacts, or a small slope, or a
combination of many of the above factors.
 A weak trend line has a short time, or few price contacts, or a big slope, or a
combination of many of the above.
Trendline
A weak trend line is broken will not make a big change (reversal), usually only
interrupting the current trend
Trendline
A strong trend line is broken will create a big result, usually creates a new trend
(reversal)
Trendline
Habits, trends and trading
strategies
1. When a strong up trend line

breaks down, prices will tend to go
down. Trading strategy: sell when
price falls below the trend line,
take profit when the price falls to a
point equal to the largest distance
between the price and the trend line
in the past, cut loss when the price
suddenly rebounds over the trend
line
Trendline
strategies
2. When a strong down trend

line breaks up, the price will tend
to go up. Trading strategy: buy
when price rises above the trend
line, take profit when the price
rises to a point equal to the largest
distance between the price and the
trend line in the past, cut loss when
the price suddenly drops back past
the trend line.
In America, both the industry index and the railroad index must confirm a trend
then we can confirm that trend really exists. In Vietnam, we can apply with both VN-
Index and HASTC-Index.
Trading volume is a supportive evidence for price trends.
PRICE VOLUME MARKET

UP UP STRONG
UP DOWN WARNING SIGN
DOWN UP WEAK
DOWN DOWN WARNING SIGN
Disadvantages of Dow theory
 It is not applicable in the trendless trading market (Sideway).
 Always react slower than market price movements
Price
begins
decline
Price begins
increase
Module 4: Traditional technical analysis tools
1. Resistance & Support
2. Price Patterns
3. Candlestick Patterns
Resistance – Support
Resistance: is the price area where the
supply increases sharply beyond the current
demand, causing the price to rise suddenly to
reverse, usually the previous peak in the past.
Support: is the price area where the

quantity of demand increases strongly exceeds
the current supply, causing the price to decrease
suddenly to reverse, usually the previous bottom
in the past.
strategies
1. When prices rise sharply and break
the strong resistance (including many
peaks), the price will continue to rise.
Trading strategy: buy when price crosses
resistance, take profit at the next
resistance level, cut loss when price
reverses below resistance level
Habits, trends and
trading strategies
2. When prices fall sharply
and break the strong support
(including many bottoms), the
price will continue to decline.
Trading strategy: sell when price
crosses support level, take profit at
the next support level, cut loss
when price reverses above support
level.
strategies
3. When the price breaks a
strong resistance level it normally
has a habit of returning to the above
price level. The resistance level will
become a strong support level.
Trading strategy: buy when price
returns to resistance level, take profit
at the next resistance level, stop loss
when price reverses below resistance
level.
strategies
4. When the price breaks a
strong support, it normally has a
habit of returning to the above
level. The support level will
become a strong resistance.
Trading strategy: sell when price
returns to the support level, take
profit at the next support level, cut
loss when the price reverses above
the support level.
trading strategies
5. When the price suddenly
rises sharply but can not break up
the weak resistance level, then the
price will drop sharply. Trading
strategy: sell when price falls
below resistance level, take profit
at the lower support level, cut loss
when price returns above
resistance level.
trading strategies
6. When the price
suddenly drops sharply and
but cannot break down the
weak support level, then the
price will rise sharply again.
Trading strategy: buy when
price above support level,
take profit at the next
resistance level, cut loss when
the price returns below the
support level.
Golden opportunity
Trần Tuấn Vinh

