Dividend Yield

A ratio of a company's annual cash dividends divided by its current stock price expressed in the form of a percentage. To get the expected annual cash dividend payment, take the next expected quarterly dividend payment and multiply that by four. For instance, if a $10 stock is expected to pay a 25 cent quarterly dividend next quarter, you just multiple 25 cents by 4 to get $1 and then divide this by $10 to get a dividend yield of 10%.

Dividend Yield = Annual Dividend / Price = $0.25 * 4 / 10 = 0.10 = 10%

Many newspapers and online quote services will include dividend yield as one of the variables. If you are uncertain whether the current quoted dividend yield reflects a recent increase in the dividend a company may have made, you can call the company and ask them what the dividend per share they expect to pay next quarter will be.

Source: Google search (source wasn't recorded at time of reading)

Capital Appreciation

One of the two components of total return, capital appreciation is how much the underlying value of a security has increased. If you bought a stock at $10 and it has risen to $13, you have enjoyed a 30% return from the appreciation of the original capital you invested. Dividend yield is the other component of total return.

Source: Google search (source wasn't recorded at time of reading)

Book Value

The current value of an asset on a company's balance sheet according to its accounting conventions. The shareholders' equity on a company's balance sheet is the book value for that entire company. Many times when investors refer to book value, they actually mean book value per share, which is the shareholder's equity (or book value) divided by the number of shares outstanding. As the book value is theoretically what a company could be sold for (liquidation value), this book value number is sometimes used as a rough guide as to whether or not the shares are undervalued.

Source: Google search (source wasn't recorded at time of reading)

Net income

Net income is equal to the income that a firm has after subtracting costs and expenses from the total revenue. 

Net income or Net loss = Revenue – Cost of goods sold – Sales discounts – Sales returns and allowances – Expenses – Minority interest – Preferred stock dividends

Source:wikipedia

Preferred Stock or preferred shares or preference shares

Source: wikipedia

Is typically a higher ranking stock than common stock, and its terms are negotiated between the corporation and the investor.

Preferred stock may carry superior voting rights to common stock or may not carry any voting rights at all. Preferred stock may carry a dividend that is paid out prior to any dividends to common stock holders. Preferred stock may have a convertibility feature into common stock. Preferred stock holders will be paid out in assets before common stockholders and after debt holders in bankruptcy. Terms of the preferred stock are stated in a "Certificate of Designation".

The main benefit to owning preferred stock is that the investor has a greater claim on the company's assets than common stockholders. Preferred shareholders always receive their dividends first and, in the event the company goes bankrupt, preferred shareholders are paid off before common stockholders. 

Gross profit or sales profit or gross operating profit

Gross profit or sales profit or gross operating profit is the difference between revenue and the cost of making a product or providing a service, before deducting overheads, payroll, taxation, and interest payments.

or Gross Profit = Revenue - Cost of Goods Sold

(Cost of goods sold includes variable costs directly linked to the product, such as material and labor. It does not include fixed costs like office expenses, rent, administrative costs, etc.)

Source: Wikipedia

Gross Margin Percentage

Gross Margin Percentage = (Revenue - Cost of Goods Sold) * 100

                                           --------------------------------------------------

                                                        Revenue

Relative price strength

Source: wikipedia.org

Is an index designed to measure the price of stock over the past 12 months in comparison to the rest of the market based on the S&P 500 or the TSE 300 over a set period of time. For example, a stock with an RS of 90 has outperformed 90% of publicly traded companies the past year.

Ratings run from 1-99, with 99 being considered the best for inclusion in the CAN SLIM schema.

Underwriter for an IPO

The most important character is probably the underwriter, an investment banker who works for an investment company. Underwriters have the distribution channels and business community contacts that can get a company's shares out to the right investors. They will also help set the initial offering price for the stocks, work to create enthusiasm for the stock, and assist in creating the prospectus. The prospectus is an important document that describes the company in great detail to potential investors. 

Source: Google search (source wasn't recorded at time of reading)

Privately Vs Publicly held Corporations

Source: howstuffwork.com

In a privately held company, the shares of stock are owned by a small number of people who probably all know one another. They buy and sell their shares amongst themselves. A publicly held company is owned by thousands of people who trade their shares on a public stock exchange.

