Currency position. Catalog: net cash position A single cash position is convenient because

Money mantra Aum - namo - dhanadaye - matchmaker This mantra is universal. Repeating it regularly will help you gain

I read the book “The Peter Lynch Method. Strategy and tactics of the individual investor." In his book, Peter Lynch reveals a lot of different information about what you should pay attention to when buying American stocks. For myself, from this book I highlighted the chapter “key investor indicators”, which I will briefly outline in this article. Even though this book is about the American market, I think we can take something from it and apply it to our reality on the Russian market.

Indicators that you should pay attention to when deciding whether to buy a stock. The order in which they appear is not related to their significance:

1. Share of sales.

If the company's interest is due to a particular product, the first step is to find out what this product means for the company, what is its share in the company's sales. If the share of sales of products you are interested in in the total income of the enterprise is not large (less than 10%), then you should not choose this company to buy shares only because of the product. You need to ask if there is another manufacturer of this product or forget about it.

2. P/E ratio

Serious earnings analysis involves the ratio of a stock's price to its earnings, known as the P/E ratio or multiple. This coefficient numerically characterizes the relationship between the stock price and the company's profit. The P/E ratio helps you understand whether a stock is overvalued or undervalued relative to the company's earnings potential. The P/E ratio can be thought of as the number of years it will take to pay back the initial investment, assuming earnings remain the same.

If you buy shares whose price is twice as high as earnings (P/E=2), then the initial investment will pay off in two years, and if its price is 40 times higher (P/E=40), then after 40 years. Slow-growing companies have the lowest P/Es, high-growth companies have the highest P/Es, and cyclicals have the highest P/Es. Below average P/E is (7-9), average P/E is (10-14), above average P/E (14-20). But buying shares just because a company's P/E is low makes no sense.

A company with fairly priced shares has a P/E equal to its earnings growth rate. For example, Coca-Cola, with an equal P/E of 15, should grow profits by 15% per year. If P/E half as much profit growth rate, this is considered very positive signal if at two more growth rate is very negative.

3. Cash position

You need to read the company's consolidated balance sheet, which shows assets and liabilities. Pay attention to short-term assets in the form of cash and cash equivalents, plus in the form of liquid shares. These two items constitute the cash position.

It is also necessary to refer to the second part of the balance sheet, namely the article “ Long-term loans". A reduction in debt obligations compared to previous years is a sign of prosperity. A cash position that far exceeds debt obligations improves the balance sheet. A lower cash position worsens the balance sheet. The calculations do not take into account short-term debt, given that the value of the company's other assets (inventory, etc.) exceeds short-term debt obligations.

Need to determine net cash position from the company's prepared statement by subtracting long-term debt from the cash position. Often long-term liabilities are higher than the cash position, cash items are reduced, debt increases, and the company has a weak financial position.

Dividing the net cash position by the number of issued shares of the company shows that per 1 share there is N amount of cash, this indicator is important. He says that N is the amount of cash per share, a kind of paper bonus that represents a hidden return of money. In addition, information about the company's own share repurchase is also important, which is a good sign. It is also necessary to take into account information about whether profits are growing and whether dividends are always paid. The purpose of a brief analysis is to find out whether the company's position is weak or strong.

4. Share of borrowed funds

How much does the company owe and how much debt does it have? Debt versus equity. This is the question that a credit officer is interested in when determining your credit risk.

A company's financial strength can be quickly assessed by comparing equity with debt on the right side of the balance sheet. It is necessary to calculate the debt/equity ratio (total share capital of the company).” In a normal balance sheet, equity should account for 75% and debt should account for 25% of the ratio. Short-term liabilities can be ignored when assessing if there are enough cash to cover them. Weak balance if 80% debt, and 20% equity.

Bank loans are the worst type of borrowing and are repayable on demand. Bond loans are the best type of borrowing; they do not provide for payment on demand while the borrower pays interest.

5. Dividends

Those who pay dividends are not inclined to throw away money on diversification. Dividends keep stocks from falling to a certain extent. On the other hand, smaller companies that do not pay dividends and use the money to expand profits often experience faster growth.

prefers a company with an aggressive growth policy over boring companies that pay stable dividends. If you're buying a company's shares for the stability of its dividend payments, ask about the company's ability to pay them during downturns and financial difficulties. The best option for an investor is a company that increases dividends for 20-30 years.

6. Book value

Hidden assets: The book value is lower than the actual value as often as it is higher. Companies that own natural resources (land, timber, oil, precious metals) or brands like Coca-Cola may only show a fraction of their true value on their balance sheet.

7. Cash flow

Cash flow is the amount of money a company receives as a result of its activities. All companies receive funds, but the costs associated with receiving them are different for everyone. If it requires significant expenses to generate cash, the company will not be able to get very far. You need to take into account free cash flow - this is the money that remains after subtracting capital costs.

