Forum Archive Index - October 2000

["Steve Moxham" <stevemox@e3.net.nz>]

There are no hard and fast rules. It takes a bit of analysis from all angles, including fundamental, technical, and qualitative measures. A good dose of intuition or feeling also wouldn't go astray.

 

NTA stands for net tangible assets. It represents the value of physical assets after paying off debt. If the company were to be wound up, the NTA in cents per share is what you could expect to receive. However sometimes assets may be under or over valued on the books and so NTA is only a rough guide.    

 

Does NTA affect share price?

 

Some would say yay, some would say nay. It may be comforting to know that you paid $1 for a share when its net assets are $2. However if the company starts racking up losses the NTA is going to fall as capital is eaten away. It's only cheap or undervalued if the prospects for the company are sound and improving.

More important for a company's share price are its profits or potential prospects for profit. Shareprice is more a function of popularity and market sentiment. Thats what you've got to try and anticipate!

The market may limit the downside of a shareprice if it thinks it has fallen too far below NTA. 

 

Is a higher or lower NTA good?

An NTA higher than what you paid for the share is good if the company decides to wind up, but more important to investors are future income streams because that means 'pay day' through dividends or capital appreciation. 

If a shareprice is less than NTA it can give you a good indication of how the market views and values the company.

  

Are there any good websites to explain things like
NTA, Tax imp, P/E ratio to a beginner?

 

For a brief explanation of terms you could start here:

http://www.sharechat.co.nz/education/glossary.shtml

 

MOST IMPORTANTLY and finally, in laymen not buffet
terms what and where should a beginner look for in
shares? (eg high NTA or P/E ratio)

Isn't that the $64,000 question for any investor! You may be looking for different things depending on whether you want to trade or invest, and that may affect the type of companies you want to buy. Evaluating the efficacy of any strategy is best done by experience. If you're short term you might want to learn a little technical analysis. If you're in for the long haul you should evaluate the company, its prospects, industry, potential for growth, and try and pick it up as cheaply as possible. I suggest you read some books on investing. A favourite of mine is "Super Stocks" by Kenneth Fisher.  

       

I hope this has helped you a little and not confused you more. =) The preceding is of course just my opinion and others may have a different perspective.