When a corporation first sells stock to the public, it does so in an IPO (Initial Public Offering).

In a publicly traded company, all of the financial information about the company is public. The Securities and Exchange Commission (SEC) is in charge of collecting this information and making it available to investors.

Corporations

Any business that wants to sell shares of stock to a number of different people does so by turning itself into a corporation. The process of turning a business into a corporation is called incorporating.

Source: Google search (source wasn't recorded at time of reading)

Income Stock Vs Growth Stock

If a company traditionally pays out most its profits to its shareholders, it is generally called an income stock. The shareholders get income from the company's profits. If the company puts most of the money back into the business, it is called a growth stock. The company is trying to grow larger by increasing the amount of equipment and the number of people who run it.

Source: Google search (source wasn't recorded at time of reading)

Doji Candlestick pattern

Noticed the formation of Doji candlestick patterns on Dec 12th for APPL (source of chart: finance.yahoo.com)

Doji represents a state of uncertainty where neither bulls or bears win.

In Technical Analysis, a candlestick captures the movement of the market for the timeframe/session specified. The session could be a minute, hour, day, week, month...

The top of the candle body represents the open price, the bottom closing price, the end of the upper wick the highest price within the session, and the end of lower wick the lowest price within the session.

Color coding the candle makes it easy to analyze whether the market was bullish or bearish. Typically red indicate a bear, and green a bull. See the price movement of Apple on July 24 and July 31st.

--

Dojis are formed when Open and Close price are the same. There are 3 types of Dojis to lookout for:

Long legged Doji: Forms when big upward and downward movements within a session, but neither bull or bear wins. Its a fight. When the overall market trend is moving up or down, the formation of a long legged Doji may be indicative of a trend reversal.

Dragonfly Doji: Show that even though bears have pushed the price down, it returned to the open state. It is a reliable indicator that the trend is reversing.

Gravestome Doji: This is an indicator that the bullish market is nearing an end.

..

Stock Averages

Source: www.howstuffworks.com

Dow Jones Industrial Average, and other averages like the S&P 500 or The Russell 2000 are broad market averages designed to tell you how companies traded on the stock market are doing in general. For example, the Dow Jones Industrial Average is simply the average value of 30 large, industrial stocks. Big companies like General Motors, Goodyear, IBM and Exxon are the companies that make up this index. The S&P 500 is the average value of 500 large companies. The Russel 2000 index averages the values of 2,000 smaller companies.

Net Asset Value (NAV)

A mutual fund's price per share or exchange-traded fund's per-share value. In both cases, the per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding.

In the context of mutual funds, net asset value per share is computed once a day based on the closing market prices of the securities in the fund's portfolio. All mutual fund buy and sell orders are processed at the NAV of the trade date; however, investors must wait until the until the following day to get the trade price.

Source: Google search (source wasn't recorded at time of reading)

Exchange-Traded Funds, or ETFs

Are index funds that trade just like stocks on major stock exchanges. Want to invest in the market quickly and cheaply? ETFs are the most practical vehicle. They help the investor focus on what is most important, choice of asset classes.

All the major stock indexes have ETFs based on them, including:

Dow Jones Industrial Average
Standard & Poor's 500 Index
Nasdaq Composite

There are ETFs for large US companies, small ones, real estate investment trusts, international stocks, bonds, and even gold. Pick an asset class that is publicly available and there is a good bet that it is represented by an ETF or will be soon.

ETFs differ fundamentally from traditional mutual funds, which do not trade midday. Traditional mutual funds take orders during Wall Street trading hours, but the transactions actually occur at the close of the market. The price they receive is the sum of the closing day prices of all the stocks contained in the fund. Not so for ETFs, which trade instantaneously all day long and allow an investor to lock in a price for the underlying stocks immediately.

Source: Google search (source wasn't recorded at time of reading)

Earnings Per Share (EPS)

Source: fool.com

The portion of a company's profit allocated to each outstanding share of common stock. EPS serves as an indicator of a company's profitability.

