The Amateur Financier

The internet is a glorious and wonderful tool, and not just for finding naughty pictures.  You can also find information about stocks, if you are so inclined.  In fact, you can probably find much more information than you would ever need, to say nothing of pitches, scams, and other assorted chicanery.  The best way to defend yourself: learn how to read through financial data.

To help you out, let’s have a little crash course in understanding online stock listings.  For our lesson, let’s use Buffalo Wild Wings (BWLD) as our example stock, since they make some tasty wings.  We’ll look at listings from Google, Yahoo, and Microsoft, as three of the major sources of financial information in the world.  There are, of course, any number of other sites that provide this information, such as the Motley Fool and stockbroker sites like Sharebuilder, but the information is essentially the same on any (reputable) site you could name.  So, as follows, here are Google‘s, Yahoo’s, and Microsoft’s listings, respectively, for BWLD on the evening of August 6, 2009:

Quite a lot of information, hunh?  Luckily, most of the information is the same no matter where you look.  I’ve gone ahead and lettered some of the important information given on each picture, to make it easier (I hope) to find this information on each one.  Let’s break down some of the most salient points:

A: Closing Price – The last price the stock traded at during the normal trading hours of the day, it’s how much the stock is worth, until trading starts up again.  Useful in figuring out the value of your stock holdings.  (Well.. there are some exceptions, as we’ll see in a few moments.)

B: Price Change – How much the stock price changed during the day, expressed in points and percentages.  Gives a quick view of how much the stock price shifted during the day.

C: After Hours – Data on the price change and new price of the stock as a result of trading after the market closes.  After hours trading tends to be rather sparse (Microsoft shows an after-hours volume of 2177 shares traded), but will shift the value of the stock from the close on one day to the open on the next.  My advice: don’t bother with after hours trading if you don’t know what you’re doing; and if you’re getting your info from a blog, chances are you still have quite a bit to learn.

D: Price Chart – Shows how the price shifted throughout the day.  If you’re a technical investor, this could be all the information you need (or want); if not, it’s just a plot of the background noise you encounter every day in your investing.

E: Open Price – The price the stock started trading at during the day in question, helpful if you want to know how the price has shifted during the day.

F: Daily Range – The highs and lows of the stock price during the day.  A larger than normal range could be a sign of more volatility in the stock price, possibly as a result of some unexpected news about the underlying company.

G: 52 Week Range – Similar to the daily range, this gives you some idea of where the stock has traded over the past year.  A value that goes above the high or below the low could indicate some big news about the stock itself, or possibly a broad economic trend (as occurred last year with the market meltdown.

H: Daily Volume/Average Volume – Shows the number of shares traded during the day as compared with the average.  As with large price shifts, higher than normal trading volumes indicate something has changed regarding the stock.

I: Market Cap – The size of the company as determined by the value of its assets.  Knowing the market cap can help you to figure out where a stock falls on the scale of small-cap to large-cap, which helps when creating an asset allocation of determining how the stock will perform under various conditions.

J: P/E – The price to earnings ratio.  As I’ve previously mentioned, the P/E ratio is one way to determine the expensiveness of a stock; high values mean that a stock is more expensive than one with low values.  Although, you need to look at comparable stocks to determine what constitutes a ‘high’ value for a particular class of stocks.

K: Dividend – The quarterly payments per share of stock, as well as the dividend yield (the annual payout divided by the current stock price).  Useful to know if you are investing for dividends (if so, you should look elsewhere; BWLD doesn’t pay any dividends, which is often the case for smaller, newer stocks).

L: EPS – Earnings per share, the value of the company’s net profits divided by the outstanding shares.  If you want to know how much of the company’s income belongs to you, the shareholder, just multiply this value by the number of shares you hold.  Obviously, higher values are better.

There is, of course, quite a bit more information that is available on each of these websites, but this is a good start.  Enjoy the stock researching goodness!