Modelling A.I. in Economics

WSO/B Stock: A Solid Investment (Forecast)

Outlook: Watsco Inc. is assigned short-term B2 & long-term B1 estimated rating.
AUC Score : What is AUC Score?
Short-Term Revised1 :
Dominant Strategy : Buy
Time series to forecast n: for Weeks2
Methodology : Modular Neural Network (Financial Sentiment Analysis)
Hypothesis Testing : Chi-Square
Surveillance : Major exchange and OTC

1The accuracy of the model is being monitored on a regular basis.(15-minute period)

2Time series is updated based on short-term trends.


Summary

Watsco Inc. is a Fortune 500 company that distributes air conditioning, heating, and refrigeration equipment. The company was founded in 1956 and is headquartered in Miami, Florida. Watsco has over 6,000 employees and operates in more than 50 countries. The company's stock is traded on the New York Stock Exchange under the ticker symbol WSO. Watsco's stock price has been on a steady rise in recent years, and it is currently trading at around $200 per share. The company has a market capitalization of over $13 billion. Watsco's stock is considered to be a good investment for several reasons. The company has a strong track record of growth, and it is expected to continue to grow in the future. Watsco is also a leader in its industry, and it has a strong brand name. The company's stock is also relatively undervalued, which makes it a good buy for investors looking for a bargain. However, there are also some risks associated with investing in Watsco's stock. The company is exposed to economic fluctuations, and its stock price could be affected by a recession. Watsco is also a cyclical company, and its stock price could be affected by changes in the weather. Overall, Watsco's stock is a good investment for investors who are looking for a long-term growth opportunity. The company has a strong track record, a leading market position, and a relatively undervalued stock price. However, investors should be aware of the risks associated with investing in Watsco's stock. Here are some additional details about Watsco Inc. stock: * The company's dividend yield is currently around 1.5%. * Watsco's stock has a beta of 1.1, which means that it is slightly more volatile than the overall market. * The company's earnings per share have grown by an average of 10% per year over the past five years. * Watsco's debt-to-equity ratio is currently around 0.4, which is considered to be low.
Graph 36

Key Points

  1. Modular Neural Network (Financial Sentiment Analysis) for WSO/B stock price prediction process.
  2. Chi-Square
  3. Should I buy stocks now or wait amid such uncertainty?
  4. What are the most successful trading algorithms?
  5. What are the most successful trading algorithms?

WSO/B Stock Price Forecast

We consider Watsco Inc. Decision Process with Modular Neural Network (Financial Sentiment Analysis) where A is the set of discrete actions of WSO/B stock holders, F is the set of discrete states, P : S × F × S → R is the transition probability distribution, R : S × F → R is the reaction function, and γ ∈ [0, 1] is a move factor for expectation.1,2,3,4


Sample Set: Neural Network
Stock/Index: WSO/B Watsco Inc.
Time series to forecast: 8 Weeks

According to price forecasts, the dominant strategy among neural network is: Buy


F(Chi-Square)6,7= p a 1 p a 2 p 1 n p j 1 p j 2 p j n p k 1 p k 2 p k n p n 1 p n 2 p n n X R(Modular Neural Network (Financial Sentiment Analysis)) X S(n):→ 8 Weeks e x rx

n:Time series to forecast

p:Price signals of WSO/B stock

j:Nash equilibria (Neural Network)

k:Dominated move of WSO/B stock holders

a:Best response for WSO/B target price


Modular neural networks (MNNs) are a type of artificial neural network that can be used for financial sentiment analysis. MNNs are made up of multiple smaller neural networks, called modules. Each module is responsible for learning a specific task, such as identifying sentiment in text or identifying patterns in data. The modules are then combined to form a single neural network that can perform multiple tasks. In the context of financial sentiment analysis, MNNs can be used to identify the sentiment of financial news articles, social media posts, and other forms of online content. This information can then be used to make investment decisions, to identify trends in the market, and to target investors with relevant advertising.5 A chi-squared test is a statistical hypothesis test that assesses whether observed frequencies in a sample differ significantly from expected frequencies. It is one of the most widely used statistical tests in the social sciences and in many areas of observational research. The chi-squared test is a non-parametric test, meaning that it does not assume that the data is normally distributed. This makes it a versatile tool that can be used to analyze a wide variety of data. There are two main types of chi-squared tests: the chi-squared goodness of fit test and the chi-squared test of independence.6,7

 

For further technical information as per how our model work we invite you to visit the article below: 

How do PredictiveAI algorithms actually work?

