I am Just a novice at all this and wandering what methods do people use when buying stock.Do people use TRENd is you friend strategy.Or if share is undervalued against its competitors or do people trade purly on technical analysis.I know there is no one best method or we would all be millionares.I just want to know what method best suites individuals

Very good. I have just printed this thread out to have a closer look.

Suggest check the spread of the share and the movement you need from buy to sell. Check the normal market size in case you wish to escape from it.

I would also suggest you place initial stop loss in case you make a mistake in you evaluation the share when you buy. IE Below the price movement you expect or will tolerate. And when into a profit use a trailing stop loss. (What you put this at is the difficult decision.) But I think it is necessary for mid and small companies.

The only problems with ideas and theory is reality hasn't nobody seems to have read the same books as me and you have to be disciplined and stick to your strategies. (I wish I was, but I am improving due to some of the pain I have had.

Fundamentalist.


I was interested in your strategies for investment and to a certain degree moving in the same direction. One of my weaknesses (amongst the many I have, some of which have given me great pleasures) is an inability to make, or think I am making a reasonable assessment of Company accounts (although I do try!! to evaluate them). Therefore, I am thrown back to making use of assessments of Margins EPS PEG ROCE ROE etc. from various packages I use (Sharescope with its data mining facility) Comdirect, Barclays, Moneyam and IC. Plus a few from other Internet sites occasionally.

In your experience, how accurately do the figures reported in their conclusions correspond to your findings? In other words are these packages reasonably reliable and can be use to form buy and sell opinions.

Another point I would like to raise, is in the past I think I am made most money from investing in smaller companies and Aim and more specifically on companies specialising in Biotechs, Tech and Support Services.

Many of them purely in the development stages, of hopefully, their long careers. Now to certain degree I am bidding blind, going on the limited information of the ideas or technologies they may be developing. In the early stages the only concrete information I have is, of cash, cash burn and possibly unreliable information of directors of the companies. Sometimes, I have burnt my fingers, but on other occasionally have been well rewarded.


What are your ideas about evaluating these companies, or are you wiser and leave them to others.

Fred

With regards to company accounts compared to fundamentals on sites I tend to find two problems with the info you get on the packages:

1) The info can well be out of date
2) The info takes the company accounts at face value (and as an accountant I dont trust the accountants who prepare them lol). That is, I will look through the accounts and make my own judgement on whether to include some items (especially exceptionals). i will also look at the balance sheet and see if their are any items held there which i believe should be reported through the P&L (ie capitalised costs, provisions) and adjust the profit figure accordingly. Also, with PAT, they will always give the reported figure. If a company has rolled over losses it may be paying a reduced or even no tax charge which to my mind distorts the future profitability so I will normally adjust this to a 30% tax charge. there are several good books on how to read and adjust company accounts


On your second point regarding the type of companies, I do invest in smaller companies but I try to apply the same philosophy. That is that I can put a fair value on the company now and in the future. That may be based on earnings stream or asset value. I tend to avoid what I call the "hope" shares, where they are currently loss making and have little asset value but have a world beating product (Torotrak spring to mind as one I was told to buy - they went from 30p to 120p back to 60p on hype - they will not make a profit for at least 3 years and then only if they sign a deal with a large manufacturer - how do you value this - is 30p fair or is 300p fair - I honestly dont know so I avoid). I cannot value these and hence feel you are investing purely on market sentiment and hope that the deal comes through/the technology works and is profitable! To me - the horses are a purer form of gambling than this type of share.

Saying that, I do occasionally break these rules: for example I hold Skyepharma shares (I bought them based on the fact I thought they would be consistently in profit by now) and PTG which is loss making, but here I believe the price I bought at seriously undervalued the assets. I do tend to avoid AIM unless the company is even more compelling than normal (I traded in and out of MXC earlier this year and will look at it again) partly through lack of faith in that market and partly because NMS can cause problems.

hope this is of some help (all my opinion of course)

Fundamentalist

Thank you. I do agree with your processing. I wish I could read or make sense of accounts, as you obviously do, a little more easily. Sometimes I think they are set up to confuse rather than enlighten. When I had an accountant for my books I use to use a simple spread-sheet setup with monthly and yearly running totals with income and costs etc. separated. Until I handed the discs with all the information (bills etc.) indexed over to the accountant I knew roughly where I stood financially, other than for tax to pay. When my accountant (a good friend) presented the figures back to me I didnt have a clue what they meant, other than the bottom line. (Probably I was disinterested.)

