Why is this a good place to start? Because there are two very important things to consider before buying a share:
- Is the company going to be profitable going forward?
- Is it a good price to pay for the company?
To answer the first question you need to understand the company very well. You have to talk to management to understand where they want to take the company. You have to analyze the financial statements to understand the future potential and the risks involved. To do this you have to spend a lot of time and you have to be bright.
Portfolio managers employ the best analysts to do this job. They spend their days dissecting the companies and then make recommendations to the manager of the fund. The fund manager, with years of experience make the final decision based on his/her fund mandate.
Why would I try to do all of this work with my limited time and skill, if I can just go and get the results from their fact sheets?! So if there is consensus between the top fund managers as to which companies will be profitable going forward, the chances of if happening is pretty good!
The second question is not as easy to answer. By the time you see the shares on the fact sheets, the share price might have gone up already, making it less of a good investment. The price you pay will determine the success of your investment.
To summarize, finding a name of a share on a fact sheet makes it a good share, but not necessarily at the right price.
Below is a summary of the top 11 shares from my top 5 rated fund managers. Each share appears on the list of at least 2 of the fund managers.
| Price | F P/E | D/Y | 1 yr | 30day | |
| Anglo American | 264 | 15 | 2.89% | -3.60% | 18.00% |
| Sasol | 530 | 10 | 3.57% | 36.70% | 2.80% |
| BHP | 322 | 13 | 3.49% | 6.10% | 0.50% |
| SAB | 491 | 20 | 2.00% | 9.80% | -8.00% |
| BAT | 527 | 16 | 3.62% | 16.30% | -5.10% |
| Standard | 115 | 11 | 4.11% | -2.60% | -9.40% |
| Richemont | 106 | 51 | 1.04% | 46.70% | 4.70% |
| Old Mutual | 32 | 12 | 3.29% | 21.60% | -4.90% |
| Investec | 75 | 14 | 3.72% | 10.60% | -1.10% |
| MTN | 199 | 15 | 4.35% | 13.30% | -5.40% |
| Naspers | 1138 | 45 | 0.34% | 87.80% | 3.40% |
| 52 High | 52 Low | Median | Fall | ||
| Anglo American | 281 | 185 | 233 | -13% | |
| Sasol | 558 | 369 | 464 | -14% | |
| BHP | 338 | 247 | 293 | -10% | |
| SAB | 550 | 430 | 490 | 0% | |
| BAT | 571 | 454 | 513 | -3% | |
| Standard | 130 | 105 | 118 | 2% | |
| Richemont | 108 | 67 | 88 | -21% | |
| Old Mutual | 35 | 27 | 31 | -4% | |
| Investec | 78 | 60 | 69 | -8% | |
| MTN | 217 | 158 | 188 | -6% | |
| Naspers | 1178 | 556 | 867 | -31% |
From this list I can make the following assumptions:
- They are all quality companies
- They will still be around 10 years from now
The next question is "do they still offer value at the current price?"
To answer this question I look at the information provided next to each one of the shares. I got the information from my online trading platform. Most of the stockbrokers with online trading facilities like Nedbank Online Trading, PSG online, Sanlam I-Trade etc. will provide you with this basic info.
Look at the list. Do you also have these shares on your list? Which of these shares do you think offer value? Would you buy them now? That is what you have to do before I get to the Third lesson. To explain the different columns:
- Price: The current trading price
- F P/E: the forward Price Earnings ratio
- D/Y: Dividend Yield
- 1yr: the price movement over the last 12 months
- 30 days: the price movement over the last 30 days
- 52 High: the highest price over the last 52 weeks
- 52 Low: the lowest price over the last 52 weeks
- Median: the price between the high and the low
- Fall: the percentage the current price can fall to get to the median price
I will tell you which of these shares I would buy today and why in Lesson 3.
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