Guide to Analysing Companies

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INVENTORY
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bracket” banks) are American, with offices in most of the
world’s financial centres.
Investment club
A group of private investors who agree to pool their funds and
manage their investments themselves. The advantage of invest-
ment clubs is that investors feel that they have more control
over their investments, and they save the management fees of a
professional fund manager. Members need the time to
analyse the securities they are investing in, which is proba-
bly why such clubs are popular among retired people.
Investment grade
The definition given to securities (usually bonds) issued by
companies or institutions with a certain financial standing. In
the United States, certain institutions are not allowed to invest
in securities below a certain grade because they are deemed too
risky. Bonds that are eligible for investment by such institutions
are called investment grade; those that are not are referred to as
junk. Because of the higher risk that their issuers will default on
repayments to holders, junk bonds carry a significantly
higher rate of interest than safer, investment-grade securi-
ties. The arbiters of whether an issue is investment grade or not
are the nationally recognised (and therefore biggest) credit-
rating agencies. (See also fallen angel and rising star.)
Investment style
The bias that a manager adopts in running his or her investment
fund. Growth funds favour shares in companies whose sales
or earnings are expected to grow rapidly and therefore have
a high return on capital. Value funds, by contrast, prefer
the shares of companies that are cheap compared with their
earnings and with the average for the market as a whole.