Stocks Flashcards
unit of ownership in a corporation
- equity investment
Stocks (Shares of Stocks)
- owner of shares of stocks
Stockholder or Shareholder
- dividends
- gains on income/profit from Sale of stock
Earnings in Stock Investment
Classifications of Stocks
Based on Ownership or Rights of Stockholders
- Common stock
- Preferred stock
Classification of Stocks Based on the Nature of Business
- Banks
- Financial services
- Industrial
- Commercial
- Mining
- Oil
Classifications of Stocks
Based on Risk and Earnings Potential
- Blue chips/Value stocks
- Growth stocks
- Cyclical stocks
- Defensive stocks
- Speculative stocks
Classifications of Stocks
4. Based on Market Capitalization
5. Marketability
6. Citizenship of Investors
- Large-cap
- Mid-cap
- Small-cap
- Micro-cap
- Large-cap
- LISTED
UNLISTED - CLASS A
CLASS B
- represents basic ownership
- carries extensive rights in the corporation
Common Stocks (Ordinary Shares)
Rights of Common Stocks Holder
- Voting rights
- Right to Dividends
- Pre-emptive rights
- enjoys preference over common stock
-> distribution of Dividends
-> distribution of Assets (in case of liquidation)
Preferred Stocks (Preference Shares)
- Belong to large corporations with long record of earnings & dividend payments
Blue chips/Value Stocks
Belong to corporations with growth rate faster than that of the general economy
Growth Stocks
Earnings & prices move with the changes in national economy
Cyclical Stocks
Earnings are not affected so much by changes in the economy
Defensive Stocks
Belong to companies that are expected to operate profitably in the future
Speculative Stocks
Stock Values
Par Value
Book Value
Net Asset Value
Market Value
nominal value assigned to a share
Par Value
value of a stock based on the value of stockholders’ equity per books of accounts
Book Value
value based on the current value of assets minus liabilities
Net Asset Value
current market price; the closing price in the day-to-day trading in the stock exchange
Market Value
Parties involved in Stock Investments
- Investor
- Stock market (Philippine Stock Exchange, PSE)
- Stock broker
- Stock clearing office
- Stock transfer office
Steps in PSE Investment
- Open an account
- Place an order
- Settle transaction (t+3)
- issued by broker upon purchase of shares
Purchase confirmation
- issued if the investor allows the broker to have the
investment under his name.
Street Certificate
- issued upon sale of stocks
Confirmation of Sale
- the least quantity that can be purchased depending on
market price of a stock and the minimum investment
that an investor in stock must have
Minimum Board Lot
- the speed at which prices go up and down
Price Volatility
- occurs when prices go up after going down for a number
of days
Technical Rebound
- occurs when prices go down after going up for a number
of days
Technical Correction
- the range within which the price of a stock may change
in one day’s trading - set at 60% to 150% of the previous day’s closing price
Price Band
- the lowest price that a stock can command
- the price at which buyers exceed sellers so that the
tendency of the price is to go up
Price Support
- the highest price that a stock can command
- price at which sellers exceed buyers so that the
tendency of the price is to go down
Price Resistance
- prices increasingly move upwards
- associated with investors’ optimism, economic recovery,
government stimuli and political stability
Bullish Market
- prices are dropping continuously
- associated with pessimism, economic downtrend,
government constraints and political instability
Bearish Market
- practice of buying “low” and selling “high” the stocks that
are in play
Timing the Market
- lowering average unit cost by buying more at lower
prices
Down Averaging
- buying regularly regardless of whether the prices are low
or high
Price Averaging
Dates involved in Dividend declaration
- Date of Declaration
- … Record
- … Ex-dividend Trading
- … Issuance
– date that the corporation is declaring or announcing the
dividend distribution
Date of Declaration
– cut-off date in determining whose names are entitled to the
dividend
Date of Record
date on which the stock is to be traded as separate from
the stock dividend, usually 2 – 4 days before official date of
record
Date of Ex-dividend Trading
– date where the shareholder receives the dividends
Date of Issuance
- based on price trends and the attitude of investors
toward a specific stock
Technical Analysis
- based on the value of the underlying corporation which
is measured in terms of book value, net asset value,
earnings per share and price-earnings ratio - value investing
Fundamental Analysis
Guide to minimize risk in Stock Investments
- Do your homework
- Diversify stock investments
- Beat the market
- Avoid trading on margin
- Know when to cut losses
- Remain focused on long-term objectives
- Order to be observed from day-to-day until it is carried
out or until the investor cancels it
Good Till Cancelled (GTC)
- Order to sell shares if prices go below a certain level in
order to minimize loss
Stop Loss Order
