10-K: annual report required by the SEC.
10-Q: quarterly report required by the
12b-1 Fee: Annual marketing fee charged
by some mutual funds. Named after SEC regulation allowing such fees.
Receivable: money owed by customers for received goods or services.
Customers must have been billed for items to be included in
Accrued Expenses: expenses shown on the
income statement but not yet paid.
After-Hours Trading: stock trading when
the major stock exchanges are closed.
Aftermarket: public trading of a company’s
shares after its IPO.
Alpha: a statistical concoction that’s
supposed to measure the excess performance of a mutual fund compared to
the performance expected for its Beta. Higher is better. Alpha is
also used by momentum investing gurus Louis Navellier and Jim Collins in
their initial screens to pinpoint outperforming stock candidates.
American Depositary Receipt (ADR): A
certificate trading on a U.S. stock exchange that represents shares of a
Amortization: when a company makes an
acquisition, the excess paid over the acquired firm's book value is
termed goodwill. Until recently, the acquiring company was required to
amortize the goodwill over a specified period. That requirement was
changed in 2002, and firms are no longer required to amortize
Analyst: someone typically working for a
brokerage house, who publishes buy/hold/sell recommendations and
earnings forecasts for a stock. Buy side analysts work for institutional
buyers, and sell side analysts work for brokerages.
Annuity: a contract sold by life
insurance companies that guarantees a specified payment at some future
time, usually retirement.
Arbitrage: the act of taking advantage of
the difference in price of the same security traded on two different
markets. For instance, if Nortel Networks were trading at $100 (US) on
the Toronto exchange and $99 on the NYSE, an arbitrageur would buy
shares on the NYSE and sell them on the Toronto exchange.
Ask Price: The price you are asked to pay
when you buy a stock (see 'Bid Price').
Asset Allocation: the process of dividing
your funds among different classes of investments such as stock, bond,
or real estate. You could further allocate your stock funds into value,
growth, foreign, etc.
Average Daily Volume: average number of
shares traded per day over a specified period.
Average P/E Ratio: Average price/earnings
ratio of stocks owned by a mutual fund.
Load: sales charge paid when selling a mutual fund (a.k.a. deferred
Backtesting: determining the results of
using particular screening criteria, as if the screen had been run at
some point back in time, and the selected stocks or funds were held for
a predetermined time period and then sold.
Balance Sheet: A
financial statement listing a company’s assets (what it owns) and
liabilities (what it owes) as of a specific date, usually the last day
of a company’s fiscal quarter. The difference between a company’s
assets and liabilities is termed its net worth or shareholder’s
Basis Points: one basis point is 0.01
percent. Usually used to describe changes in bond yields. For instance,
a ten basis point increase means the interest rate went up 0.10 percent.
A 100 basis point change is 1 percent.
Bear Market: a period when most stocks
are declining in value.
Beta: compares a mutual fund or stock’s
volatility to a benchmark (usually the S&P 500 Index). A beta
greater than 1 is more volatile than the index. For instance, a beta of
1.5 mean the fund or stock is historically 50% more volatile than the
Bid Price: the price you’re offered
when you’re selling a stock.
Big Board: the New York Stock Exchange
Block Trade: a single purchase or sale of
a stock involving 10,000 or more shares.
Blue Chips: large, stabile
Boiler Room: a high-pressure, often
fraudulent, telephone sales operation.
Bond: a long-term promissory note issued
by a corporation.
Bond Rating: a grade evaluating the
quality of a bond.
Book to Bill Ratio: the ratio of a
company’s new orders to shipments in the same period. A book to bill
ratio greater than 1.0 indicates sales growth. Ratios less than 1.0
reflect shrinking sales. Used mostly in the semiconductor industry.
Book Value: total shareholder’s equity
from balance sheet divided by the number of shares outstanding.
Bottom Line: after-tax earnings.
Literally, the bottom line on an income statement (a.k.a. net income or
Bought Deal: rather than simply acting as an agent,
an investment bank or other underwriters directly purchase
securities from the issuer, usually at a discount to the market price,
and then sells them to investors.
