Buying Stocks 101

For the novice investor, stock tables can be intimidating.  You know they hold a lot of valuable information that can help you make a decision about a particular stock, but you may find it difficult to interpret the meaning of each number or why that number may be useful.  Here we hope to shed some light on some of the common types of data listed about a stock.

52-Week High

The 52-week high tells you the highest price a particular stock has sold for in the last 52 weeks.  You might want to look at this to determine where the stock is now in relation to where it was.  If it is at its all time high right now, think twice about sending a buy order.

52-Week Low

In contrast, the 52-week low gives you the lowest price that stock has sold for in the last 52 week period.  You may use this information to determine if the stock is bargain - or if it is tanking.

Name and Symbol

This one is obvious, but important.  The name of the company will be listed along with its ticker symbol.  That symbol will be your code to get information about the stock from numerous sources.  You’ll find it listed in the financial section of your newspaper.  You’ll use it when speaking with your broker.  You’ll type it into your favorite search engine to get last night’s close.  The stock’s symbol is your key.  Memorize it.

Dividend

A dividend is a payment made to owners of a stock.  Not all stocks pay dividends, so this is an important column to pay attention to.  The amount listed is the annual dividend as if you owned one share of that stock.

Volume

The volume number indicates how many shares of the stock in question were traded that day.  If this is your first time to look at a stocks table, the volume will not be very useful to you.  But over time, you will want to watch the volume to determine if the stock is tracking in higher or lower volumes than normal.  If, for instance, it is trading more heavily than normal, that may indicate concern among shareholders or an exciting announcement that may boost the companies profits.

Yield

The yield is simply the dividend divided by the stock price.  It is a percentage and calculated as if you were to buy stock that day.  This is of great importance to income investors.

P/E

The P/E value is an important one.  It is the ration between the stock price and the earnings of the company.  You would use this ratio to determine if the stock is a good value.  In a stock table, the P refers to Price or the cost of a single share of stock, while the E stands for Earnings or the companies reported earnings for the last four quarters.

Day last

Day last is simply the price at which the stock ended the day.  Additionally, there may be high or low values for the day in some publications.

Net Change

The difference between how the stock ended today versus how it ended yesterday is the net change.  You will use this to determine if it went up or down in the last trading session.

There may be other information listed along with these numbers, especially if you are viewing stock tables on the internet.

Stock tables are a vital tool to aid in your overall strategy for buying stocks.  It would benefit you to sit down with your morning newspaper or favorite finance website and go over the terms in this post while looking at the current days stock tables.

This entry was posted on Tuesday, February 10th, 2009 at 4:26 am and is filed under Basics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.