Today we are going to look at two types of Fundamental analysis that are often used when analyzing stocks and shares. These tools can help you determine what spread betting decisions to make and whether you should take a long or short position on these stocks.
In Sale driven sectors many traders decisions are influenced by expected sales figures that are often released by retailers. Share prices in sales driven sectors can be particularly volatile to these sales figures especially if the sales figures are significantly better or worse than the market previously expected (from historic performances etc). An example would of this be if HMV released poor Christmas sales figures we would expect to see a significant drop in the value of HMV shares. If your not a subscriber to data services such as Bloomberg (unlikely if your new to financial spread betting and CFD trading), you can find such data on Yahoo Finance and other similar websites. Accessing and interpreting this data quickly can give you a step up on predicting the performance of that particular stock.
NAV (Net Asset Value) Per Share
Say you were considering taking over a manufacturing plant how would you decide want they minimum amount that the manufacturing company would be worth? Well you probably around the the value of the plant, plus the machinery and stock that the company had minus any outstanding debts that the company had. This would be a very crude way of working out the factories overall Net Asset Value.
Both analysts and fund managers are fans of using Net Asset Value per Share as indicating the minimum the would pay for a certain stock. Companies that are trading below their Net Asset Value per Share are often hunted down by Traders and Investors. The logic behind this is even if the company was to collapse and had to be sold the traders and Investors will still get more than what they paid for their shares.
Another reason why Stocks trading below their Net Asset Value are hunted out by traders and investors is the hope that the share price will rise and reach at least the Net Asset Value per share. For example if a Stock is trading for 8p and has a Net Asset Value of 12p a share the hope is that the market will realize this and bridge the gap between what the stock is trading for and what it’s Net Asset Value per share is. Making a nice profit for the individual who bought the Stock at 8p a share. Frequently this is the case and the Share price will catch up with the Net Asset Value.
Part of the Beginners Guide to Strategy and Analysis for Spread Betting