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Beta
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A measure of a stocks volatility. A beta of 1.0 means the stock tracks the overall market very closely. A beta of 1.1 means the stock will perform 10% better or worse than the market; 1.2 would be 20%; 1.3 would be 30%; etc. Some stocks such as SIRI have beta’s of 4.3. (as of 4-16-05)
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Bid & Ask
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Bid is the price someone is willing to pay for a stock; Ask is what someone is willing to sell it for. When you buy a stock you pay the Ask price, and when you sell you receive the Bid price. The Ask is always greater than the Bid.
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Book Value
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The price a company would sell for if liquidated, usually much lower than the actual price of a stock. Company's in trouble can sell below their book value however.
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Capital Gains
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The taxes charged on profits made from investing. Long term capital gains (stocks held more than 1 year) are taxed less than short term.
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Capital Losses
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Can deduct losses from capital gains at a rate of $3,000 per year. Can carry over from year to year but must have capital gains every year to offset losses.
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Debt/Equity Ratio
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The amount of debt a company has, divided by the equity (price of all shares combined). If D/E ratio is greater than 1 it means the company has more debt than the company is worth. Ideally D/E should equal 0.
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Dollar Cost Averaging
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The practice of putting a fixed amount of money into an investment account on a regular basis. Does not protect against losses but allows the purchase of more shares when prices are lower and fewer shares when prices are higher. This is a great strategy for a passive investor with a long time horizon.
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Dow 30
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The Dow Jones Industrial Average is comprised of 30 large company stocks that are chosen by the Dow Jones Company (owner of the Wall Street Journal) that are supposed to represent American business overall. Many consider this average useless because it is a small sampling of stocks.
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Float
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The number of shares of a company that are on the open market.
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Goodwill
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The “fluff” on the balance sheet. The value of the company's good name and reputation for example, listed as an asset. It can account for a sizable portion of a companies total value.
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Market Cap
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Short for market capitalization and is the number of shares outstanding times the share price. In other words what it would cost to buy the whole company, i.e. all of the shares outstanding. GE has the largest market cap in the world, ExxonMobil is number 2. (as of 4-16-05)
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National Debt
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The nation’s debt is the U.S. treasury bond market. The government issues notes, bills and bonds to fund operations and pork barrel projects not funded by tax receipts. Treasury market is “risk free” if bonds are held to maturity, because the U.S. government has the power to tax. The U.S. Treasury has never defaulted on its debt, ever.
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mrq
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most recent quarter
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P/E Ratio
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The price of the stock (P) divided by its annual earnings (E). Indicates if a stock is “cheap”. The current combined P/E of the S&P 500 is about 17 (as of 4-16-05).
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PEG Ratio
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The P/E divided by the companies growth rate. A PEG of 1 indicates a “fair” price. A PEG of less than 1 is “cheap” and a PEG greater than 1 is “expensive”. High PEG stocks are considered fast growers.
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Preferred Stock
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Usually pays a higher fixed dividend and are always paid dividends first. Has no voting rights.
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Price/Sales Ratio
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The dollar amount of annual sales per share divided by the stock price. When a P/S ratio is below 1.5 the stock is considered cheap.
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Revenues
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Another word for a companies sales. Sometimes called the “top line”. A companies earnings are called the “bottom line”.
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S&P 500
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Standard & Poor's 500 are the 500 largest companies in the U.S. Referred to by investment professionals as “the market”. The Dow Jones Industrial Average is “the market” to non-professionals.
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Selling Short
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A strategy that makes money if a stock price drops. It is a normal trade executed in reverse order. Sell first at a high price. When the stock price drops, buy it back at a lower price and keep the difference.
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Short Squeeze
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A great time to buy a stock. This happens when a large number of short sellers see the stock price going up and have to Buy to get out of their trade. This buying causes the price to go up even higher and faster causing a panic among the short sellers.
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Treasury Stock
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Shares that have been re-purchased by the company. Have no voting rights and not taken into account when calculating earnings per share or dividends.
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ttm
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trailing 12 months
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Yield (%)
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The percent gain you receive from a stock that pays dividends. It is the price of the stock divided by its dividend * 100. Stock yields compete with bond yields so “big” money flows to the bond market or to stocks that pay dividends, which ever is higher.
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Yield Curve
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This is a plot of the interest rate paid to the length of a bond's maturity. When bonds with short maturity dates pay less interest than bonds with long maturity dates, it is called a positive yield curve, indicating that the economy is growing. When long yields are less than short yields, it is a negative yield curve, indicating the economy is tanking. It is a very reliable stock market indicator.
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