Thursday, 4 February 2010
Wednesday, 3 February 2010
What would Warren Buffett do? You have to be in it (the market) to win it
What would Warren Buffett do?
Barbara Drury
February 3, 2010
Barbara Drury gives some expert advice on selecting safe shares for the long haul with Warren Buffett’s help.
One lesson from the financial crisis of 2008 is that
If you've been hovering on the sidelines wanting to start a share portfolio but are not sure how to select safe stocks for the long haul, then one source of inspiration is the world's most successful long-term investor, Warren Buffett. Faced with a volatile and uncertain market outlook, what would Warren do?
To answer that question, Money did the next best thing and spoke to five experts whose job it is to select market-beating long-term share investments.
The chief executive at Lincoln, Elio D'Amato, says the thing that sets Buffett apart is that
Value investor Roger Montgomery aims to replicate Buffett's methods of stock valuation and selection.
"The first thing you should do is dismiss conventional notions of blue-chip stocks," Montgomery says.
Montgomery says the term "blue chip" is commonly used to describe large companies, such as Foster's, that Buffett wouldn't go near because they don't produce high returns on equity.
Return on equity measures how much profit a company generates with the funds shareholders have invested. In other words, big is not necessarily best.
COMPETITIVE ADVANTAGE
Montgomery says investors should do what Buffett does and buy companies
The developer of the Conscious Investor stock-picking software, which is based on Buffett's rules, John Price, agrees.
"For medium- to long-term value, we need to look for companies that have a clear competitive advantage, stable growth in sales and earnings and not too much debt," Price says. "Then let management grow the business for you. Over time, the sharemarket will recognise the growing value of the business [and the share price will rise].
"Successful companies need something about them, such as a brand name or patents and licences, that will hold them in good stead. The strength of this economic moat gives such stocks more of a flavour of bonds where returns are guaranteed."
After crunching the numbers, Price selects Billabong, with its large collection of lifestyle brand names; bionic ear developer Cochlear, with its range of valuable patents and licences; ARB, for the proven reliability of its four-wheel-drive accessories and other products; Fleetwood, which supplies homes for retirees and the resources industry; and Wridgways, which has a trusted name in removals locally and overseas.
Price says all five stocks are reasonably priced with businesses poised to grow. While paying a fair price is important, even for the best-run companies, he argues that the price you pay for shares becomes less important if you take a long-term view.
This is because prices can be volatile in the short-term, as the market overreacts to positive and negative news, but over the long term prices tend to reflect the companies' intrinsic value.
"If earnings double over the next five years then the share price will double too," Price says.
But that doesn't mean you should pay any price for a great company.
GROWTH PROSPECTS
"You need to pay below intrinsic value to give yourself a margin of safety and only buy businesses whose intrinsic value is rising over time," Montgomery says. "That doesn't happen often but be quick to buy when it does."
That said, three of his picks - JB Hi-Fi, blood plasma group CSL and Cochlear - are no longer trading at a discount but he expects their intrinsic value to increase solidly in the next few years.
Shares in salary-packaging specialist McMillan Shakespeare have been marked down in recent weeks due to speculation about the impact on the group of the Henry Tax Review. This could present a buying opportunity for long-term investors. With its market domination, strong cash flow, high return on equity and no debt to speak of, Montgomery says its market value will rise in the next few years.
Montgomery says the classic example of entrenched competitive advantage is Australia's big four banks. They can and do increase their fees and charges, secure in the knowledge that few customers will walk because changing accounts and direct debits is so much hassle.
Montgomery says Commonwealth Bank stands out thanks to its opportunistic purchase of BankWest. By comparison, some of its competitors raised so much equity during the crisis that they diluted their returns. Commonwealth has a forecast return on equity of about 22 per cent this financial year, compared with 11 per cent to 13 per cent for Westpac, NAB and ANZ.
Montgomery is also a long-time fan of JB Hi-Fi, which has entrenched its position as the cheapest provider of electronics to its insatiable target market of young adults.
"Its gross profit margin is declining because it cuts prices to knock out the competition but its net profit margin keeps going up because it runs the business on the smell of an oily rag," Montgomery says. "It's what's called a profit loop."
JB Hi-Fi's success has also made it a preferred tenant at Westfield shopping centres, reinforcing the virtuous cycle. Montgomery says Woolworths and The Reject Shop follow a similar model and all three have little or no debt and the strong cash flow necessary to pay down debt quickly.
D'Amato also likes "category killers" and plumps for Woolworths, CSL and Coca-Cola Amatil.
Like Woolworths in retail, CSL has firmly established itself as a leader in biopharmaceuticals, a sector with excellent long-term growth prospects. And Coca-Cola dominates the Australian market for beverages by keeping pace with changing consumer preferences. It has added water, juice and food to its carbonated products and is expanding into Asia to ensure future growth.
DIVERSIFICATION
Like Buffett, listed investment company Argo Investments is a good example of patience paying off. But whereas Buffett buys whole companies he likes and holds on to them for the long haul, Argo aims to buy shares in a diverse portfolio of well-managed companies that offer safe, steady long-term growth.
Argo has been investing in Australian listed companies since 1946. Over the past 20 years, it has achieved compound growth of 12.4 per cent a year compared with the 9.7 per cent return from the All Ordinaries Accumulation Index (which measures capital growth plus dividends).
"We aim to buy good stocks and hold them permanently but sometimes there is reason to sell; companies get taken over, for instance, and then you need to buy something else," Argo's managing director, Rob Patterson, says. He says the important thing for investors who want to pick their own stocks (rather than buy shares in a listed investment company or units in a managed fund) is to diversify shareholdings across different market sectors.
"No one knows what the future holds so if you want to pick stocks you need at least 10 to cover your bases," he says.
Lachlan Partners' chief investment officer, Paul Saliba, also aims to deliver a diversified long-term share portfolio for clients not necessarily shooting for the stars but who want good, solid growth with income. But that doesn't necessarily mean set and forget.
Saliba says the group's core portfolio includes defensive stocks such as Woolworths, delivering the goods year after year, and Westpac, which he regards as the most low-risk, well-managed bank. But the core portfolio also includes medium-term tilts towards sectors with the potential to beat the overall market.
For example, BHP-Billiton is riding a wave of strong demand from China and emerging nations, booming commodity prices and the prospect of a further boost in demand as the global economy recovers. BHP is now trading at a price-earning ratio of 19.5 times forecast 2010 earnings, which Saliba regards as fair value considering the high level of growth expected in the years ahead.
