Randomness and the Stochastic Indicator
Trivia question: who said “If you visualise a rocket going up in the air – before it can turn down, it must slow down.’ I agree, it doesn’t sound extremely profound, mostly just common sense. However, the same person added: “Stochastic measures the momentum of price. Momentum always changes direction before price.” The author is…
Discounted Cash Flow Models – The Crown Jewel of Valuation or Black Magic Alchemy
Many sophisticated share market investors hail DCF (Discounted Cash Flow) Models as the one and only way to estimate the true intrinsic value of a company. For them, it is indeed the crown jewel of valuation techniques. Other investors, most notably technical analysts, scoff at DCF models as nothing more than complex smoke and mirrors,…
Cash Flow Ratios – Tools of Choice for the Professional
Newcomers to share market investing quickly learn the near universal acclaim awarded the Price to Earnings Ratio (P/E). As a valuation ratio, it reflects the share price the market is willing to pay for each dollar in earnings the company generates. However, as those same newcomers continue their education they soon discover that the tools…
The Buy and Hold Obituary – A Skeptic’s View
In the past several weeks share markets worldwide have been on a daunting roller coaster ride with the rising price of oil and the prospect of a continuing upward price spiral. The 11 March “Days of Rage” in Saudi Arabia came and went without incident serving only to highlight the wild nature of some of…
In Search of the Source of All Ratios – Financial Statements
Ratio Analysis is one of the most widely used investment tools all over the globe. With the exception of the hard-core technical analyst types, most investors rely on financial ratios of all kinds to evaluate shares. It is the cornerstone of fundamental analysis. Even the most recent newcomers to share market investing quickly discover the…
Dingoes Of The ASX 50
Stockmarket investors who don’t want to go to the trouble of sifting through stock tips or poring over charts for under-valued trading opportunities can always fall back on a ‘mechanical’ strategy, where the investor simply buys stocks that fit a selection criterion, or set of criteria. It could be the stocks with the lowest price/earnings…
Does the P/E Ratio Really Tell You Which Stock To Buy?
The Price to Earnings Ratio for the vast majority of shares in which you might be considering investing is readily available, and for those you cannot find, the vaunted P/E is easy to calculate on your own. All you have to do is get your hands on a copy of the company’s latest annual report….
How To Make Money By Thinking Big Picture
Think of top down investing as a “big picture” strategy. The big picture is the global market and all it encompasses. If you think of the global market as a forest, if it looks green and healthy, you enter the forest looking for the healthiest trees. When you find a grove of healthy trees, you…
Tools for Finding Safer Shares (Part 2) – The Quick Ratio
Something happened a short time ago – January 24th, 2011 – that shines a spotlight on the issue of finding safer shares. Australia’s giant retailer, Woolworths (WOW), lowered its guidance for the first half of 2011. Today’s earnings release cited the following conditions that led to the revised forecast: • Consumer Confidence Levels • Inflation…
How those in the know make money – and lots of it
TheBull talks to industry experts for insights on how they make money – and lots of it. Brendan fits the definition of a diversified investor. He estimates his personal assets of shares, property and part ownership in a transport business to be collectively worth about $2.5 million. Shares in his self-managed super fund include Westpac,…
