The Major Approaches to the Question of Valuation

Screening a universe of common stocks down to a manageable number for further analysis leads the investor to the question of valuation: Given the market price of the common stock, is the stock correctly valued? If, in your opinion, the answer is no and you believe the stock is either overvalued or undervalued, then a…

 

Common Stock Dividends: What Are They Worth?

The thought of dividends excites some investors to a point of financial ecstasy while moving others to bouts of slumber. Some investors seek only common stocks with high and predictable dividend payments, and other investors search out stocks with exceptional growth potential, eschewing those that pay any dividend. There are a series of dividend issues…

 

Market Tips From an Observer

Covering the stock market as a broadcaster and columnist has given Dick Davis a unique perspective on the market—and investor behavior. Although these insights are over 30 years old, many of them are just as valid today as they were in 1984. Thoughts on How Adverse News Affects Stocks The first day loss may turn…

 

The Role of Leverage and Quality in Dividend Changes

Dividend increases are typically met with a positive reaction from investors, while dividend cuts are typically met with a negative reaction. Whether these changes signal positive or negative information, however, depends on the quality of the company and its leverage. Companies with low-to-moderate levels of leverage—defined as liabilities to total assets—can signal positive information by…

 

Common Stock Repurchases: A Bane or Boon to Shareholders?

Repurchases of common stock by corporations can be an attractive alternative to dividends. They may also affect share price. But what is their impact—to the corporation; to the shareholder? Many companies have been repurchasing their common stock in recent years and some can involve hundreds of millions or even billions of dollars. Investors who own…

 

Analyzing Value: The Internal Growth Rate

Earnings and dividend growth rate assumptions are a primary factor in almost all fundamental models of common stock valuation. The greater the anticipated future growth in firm earnings, the greater the stock valuation will be, assuming risk remains unchanged. But estimating earnings growth potential is difficult. Many subjective factors are considered, including the firm’s management,…

 

Computerized Investing’s New July Content

Important Note: Dear Subscriber, Starting with the September 2018 edition, Computerized Investing will be merging with the AAII Journal. Computerized Investing was originally created when computers, and using a computer to research investments, were a new option for individual investors. In today’s environment, most consider using a computer to analyze investments a necessity. As such,…

 

Defining Yield: A Word of Many Meanings

The term “yield” is thrown about often by the financial press and others. The trouble is that yield has many different meanings and implications for investors. This workshop will try and sort out some of the major differences. It will not, however, attempt to present mathematically all of the possible yield calculations created by institutions…

 

Shareholder Letter Revelations: Can You Trust the Leadership?

Judging a firm’s leaders is an important step in analyzing a stock for investment. But it’s a murky area that offers no solid statistics to review. And most investors don’t get the chance to actually meet a company’s CEO and other officers in order to get a feel for how the firm is run. The…

 

Options: The Concept of Equivalent Strategies

Naked put selling is equivalent to covered call writing in terms of where and how profits and losses are incurred. But it can be advantageous in terms of cost savings and potential reward. Talk to an investor who is involved in a covered call writing program about his doing some naked put selling instead and…