Similarly, Saliba thinks Fairfax, publisher of The Sydney Morning Herald and The Age, is well placed to benefit from the improving economy and an increase in job ads.
"Fairfax has underperformed the broader market in recent times but the cyclical nature of the stock makes it a good candidate to hold through the first few years of the economic cycle," he says.
Brambles is another cyclical stock that has been punished by a market concerned about its Chep pallet business in the US.
Saliba says the company has made efforts to address problems with the business and is well placed to profit from the upswing in the global economy as retail sales and the movement of goods increases and drives demand for pallets.
"We recommend good-quality stocks, including some that offer a flavour of the times, that provide opportunity and security at the same time," Saliba says.
COMPANY RESULTS
Long-term investors should not dismiss small companies in their search for safety or they will miss out on the next Google, Microsoft or Berkshire Hathaway, the investment company Buffett founded more than 40 years ago.
Small, well-managed companies with products and services that are in demand have a higher growth profile than larger companies. The trick is to assess the sustainability of the company's earnings with a steely eye and avoid being carried away by hype about blue sky and new paradigms.
"If you pick a quality, diversified portfolio with a spread of companies across different industries and sizes, it boosts your chances of long-term success," D'Amato says.
At the smaller end of the market, he selects IT outsourcing firm ASG Group and Austin Engineering. Austin services the mining and resources industry with operations in Australia, South America and the Middle East.
"For conservative investors, waiting for companies to report before committing your cash is a reasonable strategy," D'Amato says. Not only do companies release their financial results but directors often comment on trading conditions and the outlook for the year ahead.
Patterson says Argo has not bought any stocks this year and declines to offer picks but confirms he is watching the current reporting season for opportunities.
The market tends to punish companies if their results are disappointing. If the selling is overdone and the price of otherwise solid companies is marked down too far, then this presents a potential bargain.
Patterson singles out Worley Parsons, a provider of engineering services to the resources sector. Worley downgraded its earnings guidance on January 13 and its price dropped from just above $30 to below $24. "It was harshly treated by the market but it's on our list to consider," Patterson says.
STOCKS FOR STAYERS
Roger Montgomery
Value Investor
JB Hi-Fi
CSL
Cochlear
Commonwealth Bank
McMillan Shakespeare
John Price
Conscious Investor
Billabong
Cochlear
ARB
Fleetwood
Wridgways
Elio D’Amato
Lincoln
Woolworths
CSL
Coca-Cola Amatil
ASG Group
Austen Engineering
Paul Saliba
Lachlan Partners
BHP-Billiton
Westpac
Woolworths
Fairfax
Brambles
This story was found at: http://www.smh.com.au/articles/2010/02/02/1264876022180.html
Barbara Drury
February 3, 2010
One lesson from the financial crisis of 2008 is that
- there's no such thing as a guaranteed return from shares.
- it's that you have to be in it to win it.
If you've been hovering on the sidelines wanting to start a share portfolio but are not sure how to select safe stocks for the long haul, then one source of inspiration is the world's most successful long-term investor, Warren Buffett. Faced with a volatile and uncertain market outlook, what would Warren do?
To answer that question, Money did the next best thing and spoke to five experts whose job it is to select market-beating long-term share investments.
The chief executive at Lincoln, Elio D'Amato, says the thing that sets Buffett apart is that
- he looks for great businesses that will be around tomorrow,
- with sources of revenue that will provide profits for the long term and
- management that can deliver.
Value investor Roger Montgomery aims to replicate Buffett's methods of stock valuation and selection.
"The first thing you should do is dismiss conventional notions of blue-chip stocks," Montgomery says.
Montgomery says the term "blue chip" is commonly used to describe large companies, such as Foster's, that Buffett wouldn't go near because they don't produce high returns on equity.
Return on equity measures how much profit a company generates with the funds shareholders have invested. In other words, big is not necessarily best.
COMPETITIVE ADVANTAGE
Montgomery says investors should do what Buffett does and buy companies
- with little or no debt and
- high rates of return on equity
- driven by a sustainable competitive advantage that
- allows them to charge more without affecting sales adversely.
The developer of the Conscious Investor stock-picking software, which is based on Buffett's rules, John Price, agrees.
"For medium- to long-term value, we need to look for companies that have a clear competitive advantage, stable growth in sales and earnings and not too much debt," Price says. "Then let management grow the business for you. Over time, the sharemarket will recognise the growing value of the business [and the share price will rise].
"Successful companies need something about them, such as a brand name or patents and licences, that will hold them in good stead. The strength of this economic moat gives such stocks more of a flavour of bonds where returns are guaranteed."
After crunching the numbers, Price selects Billabong, with its large collection of lifestyle brand names; bionic ear developer Cochlear, with its range of valuable patents and licences; ARB, for the proven reliability of its four-wheel-drive accessories and other products; Fleetwood, which supplies homes for retirees and the resources industry; and Wridgways, which has a trusted name in removals locally and overseas.
Price says all five stocks are reasonably priced with businesses poised to grow. While paying a fair price is important, even for the best-run companies, he argues that the price you pay for shares becomes less important if you take a long-term view.
This is because prices can be volatile in the short-term, as the market overreacts to positive and negative news, but over the long term prices tend to reflect the companies' intrinsic value.
"If earnings double over the next five years then the share price will double too," Price says.
But that doesn't mean you should pay any price for a great company.
GROWTH PROSPECTS
"You need to pay below intrinsic value to give yourself a margin of safety and only buy businesses whose intrinsic value is rising over time," Montgomery says. "That doesn't happen often but be quick to buy when it does."
That said, three of his picks - JB Hi-Fi, blood plasma group CSL and Cochlear - are no longer trading at a discount but he expects their intrinsic value to increase solidly in the next few years.
Shares in salary-packaging specialist McMillan Shakespeare have been marked down in recent weeks due to speculation about the impact on the group of the Henry Tax Review. This could present a buying opportunity for long-term investors. With its market domination, strong cash flow, high return on equity and no debt to speak of, Montgomery says its market value will rise in the next few years.
Montgomery says the classic example of entrenched competitive advantage is Australia's big four banks. They can and do increase their fees and charges, secure in the knowledge that few customers will walk because changing accounts and direct debits is so much hassle.
Montgomery says Commonwealth Bank stands out thanks to its opportunistic purchase of BankWest. By comparison, some of its competitors raised so much equity during the crisis that they diluted their returns. Commonwealth has a forecast return on equity of about 22 per cent this financial year, compared with 11 per cent to 13 per cent for Westpac, NAB and ANZ.
