Reading the Financial Pages for Dummies®

Chapter 21. Ten Red-Hot Clues to an Opportunity

Although it's often hard to generalise about what makes a share a red-hot opportunity, there are certain signs that you really shouldn't ignore. Stop and examine them carefully, because although some of them will turn out to be red herrings, others will turn out to be the real deal.

Of course, some people insist that you can never find a truly undiscovered red-hot opportunity, because if it's genuine the market will already have spotted it and the bargain will have evaporated as soon as some 'expert' has bought into it ahead of you. I don't believe that, actually. Indeed, it puts me in mind of an old joke.

Two economists are walking down the street when one of them spots a £50 note lying on the pavement. 'Look,' says one of them. 'Somebody's dropped a £50 note!' 'Don't touch it,' says the other one, 'it's bound to be some sort of a scam. If it had been a genuine £50 note, somebody else would have picked it up already.' And so the two of them walk on up the road, leaving the banknote blowing around in the breeze.

And the moral? Somebody has always got to be the first to spot an opportunity. Who says it can't be you? Just be careful, though, that you keep your wits about you. And always be prepared to walk away if you're not completely happy.

The Price/Earnings Ratio Is Below the Sector Average, but Rising

Having a high price/earnings ratio is very flattering for a company, of course, because the fact tells us that the market has a lot of ...