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Share Pyx Scores Because It Is 'Fundamentally' Sound
Buying and Selling Shares without Method is Madness.
The Share Pyx System Makes Sense
· Share Pyx is Unique
Share Pyx is not just the best system
of share selection. We maintain that it is the only method
that enables investors to reach decisions logically and systematically.
Yes, there are other methods of choosing
shares. Most entail collecting and scrutinising numerous
financial indicators about each company. But amassing data
gets you nowhere if you do not know the relative importance of
each item and how it can be used to arrive at a fair price.
- Maximum Return with Minimum
Risk
Share Pyx focuses on a
few key figures and leads to precise
answers, based on the belief that all investors, whatever their financial
circumstances, have a common aim - to get the maximum return for
their money at minimum risk.
Moreover, the relative proportions
of dividends and capital gain are not important. Investors
want the best possible total return.
- Grow Wealth Wisely
Share Pyx selects shares based on fundamental
value, because they are the kind of shares likely to provide the best
return with minimum risk.
Speculators may boast of making fabulous
short-term profits, but they may lose as much or more in the
next trade. Consistent gains are what count.
- Picking Value Stocks
Investors are frequently urged by financial
gurus to choose 'value stocks',
but they are not told how 'value' can be recognised or measured. Share
Pyx deals with this question thoroughly and conclusively.
The simplistic answer is that the fundamental
value of a share is the sum of the present values of the future
stream of dividends and the proceeds of a sale at some unspecified
future time. But there are complex factors to be taken
into account.
- The Growth Factor
The special attraction of shares is their
potential for growing wealth. The market values this factor
so highly that share prices are, on average, more than double
what they would be if the dividend return remained static.
Clearly, the greater the growth in earnings per share
(and therefore the prospect of an increasing dividend), the greater
the price premium. But the vital question is what measure of growth deserves what price.
- Growth Sustainability
Specifying a fixed growth rate is not sufficient
to quantify the long-range prospects of a company. The
extent to which a particular rate of growth is sustainable is
of critical importance, because the price obtained for the share
when it is sold sometime in the future will depend on the growth
rate at that time.
So any share valuation must take account of
the extent to which the forecast growth rate is likely to trend
downwards in the course of time.
- Reliability of Forecasts
The certainty with which the future performance
of companies can be forecast varies for reasons not necessarily
connected with their size or standing. The greater the
uncertainty, the greater the risk that growth will deteriorate.
So when the outlook for a company seems
unclear, it is wise to build in an increased downtrend rate or,
to be safe, you can ignore that company altogether.
- The Earnings Trajectory
A realistic forecast of future performance
must therefore have three components
- The last reported earnings per share;
- The current earnings growth rate;
- A percentage annual downtrend in that
growth rate, called the growth attenuation
rate.
The earnings curve generated by these three
variables can be described as the earnings trajectory.
Most analysts would accept this definition
of fundamental share value, but they have not been able to put
it to practical use, because there has been no generally known
method of calculating the value of the total payback.
SHARE PYX HAS THE WINNING FORMULA
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