Actuality June, 19, 2007

Investments into own business are sometimes wasted money, but not investments into bright future. At the minimum, not the investor should work for the business devouring time and resources, but quite the contrary — business should work for the founder, or the shareholder. Does business work badly? Possibly, it is the reason to invest in other, but successfully working companies. And the easiest way to do it at the stock market is to buy stocks of stably developing enterprises.

In every sector of economic activity there will be nice companies which shares are attractive to invest in. But first of all it is necessary to look at the branch from a bird’s eye view. So to say, from macroeconomic altitudes. Even if a firm has perfect management, production of high quality and has a market for it, it is only half the work. The unsuccessful conjuncture of the prices or changes of consumer preferences can yield a loss even to the best company. So, to begin with we need to understand if the weather is favorable in a branch. We will try to do it by the example of the consumer market.

The consumer market is our consumption. These are commercial networks, articles of food, pharmaceutics … The raw dollars flow, which enriched the elite at the beginning of a new century, and managers of lower or higher echelon in the middle of the decade, has reached, at last, the broad masses. Millions of people make choice in favor of supermarkets and the products with world famous logotypes. There works the well-known regularity: the growth of the population incomes enriches first of all enterprises of consumer sector.

The private investor can buy stocks of these or those companies by itself. The technology of stocks buying requires a special attention. Now we will examine the product proper. After all, the main thing is not how but what to buy.

For the company which have come to a stock exchange the share becomes a main product. After all value of all business depends on the share price. That is why proprietors of the company spend costs on intensive audit, lining clear frame of business for shareholders and invite independent directors for the company management.

On the other side of barricades — the mass of the investors, wishing to buy shares to earn on growth of their value and dividends. In investment trust companies work entire analytical departments to orient investors and indicate them attractive shares.

As a rule, analysts specialise on particular branches and by themselves calculate the so-called valid value of the share (prospective value of the share for particular time, more often for a year). One can make it either by analysis of financial flows of enterprise or by matching the results with similar corporations in other countries.

Thus it is necessary to bear in mind, that analysts of broker and investment trust companies appear just on the client’s party, that is the investor. Their problem — to let the investor to earn, and their concern — commissions. That is why analysts not only directly indicate growing stocks, but also prevent of hazard investment into crisis enterprises.

Certainly, any analyst researching a financial accounting of the emitter and trying to find in a torrent of corporate news hints on further developing of enterprise, — not truth at all in an ultimate authority. As any person, he can make mistakes. But if business is researched by ten analysts of different investment trust companies, the probability of a serious error is brought practically to nought.

The collective reason of experts gives quite correct price point for long-term investors who do not need to delve into the companies accounts by themselves and watch corporate events.

Thus each analyst should give two yields as a result of the research— valid or guide price of a share in a year and the growth estimation calculated as a difference between the running quotations and the analyst’s prognosis.

There is also such useful instrument, as a consensus-forecast, or an average guide price of analysts of different investment trust companies. This reference point allows the investor to avoid a situation in which he would be compelled to trust judgement of only one investment trust company.

Do you have an impression that prognoses of analysts seldom come true? We will not hurry. First of all we will accept, that investments are for a long time. For a year and longer. That´s why prognoses do not come true at once. And more. The prognosis is a trying to forecast the future according to the present. Therefore prognoses are changeable and not always exact, and their authors do not bear responsobility for their evaluations. Believe the prognosis or not — decides the investor, that is you.

So, let´s look at consensus-forecasts and guide prices of the companies´ shares of a consumer sector. The branch of private consumption is heterogeneous: here are more or less successful companies. Not all representatives of this market can brag of iridescent perspectives so we will not present their “achievements”.

In fact, these are all “secrets”. Investment for the term of 1-3 years is good because you don’t have to (as at trade on “Forex”) study the quotes constantly, drink valerian and to addle head with stock exchange figures and reports. This basic strategy is named «has bought and keep». And money will multiply. Not quickly, but safely.

Successful investments!