Q. What happens if you buy a stock that is splitting between the record date and the actual pay date? Do you not get the additional shares?
A. You still get them if you buy between the two dates. The record date is mainly for accounting purposes and has no direct effect on the individual investor. The person who gets the benefit of the split shares is only the person who owns those shares on the day of the actual split, the pay date. As long as you're holding shares when the stock splits, you'll get your due.
Q. What's a "pure play" company?
A. A pure play is a company that has a single business focus. When investors are drawn to a particular kind of business, they may seek out a company that's a pure play, so that their invested dollars won't be spread out over other, less desirable businesses.
If your research suggests that the light bulb industry is one of the most attractive and profitable ones around and you want to invest in it, you might invest in General Electric, which makes everything from light bulbs to airplane engines. Or you might try to find a pure play light bulb company. The hypothetical Bright Idea Light Bulb Co. (ticker: UREKA) might fit the bill. Money invested in GE would cover many different operations with varying profitability characteristics, while funds in UREKA would be focused solely on light bulbs.
Coca-Cola is a beverage pure play, vs. PepsiCo, which has Frito-Lay snacks. Ben & Jerry's was an ice cream pure play, until it was gobbled by a conglomerate.
Investing Basics: Two Issues: Quality and Price
Some Investors of our online community have been wondering what they need to consider when studying a company in which to possibly invest. If they're basic Investors, they may just look at the price-to-earnings (P/E) ratio. Real Investors will consider many measures, such as profit margins, earnings growth rates and return on equity. One important thing to keep in mind is that there are two key questions that need to be answered by the information you gather:
1) Is this a high-quality company that I'd love to own a piece of?
2) Is the price right to buy it now?
Investors generally agree that it's best to invest in high-quality companies, but they put different emphases on the second question. To some, as long as you've got a terrific company, the price isn't that important because the company will keep growing. To others, buying at a good price is important in order to reduce risk and maximize gain. But to just about all Investors how, it's vital to understand a company's business and get a handle on its quality.
Conveniently, most company evaluation measures are related to either quality or price. Here's where some measures fall.
Company quality: Sales and earnings growth, margins and margin growth, return on equity, return on invested capital, leverage, inventory turnover, flow ratio, return on assets, product and service offerings, market share, competitive positioning, proprietary technology or knowledge, brand strength, management savvy.
Stock Price: Market capitalization, enterprise value, price-to-earnings (P/E) ratio, price-to-sales ratio, price-to-cash flow ratio, price-to-book value ratio, value-per-subscriber measures, dividend yield.
Quality-related measures will help you understand how efficiently and profitably the company is run, how robust its financial condition is, and how quickly it's growing. Price-related measures will help you determine whether the stock is priced attractively or not.
A. You still get them if you buy between the two dates. The record date is mainly for accounting purposes and has no direct effect on the individual investor. The person who gets the benefit of the split shares is only the person who owns those shares on the day of the actual split, the pay date. As long as you're holding shares when the stock splits, you'll get your due.
Q. What's a "pure play" company?
A. A pure play is a company that has a single business focus. When investors are drawn to a particular kind of business, they may seek out a company that's a pure play, so that their invested dollars won't be spread out over other, less desirable businesses.
If your research suggests that the light bulb industry is one of the most attractive and profitable ones around and you want to invest in it, you might invest in General Electric, which makes everything from light bulbs to airplane engines. Or you might try to find a pure play light bulb company. The hypothetical Bright Idea Light Bulb Co. (ticker: UREKA) might fit the bill. Money invested in GE would cover many different operations with varying profitability characteristics, while funds in UREKA would be focused solely on light bulbs.
Coca-Cola is a beverage pure play, vs. PepsiCo, which has Frito-Lay snacks. Ben & Jerry's was an ice cream pure play, until it was gobbled by a conglomerate.
Investing Basics: Two Issues: Quality and Price
Some Investors of our online community have been wondering what they need to consider when studying a company in which to possibly invest. If they're basic Investors, they may just look at the price-to-earnings (P/E) ratio. Real Investors will consider many measures, such as profit margins, earnings growth rates and return on equity. One important thing to keep in mind is that there are two key questions that need to be answered by the information you gather:
1) Is this a high-quality company that I'd love to own a piece of?
2) Is the price right to buy it now?
Investors generally agree that it's best to invest in high-quality companies, but they put different emphases on the second question. To some, as long as you've got a terrific company, the price isn't that important because the company will keep growing. To others, buying at a good price is important in order to reduce risk and maximize gain. But to just about all Investors how, it's vital to understand a company's business and get a handle on its quality.
Conveniently, most company evaluation measures are related to either quality or price. Here's where some measures fall.
Company quality: Sales and earnings growth, margins and margin growth, return on equity, return on invested capital, leverage, inventory turnover, flow ratio, return on assets, product and service offerings, market share, competitive positioning, proprietary technology or knowledge, brand strength, management savvy.
Stock Price: Market capitalization, enterprise value, price-to-earnings (P/E) ratio, price-to-sales ratio, price-to-cash flow ratio, price-to-book value ratio, value-per-subscriber measures, dividend yield.
Quality-related measures will help you understand how efficiently and profitably the company is run, how robust its financial condition is, and how quickly it's growing. Price-related measures will help you determine whether the stock is priced attractively or not.