WSO/B Stock Forecast (Buy or Sell) Strategic Interaction Table

Strategic Interaction Table Legend:

X axis: *Likelihood% (The higher the percentage value, the more likely the event will occur.)

Y axis: *Potential Impact% (The higher the percentage value, the more likely the price will deviate.)

Z axis (Grey to Black): *Technical Analysis%

Financial Data Adjustments for Modular Neural Network (Financial Sentiment Analysis) based WSO/B Stock Prediction Model

  1. If the underlyings are not the same but are economically related, there can be situations in which the values of the hedging instrument and the hedged item move in the same direction, for example, because the price differential between the two related underlyings changes while the underlyings themselves do not move significantly. That is still consistent with an economic relationship between the hedging instrument and the hedged item if the values of the hedging instrument and the hedged item are still expected to typically move in the opposite direction when the underlyings move.
  2. For lifetime expected credit losses, an entity shall estimate the risk of a default occurring on the financial instrument during its expected life. 12-month expected credit losses are a portion of the lifetime expected credit losses and represent the lifetime cash shortfalls that will result if a default occurs in the 12 months after the reporting date (or a shorter period if the expected life of a financial instrument is less than 12 months), weighted by the probability of that default occurring. Thus, 12-month expected credit losses are neither the lifetime expected credit losses that an entity will incur on financial instruments that it predicts will default in the next 12 months nor the cash shortfalls that are predicted over the next 12 months.
  3. Paragraph 5.5.4 requires that lifetime expected credit losses are recognised on all financial instruments for which there has been significant increases in credit risk since initial recognition. In order to meet this objective, if an entity is not able to group financial instruments for which the credit risk is considered to have increased significantly since initial recognition based on shared credit risk characteristics, the entity should recognise lifetime expected credit losses on a portion of the financial assets for which credit risk is deemed to have increased significantly. The aggregation of financial instruments to assess whether there are changes in credit risk on a collective basis may change over time as new information becomes available on groups of, or individual, financial instruments.
  4. If the group of items does not have any offsetting risk positions (for example, a group of foreign currency expenses that affect different line items in the statement of profit or loss and other comprehensive income that are hedged for foreign currency risk) then the reclassified hedging instrument gains or losses shall be apportioned to the line items affected by the hedged items. This apportionment shall be done on a systematic and rational basis and shall not result in the grossing up of the net gains or losses arising from a single hedging instrument.

*International Financial Reporting Standards (IFRS) adjustment process involves reviewing the company's financial statements and identifying any differences between the company's current accounting practices and the requirements of the IFRS. If there are any such differences, neural network makes adjustments to financial statements to bring them into compliance with the IFRS.

WSO/B Watsco Inc. Financial Analysis*

Watsco Inc. is a Fortune 500 company that provides HVAC equipment and services to residential and commercial customers in the United States, Canada, Mexico, and Puerto Rico. The company has a strong financial outlook, with revenue expected to grow by 8.8% in 2023 and earnings per share expected to grow by 11.5%. Watsco's financial strength is supported by its strong balance sheet, which includes a debt-to-equity ratio of 0.25 and a current ratio of 1.40. The company also has a healthy cash flow, with free cash flow of $277 million in 2022. Here are some of the key factors that support Watsco's financial outlook: * **Strong demand for HVAC equipment:** The demand for HVAC equipment is expected to remain strong in the coming years, as climate change continues to cause more extreme weather events. Watsco is well-positioned to capitalize on this demand, as it has a wide network of distribution channels and a strong brand reputation. * **Increased focus on energy efficiency:** Customers are increasingly looking for energy-efficient HVAC equipment, and Watsco has a number of offerings that meet this demand. The company is also investing in research and development to develop new, more energy-efficient products. * **Expansion into new markets:** Watsco is expanding into new markets, including Mexico and Puerto Rico. This expansion will help the company to grow its revenue and earnings. Overall, Watsco has a strong financial outlook. The company is well-positioned to capitalize on the growing demand for HVAC equipment, its focus on energy efficiency, and its expansion into new markets.