Montgomery is also a long-time fan of JB Hi-Fi, which has entrenched its position as the cheapest provider of electronics to its insatiable target market of young adults.
"Its gross profit margin is declining because it cuts prices to knock out the competition but its net profit margin keeps going up because it runs the business on the smell of an oily rag," Montgomery says. "It's what's called a profit loop."
JB Hi-Fi's success has also made it a preferred tenant at Westfield shopping centres, reinforcing the virtuous cycle. Montgomery says Woolworths and The Reject Shop follow a similar model and all three have little or no debt and the strong cash flow necessary to pay down debt quickly.
D'Amato also likes "category killers" and plumps for Woolworths, CSL and Coca-Cola Amatil.
Like Woolworths in retail, CSL has firmly established itself as a leader in biopharmaceuticals, a sector with excellent long-term growth prospects. And Coca-Cola dominates the Australian market for beverages by keeping pace with changing consumer preferences. It has added water, juice and food to its carbonated products and is expanding into Asia to ensure future growth.
DIVERSIFICATION
Like Buffett, listed investment company Argo Investments is a good example of patience paying off. But whereas Buffett buys whole companies he likes and holds on to them for the long haul, Argo aims to buy shares in a diverse portfolio of well-managed companies that offer safe, steady long-term growth.
Argo has been investing in Australian listed companies since 1946. Over the past 20 years, it has achieved compound growth of 12.4 per cent a year compared with the 9.7 per cent return from the All Ordinaries Accumulation Index (which measures capital growth plus dividends).
"We aim to buy good stocks and hold them permanently but sometimes there is reason to sell; companies get taken over, for instance, and then you need to buy something else," Argo's managing director, Rob Patterson, says. He says the important thing for investors who want to pick their own stocks (rather than buy shares in a listed investment company or units in a managed fund) is to diversify shareholdings across different market sectors.
"No one knows what the future holds so if you want to pick stocks you need at least 10 to cover your bases," he says.
Lachlan Partners' chief investment officer, Paul Saliba, also aims to deliver a diversified long-term share portfolio for clients not necessarily shooting for the stars but who want good, solid growth with income. But that doesn't necessarily mean set and forget.
Saliba says the group's core portfolio includes defensive stocks such as Woolworths, delivering the goods year after year, and Westpac, which he regards as the most low-risk, well-managed bank. But the core portfolio also includes medium-term tilts towards sectors with the potential to beat the overall market.
For example, BHP-Billiton is riding a wave of strong demand from China and emerging nations, booming commodity prices and the prospect of a further boost in demand as the global economy recovers. BHP is now trading at a price-earning ratio of 19.5 times forecast 2010 earnings, which Saliba regards as fair value considering the high level of growth expected in the years ahead.
Similarly, Saliba thinks Fairfax, publisher of The Sydney Morning Herald and The Age, is well placed to benefit from the improving economy and an increase in job ads.
"Fairfax has underperformed the broader market in recent times but the cyclical nature of the stock makes it a good candidate to hold through the first few years of the economic cycle," he says.
Brambles is another cyclical stock that has been punished by a market concerned about its Chep pallet business in the US.
Saliba says the company has made efforts to address problems with the business and is well placed to profit from the upswing in the global economy as retail sales and the movement of goods increases and drives demand for pallets.
"We recommend good-quality stocks, including some that offer a flavour of the times, that provide opportunity and security at the same time," Saliba says.
COMPANY RESULTS
Long-term investors should not dismiss small companies in their search for safety or they will miss out on the next Google, Microsoft or Berkshire Hathaway, the investment company Buffett founded more than 40 years ago.
Small, well-managed companies with products and services that are in demand have a higher growth profile than larger companies. The trick is to assess the sustainability of the company's earnings with a steely eye and avoid being carried away by hype about blue sky and new paradigms.
"If you pick a quality, diversified portfolio with a spread of companies across different industries and sizes, it boosts your chances of long-term success," D'Amato says.
At the smaller end of the market, he selects IT outsourcing firm ASG Group and Austin Engineering. Austin services the mining and resources industry with operations in Australia, South America and the Middle East.
Listed companies have begun reporting their results for the six months to December, making this an opportune time to put together a list of stocks to keep an eye on.
"For conservative investors, waiting for companies to report before committing your cash is a reasonable strategy," D'Amato says. Not only do companies release their financial results but directors often comment on trading conditions and the outlook for the year ahead.
Patterson says Argo has not bought any stocks this year and declines to offer picks but confirms he is watching the current reporting season for opportunities.
The market tends to punish companies if their results are disappointing. If the selling is overdone and the price of otherwise solid companies is marked down too far, then this presents a potential bargain.
Patterson singles out Worley Parsons, a provider of engineering services to the resources sector. Worley downgraded its earnings guidance on January 13 and its price dropped from just above $30 to below $24. "It was harshly treated by the market but it's on our list to consider," Patterson says.
STOCKS FOR STAYERS
Roger Montgomery
Value Investor
JB Hi-Fi
CSL
Cochlear
Commonwealth Bank
McMillan Shakespeare
John Price
Conscious Investor
Billabong
Cochlear
ARB
Fleetwood
Wridgways
Elio D’Amato
Lincoln
Woolworths
CSL
Coca-Cola Amatil
ASG Group
Austen Engineering
Paul Saliba
Lachlan Partners
BHP-Billiton
Westpac
Woolworths
Fairfax
Brambles
This story was found at: http://www.smh.com.au/articles/2010/02/02/1264876022180.html
Valuing stocks and bonds video
http://www.cosmolearning.com/video-lectures/valuing-stocks-and-bonds-7388/
40 minutes video lecturing on valuing stocks and bonds.
40 minutes video lecturing on valuing stocks and bonds.
Stock Market Strategy: "One-day trade, Swing trade or Long-term trade"
Stock Market Strategy
Stock market is a risky place to make a profit.
Who are these players generating all this trade -speculating or investing - in the stock market?
There are many types of trades in the stock market. However, essentially the three most popular of them are:
It is common to think that the swing trade has a time horizon between the one-day trade and the long-time trade. The time horizon of a swing trade is dependent on the event(s) influencing the player to terminate the trade.
The more astute would notice that all these types are characterized by a single factor (risk tolerance profile) of the players: their ability to hold onto their position in the stock market for various investing time frames.
The beauty of the stock market is that it can be used for various purposes by different investors.
http://www.assetinvesting.com/?p=4473
Stock market is a risky place to make a profit.
