It is usually agreed that casinos should, in the public interest, be inaccessible and expensive. And perhaps the same is true of the Stock Exchange".
So wrote John Maynard Keynes. Tongue in cheek, perhaps, but his quotation raises an interesting point. Risk and volatility come as a package. That is not to say that a volatile share cannot make a good investment. But the fact that a share goes up does not necessarily make it a good long-term investment, or does it? There are some forces you should keep in mind when analysing price movements, because if you don't understand these basics you might as well take your portfolio to a casino.
The first question you should ask is: "What price should a company's share be"? In theory, the correct price, or "fair value", can be calculated by estimating how much profit the company is likely to earn in the future, then applying an appropriate discount - for example, inflation adjustment - to determine how much future earnings are worth. Divide that figure by the number of ordinary shares outstanding, and you have a price, a textbook starting point. The reality is quite different.
A company's earnings (revenues minus expenses) are published in its financial statements and are normally audited (approved) by a reputable firm of accountants.
However, because companies can "manage" their earnings in certain legitimate ways, try to look at the earnings before interest, tax, depreciation and amortisation (EBITDA) This will give you a better picture of the core business.
Cash flow is another important factor, particularly in the financial environment we find ourselves in today. A strong positive cash flow will have a significant upside influence on the share price. Does the company pay a dividend? Most investors prefer companies that do; in fact, some pension funds can invest only in dividend-paying companies. Look for the dividend yield: this is the annual dividend per ordinary share divided by the current price per share. Generally speaking, the higher the yield the better, but you also need to take into consideration earnings outlook, cash flow and external influences such as interest rates, the economic cycle and foreign exchange-rate movements.
The asset value of a company is another important constituent in valuation. You may read "ABC Fund is on a 15 per cent discount to NAV", meaning you can buy shares in the fund at 15 per cent less than the correct prevailing value. This is what we like: value for money.
There are also external factors to consider. For instance, if a large investment bank issues a "sell" recommendation on a company, you will be one of the last to know unless you are a client of that company.
Then there is the general economic outlook; information about inflation, economic growth, unemployment, consumer spending and interest rates. For example, if unemployment is rising, people become frightened of losing their jobs, so they will spend less, which is not a good thing for retailers. If at the same time consumers are reducing heir debt, this will not be good for banks, who will be receiving less interest payments from customers.
Finally, a useful tip. The "Efficient Market Hypothesis" contends that investors cannot make money trading on news reports and other public information, because the information is already reflected in the share price as soon as it is known.
The tip, therefore, is to do your homework in order to profit from identifying matters that are not reflected in the current share price.
John McGaw is a financial adviser based in Dubai. Contact him at jmcgaw@emirates.net.ae
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Racecard
6.35pm: American Business Council – Maiden (PA) Dh80,000 (Dirt) 1,600m
7.10pm: British Business Group – Maiden (TB) Dh82,500 (D) 1,200m
7.45pm: CCI France UAE – Handicap (TB) Dh87,500 (D) 1,400m
8.20pm: Czech Business Council – Rated Conditions (TB) Dh105,000 (D) 1,400m
8.55pm: Netherlands Business Council – Rated Conditions (TB) Dh95,000 (D) 1,600m
9.30pm: Indian Business and Professional Council – Handicap (TB) Dh95,000 (D) 1,200m
Cricket World Cup League Two
Oman, UAE, Namibia
Al Amerat, Muscat
Results
Oman beat UAE by five wickets
UAE beat Namibia by eight runs
Fixtures
Wednesday January 8 –Oman v Namibia
Thursday January 9 – Oman v UAE
Saturday January 11 – UAE v Namibia
Sunday January 12 – Oman v Namibia
Important questions to consider
1. Where on the plane does my pet travel?
There are different types of travel available for pets:
- Manifest cargo
- Excess luggage in the hold
- Excess luggage in the cabin
Each option is safe. The feasibility of each option is based on the size and breed of your pet, the airline they are traveling on and country they are travelling to.
2. What is the difference between my pet traveling as manifest cargo or as excess luggage?
If traveling as manifest cargo, your pet is traveling in the front hold of the plane and can travel with or without you being on the same plane. The cost of your pets travel is based on volumetric weight, in other words, the size of their travel crate.
If traveling as excess luggage, your pet will be in the rear hold of the plane and must be traveling under the ticket of a human passenger. The cost of your pets travel is based on the actual (combined) weight of your pet in their crate.
3. What happens when my pet arrives in the country they are traveling to?
As soon as the flight arrives, your pet will be taken from the plane straight to the airport terminal.
If your pet is traveling as excess luggage, they will taken to the oversized luggage area in the arrival hall. Once you clear passport control, you will be able to collect them at the same time as your normal luggage. As you exit the airport via the ‘something to declare’ customs channel you will be asked to present your pets travel paperwork to the customs official and / or the vet on duty.
If your pet is traveling as manifest cargo, they will be taken to the Animal Reception Centre. There, their documentation will be reviewed by the staff of the ARC to ensure all is in order. At the same time, relevant customs formalities will be completed by staff based at the arriving airport.
4. How long does the travel paperwork and other travel preparations take?
This depends entirely on the location that your pet is traveling to. Your pet relocation compnay will provide you with an accurate timeline of how long the relevant preparations will take and at what point in the process the various steps must be taken.
In some cases they can get your pet ‘travel ready’ in a few days. In others it can be up to six months or more.
5. What vaccinations does my pet need to travel?
Regardless of where your pet is traveling, they will need certain vaccinations. The exact vaccinations they need are entirely dependent on the location they are traveling to. The one vaccination that is mandatory for every country your pet may travel to is a rabies vaccination.
Other vaccinations may also be necessary. These will be advised to you as relevant. In every situation, it is essential to keep your vaccinations current and to not miss a due date, even by one day. To do so could severely hinder your pets travel plans.
Source: Pawsome Pets UAE
Ms Yang's top tips for parents new to the UAE
- Join parent networks
- Look beyond school fees
- Keep an open mind
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
Globalization and its Discontents Revisited
Joseph E. Stiglitz
W. W. Norton & Company
MATCH INFO
New Zealand 176-8 (20 ovs)
England 155 (19.5 ovs)
New Zealand win by 21 runs
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Moon Music
Artist: Coldplay
Label: Parlophone/Atlantic
Number of tracks: 10
Rating: 3/5
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.