The Basics of the Short Ratio, Short Selling, and Short Squeezes

The short ratio is a widely-used tool by short selling hedge funds and other portfolio managers in the stock market. The short ratio indicates the number of shares that investors sell short over the average daily volume of the stock, on the basis of 1 or 3 months. Short selling exploded to the scene in […]

The Basics Behind Using the Price to Earnings Valuation Method on a Stock

The price to earnings valuation method is a simple and quick way to get an idea about how cheap or expensive a stock generally is. Like any tool or framework, the price to earnings (or P/E) ratio is not a perfect estimate of valuation and has its drawbacks. The P/E is useful as a starting […]

Mergers and Acquisitions: Easy Basics for Beginners

Global mergers and acquisitions (M&A) volumes hit a record high in 2021, overtaking 2020’s deals. According to Refinitiv data, the total volume of completed deals, along with those in the pipeline, is $3.6 trillion in 2021, with three months to go, passing the $3.59 trillion of 2020. Mergers and acquisitions are on the upswing, typical […]

What Buybacks King, Henry Singleton, Can Teach Us About Capital Allocation

Before Warren Buffett and his special conglomerate, the compounding machine Berkshire Hathaway, there was a CEO of Teledyne called Henry Singleton—who pioneered prudent capital allocation inside of a conglomerate with stock buybacks and issuance. Henry Singleton was profiled in the excellent book, The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success. In […]

IFB182: OTC Stock Basics; The Best Free Tool for Stock Market Data

Welcome to the Investing for Beginners Podcast. In today’s show we discuss the basics of OTC (over the counter) stocks and the best free tool for stock market data. Buying and selling OTC stocks is not the same as investing in known entities, and understanding how that world works is the key to success. Check […]

The Simplest Explanation of Backlog Accounting: A Home Buying Contract

I find that backlog accounting is best explained by the home builder industry. A backlog represents work that needs to be performed but has not been recognized as revenue yet. As an example, a customer who is approved for a mortgage on a new home goes into a home builder’s backlog. Once that transaction closes, […]

This FREE Stock Market Basics PDF Makes Investing Look So Easy a Caveman Could Do It

Yeah, I said it – this stock market basics PDF really does make investing look so easy that a caveman could do it!  Maybe that needs to be the next Geico commercial… It might seem like I’m oversimplifying it but I’m really not… The first thing that you need to do, obviously, is to look […]

Other Comprehensive Income, OCI, AOCI: The Basics, with 10-K Examples

Edited for clarity: 9/21/22 As a company creates income, this changes its shareholder’s equity. Add investment securities and it can get hairy. The Statement of Comprehensive Income attempts to capture the effect of unrealized gains on investment securities. It reports these changes to shareholder’s equity through the balance sheet, through OCI and AOCI. OCI stands […]

Corporate Restructuring Basics: How Taxes and Politics Play a HUGE Role

History provides a valuable guide and lessons to finance, and the history of corporate restructuring is no exception. In particular, the Merger mania in the 1980’s provides a prime example of what can happen on Wall Street as companies struggle to survive and thrive in an ever-changing environment. While textbooks can provide fantastic explanations about […]

Valuation Basics: Market vs Book Value – and The Argument for Both

When performing a DCF valuation, you must make a distinction between using market vs book value for debt. It is a critical part of calculating the weighted average cost of capital (WACC). The easy way, of course, is to just use book value of debt from the company’s balance sheet and be done with it. […]