Definition of ‘Common Stock’

A security that represents ownership in a corporation. Holders of common stock exercise control by electing a board of directors and voting on corporate policy. Common stockholders are on the bottom of the priority ladder for ownership structure. In the event of liquidation, common shareholders have rights to a company’s assets only after bondholders, preferred shareholders and other debtholders have been paid in full. 

In the U.K., these are called “ordinary shares.”
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Investopedia explains ‘Common Stock’

If the company goes bankrupt, the common stockholders will not receive their money until the creditors and preferred shareholders have received their respective share of the leftover assets. This makes common stock riskier than debt or preferred shares. The upside to common shares is that they usually outperform bonds and preferred shares in the long run.

Definition of ‘Yield’

 

 

 

 

 

 

 

 

 

 

 

 

 

The income return on an investment. This refers to the interest or dividends received from a security and is usually expressed annually as a percentage based on the investment’s cost, its current market value or its face value.
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Investopedia explains ‘Yield’

This seemingly simple term, without a qualifier, can be rather confusing to investors.

For example, there are two stock dividend yields. If you buy a stock for $30 (cost basis) and its current price and annual dividend is $33 and $1, respectively, the “cost yield” will be 3.3% ($1/$30) and the “current yield” will be 3% ($1/$33).

Bonds have four yields: coupon (the bond interest rate fixed at issuance), current (the bond interest rate as a percentage of the current price of the bond), and yield to maturity (an estimate of what an investor will receive if the bond is held to its maturity date). Non-taxable municipal bonds will have a tax-equivalent (TE) yield determined by the investor’s tax bracket.

Mutual fund yields are an annual percentage measure of income (dividends and interest) earned by the fund’s portfolio, net of the fund’s expenses. In addition, the “SEC yield” is an indicator of the percentage yield on a fund based on a 30-day period.

 

 

Shares outstanding

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Shares outstanding are all the shares of a corporation or financial asset that have been authorized, issued and purchased by investors and are held by them. They have rights and represent ownership in the corporation by the person that holds the shares. They are distinguished from treasury shares, which are shares held by the corporation itself and have no exercisable rights. Shares outstanding plus treasury shares together amount to the number of issued shares.

Shares outstanding can be calculated as either basic or fully diluted. The basic count is the current number of shares. Dividend distributions and voting in the general meeting of shareholders are calculated according to this number. The fully diluted shares outstanding count, on the other hand, includes diluting securities, such as warrantscapital notes or convertibles. If the company has any diluting securities, this indicates the potential future increased number of shares outstanding.

Finding the number of shares outstanding[edit]

The number of outstanding shares may change due to changes in the number of issued shares as well as the change in treasury shares. Both can occur at any time of the year. There are several useful public sources to find the number of shares outstanding of a given corporation.

Public traded companies investors relation

The financial reporting obligation of the public traded company also ensures the publication of issued and outstanding shares. The reports are usually available in the investors relations section of the companies web site. Web directories are supporting direct access to company web sites.[1][2] Public traded companies bundles the reports normally in the investor’s relation section, e.g. Deutsche Bank AG,[3] Eni S.p.a.,[4] Anheuser Busch InBev SA,[5] EDP – Energias do Brasil SA[6] or Accor SA.[7]

Authorized information service

In many countries there is an information service authorized or provided by the local financial authority which gives access to the companies financial reporting. In the United States the number of shares outstanding may be obtained from quarterly filings with the U.S. Securities and Exchange Commission. Quarterly filings are accessible using the US EDGAR.[8] In Germany those figures are available using the German company register, the central platform for storage of company data.[9] In the Netherlands the Netherlands Authority for the Financial Markets (AFM) provides on its web site a register of issued capital.[10] In Italy, the Commissione Nazionale per le Società e la Borsa (CONSOB) provides on its web site a register of issuers with latest total shares.[11]

Local stock exchanges

Since outstanding shares are an essential detail of public traded companies the number can be found on the local stock exchange web sites. Beyond stock charts and lasted prices they in almost all cases also provides the companies number of outstanding shares. E.g. the Brazilian BM&FBOVESPA,[12]the Swiss SIX,[13] the Borsa Italiana[14] or the Tel Aviv Stock Exchange (where shares outstanding are termed “Capital Listed for Trading”).[15]

http://en.wikipedia.org/wiki/Shares_outstanding

 

OUTSTANDING SHARES

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JADI OUTSTANDING SHARE ITU ADALAH SEMUA SAHAM YG DIMILIKI OLEH COMPANY…………….BAIK BASIC SHARES ( 1-3) DAN DILUTED SHARES(4)

1. TERMASUK SEMUA SAHAM YG AKAN DIKELUARKAN –> ISSUED SHARE

2. TERMASUK SEMUA SAHAM YG SUDAH DI BELI OLEH INVESTOR –> SHAREHOLDER

3. TERMASUK SEMUA SAHAM AUTHORIZED -> SAHAM YG DIMLIKI MANAGEMENT COMPANY

4. TERMASUK SEMUA SAHAM DILUTED –> SAHAM YG DIMLIKI MANAGEMENT COMPANY YG BERNAMA WARRANTS, COMPANY NOTES DAN CONVERTIBLES.

