Never forget these two axioms:
Money frees us, but its pursuit enslaves us.
It’s not how much you have at the end; it’s how much you could have made.
I’m back after a fun filled fabulous family vacation. (That’s for all of you who enjoy alliteration!) Let’s just jump into it.
Let’s assume you want to get into individual stock buying yourself either without a financial advisor or on the side of your financial advisor. Also (and always a good idea), you could just want to check the stocks your advisor has selected for your portfolio.
Let’s start with the basics.
My bias: When I look at a stock that I am mulling over, I start with Yahoo Finance. It’s concise, easy to read, readily accessible, and has the basic statistics needed for at a minimum first blush impression of the equity.
Most importantly, you can’t beat the price point.
It’s absolutely free for life!
There are many many other stock research sites you can use and some will convince they are the best and even try to seduce with a freemium model where if you just only spend a few measly dollars a month, even more information like “quantum data” or some such thing will be unleashed for just smart people like you.
Here is how Yahoo Finance is set up for individual stocks.(I’ll use Microsoft [MSFT] as an example though this could be any stock.)
Sarcastic Reader: That’s as we say in the biz…a shit ton of numbers…
Dr. Scared: This is it! This is how they screw you!!
Dr. Unwise: Exactly what business are you in that a “shit ton” is actually a unit of measure?
PWT: Uh…guys…FOCUS!
One by one, let’s discuss the above statistics.
The company name along with its stock symbol is listed. The stock exchange where this stock is traded is also listed as you can see in this case is our old friend, the NASDAQ,
It also is noted that the prices you see is in US currency.
The current price is pretty obvious (I hope) with how much it went up (YAY!) or how much it went down (Boo!) as well as the percent increase (or decrease) corresponding to the number of dollars and cents the stock moved.
Believe it or not, there is after hours trading (but not for mere mortals like you and me) that causes (generally speaking) small fluctuations and a difference between what the stock in question closed at and what price it will open at the following morning. Along with this again is both the percent increase (or decrease) corresponding to the number of dollars and cents the stock moved.
Previous Close: This is what price the stock closed at just before trading started today (ie, the day you are looking at the stock’s info)
Open: This is what the stock price is at the open of the trading day which can be quite different than what the closing price was depending on what happened between those points in time Remember that any event in the world at any time may affect a company’s stock—a scarcity of a needed mineral, a civil war, a strike starting at midnight after failed last minute negotiations, etc, etc.
Bid: The highest price that buyers of the stock are willing to pay for the stock
Ask: The price at which sellers of the stock are willing to sell it at
Day’s Range: Easy peasy lemon squeezy. This is the top price of the day along with the lowest stock price of the day which just means the range of prices that you could possibly have purchased or sold at. Realize that the closing price or opening price does not have to be either the top or bottom price of this range, just somewhere within this range.
52 week Range: Just as easy as the above. This is the lowest stock price and the highest stock price over the past year (ie, 52 weeks) to give you an idea of where the current stock price is relative to its (fairly recent) highs and lows
Volume: the number of shares traded during a given period of time (usually in a day if not stated differently otherwise) Volume typically does not affect stock price directly. However, a very lightly traded stock (not likely any companies you have heard of and not any you would invest in until you have a critical mass of core holdings already and become a more savvy [and bolder] investor) may fluctuate significantly with an unusually high volume of trading. Also, if you see volume change significantly (higher or lower) for any stock, it may be indicating something about the company that should you pay attention. Stop looking at the key statistics of the stock and just put the company’s name into a search engine and see what news is out there about the company. ALWAYS REMEMBER: YOU’RE INVESTING IN COMPANIES, NOT JUST STOCKS.
Average Volume: the number of shares traded in any given time period divided by that unit of time which can be recorded as daily, weekly, etc though it is often daily and in some stock sites it is then denoted as “Average Daily Trading Volume (ADTV)”
Market Capitalization: the stock price times the number of shares available for sale (ie, the number of outstanding shares) This can be misleading in terms of saying this is how much a company is worth given the fact that it doesn’t account how much debt the company may be carrying and the fact that it also doesn’t account for all the shares the company doesn’t put out for public sale among many other factors not to be discussed here
Beta: a stock’s sensitivity to the overall market
A beta of 1.0 means the stock moves (up or down) in perfect alignment with the overall market whereas a higher one means it moves higher or lower than the market’s same direction. For example, a beta of 1.10 means that this particular stock will move (up or down) 10% greater than the overall market does. A lower beta means that the stock in question will not move (up or down) as readily as the overall market does. Ideally, your stock has a beta of 1.0 since it is predictable relative to the market. If you have a high beta stock and the market has a downturn (and it will happen as sure night follows day), then your stock will likely get crushed.
