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Definition

In the context of the share market, this means searching for shares which have the potential to yield a good return. Prospecting begins with the universe of shares listed on the JSE and through various mechanisms, narrows that number down to a few "interesting" shares with good prospects. These shares are then kept on a private investors watch list and carefully monitored. From the watch list the investor then selects those shares which he or she actually wishes to own as part of their portfolio. The process of prospecting differs from one investor to another, but typically it involves subjecting the share to a set of criteria designed to highlight those with lower risk and better returns. For example, an investors first criteria might be the average daily volume traded in the share. Very thinly traded shares are clearly unsuitable because they cannot easily be sold when they reach their stop-loss levels which substantially increases the risks of buying them. Other criteria might be their earnings track record, or their exposure to the volatility of the rand, or their exposure to union action.

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