Providing insight for individual investors
A few months ago, Kraft Foods Group was replaced by UnitedHealth Group in the Dow Jones Industrial Average. It turns out that the Dow Jones is a price-weighted index as opposed to a market-cap-weighted index (like the S&P 500) or … Read more
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One of the more interesting and insightful models or systems in financial analysis is the DuPont analysis, named after the U.S. chemical company that began systematically looking at these numbers in the 1920s. The DuPont analysis is a way of … Read more
3 CommentsEditor’s Note: We find that many investors are confused when financial professionals talk about what interest rates will be in three years. This article explains something that is intuitive if considered properly: we can apply judgment to the present and … Read more
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One of the dirty little secrets of finance is that publicly traded corporations maintain two different sets of “books,” or accounting ledgers. Before you get all riled up and start calling various attorney generals’ offices, understand that it is perfectly … Read more
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It can be difficult for investors to understand how their professional managers are really performing. A few statistical tools can help illuminate whether investors are getting value. The numbers below illustrate performance for two sets of investment managers. How can … Read more
Leave a CommentOne of the quickest ways to tell if a company is over or undervalued is to look at its price-to-earnings ratio (P/E) and compare it with the overall P/E of the market—for example, the S&P 500 Index or the Dow … Read more
3 CommentsNo, not the golf kind; those are “divots.” “DIVUTS” is an mnemonic device that CFA Program candidates use to memorize the different things that can affect the price of options. It stands for: Dividends Interest rates Volatility Underlying stock price … Read more
Leave a CommentWe’ve all heard about the mountains of cash that are just sitting on corporate America’s balance sheet, stashed away in bank accounts overseas earning next to nothing in interest. What should companies do with all that cash they have on … Read more
14 CommentsWhat does it mean when we say a stock is “expensive”? While I was working for companies like Smith Barney and Oppenheimer, I would actually hear people say things like “$550 a share for Apple(AAPL)??? No. That’s way too expensive!!! … Read more
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