Breakout: a charting (technical analysis)
term meaning a stock price has moved above or below a previous trading
Bulletin Board System: stocks that don’t
qualify for NASDAQ listing are traded here or by Pink Sheets.
Bull Market: a period when most stocks
are increasing in value.
Buy Side Analyst: analyst working for
mutual fund or other institutional investor. We don’t usually get to
see their reports.
Option: an option to buy 100 shares of a specified stock at a
predetermined price (see LEAPs and put options).
Capital Gains Distribution: payments to
mutual fund holders representing the fund holders share of the fund's
profits resulting from the sale of stocks in the fund's portfolio. The
fund reduces its share price by the same amount, so the fund holder
doesn't gain from the transaction, however the fund holder is liable for
payment of any resulting capital gains taxes.
Capital Lease Obligations: balance sheet
liability reflecting lease payments due for the term of the lease.
Capitalize: costs of items such as
buildings, equipment and other items with a useful lifetime exceeding
one-year are categorized as assets to be depreciated over a number of
years, rather than being expensed in the year of purchase.
Capitalization Weighted Index: largest
companies have most influence on index price action.
Carry Trade: profiting on interest rate
differentials. For instance, borrowing money at a relatively low
short-term rate and lending it out a higher long-term rates.
Cash & Cash Equivalents: cash in bank
and all securities that can readily be converted to cash within three
months or less.
Cash Flow: After tax income minus
preferred dividends and general partner distributions plus depreciation,
depletion, and amortization (Market Guide definition). See Operating
Cash Flow and Free Cash Flow.
Charting: making buy and sell decisions
based entirely on stock price and volume history (same as technical
Chat Room: a real-time message area
usually dedicated to a particular topic.
Closed-End Fund: investors buy shares
from other share holders, and sell shares to other investors. Share
price is determined by supply and demand for fund shares (as opposed to
Net Asset Value for open-end Funds).
Commission: fees paid to a broker to
execute a stock or mutual fund trade.
Commodities: minerals such as gold or
silver, food such as corn or wheat, animal products, and the like.
Common Stock: shares of a publicly held
corporation, usually includes voting rights. Common stock has lower
priority in event of liquidation than preferred shares.
Conference Call: a multi-party telephone
call hosted by a company, primarily for analysts, shortly after making
an earnings announcement.
Confirmation: notice from a stock broker
giving details of a stock or mutual fund purchase or sale.
Consensus Estimate or Rating: the average
of analysts individual earnings forecasts or buy/sell ratings.
Consolidation: a charting term meaning a
stock price is in a trading range, not moving significantly up or down.
Contrarian: similar to value investor.
Looks for stocks with prices beaten down out of proportion to
Convertible Bond: a bond that can be
exchanged for shares of stock.
Cost of Sales: cost of materials and
labor required to produce products or services. Gross profit is sales
minus cost of sales.
Coupon Rate: the interest rate on a
Current Ratio: current assets (cash,
inventories, and accounts receivables) divided by liabilities due within
Sales Outstanding: a measure of accounts receivables compared to sales.
Higher DSOs means a company’s receivables as a percentage of sales
have increased, not a good sign.
Debt to Equity (Long Term): total long
term debt divided by total shareholder equity.
Debt to Equity (Total): total (short and
long term) debt divided by total shareholder equity.
Depreciation: A non-cash accounting
charge representing the loss in value of hard assets such as buildings
and machinery over the accounting period.
Deferred anything: balance sheet
liability reflecting expenses shown on the income statement that haven't
actually been paid.
Deferred Income Tax: balance sheet
liability reflecting taxes due, but not yet paid.
Deferred Load: sales charge paid when
selling a mutual fund (a.k.a. back-end load).
Deferred Revenue: a balance sheet
liability reflecting payments received for work not yet performed.
Diluted Earnings (a.k.a. fully diluted
earnings): total of after tax (bottom line) earnings divided by number
of common shares including unexercised stock options, and unconverted
preferred stock and convertible bonds. Undiluted earnings would be after
tax earnings divided by issued stock only, not considering outstanding
Direct Stock Purchase Plan (DSP): a plan
implemented by a corporation allowing purchase of shares, or fractions
of shares, directly from the company, usually on a regular basis.
