Stock Market and Shares Essay

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How to select shares
Six common sense strategies, used by successful investors, to identify shares with potential
Plus, a basic guide to fundamental and technical analysis

One College Square South,
Anchor Road, Bristol, BS1 5HL www.hl.co.uk Contents pg 3

Introduction
Why pick shares?
What this guide will tell you

pg 4
Part A. Get the idea Method 1: Economic cycle Method 2: Big Themes Method 3: Scuttlebutt Method 4: Directors’ dealings Method 5: Newspapers and magazines Method 6: Excessive falls Get the idea - Summary pg 12

Part B. Analyse the Company
Fundamental Analysis
1. Performance (Profit Margin)
2. Sustainability (Gearing)
3. Value (PE Ratio)
Fundamental analysis - Summary

pg 16

Technical Analysis
1. Trends
2. Support/Resistance

pg 19
Fundamental or technical analysis? Conclusion

2

Free live share prices
All of our clients can get live share prices across our website.
Unlike other sites which only show static prices, our prices will also continually update on the screen so you will always view the latest share price.
New clients - access live share prices as soon as your account is open
Existing clients - visit www.hl.co.uk/liveprices to activate live prices

Important Investment Notes
All investments should be held for the long term as their value can fall as well as rise, therefore you could get back less than you invested. Unless otherwise stated investments do not provide the capital guarantees of a deposit account. Similarly any yields will vary over time, so income is variable and not guaranteed. This is designed as a guide for information purposes only and is not a personal recommendation. If you are unsure you should seek advice.
May 2014

Introduction
Why pick shares?
In 2008 the FTSE All Share Index fell 33%. It was a terrible year for shares. However, in that year 225 of the 570 shares in the FTSE All Share beat the
Index. The share price of three shares, Telecom
Plus, Randgold Resources and BTG, increased over 50%; pharmaceutical giant AstraZeneca rose
30%.
In the following year, 2009, the market bounced back and the FTSE All Share Index increased 25%.
That year 340 of the 570 shares in the FTSE All
Share beat the index, with 100 shares increasing by over 100%.
The lessons we can draw is that in every year the overall index can mask the performance of individual shares. Even in a disastrous year like 2008 there will be some shares that perform strongly. The challenge for investors is to identify those shares.

What this guide will tell you
The purpose of this guide is not to say selecting shares that perform is easy; it is certainly not without risk. However, it can be a lot easier than you think.
Success in share investing is not a matter of having a PhD in mathematics or just looking at past performance, rather it involves the application of common sense and a disciplined approach. This guide aims to tell you how to get started with this.
Before you go any further you should be fully aware of the risks of investing in shares. Whilst there are always shares that outperform the market, there are also those that significantly underperform. Risk and reward go hand in hand, no matter how confident you are about a particular share, you must be aware that they can fall in value, and you could get back less than you originally invested.
When you think about buying shares, but you don’t have a particular share in mind, you need some ideas for which companies to buy.
Where do you find these companies?
That’s what the first part of this guide is about – it lists six different methods used by successful investors to identify interesting shares. This is not an exhaustive list. You can use some, all, or none of these methods, they are just here to give you some ideas and a simple starting point.
Having found one or more possible shares to invest in, you may wish to take a closer look at each company to see if it will make a good investment. The second part of
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