De-mystifying Stock Holdings and Key Terms: Part I

It’s always helpful to have a refresher course on different topics within the field of research. Here are a few terms regarding stock that we’ve broken down into smaller chunks. Hopefully it will be very easy to digest!  This is part one of a two-part series on stock.

Key filings:

·         Official Annual Report: 10-K, 10-K405, 10-KSB

·         Quarterly Report: 10-Q

·         Report of a “material event”:  8-K

·         The proxy statement:

                -Stockholdings

                -Options and restricted stock

                -Directors’ Fees

                -Executive compensation

                -Retirement plan summary

                -Employment agreements and special agreements

Where to find these filings:

·         The SEC, EDGAR

·         Web sources such as Yahoo, Google Finance, WSJ MarketWatch, the company’s website

·         Paid sources such as 10K Wizard

Key Terms:

Insider: Directors, top policy setting officers, owners of 5% or more of the stock

Common Stock:

·         The majority of stock is issued in this form. Common shares represent ownership in a company and a claim on a portion of the profits.

·         Some companies have more than one class of common stock (Typically Class A and Class B).

·         The purpose of different classes is to keep controlling voting power of a public company within original investors, founding family, or current insiders.

·         One class isn’t offered to the public and is available only to those in the controlling group, but the insider class is convertible to the public class.

Preferred Stock:

·         Preferred stock represents some degree of ownership in a company but doesn’t come with the same voting rights (varies depending on the company). Investors are usually guaranteed a fixed dividend forever. This is different from common stock, which has variable dividends that aren’t guaranteed. In the event of liquidation, preferred shareholders are paid off before the common share holder.

Valuing Current Stockholdings:

·         Check Yahoo Finance or other sources for transactions since record date.

·         Look up the previous closing stock price online.

·         Value directly held shares and indirect shares separately.

·         Quoting 52-week high and low gives perspective; explain sharp rises or declines by checking news reports.

Valuing Historical Holdings:

·         If your prospect is no longer a reporting insider, start with their last report (proxy or Form 4).

                -Check for stock splits or stock dividends since they left.

                -If they made no subsequent transaction, the stock would now be worth $___.

·         If the company was acquired or merged, find the final terms and apply to their last known holdings.

Feel free to post your comments or questions.  Don’t forget to check out the sources listed at the top of the post.  Stay tuned for part two, and happy researching!