Investment Ideas and false analysis…
There are probably as many ways of finding shares to invest in as there are businesses listed on the various exchanges. My preferred method and please understand that I am not offering advice (see legal disclaimer) nor am I advocating this approach, involves a combination of perusing over share tips from quality publications or websites such as the Investors Chronicle; Motley Fool, ADVFN and from RNS and investigating more general economic news from the various financial websites (to many to mention).
However my best ideas (some of which I regrettably did not act upon) have come from applying filters to the London Stock Exchange website FTSE -100, -350 constituents lists.
This is not so long winded as you imagine. I approach the task in small chunks and I can also immediately exclude and filter out large numbers of businesses as I filter against a set of loose criteria but always including the following:
-a history of steady increased earnings, and that they are actually in profit.
-a current Earnings yield of at least 6% ((earnings per share/current share price) x 100).
After this I manually examine the businesses fundamentals, loosely evaluating things like:
-the current balance sheet, and cash-flow situation. Looking for the usual obvious things.
-the businesses share price in past five years, and key news for that period.
Any of these reviewed businesses which match the criteria I am looking for and (including a little room for manoeuvre with the numbers) get added to my watch list, along with the tips or interesting shares that I have read about elsewhere.
From the watch list, I then review a little more closely in detail, read the annual reports; and try to apply a rating scale I formulated myself. I then use this list and scale as a starting point for considering a new investment.
At the time of writing my watchlist is growing faster than my ability to attempt to review and rate, such are the opportunities which seem to be present at the moment. You will notice that I am consistently trying to avoid the word “analyse” or “analysis”, this is not just because they are tricky to spell (they are). It is partly because so far as I am concerned I am not analysing anything here. The principle reason I loathe to use the word though, is it implies some kind of scientific technique or sophistication when in fact I am applying mere common sense, a bit of logic, and hope (hoping that my future expectations of growth roughly follow reality).
Yes. There is perhaps more than a bit of Warren Buffett-esque influence, but my belief is that this approach is not merely one of fantasy, but one that has a sound basis in practical investment logic also. And more importantly one that will allow me no matter what the outcome, to sleep soundly at night knowing that I at least tried my best.
Author can be contacted: Investing1234@hotmail.co.uk
Please read the blog Legal Disclaimer.