Stock selection could be a difficult task for most people.One of the most frequents questions people ask me ,is how to choose the best stocks.You will find bellow tips on how to select the most profitable stocks,whenever you want to make your investment decision.
For convenience,I have divided the stock picking tips into two broad categories;Qualitative and Quantitative.Enjoy your reading.
The
QUALITATIVE TIPS
MANAGEMENT
One of the major things you must consider before buying shares of a company,is the company's management.This is because human resoure is the most important factor of production.He organises the other factors of production,and he determines the success of the organisation or otherwise.
The importance of good management in the life of an organisation cannot be over emphasized.A good management will continue to surpass the expectations of stakeholders from time to time.History is replete with stories of turnaround of organisations by some management.We also have situations, where flourishing organisations have gone under, because of an ineffficient management.The CEO and other board members are very key in the life of an organisation.Their commmitment to shareholders' wealth is very important.The management of Companies like,Guaranty Trust Bank, Guinness plc and First Bank have demonstrated un-parralled commitment to Shareholders' wealth.The followimg are things you should find out about the company's management before you part with your money.
Companies where the owners are the managers
One way to make huge fortunes fom the capital market,is to invest in stocks,where the owners are managers.That is, a company where the CEO and other principal officers of the company own substantial amount of shares in the company,especially companies where the founder is the CEO or Chairman.For instance,a company like Guaranty Trust Bank where the the MD/CEO,Mr.Tayo Aderiokun,has over 300million shares,will continue to surpass stakeholders expectations.This is becuse He will continue to strive to make the company better, because as the company is improving, his fortune is also improving.This information can be found in Annual reports of companies.
The antecedent of the diretors.
What companies have they managed before?What are their antecedents?These are some of the questions you must find answers to before you part with your money.The likes of Mr.Felix Ohiweri, Chief Olusegun Osunkeye,Chairman of Nestle have written thier names in gold in this respect.
Timely release of information;
How promptly do they communicate with shareholders? Do they keep Shareholders abreast of happenings in their organisation? .These are some of the questions you must have answers to.This is because some management don't care about the shareholders' so to speak
Friday, May 25, 2007
Thursday, May 24, 2007
BENEFITS OF INVESTING IN SHARES 2
LIQUIDITY
Shares affford liquidity.They can be easily bought and sold.It takes only T+3 days to perfect a transaction on the floor of the Nigerian exchange.Where 'T' represents the day of transaction.This means that an investor can invest or divest from a company within a week.
COLLATERAL FOR LOAN
Shares of quoted companies are one of the most acceptable form of collateral to secure loans and advances by financial institutions.An investor's CSCS statement can be accepted as a collateral for loans and advances.
POTENTIAL DIRECTORSHIP OF A PUBLIC LIMITED COMPANY
Becoming the director of a public limited company is not the exclusive preserve of only those who start the company.All a prospective director needs to do is to acquire a certain percentage of the company shares(this varies from one company to another).An investor,who desires to become a director of a PLC. could also check the Articles and Memorandum of Asssociation of the company of his choice for the procedure of becoming a director.
There are so many benefits atttached to being a director of a company.Directors get emouluments for their service,and they also get all the other benefits,they deserve as an investor.
If you can, try to be one!
AUDIT COMMITTEE MEMBER
Shareholders are also eligible to be Audit commitee members.Audit commmitee members look into the acccounts presented by the company.They also get paid for rendering this service,in addition to other benefits due to them.
CONFIDENTIALITY
An investor, who does not want people to know of his interest in a company ,will find shares plesant.This is because unless you tell people about your shareholding in a company.They might never find out.
TRANSFERABILITY AND DIVISIBILITY
Shares can easily be transfered from one person to another.Parents could pass shares as inheritance to their children.This is a way of securing the financial future of such children.
VOTING RIGHT
Shareholders have a say in the affairs of the company.One of the ways they express themselves is by voting at the Annual and Extra-ordinary general meetings of the company .The board of directors needs the ratification of shareholders, before any major decision is taken.For instance,shareholders must give their consent before a company embarks on a public offer or a right isssue.They also have the rights to sack errring directors.They do this by exercising their voting right.
MINIMAL START-UP CAPITAL REQUIRED
Most profitable investments require the commmitment of huge sums of money.This is not the case with shares.A Person can start investing in shares ,with as little as Five thousand naira and watch his investment grow.What are you waiting for?