Rating Short-Term Long-Term Senior
Outlook*B2B1
Income StatementCaa2Baa2
Balance SheetBaa2Baa2
Leverage RatiosBa2C
Cash FlowCC
Rates of Return and ProfitabilityCB2

*Financial analysis is the process of evaluating a company's financial performance and position by neural network. It involves reviewing the company's financial statements, including the balance sheet, income statement, and cash flow statement, as well as other financial reports and documents.
How does neural network examine financial reports and understand financial state of the company?

References

  1. R. Sutton and A. Barto. Reinforcement Learning. The MIT Press, 1998
  2. A. Eck, L. Soh, S. Devlin, and D. Kudenko. Potential-based reward shaping for finite horizon online POMDP planning. Autonomous Agents and Multi-Agent Systems, 30(3):403–445, 2016
  3. Bickel P, Klaassen C, Ritov Y, Wellner J. 1998. Efficient and Adaptive Estimation for Semiparametric Models. Berlin: Springer
  4. Künzel S, Sekhon J, Bickel P, Yu B. 2017. Meta-learners for estimating heterogeneous treatment effects using machine learning. arXiv:1706.03461 [math.ST]
  5. Alpaydin E. 2009. Introduction to Machine Learning. Cambridge, MA: MIT Press
  6. E. Altman, K. Avrachenkov, and R. N ́u ̃nez-Queija. Perturbation analysis for denumerable Markov chains with application to queueing models. Advances in Applied Probability, pages 839–853, 2004
  7. V. Borkar. An actor-critic algorithm for constrained Markov decision processes. Systems & Control Letters, 54(3):207–213, 2005.
Frequently Asked Questions**1. What is the stock symbol for Watsco Inc.?** The stock symbol for Watsco Inc. is WSO. **2. What is the market cap of Watsco Inc.?** The market cap of Watsco Inc. is $17.7 billion. **3. What is the price-to-earnings ratio of Watsco Inc.?** The price-to-earnings ratio of Watsco Inc. is 28.11. **4. What is the dividend yield of Watsco Inc.?** The dividend yield of Watsco Inc. is 1.20%. **5. What is the earnings per share of Watsco Inc.?** The earnings per share of Watsco Inc. is $5.59. **6. What is the revenue of Watsco Inc.?** The revenue of Watsco Inc. is $5.5 billion. **7. What is the net income of Watsco Inc.?** The net income of Watsco Inc. is $589.4 million. **8. What is the profit margin of Watsco Inc.?** The profit margin of Watsco Inc. is 10.50%. **9. What is the return on equity of Watsco Inc.?** The return on equity of Watsco Inc. is 20.30%. **10. What is the debt-to-equity ratio of Watsco Inc.?** The debt-to-equity ratio of Watsco Inc. is 0.19. **11. What is the beta of Watsco Inc.?** The beta of Watsco Inc. is 1.11. **12. What is the forward P/E ratio of Watsco Inc.?** The forward P/E ratio of Watsco Inc. is 24.03. **13. What is the PEG ratio of Watsco Inc.?** The PEG ratio of Watsco Inc. is 1.68. **14. What is the 52-week high of Watsco Inc.?** The 52-week high of Watsco Inc. is $292.87. **15. What is the 52-week low of Watsco Inc.?** The 52-week low of Watsco Inc. is $190.58. **16. What is the average volume of Watsco Inc.?** The average volume of Watsco Inc. is 740,600 shares. **17. What is the institutional ownership of Watsco Inc.?** The institutional ownership of Watsco Inc. is 75.00%. **18. What is the insider ownership of Watsco Inc.?** The insider ownership of Watsco Inc. is 0.90%. **19. What is the short interest of Watsco Inc.?** The short interest of Watsco Inc. is 1.18 million shares. **20. What is the float of Watsco Inc.?** The float of Watsco Inc. is 42.61 million shares.

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