The Traders Edge

 


If you've just watched Why you need ShareMagic™ you'll know that we believe in fundamentals. We believe that to be a successful investor in stocks you have to understand the underlying businesses you're buying into. In the words of Jason Zweig:

"A stock is not just a ticker symbol (ie, a price), it is an ownership interest in an actual business, with an underlying value that does not depend on its share price. The market is a pendulum that forever swings between unsustainable optimism (which makes stocks too expensive) and unjustifiable pessimism (which makes them too cheap). The intelligent investor is a realist who sells to optimists and buys from pessimists."

Read on to learn how ShareMagic™ makes the information you need to discover underlying value accessible and efficient.

The Short Answer

Why should you take a good look at ShareMagic™?

The short answer is:

  1. better information
  2. better tools for making sense of the information
  3. unparalleled information integration
  4. the best way to unlock share market value

Let me explain how ShareMagic™ turns data and information into results.

The Truth About Stock Market Data

To understand the ShareMagic™ advantage, you need to understand the world of stock data.

The world is awash with financial information, especially stock data. You can get share prices on any number of websites. You can download annual reports directly from most listed companies. You can read company news in the paper or on dozens of online portals. But there are a few obvious problems:

  1. there is too much information to deal with
  2. most of the available data is 'raw' and hard to digest
  3. a lot of the info just isn't that helpful

Before I tell you how ShareMagic™ solves these problems, we need to look in more detail at the information you need to get investment results.


Price data

Sometimes referred to as time-series data – because it is used to draw graphs – this is the information you see all over the place: the latest share price of Anglo American or MTN, the price trend of Vodacom or Nedbank, and so on. When a script writer is preparing text for the business news, he (or she) looks at the price data and writes something like, 'Anglo American was up R2.50 today in spite of poor demand for resource stocks, while Billiton fell R3.00.' This is only interesting if you know exactly what these shares were trading at yesterday; even so, it's not particularly helpful when it comes to making decisions.

Stock exchanges pump out price data, making it the basic ingredient for share trading programs. But this data is not very useful in its raw form, hence the proliferation of charting packages (also know as 'technical analysis' packages) available to investors – these try to turn price data into useful information.

Put into graphical format with the addition of some statistical analysis, price data can be very useful indeed. But is it enough?

Believe me, 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:

  1. is this really a good business?
  2. how much money do they actually make?
  3. will their profits keep growing?
  4. what's their competitive position?
  5. are they facing any strong headwinds?
  6. 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.


Fundamental Data

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:

  1. most annual reports run to hundreds of pages
  2. annual reports are not consistent in the way they present information and numbers
  3. 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.


News

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 story?

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? ShareMagic™ 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 ShareMagic™ 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:

  1. a technical analysis package for charting
  2. financial sites to keep up with breaking news
  3. reference material (like The Stock Exchange Handbook) to get business facts
  4. listed company websites to get electronic annual reports
  5. portfolio management tools to keep track of open positions
  6. advice services for new ideas

And all these are probably in addition to an online trading account!

ShareMagic™ 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 Share Magic™ Advantage

But does one really need all this information? I 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 ShareMagic™ 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.

To summarise...

Successful investing is all about access to the right information and the ability to interpret information efficiently. That's the beauty of ShareMagic™ – it brings everything you need into a single interface and makes the information easy to decipher.

The ShareMagic™ solution gives you:

  1. great charting
  2. pertinent news organised by co9mpany
  3. instant online access to intra-day prices and live information
  4. detailed company fact sheets
  5. one of the best portfolio management tools available*
  6. structured financial data that makes it easy to see trends and performance

The only question really is – can you afford to be without it?

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