PRESTIGE AND PEACE OF MIND
Having shares also elicits some form of satisfaction.An investor ,who sees the price of his stock appreciating will be happy.Another investor,who sees a product of his company may say to himself,'I am a part owner of that company'.It could also give an investor peace of mind ,because he knows he has something to fall on in case of an emergency.
Wouldn't you rather buy shares?
The next thing I will discuss on this blog is how to pick profitable stocks.
Shares affford liquidity.They can be easily bought and sold.It takes only T+3 days to perfect a transaction on the floor of the Nigerian exchange.Where 'T' represents the day of transaction.This means that an investor can invest or divest from a company within a week.
COLLATERAL FOR LOAN
Shares of quoted companies are one of the most acceptable form of collateral to secure loans and advances by financial institutions.An investor's CSCS statement can be accepted as a collateral for loans and advances.
POTENTIAL DIRECTORSHIP OF A PUBLIC LIMITED COMPANY
Becoming the director of a public limited company is not the exclusive preserve of only those who start the company.All a prospective director needs to do is to acquire a certain percentage of the company shares(this varies from one company to another).An investor,who desires to become a director of a PLC. could also check the Articles and Memorandum of Asssociation of the company of his choice for the procedure of becoming a director.
There are so many benefits atttached to being a director of a company.Directors get emouluments for their service,and they also get all the other benefits,they deserve as an investor.
If you can, try to be one!
AUDIT COMMITTEE MEMBER
Shareholders are also eligible to be Audit commitee members.Audit commmitee members look into the acccounts presented by the company.They also get paid for rendering this service,in addition to other benefits due to them.
CONFIDENTIALITY
An investor, who does not want people to know of his interest in a company ,will find shares plesant.This is because unless you tell people about your shareholding in a company.They might never find out.
TRANSFERABILITY AND DIVISIBILITY
Shares can easily be transfered from one person to another.Parents could pass shares as inheritance to their children.This is a way of securing the financial future of such children.
VOTING RIGHT
Shareholders have a say in the affairs of the company.One of the ways they express themselves is by voting at the Annual and Extra-ordinary general meetings of the company .The board of directors needs the ratification of shareholders, before any major decision is taken.For instance,shareholders must give their consent before a company embarks on a public offer or a right isssue.They also have the rights to sack errring directors.They do this by exercising their voting right.
MINIMAL START-UP CAPITAL REQUIRED
Most profitable investments require the commmitment of huge sums of money.This is not the case with shares.A Person can start investing in shares ,with as little as Five thousand naira and watch his investment grow.What are you waiting for?
PRESTIGE AND PEACE OF MIND
Having shares also elicits some form of satisfaction.An investor ,who sees the price of his stock appreciating will be happy.Another investor,who sees a product of his company may say to himself,'I am a part owner of that company'.It could also give an investor peace of mind ,because he knows he has something to fall on in case of an emergency.
Wouldn't you rather buy shares?
The next thing I will discuss on this blog is how to pick profitable stocks.
Wednesday, May 23, 2007
BENEFITS OF INVESTING IN SHARES 1
There are so many reasons why you should invest in the capital market .I will explain them below.
DIVIDEND
This is a slice of the profit that is made by a company.This profit is shared among the owners of the company at the end of every financial year.Dividends are given according to the number of shares an investor has in the company.
BONUS ISSUES
These are shares that are given free of charge to shareholders,according to the proportion of ownership in the company.Bonus issues rank equally in all respects with existing shares of the company.This increases the number of shares an investor has in the company.
The way to profit from bonus issues given by companies is to buy shares of companies, whose management give out bonus issues regularly.For instance,an investor who bought 10,000 units of Union bank shares in 2003 now has 25,073 units shares in the company.This is because Union bank gave a bonus of 1 for 3 , for three consecutive years,and a bonus of 1 for 10 in 2006.
CAPITAL APPRECIATION
One of the major reasons why you should invest in the capital market is, capital appreciation.A stock is said to appreciate,when the price is above the purchase cost.The Nigerian stock exchange offers superb capital appreciation prospects.For instance, an investor who bought 100,000naira worth of Zenith bank shares now has investment worth over 450,000naira in the company.This is because the stock has appreciated by over 3000%.
The key to making money through capital appreciation is to buy stocks that have growth prospects.By this I mean you should buy low and sell high.I will discuss this in greater detail later.
DIVIDEND
This is a slice of the profit that is made by a company.This profit is shared among the owners of the company at the end of every financial year.Dividends are given according to the number of shares an investor has in the company.
