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To be a successful fundamental investor a number of things need to happen for you. Firstly you need to have an excellent sharebroker. This is a very tough call as brokers make their living by you buying and selling regularly and there are times when you should be doing neither. Because brokers cannot cover all stocks they do tend to have their favourites. If you look at the numerous websites where brokers make their calls you will see recommendations that are clearly just bad calls.
The “broker” person you deal with over the phone is… well really the front window of the broker business and these persons are the sales people if you like. And they sound convincing – that is their specialty. The keen ones gather for a morning meeting and redistribute information that their research people have developed or obtained overnight from overseas affiliations. This information can be so far off the mark it isn’t funny – and these calls can cost you a lot of money.
To be a fundamental investor you need to plough through oodles of annual reports which are out of date once they hit the printers. In any case you need to be both a financial wizard and economic guru to usefully assess the mass of data.
The answer is in understanding price and volume. It is a process that is clinical yet its not time consuming. If you apply the learned techniques correctly and with discipline you will succeed.
I have been watching for some weeks now the flagging share price of Fosters – in fact I mentioned it in one of my editorials in January. I have also been reading with amusement the flurry of company announcements by the Fosters Group – share buy back notices – shareholder newsletter – CEO stepping down etc., etc.,. It is as one would anticipate – the PR machine kicking in. But the stock remains motherless and it will take more than headlines to bring back Insto and retail support. All this could be seen well before the flood of media exposure.
There are other stocks that are also loveless right now – see if you can identify and use that knowledge to interpret the headlines. Try looking in the Telecommunications sector!
Meanwhile the markets had a sound run last week and the upward trend is still intact. A little falter on Wall Street on Friday may flow through to the Australian market early in the week. However there is still value in the market – but be selective and stick with your plan.
Tom Scollon
Editor
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