Nice and PC does it

Diary of a private investor: ISAs are not an ideal tax-free investment, but while your computer sieves out the white elephants you are free to fine-tune performance

It is ISA time at Chez Bond. I confess to being a laggard over this form of tax-free investing (Individual Savings Accounts have been around since April), probably because they are not as good as the PEPs (Personal Equity Plans) they replaced.

It is ISA time at Chez Bond. I confess to being a laggard over this form of tax-free investing (Individual Savings Accounts have been around since April), probably because they are not as good as the PEPs (Personal Equity Plans) they replaced.

With our combined PEPs Mrs B and I could buy £18,000 of equities every year and never have to pay tax on the capital gains. The ISA rules mean we're down to £14,000 this year and in the next tax year it will be £10,000.

However, let's be thankful for small mercies and, hey, we have still got those PEPs, one a year since 1987. We can continue to trade within those although, because of the high commission charges for swapping stocks, I rarely change my original choices.

What we want for the ISAs are low-risk shares, preferably under-valued, that are going to grow over the long term.

I'm not too good at sums so to help me reach a decision I turn to my faithful CD in drive A of the computer which I have pre-programmed with a series of "sieves". These are designed to reduce the field of 2,700 runnersquoted on the London Stock Exchange - down to a handful of potential winners.

The sieves I use are fairly standard and were developed with the help of my friend and mentor, Jim Slater. Let me outline the approach. First I check the PEG factor. The 'P' stands for price, the 'E' for earnings and the 'G' for growth. You take the current share price, divide it by the latest earnings-per-share, then divide that by the estimated future growth rate of earnings-per-share. It sounds rather complicated, but if the resulting figure is below one it is a fair indication that the price is reasonable.

Next I try to eliminate slow-growing shares by ensuring that the earnings-per-share figure is rising by at least 20 per cent. And, to make sure the directors are looking after and business and keeping the shareholders happy, I want to see a cashflow-per-share at least equal to the earnings-per-share. To select those shares that are performing well, the sieve insists on positive relative strength.

Finally, my trusty CD makes sure our short list includes only those stocks where profit margins have been increasing in recent years and the companies haven't got unacceptably high short-term borrowings.

My sieves have narrowed the field down to 10 shares. In no particular order they are: Springwood, Merchant Retail, LPA, Interlink Foods, IS Solutions, Bristol United Press, Bensons Crisps, Amey, Fitness First and Ask Central.

What a mixed bag! I weed out the minnows, anything with a market capitalisation of less that £50m, and I'm left with Springwood, Merchant Retail, Bristol United Press, Amey, and Fitness First.

Now it is down to personal preference. What does each company do or make? Do I understand it? No use buying into a business that is too technical for my simple mind, as I will not be able to use common sense when I make my decision.

There is still a lot more homework to do. Obtain the latest annual report from the relevant registrars. Check to see whether the companies have websites, and if so is the information useful or just dressed-up advertising? Are directors buying or selling? Have the institutions got substantial holdings?

Finally, I comb the archives to see whether the companies have been getting good or bad press coverage. All this takes time and suddenly there are no more days left this week. Never mind, we're going to invest £14,000 so there is no point in rushing. It could be that none of the shares on my short list satisfy my criteria, in which case it will be back to the drawing board. I will let you know the outcome in next week's column.

PS. This week Postman Pat brings me a unique communication: a welcome pack from a company whose shares I recently bought. There's a chatty letter from the chief executive and details of the company's history and its products, latest press releases and biographies of top managers. A simple bit of public relations, it reinforces my interest and makes me feel part of a shareholder club.

I hope to buy around 60 new shares a year, and this is the first time any company has said thanks for investing. Trouble is it's a Canadian outfit, High point Telecommunications, quoted on the Alberta Exchange.

Terry Bond has been a newspaper journalist, broadcaster and author, business partner of the round-the-world sailor Sir Chay Blyth, owner of an international public relations business and a European property company and sales and marketing director of a major PLC.

Now he is a private investor with a substantial portfolio, involved principally in British and American equities. He is also a director of ProShare (UK) Ltd, the organisation which looks after the interests of the investor in the corridors of power.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

News
Emma Watson has become the latest target of the 4Chan nude hacking scandal
peopleThreats follows actress' speech on feminism and equality at the UN
Life and Style
food + drink
Arts and Entertainment
British actor Idris Elba is also a DJ and rapper who played Ibiza last summer
film
Life and Style
tech
PROMOTED VIDEO
Life and Style
tech
Life and Style
Alan Turing, who was convicted of gross indecency in 1952, was granted a royal pardon last year
life
Arts and Entertainment
Sheridan Smith as Cilla Black and Ed Stoppard as her manager Brian Epstein
tvCilla Episode 2 review: Grit under the glamour in part two of biopic series starring Sheridan Smith
News
i100
Life and Style
life
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    IT Project manager - Web E-commerce

    £65000 Per Annum Benefits + bonus: Clearwater People Solutions Ltd: If you are...

    Trainee / Experienced Recruitment Consultants

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree are a global FTSE 250 ...

    Trainee Recruitment Consultant - Soho

    £20000 - £25000 per annum + OTE £40000: SThree: As a Recruitment Consultant, y...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Day In a Page

    Secret politics of the weekly shop

    The politics of the weekly shop

    New app reveals political leanings of food companies
    Beam me up, Scottie!

    Beam me up, Scottie!

    Celebrity Trekkies from Alex Salmond to Barack Obama
    Beware Wet Paint: The ICA's latest ambitious exhibition

    Beware Wet Paint

    The ICA's latest ambitious exhibition
    Pink Floyd have produced some of rock's greatest ever album covers

    Pink Floyd have produced some of rock's greatest ever album covers

    Can 'The Endless River' carry on the tradition?
    Sanctuary for the suicidal

    Sanctuary for the suicidal

    One mother's story of how London charity Maytree helped her son with his depression
    A roller-coaster tale from the 'voice of a generation'

    Not That Kind of Girl:

    A roller-coaster tale from 'voice of a generation' Lena Dunham
    London is not bedlam or a cradle of vice. In fact it, as much as anywhere, deserves independence

    London is not bedlam or a cradle of vice

    In fact it, as much as anywhere, deserves independence
    Vivienne Westwood 'didn’t want' relationship with Malcolm McLaren

    Vivienne Westwood 'didn’t want' relationship with McLaren

    Designer 'felt pressured' into going out with Sex Pistols manager
    Jourdan Dunn: Model mother

    Model mother

    Jordan Dunn became one of the best-paid models in the world
    Apple still coolest brand – despite U2 PR disaster

    Apple still the coolest brand

    Despite PR disaster of free U2 album
    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits