Share Prices And Markets

INTRODUCTION - There are various types of shares available to people to buy, they include preference shares, bonds and gilts, but the most popular one is the ordinary share, ordinary share owners, represent ownership of a company. When shares are but in a company, shareholders become part-owners of the business.

Most companies do not have to list on the stock market to issue shares, these businesses are known as "unlisted" firms and their shares are often known as "unquoted". Shareholders have a say in the company's affair and can do so by voting at company meetings, they also share in the company's fortunes. The value of the share increases as the company's performance increase but if the company performs badly the share price could also fall in value. The benefits of share ownership, comes in two fold. One can either benefit through the growth of the company or, and through the payment of dividends. Shares that pay dividends are generally known as 'Income' stocks.

Companies can return money to shareholders in other ways too such as buying back their shares. This increases the value of those shares still in circulation. "By investing in shares you are also linking your financial wealth to the health of the UK and overseas economies". The proportion of goods and services sold in the UK and abroad typically rises when economies are growing and falls when in recession, thus affecting profits.

Savings accounts do little to protect your money from inflation as your real rate of return is small, averaging 1.8% a year after inflation according to Credit Suisse First Boston's Equity Gilt Study 2003. Shares, on the other hand, do have the ability to produce better gains, averaging 6.8% a year after inflation.

Share ownership is not without risk as inflation often eats away the value of savings over a long term period, but with shares u can loose your money. It also sometimes happen that if the company invested in goes bankrupt then the shares are worthless.

HOW TO READ SHARE PRICES

Share prices for most companies listed on the London stock exchange, can be found in the Companies and Markets section of the financial time, or online at londonstockexchange.com by the London stock exchange, or at thisismoney.com, brought to you from the daily mail.

To best explain how to read share prices and spot winners, losers and mediocre companies , we are going to do a case study on 3 companies in the insurance sector and in competition with each other.

The 3 companies are;

 Royal & Sun Alliance

 Prudential

 Friends Provident

There are some factors that could affect the share price of any of these insurance company or any other company for that matter. They are;

 The economy

 Company News

 Analyst Report

 Tabloid Influences

Before we discuss these factors any further, the basics of share reading will be explained in other to make sense of the figures.

When reading a company's share price listing, for example on the back of the Financial Times or on the London stock exchange website, it is formatted as shown below.

COMPANY PRICE CHANGE% HIGH LOW P/E VOLUME

___________________________________________________________________________________________

Prudential 671.50p -1.10% 678.00p 672.00p 25.7 5,740,407

R&S Alliance 148.00p -0.34% 148.60p 146.30p 9.9 6,309,916

Friends provident 157.80p +0.70% 158.40p 155.50p 8.8 4,865,457

The data above was captured at 1:09pm on the 3rd of Dec 2007 at www.thisismoney.com

Under the "company" column, you will find the list of the companies in which share price information is given across a row. The "price" column shows the current value of each share held in the corresponding company at the time stated above. In this case it is 671.50p for the prudential, and the "change" column simply shows the percentage change of the share price from the time the market opened today, to the time stated above. The "high" column shows the highest value of the share price since the market opened today, and the low vice versa. The "volume" column shows the amount of shares traded since the market opened today till the time we captured the data above. And the p/e is the price earning ratio. This simply shows the value earned by the share so far. This is worked out by dividing the current share price by the earnings.

CASE STUDY

The Prudential, Royal & Sun alliance and Friends provident, will be analysed based on their share price performance over the past three years and their profitability and dividends paid within the past year. And from that information we would be able to categorise each company either as a looser winner or mediocre in comparison with each other. The factors mentioned earlier will also be used to determine the status of the company in other to justify the results.

THE PRUDENTIAL

Established in 1848, today Prudential plc is an international financial services company with a product range which extends from personal banking, insurance, pensions and retail investments, to institutional