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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.

Dividend Yield

Dividend Cover

Dividend growth

Earnings Growth

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.