Nzx Share Prices

Advise For New Share Investors on the NZX   by Cam Watson

It is quite common for new share investors to go straight for the bottom shelf and look for the lowest quality Shares that cost 5 cents. This is a shame because the NZ market has many high quality companies and funds that have a solid track record and are far less risky investments.

Much discussion centres on how the NZX is diminishing and has a limited number of good Investment Options. Given we are a small market; there are still a good number of world-class companies available to investors on our local stock exchange.

Quality is often a key determinant of returns when it comes to any investment. One of the key indicators to look for when it comes to picking good quality businesses is a proven track record of steady growth in earnings per share. Quality businesses should be growing their earnings over time, and this earnings growth should also translate to equally steady growth in dividend per share.

Another attribute of a stable, conservatively managed business is a strong balance sheet. It is a simple, but little considered, fact that companies with no debt do not go bankrupt. Some companies that have defensive businesses and high cash flows can tolerate higher levels of debt, but always look for rock solid finances.

It is important to look for companies with strong market positions and an element of pricing power, as excessive competition puts pressure on margins and undermines profitability. Good businesses will often have the upper hand on their competitors either because they have an unrivalled brand, distribution network or product. They may also have high levels of pricing power, and this ability to increase prices is indicative of a business with a strong market position.

Companies that are defensive are generally higher quality companies. Such companies are those that provide goods and services for which there is a reliable and growing demand. Businesses that provide these