History of Fibonacci Sequence
Leonardo Fibonacci's real name is Leonardo
Pisano, is a mathematician, living in the 12th -13 century
in Pisa (Italy).
In 1202 he published Liber Abaci (A book on
calculus). The book introduced the Fibonacci Sequence
(1,1,2,3,5,8,13,21,34, ...) based on the observations of the
Gizeh Pyramid in Egypt.
Fibonacci Sequence
The Fibonacci sequence begins with 0 and 1; Subsequent numbers are calculated by
sum of the two preceding numbers:
0,1,1,2,3,5,8,13,21,34,55,89,144,233,377….
Golden ratio: if we take any number in the Fibonacci series divided by the preceding
number, the result around the ratio of 1.618. Conversely, if you take any number in
Fibonacci series divided by the subsequent number, the result revolves around the ratio of
0.618
Small numbers
The big number Small numbers Small numbers
Fibona divide by
divide by the divide by divide by
cci numbers
previous small numbers greater numbers greater
series greater than 3
number than 1 order than 2 order
order
0
1
1 1.000 100.0% 0.0%
2 2.000 50.0% 50.0% 0.0%
3 1.500 66.7% 33.3% 33.3%
5 1.667 60.0% 40.0% 20.0%
8 1.600 62.5% 37.5% 25.0%
13 1.625 61.5% 38.5% 23.1%
21 1.615 61.9% 38.1% 23.8%
34 1.619 61.8% 38.2% 23.5%
55 1.618 61.8% 38.2% 23.6%
89 1.618 61.8% 38.2% 23.6%
144 1.618 61.8% 38.2% 23.6%
233 1.618 61.8% 38.2% 23.6%
377 1.618 61.8% 38.2% 23.6%
610 1.618 61.8% 38.2% 23.6%
987 1.618 61.8% 38.2% 23.6%
1597 1.618 61.8% 38.2% 23.6%
Godden rate in nature
Godden rate in body and fashion
Godden rate in industry design
Fibonacci in technical analysis
 Using the Fibonacci sequence is one method to identify support and resistance points.
 Fibonacci sequence is often applied in technical analysis under many forms:
Fibonacci Retracements
Fibonacci Arcs
Fibonacci Fans
Time Zones
Fibonacci Retracements are formed by drawing a trend line connecting two extreme
points, from a bottom to a top or versa.
Horizontal lines will be set at the levels equivalent to Fibonacci ratios: 0% (top or
bottom), 23.6%, 38.2%, 50%, 61.8%, 76.4% and 100% (top or bottom), or extended at
261.8% and 423.6%.
After each price movement (increase or decrease), prices tend to recover a
significant proportion of the original movement. When prices fluctuate or recover to
resistance and support levels often appear near the Fibonacci Retracement levels.
 In the technique of using Fibonacci Retracements, the identifying of peak and
bottom point plays an important role.
 Retracements also have different levels of significance. Support and resistance
usually appear near the points 38.2%, 50%, 61.8%.
VNINDEX (418.750, 427.630, 418.440, 426.430, +14.7900)
1250
1200
1150
1100
1050
1000
950
900
850
800
750
700
0.0% 650
600
550
23.6%
500
38.2% 450
50.0% 400
350
61.8%
300
250
200
150
100.0%
100
50
2003 A S O N D 2004 A M J J A S O N D 2005 A M J J A S O N D 2006 A M J J A S O N D 2007 A M J J A S O N D 2008 A M J A S O N D 2009 A MJ
VNINDEX (418.750, 427.630, 418.440, 426.430, +14.7900) 600
590
580
570
100.0% 560
550
540
530
520
61.8% 510
500
50.0% 490
480
38.2%
470
460
23.6% 450
440
430
0.0% 420
410
400
390
380
370
360
350
340
330
320
310
300
290
280
270
260
250
240
230
220
210
July August September October November December 2009 February March April May June
Fibonacci Arcs
Fibonacci Arcs
Trần Tuấn Vinh

Fibonacci Fans
 Fibonacci Fans are drawn buy connecting the peak to the bottom and versa. Then,
an "invisible" vertical axis is drawn through the second extreme (peak or bottom).
 The three trend lines will be drawn from the first extreme point cutting the
vertical axis at 38.2%, 50%, 61.8%. (With 2 points of the top and the bottom are
equal to 0% and 100%).
 Depending on the circumstances, these trend lines can be considered as support
and resistance lines in technical analysis.
Fibonacci Fans
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Fibonacci Time Zones
 Fibonacci Time Zones are established by dividing the graph into vertical axes
with a distance following the Fibonacci sequence (1,1,2,3,5,8, ...).
 Strong price changes are often located near these vertical axes.
Fibonacci Time Zones
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Elliott Wave Principle
 History
 Basics of EWP
 Application
History
In 1938, a study called The Wave Principle or Elliott Wave Principle (EWP) was
published for the first time, introducing the research of Ralph Nelson Elliott.
This theory was heavily influenced by the Dow theory and R. N. Elliott himself
considered his theory a necessary complement to the Dow.
In 1946, Elliott completed his study and published his work in Nature's Law - Secret
of the Universe.
History
Elliottrealizes the market moving in cycles that reflect many different factors. The
ups and downs of the market are always revealed through some basic models, namely
waves. These waves may be repetitive in shape, but are not repetitive in time and magnitude.
In 1978, A.J.Frost and Robert Prechter supplemented and explained this theory more
clearly in the Elliott Wave Principle (EWP) book.
Basics of EWP
Pattern: Wavelengths are are repeated. This is considered to be the most important
factor in wave theory.
Ratio Analysis: To classify retracements and target prices by determining the ratio
between different waves.
Time : can further confirm the pattern and the ratio of wavelengths. This is
considered to be the least important factor among the factors.
Pattern
 The Basic Pattern.
 Complete Cycle
 The General Pattern
 Corrective Wave
The Basic Pattern (H1)
The Basic Pattern
There are two types of wave development: Motive and Corrective. Motive is
composed of 5 wavelengths, correction is composed of 3 wavelengths.
The wavelengths 1 - 3 - 5 represent the main movement trend which is strongly
dominating the market.
Wavelengths 2 - 4 represent a partial retrieval of the previous wave.
Complete Cycle - H1
Complete Cycle
EWP says that the market follows a rhythm of 5 increasing wavelengths and then 3
decreasing wavelengths. At that time, the market has completed a Cycle.
A complete cycle consists of 8 wavelengths: 5 increasing wavelengths and 3 decreasing
wavelengths.
General pattern
Elliott theory incudes 8-wavelengths but in reality the magnitude of trends or
cycles is very diverse.
Elliott has scaled the trend into nine levels from the "Grand Super cycle" that
lasts for hundreds of years to “Sub minute cycle” that only happens within a few hours
of trading. Therefore, it is also important to consider the magnitude of the trend.
The point to keep in mind here is that the 8 fundamental wavelengths in the cycle
are maintained regardless of the magnitude of the trend.
General pattern
A wave can be divided into smaller wavelengths, these smaller wavelengths can be further
divided into smaller wavelengths. The 8-wavelength model of a cycle can act as a wavelength
of a larger cycle.
For example: Two wavelengths 1 and 2 can be divided into 8 smaller wavelengths and then
can be divided into 34 smaller wavelengths. However, these two wavelengths are only the first
2 wavelengths in the uptrend including 5 larger wavelengths.
General pattern
Frost and Prechter

