There are two main methods you can use to pick stocks for investing or trading.
I'm talking about terms called “fundamental” and “technical” analysis.
You need to understand the differences between these methods - if you are to use them successfully as an investor…
Use them correctly - and you stand to make big profits. Use them incorrectly and you could lose out big time.
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One of the easiest, and most popular ways to check if a share is a buy or sell in the stock market is to take the price of the stock or a pool of stocks, and then divide that by earnings.
This is the price/earnings (PE) ratio.
When the PE ratio is above some longer-term average, the stock is considered expensive - and possibly a sell.
When it's below average, it's considered cheap - an... ››› more
Dischem is due to list on the JSE on 18 November 2016.
The company shared that it'll probably list at a price of R16.25 - R20.25. If demand for its shares is too high, it could increase the listing price.
Now, I must say, Dischem is a great business. It's doubled its number of stores since 2010, and tripled them since 2008.
It's clear that Dischem can take major market share from other co... ››› more
Most types of risks for investors are almost impossible control.
Take politics for example - You have no control over what the Government says or does that could affect the markets.
But there's one type of risk an investor can control - The risk of paying too much for a stock.
Let me explain…
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When you're looking for a solid share to invest in, the company's Price Earnings Ratio (PE) is a great way to find a good investment.
You see, the PE ratio shows you the relationship between the price of a share and the profits the company is making.
But more importantly, the PE ratio reveals to you whether a share is cheap or expensive.
It could also tell you where the share's going (an... ››› more
The cyclically adjusted price earnings (CAPE) ratio is a way to measure if the stock market is looking cheap or expensive compared to its long-term trend.
The idea behind the ratio is you can use it to tell you if it's a good time to be in the stock market.
So what exactly is the CAPE ratio? And is it a good idea to use it?
Let's take a closer look…
What is the CAPE ratio?
To c... ››› more
When it comes to financial ratios, the PE (price earnings) ratio is one of the most widely used. The PE ratio gives you a way of valuing a stock in a simple way.
Companies that are growing at a slow rate or have erratic profits should trade at a low PE ratio. Whilst companies that are growing quickly should trade at a higher PE ratio.
So what about other commonly used methods such as the div... ››› more
To find the best shares to buy, you need to do your research. You want to give your cash the best chance of future growth investing in shares.
So how can you uncover a good investment?
One common way of valuing a company is using the price earnings (PE) ratio. But the PE ratio has its flaws.
Read on to find out the downfalls of the PE ratio and what you should use instead…
What ... ››› more
If you're reading through financial news reports or company annual statements, you're likely to come across a number of different financial ratios.
Many of these ratios can be very useful in helping you make a decision about whether or not to invest in a company.
So what are the main financial ratios you need to know about? And what do they mean?
Read on to find out…
Four financia... ››› more
If you want to start investing in penny stocks, you need to conduct thorough research first. This will help you uncover stocks with the best chance of future success.
One of the most commonly quoted financial ratios can be a good starting point. This is the price earnings (PE) ratio.
So how can you use it?
Read on to find out…
What is the PE ratio?
The PE ratio compare a compan... ››› more
The price earnings (PE) ratio is one of the most quoted financial ratios.
But what is the PE ratio? And what does it tell you?
Read on to find out…
What is the PE ratio?
The PE ratio is the share price of a company divided by its current earnings per share (EPS)…
PE ratio = share price / earnings per share
In other words, it shows you the value of a company as a multipl... ››› more
Making money from investing in shares comes down to the price you pay and the price you sell.
To boost your chances of making a profit, you want to buy into shares when they're showing good value.
So how can you do this?
The price earnings (PE) ratio is one of the most widely used financial ratios for the job, but there's another one you can use to get a bigger picture…
What is t... ››› more
Investing in penny stocks can prove to be a profitable endeavour. You can make money by investing in the right small company.
When you invest in a penny stock that's soaring, it can be hard to know when to bail out. You don't want to see your profits disappearing as the share price heads south.
That's what it's important to keep an eye on its PE (price earnings) ratio.
Let's take a closer... ››› more
On the face of it, investing in shares should be easy. You just need to find undervalued shares and wait for them to rise in price.
Numerous studies over the years have shown that following an investment strategy of buying shares for less than they're worth is beneficial. It's just a case of waiting and being patient.
Value investing should beat the market's performance over the long-term.
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“Francois, I'm no investment expert, but I immerse myself in economic and household data everyday. And I just can't see what it is that's pushing growth for companies any further. Where is the stock market going to from here?”
That's the gist of a discussion I had with a Coca-Cola executive at a wine tasting last night. He's in charge of South Africa's strategy and planning - And he's really... ››› more
When you invest, you want the price of the shares to rise. Whatever your investment window is, you hope the price rises and you'll make a profit.
But there are underlying factors at work with share prices. It's not all down to the financial performance of a company. There are factors outside of its control that can have a bearing on the price.
To understand these, you need to get to grips wi... ››› more
Fundamental analysis involves delving through all the available information you can get your hands on about a specific company.
One of the key aspects of fundamental analysis is using financial ratios to unearth what's really going on in a company's financials. And to work out whether it's worthy of your investment.
So what financial ratios should you use?
Read on to find out the key fin... ››› more
The cyclically adjusted price earnings (CAPE) ratio shows you smoothed out earnings over a ten year period. You can use CAPE to work out whether investors are paying a lot or a little for earnings at the moment. Research done found that, on a broad basis, the CAPE ratio was right. Let's take a closer look at what the research showed…
The results from using the CAPE ratio are impressive
Resea... ››› more
Buying into a fantastic company has the potential to turn into a terrible investment if you buy at the wrong price. It's crucial you don't pay too much for any share. Read on to find out why…
The importance of not overpaying for shares
Let’s illustrate this with the help of an example…
Company ABC is a solid company. It comes with a great brand and great profit margins. The company’... ››› more
If you're hunting for penny stocks to invest in, you'll probably start off with a long list of potential buys. As you research the companies, this list will become shorter. This research could include looking at company fundamentals, such as financial figures. Then it's time to have a look at price earnings (PE) ratios. So what are you looking for with the PE ratio? And how can you apply it to inv... ››› more
Disclaimer Note that FSP Invest, a division of Fleet Street Publications (Pty) Ltd, is a research house and not a registered broker, financial advisor or financial service provider. Our editors and customer services teams also do not give personal investment advice. The advice in this website is general advice only and may not be appropriate to your particular investment objectives, financial situation or particular needs, so before investing or if in any doubt about your personal situation, you should seek professional advice from a stockbroker or independent financial adviser authorised by the Financial Services Board.
We research our recommendations and articles thoroughly, but disclaim all liability for any inaccuracies or omissions found in this publication.
Remember: Never invest more than you can afford to spare and that the value of any investment, and the income derived from it, can go down as well as up. The past is not necessarily a guide to future performance.
Editors or contributors may have an interest in investments commented on in this newsletter. However they have signed restraints to prevent the abuse of their position as contributors to this publication.