 EPS = Net Income - Dividends on Preferred Stock

            --------------------------------------------------------------

                   Average Outstanding Shares

An important aspect of EPS that's often ignored is the capital that is required to generate the earnings (net income) in the calculation. Two companies could generate the same EPS number, but one could do so with less equity (investment) - that company would be more efficient at using its capital to generate income and, all other things being equal, would be a "better" company.

Why Mutual Funds underperform?

Two factors why Mutual Funds underperform:

1. Turnover

Turnover represents how much of a mutual fund's holdings are changed over the course of a year through buying and selling. Because buying and selling stocks costs money through commissions and spreads, a high turnover indicates higher costs (and lower shareholder returns) for the fund.

2. Cash Reserves

The other principal category of actively managed mutual fund behavior that hurts shareholders is the cash reserves that make up such a large percentage of so many mutual funds. For various reasons, actively managed mutual funds don't invest all the money at their disposal, but instead maintain cash balances of approximately 8%.

There are essentially two reasons for this cash reserve maintenance. First, mutual fund managers are keeping money on hand in case shareholders decide to sell their shares suddenly.

Additionally, mutual fund managers apparently keep some money in cash under the belief that doing so will provide them with flexibility for those occasions when there is a fire sale in the market. This is the "buy low, sell high" theory -- managers apparently believe that they can time the market, sell off some of their holdings when the market is "too high," and buy back some shares when there is a better price available.

Source: Google search (source wasn't recorded at time of reading)

Volume

Source:Investopedia.com

The number of shares or contracts traded in a security or an entire market during a given period of time. It is simply the amount of shares that trade hands from sellers to buyers as a measure of activity. If a buyer of a stock purchases 100 shares from a seller, then the volume for that period increases by 100 shares based on that transaction.

Volume is an important indicator in technical analysis as it is used to measure the worth of a market move. If the markets have made strong price move either up or down the perceived strength of that move depends on the volume for that period. The higher the volume during that price move the more significant the move.

Options

Options are the most versatile trading instrument ever invented. Since options cost less than stock, they provide a high leverage approach to trading that can significantly limit the overall risk of a trade or provide additional income. Simply put, option buyers have rights and option sellers have obligations. Option buyers have the right, but not the obligation, to buy (call) or sell (put) the underlying stock (or futures contract) at a specified price until the 3rd Friday of their expiration month. There are two kinds of options: calls and puts. Call options give you the right to buy the underlying asset. Put options give you the right to sell the underlying asset.

Example: Jane wants to buy a house. After a few weeks of searching, she discovers one she really likes. Unfortunately, she won't have enough money for a substantial down payment for another six months. So, she approaches the owner of the house and negotiates an option to buy the house within 6 months for $100,000. The owner agrees to sell her the option for $2,000.

Scenario 1: During this 6-month period, Jane discovers an oil field underneath the property. The value of the house shoots up to $1,000,000. However, the writer of the option (the owner) is obligated to sell the house to Jane for $100,000. Jan e buys the house for a total cost of $102,000-$100,000 for the house plus the $2,000 premium paid for the option. She promptly turns around and sells it for a million dollars for huge profit of $898,000 and lives happily ever after.

Scenario 2: Jane discovers a toxic waste dump on the property. Now the value of the house drops to zero and she obviously decides not to exercise the option to buy the house. In this case, Jane loses the $2,000 premium paid for the option to the owner of the property.

Source:https://www.forbes.com/2006/10/18/markets-options_education_center_basic_how_options_work.html#33157d7f3b2f

Options Strike Price

The price at which an underlying stock can be purchased or sold if the option is exercised is called the strike price. Options are available in several strike prices above and below the current price of the underlying asset. Stocks priced below $25 per share usually have strike prices at 2 ½ dollar intervals. Stocks priced over $25 usually have strike prices at $5 dollar intervals.

Source: Google search (source wasn't recorded at time of reading)

Accounts Receivables (AR)

Money owed by customers (individuals or corporations) to another entity in exchange for goods or services that have been delivered or used, but not yet paid for. Receivables usually come in the form of operating lines of credit and are usually due within a relatively short time period, ranging from a few days to a year.

On a public company's balance sheet,  accounts receivable is often recorded as an asset because this represents a legal obligation for the customer to remit cash for its short-term debts.

