Investing Basics – Understanding Stocks and How to Trade Them

There are many characteristics to individual equities that you can purchase and sell, but what do all the different numbers and terms mean? I will explain using Apple stock.

AAPL Stock.png

This is a screen shot from Yahoo Finance of Apple Inc. (the ticker symbol is AAPL) taken at 6:34pm ET on March 6th, 2017. So what do all of this data mean? Lets run down the list.

Previous Close – $139.78, this means that at the end of the last trading day the stock closed at a price of $139.78

Open – $139.33, this means the stock opened this morning at 9:30 am ET at a price of $139.33. But why is that different from the previous close? After hours trading is legal and can cause the price to change between trading sessions. After hours trading is riskier and unless you know what you are doing, you should refrain from trying it.

Bid – $139.27 x 200, this means that the highest price someone is will to buy the shares are for $139.27 and they are willing to buy 200 shares.

Ask – $139.34 x 500, this means the lowest price someone is willing to buy the shares are for $139.34 and they are willing to buy 500 shares. But the bid and ask are different? The difference is referred to as the bid-ask spread, and this shows you how liquid a stock is and how often it is traded, the smaller the spread the more volume and trading occurs. If you enter a market order, you will simply either buy at the ask or sell at the bid, but if you put in a limit order, you are put in line at that price and if the price moves towards your limit order, you will get filled.

Day’s Range – $138.60 – $139.77, this shows how much movement occurred on the day, the lowest price of the day at any point in time was $138.60 and the highest price at any point in time was $139.77.

52 Week Range – $89.47 – $140.28, just like the day range, this shows that over the past 52 weeks the stock price at its lowest went down to $89.47 and at its highest it was $140.28.

Volume – 18,906,967, this shows you how many shares were traded during trading hours, it is updated in almost real time so that number will steadily climb throughout the day.

Avg. Volume – 28,874,705, this tells you on average (usually a 3 month average) how many shares trade throughout the day. Compared to the volume of the day, March 6th was a very light volume trading day. Most likely means people didn’t have a strong reason to buy or sell.

Market Cap – $731.05B, this tells you that the value of all of Apple Stock is worth $731 BILLION dollars. It is a simple calculation of # of shares outstanding x share price.

Beta – 1.45, this is a statistical correlation risk indicator, it measures how much more risky a stock is compared to the market. A Beta of 1.45 means that Apple moves 1.45x as much as the market (S&P500), so for every percent that the S&P500 goes up, Apple will go up 1.45%. Conversely for every % the S&P goes down, Apple will go down 1.45%.

PE Ratio (TTM) – 16.73, this is a ratio of the current stock price divided by the earnings per share of the company over the trailing twelve months (TTM). This is a great ratio to use to compare two companies, a high PE ratio may indicate a company is over valued, and a low PE ratio may indicate a company is undervalued (may is the operative word).

EPS (TTM) – $8.33, this tells you what the earnings per share (EPS) was for the trailing twelve months. This company has had net earnings per share over the past twelve months of $8.33.

Earnings Date – Apr 24, 2017 – Apr 28, 2017, this is an estimate of when the next time Apple will share their earnings with the public. This is an important date because a lot of information is released on the earnings date and stock prices tend to change the most the days leading up to and immediately after an earnings announcement.

Dividend & Yield – $2.28 (1.63%), this is how much money Apple distributed as a dividend on its last dividend payment, and what % that dividend is of the company stock. A high dividend yield means the company is paying out most of its earnings and isn’t investing for growth, a low or 0 dividend yield means the company isn’t returning any of the cash and instead is investing to grow their earnings.

Ex-Dividend Date – N/A, this date would normally represent the first day the stock trades where you would not receive the dividend if you purchased it on that date. For instance if the ex-dividend date was March 8th, you would have to own the stock at the close of trading on March 7th to receive the dividend. On March 8th it is trading ex (without) the dividend.

1y Target Est – $142.48, this represents the consensus (average) price target that professional analysts believe the stock price will be in (roughly) one year.

I hope this helps you better understand what all the numbers mean when you are trying to buy or sell a stock. If you feel more comfortable maybe mutual funds or more your speed. Just keep in mind the risk tolerance and ability you have, taking on too much or too little risk can adversely affect your long term finances.

For the record at the time of this writing, I do not have a position in Apple stock and am not planning on creating a position in the near term.

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2 Responses to Investing Basics – Understanding Stocks and How to Trade Them

  1. qasim says:

    very valuable information . what if some one is from a low ranked school from a third world country . can he still become a trader .

    Like

    • brentlevin says:

      Yes, you can become a trader of your own personal money with as little as a few hundred dollars. If you are wanting to become a professional trader for a major firm like Goldman Sachs that will be much more difficult. Even if the school is low ranked, work really hard to be one of the top students at that school, then focus your efforts in smaller regional firms highlighting your desire and work ethic.
      Best of luck!

      Like

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