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Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is going solo to give some help to beginner investors.
Perhaps, you are new to stock investing and have started listening to this podcast and watching CNBC. But you’re confused by some of the terms that are thrown around.
Tracey wants to give you some help.
Apple is Expensive: Huh?
You might have heard analysts saying Apple (AAPL - Free Report) is “expensive.” Yes, it’s trading over $150 a share, but the price isn’t what the analysts are talking about.
Apple currently trades with a forward P/E of 26. When analysts on television say it is “expensive” they are likely talking about its P/E.
Apple’s earnings are only expected to rise 8% this fiscal year. Yet Apple has one of the highest P/Es among the FANGMAN stocks.
Just know that it’s not about share price when looking at valuation.
ExxonMobil: Forward or Trailing P/E?
Another confusing concept for beginners may be on what type of P/E is being used. YahooFinance has the trailing P/E on its main quote page but Zacks has the forward P/E.
It can be a problem when a company has strong year-over-year earnings growth like ExxonMobil (XOM - Free Report) .
ExxonMobil is expected to grow earnings by 125% in 2022. It’s forward P/E is cheap, at just 7.8x. But ExxonMobil’s trailing P/E is more than double, at 16.1.
That’s a big difference. Be sure you know which type of P/E you are using.
What is Arbitrage? Twitter and Activision Blizzard
Beginning investors might have heard the word “arbitrage” thrown around recently and wondered what it was all about.
There are two good examples of the arbitrage trade occurring right now.
The first is with Elon Musk’s offer to buy Twitter and the second is with the Microsoft’s (MSFT - Free Report) proposed acquisition of Activision Blizzard .
Arbitrage is when a trader buys shares of a company that has an acquisition offer because those shares are under the buy-out price. They are betting that the deal goes through and they make the difference.
For example, Elon Musk offered to buy Twitter at $54.20 but the shares recently traded in the $30s. David Einhorn at Greenlight Capital recently announced he bought a position, with an average price of $37.24.
That’s the arbitrage. He is betting the court orders the deal to go through at $54.20.
Microsoft has an offer to buy Activision Blizzard at $95 per share. But Activision Blizzard is now trading around $79. Earlier in the year, Warren Buffett announced that he had put on a big arbitrage trade, buying 9.5% of Activision Blizzard in the belief that Microsoft would be able to go through with the deal and he would make the difference.
New investors shouldn’t get thrown by fancy investing lingo. It’s usually not as difficult as it seems.
What Other Confusing Investing Terms Should Beginners Know About?
Tune into this week’s podcast to find out.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.
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Zacks Market Edge Highlights: Apple, ExxonMobil, Twitter, Microsoft, and Activision Blizzard
For Immediate Release
Chicago, IL – August 4, 2022 – Zacks Market Edge is a podcast hosted weekly by Zacks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life. To listen to the podcast, click here: https://www.zacks.com/stock/news/1963303/beginner-investors-how-to-understand-stock-investing-lingo
Welcome to Episode #325 of the Zacks Market Edge Podcast.
Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.
This week, Tracey is going solo to give some help to beginner investors.
Perhaps, you are new to stock investing and have started listening to this podcast and watching CNBC. But you’re confused by some of the terms that are thrown around.
Tracey wants to give you some help.
Apple is Expensive: Huh?
You might have heard analysts saying Apple (AAPL - Free Report) is “expensive.” Yes, it’s trading over $150 a share, but the price isn’t what the analysts are talking about.
Apple currently trades with a forward P/E of 26. When analysts on television say it is “expensive” they are likely talking about its P/E.
Apple’s earnings are only expected to rise 8% this fiscal year. Yet Apple has one of the highest P/Es among the FANGMAN stocks.
Just know that it’s not about share price when looking at valuation.
ExxonMobil: Forward or Trailing P/E?
Another confusing concept for beginners may be on what type of P/E is being used. YahooFinance has the trailing P/E on its main quote page but Zacks has the forward P/E.
It can be a problem when a company has strong year-over-year earnings growth like ExxonMobil (XOM - Free Report) .
ExxonMobil is expected to grow earnings by 125% in 2022. It’s forward P/E is cheap, at just 7.8x. But ExxonMobil’s trailing P/E is more than double, at 16.1.
That’s a big difference. Be sure you know which type of P/E you are using.
What is Arbitrage? Twitter and Activision Blizzard
Beginning investors might have heard the word “arbitrage” thrown around recently and wondered what it was all about.
There are two good examples of the arbitrage trade occurring right now.
The first is with Elon Musk’s offer to buy Twitter and the second is with the Microsoft’s (MSFT - Free Report) proposed acquisition of Activision Blizzard .
Arbitrage is when a trader buys shares of a company that has an acquisition offer because those shares are under the buy-out price. They are betting that the deal goes through and they make the difference.
For example, Elon Musk offered to buy Twitter at $54.20 but the shares recently traded in the $30s. David Einhorn at Greenlight Capital recently announced he bought a position, with an average price of $37.24.
That’s the arbitrage. He is betting the court orders the deal to go through at $54.20.
Microsoft has an offer to buy Activision Blizzard at $95 per share. But Activision Blizzard is now trading around $79. Earlier in the year, Warren Buffett announced that he had put on a big arbitrage trade, buying 9.5% of Activision Blizzard in the belief that Microsoft would be able to go through with the deal and he would make the difference.
New investors shouldn’t get thrown by fancy investing lingo. It’s usually not as difficult as it seems.
What Other Confusing Investing Terms Should Beginners Know About?
Tune into this week’s podcast to find out.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.