Look-through earnings include the profits that a company pays to its shareholders in the form of dividends and the retained earnings that the company uses to expand its operations. This concept was popularized by Warren Buffet to analyze the overall earnings-generating capabilities of the firm. The idea is that all of these profits have value to investors - the dividends provide an immediate benefit, while the retained earnings should increase the stock's value in the future. Taobiz explains Look-Through Earnings The investor should consider all of these profits - the look-through earnings - in assessing the value of a stock. Look-through earnings also account for the taxes that would have been paid if the retained earnings had been distributed as dividends.
The degree of likelihood that the borrower of a loan or debt will not be able to make the necessary scheduled repayments. Should the borrower be unable to pay, they are then said to be in default of the debt, at which point the lenders of the debt have legal avenues to attempt obtaining at least partial repayment. Generally speaking, the higher the default probability a lender estimates a borrower to have, the higher the interest rate the lender will charge the borrower (as compensation for bearing higher default risk). |||Most people encounter the concept of default probability when they go through the process of purchasing a residence. When a home buyer obtains a mortgage on a piece of real estate, the lending bank makes an assessment of the buyer's default risk and estimates their default probability. The higher this estimated probability, the greater the interest rate applied to the loan.The same logic comes into play when investors buy and sell fixed-income securities on the open market. Companies that are cash-flush and have a low default probability will be able to issue debt at lower interest rates. Investors trading their bonds on the open market will price safer debt with a bit of a premium compared to riskier debt. If a company's financial health worsens over time, investors in the bond market will adjust to the increased risk and trade its bonds at lower prices.
A money-making strategy that teaches investors a common-sense method for value investing in the stock market that is designed to beat the market's average annual returns. The Magic Formula strategy is described in the best-selling book "The Little Book That Beats The Market" (1980) by investor and Wharton graduate, Joel Greenblatt. Taobiz explains Magic Formula Investing Investors can use Greenblatt's online stock screener tool to select 20 to 30 top-ranked companies, based on their earnings yield and return on capital, in which to invest. These will all be large companies, and no financial companies, utility companies or non-U.S. companies will be included. Investors sell the losing stocks before they have held them for one year to take advantage of the income tax provision that allows investors to use losses to offset their gains. They sell the winning stocks after the one-year mark, in order to take advantage of reduced income tax rates on long-term capital gains. Then they start the process all over again.
A type of model used by financial institutions to determine the likelihood of a default on credit obligations by a corporation or sovereign entity. These statistical models often use regression analysis (analyzing changes to certain market variables that are pertinent to a company's financial situation) to identify credit risk. |||In most cases, when a default model is run, the result is given as the probability of default. However, other types of default models are used to predict a company's exposure-at-default and loss-given-default. These models predominantly are used by credit rating agencies such as Moody's and Standard & Poor's (S&P).
The largest securities market in Spain, also known as the Bolsa de Madrid. In 1809, Jose I Bonaparte attempted to establish Spain's first stock exchange in Madrid but it failed because Madrid was not a major business center at the time. 1831 saw the enactment of the law creating the Madrid Stock Exchange with securities of banks, railways and iron and steel companies being the first traded. Taobiz explains Madrid Stock Exchange (MAD) .MA The Exchange remained open during WWI, but closed during the Spanish Civil War from 1936 through early 1940. The Spanish Stock Exchange was transformed in 1988 with Spain's incorporation into the European Monetary System. In 1993, the Madrid Stock Exchange switched to all-electronic trading for fixed-income securities. In 1999 Spain's securities markets began trading in Euros. Its regulatory body is the Spanish Stock Exchange Commission.
1. A bond that sells at a significant discount from par value.2. A bond that is selling at a discount from par value and has a coupon rate significantly less than the prevailing rates of fixed-income securities with a similar risk profile. |||1. Typically, a deep-discount bond will have a market price of 20% or more below its face value. These bonds are perceived to be riskier than similar bonds and are thus priced accordingly.2. These low-coupon bonds are typically long term and issued with call provisions. Investors are attracted to these discounted bonds because of their high return or minimal chance of being called before maturity.
The Computer Assisted Trading System (CATS) was developed by the Toronto Stock Exchange in 1977 and implemented in the Madrid Stock Exchange (MSE) in 1989. This was the world's first fully electronic trading system. The MSE initially traded seven large-cap stocks on the system and expanded to 51 by the end of the year. Taobiz explains Madrid SE CATS (MSE) .MC By 1995, the Madrid Stock Exchange had replaced CATS with the Sistema de Interconexión Bursátil Español (SIBE), a more modern electronic trading system developed by the MSE. SIBE connects the four Spanish stock exchanges (Madrid, Valencia, Bilbao and Barcelona) to form a unified, continuous market, providing price information and other data in real time.
A passive form of portfolio management that involves the matching of future cash inflows with future liabilities. The process of dedicating a portfolio may be used as an alternative to multiperiod immunization, which reduces the level of interest rate risk to which a portfolio is exposed. |||Because the portfolio is usually made up of investment-grade instruments, there is generally no need to rebalance it. Additionally, the payments are virtually guaranteed, as there is a low level of default risk associated with investment-grade instruments. An example of a dedicated portfolio strategy could involve a pension fund that will begin making payment distributions to plan members in five years' time. To immunize this cash outflow, which is a liability to the pension fund, the fund could purchase five-year government bonds.
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