Equity purchases attempt to earn profit from share appreciation and dividends. You can orient your investing by sorting the equities into equity categories that meet a specific objective. The Growth and Value Equity category attempts to earn return primarily from share appreciation. The income equity category attempts to earn return from dividends. You can analyze firms you purchase to determine which fits your objective for investment based on their sorted category.
Share appreciation is incredibly simple to understand. You purchase shares at a price, they rise to a higher price, and you sell them. This earns you a profit equal the share value increase. The formula for share appreciation is also simple:
This formula will tell you how much the share has earned you in raw share appreciation. This is not your actual return; your actual return includes dividends. That formula is also fairly simple:
The Growth and Value share categories garner mostly share appreciation. The way they deliver share appreciation is slightly different. Value shares are purchased while market price is deeply undervalued, held until they have increased significantly, and sold. It’s important to note that a share should only be considered as a value share if you can get it beneath intrinsic value, after a discount value is added. They are easily found in bear markets, and difficult to find in bull markets. Any information or tendency that hurts a company’s share price, while its fundamentals remain stable, can lower the share price. If it moves below intrinsic and discount values, that share could be your potential value share. The firm has to be able to recover! If the firm is permanently maimed by the source of its price drop, it is not a value share.
Growth Shares, on the other hand, are shares that are primed for long term growth. The higher the potential for stable long term growth, the better the company is as a growth share. These are typically small, middle and rarely large capitalization shares which have a lot of long term room to increase their value. These usually are not “blue chip” or mega capitalization shares like Microsoft or General Electric. These firms have lots of room to grow into markets and increase their space in the industry. The trick here is finding high returns growth shares that are not taking insane risks to acquire their steady growth year over year. The requirement for growth shares is large potential for growth, and stable internal fundamentals. If the firm is growing with unreasonable amounts of leverage, high amounts of risk, or strategy that is detrimental long term, it should not be considered for investment.
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International Economic Analysis:
- Major Currency Economic Summaries
- Performance of Major Imports and Exports
- Mandates of Central Banks versus Expectations
- Performance Indexes of Major Economies
- Economically Correlated Currency Projections
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- Performance Indexes of U.S Economy
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- Fundamental Ranking of U.S Business Sectors
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- Occasional: Firm Fundamental Strength Report
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