How can I find cheap shares?
What is a Cheap Share?
People often ask me if a share is cheap and I always reply that any asset is only worth what a seller is prepared to sell at and a buyer is prepared to buy at.
However, when considering whether or not a share/stock is cheap, I would take the following into account.
1) What is known as 'fundamentals'
Fundamentals for me include the following:
Price earnings or PE ratio.
Balance sheet Strength.
2) Equity Market conditions
Equity Market conditions are usually a function of the wider world and in general when conditions are very bad, you will hear traders and investors say 'fundamentals have gone out of the window' or 'the market has gone down the toilet' or words to that effect. This is often the time to buy, but never ever underestimate how ferocious down legs in the market can be. When you hear lots of people screaming that shares are cheap, if the wider malais that started the rot is still at large, believe me, they can get even cheaper. This will tend to lead to much higher market volatility, where stocks can swing wildly through a day or from day to day.
3) If you are not a fan of Warren Buffett, then we suspect that you should not be investing in equities, but some of his famous phrases include:
"Be fearful when others are greedy and greedy when others are fearful"
"I'm 15% (Philip Arthur) Fisher and 85% Benjamin Graham. The basic ideas of investing are to look at stocks as business, use the market's fluctuations to your advantage and seek a margin of safety. That's what Ben Graham taught us. A hundred years from now they will still be the cornerstones of investing"
I believe that the best way to invest is the Buffet way (borne out by his incredible track record) That is why I developed the Dividend optimizer tool, because essentially it gives our membership an excellent way to assess the historic and future growth of a companies dividend. It tells our membership, how many consecutive times a company has increased it's dividend in the past 5 years. It also provides dividend forecasts based upon the average analysts forecasts. It also provides a measure of forward dividend cover so that our clients can assess the safety of the dividend.
Obviously, when assessing investments our tool is just that. An investment tool that allows our membership to narrow down their choices of investments if it is dividends that they are interested in. To do this they can use our extensive selection criteria. It must be said however that if the optimizer throws up a number of potential investments, the member should absolutely then go on and conduct additional research before deciding to invest his or her hard earned cash.
- What is the PE ratio?
- How is the dividend yield calculated?
- What's the difference between dividend yield and annualized yield?
- What is Market Cap?
- What does Mark-to-Market mean?
- What is day trading?
- What is a dividend?
- Forecast dividend Increase
- What does "Ex-Dividend" mean?
- Consecutive Annual Dividend Increases
- What is the OptimizerMax tool?
- What is the CountdownMax tool?
- What is the GeneratorMax Tool?
- What does cum dividend mean?
- The FTSE Quarterly Review
- What is the record date?
- What is Dividend Declaration?
- What is DRIP?
- An overview of dividend dates
- What is an ETF?
- What does CAGR stand for
- What are futures?
- What are Options?
- What does Fiduciary Duty mean?
- What is Shorting?
- What does going long mean?
- What is a share split?
- What is a Long-only fund?
- What is a long-Short fund?
- What is a rights issue?
- What is a share buyback?
- What is a Government Bond?
- What is a corporate bond?
- What is an ISA?
- What is the bid price?
- What is the offer price?
- What does Blue chip mean?
- What is the spreadbetting series?
- What is the spreadbetting price?
- What is the spreadbetting dividend?
- What is the spreadbetting level?
- What is the spreadbetting margin factor?
- what is the spreadbetting margin requirement?
- What is the spreadbetting yield?
- What is an IMS?
- Why does the FTSE 100 list more than 100 shares?
- What is dividend cover?