In previous blogs I wrote about what the stock market is (here), how to find stocks you may be interested in buying based on your own knowledge and experience as a consumer (here) and a few tips for picking stocks for beginners (here). If you happened to have read them over the past few weeks (or hastily over the last 15 minutes) you may have some ideas for companies you want to invest in. But how do you find out whether your ideas are good ones? There really is only one way. Research. Don't worry, it's not nearly as dull as it sounds.
So you have a company name. Where do you go from there?
Its time to do a little digging. You should be familiar with the product or service the company provides to some degree already but you have to find out more about the business. What is the company's ticker symbol? How big is it? Where do they operate? What other products and services to they provide and to whom? Who are there major competitors?
Eventually, these and other important questions will have to be answered, preferably before you decide whether to buy in or not. I write "eventually" because I think a layered approach is the most accessible. Over the next few blogs I intend to show you around some useful (and free) tool available right here on your friend the Internet. These are websites that I use to track the market and investigate companies that I invest in.
The first tool I would like to introduce is the Yahoo! Finance page. I think a visual aid will help so right click here and select "open link in a new window". Got it open? It might be helpful to have this page and the Yahoo! Finance page open side by side.
Welcome to the Yahoo! Finance homepage. Here you can check out some financial headlines, get a snap shot of the markets activities for the day (notice the chart a quarter way down the left side of the page) or use the "Get Quotes" search box (top left). I am going to let you poke around on the homepage on your own. I am more interested in the company pages on Yahoo! Finance. You access these pages through the "Get Quotes" search box.
Get Quotes: This search box is a great way to find the company's ticker symbol. The ticker symbol is a unique identifier (usually 3 letters or less) used when trading stock. You likely have seen ticker symbols marching across the bottom of your television screen if you have ever flipped to CNBC or FOX Business channel. To find the ticker symbol just start typing the company name in the search box. A drop down list of companies will appear and you can select the intended company.
Go ahead, try it! If you don't have a company in mind take a look at Walt Disney Corporation (DIS). I split this page into 4 sections. I am only going to go over the first section today, the Stock Information. The otther sections, the Chart, the Headlines and the Links along the left side of the page, require a blog or more of their own.
Section One: Stock Information
This is the section smack dab in the middle of your screen just below the company name. Some of this information is pretty intuitive but I am going to go over it line by line starting with the left-most column.
Last Trade: This is the price that this particular stock was sold for in the last trade. This isn't necessarily the price it is still selling for though. Price changes happen rapidly and there is a fifteen minute delay before this information shows up on your screen.
Trade Time: Another easy one. This is the time (or date if it is a weekend or holiday) that the last trade was executed.
Change: This line shows the difference in the stock price since the market open (9:30 AM EST M-F, excluding holidays). The arrow indicates whether the price has increased or decreased (also illustrated by the color: green for an increase, red of a decrease). It shows the dollar value of the increase and the percentage (in parenthesis).
Prev. Close: Short for previous close. This is the price that the stock closed at on the previous trading day.
Open: This is the price that the stock was at the market open. This price is often different than the previous day's closing price because there is after market trading in the US and other the markets around the world (Asian, European etc) effect US stocks as well.
Bid: Here you see two numbers that look something like this: 40.00 x 300 (or something similar). This means that there is a large open order to purchase 300 shares of this stock at the price indicated ($40.00 per share). This is the highest bid of the currently open orders. These numbers will change when this order is filled, canceled or modified so it is no longer the highest bid, or a new higher buy order is placed.
Ask: This is the flip side of "Bid". Here you see two numbers in the same format as above. The difference here is that instead of a buy order. This represents a large sell order.
SIDE NOTE: Often these numbers will change very rapidly for popular stocks and the two prices, Bid and Ask, will be very close, within pennies of one another. This is not always the case though. Some stocks will show a large gap between the Bid and Ask prices. This might indicate a divergence in public opinion.
1y Target Est: Short for 1 year Target Estimates. This is supposed to be a prediction of what the stock price will be a year from now. Honestly, I am not sure where Yahoo! gets these numbers. I suspect this is the average, median or mean of a group of Analysts following the stock. Frankly, I put absolutely no faith in these numbers and I implore you to ignore them as well.
Day's Range: This is another easy one. This is the lowest and highest price the stock has traded for over the course of the day.
52wk Range: Short for 52 week Range. This one is similar to the Day's Range but instead of the day it represents the lowest and highest prices over the past year.
Volume: This is how many share of this stock have changed hands today. This number is often in the tens of millions for well known corporations. By itself this number doesn't tell you much.
Avg Vol (3m): Short for Average Volume (3 months). This is the average number of share traded daily over the past three months. If you compare this number to the number above it (Volume) you have an indication of how much interest there is in this particular stock. A spike in volume generally coincides with some news or event that may impact the stocks value. It is a sign that you should be looking for that news because it may require some action (buying more, selling etc).
Market Cap: This number is the perceived value of the company based on the price of the stock and multiplied by the number of shares outstanding. So, if you happen to be wondering how many shares of Disney stock are out there simply divide the Market Cap by the stock price for a ball park (accuracy is effected by how much rounding Yahoo! does to the Market Cap).
P/E (ttm): Here is where things start to get interesting. P/E is short for Price to Earning ratio, also known as "the multiple". To get this number you take the stock price (P) and divide it by the earnings per share (E or EPS). This is a very important number. A high P/E generally indicates a stock may be expensive or that there is a great expectation for growth in future earnings. A low P/E generally means a stock may be cheap or that the expectation for earnings growth is limited. It isn't as simple as that of course. I will write more about this in a later blog.
EPS (ttm): Short for Earnings per share. This number represent the company's annual earnings (think revenue or sales, not net income. I will write more about this when I go over financial statements) divided by the total number of shares.
SIDE NOTE: I am sure you didn't miss the fact that I ignored the (ttm) on the previous two definitions. It stands for trailing twelve months. This indicates that the EPS number is a total of the previous years earnings. This effects how we consider this information. A lot can happen in twelve months that can impact (positively or negatively) a company's ability to earn. Like everything, these numbers cannot be taken at face value.
Div & Yield: This one is short for Dividend and Yield. I wrote briefly about dividends in a previous blog (here). The first number is the dollar amount you will earn annually for each share of this stock you own. It is often split into quarterly payments.
The yield is a percentage that represents the annual return you will gain simply for owning the stock. To find the yield you divide the dividend by the stock price. There are a lot of reasons that a high yield is attractive. First and foremost it is the closest thing to a guaranteed return you will find when dealing with stocks.
No comments:
Post a Comment