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Topic
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Description
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Support
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Level at which the share fails to fall below based on 6 months charts
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Resistance
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Level at which the share struggles to rise above based on 6 months charts
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1/3/5 Year Trends
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Should always been in a steady upward climb over a long period
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Market Capitalisation
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What the basic company is worth.Ideal to look in and around the £50-£950m as nomally better growth prospects
Up To £50M - Very small
£50-£140M - Small
£140-£450 - Medium
Above £450 - Top 350 in UK
Above £2bn - Probably FTSE 100
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Full Year Profits
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What sort of money is it making. Companies reporting losses should be flag as a big negative.
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Profits against Market Cap
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If you bought the company outright what sort of profits would you be making.
Anything over 15 times profits to market cap is expensive.
For example :
Market Cap = £120M
Yearly Profits = £10MProfit/Market Cap = 12
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Profits Rising
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Is the company growing and making more money...Yes good...No bad...stating the obvious really.
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Net Debt
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Any company with more debt than 3 years worth of full year profits should be considered high risk.
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PE Ratios
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Calculated as share price / earnings per share...be careful when using these. High PEs suggest
people are confident in the company and prepared to wait long time for return ( although expectation
will be a return alot quicker )...The downside is that the company could be over valued.
Preference would be for companies with a PE of 12-20 which means that a good company will have the opportunity
to exceed expecations...and the share price would climb sharply.
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Positive News
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Check all positive news over last few years and see the impact it has had on share price...Lots of positive news is good.
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Negative News
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Reverse of above...Any recent negative news should start alarm bells ringing.
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Dividends
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Check the dividend payouts for the last few years and see if it has been stable or better still rising. A company raising
dividends year on year is a very positive one.Any sign of falling dividends or cutting altogether probably means you should look elsewhere.
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Core Business And Conditions
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What does the company do and is the market its in growing ?.What is the sector doing as a whole in terms of rising or falling.
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Spreads
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What is the percentage difference between the buy and sale price ( spread ). Anything more than 5% should cause worry.
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Website & E-mail
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What state is the website in, if in the retail market would you use it. Does it perform the require tasks ( e.g selling products, the company,
product launches etc etc ).
What information does it have for investors ?. Does it have the latest financial figures ( minimum expectation ).
Email the company claiming to be a share holder and ask when the next AGM is. Check to see the response times and how they treat their shareholders.
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Timing
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It is important to get the timing right when investing. Its better not to jump in on the back of a positive news release but to
carry out the full research and then ensure that :
Good volumes being traded - Careful with trades, not all buys are buys and vice versa
Positive chart and momentum
General markets are rising
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Stop Losses & Profit Limits
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You should try to limit stop losses at around 10% less than the share price. This helps to limit losses and takes emotions out of trading
if you make that dicision in advance. You should also check to see previous Support levels when making this decision.
The downside is when a Market Maker attempts to Tree Shake a share in order to fill a big order. If a share falls dramatically in a day for
no apparent reason its likely to be a Tree Shake and is likely to rise the following day.
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