What is a Stock
A stock represents the smallest share of a company possible. When you buy a stock you are in effect buying a part of the company whose stock you are buying. Ownership of a company's stock, even a single share, gives you the right to say how the company is run and a slice of the profits the company makes. Since most companies that issue stock are limited liability, ownership does not imply the obligation in case company goes bankrupt etc.
Ownership of a companies stock or shares represents a vote, regularly shareholders will be asked to vote on issues the company is facing. The Profits are distributed either by paying dividends ("slice of the profit") or by share buybacks.
Typically companies issue to stock to raise capital, this capital may be required to expand operations, acquire new companies or property, fund research etc. They are typically issued at par value, however there is usually a premium attached to this value, therefore more often than not you will pay a premium to the par value to own the stock. This premium depends on the perceived growth and outlook of the company.
Stock investors will usually buy stocks if they believe the company has good growth prospects, which in turn would yield bigger profits, thereby increasing both the value of the share and the "slice" of the company profits the company receives. If the company prospers the value of the stock rises and the distribution of profits increases. On the other hand if the company does poorly the value of the share may fall.
Stock Markets
The buying and selling of stocks is conducted on the stock exchanges. To facilitate the buying and selling of their companies stock, the company must list in that exchange. This is to say that if a company is listed on one exchange you cannot buy and sell that stock on a different exchange. Note a company can be listed, in more than one exchange in more than one country. A company must list in order for their stock to be bought or sold.
There are stock exchanges located throughout the world, the major ones being located in the US, UK, Germany, Japan, China, India. Some countries will have more than one exchange, for example in the US you have the New York Stock Exchange and the NASDAQ.
Typically the buying and selling of stocks can only be conducted during the opening hours of the market or exchange in question. In some cases the markets may be open for extended periods. Brokers provide access to the markets. In order to buy or sell any stock it is necessary to open an account with a brokerage firm. It is important to note, it is important to use a good and reputable broker, one that can provide access to a number of exchanges and not just one.
Brokers take orders to buy and sell the stock at a certain price or time, further there are a number of types of orders you can place on the market. These include both orders to buy and sell at certain prices. Brokers will charge you a fee to execute trades. The fee is usually referred to as a commission.
Stock Indices
Stock indices are essentially averages compiled by taking account of the prices by which the stocks listed on the index are trading. They essentially fall into two main categories, first the broad based indices which take into account all the stocks on the exchange, second the selected indices which take into account a selection of selects.
For Example the Dow Jones Industrial Average takes into account 30 of the ?largest? US companies selected to represent the industrial component of the US stock markets. The NYSE composite takes into account all stocks listed on the New York Stock Exchange.
Further there are different ways in calculating these indices the most common being the price-weighted indices, such as the Dow Jones Industrial Average, and the market value weighted indices such as the S&P 500. Price weighted indices essentially assign an equal weight to each company selected, market value weighted indices assign greater weight to larger companies. This is to say that movement in the larger companies stock price have a greater impact on the overall index.
Stock Prices and Quotes
Stock prices and quotes are available from many sources. Newspapers carry summaries of the previous days price action, online sources can provide current prices, there are also a number of television channels that display this information. Although in the case of television channels they will usually show information about the important stocks during the session.
The Stock prices themselves are for the main part determined by perceived performance i.e. to what extent the company is expected to grow. The companies report their financial information quarterly. In many cases they will also report on their outlook for the future. Therefore whenever the companies make announcement that in any way alter the company?s future, investors typically re-adjust their positions to reflect this. Announcements such as these usually have large impacts on the stock prices.
What Zack knows is FA, he knows what is undervalued and what is overvalued.
I have received lots of messages asking market has moved up too fast, should we sell it now?... Read more
Well, like I said before, I don't know where is the bottom and where is the peak but what I do know is market is never wrong! If u think market is too high and u sell off ur shares and later on, the market shoots up again, u are wrong, market is right or if u think it is too low, u jump in and the market comes down, once again u are wrong and market is again right! This is what people call market will never be wrong!
All this is just like telling me my mother is female, buy low sell high, my father is male... haha!
Though market is never wrong but still I have ways to deal with her since i cannot beat her, I have to join her. How to join her? use TA? of course NOT! The more u use TA the more u suffer!
The solution is simple:-
2 things
1) Fund allocation. Monitor ur cash vs shares ratio.... Read more
2) Sell and buy in stages.
U don't know where is the peak, hence sell in stages like what I did to PANTECH, ALAM n ZELAN .
Same goes to buying in stages.
U know very well, market will never go below 900 anymore.. hence, u can allocate ur fund in 3 buying stages 1150, 1100 and 1000.
Ok.. lets come back 2 warrant.
How to pick a good warrant ?
Before I show u how to pick a good warrant, I must first show u my proven track records in warrants (warrant album).
First, YTL-wb bought in year 2002, cost 0.52 for 213 lots
sold all @ avg 1.60+ , Profit RM200K+
Second, IJM-wb bought in year 2006, cost 0.38 for 278 lots
sold all @ avg 1.20+- , Profit RM220K+
Third, the latest one, YTLpwr-wb bought in 2008, cost 0.49 for 100 lots.
sold all @ avg 0.76 , Profit RM25K+
Total profit made from warrant = RM450K+.. How do you like that? :)
What is a good warrant ?
3 criterias
1) Must be in money, what is in money warrant? In money warrant is the premium that u get after u minus out ur cost and conversion from its mom.... Read more
Example : TGOFF-wa
As at 8th May 09
Mom = 1.25
TGOFF-wa= 0.69
Conversion = 0.55
Hence, 0.69 + 0.55= 1.24
1.25 - 1.24 = 1cent , premium = 0.01/1.24 = 0.8%
Due to cost and time factor, any premium below 30% is still considered as in money warrant. What is the 30% premium for TGOFF @ 1.25 ? The answer is 1.08 .
1.08 + 0.55 =1.63
1.63 - 1.25 /1.25 x 100% = premium 30%
In another word, the FV for TGOFF-wa is 1.08! $$$$$$$
2) Future earnings of its mom, take a look at my previous warrant purchases , all are bluechips such as YTL and IJM. The latest one is Tanjong offshore, with its status of political link darling and orders in hand, I foresee its future earnings to be a good one.
3) Expiry date must be at least 3 years and above, why? Simple.. cos u don't know what will happen tomorrow, what if another 911 happens tonight? Once its mom dive from the sky, your premium could be gone with the wind also, hence longer expiry date is essential.
Also guys check out yourself, besides YTLpwrwb, how many of the warrants in KLSE could satisfy the above criterias?... Read more
The answer is XXXXX :) Still no clue?
Same old saying, we are not smart as Warren or Li kar sing, we all wish to be them but we're not. So how??
Since we cannot be them.. we can follow their method, what made them who they are now? That's the thing we need to learn from them.
Everybody wants to be a genius, but how many of us are born a genius? born dumb is not ur fault. Follow those smart people and u'll never be wrong!
The saddest thing is "you are less smart but still you think you are very smart!