I have tried mugging this aspect of my ignorance up and will continue to do so. But doing this will probably need extending my lifes expectancy or make it feel longer.

Fred

how else do you think us`accountants would make our money if it was that simple anyone could do it lol!!!

the simple things to look for are:

Are they capitalising nearly all their costs
Have they got a heft level of provisions on their balance sheet
Is the tax charge 30% ish (ie is PAT 70% of PBT)

feel free to ask if you ever want clarification

I buy the Financial Times and a pin lol

I wonder what are the chances of getting winners by sticking a pin in randomly
in the FTSE 100 ?

I simply try and go with the medium term trend - if it's up I look for opportunies to get long in a shorter timeframe

Fundamentalist

I thought it was because I always paid my accountants bills. He never paid mine.

I thought I was supporting hime in the lifestyle he had become accustomed to.








I never invoiced him.

Sounds like a great arrangement Fred!

Fundamentalist

Do you use Sharescope.

If so, do you use its data mining facility?

If so, what are your are your basic filters?

I do find this feature of Sharescope fascinating I am not certain if I have the confidence yet to make decisions on it. I sometimes think it is easier for a fool to make decisions on little knowledge that a wise man on a lot of information. But being a fool perhaps I am biased.


If you wish E-mail me via Moneyam.

Today is a good day more blue than red. At the moment with this market I am sweating a little. I think if I was in cash I would leave it there. Bring back Clinton or a Clinton.

Fred

you have mail

If I'm trading, I take my signals from the charts and tend to ignore the fundies. I maintain that the only friend that anybody needs is the trend. For longer term positions, I believe that fundies are more important, particularly so for smaller companies.

Croc used to have some analyser software which picked out the 1-2-3 trend, but I guess that, now he's sadly departed, this would no longer be supported. I use Sharescope eod to export ohlc values into a spreadsheet/database and then manipulate the data and identify trending targets which look to have completed a pullback. It gives me a list of 50 or 60 fresh targets across the LSE each night. Some of the small cap/seaq traders on the Traders Thread on the pay-per-view use SS filters to get their signals. Have you tried asking them?

My strategies are evolving. Some say I am still evolving and got a long way to go.

I think eventually I am going to divide my pot into long term trend followers based on hopefully good fundamentals and follow the charts like you until the trend changes. If I am lucky and have winners I will be more careful and place trailing stop losses. "I have difficulty in Selling". (Bloody conceit that I can't be wrong -------------------again.) If I out a reasonable chunk into a share generally it has to be profit making, good PEG, pays a covered dividend and a capitalisation at least above 15,000,000. But also have a reasonable NMS and smallish spread. etc.

Also I use the charts Trend lines to tell me the rate of growth and move on if I think the share's trending overall rate is poor and prospects remain poor I will move on.


The second portion will again base on Fundamentals but less demanding and linked to changes in trends. I use Sharescope more and more and have set up different filters to pick out trends over 2,1,.5,years periods and 1month periods. All changeable with mood and availabillity. Also acting as a filter I use MAverages and Price. This I hope guides me to a group of shares I can have a guess at using charts and indicators to and hopefully ride the trend when I see one. Short or Long Term.

Small spread, large volumes and large MS. egs Lloyds


Another portion which I am already using as punts, smaller amounts but on small companies in Support services . Software, Techs and Biotechs where I like the ideas they are R+D on. Again trying to time buys and sells aided by graphs. I have been lucky and unlucky partially due to the speed of price movement and small market sizes. But rewards are good as a whole.