Who are these players generating all this trade -speculating or investing - in the stock market?
There are many types of trades in the stock market. However, essentially the three most popular of them are:
1. One-day trade
2. Swing trade
3. Long-time trade.
It is common to think that the swing trade has a time horizon between the one-day trade and the long-time trade. The time horizon of a swing trade is dependent on the event(s) influencing the player to terminate the trade.
The more astute would notice that all these types are characterized by a single factor (risk tolerance profile) of the players: their ability to hold onto their position in the stock market for various investing time frames.
The beauty of the stock market is that it can be used for various purposes by different investors.
http://www.assetinvesting.com/?p=4473
The Best Strategy For Trading On Stock Market
The Best Strategy For Trading On Stock Market
By: Wall Street Window
Tuesday, February 02, 2010 11:59 AM
I've been a successful stock trader for over a decade now and thanks to the Internet my reputation has spread. I have a free email investment letter with over 50,000 subscribers in it and get questions from them all of the time.
Well any strategy has got to incorporate some risk management principles and a real plan when it comes to making trading decisions.
They just turn on the TV and buy when some hot news comes out or read a story in a magazine and get in what looks like a hot stock.
But when you make money like this it is just look and odds are you are going to end up losing money. Even if your stock goes up you won't know what to do with it.
So first of all you need a good strategy when it comes to picking out stocks and making trades. Personally I've looked over decades of market data to figure out what chart patterns appear the most consistently before a stock goes up and then looked at the fundamentals that these stocks seem to have the most in common.
I call this combination the Two Fold Formula. I look for stocks that have both
One of my favorite indicators to do this is the PEG ratio. Unlike the P/E ratio, which just looks at one years worth of earnings the PEG ratio takes the price of a stock and compares it to its projected earning growth for the next five years.
This can give you a great list of the 50 hottest stocks to keep an eye on.
After that l look for a specific chart pattern and technical condition that I've also found to be common to the biggest winners.
To me this is the best strategy for making money in the stock market and I spell it all out for you free in my Two Fold Formula guide. You can get it when you join my free email list.
I believe in providing maximum value for people on my list. This is not a list of pitches and hype, but real information that will make you money in the stock market.
http://www.istockanalyst.com/article/viewarticle/articleid/3829746
By: Wall Street Window
Tuesday, February 02, 2010 11:59 AM
I've been a successful stock trader for over a decade now and thanks to the Internet my reputation has spread. I have a free email investment letter with over 50,000 subscribers in it and get questions from them all of the time.
Probably the most common question I get is what is the best strategy for trading on the stock market?
Well any strategy has got to incorporate some risk management principles and a real plan when it comes to making trading decisions.
Most people don't do this though.
They just turn on the TV and buy when some hot news comes out or read a story in a magazine and get in what looks like a hot stock.
But when you make money like this it is just look and odds are you are going to end up losing money. Even if your stock goes up you won't know what to do with it.
So first of all you need a good strategy when it comes to picking out stocks and making trades. Personally I've looked over decades of market data to figure out what chart patterns appear the most consistently before a stock goes up and then looked at the fundamentals that these stocks seem to have the most in common.
I call this combination the Two Fold Formula. I look for stocks that have both
- a low valuation and
- high earnings growth.
One of my favorite indicators to do this is the PEG ratio. Unlike the P/E ratio, which just looks at one years worth of earnings the PEG ratio takes the price of a stock and compares it to its projected earning growth for the next five years.
So by using the PEG ratio you can make buy decisions based upon the price you are paying for earnings growth.
This can give you a great list of the 50 hottest stocks to keep an eye on.
After that l look for a specific chart pattern and technical condition that I've also found to be common to the biggest winners.
To me this is the best strategy for making money in the stock market and I spell it all out for you free in my Two Fold Formula guide. You can get it when you join my free email list.
I believe in providing maximum value for people on my list. This is not a list of pitches and hype, but real information that will make you money in the stock market.
http://www.istockanalyst.com/article/viewarticle/articleid/3829746
Thailand Encourages Forex Outflows
* FEBRUARY 2, 2010, 11:58 A.M. ET
Thailand Encourages Forex Outflows
By ROBERT FLINT
Thailand has come full circle in its efforts to constrain the baht's appreciation, now encouraging currency outflows after placing short-lived controls on capital inflows a few years ago.
The change in rules had been announced last week, with details revealed Monday in Bangkok. The main points include easing limits on investment and lending abroad as well as looser regulation of corporate management of foreign-exchange risk.
Moreover, regional currencies often serve as a proxy for the yuan, since China's exchange system doesn't allow investors to take positions--and thereby make direct bets--on the yuan.
Thailand has been resisting pressure on the baht from one direction or the other for more than a decade. In the opening round of the Asian financial crisis in the late 1990s, speculation against the baht forced the Thai government to abandon a fixed-rate regime and float its currency. The dollar peaked around THB56 in January 1998, from precrisis levels roughly seven years earlier at THB25.
As the Thai economy recovered, the baht regained a lot of ground on the greenback. Hot money began flowing into the country to take advantage of a booming local stock market, which in turn fed further appreciation of the local currency.
The announcement of controls had a disastrous effect on the Thai stock market, with equity prices plunging close to 15% in their largest-ever one-day loss. The government immediately scaled back on the controls to cease penalizing foreign investors in Thai equities. All controls were gradually relaxed and finally abolished by a newly elected civilian government in March 2008.
The controls on inflows had only a limited effect on the baht. By the time they ended, the dollar was around THB32. Since then, it has fluctuated between THB32 and THB35 and most recently traded just above THB33.
But with the baht once again threatening to push higher, the Thai government chose to encourage outflows rather than restrict inflows. The big question is whether the latest revision to the rules will be more successful than previous attempts that have included repeated intervention in the dollar's favor by the Bank of Thailand.
"Other countries in the region, like China and South Korea, have also tried encouraging investment outflows to remove some of the upward pressure on the currency," Marc Chandler, global head of foreign exchange at Brown Brothers Harriman, said in a note.
"It is not clear that the measures in those countries have had much impact on outflows or the respective currencies," Mr. Chandler said.
There wasn't much immediate effect on the baht Monday, with the greenback down slightly to THB33.160 from THB33.179 late Friday, in line with declines against other currencies.
Some analysts doubt that Thai companies have enough money to invest abroad on a scale that would have an impact on the baht's exchange rate. In fact, there may be nothing the Thai government can do to guide its currency in the direction it deems best. The baht may remain a prisoner of movements in the yuan and dollar, whatever strategy Thai authorities choose.