Ratio Analysis
Wave 2:
Wave 2 = 38.2% * Wave1
= 50% * Wave 1
= 61.8%* Wave 1
Wave 3: The target point of wavelength 3 is :
Wave 3 = 1.618× wave 1
Wave 3 = 2 × 1.618× wave 1 (extended case)
Wave 4:
Wave 4 = 38.2% * Wave 3
= 50% * Wave 3
= 61.8%* Wave 3
Ratio Analysis
Wave 5: The target point of wavelength 5 is :
Maximum targer : Wave 5 = 2 × 1.618× wave 1 + The peak of wavelength 1
Minimum targer : Wave 5 = 2 × 1.618× wave 1 + The Bottom of wavelength 1
If wavelengths 1 and 3 are equal, wavelength 5 is expected to expand, the target price can be
calculated by: taking the distance from the bottom of wavelength 1 to the peak of
wavelength 3 multiplied by 1,618 and plus bottom of wavelength 4.
Ratio Analysis
n = 0.382*x y = 1.618*x
Minimum z = 2*1.618*x Maximum z = 2*1.618*x + x
Z mở rộng = 1.618*(x + y – n) + m
Ratio Analysis
Ratio Analysis (Corrective Waves)
Ratio Analysis (Motive Waves)
Corrective Waves
 Corrective Wave:
 In the form of Zig - zags 5-3-5, wavelength c tends to equal a.
 In Flat 3-3-5, if wave b passes the peak of wave a, wave c will equal 1,618
multiplied by wave a
Ratio Analysis Zig - Zags
Ratio Analysis – Flat
Ratio Analysis – Flat
Technical Analysis Chart Patterns
 Triangles
 Rectangles
 Flags and pennants
 Head and shoulders
 Double and triple tops/bottoms
 Wedges
 Rounding tops/bottoms
 The Cup with Handle
 The Saucer
Triangles
 Flat top triangle
Trần Tuấn Vinh
Triangles
 Flat bottom triangle
Triangles
 Equilateral triangle
Trần Tuấn Vinh
Rectangles
Trần Tuấn Vinh
Flags and Pennants
Bullish Flag
Flags and Pennants
Bearish Flag
Flags and Pennants
Pennant
Trần Tuấn Vinh
Head and shoulders
VNINDEX (424.100, 430.780, 424.100, 427.050, +8.50000)
Tran Tuan Vinh (2009) 900
850
800
750
700
650
H 600
S 550
S 500
450
Neckline 400
350
300
250
200
8 February April May June July August September November 2009 February March April May June July
VNINDEX (528.160, 549.620, 513.490, 547.990, +19.5000) 1250
1200
1150
1100
1050
1000
950
900
850
800
750
700
650
600
550
500
450
400
Right Shoulder
350
Right Shoulder
300
250
Head 200
Oct Nov Dec 2007 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2008 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 Mar Apr May Jun Jul Aug Sep Oct Nov
Trần Tuấn Vinh
Trần Tuấn Vinh
DOUBLE-TRIPLE TOPS/BOTTOMS
Double Top Double Bottom
Trần Tuấn Vinh
DOUBLE-TRIPLE TOPS/BOTTOMS
Triple Top Triple Bottom
Wedge
VNINDEX (539.900, 542.000, 536.110, 536.110, -1.70001)
570
560
550
540
530
520
510
500
490
480
470
460
450
440
430
420
410
Wedge
400
390
380
370
360
350
340
330
320
310
300
290
280
270
260
250
240
230
16 23 30 7 13 20 27 4 11 18 25 1 8 15 22 29 6 13 20 27 3 10 17 24 31 7 14 21
April May June July August September
Rounding tops/bottoms
Rounding Tops Rounding Bottoms
The Cup with Handle