(For you sadists who need to know how beta is calculated [no one is talking to you Dr. Scared or Sarcastic Reader], this is how it works in a thumbnail sketch. Believe it or not, the company’s monthly earnings over the past five months versus the returns from a major index {usually the S&P 500 which is serving as the surrogate of the overall market} who then undergo a statistical regression analyses [don’t ask me details people, I’m no mathmagician] and, voila, your greatly desired beta pops out.
Now imagine doing that for every publicly traded company every month.
PE Ratio (TTM): the current share price divided by the EPS (earnings per share) This is a way to figure out the pricing of a stock relative to the overall market and also other companies’ stocks especially if in the same sector (eg, comparing two tech companies or even more relevant [since tech companies are widely diverse—Google vs Netflix anyone?] two car companies). TTM=twelve trailing months—all numbers are based on what the company has done over the 12 months prior to the time you’re viewing these statistics.
EPS (TTM): Earnings per share The company’s earnings over the past 12 months divided by the number of shares of the company’s stock available for trading (AKA outstanding shares)
TTM=twelve trailing months—all numbers are based on what the company has done over the 12 months prior to the time you’re viewing these statistics
Earnings Date: The date at which the earnings of the company in question are publicly revealed This is done quarterly at least and can significantly change a stock’s price. People have bribed their way into getting that data early and invest accordingly—and then go to jail for insider trading
Forward Dividend & Yield: Forward dividends are exactly what they sound like—payments that are expected to be paid out in the future Trailing dividends are the ones that have already been paid and can be cataloged given that they have already been paid and are well known. There’s no speculation in trailing dividends, just forward ones. Estimating forward dividends is an art, not a science. If you have a company with stable dividend payments without any fluctuation for years or even decades, then the forward dividend estimation is easy. However, that’s rarely the case and then you need to look at the forward dividends with a skeptical eye. In either case, all dividend calculations are based off a time period of 12 months.
Dividend rate is the total amount of dividend payments paid over 12 months (forward or trailing). Dividing this dividend rate by the price of the stock and then multiplying that by 100 is the dividend yield. Think of the dividend yield this way: For every $100 invested in the stock in question, the dividend yield will tell you how much money will get paid out to you each year. (For example, a dividend yield of 3.35% will mean you as an investor will get $3.35 for every 100 dollars invested in that stock for that year.)
Ex Dividend Date: The date by which an investor will not get the next dividend Buy before this date and you will own the stock as short as possible to still get the dividend. If you’re going to buy a dividend paying stock anyway, the least you can do is buy it so you get your first dividend ASAP which makes a giant difference over the next 20-25 years.
1 Y Target Est.:To quote Yahoo Finance itself, “The 1-year target price estimate represents the median target price as forecast by analysts covering the stock. Data is provided by Thomson Reuters. More detailed target estimate data can be found by clicking a company’s “research” link.” In a practical sense, this is largely worthless given the fact it is updated only every 6 months or so.
Here are a few more statistics that Yahoo Finance doesn’t have featured prominently, but that other stock websites do.
Sales short:the total number of shares that are being sold short (ie, shares that are borrowed with the hopes that the company’s stock will go down in price) This gives you an idea of how some large experienced or even institutional investors view the stock if there is a high number of “shorts” betting against the stock. They may be wrong, but it should be heeded when many people are betting against the stock. What do they know that you don’t? It should give you pause as to why so many people are betting against it and why.
Short Interest: percent of outstanding shares that are being sold short In other words, of all the shares that are available for public sale, how many are betting that the stock will be going up versus how many are betting that the stock will be going down. It’s a general (though only one) indicator of investor sentiment which alone can drag down or elevate stock prices.
Ok….tons of info thrown out at you in one not-so-little blog post. Now that we’ve learned how to read through key statistics of a company’s stock, we can build on that next time.
I’d love to hear from any and all of you about your thoughts, so we can all learn from one another.
Please spread the word about this blog to your friends (real and virtual), family, and colleagues. Talk to you soon.
Until next time…