Having covered a number of company fundamentals that demonstrate how a company is operating (Turnover, Profitability and Leverage), this article will examine the Balance Sheet, which provides an overview of a company’s assets and liabilities, as well as the shareholders’ equity at a given point in time. Each of these sections includes many sub-accounts which […]
Understanding Company Fundamentals – Balance Sheet Read More »
Leverage, or debt as it is more commonly known, is a term that refers to money that a company has borrowed. When a company wants to invest in new assets, it needs cash to pay for them. That cash can come from one of three sources – sales and investment returns, equity capital or debt
Profit is an economic concept which occurs when the income from an economic transaction exceed the costs of carrying it out. For example, if a company sells windows that cost £500 in material and, plus £100 in labour and transportation costs, but they receive £1000 from the sale of the window, then their profit is
Understanding Company Fundamentals – Profitability Read More »
Turnover is a financial term which refers to how much cash has entered a company’s bank account in a given period. In most companies, it reflects the value of its sales in that year, either of goods or services, but before costs such as salaries and taxes. Most investors like to see an increasing turnover
In my previous article, I wrote about my approach to portfolio risk management and the steps I take to reduce my risk profile and qualify potential opportunities. Underneath the hood of any investment engine is a financial model of factors which affect a company’s performance. My ideal portfolio is one which is high yield (compared
When it comes to investment assets there are lots of ways to categorise them. You can categorise by asset type, geography, sector, and so on. One of the most commonly overlooked is liquidity. Generally speaking, assets fall somewhere on a spectrum of liquidity, which refers to how easily convertible they are into cash. Large, listed
Does your portfolio contain sufficient liquidity? Read More »
Earlier this month I was speaking to an old colleague who had discovered my blog and wanted to know about the biggest hurdles that I faced when building my portfolio. Truthfully, the biggest challenges I’ve faced are ones which I’ve only partially overcome and I’m pretty sure I’ll always face them. Building capital. When I
Three things that people won’t tell you about building your portfolio Read More »
Not all that long ago, Neil Woodford was slated as one of the UK’s leading investment success stories. Featured by multiple press publications as ‘one to watch’, retail investors flocked to him as he made generous returns at investment house Invesco Perpetual. When he moved to establish his own funds in 2014, hundreds of investors
The danger of not understanding your investments Read More »
Any savvy investor worth their salt is aware that diversifying your portfolio is a key way to reduce your risk. You might have also heard of the concept of ‘hedging’ your investments, which is a method of reducing the risk of declining prices in an investment. A ‘hedge’ position usually refers to an something which
Cash flow, or the ability of a business to generate cash, is one of the most important factors for success in business. With interest rates at rock bottom levels, access to cheap capital has rarely been more available, but successfully deploying that capital to generate cash is the real measure of a business’s success. A
The markets have been increasingly volatile over the last few months. After an extended period of low volatility, this has caught some investors off-guard, with many piling into ’tipped’ stocks without examining the fundamentals of the company and consequently being surprised when they suffered a sudden drop in value as volatility picked up. Being a
A few weeks ago, I wrote an article about an on-going crisis in business that is being caused by the Big Four accountancy firms. Recent failures of auditors in the UK have left investors like myself with an increasingly strong feeling that the reports we receive are of no real value in determining how a
The Big Four accountancy firms; KPMG, Deloitte, EY and PwC are the four largest auditors of modern businesses. They also happen to have overseen the major corporate disasters experienced by Tesco and Carillion whilst declaring these companies to be fit to trade and properly financed. Sadly, despite these disasters, there seems to be a closed
In a world growing ever faster and more complex, are you prepared to adapt your way of living to keep moving forward? Being able to think critically, analyse and situation and then take action sounds simple, but when facing a barrage of emails, phone calls, meetings, and face to face conversations, are you able to
As an investor who is primarily focused on receiving income from my investments, I am aware of the dangers of falling into a ‘yield trap’. After several years of actively managing a portfolio of investments, I have become better versed with looking beyond the initial headline yield of an investment and learning to assess the