Source: https://www.abc-amega.com/glossary

Hedge Funds

Hedge funds are generally privately-owned investment funds, and so are not regulated like mutual funds whose owners are public corporations. Furthermore, hedge fund managers are compensated as a percent of the returns they earn. This attracts many investors who are frustrated by mutual fund fees that are paid regardless of fund performance.

Source: Google search (source wasn't recorded at time of reading)

Collateral Debt Obligation (CDO)

CDO's, or Collateralized Debt Obligations, are sophisticated financial tools that repackage individual loans into a product that can be sold on the secondary market. These packages consist of auto loans, credit card debt, or corporate debt. They are called collateralized because they have some type of collateral behind them.

CDO's are called asset-backed commercial paper if the package consists of corporate debt, and mortgage-backed securities if the loans are mortgages.

CDO's were created to provide more liquidity in the economy. It allows banks and corporations to sell off debt, which frees up more capital to invest or loan. However, the downside of CDO's is that it allows the originators of the loans to avoid having to collect on them when they become due, since the loans are now owned by other investors. This may make them less disciplined in adhering to strict lending standards.

Source: Google search (source wasn't recorded at time of reading)

Commodities Futures

Source: Investopedia.com

Commodities futures, or futures contracts, are an agreement to buy or sell a commodity at a specific date in the future at a specific price. If commodities traders had to actually deliver the product, very few people would do it. Instead, they can fulfill the contract by delivering proof that the product is at the warehouse, by paying the cash difference, or by providing another contract at the market price. The most commonly reviewed commodities are oil and gold.

Commodities

Commodities are agreements to buy and sell virtually anything except, for some reason, onions. The primary commodities that are traded are oil, gold and agricultural products. Since no one really wants to transport all those heavy materials, what is actually traded are commodities futures contracts or options. These are agreements to buy or sell at an agreed upon price on a specific date.

The commodities markets are in Chicago (Chicago Board of Trade) and New York (New York Board of Trade, and the New York Mercantile Exchange).

Source: The Complete Guide to Investing in Short-term Trading: How to Earn ...https://books.google.com/books?isbn=160138002X

Derivatives in Corporate Finance

Derivatives are contracts whose values are tied to price changes of underlying securities. A typical currency derivative gives its owner the right or obligation to buy or sell a block of dollars, yen or other currency over a given period at a set exchange rate. Interest-rate derivatives are like insurance policies that pay off if rates move up or down a specified amount during the time covered.

In one important use, derivatives can neutralize risks. An American company that must exchange dollars for yen to buy goods from Japan could use a currency derivative to make up the difference if the dollar falls and Japanese goods become more expensive. Essentially, the contract would allow the company to lock in today's exchange rate for a given period. The American company would lose money on the derivative contract if the dollar got stronger instead of weaker, but that would be offset by the lower cost of Japanese goods as dollars were exchanged for yen.

A company could, however, use the same currency contract to speculate, by simply buying a contract in hopes it becomes more valuable as exchange rates change. Since the change in the contract's value would not be counterbalanced by a gain or loss in the purchase of Japanese goods, the company would suffer a net loss if the dollar strengthened and the contract loses value. This is speculation.

Source: http://knowledge.wharton.upenn.edu/article/the-role-of-derivatives-in-corporate-finances-are-firms-betting-the-ranch/

Beta Ratio

Source: Investopedia

The beta is a measure of a stock’s price volatility in relation to the rest of the market. In other words, how does the stock’s price move relative to the overall market.

The number is calculated using regression analysis. The whole market, which for this purpose is considered the S&P 500, is assigned a beta of 1. There is no single index used to calculate beta, although the S&P 500 is probably the most common proxy for the market as a whole. 

Stocks that have a beta greater than 1 have greater price volatility than the overall market and are more risky. Stocks with a beta of 1 fluctuate in price at the same rate as the market. Stocks with a beta of less than 1 have less price volatility than the market and are less risky.

How to Use Beta

Investors can find the best use of the beta ratio in short-term decision-making, where price volatility is important. If you are planning to buy and sell within a short period, beta is a good measure of risk. However, as a single predictor of risk for a long-term investor, the beta has too many flaws. Careful consideration of a company’s fundamentals will give you a much better picture of the potential long-term risk.