Discount: the difference between a bond's
face value and its current market price.
Dividends: cash or stock paid to
shareholders, usually on a quarterly schedule.
Dividend Reinvestment Plan (DRIP): a plan
implemented by a corporation to allow investors to collect dividends in
shares (usually fractions of shares) of stock rather than in cash.
Derivatives: options and other instrument
whose value depends on an underlying security. For instance, the value
of a call option on Cisco Systems (derivative) fluctuates with the price
of Cisco System’s stock.
Discount Broker: a stockbroker charging
lower commissions than full-service brokers. Discount brokers do not
give investment advice.
Dividend Yield: total of 12-month's
dividends paid (historical or forecast) divided by the latest share
Dogs of the Dow: a contrarian stock
selection strategy based upon buying the highest dividend yielding
stocks of the Dow Jones Industrial Average.
Dow Jones Industrial Average: unweighted
index of thirty of the largest U.S. corporations.
Downtick: a stock trade executed at a
lower price than the previous trade.
Downtrend: stock price is heading down.
Due Diligence: the process whereby an
in-depth examination of a company’s business prospects is conducted.
Dutch Auction: a method of allocating
shares in an IPO where you specify how much you’re willing to pay for
how many shares.
per Share (EPS): after tax 12-month's earnings divided by the number of
EBIT: earnings before interest and taxes.
Also known as operating income.
EBITDA: earnings before interest, taxes,
depreciation and amortization. Adds these items back to reported
earnings to more accurately reflect real cash earnings of company.
Similar to operating cash flow, except operating cash flow also
considers changes in levels of inventories and receivables.
ECN: electronic trading network. ECNs are
expected to supplement or even replace conventional stock exchanges over
the next one to two years.
EDGAR: database maintained by the U.S.
Securities & Exchange Commission (SEC) containing government
required reports filed by corporations.
Emerging Markets: developing countries.
EPS: earnings per share.
Ex-Dividend: the day after dividends are
Execution: a trade completion. For
instance, your trade was executed at $12.00.
Expense Ratio: all expenses incurred by
mutual fund management in operating and marketing the fund. Includes
management and 12b-1 fees. Doesn’t include loads or redemption fees.
Expense ratios are deducted before computing fund returns.
Extended Hours Trading: trades executed
outside normal market hours.
Extraordinary Items: charges for items
that are both unusual in nature and infrequent in occurrence, such as
Value: the true value of a stock based on criteria of the user’s
choosing. A stock is said to be overvalued when the share price exceeds
the fair value.
Fallen Angel: an IPO trading below its
issue price in the aftermarket.
Fed (The): Federal Reserve Board.
Federal Open Market Committee (FOMC): the
Fed’s monetary policy committee, chaired by Ben
Financial Leverage Ratio:
The leverage ratio,
which is total assets divided by shareholders' equity,
is an all-purpose debt gauge. A company with no debt would have a ratio
of one, and the higher the ratio, the more debt. The
average leverage ratio of S&P 500 stocks is around 2.5. Most banks have
ratios in the 10 to 15 range.
Financials: financial statements
including operating statement, balance sheet, and statement of cash
Fiscal Year: any 12-month period
designated by a corporation as their accounting year. Once set up, a
corporation's fiscal year does not change.
Flipping: the practice of buying IPO
shares at the issue price and reselling them on the first day of
Float: shares outstanding less shares
held by insiders. Insiders cannot readily trade shares, so float is
considered to be the number of shares available for trading.
Forex: foreign currency exchange
Funds From Operations (FFO): used instead
of earnings to evaluate real estate investment trusts (REITs).
Depreciation of real estate that was deducted from earnings is added
back in to calculate FFO. Any gains or losses from the sale of real
estate is also removed.
Free Cash Flow: operating cash flow minus
amounts spent on plants and equipment.
Front-End Load: sales charge paid when
purchasing a mutual fund.
Full Service Broker: a stockbroker
offering investment advice and other services not usually offered by
Fully Diluted: number of shares
outstanding including options granted but not yet exercised.
Fundamental Analysis: analyzing stocks by
looking at earnings, sales, profit margins, etc.
