Real-time mar­ket info is the best

Whangarei Report - - Money - With CARO­LINE RITCHIE

WHAT does all that stuff in the news­pa­per mar­ket snap­shot mean? Is it loaded with se­crets that, if you just ap­ply your­self, will de­ci­pher into prof­its? Magic trans­la­tions? In­deed, the num­bers you see printed are from the long dis­tant past of 24 hours ago, which in mar­ket terms is back in the pri­mor­dial man­groves. The an­swers will hardly sur­prise you, but it is im­por­tant not to get mixed mes­sages from things, those are the source of much un­hap­pi­ness.

Mar­ket snap­shots, in all their vari­ants, still seem to be part of the fur­ni­ture on busi­ness pages and de­rive them­selves from an age be­fore the in­ter­net and, dare I even men­tion it, Tele­text. They sum up, with nei­ther judg­ment nor opin­ion, who did what in the past trad­ing day. They are a static pic­ture of some­thing that never stops mov­ing. If you pe­ruse it, bear this in mind.

Ev­ery­one with ac­cess to cy­berspace now watches their shares on­line, if not in real time, then with only a short de­lay. If you have a de­cent ac­tive ad­viser, you can ex­pect her to be glued to her high-end live feed ev­ery wak­ing hour. Mostly be­cause this is where the ac­tion hap­pens but also be­cause the data com­ing through costs her com­pany $20,000 per year, so it pays for her to look like she is sit­ting in front of it.

The snap­shot shows you gain­ers, losers, the top 10 by value and by vol­ume. Buy and sell prices, which tell you what the call auc­tion queue looked like when the mar­ket closed. Use­ful­ness varies. The clos­ing quotes can change af­ter the mar­ket is closed, as in­sti­tu­tions make ad­just­ments or change or­ders. Be­hind the scenes go­ings on. Share moves are usu­ally quoted in cents, which is weird, since the most rel­e­vant thing is per­cent­age. You live or die only by per­cent­ages. Fifty-two-week highs and lows list a rolling 365 day re­port on the peaks and the troughs. The one I’m look­ing at only has half the needed dec­i­mal points in the “lows” col­umn, which makes it a bit in­ter­est­ing. Ei­ther way, you get to re­joice or de­spair, if you en­joy that sort of daily thing.

Div Yield is use­ful. This takes all the past an­nual div­i­dends, (in­terim, fi­nal, and any spe­cials), adds them all up and di­vides them over the cur­rent price to get the gross yield. Your tax and im­pu­ta­tion sta­tus may al­ter your fi­nal re­sult, but as a guide, it’s fine. Note: ev­ery­thing here is his­tor­i­cal and may not fore­tell what the com­pany shall do in the fu­ture. This con­trasts with what your bro­ker may quote you, they typ­i­cally use for­ward fore­casts and ra­tios, which are more help­ful.

The P/E Ra­tio is prob­a­bly one of the most sali­vated over bits. It takes the cur­rent price and di­vides it by the earn­ings per share. Presto! You now have a mea­sure of how many years of earn­ings in­vestors are will­ing to pay for a stock.

The old school rule of thumb used to be that a low P/E in a sec­tor (for you line them all up and peer at them un­der your share­bro­ker mi­cro­scope you see) sig­ni­fied cheap, and a high P/E ex­pen­sive. And lead­ing on from that you were sup­posed to be able to pre­dict whether stocks would rise or fall. Prob­lems arise, how­ever, such as in the tech sec­tor, where com­pa­nies can sus­tain neg­a­tive P/ES for years, in some cases decades, yet their shares per­form amaz­ingly. Humph.

The dan­gers of yes­ter­day’s news in a clincher. I en­cour­age all in­vestors to start at the NZX, ASX & Bloomberg web­sites. The pa­per is great for check­ing, as Ge­orge W Bush liked to say, “From time to time”. Caro­line Ritchie is a for­mer AFA, share­bro­ker & port­fo­lio man­ager. She runs In­vest­ment Stuff, an in­vest­ment coach­ing ser­vice. Visit her at­vest­ State­ments in this col­umn are not fi­nan­cial ad­vice.

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