According to Google, influencers are so 2019 (Investing Data Part I)
December 11, 2020 by The Q.ai Team
This newsletter focuses on investing terms every investor should know
As if we all haven’t been replaying this year repeatedly in our heads, Google has released its annual Year in Search video.
Some of our favorite search trends:
- “How to be an ally” was searched more than “how to be an influencer”
- “What day is it” hit an all-time high in April, which is concerning because the devices used to Google things already tell us the date and time
- “How to thank,” “how to foster a dog,” and “cranberry juice” (IYKYK) also hit all-time highs this year
The biggest miss on Google’s part was highlighted by one YouTube user, who said “I was high-key hoping for Alex Trebek to be at the end saying, ‘Because life’s greatest answers are asked in the form of a question.'”
Maybe next year, Googs.
If you ever want to ask us anything, provide feedback, submit a request or tell us whether Lil Nas X’s HOLIDAY music video got you into the holiday spirit, please feel free to email or DM us on IG or Twitter.
This Week’s Biggest Headlines
- This week has not been great for markets. For the week, the Dow is down 0.7%, the S&P 500 is down 0.8% and the Nasdaq entered Friday’s session down 0.5%. The one thing that can turn around the current sentiment is a coronavirus relief deal. Read more.
- DoorDash and Airbnb IPO’d this week. Both unicorn companies opened significantly higher than its initial offering, earning valuations of $66 billion and $101 billion, respectively. In fact, DoorDash’s stock price jumped 85% while Airbnb’s jumped 115% in its first day. This suggests that both companies could have raised much more money if they wanted to – this is also called leaving money on the table. Read more.
- Elon Musk is peacing out from California, probably because the weather is too nice. OK, we all know that’s not the reason he is leaving (TBH, it’s probably one of the reasons he stuck around for so long). Musk has been extremely vocal about California’s policies around taxes and its overall treatment of innovators. It also didn’t help that he wasn’t a fan of shelter-in-place orders, too. Like many Silicon Valley executives, he’s taken up a new residency in Texas, where Tesla’s new car plant is set to be built. At this time, SpaceX and Tesla’s main operations will remain in California. Read more.
- Ben & Jerry’s is arguably the chillest ice cream company around. Not only is the new flavor “Change the WHIRLED” a collaboration with NFL player-turned-activist Colin Kaepernick, it is also non-dairy and vegan. Over the span of three decades, Ben & Jerry’s has been no stranger to social justice, even at a time when the public eye didn’t expect companies to take stances on such issues. This has been an effective business strategy for the company, which has bolstered its co-branding initiatives by inventing unique ice cream flavors inspired by popular culture figures. Read more.
- Facebook is being sued (again) and the reason is (again) for illegal monopolization. Who filed the lawsuit? 46 states, D.C. and Guam. If you’re curious, Alabama, Georgia, South Carolina and South Dakota were the states that decided to not partake. The lawsuit alleges that Facebook’s anti-competitive strategy of eliminating threats through acquisition further strengthens its monopoly, specifically citing the purchase of Instagram and WhatsApp. Additionally, the company is accused of anticompetitive conduct, including cutting API access from third party apps that possess social functionalities. Facebook doesn’t have a great reputation in this area, but that didn’t stop the company from profiting by $18.5 billion in 2019. Read more.
- Disney’s stock jumped 8% this morning after announcing Disney+, which launched a little over a year ago, now has nearly 87 million subscribers. For context, Netflix, which has had offered streaming services since 2007, has around 200 million subscribers. Disney projected hitting its current subscriber count by 2024. So, clearly, someone’s getting a big holiday bonus this year. Read more.
Let’s not forget “the usual”
- The F.D.A. panel voted on Thursday to formally recommend emergency authorization of Pfizer’s vaccine. This does not mean that it has been approved – but it is expected to be on Saturday. This is huge – the vaccine could be distributed as soon as next week. Read more.
- Wednesday was the first time over 3,000 COVID-related deaths were recorded in the U.S. To put things in perspective, there were more deaths on Wednesday than 9/11 or D-Day. With the Pfizer vaccine in a good position for F.D.A. approval, there’s hope that the worst is now behind us. Read more.
- 137,000 more unemployment claims were filed last week than the week before. There really isn’t a good way to sugarcoat this: the labor market has been slammed this year by the pandemic and it shows. It’s unlikely that the coronavirus will disappear overnight, so it’s crucial that measures are taken to support the economy. Read more.
How to decipher stock market data
Investing terminology can be hard to pick up. While intimidating at first, it’s integral to becoming a well-rounded investor. For security-related data, the most important terms to know include EPS, Simple Moving Average, Yield, Dividend, and P/E Ratio.
There’s nothing more frustrating for a learning investor than finding a great “tell-all” article…written in a language you can’t understand. And the overabundance of unfamiliar terms and numbers can be intimidating and exasperating at first.