Fund Family: a group of mutual funds
owned by the same company.
Funds From Operations (FFO): Used in
place of earnings per share (EPS) to measure the performance of REITs.
FFO, similar to cash flow is the REITs net income less gains and losses
from sales of property or debt restructuring, and adding back real
estate depreciation back in.
Inflation Gauge: a private-sector index (1992=100) that attempts to
predict the direction of inflation over the next 6 to 12 months. Click
here to see it.
accounting: a company estimates
the future profitability of a trade made today and books
a profit today based on the present value of those estimated future
growth at a reasonable price. A strategy of buying stocks whose
price/earnings ratio is equal to or less than the estimated annual
earnings growth rate.
Generally Accepted Accounting
(GAAP): Accounting rules and procedures established by the Financial
Accounting Standards Board, an independent self-regulating
Geographic Funds: mutual funds
specializing in a specific geographic area such as Europe.
Good For the Day: buy or sell limit order
will expire at close of trading if not executed.
Good til Canceled: buy or sell limit
order remains active until you cancel it.
Goodwill: the amount of a company's
shareholder's equity that exceeds the value of its hard assets.
Green Shoe: an agreement allowing the
lead underwriter to buy additional shares of an IPO at the offering
price after the IPO begins trading.
Gross Margin: gross profit divided by
Gross Profit: profit a company makes on
goods and services before considering overhead expenses. Gross profit is
sales minus cost of sales.
Growth Stocks: companies with consistent
annual earnings and sales growth of at least 15%.
pledging of assets as collateral.
From Continuing Operations: see Operating Income.
Income Statement: a record of a company's
sales and expenses over a particular year or quarter.
Index: a composite representing the value
of a group of stocks.
Industry Group: companies in related
Initial Public Offering (IPO): first sale
of stock to the public by a corporation.
Insiders: Officers, directors and anyone
else owning more than 10% of stock outstanding.
Insider Ownership: number of shares owned
or controlled by insiders.
Insider Trading: shares bought and sold
by company insiders. It’s legal as long as they follow the SEC’s
Intangibles: soft assets such as patents,
Interest Coverage: a measure of a company’s
ability to pay interest on its debts (operating income divided by
Institutional Ownership: Shares owned by
pension funds, mutual funds, banks, etc.
Intraday: stock trading tracked in
periods shorter than one day.
Intrinsic Value: a term favored by value
oriented fundamental analysts to express the actual value of a
corporation, as opposed to the current value based on the stock price.
Usually calculated by adding the current value of estimated future
earnings to the book value.
Inventory: raw materials, work in
process, and finished goods that haven’t been shipped to customers.
Investment Bank: an organization, usually
a stock brokerage firm, involved in taking a new company public (IPO),
consulting on mergers and acquisitions, handling corporate borrowing,
Effect: supposedly, small stocks make a big move up in January.
Junk Bonds: corporate bonds with poor
company with market capitalization greater than $8 billion.
Lead Underwriter: brokerage house in
charge of IPO.
Leverage: see Financial
Leveraged Buy Out: Take over of a public
corporation using borrowed funds.
LEAP: a long-term put or call option (as
long as three years).
Limit Order: order with broker to buy
stock at limit price or less, or to sell stock at limit price or higher.
Liquidity: a measure of the number of
shares, or dollar value of shares traded daily. Mutual funds and other
institutional buyers prefer high liquidity stocks so they can easily
move in and out of positions.
Load: a sales commission paid when you
buy (front-end) or sell (back-end) a mutual fund.
Lockup Period: time after IPO, typically
180 days, when insiders are prohibited from selling their shares.
Long-Term Investments: balance sheet item
reflecting investments in other companies, etc.
borrowing funds from your broker to buy stock.
Margin Account: a brokerage account with
approved credit so you can buy stock on margin.
Market Capitalization: latest stock price
multiplied by number of shares outstanding (shares issued).
Market Maker: intermediary for stocks
traded on NASDAQ, and for off-hours trading in NYSE stocks. When you
trade NASDAQ stocks, you buy your shares from the market maker. When you
sell shares, you sell them to the market maker. The market maker keeps
the difference between the bid and asked prices.