BILA SAJA SEBUAH COMPANY MEMILIKI DILUTED SHARE ( 4) MAKA POTENTSI AKAN PENINGKATAN JUMLAH OUTSTANDING SHARE COMPANY TSB DI MASA DEPAN AKAN SANGAT MENINGKAT. DENGAN KATA LAIN INI COMPANY YG MEMILIKI DILUTED SHARES ADALAH COMPANY YG PUNYA MASA DEPAN YG BAIK UTK DIJADIKAN TARGET INVESTASI …..ANDA…

Definition of ‘Blue-Chip Stock’

Stock of a large, well-established and financially sound company that has operated for many years. A blue-chip stock typically has a market capitalization in the billions, is generally the market leader or among the top three companies in its sector, and is more often than not a household name. While dividend payments are not absolutely necessary for a stock to be considered a blue-chip, most blue-chips have a record of paying stable or rising dividends for years, if not decades. The term is believed to have been derived from poker, where blue chips are the most expensive chips.

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Investopedia explains ‘Blue-Chip Stock’

A blue-chip stock is generally a component of the most reputable market indexes or averages, such as the Dow Jones Industrial Average, the S&P 500 and the Nasdaq-100 in the United States, the TSX-60 in Canada or the FTSE index in the United Kingdom.

While a blue-chip company may have survived several challenges and market cycles over the course of its life, leading to it being perceived as a safe investment, this may not always be the case. The bankruptcy of General Motors and Lehman Brothers, as well as a number of leading European banks, during the global recession of 2008, is proof that even the best companies may sometimes be unable to survive during periods of extreme stress.

Definition of ‘Outstanding Shares’

 

A company’s stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders. Outstanding shares are shown on a company’s balance sheet under the heading “Capital Stock.” The number of outstanding shares is used in calculating key metrics such as a company’s market capitalization, as well as its earnings per share (EPS) and cash flow per share (CFPS).

A company’s number of outstanding shares is not static, but may fluctuate widely over time. Also known as “shares outstanding.”

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Investopedia explains ‘Outstanding Shares’

A company’s outstanding shares will increase if it issues additional shares. Companies typically issue shares when they raise capital through an equity financing, or upon exercising employee stock options. Outstanding shares will decrease if the company buys back its shares under a share repurchase program.

The number of shares outstanding will double if a company undertakes a 2-for-1 stock split, or will be halved if it undertakes a 1-for-2 share consolidation. Stock splits are usually undertaken to bring the share price of a company within the buying range of retail investors; the doubling in the number of outstanding shares also improves liquidity. Conversely, a company will generally embark on a share consolidation to bring its share price into the minimum range necessary to satisfy exchange listing requirements. While the lower number of outstanding shares may hamper liquidity, it could also deter short sellers since it will be more difficult to borrow shares for short sales.

For a blue chip stock, the increased number of shares outstanding due to share splits over a period of decades accounts for the steady increase in its market capitalization, and concomitant growth in investor portfolios. Of course, merely increasing the number of outstanding shares is no guarantee of success; the company has to deliver consistent earnings growth as well.

While outstanding shares are a determinant of a stock’s liquidity, the latter is largely dependent on its share float. A company may have 100 million shares outstanding, but if 95 million of these shares are held by insiders and institutions, the float of only 5 million may constrain the stock’s liquidity.

Definition of ‘Buyout’

 

The purchase of a company’s shares in which the acquiring party gains controlling interest of the targeted firm. Incorporating a buyout strategy is a common technique used to gain access to new markets and is one of the most common methods for inorganically growing a business.
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Investopedia explains ‘Buyout’

A leveraged buyout is accomplished by borrowed money or by issuing more stock. Buyout strategies are often seen as a fast way for a company to grow because it allows the acquiring firm to align itself with other companies that have a competitive advantage in a specific area.

Definition of ‘Private Equity’

Equity capital that is not quoted on a public exchange. Private equity consists of investors and funds that make investments directly into private companies or conduct buyouts of public companies that result in a delisting of public equity. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet.

The majority of private equity consists of institutional investors and accredited investors who can commit large sums of money for long periods of time. Private equity investments often demand long holding periods to allow for a turnaround of a distressed company or a liquidity event such as an IPO or sale to a public company.