As you can see I am still playing about, but I am slowly getting there and will probably end up with more money in group 1 than 2 or 3. But I have been thinking of reducing the number of companies held and if I see the market moving sideways of getting out for a period and waiting. I wish I could control my sense of "urgency" I often buy when if I waited a little longer I would have got a better price or share.




Now where is the toilet.

Some good points in the posts above, useful to many of us!
Company reports are hard going if you're not an accountant (I'm not)
I was told the following - I make no claim as to whether it is accurate
of not, I'm simply passing on what I was told some time ago and that I have found useful to bear in mind. However if it is inaccurate please put me right
I wont mind and as I said I'm no accountant!!!

For short term 'health' of a company - EG: if it could go bust in the
next year, I was told ages ago to check the line in the accounts titled
"total assets less current liabilities" this shows if they have assets that
could be used to keep them afloat if needs be when balanced against the creditors that are known to fall due in the next year and could demand payment. So if you're looking at a tiny firm and to invest in the short term, this may be useful to check, along with obviously whether they are actually making any money etc. However please note you need to look generally under this line in the report to find those creditors that have a longer term arrangement with them.

Fred (& others, if interested),

I am also not an accountant (unlike Fundamentalist, F1).

If you are interested in fundamental analysis, one book (if I may suggest one) in picking the bones out of accounts for the non accountant who is interested in fundamental analysis (rather than T.A.) is "Magic Numbers" by Peter Temple.

This covers 33 ratios from how to calculate Market Capitalization through to the Sharpe Ratio. This encompases PEG, Gearing, NAV, ROCE & discounted cash flow modelling / ratios.

It is very easy reading (without ever being too patronising), with plenty of real examples.

I can't recomend it enough (& NO I am not being paid here!!).

From my point of view when I first read it three years ago, it enabled me to move from going on what others said was, for example, the PEG factor, to being able to effectively work this out for myself, make my own adjustments and make my own conclusions.

Interested to know if anyone else has got anything from this book?

Mickey ( a fundamentalist to his dying day, lol).

p.s., F1 - I told you Rok were on the aquisition trail! Another small, but perfectly formed deal?

Mickey

Nice to see you over this side. i saw the ROK deal - looks good value to me. Bit disappointing as a GFRD holder, may mean that is less likely to happen now. Still contemplating splitting my investment between the two companies rather than solely in GFRD.

May take a look at the book - always good to read another perspective.

Markets pretty grim at the mo - watching THUS - looking to find the bottom - anywhere below 15p and I will start to open a position though could be headed back down to 12p again.

Anything else grabbing your fancy at the mo?

Fundy (F1 to you mickey)

edddcarter,

If you new to all this, then until you get some experience
under your belt then please, please, please keep your
initial stakes stupidly low until you start getting it right.

If you don't, the market will eat you for breakfast and wipe
you out.
Just concentrate at getting it right at first and conserving your
pot.
That way you'll still have some money left when you are starting
to get it right.

Melnibone.

F1,

sorry to be stalking you lol!

Was a bit dis-illusioned that no one seems to have taken over the DOOB thread (I don't think that I have the time to even post once a day - how did he do it, lol!??) so thought I would see what was on offer here.

Markets grim? I am in AHT so I can't agree lol!! I need diversification now lol!!

I think that Peter Temple's book may be a bit basic for an accountant, F1, but if you find it useful, I would be most impressed!

Mickey.

Mickey

Likewise, Doobs thread has left a gaping hole! it would be nice to know how he is doing in his new venture

Good to hear your in AHT, Hatto is doing very well out of that one too i hear! I tend to post a lot over here mainly on share specific threads and the general day traders thread - i have always lurked not posted at ADVFN until Doobs thread - I just cant stand the pointless ramping/deramping arguments that go on. Over here is far quieter but still a lot of knowledgeable posters. Feel free to join us regularly or send me an internal mail if you want

F1

F1,

I may well do that...

(btw, how do I send an internal email though?)

I don't have any specific feelings at the mo, other than as communicated, but I am going to post the Chinese Rice proverb on "doob"

mickey.