Market Order: order with broker to buy or
sell stock at current market price.
Master Limited Partnership (MLP): Similar
to a real estate investment trust (REIT), except MLPs are not limited to
a specific industry compared to REITs which must invest in real estate.
Both types trade like stocks on the New York Stock Exchange, and both
types must distribute most of their earnings in the form of
Median Market Cap: the average market
capitalization of stocks owned by a mutual fund.
Message Board: a location on a Web site
dedicated to the discussion of a particular topic, usually a single
stock or industry sector. Discussions are not real-time. Someone posts a
message, and then others respond over a period of hours or days.
Mid-Cap: company with market
capitalization between $2 billion and $7 billion.
Model: a strategy for selecting stocks
using screening criteria that have been found to work in the past.
Momentum Analysis: usually involves
looking for stocks in a strong uptrend (high relative strength), strong
earnings growth, and increasing earnings forecasts. In today’s market,
may include relative strength only.
Momentum Stocks: companies currently in
favor by investors (price/sales greater than 10, price/earnings greater
than 35 or so).
Money-Center Bank: the largest banks such
as Citigroup and Bank of America.
Money Supply: the amount of money in
circulation. The Federal Reserve Board attempts to control the growth of
the US economy by regulating the increase in money supply.
Morningstar: mutual fund rating
Mortgage REIT: A real estate investment
trust (REIT) whose primary business is investing in real estate
Most Recent Quarter (MRQ): as of the last
date of the last reported fiscal quarter.
Moving Average (MA): the average
closing price of a stock over a specified period. For instance, the 10-day
MA is the average closing price for the past 10 days. Stocks are said to
be in an uptrend when above their MA and in a downtrend when below. The
most widely followed MAs are 50 days and 200 days. Long-term investors
tend to look at the 200-day MA while active traders are more likely to pay
attention to the 50-day MA. Many investors look at both. As a general
rule, it's best to avoid stocks trading below both their 50- and 200-day
national market for trading stocks.
NASDAQ 100 Index: index of 100 largest
companies on NASDAQ. The NASDAQ trades like a stock under the symbol QQQQ.
Net Asset Value: value of all stock and
other assets owned by mutual fund divided by total number of shares fund
Net Income: After-tax earnings (a.k.a.
bottom-line or profit). Earnings per share (EPS) is net income divided
by the number of outstanding shares.
No Load Mutual Fund: no sales commission
is charged if you buy shares directly from the fund. There may or may
not be a commission charged if you buy the fund through a broker.
Non-Operating Expenses: expenses not due
to basic business of company.
Non-Operating Income: income not derived
from basic business of company.
Normalized Earnings: profits a company
can be expected to achieve taking out cyclical effects and unusual
events such as one-time write-offs caused by late product releases,
customer bankruptcies and the like.
trade price of the day’s first transaction.
Open End Mutual Fund: investors buy
shares directly from fund, and sell shares directly to fund. Share price
is Net Asset Value (NAV).
Operating Cash Flow: surplus cash
generated from company’s basic operations without regard to income tax
entries such as depreciation and amortization. Changes in levels of
inventories, accounts receivable and accounts payable also affect cash
flow. Also see Free Cash Flow.
Operating Earnings: not the same
as operating income. See pro forma earnings.
Operating Income: sales minus all
expenses except income taxes and other items not related to basic
Operating Margin: operating income
divided by sales.
Over-the-Counter-Market: older name for
stocks traded on NASDAQ. Also refers to bulletin board and Pink Sheet
for Order Flow: a payment made by a market maker to a broker as a thank
you for directing your stock trade to that market maker.
Payout Ratio: Percentage of earnings paid
out in dividends.
PEG: price to earnings ratio divided by
the forecast annual earnings growth rate. Traditionally, stocks were
said to be fairly valued when the p/e and the forecast growth rate were
Phase 1, Phase 2, & Phase 3: the
series of FDA required tests before a new drug can be placed on the
Poison Pill: Steps taken by a corporation
to thwart a hostile takeover attempt. For instance, a company could
issue rights to purchase shares at a substantial discount after a
merger, or it might issue preferred shares giving holders the right to
redeem their shares at a discount after a merger.
