Get ready for a profitable 2017

Thursday, 5th January 2017 14:52 - by Stefania Barbaglio

With 2016 almost behind us and the Christmas holidays just around the corner, there will soon be plenty of time to spend with family but also to re-think your investment portfolio. It’s time to take stock of your profits and losses and carefully consider good opportunities to kick off 2017.

Here are a few DYOR (Do Your Own research) tips for investors to assess companies:

First of all, you have to decide what you would like your time frame to be: are you a day trader, short-term investor or willing to hold on for longer? (For the sake of ease, I am assuming you are a medium-term investor.)

To start with, let’s look at the fundamentals – i.e. key financial information. This means a sound analysis of the balance sheet. Is the company making profits or losses? Do they have any form of debt? If there is a dividend policy, what are the terms? What is the spread? How many shares are in issue and what is the market capitalisation compared to their peers? Last but not least, do they have cash in the bank? If not: red light! They might be going for a placing and you should carefully consider your entry in order not to get diluted.

On lse.co.uk, you can search for the company you are interested in and examine their fundamentals, share price chart, regulatory news (RNS) etc.

Who are the directors and management team running the company? What is their experience and track record? This is a key point. If you have the right people who can deliver on strategy, it is much easier for shareholders to feel comfortable with their investment. Are they open to dialogue with investors? Communication with shareholders is crucial nowadays. On Share Views, the lse.co.uk TV show, we regularly invite CEOs to answer questions from private investors, so make sure you check our video library.

What is the company’s business? Depending on the sector they operate in, there might be different considerations. For example, if they are a resource company, you want to see if they are an explorer or a producer and where their assets are. For pharma, which drugs are they developing and what is unique about it to make it a breakthrough treatment? It is crucial that you understand the space they operate in and the catalysts that can influence the company’s performance.

What is the company strategy? Look at recent RNS newsflow and see the developments made over the last 12 months. It will help you to understand where they are.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.