Real-time market info is the best
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 at www.investmentstuff.co.nz. Statements in this column are not financial advice.