Portfolio: a group of stocks, mutual
funds, or other securities.
Post-Offering Shares: the number of
shares that will be outstanding after an IPO.
Preferred Stock: debt instruments.
Preferred shareholders are paid ahead of common stock holders in the
event the corporation is liquidated. Convertible preferred shares can be
converted into common stock according to predetermined conditions.
Price to Book Ratio (p/b): latest share
price divided by book value stated in latest report.
Price to Earnings Ratio (p/e): latest
share price divided by 12-month earnings per share (eps). Also a measure
of the market's enthusiasm for a company.
Price to Sales Ratio (p/s): latest share
price divided by 12-month sales per share.
Profit Margin: bottom line (after tax)
earnings divided by sales.
Pro Forma Earnings: (as if) earnings
without considering certain expenses such as inventory write downs,
severance pay, depreciation and amortization charges, or just about
anything else the company feels like excluding to make its earnings look
better. Also known as core earnings, ongoing earnings, earnings
excluding special items, or operating earnings.
Property, Plant and Equipment (PPE): all
hard assets such as buildings, airplanes, machinery, etc.
Prospectus: a document circulated to
potential investors prior to an IPO describing a company’s business
Proxy Statement: material given to
stockholders when the corporation solicits shareholder votes. The proxy
statement usually contains details on the corporation's executive
Put Option: an option to sell 100 shares
of a specified company’s shares at a predetermined price (also see
LEAPs and call options).
Ratio: cash and cash equivalents plus accounts receivables divided by
current liabilities (aka Acid Test Ratio)
Quiet Period: time after IPO, typically
25 days, when all parties involved in IPO are prohibited from commenting
on the company’s future prospects. Analysts employed by underwriters
are free to make buy/hold/sell recommendations after the Quiet Period
Quote: information on the last trade, and
current bid and asked prices. Most quotes are intentionally delayed
about 20 minutes.
high and low trade prices for the day, week, or month.
Real Estate Investment Trust: see
Real-Time Quotes: stock trading price
reports that have not been artificially delayed.
Receivables: See accounts receivable.
Redemption Fee: Fee charged when you sell
a mutual fund, if you haven’t held the fund for the prescribed minimum
REIT (real estate investment trust): A
special form of corporation that invests
primarily in real estate. REITs do not pay
federal income taxes as long as they
pay out 90% of their earnings to shareholders
in the form of dividends.
Relative Dividend Yield: dividend yield
of a stock compared the dividend yield of the S&P 500.
Relative Strength: stock price
performance compared to the S&P 500, or to the entire stock market.
Can measure performance over any time span, but most often uses 12
months. Relative strength is different from RSI (Relative Strength
Indicator) indicator used in technical analysis.
Research and Development (R&D): costs
of developing new products and services.
Return on Assets: after tax income
divided by total assets.
Return on Capital
(return on invested capital): after tax income
(latest 12 months) divided by total of shareholder’s equity plus long
term debt, plus other long term liabilities.
Return on Equity: after tax income
(latest 12 months) divided by shareholder’s equity (from balance
Revenues: a company’s sales.
Road Show: presentations made by
underwriters and IPO company officials to institutional buyers to create
interest in the offering.
Russell 2000 Index: the Russell 3000 is
an index of the 3,000 largest US publicly traded corporations. The
Russell 2,000 is a capitalization-weighted index of the 2,000 smallest
companies of the Russell 3000.
500: capitalization weighted index of 500 of the largest U.S.
Sales: services and products sold by a
company. Sales and revenues mean the same thing.
Sales per Share: annual sales divided by
the number of shares outstanding.
Same Store Sales: sales at retail stores
or restaurants open at least one year. A chain’s same store sales
growth excludes gains due to increases in the number of stores. Same
store sales growth in the 5 percent to 10 percent range is considered
Screening: searching the entire universe
of mutual funds or stocks meeting user-specified criteria.
Sector Funds: mutual funds specializing
in a particular industry sector such as computers, or health care.
Secular Trend: a very long-term
Sell Side Analyst: an analyst employed by
a brokerage house such as Merrill Lynch.