The Saucer

SNG (62.9000, 63.0000, 59.5000, 61.1000, -0.90000) 260
250
100.0%
240
230
220
210
200
190
180
170
61.8% 160
150
140
50.0% 130
120
110
38.2%
100
90
Saucer 80
23.6%
70
Break Out
60
50
40
30
0.0% 20
10
0
2007 Nov Dec 2008 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2009 Mar Apr May Jun Jul Aug Sep Oct
Candlestick patterns
1. Reversal Patterns
1.1 Hammers and Hanging men
1.2 Dark Cloud Cover
1.3 Piercing Line
1.4 Engulfing Patterns
1.5 Stars
2. Continuation Patterns
2.1 Upside and Downside Gaps
2.2 Rising-three and Falling-three Methods
Hammer
Hammer
 Formed after a series of continuous decrease days
(downtrend dominates).
 The hammer is formed when prices opened lower but at
the end of the day the price rebounded and closed near the
upper. The lower shadow is at least twice the length of the
body.
Hanging men
Formed after a series of continuous increase days
Hanging men is formed when prices opened higher but at
the end of the day the price rebounded and closed lower open
price, the lower shadow is at least twice the length of the body
Hanging
men
BHS (33.9000, 34.7000, 33.5000, 34.7000, +1.60000)
41.0
40.5
40.0
39.5
39.0
38.5
38.0
37.5
37.0
36.5
36.0
35.5
35.0
34.5
34.0
33.5
33.0
32.5
32.0
31.5
Hammer 31.0
30.5
18 25 1 8 22 1 8 15 22 29 5 12 19
February March April
Dark Cloud Cover
Dark
Formed after a series of continuous Cloud
increase days.
A candle appears with the opening
price higher than the opening price of the
previous day, but the price closed lower than
the middle of the previous candle. And the
shadow of this candle is very small.
The previous candle must be a rising
candle
Dark Cloud Cover
Piercing Line
Appears after a series of continuous Đóng cửa trên
decrease days điểm giữa
A candle appears with opened lower
than the close and the close price is higher than
the middle of the previous candle.
The previous candle must be a bearish
candlestick Điểm
giữa
Piercing Line
Bullish Engulfing Patterns
Appears after a series of continuous
bearish days.
A candle appears with open price is
lower than the lowest of previous candle, and
the closing price is higher than the highest of
the preceding candle.
The preceding candle must be a
bearish candlestick.
Shadows of these two candles are
narrow
Bullish Engulfing Patterns
Bearish Engulfing Patterns
Appears after a series of continuous
bullish days.
A candle with price opens above the
upper and close price is lower than the lower
of the previous candle.
The preceding candle must be a
bullish candle.
Shadows of these two candles are
narrow
Bearish Engulfing Patterns
Upside Gap
Appears in bullish market
This pattern further confirms the upward
trend Gap
The first candle is a bullish candle,
creating a gap with the candle before it, the
second candle is a bearish candle, but the close
price still remains above the closing price of the
candle before the first one.
The candle before the first candle must
be a bullish candle
Upside Gap
Downside Gap
Appears in a bearish market
This pattern further confirms the
downtrend Downside Gap
The first candle is a bearish candle,
creating a gap with the candle before it. The
second day is a bullish candle, but the upper Gap
boundary is still below the close of the day
before first candle.
The candle before the first candle must
be a bearish candle
Rising Three Methods
Appears in bullish market
Confirming the continuous uptrend
Start with a large bullish candle, then
appear about 3 or 4 small bearish candles but the
range of these candles is within the white candle.
After that, big white candle appears with opening
and closing prices higher than the previous white
candle.
Rising Three Methods

Falling Three Methods
Appears in bearish market.
Confirming the continuous downward trend
Start with a large bearish candle, then there
are about 3 or 4 small bullish candles but the range
of these candles is within the black candle. After
that, a large bearish candle appears with opening
and closing prices lower than the previous bearish
candle.
Falling Three Methods

Module 5: Indicators
1. Trailing Indicators: MA, MACD, Bollinger Band, Envelopes, MDS, Parabolic
SAR …
2. Momentum Indicators: RSI, Stochastic, ROC, Momentum …
Trailing Indicators
Moving Average: simple moving average (SMA)
Is the average price of a security at a given time within a defined time period "n".
Calculation: Plus all the closing prices of a security in the "n" days and then
divide by "n".
A graph is drawn by connecting the moving average indices calculated at each
time of a stock according to the time of market operation.
MA
Point out market trends: HSG (46.7000, 47.1000, 46.4000, 46.8000, -0.20000)
Giam manh 55
P
 The price chart above the 50
moving average shows that 45
the market is in an uptrend