Cash flow is used to value a stock. A stock priced at $20 with annual cash flow of $2 per share has a standard ratio of 1/10. This 10% cash flow yield represents the stock's minimum expected return over the long term.

8. Inventories

Peter Lynch looks at whether stocks are increasing. If a company boasts of growth of 10%, but inventories increase by 30%, this is a bad signal. The company should compromise on price and get rid of inventory. Otherwise, she may face problems next year. New products will compete with old ones, and as a result, inventories will increase so much that the company will have to greatly reduce prices, and therefore profits. Rising inventories aren't as bad for auto companies.

9. Pension plans

The absence of pension obligations is a big plus. Even in bankruptcy, the company is obliged to fulfill pension obligations.

10. Growth themes

A business that, despite annual price increases, retains its clientele is an excellent investment opportunity. All other things being equal, a company with a growth rate of 20% and a P/E of 20 is a much better acquisition than a company with a growth rate of 10% and a P/E of 10.

11. Summary

The bottom line is the number at the end of the income statement, in other words profit after tax. Profit before taxes or gross profit is the main indicator by which a company is evaluated. It shows what is left of annual sales revenue after subtracting all costs, including depreciation and interest payments. Comparing the gross profit of companies in different industries is of little use; comparison in the same industry is another matter. The company with the highest gross profit is the lowest cost business, and the business in turn has the highest chance of survival.

Here is a brief summary of the important points of the book that I wrote; they were the first things I noticed when reading it.

Refers to the amount of actual cash that a given corporation, bank or other legal entity has in its possession at a particular point on time. Generally, this includes the actual cash or accounts that are held by the company. It may also include other assets that are easily converted into cash, called liquid assets, such as short-term bonds or certificates of deposit. This does not include assets that have a low degree of liquidity, such as food, real estate, machinery or other items that cannot be quickly and easily converted into cash.

While individuals can technically have a cash position equal to the amount of their liquid investments, the term is most often used in a business context. A company, for example, lists its cash position on its balance sheet and communicates that cash position to investors, creditors, or other interested parties. The bank must have a cash position as well.

Generally, banks are required to have a minimum set amount of cash on hand based on the amount of funds people deposited into the bank. For example, if a brand new bank opened and 100 individuals each deposited $10 US Dollars (USD), then the cash position required by the bank would be based on $1,000 USD in escrow funds. The bank would thus be required to have at least $1,000 USD in cash so that it would have money to pay each of those people if they all came to take out their money at the same time.

For corporations, on the other hand, determining how much cash to have can be tricky. In general, a company does not want to have too little cash on hand. Cash is required to grow the fund's business and make purchases of supplies and services necessary to run the business. Cash can also be a sign of solvency and stability within a company. Cash, however, produces a relatively low investment return compared to other less liquid investments, and having too much cash on hand can be a downside to a company.

Investors can look at the cash positions of various companies when determining whether to invest or not. If a company does not have what is considered an adequate amount of cash, it may appear to be a weak investment. Achieving the proper balance in this way is important for a public company hoping to attract investors.

Trading on the stock exchange in the 21st century is an extremely high-tech process. In order for an investor to carry out a transaction, various trading terminals are developed, brokerage systems are created that can cope with heavy loads, APIs are implemented for them, high-speed communication channels are laid, new technologies are introduced, etc. This is not surprising - after all, the difference between success and failure, profit or loss in the stock market is often only a fraction of a second. Therefore, everything should work like clockwork and very quickly.

We have already talked about direct connection technologies, which are used to send trading orders directly to the exchange, bypassing the broker's systems. However, direct access costs a lot of money and is not affordable for all traders, who nevertheless want to make transactions with maximum speed. In this topic, we will talk about how we carried out a complete upgrade of our trading system, which allowed us to create an infrastructure product that meets world standards of stock market technologies.

Welcome to the matrix

Both money and time have always been invested in this. As a result, at the beginning of the 2000s, its own trading system, it-trade, was created, which included modules for processing trade orders, middle and back offices, as well as a digital signature system to ensure security. In addition, we have created a line of our own trading terminals. One of them, SmartTrade, has become very popular on the Russian market and, in principle, still remains a reliable and convenient means of placing trading orders on the market and analyzing the market itself. Clients could also carry out trading operations using the web interface.

The system has been operating for more than 13 years and the entire set of software products is objectively outdated. It became increasingly difficult to maintain them and develop functionality (one SmartTrade terminal has more than 1 million lines of code), in addition, the architecture itself also ceased to meet modern requirements - we had two trading desks with servers, and in order to develop the company’s business, their the number had to be increased, which would lead to problems with controllability and synchronization.

As a result, all efforts were spent on maintaining and normal functioning of the shopping complex, and there was no talk of developing new products. Requirements for work speed and quality were constantly growing, and meeting them within the framework of the old architecture and paradigm was becoming increasingly difficult. In addition, the “old” trading system had one weak link - its core, the risk management system (RMS), which fundamentally could not be parallelized and duplicated. Accordingly, its failure could stop trade.

