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Hunting For Winners In The Stock Market Jungle

What with bulls and bears, it’s not surprising why some investors believe that financial markets are a jungle.

Truth is, financial-market commentators have always had a soft spot for furry and feathered beasts both large and small.

Stags are, in essence, short-term speculators. They like to apply for shares in new issues in the hope of selling them soon after trading begins. In general, stags don’t really care what shares they buy, just as long as they go up.

Stags might like to chase after gazelles, which are fast-growing businesses. But they will be keen to avoid turkeys though, which are start-up companies that could subsequently go bust.

That said vulture fund could be on the lookout for tasty-looking turkeys. They won’t think twice about buying shares in distressed companies in the hope of stripping remaining assets.

Elephants are a type of fund too, though they tend to be ultra-large institutions that can move markets significantly. Typical elephants are pension funds and insurance companies that have lots of money to spend.

Elephants like gorillas. These are large companies that overshadow an entire industry. We don’t have any gorillas in Singapore yet. We have to look overseas to find those hairy beasts. Examples of gorillas are Amazon (Nasdaq: AMZN) in the US and Tencent (SEHK: 700) in Hong Kong.

At the other end of the scale are dogs. These are companies that have a small market share in a mature industry. The term was first coined by Boston Consulting Group.

Dogs are also used to describe companies that have badly underperformed the market. For instance, Dogs of the Dow is an investing strategy that relies on buying a handful of Dow Jones Industrial Index shares with the highest yield at the beginning of the year. The theory is that they could turn out to be the best performers next time around.

If there are dogs, then there must be cats. An often heard phrase in the stock market is a dead-cat bounce. It refers to a temporary rise in share prices after a severe fall. The origin of the term is somewhat gruesome. It may be best left to your own imagination. (But let’s just say a tall building, a deceased animal and the physics of recoil dynamics are somehow involved.)

Sticking with bouncing animals, kangaroo is a slang term for Australian shares. More specifically, they will be companies with an emphasis on mining, tobacco or property.

A recent addition to the animal lexicon is the grey rhino. It refers to an obvious threat that the market chooses to ignore. China’s growing debt bubble, overvalued cryptocurrencies and negative bond yields could be examples of Grey Rhinos.

These are just a few examples of creatures that lurk in the financial jungle. But far from being dangerous, the financial markets can be a great place to let your money grow.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Director David Kuo doesn’t own shares in any companies mentioned. The Motley Fool Singapore has recommended Amazon and Tencent.