Write to Robert Flint at robert.flint@dowjones.com
http://online.wsj.com/article/SB10001424052748704022804575041090733252952.html?mod=WSJ_Markets_section_Currencies
Thailand Encourages Forex Outflows
By ROBERT FLINT
Thailand has come full circle in its efforts to constrain the baht's appreciation, now encouraging currency outflows after placing short-lived controls on capital inflows a few years ago.
The change in rules had been announced last week, with details revealed Monday in Bangkok. The main points include easing limits on investment and lending abroad as well as looser regulation of corporate management of foreign-exchange risk.
It's another chapter in the struggle by regional Asian currencies to maintain an independent course in the shadow of the Chinese yuan. As long as China keeps the yuan stable against the dollar, its smaller neighbors can't let their currencies appreciate too much so as not to diminish the competitiveness of their exports.
Moreover, regional currencies often serve as a proxy for the yuan, since China's exchange system doesn't allow investors to take positions--and thereby make direct bets--on the yuan.
Thailand has been resisting pressure on the baht from one direction or the other for more than a decade. In the opening round of the Asian financial crisis in the late 1990s, speculation against the baht forced the Thai government to abandon a fixed-rate regime and float its currency. The dollar peaked around THB56 in January 1998, from precrisis levels roughly seven years earlier at THB25.
As the Thai economy recovered, the baht regained a lot of ground on the greenback. Hot money began flowing into the country to take advantage of a booming local stock market, which in turn fed further appreciation of the local currency.
By December 2006, the dollar had reached a nine-year low versus the baht and threatened to dip below THB35 if left unchecked. In response, the military-appointed government of the time imposed capital controls to hinder the inflow of short-term speculative funds.
The announcement of controls had a disastrous effect on the Thai stock market, with equity prices plunging close to 15% in their largest-ever one-day loss. The government immediately scaled back on the controls to cease penalizing foreign investors in Thai equities. All controls were gradually relaxed and finally abolished by a newly elected civilian government in March 2008.
The controls on inflows had only a limited effect on the baht. By the time they ended, the dollar was around THB32. Since then, it has fluctuated between THB32 and THB35 and most recently traded just above THB33.
But with the baht once again threatening to push higher, the Thai government chose to encourage outflows rather than restrict inflows. The big question is whether the latest revision to the rules will be more successful than previous attempts that have included repeated intervention in the dollar's favor by the Bank of Thailand.
"Other countries in the region, like China and South Korea, have also tried encouraging investment outflows to remove some of the upward pressure on the currency," Marc Chandler, global head of foreign exchange at Brown Brothers Harriman, said in a note.
"It is not clear that the measures in those countries have had much impact on outflows or the respective currencies," Mr. Chandler said.
There wasn't much immediate effect on the baht Monday, with the greenback down slightly to THB33.160 from THB33.179 late Friday, in line with declines against other currencies.
Some analysts doubt that Thai companies have enough money to invest abroad on a scale that would have an impact on the baht's exchange rate. In fact, there may be nothing the Thai government can do to guide its currency in the direction it deems best. The baht may remain a prisoner of movements in the yuan and dollar, whatever strategy Thai authorities choose.
Write to Robert Flint at robert.flint@dowjones.com
http://online.wsj.com/article/SB10001424052748704022804575041090733252952.html?mod=WSJ_Markets_section_Currencies
Good strategies for buying in and for preventing big losses
Strategies for buying in:
Strategies for preventing big losses:
Dollar cost averaging and phasing in strategies are useful for those who wish to reduce the risks associated with market timing.
Regardless of the buying in strategies (lump sum, dollar cost averaging or phasing in), acquisitions should only be done when the stock is available at bargain price or fair price, and certainly never when it is overpriced.
Stop-loss maybe unnecessary for some or many investors if the other risk management ideas are followed.
Value investors with a long term investing time horizon rarely need to use stop loss strategy. In fact, the drop in price offers an opportunity for the value investor to reduce his cost per share. This is safe provided he has not made a mistake in his initial assessment of the quality, value and management (QVM) of the stock.
Rebalancing at regular or fixed intervals can be usefully employed to bring his equity portion to a previously determined set proportion of his asset allocations in his portfolio. This is particularly useful for those who are unable to take big risks (big losses: real or missed profit losses) during the bear or bull markets.
Though theoretically attractive, to be able to profit through rebalancing, near the peak of the bull or near the depth of the bear market, assumes one has the ability to predict (time) the market consistently. This is of course not possible.
Always keep in perspective the 3 personal factors that are very important in your investing: time horizon, risk tolerance and investing objectives.
- Lump sum investing
- Dollar cost averaging
- Phasing in
Strategies for preventing big losses:
- Stop loss strategy
- Rebalancing
Dollar cost averaging and phasing in strategies are useful for those who wish to reduce the risks associated with market timing.
Regardless of the buying in strategies (lump sum, dollar cost averaging or phasing in), acquisitions should only be done when the stock is available at bargain price or fair price, and certainly never when it is overpriced.
Stop-loss maybe unnecessary for some or many investors if the other risk management ideas are followed.
Value investors with a long term investing time horizon rarely need to use stop loss strategy. In fact, the drop in price offers an opportunity for the value investor to reduce his cost per share. This is safe provided he has not made a mistake in his initial assessment of the quality, value and management (QVM) of the stock.
Rebalancing at regular or fixed intervals can be usefully employed to bring his equity portion to a previously determined set proportion of his asset allocations in his portfolio. This is particularly useful for those who are unable to take big risks (big losses: real or missed profit losses) during the bear or bull markets.
Though theoretically attractive, to be able to profit through rebalancing, near the peak of the bull or near the depth of the bear market, assumes one has the ability to predict (time) the market consistently. This is of course not possible.
Always keep in perspective the 3 personal factors that are very important in your investing: time horizon, risk tolerance and investing objectives.
Is 1Malaysia for real?
Why are the facts twisted? And with such insensitivities. Are there more of such people in the PM's office?. A consolation, PM Najib acted swiftly to demand Nasir's resignation.
http://www.themalaysianinsider.com/index.php/malaysia/51779-racism-hinders-najibs-1-malaysia
Tuesday, 2 February 2010
How an investor picks "good" businesses to invest
Buy Good Companies
This investor invests in "good' businesses. What are "good" businesses?
Although he buy shares with the expectation that he will one day sell them, he prefers to hold on to them for a number of years and rides the companies' performance.
If he will commit at least 5% of his assets to a company, he must be sure that it has a considerably more than a fair chance of working out.
Though he does not want to control the business, he sees himself as owner of a business and its surplus cash flow.
He expects to get his returns from the company's profitable operations as these become reflected in the price of its shares.
(This stance is considerably different from that of value investors who buy cheap stocks that have fallen below the reproduction cost of the assets and wait for the market to realise that it has overreacted.)
He looks for other signs that identify the kind of good businesses he covets.
High profit margins are a positive mark; these make the company's earnings less vulnerable to changes in the level of sales. They may also indicate that the company is operating within a franchise and is less susceptible to having its profits eroded by a new entrant.
He likes duopolies, because the two firms generally do not compete intensely with one another, and certainly not on price, so each is left with a high return on capital. Monopolies, by contrast, are always subject to government intervention, either to break them up or regulate their earnings. And even if governments do nothing, they are an invitation to new competitors to try to capture some of their very lucrative business, often by using a newer technology that allows the entrant to leapfrog the incumbent with lower prices or better products.
In making his long-term commitments, he wants to invest with smart management that has the shareholders' interests in mind. He has had generally bad experiences when he tried to influence managers to change direction, and he is not contentious enough by temperament to enjoy the struggle. It may be true that a company being run by superior executives has nowhere to go but down once those managers leave, and that buying the stock of a poorly run company at a deeply depressed price can position the investor for a profit once management improves. But that is a speculative bet; sometimes bad management stays in place for decades.
He expects to own his stock for 4 or 5 years. He doesn't want to wait on the chance that better management will show up, and he doesn't want to lead a shareholder revolt to make that happen. All he needs to know is that the current managers are healthy and young enough to keep the company on course for a few more years.
Buy Them Cheap
He normally holds shares in 10 or even fewer companies, on average he needs to put a lot of money into any one name. Because great situations are so difficult to find, he is prepared to buy 20% or more of any one company.
While there are around 1,500 or more companies large enough for him to own, his "good business" requirement probably shrinks that list by 80%, leaving him with no more than 300 possible candidates. But even within this restricted universe, he is brutally selective.
He is looking for "two-inch putts," by which he means investments that will provide him with a high rate of return while subjecting him to a low level of risk. There is only one way he can meet that goal. He has to spot companies that meet all his standards and are still available at a price that will provide him a high rate of return based on future earnings growth.
He is not attracted to turnaround companies or cyclicals, where a successful investment depends on timing. He does not believe in speculating that an underperforming company will be taken over, because most managements resist selling out. Opportunities to make this kind of investment arise irregularly, and then due to unpredictable circumstances. For example, a change in government regulations can be the vehicle. The newness of the issue, and the volume of shares available at one time kept them cheap, at least initially.
Sometimes a cloud settles over whole industries based on little more than questionable assumptions about the future. This provides him opportunities to buy good companies cheap.
Glenn Greenberg of the Chieftain Capital Management.
This investor invests in "good' businesses. What are "good" businesses?
- They are unchallenged by new entrants.
- They have growing earnings.
- They are not vulnerable to being technologically undermined.
- They can generate enough free cash flow on a regular basis to make the shareholders happy, either through dividends, share repurchase, or intelligent reinvestment.
Although he buy shares with the expectation that he will one day sell them, he prefers to hold on to them for a number of years and rides the companies' performance.
If he will commit at least 5% of his assets to a company, he must be sure that it has a considerably more than a fair chance of working out.
Though he does not want to control the business, he sees himself as owner of a business and its surplus cash flow.
He expects to get his returns from the company's profitable operations as these become reflected in the price of its shares.
(This stance is considerably different from that of value investors who buy cheap stocks that have fallen below the reproduction cost of the assets and wait for the market to realise that it has overreacted.)
He looks for other signs that identify the kind of good businesses he covets.
High profit margins are a positive mark; these make the company's earnings less vulnerable to changes in the level of sales. They may also indicate that the company is operating within a franchise and is less susceptible to having its profits eroded by a new entrant.
He likes duopolies, because the two firms generally do not compete intensely with one another, and certainly not on price, so each is left with a high return on capital. Monopolies, by contrast, are always subject to government intervention, either to break them up or regulate their earnings. And even if governments do nothing, they are an invitation to new competitors to try to capture some of their very lucrative business, often by using a newer technology that allows the entrant to leapfrog the incumbent with lower prices or better products.
In making his long-term commitments, he wants to invest with smart management that has the shareholders' interests in mind. He has had generally bad experiences when he tried to influence managers to change direction, and he is not contentious enough by temperament to enjoy the struggle. It may be true that a company being run by superior executives has nowhere to go but down once those managers leave, and that buying the stock of a poorly run company at a deeply depressed price can position the investor for a profit once management improves. But that is a speculative bet; sometimes bad management stays in place for decades.
He expects to own his stock for 4 or 5 years. He doesn't want to wait on the chance that better management will show up, and he doesn't want to lead a shareholder revolt to make that happen. All he needs to know is that the current managers are healthy and young enough to keep the company on course for a few more years.
Buy Them Cheap
He normally holds shares in 10 or even fewer companies, on average he needs to put a lot of money into any one name. Because great situations are so difficult to find, he is prepared to buy 20% or more of any one company.
While there are around 1,500 or more companies large enough for him to own, his "good business" requirement probably shrinks that list by 80%, leaving him with no more than 300 possible candidates. But even within this restricted universe, he is brutally selective.
He is looking for "two-inch putts," by which he means investments that will provide him with a high rate of return while subjecting him to a low level of risk. There is only one way he can meet that goal. He has to spot companies that meet all his standards and are still available at a price that will provide him a high rate of return based on future earnings growth.
He is not attracted to turnaround companies or cyclicals, where a successful investment depends on timing. He does not believe in speculating that an underperforming company will be taken over, because most managements resist selling out. Opportunities to make this kind of investment arise irregularly, and then due to unpredictable circumstances. For example, a change in government regulations can be the vehicle. The newness of the issue, and the volume of shares available at one time kept them cheap, at least initially.
Sometimes a cloud settles over whole industries based on little more than questionable assumptions about the future. This provides him opportunities to buy good companies cheap.
Glenn Greenberg of the Chieftain Capital Management.
