Author, Andrew Sheldon
Global Mining Investing is a reference eBook to teach investors how to think and act as investors with a underlying theme of managing risk. The book touches on a huge amount of content which heavily relies on knowledge that can only be obtained through experience...The text was engaging, as I knew the valuable outcome was to be a better thinker and investor.
While some books (such as Coulson’s An Insider’s Guide to the Mining Sector) focus on one particular commodity this book (Global Mining Investing) attempts (and does well) to cover all types of mining and commodities.
Sunday, March 09, 2008
Typically stocks that are have been making losses are trading at huge discounts. Shareholders have abandoned the stock, and will be looking for signs of improvement. Typical signs are:
1. Changes in senior management & the board
2. Asset sales
3. Restructuring of debt
Unfortunately the information provided by Forbes is not really in a useful state. We really need to import this data into a spreadsheet. I am assuming that Forbes has applied a consistent format for calculating this data, but since its a new service and not a market advisor, it would be worthwhile to check the figures. By doing that we can perform some simple analysis of financial ratios:
1. Profits as a fraction of sales: This will provide an indication of which companies have low profit margins. Certain industries have better profit margins than others, so its worth comparing the companies with industry peers. Bear in mind that two insurance companies need not be the same. One might be insuring buildings, the other is offering house insurance. We are looking for patterns at first, then we need to explain the discrepancies.
2. Earnings as a fraction of market capitalisation: This will tell you which companies are valued at a discount or premium in the market. Its like a price-earnings ratio (PER). You need to consider why the stock is trading at a premium. These are major stocks, so they tend to be high profile. So you need to know the reason for the under- or over-rating. eg. Oil companies 5 years ago were trading at a discount because because whilst oil prices were historically high, the market thought they would collapse back to $9/barrel. That perception has since changed and oil companies are amongst the largest in the world, with oil at $105/barrel up from $44/barrel at the time.
3. Profits as a fraction of assets: This will provide an indication of which companies have under-performing assets. Assets can be under-performing for a variety of reasons. The profits might be low because those assets have huge liabilities against them. Given the outlook for higher inflation, we would need to consider the risk of higher interest charges. This might be considered a negative, but steps to reduce debt would be a positive if done sooner rather than when its forced.
After identifying anomalies, comparing them with peers, and attempting to explain the anomaly in the market rating, the next step is to look at the stock chart, and to take a closer look at the company. Then I would be trying to find a CFD provider who trades that stock.
Andrew Sheldon www.sheldonthinks.com
You can view foreclosed properties listed for as little as $US10,000 in Japan thanks to depopulation and a culture that is geared towards working for the state. I bought foreclosed properties in Japan and now I reveal all in our expanded 350+page report. The information you need to know, strategies to apply, where to get help, and the tools to use. We even help you avoid the tsunami and nuclear risks since I was a geologist/mining finance analyst in a past life. Check out the "feedback" in our blog for stories of success by customers of our previous reports.
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MY ADVICE is (i) look at a range of market indices and decide upon what level of correction would give you the justification you need to get in & out of the market. It might be a 5-10% retracement or a break of trend. (ii) Diversify if you dont have an intimate knowledge of the company or management. More than 30% in one company is aggressive.
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