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Investment strategy: Find these two signals and you could be onto a winner

by , 01 April 2015

Trying to find the best investment opportunities isn't easy.

You want to uncover solid companies that will perform over the years, rewarding you along the way with a rising share price and the prospect of dividends.

So what sort of things can indicate a company is going to be a top performer?

Read on to discover two signals that you should watch for…

A winning investment strategy

James O’Shaughnessy wrote What Works on Wall Street. In the book, he tested hundreds of different investment strategies.

One investment strategy that stood out was focusing on companies that did the following:

  • They bought their own shares back; and
  • Their share price was in an uptrend.

O’Shaughnessy showed that from 1927 to 2009, this strategy turned $10,000 into an astonishing $1.84 billion.

Why are share buybacks a good thing?

Companies may decide to return money to their shareholders through paying them dividends. But another way they can do it is through share buybacks, Dr Steve Sjuggerud in Daily Wealth explains.

When a company embarks on a share buyback, it reduces the number of shares in issue. And this boosts the percentage of a company you own.

For example, you own shares in Company ABC. If you own 1,000 shares and there are 100,000 shares in issue, you own 1% (1,000/100,000) of the total shares. If the company decides to buy back 50,000 of these shares, your share rises to 2% (1,000/50,000) of the company.

Buybacks are a way for companies to give wealth back to their shareholders. And O’Shaughnessy’s research showed that if you bought a basket of companies doing this that were also in an uptrend, their performance beat the market.

So there you have it. If you find companies displaying these two signals, you could be onto a winner.

*********** Hot off the press ************

Find out what this 27 year old trader did to turn R30,000 into R150,000 in 3 years!

He didn’t spend hours in front of a computer. In fact, he only traded 30 minutes a day.

Find out how he did it!


Investment strategy: Find these two signals and you could be onto a winner
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