Stock Selection

http://www.stockmarket.co.nz/SSM3.htm

The "Small Company Effect"
Younger investors (who have a long term investment "horizon" and who can afford to take some extra risk) should invest part of their portfolio in some of the "smallest" companies listed on the sharemarket. Older investors (seeking to minimise risk) should aim to invest in shares below the top 10-20% by size as these offer better returns than the very largest listed companies.

Sharebroker "Neglect", Institutional "Neglect"
All investors should therefore seek to own shares that are "neglected" by brokers and have few (or no) institutional shareholders - while avoiding companies "followed" by many brokers and where many institutions already hold significant shareholdings.

"Under-valued" Shares
All investors should seek low P/S (Price/Sales), low P/E and high Yielding shares, while avoiding high P/S, high P/E and low Yielding shares.

"Insider" Buying and Selling, Share Re-purchases
A "buy" signal was considered to have occurred when three "insiders" bought shares within one month, while three sellers within a month constituted a "sell" signal.

Certainly investors should tend to favour Australian shares where several "insiders" have purchased shares during the last year.Share re-purchases are relatively rare, but can lead to excellent investment returns over the following couple of years - especially among the very "smallest" companies!

Relative Price Strength
Compare the current share price to its "26 week moving average". If higher, hold. Otherwise, sell.