The Quantum Jump Approach

track record can give an idea as to its future prospects. Most public companies will provide you with a free copy of their last published accounts on written request to the company secretary. These accounts are likely to contain a five-or ten-year summary.

There are ways of calculating ratios (by dividing one number in the accounts by another) which can be compared with other companies, industry norms and previous years. This is known as 'fundamental analysis'.

But all this is likely to be a fruitless task for the investor. Accounts are rarely published sooner than four months after the year-end, so you can be looking at information up to sixteen months old.

The analysis has effectively already been done anyway, by people who had that information (and probably acted upon it) before you ever saw it.

Analysis of Share Price

Analysis of share price covers a range of activities designed to predict future share movement on the basis of past movement.

The two commonest methods are:

i moving average, and

ii charting.

Moving Averages

The object of share dealing is to buy when the shares are at their cheapest and sell when they are at their highest. It must be stated at the outset that no one will ever do this perfectly. If you buy at 10% above the lowest price and sell at 10% less than the highest, you have done very well. If you sell at a good profit, the fact that the share price carries on rising afterwards should not bother you. You must always concentrate on what you have achieved, and not worry about what you might have achieved.

Looking at share movements by themselves is not always helpful, as the movements can be subject to various short-term fluctuations which make it hard to discern a general trend. The moving average method smooths out such short-

Next:

• Demack on The Question Of Ownership
• Demack on How To Develop A Vision To Ensure Success Unquoted Companies

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