All this confronted us with the need to create a new trading system that would meet the best world standards. Due to its matrix structure, and also due to the fact that the apparatus of matrix theory was used in calculating risks, the new system was called MatriX, that is, “Matrix”.

Architecture

The hardware of the complex uses PowerEdge blade servers and PowerVault storage systems from Dell.

Technology and hardware

As a result, the hardware part of the new system was provided by Dell, and the software (and some hardware) was supplied to us by IBM.

Dell PowerEdge Servers

Under each of these balancer servers there are several more servers that solve local problems. Client connections are distributed among them so that each server receives the same load.

Our servers are connected to each other and to the exchange trading system using a special high-speed bus built on IBM Data Power X75 servers and MQ Low Latency Messaging software.

Interesting fact: The MatriX project is the first case of using these servers in Russia. By the way, there were even some problems associated with this - the United States recognizes these technologies as having a dual purpose. That is, there is a possibility that someone will use them for military purposes. Due to the delays associated with all this, the delivery dates for equipment were delayed by as much as six months - and we were lucky that the famous Jackson-Vanik amendment was canceled, otherwise it is unknown how everything would have turned out in the end.

Behind this bus there are already exchange gateway servers. The bus decides on its own which of them to send a specific request through, or which of them to take data from. In principle, this is enough for the normal functioning of the entire system, but we also added a risk management server to it, which, unlike the previous system, is now not a central link, and any problems with it do not cause the entire system to stop.

Another innovation is the so-called FIX servers, which allow you to connect applications written under the FIX protocol to the MatriX vehicle. We will talk about this solution in more detail in a separate topic.

The final system architecture looks like this:

What did it give?

Other advantages of the new trading system include:

• Increased productivity (up to 2000 orders per second in one thread, more than 10 million orders per trading day).
• The already mentioned ability to access external systems via OMS-FIX 4.4 Gates.
• Single cash position (SCP) and own risk accounting for client portfolios.

Single cash position

When working with the previous version of the it-trade/SmartTrade trading system, the client was provided with a separate personal account for each trading platform. For example, the Moscow Exchange Stock Market is an MS account; Moscow Exchange derivatives market - RF account; Foreign exchange market of the Moscow Exchange - FX account (non-deliverable) or CD account (deliverable) and others. With such a division, securities and funds located on one trading platform cannot serve as collateral for transactions on another.

When using a single cash position, the client is provided with a single account with an MO identifier, which includes several trading platforms at once:

• Stock market of the Moscow Exchange (all instruments traded in T+2 mode).
• Derivatives market of the Moscow Exchange (futures, options).
• Foreign exchange market of the Moscow Exchange (non-deliverable mode).
• London Stock Exchange section IOB (ADRs of Russian issuers).

It is easiest to understand the benefits of a single cash position using a simple example. If in the old it-trade trading system, to purchase 100 shares of Lukoil (LKOH), 43,800 rubles would be required as collateral (the cost of a share as of 10/22/2013 was 2,030 rubles, the amount of collateral for the T+2 market was 438 rubles, i.e. . 100 x 438 - 43500), and to sell 10 futures contracts for shares of the same issuer LKOH-12.13 (on the same date, 1 futures cost 20,650 rubles, collateral - 2,132 rubles) would require 10 x 2132 = 21320 rubles In total, to complete two not very large transactions, the amount of funds required to secure the transaction would exceed 65,000 rubles.

In the new trading system it would be equal to 26,746 rubles. The difference is quite significant - it turns out that you can manage your own funds more flexibly; they can work, rather than being idle in a state blocked as collateral.

Need for Speed

At the same time, it is obvious that the speed advantages of the Matrix trading system most of all attract high-speed traders (HFT traders) who trade on the stock exchange using mechanical trading systems. It is this type of traders that “makes” most of the turnover of all popular exchange platforms. Such traders play a big role in the stock market ecosystem (read our special topic for more information about the trends and prospects of algorithmic trading). But no algorithmic trading strategy, even the most successful in theory, can work properly in practice if proper speed is not ensured.

Therefore, both the exchanges themselves and brokers are constantly developing their own infrastructure - in 2010 alone, exchanges, telecommunications companies, algorithmic hedge funds, corporate and private algorithmic traders spent more than $2 billion on technical re-equipment in order to increase the speed of trading around the world.

Domestic exchange platforms (in particular, the Moscow Exchange) also follow this trend. If in 2010 the execution time of orders in the trading systems ASTS (MICEX stock market) and FORTS (RTS derivatives market) was 5-15 and 15-50 ms, respectively, then already in 2013 the figures were 0.700 ms and 3-5 ms. Now the execution time of orders in the core of the exchange system does not exceed 50 microseconds.

When looking at all these efforts, it is clear that brokers simply do not have the right to lag behind, so further upgrade and improvement of this link in the chain that the application passes on the way from the user to the exchange is simply inevitable.

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