Debt Security

A bond, note, debenture, or other form of commercial paper issued by a corporation to borrow money, as opposed to capital stock, which represents the shareholders' ownership, or equity. Holders of debt securities have priority in secured assets (the corporation's general property or assets specified in the debt obligation) over unsecured general creditors.

Source: Google search (source wasn't recorded at time of reading)

Corporate Rating

Source: Investopedia

Before you decide whether to invest into a debt security from a company or foreign country, you must determine whether the prospective entity will be able to meet its obligations. A ratings company can help you do this. Providing independent objective assessments of the credit worthiness of companies and countries, a credit ratings company helps investors decide how risky it is to invest money in a certain country and/or security.

There are three top agencies that deal in credit ratings for the investment world. These are: Moody's, Standard and Poor's (S&P's) and Fitch IBCA. The ratings lie on a spectrum ranging between highest credit quality on one end and default or "junk" on the other. Long–term credit ratings are denoted with a letter: a triple A (AAA) is the highest credit quality, and C or D (depending on the agency issuing the rating) is the lowest or junk quality.

Bond Rating		Grade	Risk
Moody's	Standard & Poor's
Aaa	AAA	Investment	Lowest Risk
Aa	AA	Investment	Low Risk
A	A	Investment	Low Risk
Baa	BBB	Investment	Medium Risk
Ba, B	BB, B	Junk	High Risk
Caa/Ca/C	CCC/CC/C	Junk	Highest Risk
C	D	Junk	In Default

Holding Company

Source:wiktionary.com

A parent corporation that owns enough voting stock in another corporation to control its board of directors (and, therefore, controls its policies and management).

A holding company must own at least 80% of voting stock to get tax consolidation benefits, such as tax-free dividends.

A good example is Warren Buffett's Berkshire Hathaway (NYSE: BRK.A), which owns GEICO, See's Candies, Executive Jet, Dairy Queen, The Pampered Chef, Benjamin Moore paints etc

Unit Trust

Source: investorwords.com

An SEC-registered investment company which purchases a fixed, unmanaged portfolio of income-producing securities and then sells shares in the trust to investors. The major difference between a Unit Trust and a mutual fund is that a mutual fund is actively managed, while a unit investment trust is not managed at all. Capital gains, interest and dividend payments from the trust are passed on to shareholders at regular periods. If the trust is one that invests only in tax-free securities, then the income from the trust is also tax-free.

A unit investment trust is generally considered a low-risk, low-return investment. Some investors prefer Unit Trusts to mutual funds because Unit Trusts typically incur lower annual operating expenses (since they are not buying and selling shares); however, Unit Trusts often have sales charges and entrance/exit fees. also called fixed investment trust or participating trust or Unit Investment Trust (UIT).

LIBOR Index and LIBOR Rate

Source: Investopedia

LIBOR (an abbreviation for "London Interbank Offered Rate") is the interest rate offered by a specific group of London banks for U.S. dollar deposits of a stated maturity. The majority of interest-only loan programs are tied to the LIBOR index rate although some lenders use the CMT (treasury) and COFI indexes.

Stop Loss Order

An order placed with a broker to sell a security when it reaches a certain price. It is designed to limit an investor's loss on a security position. Also known as a "stop order" or "stop-market order".

In other words, setting a stop-loss order for 10% below the price you paid for the stock would limit your loss to 10%.

Source: Google search (source wasn't recorded at time of reading)

Consumer price index (CPI)

CPI is an index number measuring the average price of consumer goods and services purchased by households. It is one of several price indices calculated by national statistical agencies. The percent change in the CPI is a measure of inflation. The CPI can be used to index (i.e., adjust for the effects of inflation) wages, salaries, pensions, or regulated or contracted prices. 

Source: Google search (source wasn't recorded at time of reading)

Futures Market

Source: Investopedia

An auction market in which participants buy and sell commodity/future contracts for delivery on a specified future date. Trading is carried on through open yelling and hand signals in a trading pit.

Volume in the futures market usually increases when the stock market outlook is uncertain.