Deciding Which Shares To Buy
Should I research a company before I invest in its shares?
You should always research a company that you're going to consider buying. Either by contacting a broker and asking for his research or by contacting the companies that you're thinking of buying. Many leading companies have their own websites, and if you go into them you'll find them very informative. They'll give you past performance of the company, data on its products, and even, with some of the companies, forecasts for the future.
Where do I find information about stocks?
Information or research regarding individual stocks and shares can be found by you broker, you'll find that most brokers have a very large research department. Secondly you can probably contact the individual companies internet sites, they will show you past performances of the company, current products and even in some cases forecast the future. There are also a number of internet sites that over the years that have sprung up that offer a fee paying service for similar research.
What information do I need to analyse a quoted company?
When analysing a quoted company, any bit of information you can acquire is essential. And what I mean by that is that you should be looking at: markets, profitability, sector, current market trends, forecast for the future, marketability of the shares, and marketability of the actual company itself. And another factor to consider is worldwide events and even the management of the individual company.
What is earnings per share?
The earnings per share are calculated by taking the gross profit of the company and dividing it by the number of shares in issue. The net earnings per share are calculated in a similar way, but after normal expenses and tax.
What is the price earnings ratio?
The price earnings ratio, or PE, is an indication of how a share price is trading, and is calculated by taking the earnings per share and dividing it into the current share price. For example, if a share had a share price of 100p and earnings per share of 10p, then the PE ratio would be 10.
How do I use the price earnings ratio?
You use a price earnings ratio to compare one particular share in a sector with other shares. Its a very useful indicator. But it should be born in mind that it is an indicator based on last years profits, which can be as much as eleven or twelve months out of date. When comparing the PE Ratios in a sector, obviously the lower the PE Ratio the more attractive that share is in that sector.
What are trade charts?
There are number of forms of charts which can be accessed in many areas such as brokers, internet, trading sites, banks and boarding societies. The trade shown in the charts can be a history of the share price, can be trading volume of the share price or the activity of the share price over given period. They are very good indicator in buying and selling shares.
Where can I find trade charts?
Trade charts can be found on most Internet sites, but you can pay a fee to your stockbroker who will supply you with charts for various companies. Also, I believe a number of banks and building societies offer the same service. When in doubt, speak to your professional advisor.
What is a trend?
A trend when trading in a market is an indication of which way a market is going. So you would say a rising trend which indicates the market is going up or falling trend indicates a market is falling.
Should I follow market trends?
As with many things, market trends are just another indicator for you to use and a very useful tool, indeed. Many professionals use trend lines on a daily basis to make profits and in many cases losses.