From the pen of Karin Iten…

Dear Investment Academy Reader,

Does the thought of cruising your newspaper’s share price page fill you with the same dread and confusion your Matric trigonometry exam did? Do you often find yourself wondering why newspapers take the trouble of allocating so much space to shares, when there could be more sport or entertainment news? If you answered yes to either (or both) of these questions, then this Investment Academy is for you.

With all the talk about market volatility, there’s nothing more important than taking the time to track what your shares are doing. Although the share price page is historic, reflecting the share’s movement of the previous day, they’re vital for keeping you up to date on your portfolio’s happenings. After all, they’re one of the best ways to decipher when the time is right to buy, hold and sell your shares.

But to do this, you first need to understand what all those figures mean. So today, we’ll be taking a look at the share page to show you how to read it.

Finding your share

The shares listed on the JSE’s main board fall into nine major sectors, which are further divided into the industry classification. This means the company is placed according to what classification its core activity falls under. So, the first thing to do when looking up your share is identify exactly what it is that the company does. Pretty obvious isn’t it? But it makes it much harder to find the share if you aren’t sure what the business’s main enterprise is.

How are shares classified?

To help you out, here’s a look at what the JSE’s nine sectors include:

*** Resources – oil and gas
*** Basic industries – chemicals, forestry & paper, metals, coal, diamonds & gemstones, and mining
*** General industries – construction & materials, general industries, electronics, engineering, transportation, and support services
*** Cyclical consumer goods (businesses whose profits are highly exposed to the ups and downs of the business cycle) – automobiles & parts, beverages, food producers, household goods, leisure goods, and personal goods
*** Non-cyclical consumer goods (those companies whose profits aren’t affected as much by cycles) – healthcare equipment & services, pharmaceuticals & biotechnology, food & drug retailers, and general retailers
*** Cyclical services – media, and travel & leisure
*** Non-cyclical services – fixed-line telecommunications and mobile telecommunications
*** Financials – banks, non-life insurance, life insurance, real estate, general financial, and equity investment instruments
*** Information technology – computer hardware & software, and computer services

In addition, newspapers also list the prices of shares that fall under specialist securities. These include companies listed under the AltX (the Alternative Exchange), the Development Capital Market (DCM), the Venture Capital Market (VCM), corporate debt, Exchange Trust Funds (EFTs), investment products, Kruger rands, preference shares, warrants and other securities.

One important thing to note is, for space reasons, company listed names (known as “short names”) are in their abbreviated form. So if, for instance, you were looking for the price of Anglo Gold Ashanti you have to look for it under its short name “Anggold”. Following the short name is the listing’s three letter abbreviation (known as the ticker symbol). For our example, the ticker symbol is ANG.

What do the numbers mean?

Once you’ve found the sector and located your company, it’s time to look at what the numbers mean. You’ll find these numbers entered under the following columns.

Closing price (Close)
The first number following the company name and ticker symbol is the Closed or Ruling Price column. This is the price the last transaction of the day was conducted at, or the share closed at.

Highs and lows
Next comes the share’s high and low prices for the day. These figures give useful indications of how much the price fluctuated throughout the day.

Move
This column reveals how many cents the share has gained or lost from the time of the previous close. Note that a loss is indicated by a negative number (e.g. -46). If the entry’s blank or there’s a dash in the column, it means the share price hasn’t changed since the last close.

Year’s percentage move (YM %)
This indicates the share’s percentage gain or loss over the past 12 months.

Dividend yield (DY)
A dividend is a payment of a company’s after-tax profit to individual shareholders. It’s not a mandatory payment and is, therefore, at the discretion of the company’s board. If a company chooses to pay their shareholders a dividend (quarterly, half-yearly or annually) it will be listed under this column. DY is calculated by dividing the actual per share dividend by the share price multiplied by 100 (for the percentage). This means if you receive a R10 dividend of a share trading at R500, then the share’s dividend yield is 2%.

Price to earnings ratio (PE)
This refers to the market price of a share divided by its after-tax earnings. It’s calculated by dividing the price of the share by the annual earnings per share. For example, if a company’s profit is R5 million for the year and it has 2 million shares in issue, its earnings per share will be R2.50.

Note that the DY and the PE ratios always move in opposition – as the share price goes up the DY falls and PE rises, and vice versa.

Volume
This allows you to find out how many shares were traded that day. When large volumes of typically quiet shares start to move, this is usually a good indication that something’s afoot. If there is a significant jump (up or down) in the price when the volume traded is large, it’s time to start asking questions.

One last thing, if you see an “S” listed next to the company name it means the share has been suspended. If this is the case, the price given will be that of the last day the share traded before suspension.

Hope this has made looking for share’s a whole lot less intimidating to all you novice investors.

Here’s to your financial freedom!

Karin Iten,
for the Investment Academy