40
gia HSG
35
 The price chart below the P
moving average shows that 30
O
the market is in downtrend. 25
SMA(50)
Tang manh 20
P
15
10
2008 2009 February March April May June July August September November December 2010 February April
MA
Buying and selling DPM (39.5000, 41.2000, 39.3000, 40.8000, +1.50000) 45.5
signals:
45.0
44.5
44.0
43.5
43.0
Buy when the price line 42.5

42.0
41.5
crosses the moving average line

41.0
40.5
40.0
39.5
sell
from the bottom up 39.0
38.5
38.0
37.5
Sell when the price line

37.0
36.5
36.0
35.5
crosses the moving average line sell

35.0
34.5
34.0
from the top down

33.5
33.0
32.5
32.0
31.5
31.0
30.5
30.0
29.5
29.0
28.5
28.0
27.5
27.0
buy 26.5
26.0
25.5
25.0
24.5
buy 24.0
23.5
23.0
22.5
22.0
21.5
21.0
20.5
2010 Jun Jul Aug Sep Oct Nov Dec 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012 Feb Mar Apr May
MA
Play a resistance and
support role:
 In an uptrend, the moving DPM (39.5000, 41.2000, 39.3000, 40.8000, +1.50000) 45
average acts as a support

line 40
resistance
 In the downtrend, the 35
support resistance
moving average acts as a support
resistance line
30
support support
support 25
2010 Jul Aug Sep Oct Nov Dec 2011 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012 Mar Apr May
MA
Term of moving average
 Very short: 5-13 days
 Short: 14-25 days
 Weak medium term: 26-49 days
 Medium term: 50-100 days
 Long term: 100-200 days
MA
Use multiple moving averages to VNINDEX (488.600, 492.440, 486.250, 488.070, +1.76001) 565
560
identify market trends: 555

550
545
540
535
530
525
520
515
 The market rises when the short 510

505
500
moving averages lie above the

495
490
485
480
long moving average

475
470
465
460
455
450
445
440
435
 The market falls when short 430

425
420
moving averages are below the

415
410
405
400
long moving average

395
390
385
380
375
370
365
360
355
350
345
340
335
330
325
320
315
2010 Jun Jul Aug Sep Oct Nov Dec 2011 Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2012 Feb Mar Apr May
MACD
Moving Average Convergence Divergence – MACD
+ Fast MACD : he MACD is calculated by subtracting the 26-period Exponential
Moving Average (EMA) from the 12-period EMA
+ Signal line: A nine-day EMA of the MACD

MACD
Point out market HSG (46.7000, 47.1000, 46.4000, 46.8000, -0.20000)
trends: 55
50
+ If both the Fast MACD 45
and the signal lines are

above zero (0) line, it
40
shows that the market is 35
increasing. 30
25
+ If both the Fast MACD 20
and the signal lines are

below the zero (0) line, it
15
shows that the market is 10
falling. Xu huong tang

MACD (0.69863) 5
4
3
2
1
0
Xu huong giam -1
-2
-3
April May June July August September October November December 2010 February March April
MACD
Buy / sell signals:
HSG (46.7000, 47.1000, 46.4000, 46.8000, -0.20000)
55
50
 Buying signal: when the 45
Fast MACD crosses the

signal line from the bottom
40
up, the cut point is far from 35
the zero line indicates the 30
market will increase 25
strongly. 20
15
 Sell signal: when the Fast 10
MACD crosses the signal 5
line from the top down, the MACD (0.69863)

Q Bán 5
cut point is far from the j

Bán 4
3
zero line indicates the 2
market will fall sharply.

1
O 0
-1
Mua
Q Mua Q Mua
-2
-3
2009 February March April May June July August September October November December 2010 February April
Momentum Indicators
Bullish divergence and Bearish divergene: The divergence between the MACD
line and the price chart shows that the present trend is weakening..
+ Bullish Divergence: when the price chart is formed of subsequent bottoms