How to Identify Stock Bull Market Tops
Many Symptoms occur When Bull Market is at Major Top .These are given below
1. Yearly High of Stock Index much higher than Previous year’s High
2. Now of Shares hitting new High as percentage of Total Shares Climbs new peak
3. Very Fast upsurge in Stock prices and indices
4. Near unanimous view of Experts that This is Start of biggest bull in History
5. General Magazines Which Do not Care About Stock Markets in Normal time, puts bull run in Cover Story
6.New Theories to justify high prices, in 2008 we had the Decoupling Stheory
7. A Sea of New Investors enter the Stock market with Dreams of instant Rich
8.Market Stops reacting to Good News
http://nse2rich.com/how-to-identify-stock-bull-market-tops-are-sensex-nifty-near-the-top/
So these were the Symptoms.
Are we at Top of 2010 now or is This Bull market still Alive?
Are We are Still Quite Far From Bull market top?
What will be your decision?
What are your actions: staying invested, rebalancing or divesting partially or divesting totally?
But then you will be timing the market, a dangerous strategy too!
1. Yearly High of Stock Index much higher than Previous year’s High
2. Now of Shares hitting new High as percentage of Total Shares Climbs new peak
3. Very Fast upsurge in Stock prices and indices
4. Near unanimous view of Experts that This is Start of biggest bull in History
5. General Magazines Which Do not Care About Stock Markets in Normal time, puts bull run in Cover Story
6.New Theories to justify high prices, in 2008 we had the Decoupling Stheory
7. A Sea of New Investors enter the Stock market with Dreams of instant Rich
8.Market Stops reacting to Good News
http://nse2rich.com/how-to-identify-stock-bull-market-tops-are-sensex-nifty-near-the-top/
So these were the Symptoms.
Are we at Top of 2010 now or is This Bull market still Alive?
Are We are Still Quite Far From Bull market top?
What will be your decision?
What are your actions: staying invested, rebalancing or divesting partially or divesting totally?
But then you will be timing the market, a dangerous strategy too!
The Simplest Stock Buy-Sell Decision Rules
http://stockmarket.globalthoughtz.com/index.php/stock-buy-sell-decision-rule/
People gain from stock market because stock market does not fully reflect a stock’s “real” value. After all, why would we all are doing stock market analysis if the stock prices were always correct? In financial jargon, this true value is known as the intrinsic value.
For example, let’s say that a company’s stock was trading at $40. After doing extensive homework on the company, you determine that it really is worth $50. In other words, you determine the intrinsic value of the firm to be $50. This is clearly relevant because an investor wants to buy stocks that are trading at prices significantly below their estimated intrinsic value.
The comparison between market price and intrinsic value helps to make decisions regarding the buying or selling of a particular share.
The following notes show the comparison, decision and reason:
1 Market price < Intrinsic value
e.g. $ 50 < $ 60
2 Market price > Intrinsic value
e.g. $ 40 > $ 30
3 Market price = Intrinsic value Correctly
e.g. $ 20 = $ 20 priced
1) You don’t know if your estimate of intrinsic value is correct; and
2) You don’t know how long it will take for the intrinsic value to be reflected in the marketplace.
People gain from stock market because stock market does not fully reflect a stock’s “real” value. After all, why would we all are doing stock market analysis if the stock prices were always correct? In financial jargon, this true value is known as the intrinsic value.
For example, let’s say that a company’s stock was trading at $40. After doing extensive homework on the company, you determine that it really is worth $50. In other words, you determine the intrinsic value of the firm to be $50. This is clearly relevant because an investor wants to buy stocks that are trading at prices significantly below their estimated intrinsic value.
The comparison between market price and intrinsic value helps to make decisions regarding the buying or selling of a particular share.
The following notes show the comparison, decision and reason:
1 Market price < Intrinsic value
e.g. $ 50 < $ 60
- Under- priced
- Buy
- Because the market price increases to meet the value and we can gain from the price rise.
2 Market price > Intrinsic value
e.g. $ 40 > $ 30
- Over- priced
- Sell
- Because the market price falls to meet its value and we can avoid the loss by selling the share now.
3 Market price = Intrinsic value Correctly
e.g. $ 20 = $ 20 priced
- No action
- Because it is correctly priced and the price is not expected to change.
- Therefore there is no profit likely to be made from buying or selling the share.
4 Market price almost equal to Intrinsic value
e.g. $ 40 is almost equal to $ 42- No action
- Because the difference in the value and price can not offset the transaction cost and we can incur losses.
The big unknowns are:
1) You don’t know if your estimate of intrinsic value is correct; and
2) You don’t know how long it will take for the intrinsic value to be reflected in the marketplace.
Mastering Your Craft at Stock Picking
The pattern of learning anything begins with theoretical understandings initially and practical understanding later. That is, general principles first, and then particular instances of those principles.
The 10,000-hour rule (i.e. one cannot master a subject or skill until he’s practiced it for at least 10,000 hours) is true.
To be good at picking stocks, a further 40,000 hours of studying it will certainly (all else equal) yield a better stock picker!
However, it would be better to attain 10,000 to 20,000 hours of study or practice in several, related fields.
http://prisonproxy.blogspot.com/2010/02/mastering-your-craft.html
The 10,000-hour rule (i.e. one cannot master a subject or skill until he’s practiced it for at least 10,000 hours) is true.
To be good at picking stocks, a further 40,000 hours of studying it will certainly (all else equal) yield a better stock picker!
However, it would be better to attain 10,000 to 20,000 hours of study or practice in several, related fields.
http://prisonproxy.blogspot.com/2010/02/mastering-your-craft.html
Always stick to good companies. Invest cleverly into these and these only.
When you buy shares, you own part of the company, including its assets.
Although the value of money decreases with inflation, your investment in a good company can increase as the company grows and the value of its assets increases.
Note that we say a 'good' company.
Not all companies are good companies and not all share prices will increase over time, simply because not all companies will expand and grow.
That is why it is important to be clever when you make equity investments.
Although the value of money decreases with inflation, your investment in a good company can increase as the company grows and the value of its assets increases.
Note that we say a 'good' company.
Not all companies are good companies and not all share prices will increase over time, simply because not all companies will expand and grow.
That is why it is important to be clever when you make equity investments.
Reviewing the basics of investing in equities
Although investing in equities is risky, it is a sure way to beat inflation - especially if
- you are patient and
- have a long time horizon.
Five important don'ts when you want to buy shares
Mistakes to avoid when you invest in equities
Do not buy on tips or rumours. Consult someone who has long experience of equity investment.
Do not buy with borrowed money.
Do not buy shares in boom times when everybody is buying and sell in bust times when everybody is selling. Or put differently: do not buy when shares are at a high and sell when they are at a low - you will make a loss!
