The days of ignorance when investing in stocks and shares are long gone with the Internet opening up an array of different ways in which to research stocks and shares prior to investing. While many people still go with “momentum stocks” you should always do your own research to know exactly what you are buying, what the news is and what the prospects are. So, where do you begin your in-depth research of stocks and shares?
Broker research notes
The vast majority of traders use online services to buy and sell their shares as they are relatively cheap and quick. The chances are, depending upon which company you use, your online broker will have a research department (or access to research notes) which you should ask about. These notes will give you an in-depth look at different companies, and they are often free to customers, with forecasts for the years ahead. Whether or not you agree with the recommendation on these research notes, which are often commissioned by the underlying listed companies, they should make you think and look at things differently.
Discounted cash flow, EBITA and other financial indicators are a useful way to monitor how successful a company has been and how strong their balance sheet is. These are not necessarily financial indicators that the average trader would seek out but they do give a different angle.
Message boards
While it can be very dangerous to believe what you read on message boards covering stocks and shares, sometimes they can give you interesting snippets of news which are not necessarily covered by the mass media. There may also be people who are “relatively close” to the company involved who may let slip some interesting information about future prospects. Don’t forget, while the vast majority of message board members simply read the comments, you also have the option to ask questions yourself. Put forward your opinions, ask for feedback and sometimes these can develop into interesting and informative online conversations.
Message boards are monitored by regulators because historically inside information has leaked before official announcements. That is not to say that interesting snippets of information will not emerge before they are officially announced but be careful when you post comments. Some people have been known to post negative comments as a means of encouraging sellers, encouraging a fall in the share price and then taking advantage with a purchase at lower levels. Read it, take it in but also do your own research so that you can back up any advice you see on the message boards.
Directors dealing
Before we look at directors dealing it is worth noting that directors are only allowed to buy and sell shares at particular times of the year. In the run-up to half-year and full-year results, as well as trading statements, directors will likely be blocked from buying or selling shares. The same will occur just prior to important announcements which may have an impact upon the share price. Director’s dealing has long been a means of monitoring the confidence that directors have in their own company. It is just part of the overall jigsaw which allows you to look at shares in more detail, see who is positive and negative about the company, read about the potential prospects and then make up your own mind.