Fortunately, interpreting a stock chart isn’t difficult – you have to know where to get started.
The first thing to do when you’re researching investment data is gain an understanding of the basics. Let’s break down a few of the most important terms you’ll need to know as a successful investor.
Note: This section is in 2 parts. This week, we’ll go over the most important investing terms you need to know in order to understand data that’s being presented. Next week, we’ll focus on understanding the charts that illustrate these terms.
Earnings per share, or EPS, is a calculation of a company’s profitability. The higher a company’s EPS, the better the company is doing – at least on paper.
To find EPS, you divide the company’s profits by the number of shares in the hands of investors (also known as shares outstanding).
Another way to look at EPS is a measure of how much profit the company rakes in per share of stock. While this number doesn’t guarantee future profits, it can paint a picture of where the company currently stands.
It’s important to note that a company can also manipulate its EPS, though not always for unscrupulous reasons. For instance, a company may adjust its EPS to account for the fact that they diluted their stock or ceased funding for a project.
Opening and Closing Prices
Opening and closing prices can come in handy for both day traders and long-term investors, depending on the time frame you view. This metric is helpful in hinting toward increased market interest or a reflection of the news cycle on the stock in question.
These terms are exactly what they sound like – opening prices are the first price of the trading day, while closing prices are the last. However, if a stock trades after-hours, the closing price on one day and opening price on the next may not be the same.
Simple Moving Average vs Exponential Moving Average
A simple moving average, or SMA, is a calculation of closing prices within a set period. This number can be useful in projecting future price movements. SMAs can be as a technical indicator in determining whether an asset will continue or counter bear or bull trends.
An exponential moving average, or EMA, is another arithmetic calculation that highlights the significance of recent data. Investors use this technical indicator to determine whether they should buy or sell securities.
A stock’s volume is simply how many shares changed hands in a given time frame. By taking the volume over the course of a day, or the average over the course of some weeks, an investor can see how market interest fluctuates over time.
Volume is a direct measure of market activity and liquidity; typically, more liquid stocks move more often. However, high market interest is not inherently positive or negative, so it’s important to examine the underlying reason a normally sedentary stock begins to post record-breaking volumes.
A great example of this is the 2020 pandemic crash, during which many companies posted extraordinarily high volumes. While market interest was certainly skyrocketing, it was primarily due – at least initially – to panicky investors looking to dump their shares, which then flooded the market overnight.
Yield is the income return on an investment from dividends or interest payments. Income-oriented investors typically choose securities that return higher yields to boost their annual intake. You’ll often see yield as an annual percentage.
A dividend is the money paid to investors who own shares of a particular stock. This money comes from the company’s earnings, although not every profitable company pays dividends. The power to hand out this type of return rests in the hands of the Board of Directors, who vote to set how often and much to pay investors. Dividends payments come in the form of cash or shares of additional stock.
One of the most common terms you’ll see is market capitalization – or market cap. It describes how much money a single investor would pay to purchase every share of a company’s stock.
To calculate market cap, multiply a company’s outstanding shares (the number of shares circulating among investors) by the current price of a single share.
In investing, a company can be classified as:
- Small cap – worth between $300 million and $2 billion
- Mid cap – worth between $2 billion and $10 billion
- Large cap – worth over $10 billion
While a large cap company might not necessarily perform better, it typically has a lot farther to fall in case of emergency.
Compound interest is how your money earns money. Simply put: when you invest money in the market, that money earns interest. When that interest moves into your principle (compounded), you then earn interest on your interest. Depending on the specific investment, your interest may compound one or more times throughout the year.
The P/E ratio is one metric investors use to measure a company’s current worth.
Typically, investors use this ratio to compare a company against itself, although you can also compare apples to apples (or Apple to Microsoft).
To find a company’s P/E ratio, you simply divide the company’s current share price by its earnings per share (EPS).
Generally, a high P/E ratio indicates solid growth potential (or an overvalued stock).
There are two main variations of the P/E ratio that investors find useful:
- Forward P/E Ratios use predictions of future earnings to calculate a company’s potential for growth
- Trailing P/E Ratios use past data to analyze a company’s past performance
Keep in mind that, similar to EPS, it is also possible for a company to falsely manipulate their P/E ratio to inflate their performance in the market. Investors should take heed not to take an extraordinarily high P/E ratio at face value.
The bottom line
When you first start investing, one of the most important things you do is research everything. Your potential holdings, your current portfolio, the overlying market – any and every piece of data is fair game. In doing so, you’ll likely by bombarded with truckloads of unfamiliar terms and concepts. While challenging, learning to decipher and understand all of this investment data is key to becoming a well-learned, successful investor.
If there is one investing term you should remember, it is price-to-earnings ratio (P/E Ratio). This 4-minute video explains everything you need to know without leaving you more confused than before. Knowing this can prevent bad investing decisions.