magazine archive

magazine archive

First-time Investor

Using return on capital employed to identify quality stocks

Thursday 29 Oct 2020

In previous parts of this series we have looked at a range of valuation metrics, many of which are a good starting point when researching a stock. To delve a little deeper into a company’s genuine worth there is merit in reaching for a measure that is often employed by fund managers and investment...

How to calculate enterprise value and when to use it

Thursday 22 Oct 2020

Enterprise value (EV) is often underappreciated by investors who tend to focus on the market value of a company. It is arguably a better way to value a business than market capitalisation (also known as market cap) because it takes account of debts, preferred shares, minority interest and cash. Put...

Price to book can be a good way to value banks and housebuilders

Thursday 15 Oct 2020

There are different ways to value companies such as price to earnings and price to earnings growth . Particularly popular among value investors is the price to book metric, enabling individuals to screen for companies trading on a discount to the value of their assets. It has historically been the...

Using the PEG ratio to find growth at a reasonable price

Thursday 08 Oct 2020

The price-to-earnings (PE) ratio is a great starting point for beginner investors looking to get to grips with the valuation of companies listed on the stock market. However, it has big limitations. It won’t, for example, give you any idea on the trajectory of a firm’s earnings. THE PEG RATIO A...

What the price-to-earnings ratio means

Thursday 01 Oct 2020

When fund managers, analysts, the financial press and so on talk about ‘cheap’ and ‘expensive’ stocks, it’s important for anybody thinking about investing to know what that actually means. It does not mean that because a company’s share price is £100 it is expensive, or that because it’s share...

Six simple rules for successful investing

Thursday 24 Sep 2020

As regular readers will know, we have a soft spot for legendary value investor Benjamin Graham, author of The Intelligent Investor , which that other legendary value investor Warren Buffett describes as ‘by far the best book on investing ever written’. In the book’s introduction, Graham says his...

Explaining stock options and warrants and why they are important

Thursday 17 Sep 2020

As a beginner investor, the most important things to understand are how to buy and sell shares, what can move a company’s share price and how and where to find investment ideas. But when you gain some investing experience, you may come across things called stock options and warrants, particularly...

How companies raise cash and what it means for investors

Thursday 10 Sep 2020

In the latest instalment in our first-time investor series, we look at the various ways in which companies raise money to fuel their expansion, then explore the reasons that companies undertake ‘share splits’ and ‘consolidations’. PLACING NEW SHARES The different methods by which publicly-traded...

Important signals: why smart investors study director deals

Thursday 03 Sep 2020

You’ve opened your investment account, mastered the mechanics of buying stocks and familiarised yourself with the main catalysts that move share prices. Now the first-time investor needs to add additional weapons to their stock picking armoury. Among the signals that indicate whether a company is...

What moves a share price

Thursday 20 Aug 2020

So you have opened a share dealing account, familiarised yourself with the mechanics of buying a share and purchased a few companies for your portfolio. The next step on the novice investor’s journey is to learn about the numerous factors that drive a share price higher, or lower. From a top down...