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I have a new book about to be published, The Naked Trader’s Book of Trading Strategies. It’s available on Amazon from July 18th.
There are loads of strategies to suit most traders/investors, except those of you who insist you can play the Forex casino and expect to win. The house always wins.
I thought I’d pick one of my favourite strategies: “Dash for Cash”.
Cash is unfashionable these days. Sometimes you can’t even get a cup of coffee with a £5 note. “Cards only, please.”
Well, stuff you. I’ll go to the café next door which takes cash – the coffee’s better too!
But with interest rates rising, buying companies with a decent cash pile can prove a great strategy. If the company you find has a big cash pile and profits are rising and things look good – well, even better.
When I say cash, what I am after is a net cash figure.
Pretty much all companies give a net debt or a net cash figure with every full or half-year report.
I’m no accountant and it doesn’t reveal everything, of course, but a decent net cash amount is definitely positive.
When I see net cash I smile. It makes me feel it’s unlikely anything catastrophic is going to happen. And when there’s net cash there’s the possibility of a company using that money: for share buybacks, acquisitions or big dividends. All of which should help a share price.
I’m not saying just look at net cash. I’m saying if you find a company with good net cash, it is worthy of further inspection.
Take for example Me Group (LSE:MEGP). There is a ton of net cash here as stated in the recent report.
Cash on the balance sheet usually means things are going well.
It could also mean the company using that dosh to give money back to shareholders (dividends), to buy back its own shares (raising their value), or to acquire other companies (resulting in a bigger and more valuable firm).
Companies with big cash often also hand out special extra dividends which Me Group has done in the past.
I’m not saying just buy companies with big cash piles. I’d also want to see rising profits, dividend and a good outlook.
Me Group also qualifies for two other different strategies in the book.
One is pinpointing companies about to get promoted to the FTSE 250 or 100.
Tracker funds have to buy into promoted companies and that often gives a bump to the share price for a while.
As I write this Me has gained its promotion which appears to be lifting the price – said company usually also gets a higher profile.
Me also qualifies for a third strategy from the book – “trading ahead of expectations”.
If you’re buying companies who consistently use the phrase “ahead of expectations” or even better “substantially ahead” then you should be looking at a consistently rising share price.
My latest podcast is out! Lots of share chat plus a chat with the consumer editor of the Financial Times, a look at more trading strategies from my new book and a £100 competition!
The link is here: https://soundcloud.com/thenakedtrader/nt6
