Investments in shares and types of shares
Good to know each trader ► Investments in shares and types of shares
The shares their views and investment properties
The shares their views and investment properties According to the RF Law "On the Securities Market"
Action in the securities market - it issued security that fixes the right of its holder to receive part of the profits of the company and a portion of his property at his disposal. It is perpetual ie drawn on the market until there is a release her corporation. The joint stock company is not obliged to redeem it. The shares are registered or bearer. There are two categories of shares: ordinary (plain) and preferred. Ordinary shares differ from those preferred by the following features:
• They provide the right owner to vote at shareholders' meetings;
• Payment of dividends on them, and the liquidation value of the company in liquidation may be carried out only after the allocation of funds among the relevant holders of preferred shares.
Preferred stock differs from common that usually do not give the right to vote at the meeting of the company (if it is not enshrined in the charter of joint-stock company). However, such a right appears the owners, if the meeting decides not to pay dividends on preferred shares and discusses issues relating to the property interests of owners of these shares. Preferred shares, compared to conventional, are also characterized by the fact that the pre-emptive right to provide their holders to dividends and liquidation value of the company on liquidation. Another difference is that the dividend on ordinary shares can not be paid. According to the preferred shares, the amount of dividend which is defined in the statute, can not be a complete non-payment of dividend. Dividends on them should be paid at least in part. Possession of a privileged action is associated with a lower risk for the investor, because it gives him the right to receive dividends and liquidation value especially compared to the holders of ordinary shares. At the same time, in case of success of the company its owner will likely receive a smaller dividend than a common share. Shareholder by buying preferred convertible share, insures itself to a certain extent in the case of not very successful activity of JSC and, at the same time, reserves the possibility to convert into common shares, to raise the level of their income.
There are also outstanding and declared shares. Outstanding shares shares is implemented. They determine the amount of the authorized capital stock. Authorized shares - are shares that AB may, in addition to the placed.
One of the main characteristics of the shares is nominal (face value), the nominal value of all outstanding shares of the authorized capital stock. The nominal value of all outstanding preferred shares shall not exceed 25% of the authorized capital stock. The nominal value of shares, as a rule, does not coincide with its market value. In a well-functioning stock is above par, and in poorly-operating below par. The sum of all nominal value of shares determines the authorized capital stock.
The concept of "capitalization" should be distinguished from the authorized capital. Capitalization - a measure of the amount of capital in the market value embodied in the shares. It is defined as the product of the current market value of outstanding shares on a number of them.
Another feature is the income shares. Income on shares can be presented in two forms - as a growth market value and as a dividend. Increase in market value generates income at the time of sale. If this is not done in due time, the stock price may fall. Increase in market value occurs for two reasons. (And may fall for the same reason the course) The first is speculative transactions on the resale of securities on the stock market. Secondly, this is a real increase in the company's assets. A profit of JSC divides it into two parts. One part is paid in the form of dividends, and the other - is reinvested to maintain and expand production. Reinvested profit, takes the form of fixed and current assets, really fills action and leads, as a rule, to the growth of its value.
Another source of income is a shareholder dividend. If the investor is not inclined to take risks, it should focus on the actions for which the dividends are paid on a regular basis, although in this case the price may grow not very fast Big reliability of such a situation is that the investor actually receives income in the period of ownership share. Even if the future market value will fall anyway, he has already implemented part of the income.
Serious financial decisions require consideration of many factors. Understanding the investment attractiveness of the shares can be formed on the basis of a few simple indicators.
The first indicator - a dividend rate. Dividend rate is defined as the ratio of the annual dividend for the current stock price and is recorded (in%):
D = Div / P * 100%, where D - the dividend rate in%; Div - dividend in the currency; P - the current share price in the currency.
When calculating this indicator usually use really paid dividends. The rate of the dividend shows a rate of return investors will receive on their investments due to the possible dividends if you buy stock at the current price. Dividend rate may give the investor an idea of what form mainly generates income share, in the form of dividends or by market value. Making a decision based on a dividend rate indicator, it is necessary to trace its dynamics over a long period.
Another indicator - the payback period of the action. It is measured in years and is defined as the ratio of the current share price (P) to net income per share (E), which earned the company, if you imagine that the entire profit be paid as dividend, (E) - is all the profit per share. It is divided into dividends and reinvested profits into production.
Payback Period = P / E ratio or a multiple of profits.
From experience it is known that the payback of 10-15 years is high rate, 1-2 years - is low. This is due to the fact that when investors are confident of good prospects of the enterprise, then the payback period increases as the stock price rises as a result of increased demand. For the issuer, it is good because it creates a good environment to attract additional financial resources. At the same time the stock with a high P / E - is not always the best choice for the investor, since largely increase its market value may be already settled. The lower the P / E ratio means that the stock price is low, as investors do not believe in a reliable perspective. The acquisition of such shares entails, as a rule, with greater risk.