are lower than previous bottoms while the MACD is formed of subsequent bottoms
are higher than previous bottoms. This shows that the downtrend is weakening.
+ Bearish Divergence: when the price chart is formed of subsequent tops are
higher than previous tops while the MACD is formed of subsequent tops are lower
than previous tops. This shows that the downtrend is weakening
VNINDEX (516.210, 517.260, 512.540, 515.820, +0.48999)
650
600
550
500
450
400
350
300
250
MACD (1.01734) 40
35
Phan ky giam 30
25
20
15
10
5
0
-5
-10
-15
-20
Phan ky tang -25
-30
-35
2008 Jun Jul Aug Sep Oct Nov Dec 2009 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 Feb Mar Apr
RSI
RELATIVE STRENGTH INDEX
The relative strength index (RSI) is a momentum indicator used in technical
analysis that measures the magnitude of recent price changes to evaluate overbought or
oversold conditions in the price of a stock or other asset
RSI measurement:
RSI =100- 100/(1+RS)
Average Gain = Total Gains/n
Average Loss = |Total Losses/n|
n = number of RSI periods
RS = Average Gain/Average Loss
Firm X
Date Price (USD) Gain Loss Average Gain(3) AverageLoss(3) RS RSI(3)
1 5.0
2 5.2 0.2 -
3 5.0 - (0.2)
4 5.5 0.5 - 0.23 0.07 3.50 77.78
5 6.0 0.5 - 0.33 0.07 5.00 83.33
6 5.8 - (0.2) 0.33 0.07 5.00 83.33
7 6.5 0.7 - 0.40 0.07 6.00 85.71
8 7.0 0.5 - 0.40 0.07 6.00 85.71
9 6.8 - (0.2) 0.40 0.07 6.00 85.71
10 7.0 0.2 - 0.23 0.07 3.50 77.78
11 7.5 0.5 - 0.23 0.07 3.50 77.78
12 7.7 0.2 - 0.30 - #DIV/0! 1.00
13 7.2 - (0.5) 0.23 0.17 1.40 58.33
14 7.0 - (0.2) 0.07 0.23 0.29 22.22
15 6.5 - (0.5) - 0.40 - -
16 7.0 0.5 - 0.17 0.23 0.71 41.67
RSI
RSI application :
1/ Indicates status of overbought / oversold:
If the RSI is above 70, it indicates that the market is overbought, whereas if the
RSI is below 30, the market is oversold.
2/ Indicates buy / sell signals:

When the RSI line crosses down the line 70 from the top, it indicates a sell signal.
When the RSI line crosses up the line 30 from the bottom, it shows a buy signal
VNINDEX (516.210, 517.260, 512.540, 515.820, +0.48999)
650
600
550
500
450
400
350
300
250
Relative Strength Index (55.3182) 90

Ban Overbought 80
70
60
50
Mua 40
30
20
Oversold 10
0
2008 Jun Jul Aug Sep Oct Nov Dec 2009 Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2010 Feb Mar Apr
RSI
3/ Bearish Divergence and Bullish divergence
Bullish Divergence: when the price chart forms lower lows while the RSI forms
higher lows
Bearish Divergence: when the price chart forms higher points while RSI forms
lower highs
VNM (88.0000, 88.0000, 86.0000, 86.5000, -0.50000)
100
95
90
85
80
75
70
65
60
55
50
45
40
35
30

80
75
70
65
60
55
50
45
40
35
30
25
Phan ky tang 20
15
2008 May Jun Jul Aug Sep Oct Nov Dec 2009 Feb Mar Apr May Jun Jul Aug Sep Oct
VNINDEX (516.210, 517.260, 512.540, 515.820, +0.48999) 650
640
630
620
610
600
590
580
570
560
550
540
530
520
510
500
490
480
470
460
450
440
430
420
410
75
70
65
60
55
Phan ky giam 50
45
40
35
30
25
22 29 6 13 20 27 3 10 17 24 31 7 14 21 28 5 12 19 26 2 9 16 23 30 7 14 21 28 4 11 18 25 1
July August September October November December 2010 February
Money Flow Index – MFI
A indicator is created by comparing positive cash flow with negative cash flow, that
can be compared with stock prices to confirm an upward or downward trend of a particular
stock.
Formula
First, we need to calculate the cash flow of each stock (money flow)
Money Flow = (Typical Price) x (Volume)
MFI compares the ratio of positive and negative cash flows. If today's price is
higher than yesterday, it is said to be positive money, otherwise it is negative money. In 14
days, the sum of all those positive money is called positive money flow. MFI is calculated
based on the ratio of money:
Finally, MFI is measured by:
Note: The fewer days that a MFI is used, the more flexibility it will have.
MFI application
2 basic applications of MFI
Divergence (trend reversal):
If the MFI line is opposite price line, the current trend of the price could be
reversed.
Overbought/oversold:
If the MFI line is above 80, the market is in a state of overbought and the price is
too high. The price will fall again when the MFI fall below 80 - giving SELL signal.
If the MFI line is below 20, it means the market is oversold and the price is
too low. The price will increase again when MFI goes beyond 20 - giving BUY signal.
Bollinger band
Because the standard deviation is proxy of volatility, the Bollinger Band will
automatically expand when the market is volatile and narrow when the market is stable.
Bollinger Band includes 3 line : Middle Band: is simple moving average (SMA),
Lower Band, and Upper Band.
Lower Band and Upper Band are measured as flowing:
.
The bottom line is similar, instead plus by minus. And D is the number of standard
deviations (1,2,3 ..)
482
Bollinger band
VNINDEX (408.180, 410.480, 405.720, 408.440, +0.64999)
555
550
545
540
535
530
525
520
515
510
505
500
495
490
485
480
475
470
465
460
455
450
445
440
435
430
425
420
415
410
405
400
395
390
385
380
375
370
365
360
355
1 8 15 22 29 6 13 20 27 4 10 17 24 8 14 21 28 7 14 21 28 4 13 25 4 16 23 30 6 13 20 27 4 11 18 25 1 8 15 22 29 5 12 19 26 3 10 17 24 1 7 14
November December 2011 February March April May June July August September October November
483
BOLLIGER band
 The price of the stock tends to fluctuate within the Bollinger range.
 Large price changes usually occur when the Bollinger band narrows.
484
3. Stochastic Oscillators
Trần Tuấn Vinh

