Learning about shares: Make the most of the facts at your fingertips

Olympic champ and new investor BARBARA KENDALL gets help from NZX's Dan Dividend

Barbara asks: How can I keep tabs on what companies are up to - their activities, new ventures and plans?

Dan Dividend responds:

You've correctly identified the one thing all investors need - information.

Buying shares in a company without knowing what the company is up to is like throwing all your chips on one number on the roulette table. Fine if you like gambling, not too smart if you want to be a successful investor in the long term.

Fortunately, companies release information through several avenues and it's pretty easy to get your hands on. All you need is the usual equipment: newspaper, television, internet connection and a keen nose to sniff the breeze the business world stirs up.

I'll call on this week's guest NZX broker, ASB Securities managing director Tim Preston, to explain how you can use common information channels.

Tim says: None of the information sources should be used in isolation.

Analysts' reports

Most NZX firms employ or have access to analysts who research companies and make buy, hold or sell recommendations.

Analysts' reports summarise factors affecting companies, analyse their financial results and discuss the merits of their expansion plans, among other things.

Depending on which service you choose as a client, these reports can be available to you and it's worth reading them. Analysts spend a great deal of time researching companies so you don't have to.

Market announcements

NZX requires listed companies to continually disclose "material" information.

Broadly speaking, material information is anything that a reasonable person would expect to materially shift a company's share price if it was generally available to the market.

A company's share price could move significantly in response to information if enough people were prompted to buy or sell shares.

Companies submit market announcements to NZX disclosing material information. NZX then publishes the announcements and makes them available free at nzx.com.

Media

The business section of your daily newspaper and the business news on TV offer a feast of news and views on listed companies.

Add to that the numerous financial magazines and of course the internet, where you can find financial publications and company websites, and you've got a heap of information at your disposal. If you can't get online to check company announcements, anything significant is likely to make the news anyway.

This makes the media a great place to get a round-up of the latest on listed companies: who's taking over who, what's happening in key industries, which way the market went today and more.

If interpreting financial results isn't your strong point, the media can often help too. Around a company's balance date you'll see news reports that pull out the financial highlights and lowlights, especially for larger companies.

Company contact databases

If you're a shareholder you'll already be on the company's investor contact list, meaning the annual report and other company publications arrive in your letterbox or inbox regularly.

Company publications are also available to prospective investors on request.

And, of course, there's a wealth of financial information contained in the annual report. Other company publications, such as newsletters to shareholders and the prospectus, if there is a recent one, will also give you an overview of what the company is up to.

Using information

When a company you own shares in (or one you've shortlisted as an investment possibility) announces information or makes the news, think about how it might affect the company.

Do you think a proposed project is too ambitious or will it put the company under financial pressure? Or do you think the proposal will successfully expand the company and in turn boost the share price?

You can discuss your thoughts with advisers at NZX firms. There is a list of firms at nzx.com.

* GOT A QUESTION? Feel free to email Dan Dividend with your questions.