Newbie Stocks?

Question

I am new to stocks; I have always had an interest but no education. Where can I look to find out what different numbers mean such as PEG and P/E? Also I notice that a lot of stocks have a big jump in the beginning of their existence and then level off. Where can I find out what companies are new to the stock market?

Answer 1

Here is an analogy that might be useful to you:

Think of a company like a rental property. You paid a price (P) for it and you earned (E) some rental income. That is the P/E ratio. With this ratio you can compare various properties selling at different prices with different earnings on the same playing field.

Now the real estate market is expected to grow (G) by x% next year. So to get further insight into the value of your property you divide the P/E by G (the growth rate). That is you PEG ratio.

Your goal is to find a bunch of similar properties/companies/stocks and choose the one with the lowest P/E and PEG. This way you will know that amongst the choices, you chose the cheapest one.

However, there might be a reason why it is cheap. Old Chinese saying, cheap thing no good and good thing no cheap. But wise investor know when a good thing too cheap and not too cheap to buy.

Answer 2

Don,
There are few different answers to your question. If you want to find out about new stocks I would recommend any/all of the following:
- Subscribe and read the Wall Street Journal
- Subscribe and read Investors Business Daily
- Watch Jim Cramer's show on CNBC
- Run stock screens on stocks to identify the greatest appreciation over a three year period and analyze those companies over the last three years. Try and identify the reasons why they increased so much. This will teach you lessons about what companies to look for.
- Run some searches on P/E and PEG, but for the record P/E is the stock price divided by the earnings per share & PEG is the P/E divided by the expected growth in earnings per share; compare these ratios between different potential investments to get a sense of their relative expensiveness or cheapness to each other.
- Check out ETF's. They're a great way to capture equity market appreciation without having to understand equity valuation or paying for mutual fund mismanagement.
- IPOs: a search on IPOs will identify many sources of IPO information. I think what you're really asking is how to invest in IPOs -- that is a function of which broker you have a stock account with. Call your broker to see if they have any IPOs, if not, then consider changing to a major broker that has a healthy investment banking business such as Lehman Brothers, JP Morgan, MorganStanley, Credit Suisse, etc... However, if you're new to investing, you should know that IPOs are very cyclical and can be riskier than the overall market if it hits a downturn.
- Lastly, find and read Graham and Dodd's The Intelligent Investor: it's the book that Warren Buffett recommends for anyone asking for advice on learning how to invest.

Answer 3

Whether your goal is to be a serious investor going at it on your own, or to become well-informed enough to meet and exceed the knowledge of your financial advisor and/or portfolio manager, in order to take a more active role in your financial success, I think a few key investment books will take you far. However, I assume from your question that you want to actually pick your own stocks, and for this you must start at the bottom:

Everyone tells you to read Benjamin Graham investment books, but these books assume you have at least basic knowledge of finance and economics. So firstly, learn the rules of accounting, if you haven't already, most importantly learning how to read and interpret balance sheets and income statements, and how the various accounts are treated. You should be able to find a decent accounting text at the local library. There is no short-cut around this other than some study. I found most internet sites about accounting quite inadequate. In addition, I also highly recommend you study a little about how the economy works. Now, go to a few online investing sites to get the basics of investing (no need really for a book for these things, because most of them are basic and will be easily learned online). I will mention one here:

Investopedia.com (THE best site out there, will keep you occupied for a LONG time)

These things will give you the financial background you need to take it to the next level.

Now you can read the recommended books:

The Intelligent Investor, by Benjamin Graham will serve as the framework for your new business mind. This book alone will educate you enough to make sound financial decisions, as it cuts through so much of the B.S. you will encounter in this field. (Btw, there is a whole section devoted to IPO's and how most of us "little guys" (i.e. non-institional investors) won't make a dime off of them). This was the first book I read on investing, and I will tell you... it was absolutely SOBERING.
Security Analysis, by Benjamin Graham, expounds upon the framework introduced in the first book, and it gets as technical as you would ever need. You will know P/E inside out, its uses and limitations.
Common Stocks and Uncommon Profits, by Philip Fisher. Warrent Buffett describes himself as 85% Graham and 15% Fisher. Fisher shows you the growth approach to investing.

Well, that's a start.

Answer 4

Hi, I dont know your current lvl of knowledge so i will just tell you what you need to know to be a successful investor/trader.

You want to learn Fundamental Analysis and Technical Analysis. Go and get some good books, and take notes.

Many ppl only learn one of the above, but you will have an advantage if your versed in both.

Theres no point of me giving you a massive list of do's and don'ts, as to be successful in the market takes dedication and work. Not to put you off but 90% of traders fail. The small percentage that succeed have put the work in.

"Anything worth doing Is worth doing the hard-way."

Good luck, and remember the market isn't a casino.

(1 more thing. PLZ stay away from these rubbish internet programs that promise thousands a day/week. Its all a scam)

Answer 5

So you're interested in IPO's (initial public offering). They start low and then go up. Check out VG (Vonage), a recent IPO that started at $17.25 and is worth $3.12 in less than a year.

First lesson: As a "newbe" you'll tend to think you found some magic, easy way to make money. Forget it. You're not the genius you think you are.

Take some time to really learn investing. Read (and understand) 2 - 3 books on investing before you open a brokerage account.

Investing in stocks is a great way to increase your net worth. But never think you've found an obvious "easy" way to be successful.

Best of luck to you. Work hard and you'll do well. Look for the "easy way out" and you'll screw yourself.

Answer 6

Barns and Nobel for the first part of your question. As far as new companies(IPO's) there are several news letters with this info in them. Check with your broker and ask what they have with this info.

Answer 7

spend sometime building up your knowledge before taking the plunge...it will pay off in the long run..

making money is all about sustainability...