BONUS ISSUES
These are shares that are given free of charge to shareholders,according to the proportion of ownership in the company.Bonus issues rank equally in all respects with existing shares of the company.This increases the number of shares an investor has in the company.
The way to profit from bonus issues given by companies is to buy shares of companies, whose management give out bonus issues regularly.For instance,an investor who bought 10,000 units of Union bank shares in 2003 now has 25,073 units shares in the company.This is because Union bank gave a bonus of 1 for 3 , for three consecutive years,and a bonus of 1 for 10 in 2006.
CAPITAL APPRECIATION
One of the major reasons why you should invest in the capital market is, capital appreciation.A stock is said to appreciate,when the price is above the purchase cost.The Nigerian stock exchange offers superb capital appreciation prospects.For instance, an investor who bought 100,000naira worth of Zenith bank shares now has investment worth over 450,000naira in the company.This is because the stock has appreciated by over 3000%.
The key to making money through capital appreciation is to buy stocks that have growth prospects.By this I mean you should buy low and sell high.I will discuss this in greater detail later.
Monday, May 21, 2007
BUYING SHARES THROUGH THE SECONDARY MARKET
The secondary market is similar to other traditional market in some respects.It is the market for existing securities.It is the market where shares are bought and sold.An investor needs the service of a stockbroker to buy shares through the secondary market.Stockbrokers are intermediaries between buyers and sellers.They are the only people who are are authorised to buy and sell shares on the secondary market.The secondary market is the floor of the stock exchange.It is the place where trading is carried out.
The procedure for buying shares from the secondary marketis very simple.It is explained thus:
STEP1:Collect a CSCS account opening form from a licensed stockbroker of your choice.
STEP2:Fill in the neccessary details and return to your broker.
You can start buying shares after a CSCS account has been opened in your name
The procedure for buying shares from the secondary marketis very simple.It is explained thus:
STEP1:Collect a CSCS account opening form from a licensed stockbroker of your choice.
STEP2:Fill in the neccessary details and return to your broker.
You can start buying shares after a CSCS account has been opened in your name
BUYING SHARES THROUGH THE PRIMARY MARKET
The primary market is the market where companies seeking for fresh funds for the first time access.These companies usually spend a lot of money on advertisement both in the print and electronic media to woo people to buy shares in their company.It could be an Initial public offering ,Offer for sale, Private placement,rights issue.t.c
An investor who buys shares through the primary market is issued a share certificate.A share certificate is a proof of ownership in a company,though we now have e-IPO .e-IPO is a recent development.An investor who chooses the option of the e-IPO will have his CSCS account credited directly with the number of shares he purchases on the primary market.This will save the investor of the stress of demobilizing his share certificate.
One of the unique features of buying shares through the primary market is that it is commision free.All a prospective investor needs to do is to collect a prospectus from his stockbroker or any bank close to him.He will then fill out the form and submit it to his broker or banker with the amount of money for the number of units he applies for,period.
An investor who buys shares through the primary market is issued a share certificate.A share certificate is a proof of ownership in a company,though we now have e-IPO .e-IPO is a recent development.An investor who chooses the option of the e-IPO will have his CSCS account credited directly with the number of shares he purchases on the primary market.This will save the investor of the stress of demobilizing his share certificate.
One of the unique features of buying shares through the primary market is that it is commision free.All a prospective investor needs to do is to collect a prospectus from his stockbroker or any bank close to him.He will then fill out the form and submit it to his broker or banker with the amount of money for the number of units he applies for,period.
Wednesday, May 16, 2007
INTRODUCTION TO SHARES
Shares are units of ownership in a company .They are the small units into which the capital of a company is divided into.A person who has shares in a company is called a shareholder of the company.For instance,people who have shares in Guaranty trust bank plc. are shareholdes of the bank.Shareholders get a slice of the profit that is made by the company where they have shares.They are also entitled to some other benefits.
HOW TO BUY SHARES
A prospective investor can buy shares either though the primary market or through the secondary market.The primary market is the market for new issues of securities.Companies that are seeking for fresh funds from the capital market do so through the primary market.The secondary market is the market for existing securities.It is the market where shares are traded.
HOW TO BUY SHARES
A prospective investor can buy shares either though the primary market or through the secondary market.The primary market is the market for new issues of securities.Companies that are seeking for fresh funds from the capital market do so through the primary market.The secondary market is the market for existing securities.It is the market where shares are traded.
Subscribe to:
Posts (Atom)
