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Article: Darwinian stock-picking.
- Article from:
- Investors Chronicle
- Article date:
- September 3, 2004
CopyrightCOPYRIGHT 2004 FT Business. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Companies are like black boxes. You never really know what goes on inside, and all they emit is a stream of numbers. We assume that these numbers are meaningful and that we can find systematic ways to predict share prices from these accounting variables. But are we right?
Every listed company produces thousands of numbers each year that are supposed to represent its financial health. Among them, you'll find over 100 different measures of turnover, profits, debt, dividends, creditors, shareholder funds and so on.
So the problem is knowing which number or ratio to look at when you want to decide whether the company's shares are worth buying. Even a ...