CHAPTER 30 - Where and when to Choose Shares

Abstract

There are a large number of different industries operating at the same time, and to examine them all in detail is a major undertaking. Many industries are divided into general groupings though, by just glancing at the lists of quoted prices in the daily papers and financially orientated weeklies. This chapter explains two important groups, namely, capital goods industries and consumer goods industries, either of which can be home-market biased or export biased. The first group is set up because the shares of companies in each are affected by completely different factors. Capital goods are the ones that are not used up quickly but are a more or less permanent part of the assets of an organization. Consumer goods themselves are subdivided into two groups: (1) consumer durables and (2) ordinary consumer goods. The practice of investment is by distinguishing between two groups of shares. One group is the defensive equity, and the other is the share that is hardest hit by money shortage and economic squeeze. It is important to remember that when things are bad, nearly all share prices come down however good the companies concerned are. In good times, prices are over-optimistic. Some shares have better defensive qualities than others. Their prices do not slide so far and show resistance to further slides quite early.