Should I Buy Shares In.. Grades

Should I Buy Share In.... is a specific question that requires the responder to be FCA registered.

The grade that I give to a company is my assessment of the risk that buying share entails. There is no reason to believe and every reason not to believe that my assessment is suitable for the reader's needs and is not advice to buy, sell or hold any particular share.
The Black Grade

Shares That I Think Could Collapse To Nothing Or Suffer A Massive Share Issue.

A company with this grade may continue to trade for a long period of time which can make it tempting to buy shares when there is a rise.

These companies may have a history of real profits but something has gone changed and I think that there is a significant problem which I suspect can only be solved by drastic action.

This action could quite possibly be a large share issue that you may or may not be eligible to take part in wiping out all or most of the value of your holdings or administration and sale to lenders.

I find this sort of company terribly tempting when just looking at the share price graph as there can appear to be an easy 50%-100% upside, but by assigning it a black grade I know that I have thought about it and I mustn't be swayed by the graph.

The Red Grade

Shares That I Expect To Be Affected By Repeated Losses, Share Issues And Profit Warnings.

Rather than a specific issue that can be highlighted as with Black Grade, Red Grade companies may also continue to trade for a long period of time but don't have a specific issue.

Instead they may have a history of lots of different problems that seem to result in most years being bad, but bad for a different reason from last year.


Black Grade share are more likely to move to a more positive grade than Red Grade as Red indicates a long term trend whereas Black can be more short term critical but long term recoverable.

The Grey Grade

Shares That I Think Are Informative But A Very High Risk Because The Valuation Seems Too High.

I started this grade when I ran into Muddy Waters reports on companies that say that not all is as it seems.

I wouldn't buy these shares but I am interested in the company both to see if MW was right and to learn what to look for in terms of aggressive accounting.

The Pink Grade

A Pure Slightly Informed Gamble, The Market Doesn't Like The Company But I Think That I Understand Why.

There is no doubt in my mind that these companies could go broke, but unlike black grade shares I can also see how they may recover.

For example a argument between a very large shareholder and the board raises real issues but over depresses the share price. For example SuperDry went through this phase, and Amigo Loans are still in it.

The Orange Grade

Shares That I Think Show Promise With A Few Caveats.

Very few shares are without some element of risk and these shares have some signs to be worried about but not at such a level that they must be avoided.

They wouldn't normally be my first choice for investment and I would need to be sure that I am up-to-date on the latest news if purchasing.

The Green Grade - Shares That I Think Are Oversold.

These are shares that I regard as being as safe as any share can be, they can still go down but the long term looks good.

The Slate Grade

Shares That Are Of No Great Interest To Me, A Solid Business With No Reason To Expect A Price Change.

A lot of companies have a business that although safe and profitable there is no reason for their share price to rise or fall outside of the normal movement of the market.

If you are a dividend investor these may be attractive to you.


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