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Investopedia explains ‘Private Equity’

The size of the private equity market has grown steadily since the 1970s. Private equity firms will sometimes pool funds together to take very large public companies private. Many private equity firms conduct what are known as leveraged buyouts (LBOs), where large amounts of debt are issued to fund a large purchase. Private equity firms will then try to improve the financial results and prospects of the company in the hope of reselling the company to another firm or cashing out via an IPO.

Private Equity For Retail Investors

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By Aaron Levitt on October 11, 2013

 

With popular social media website Twitter announcing that it will go public via an IPO later this year, the market has been abuzz with private equity and start-up companies. And there’s good reason. For early investors, a successful start-up can be worth some big coin once it hits the big time. Meanwhile, an improving economy has created a surge in buy-out and M&A activity. All leading to massive profits for those institutional private equity players that dabble in these markets.

If you’re a pension fund or other huge accredited investor, getting into this world of private equity is actually pretty easy. But what about us retail investors? Is it possible to gain from all of this activity?

The answer is a resounding yes. Luckily, for retail investors accessing this world of private equity and venture capital has never been easier for portfolios.

Big Gains For Investors

The pending Twitter IPO has renewed the general public’s obsession with start-up companies. That’s because these start-ups can turn early investors into millionaires overnight. According to investment consultant Cambridge Associates‘ two main indexes of PE returns, both private equity investors in the U.S. and those abroad have averaged nearly 13.6% in annual returns over the last 20 years. Venture capitalists- or those who just provide seed money to start-up companies- have done even better by realizing nearly 30% returns in that time.

Straight stock investors haven’t been so luckily. During the same time period, the broadSPDR S&P 500 (NYSE:SPY) only managed to produce 8.53% in annual returns.

There’s plenty of reasons to think that the party will continue going for some time. Innovation in the technology and healthcare space continues to grow rapidly, while private equity buy-outs continue to reach a fervor pace. A prime example, has been computer maker Dell’s (NASDAQ:DELL) recent $24.4 billion buy-out. All in all, CEO of buyout firmApollo Global Management (NYSE:APO) Leon Black estimates that PE investors should see low- to mid-teen returns going forward.

Given the potential for higher returns, regular retail investors do have some options for playing these markets.

Take A Look At Business Development Companies

The first place investors should look is towards business development companies (BDCs). These firms invest in or lend to small- to midsized companies and provide managerial assistance in hopes of profiting as these businesses grow. They are basically, the closest thing to a publicly traded private equity or venture capital as regular retail investors can get. Several BDCs- like Hercules Technology Growth Capital (NASDAQ:HTGC) and Ares Capital Corporation (NASDAQ:ARCC) –have been quite successful at spotting the “next big thing” in the tech world.

Secondly, due to their tax structure, BDCs are similar to real estate investment trusts(REITS) in that they are required to payout 90% of earnings as dividends back to shareholders. That results in some hefty yields- often in the 7 to 12% range.

The Market Vectors BDC Income ETF (NASDAQ:BIZD) could be one of the best ways to add the sector to a portfolio as it offers investors a broad play. The new ETF tracks 27 different BDCs and offers a hefty 7.72% dividend yield. Since inception back in February, BIZD has returned about 5%. Expenses are high at 8.33%. But much of that stems from acquired fund fees and expenses from the underlying BDCs themselves and not the fund.

Public PE Firms

The other choice for investors could be betting on the firms that are doing the buy-outs and venture capital themselves. While it won’t provide the same level of direct participation, the fees and earnings from buy-out funds and PE deals do trickle back into these firm’s pockets. Several major players like Blackstone (NYSE:BX) and Kohlberg Kravis Roberts & Co (NYSE:KKR) are now publicly traded and offer juicy yields and capital appreciation for their shares. The PowerShares Global Listed Private Equity (NYSE:PSP) can be used as a broad global play on these firms as well as provide some exposure to BDCs. The ETF yields 10.46%.

The Bottom Line

Recent hot IPOs like Potbelly (NASDAQ:PBPB) and Twitter has many regular investors salivating at the chance to participate in start-ups and private equity. With returns in the 13% to 30% range, who wouldn’t be? Luckily, the world of private equity can be achieved in a regular portfolio. For investors, funds like the ProShares Global Listed Private Equity ETF (NYSE: PEX) make it all too easy.

Disclosure – At the time of writing, the author did not own shares of any company mentioned in this article.

Definition of ‘Effective Date’

 

 

The date, declared by the Securities & Exchange Commission (SEC), on which shares can start trading. This usually refers to the date when shares become available for sale in an initial public offering.
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Investopedia explains ‘Effective Date’

The effective date occurs approximately 20 days after the security is registered with the SEC, giving time for the SEC to review the registration. The registration will be either accepted or rejected by the twentieth day or earlier. Amendments can be made to the registration if the SEC deems that changes are necessary. If the items in question are not modified, the registration process is not completed.