Guide to Analysing Companies

I
INVESTMENT STYLE
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value stocks usually pay high dividends; growth stocks
pay hardly any at all. A fund that combines both styles and
therefore has more freedom to switch between the two is called
a blend fund. Investment style was born in the United States
but has since taken off in the UK, elsewhere in Europe and in
other markets.
Sometimes your best investments are the ones you don’t make.
Donald Trump
Investment trust
A company that, like any other, issues shares to investors but
whose business is also investment. Called a closed-end
fund in the United States, an investment trust (unlike a unit
trust or mutual fund) has a specified number of shares
that make up its capital. The main advantage of an invest-
ment trust (like a unit trust or mutual fund) is that it allows in-
vestors to spread their risk. Another is that (unlike a unit trust
or mutual fund) it can also borrow money to give it gearing
or leverage. This can work in shareholders’ favour provided the
trust’s return on its investments is greater than the cost of its
capital; if not, it ends up destroying the value of its shareholders’
investments.
Most investment trusts offer different types of shares, from
ordinary shares (the riskiest) up to preferred or prefer-
ence shares and even loan stock. They are thus able to
offer different things to different investors: income shares for
those who want interest on their investment; and capital shares
for those who are most interested in capital gain.
Investor relations
The job of keeping investors in a company informed about its ac-
tivities and performance with the aim of maximising the value of
its shares. Investor relations consultants start by examining the
register of shareholders to find out which institutions are holders