No emotion involved

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Advisers have signalled a need for better investor tools. BT Financial Group head of platforms Kelly Power says that feedback from their network is for better investor websites and better reports that they can provide to their investors.

StocksInValue head, Toby Norton-Smith says the problem is that wherever you look, you will be bombarded with biased opinion.

“There’s so much information out there that it becomes white noise,” says Norton-Smith. “Look up any stock and there’ll be a broker saying ‘buy this stock’.”

Stock valuations and recommendations are fundamental to an adviser’s role, he says, with an obligation – either legally, or self-imposed by customer feedback – to show that they have independent research.

One of the problems however, is that a lot of investor tools don’t show the assumptions made to achieve a valuation. People are also too frequently driven by emotion and sentiment.

“There is clearly a degree of emotion that drives short term price fluctuations in the stock market,” says Norton-Smith.

“There are instances where there are popular companies that we just don’t see the value in at the time…For instance, Cochlear, the ear implant specialists. We think it’s a fantastic company, really healthy business, but its share price, we historically said, was overpriced compared to what we valued it at.”

StocksInValue forms a transparent report, which shows the assumptions made by the analysts. This means that if an adviser or client doesn’t agree with a particular assumption, they can change it to change the valuation.

Norton-Smith says this is “particularly useful for people who know a little bit more about equities, like financial planners or accountants who may be giving advice to their clients.”

He says that it is important to look at the fundamentals, void of sentiment. “If it doesn’t appear in the numbers it’s likely that over time that sentiment will dwindle and go the other way.”

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