Trần Tuấn Vinh
Module 6: Software
1. Metastock
2. Netdania.com
Install Metastock
 Use the "MetaStock 8.0" or higher
 Insert the disc into the computer.
Click: Next
Trần Tuấn Vinh
click: I accept this agreement
type: your name and company
YPHQ-3ED6-ZJW71
Trần Tuấn Vinh
type SETUP_KEY:
click: Next
click: Yes
Click: Next
Click: Next
Click: No Real-time Vendor
Click: Next
Click: Next
Click: Next
Trần Tuấn Vinh
Click: next
Click: Overwrite
Click: Next
Click: No, I will restart my computer later
Click: Finish
Launch software
 On Desktop, double-click on MetaStock Icon
Import data
 Click on The Downloader on desktop
Chose: Tools
Chose: Convert
At Source tap, chose Files Type and chose : Execel (daily data) or
ASCII text (Whole data)
Then, Click on Browse
chose Desktop, then chose 4 files (Fund, HaSTC, HOSE, index), next,
click on Open
At Destination, Catalogue Files Type chose: MetaStock
Then, Click on Browse
Search folder Data MetaStock, click Save
Chose: Ok, and wait
Chose: Close, finish
Technical analysis for forex and oil
 netdania.com
Khởi động
 On www.netdania.com
 Chose Product, and then Finance Chart
Open chart: Click on
7. Some Issues to know when applying technical
analysis in investment
A good technical analyst does not mean a good investor
Subjectivity always exists in technical analysis
Dominant by fundamental analysis
The problem of phase time
The last is the psychological issue
A good technical analyst does not mean a good investor
The reality is that some investors are equipped with the same technical knowledge
and technical skills, but when they enter the real investment, only a few of them are
successful, most of them fail (according to statistics). This figure is 90% / 10%).
This means that "the same good fishing rod, not everyone can fish". What is the
problem here? It is you! Is your mentality! That is the technical analysis application of each
person.
A good technical analyst is a person who knows the details of the market and
provides convincing evidence for his judgment.
Meanwhile, good investors use only a few simple tools that are suitable for
themselves (forte) to keep up with market movements in order to gain profits.
Subjectivity always exists in technical analysis
TA is an art. Art always has its own individual signature.
The subjectivity is expressed in how you view different models, different
wavelengths, different trends ... on the same graph of investors. Even for Indicators which is
an algorithm-generated tool, the usage also contains subjectivity, expressed in the parameter
selection, duration ... of each investor.
The danger of being subjective, is that investors always see the graph the way they
want it, they try to look for signs that support their thinking, rather than looking objectively.
A good investor is one who always restrains this subjectivity, by thinking both ways.
Typically G.Soros with the famous thinking: "I could be wrong"
Dominant by fundamental analysis
In the process of applying technical analysis to investment, investors often have the
habit of using fundamental analysis to support their decisions.
The problem occurs when, the results of the technical analysis are not supported or
contradictory with the fundamentals; At this time, it is very difficult for investors to make
decisions or make wrong decisions.
The best way to solve this problem is to know which type of analysis to focus on or if
you want to combine the two, you must keep the principle: invest only when the two factors
are identical.
At the same time, if you chose a different phase time, it will be possible to produce
different results on market trends. This creates the biggest challenge for investors when
making decisions.
Trần Tuấn Vinh
Trần Tuấn Vinh
Trần Tuấn Vinh
Long-term trends will affect the short-term trend. If the short-term trend is the same
direction as the long-term trend, the market will have more momentum and the price range
will last longer than the case of the short-term trend opposite to the long-term trend.
If investing in a short 5 Months phase, the analysis must begin with a day, hour chart
and end in a 5 Months chart to make a decision. If investing in daily time phase, it must start
with monthly, weekly chart, then end with daily chart.
Trần Tuấn Vinh
Trần Tuấn Vinh
Trần Tuấn Vinh
The psychological issue
Why are some investors not buying and selling on their own but following rumors
even though he is financially savvy?
Why would an investor lose 10%, 30%, and 50% and then be forced to cut losses at
70%?
Why would an investor analyze the market go down, but at the beginning of the first
30 minutes he decided to buy when he saw the market go up, and then at the end of the
session he "regrets" when he saw the market plummet?
The general answer is: he has no trading rules yet or he does not comply with the
trading rules.
Why do most investors want to sell instead of buying when the price breaks up the
previous highest level (Resistance). Meanwhile, everyone knows that when prices break
above the previous high, it will continue to reach new highs
The general answer to these two issues is confidence. We often lose confidence in the
moment we decide to invest
Why do most people Top 1 Top 2
who trade based on patterns
tend to trade early before the The high-risk sell
patterns are completed? region, but many
Because, they are always sellers
motivated by the mentality
"surely the model will happen,
the wait will reduce profits."
Low-risk sell area,
but few sellers
Finish pattern are