Settlement: the process of paying for
stocks you purchase, or receiving credit from your broker for the stocks
you sell. Most stock transactions must be settled within three business
Shareholders Equity: the difference
between the total of assets and liabilities shown on a company’s
balance sheet. Book value is the shareholders equity divided by the
number of outstanding shares.
Shares outstanding: the total number of
shares issued by a corporation.
Sharpe Ratio: An attempt to compare a
fund’s performance to risk. Higher Sharpe Ratio funds are said to be
better performers than lower ratio funds.
Short Interest: number of shares borrowed
by short sellers.
Short Interest Ratio: number of days it
would take to cover short interest at average daily volume (short
interest divided by average daily volume).
Short Sale: selling stock you don’t
own. You hope it drops in price so you can buy it back later at a lower
price. You must have a margin account with your broker to sell short.
Short Squeeze: a sharp move up in stock
price forcing short sellers to liquidate their positions.
Short-term Debt: borrowings that must be
repaid within one-year.
Short-term Investments: stocks and other
Small Cap: company with market
capitalization less than $1 billion.
Specialist system: a person on a stock
exchange floor (specialist) matches buy and sell orders (used on New
York and American stock exchanges).
Spider: a security representing one-tenth
the value of the S&P 500 index. Spiders trade like a stock. Spiders
are a means of owning the index without buying mutual fund shares.
Spread: the difference between the bid
and ask prices for a stock.
Standard Deviation: a measure of a mutual
fund or stock’s historical volatility.
Stop Order (stop loss): order with broker
to sell stock at market price when it goes down to specified (limit)
Stop Limit Order: a combination of a stop
order and a limit order. The limit order becomes effective when the
stock hits the stop price.
Surprise: difference between reported
earnings and analysts’ consensus forecasts. It’s a positive surprise
if reported earnings exceed forecasts, and a negative surprise when
reported earnings come in below forecasts.
Sweep: movement of funds from a non
interest-bearing account to an interest bearing account.
Book Value: Book Value minus goodwill and intangible assets.
Technical Analysis: making buy and sell
decisions based entirely on stock price and volume history (same as
Top: a charting term meaning the stock
price is going down from here.
Top-Line: sales or revenues.
Total Liabilities: all monies owed
regardless of how classified on the balance sheet. The best measure of a
firm's total debt.
Triple Witching: the third Friday of
March, June, September and December is the day when index futures, index
future options, and certain stock options all expire. Triple Witching
Fridays are know for high volatility.
Trailing Twelve Months (TTM): the last
four reported quarters.
Turnover Ratio: how often a mutual fund
changes its portfolio holdings. 100% turnover means a fund, on average,
changes all the stocks in its portfolio once a year.
a stock trading below its fair value.
Underwriter: brokerage house
participating in an IPO.
Uptick: a stock trade executed at a
higher price than the previous trade.
Uptrend: stock price is trending
Investor: one who looks for out of favor (value priced) stocks.
Value Stocks: companies currently out of
favor with investors. These companies usually have low valuation ratios
(price/earnings less than the S&P 500, price/sales ratio less than
2, price/book ratio less than 2).
Venture Capitalist: an investor involved
in financing a company’s operations before going public in exchange
for an ownership percentage.
Volume: number of shares traded during a
specified time, usually one day.
Portfolio: a group of stocks or funds that you are tracking, but don’t
WEBS (World Equity Benchmark Shares):
country-specific indexes that trade like stocks. WEBS give investors the
opportunity to invest in 17 different foreign countries.
Whisper Number: analysts publish earnings
forecasts for companies they follow. Sometimes analysts publish a lower
number than they really believe to reduce chances of a negative
surprise, but they supposedly "whisper" what they really think
to their best friends. Most whisper numbers you see on the Web are
simply the analysts' consensus forecasts plus the average of the most
recent two or three earnings surprises.
Working Capital: current assets minus
Interest and dividends paid to mutual fund shareholders as a percentage
of share price (Net Asset Value). Also the effective interest rate on a
bond. For instance, if a bond pays $1.00 interest annually, and is
selling for $10.00, the yield is (1.00/10.00) 10 percent.