We love price data – we couldn't live without it – but this is the important question that all traders and
investors have to grapple with:
is it enough?
You've probably already guessed that we don't think it is. You can discover a lot about a stock by looking at the history of its share price but you cannot answer a whole bunch of very important questions. To name just a few:
is this really a good business?
how much money do they actually make?
will their profits keep growing?
what's their competitive position?
are they facing any strong headwinds?
is the share cheap or expensive at the moment?
To put price data into perspective, let's consider that last question for a moment. Nobody can argue that it's better to buy
a thing that's worth buying when it's cheap. Sometimes, if something is really good quality, it may be a good idea to buy it
even when it's expensive, but you're always going to do better if you buy when it's cheap. (NB: We're talking about buying
quality here – from an investment point-of-view, buying something with no real
value is never a good idea, no matter how 'cheap' you can get it.)
Now the first important lesson is that price and value are not the same thing. If one share costs R5 and another costs R200 that doesn't make the first one cheap. In the stock market,
price and value are completely unconnected.
The second lesson is that where the price has been in the past doesn't necessarily tell you anything about the current
value. If a share traded at R100 last year and it's now trading at R50, that doesn't necessarily mean it's cheap – it might
even be more expensive that it was a year ago! It all depends on what's happening in the underlying business.
The term 'fundamentals' really covers two categories of information – business facts and financials. Business facts
include what the company does, where it operates from, who runs the organisation, who it competes with, and how many people it
employs. Financials tell us, amongst other things, how much money the company makes (sales and profit), how much tax it pays,
how much it owes to creditors, and how much it gives to shareholders by way of dividends.
You can get most of this information out of annual reports, but these present a few challenges:
- most annual reports run to hundreds of pages
- annual reports are not consistent in the way they present information and numbers
- you need lots of annual reports to provide a broad overview
Those investors – like professional fund managers – who look at annual reports regularly invariably capture the key
numbers into an Excel spreadsheet or a database – it's the only way to analyse trends and patterns. They usually create
summaries of the business facts as well – after all, you don't want to have to go back to the annual report every time you
look at a share.
When you invest in a company you want to know when they're in the news. Sounds easy enough – just read the business pages
of your morning paper every day. But how do you keep track of what's happening to dozens – or hundreds – of listed
companies? How do you monitor the impact of breaking news on each company, or ensure that you follow each step of an evolving
News summaries organised by category or entity is the obvious answer – and there are many websites and services that do
this. But how much more convenient to have everything – even the news you need – in one place? Magic™
doesn't just give you breaking news, it also files news and official notices by company, allowing you to drill down to what's
important when you're considering a particular stock.
ShareMagic™ – Information Integration
The vision behind Magic™ began with
the need for information integration. Even today, with the vast amount of market data online, most investors and traders use
several tools and services to get the job done. To name the major ones:
- a technical analysis package for charting
- financial sites to keep up with breaking news
- reference material (like The Stock Exchange Handbook) to get business facts
- listed company websites to get electronic annual reports
- portfolio management tools to keep track of open positions
- advice services for new ideas
- And all these are probably in addition to an online trading account!
Magic™ doesn't just seek to pull all this information into one
place, it strives to integrate everything in ways that are intuitive and useful.
The Magic™ advantage
But does one really need all this information? We hear you ask. Isn't there a simpler way?
Unfortunately, the answer is no. When it comes to investing, ignorance is not bliss. You may hear 'charting purists' argue
that all you need is price – that everything that is known about a share is already 'discounted' in the price – but
seasoned investors soon discover that this is just not true. Share prices often react to results releases – going up on good
profits or falling on disappointing results – something that would not happen if the collective market wisdom was always
fully discounted in the share price. In reality, stocks are frequently overvalued or undervalued by 'the market' – this is
precisely where the greatest opportunities are to be found.
To discover growth and value opportunities, you need the fundamentals. What you will discover with Magic™
is that having all the information you need in one place – properly organised and fully integrated – makes it easy to deal
with the overabundance of data that you need to make astute investment decisions.
Successful investing is all about access to the right information and the ability to interpret information efficiently.
That's the beauty of Magic™ – it brings everything you need into
a single interface and makes the information easy to decipher.
The Magic™ solution gives you:
- great charting
- pertinent news organised by company
- instant online access to intra-day prices and live information
- detailed company fact sheets
- one of the best portfolio management tools available*
- structured financial data that makes it easy to see trends and performance
The only question really is – can you afford to be without it?
Where to from here?
Haven't you waited long enough to get the right tools? Take the bull by the horns and give yourself the Magic™
advantage. Call +27 11 728-5510 (toll free) today to sign up for Magic™
or to arrange a no-obligation demo.
Call +27 11 728-5510 now to get started
PS To find out more about the Magic™
to get an overview of the complete product range. Or phone +27
and talk to one of our friendly
PPS If you're still wondering whether you can really make money from investing in stocks, watch our online video
Three Surefire Ways To Make A Million. Even if you don't have any capital to start with and only earn a modest salary, the right investment
choices can make you wealthy.