completed
Why are most MA
traders tend to trade when
the price contact with the
MA? Because, they are
always motivated by the
mentality "definitely
price will cut through
MA, waiting to reduce
profits."
The common answer to these two questions is patience.
A recommendation of professional investors is "no
opportunity, no trading".
In summary, to solve 3 psychological issues: rules, confidence,
and patience, what should investors do? Practice!
Start by researching and creating a trading model; After that, retest
the effectiveness of the model with historical data or Demo
transactions.
Once you have a reliable trading model, always be patient with the
rules set by the model.
The process of writing technical analysis report
Start the analysis with a long time phase, then analyze it carefully with the trading
time phase.
Identify and draw a major market trend line. Note the interaction between the trend
line and the price line.
Look for Patterns to analyze trend reversals or continuity.
Use the moving average (MA) to confirm the main trend.
The process of writing technical analysis report
Using Money Flow Index to confirm the strength of trend

Using MACD, RSI, Stochastic … to early warning the reversal. Note the divergence
of this indicator group.
Make final judgments about future price trends.
And finally, we can predict the future price level with the Resistance & Support,
Fibonacci, Elliot Wave or Patterns tools.

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Investments

Phd. Luu Thu Quang

Chapter 1. Overview of Investments

 Take advantage of compound

 Without investing your free

 Most of the world's

 Listen to celebrities: It is not wrong to seek professional advice, but listening

 Forget your strengths: A common mistake that inexperienced investors often

 Determine investment objectives: profits and risks

 Quantitative analysis: use mathematical models to predict macro factors,

Growth investors often call growth investing a capital growth strategy,

 Typically, such an investor would need to completely rid his or her

 C - Current quarterly earnings per share has increased sharply from the

 The lecture only focuses on common stock analysis.

1. Buy a good / great company

"Buying a great company at a reasonable price is much better than buying a

2. With cheap / reasonable price

3. Hold for a reasonable amount of time

Application: prioritizing the search for under-value stocks; suitable for

Investment environment is a combination of economic, social, cultural,

Source: Nguyễn Đức Thành, Phạm Văn Đại(2016),

- Using Michael Porter model to analyze the situation of the

- Based on the analysis results from step 1, make a final

A NÔNG NGHIỆP, LÂM NGHIỆP VÀ THUỶ SẢN

P GIÁO DỤC VÀ ĐÀO TẠO

U HOẠT ĐỘNG CỦA CÁC TỔ CHỨC VÀ CƠ QUAN QUỐC TẾ

 Michael Porter model

Trần Tuấn Vinh

Year of birth: 1947

The goal of sector/industry analysis based on the MP model is to find out:

Productivity increases rapidly by large investments: 1. How is the industry applying

Barriers to exit the industry: 1. is it easy or difficult for companies to withdraw

Starting business very early, Buffett

 Một nhà đầu tư, chỉ cần tốt hơn

 “The stock market is a device

 “You don't need to be a rocket

Fisher is one of the people who greatly

 Important management qualities of a company include: comprehensive

Graham's ideas and investment methods are

The excellent company is one that has:

 There are specific characteristics (design or function) that make it easy

 What drives a highly competitive product? (with specific characteristics,

 What factors are the competitiveness of a product expressed through?

 What factors affect the potential market? (technology, consumption

 Case study - Coteccons

 Reasonable ESOP policy

Working capital / Total assets Working capital / Total assets

Current ratio = "Current assets and short-term investments" / “Current liabilities"

Net (credit) Sales/Average Accounts Receivable—gives a measure of how quickly

Inventory/Total Assets. Shows the portion of assets tied up in inventory.

Selling expenses to sales

Management expense to sales

Retention Ratio (Net Income− Dividends Distributed)/Net Income

1. Basic issues of stock valuation

Make investment decisions to buy, sell, or hold

Issuing and listing of stocks

1. Vietcombank VCB 100,000 IPO 50,000

2. Bia Sài Gòn SABECO 70,000 IPO 30,000

3. Tài chính Dấu khí PVFC 51,000 IPO 15,700

4. Đạm Phú Mỹ DMP 100,000 List 27,900

5. Điện Quang DQC 290,000 List 9,400

6. Nhà Từ Liêm NTL 270,000 List 28,900

(09/09/2008, Source: www.ssc.gov.vn, www.vse.org.vn)