Do not invest in a share that has been in the spotlight recently - the price might already have been driven up significantly.
Do not buy a share just because the price has dropped substantially and you think it is a bargain. There might be sound reasons why it has dropped.
Do not buy on tips or rumours. Consult someone who has long experience of equity investment.
Do not buy with borrowed money.
Do not buy shares in boom times when everybody is buying and sell in bust times when everybody is selling. Or put differently: do not buy when shares are at a high and sell when they are at a low - you will make a loss!
Do not invest in a share that has been in the spotlight recently - the price might already have been driven up significantly.
Do not buy a share just because the price has dropped substantially and you think it is a bargain. There might be sound reasons why it has dropped.
Two important strategies to help you avoid large losses: STOP LOSSES and REBALANCING
Stop losses and rebalancing are strategies to help you avoid large losses when you invest in equities.
Stop-loss strategy
A stop loss is a specified minimum price at which you will sell a particular share in order to stop the loss. This is a good strategy with which to protect yourself against large capital losses. You decide on a percentage loss that you are prepared to take on your investment, and sell when it reaches that percentage. Stop losses are implemented when the buying of shares (normally not unit trusts) takes place, i.e. an instruction is given by the investor to the stockbroker to buy 1000 shares in XYZ at, say $10,00 and to implement a stop loss at, say $9,00 (the investor perceives XYZ to be a somewhat risky proposition). The investor has done his sums and comes to the conclusion that the maximum loss he can bear is $1000, hence he limits his potential losses to $1000 by implementing a stop-loss strategy ($1000 divided by 1000 shares = $1.00 per share; $10.00 per share - $1.00 per share = a stop-loss level of $9.00)
Rebalancing
This strategy is best explained by an example. Following the analysis of your investment profile (time horizon, risk tolerance, and investment objectives), you decide to invest 50% of an amount of $1000 in equities and 50% in other asset classes, such as bonds and cash.
Assume that after a year your equities have decreased to $400 and your other investmens have increased to $800. This means your original $1000 portfolio is now worth $1200.
Rebalancing means that you adjust your portfolio constituents to get back to a point where half is again invested in equities and half in bonds and cash. You will therefore have to sell some bonds and buy some equities. This is an important strategy to keep your portfolio diversified and in line with your time horizon, risk appetite and investment objectives.
Stop-loss strategy
A stop loss is a specified minimum price at which you will sell a particular share in order to stop the loss. This is a good strategy with which to protect yourself against large capital losses. You decide on a percentage loss that you are prepared to take on your investment, and sell when it reaches that percentage. Stop losses are implemented when the buying of shares (normally not unit trusts) takes place, i.e. an instruction is given by the investor to the stockbroker to buy 1000 shares in XYZ at, say $10,00 and to implement a stop loss at, say $9,00 (the investor perceives XYZ to be a somewhat risky proposition). The investor has done his sums and comes to the conclusion that the maximum loss he can bear is $1000, hence he limits his potential losses to $1000 by implementing a stop-loss strategy ($1000 divided by 1000 shares = $1.00 per share; $10.00 per share - $1.00 per share = a stop-loss level of $9.00)
Rebalancing
This strategy is best explained by an example. Following the analysis of your investment profile (time horizon, risk tolerance, and investment objectives), you decide to invest 50% of an amount of $1000 in equities and 50% in other asset classes, such as bonds and cash.
Assume that after a year your equities have decreased to $400 and your other investmens have increased to $800. This means your original $1000 portfolio is now worth $1200.
Rebalancing means that you adjust your portfolio constituents to get back to a point where half is again invested in equities and half in bonds and cash. You will therefore have to sell some bonds and buy some equities. This is an important strategy to keep your portfolio diversified and in line with your time horizon, risk appetite and investment objectives.
Costs of a standard equity transaction
The cost of a standard equity transaction is made up of:
Brokerage
Your broker could charge you a percentage of the value of your trade, depending on the size of the trade and the nature of the service required.
- a stockbrokers's fee,
- taxes,
- a levy for the adminsitrative cost of the electronic settlement system,
- insider trading levy and
- other compulsory administrative charges.
Brokerage
Your broker could charge you a percentage of the value of your trade, depending on the size of the trade and the nature of the service required.
- All brokers charge a minimum per deal, even if your order is very small.
- If your investment is too small, the charges could dilute your returns considerably. Your investment would need to deliver sizeable returns before expenses are recovered.
The stock market provides a market for setting prices based on supply and demand
More about the stock market
The stock market provides a market for dealing in listed shares, and for setting prices based on supply and demand.
It is for this reason that prices of equities fluctuate.
Just as in any open market, prices will go up if there are more buyers than sellers and vice versa.
Most of the buying and selling occurs electronically today.
The performance of the stock market is often gauged by the performance of an important index. An index reflects the performance of a grouping of shares.
The best known index in the world is the Morgan Stanley Capital Internation (MSCI) Index, which represents the biggest shares in the world based on market capitalization. When the prices of these shares dip, the index will also go down, and vice versa.
For each country, the main index consists of the biggest shares based on market capitalization. There are also other sub-indices (financials, industrials, mining, etc.). Each of these indices represents a certain grouping of shares based on their market capitalisation.
The stock market provides a market for dealing in listed shares, and for setting prices based on supply and demand.
It is for this reason that prices of equities fluctuate.
Just as in any open market, prices will go up if there are more buyers than sellers and vice versa.
Most of the buying and selling occurs electronically today.
The performance of the stock market is often gauged by the performance of an important index. An index reflects the performance of a grouping of shares.
The best known index in the world is the Morgan Stanley Capital Internation (MSCI) Index, which represents the biggest shares in the world based on market capitalization. When the prices of these shares dip, the index will also go down, and vice versa.
For each country, the main index consists of the biggest shares based on market capitalization. There are also other sub-indices (financials, industrials, mining, etc.). Each of these indices represents a certain grouping of shares based on their market capitalisation.
Listed and Unlisted companies.
You can hold shares in companies that are
Be very careful when you invest in unlisted shares.
- listed on the stock market or
- in unlisted companies.
- Companies list on a stock exchange in order to gain access to more capital, and
- they must comply with stringent criteria set by the stock exchange to protect investors.
Be very careful when you invest in unlisted shares.
- Unlike the listed companies, the unlisted companies are not scrutinised that closely.
- Shares in unlisted companies therefore carry a bigger risk and
- are also much more difficult to sell as there is no open market.
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