The following analytical data - is the ratio of the current share price (P) to its carrying amount (B) .Balansovaya value per share is determined by subtracting from the value of the company's assets the amount of its liabilities, and dividing by the number of shares. For a well-functioning enterprise P / B must be greater than 1, but not too high, which would suggest revaluation courses sa shares. Usually the figure is 1,25-1,3. It is also necessary to consider such a figure as the amount of earnings per share EPS. It is determined by dividing the profit of the enterprise announced the total number of shares. Since the shares of various companies differ on the value of using it is difficult to draw comparisons between the shares. It is better to use the ratio of the announcement came to the volume of capitalization of the company at the beginning of the period for which the profit (or the ratio of earnings per share to its price at the beginning of the period) was announced. The resulting figure gives an idea of the effectiveness of investment one of the ruble funds in this or that company.
In the West, the quality assessment of analytical companies give. The most famous of them are «Moody's Investors Service», «Standard & Poor». The most reliable companies are called "blue chips" - is a reliable and leading companies in their respective industries.
Classification of shares. If you have decided to purchase shares and are facing a dilemma, which ones deserve your attention as an object for investment, you should know that there are several kinds of shares. Your choice of a particular category of shares to be dictated, first of all, compliance with its characteristics of your investment goals, the size of available resources, and risk appetite.
In the US stock market often distinguish the following categories of shares:
• blue chips (Blue Chip Stocks),
• penny stocks (Penny Stocks),
• the value of shares (Value Stocks),
• growth stocks (Growth Stocks),
• shares of income (Income Stocks),
• cyclical stocks (Cyclical Stocks),
• speculative stocks (Speculative Stocks) and
• protective actions (Defensive Stocks).
"Blue chips" on Wall Street called the most popular stocks. Among the issuers of this category such famous companies as General Electric, Dupont, IBM, Proctor & Gamble, ie companies that have a solid reputation and a stable position in the market. Dow Jones Industrial Average Index, which includes shares of 30 largest companies in the US, called "index of blue chips."
Usually on such shares on a regular basis for a long time the dividend is paid, regardless of whether favorable year was the company or bad, in addition, buyers of blue chips can count on a low but steady income in the form of capital gains as a result of rising prices for these shares.
Penny stocks get their name because of the relatively low price, which usually does not exceed US $ 5.00. This low price determines more attractive penny shares to individual investors, who often do not have sufficient funds to build a portfolio of the most expensive shares of large companies. Some penny stocks grow significantly in price, bringing their owners incredible profits, but there are cases when the company issuing penny stocks are low-profit or even go bankrupt.
Shares value called undervalued stocks. It shares the market price which, for whatever reasons below their "intrinsic" (fair) value, which is calculated based on the actual financial performance of the issuer. Undervalued shares are sometimes due to the fact that the company has released their function in the industry unattractive to investors.
Issuer growth stocks often appear young and dynamic company with a high potential for further growth. Typically, these companies invest heavily in innovation and almost completely reinvest profits to expand operations and increase their market share, so their dividends, if paid, is very low.
Buyers growth stocks should be willing to sacrifice current income (dividends) for the sake of future capital gains. In addition, we must remember that the market price of growth stocks may be more volatile than other stocks.
Shares of income attracted investors expect to receive a constant dividend yield.
The company is able to regularly pay its shareholders a good dividend, if the stability of its earnings due, for example, the competitive advantages of its products or services.
Cyclic called shares of those companies, whose operating results are dependent on the economic cycle of development, and for some industries have their own cycles conditions. When the overall economic conditions are favorable, the profit cyclical company grows with the quotation of its shares. With deteriorating economic environment, the company's profit decreased, and prices for its shares start to fall.
One of the characteristics of speculative stock is unjustifiably overstated the ratio between the market price and the net income per share (ratio of "price / earnings», price to earnings ratio). For example, in the late 90's a good example of speculative shares were shares of most Internet companies that had very high market capitalization against the background of small profits or even losses. By speculative stocks are often first placed on the market. They are presented to high demand, fueled by hopes for a rapid increase in their market value.
Price dynamics of protective shares shows resilience during periods of market decline. These issuers are companies whose activities are less susceptible to changes in economic conditions, as demand for their products in times of crisis almost does not decrease (the pharmaceutical and utilities, companies that produce food products, etc.). Protective shares are included in the investment portfolio as a hedge against a sharp fall in the value of its other components.
If you can not bear to watch the sharp fluctuations of quotations and not less abrupt changes in the value of your portfolio, you should focus on the actions of the giant companies have already proven. If you aim for maximum yield of your investments and are willing to take higher risk, the object of your attention may be shares of small companies with high growth potential.
If we talk about such a concept as a play on the stock exchange, then this definition can be described quite differently, based on how serious you feel about the financial market…