A number used in the denominator of the ratio between the total value of an index and the index divisor. The number, which typically has little mathematical rationale behind it, remains consistent and therefore enables comparability within the index over time. How the value of the index is computed depends on the type of index under consideration. Taobiz explains Index Divisor An index divisor is a crucial number in the calculation of the value of an index. It is the basis for comparability across time, and the starting point for adjustments that need to be made due to changes in the equity composition of the underlying companies in the index. Some of the adjustments that may need to be made to the divisor include changes in the number of shares floated by a company, any rights offerings made to employees or management, and any share repurchases.
An equity security that pays regular, often steadily increasing dividends, and offers a high yield that may generate the majority of overall returns. While there is no specific breakpoint for classification, most income stocks have lower levels of volatility than the overall stock market, and offer higher-than-market dividend yields. Income stocks may have limited future growth options, thereby requiring a lower level of ongoing capital investment. The excess cash flow from profits can therefore be directed back toward investors on a regular basis. Income stocks can come from any industry, but are most commonly found as companies operating within real estate (through real estate investment trusts, or REITs), energy sectors, utilities, natural resources and financial institutions. Taobiz explains Income Stock Income stocks are sought by conservative investors who still want some exposure to corporate profit growth. They also have steady streams of revenue that allow for a high level of income payout to investors. The ideal income stock would have a very low volatility (as the Beta would measure), a dividend yield higher than prevailing 10-year treasury bond rates, and a modest level of annual profit growth. Ideal income stocks would also show a history of increasing dividends on a regular basis so as to keep up with inflation, which eats away at future cash payments.
A concept relating to the different stages an industry will go through, from the first product entry to its eventual decline. There are typically five stages in the industry lifecycle. They are defined as: i. Early Stages Phase - alternative product design and positioning, establishing the range and boundaries of the industry itself. ii. Innovation Phase - Product innovation declines, process innovation begins and a "dominant design" will arrive. iii. Cost or Shakeout Phase - Companies settle on the "dominant design"; economies of scale are achieved, forcing smaller players to be acquired or exit altogether. Barriers to entry become very high, as large-scale consolidation occurs. iv. Maturity - Growth is no longer the main focus, market share and cash flow become the primary goals of the companies left in the space. v. Decline - Revenues declining; the industry as a whole may be supplanted by a new one. Taobiz explains Industry Lifecycle The composition of the phases within the industry lifecycle is an ever-changing mix. The standard model typically dealt with manufactured goods, but today’s U.S. economy is more an economy of services, either on the industry's outset, or as a natural extension of a declining-product based model. The advent of the internet alone is transforming many business models from "things" to people and services.
A classification method for individual stocks or companies, usually grouped based on common lines of business. Although there is no official standard for industry group classification, Investor's Business Daily has a proprietary model that is popular with 197 industry groups, and Reuter's baseline uses another, with about 185. Most designations will have somewhere between 150 and 200 industry groups in total, with the sum total of industry groups capturing nearly all of the economy as can be measured by the GDP. Taobiz explains Industry Group For example, some general industry group classifications are drug retailers, forestry products and semiconductor equipment. Industry group-level research is a good place for investors to start when doing individual company research - most of the companies within one industry group tend to rise and fall as a whole. By knowing the trends in place within the industry group, investors can better understand the investment potential of the companies within that group.
A category of stocks that relate to producing goods used in construction and manufacturing. This sector includes companies involved with aerospace and defense, industrial machinery, tools, lumber production, construction, cement and metal fabrication. Taobiz explains Industrial Goods Sector Performance in the industrial goods sector is largely driven by supply and demand for building construction - residential, commercial and industrial - as well as the demand for manufactured products. When the economy contracts and consumers save more and spend less, activity in this sector drops because companies will postpone expansion and produce fewer goods. The performance of the industrial goods sector closely follows the performance of the S&P 500.
Material information about a company's activities that has not been disclosed to the public. Taobiz explains Insider Information It is illegal for anyone with access to insider information to make trades based on it.
The purchase of shares of stock in a corporation by someone who is employed by the company. Insider buying should not be confused with insider trading. Insider trading refers to corporate insiders trading on private information, an activity that is illegal. However, insider buying is based on public information in a situation where insiders believe that their stock is undervalued. Taobiz explains Insider Buying Insider trading is often a temptation faced by corporate officers and board members who know of new products or inventions that could cause the stock price to rise. Those in this position must carefully adhere to special regulations when purchasing stock in their companies to avoid penalties. On the other hand, insider trading typically occurs when employees believe that the public is not valuing their stocks properly. Because insider transactions are public information, knowing that insiders are purchasing stock can signal future stock appreciation.
The highest bid and lowest offer price for a security quoted among all of the market makers competing in a security. Taobiz explains Inside Quote This is also known as the inside spread.
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