Market Capitalization represents how much someone would pay for a company if they were to purchase 100% of the shares at the current share price. In essence, it is public opinion of a companies net worth. The metric does not represent the true value of the company (profits, product position etc..) nor does it represent a company whose product has taken off but their reputation has not yet caught up.
Market cap provides a starting point for evaluating whether or not you want to buy stock in a company. Use the market cap information to compare two or more companies of similar size when evaluating a company. To calculate, you multiply the total number of outstanding shares by the current stock price. This information is readily available at the company’s web site or on free financial websites such as Google Finance or Yahoo Finance.
Since many companies have a dominant share holder, many stock market indices adjusts the market cap by calculating it on a free float basis (number of share available for public trading). Free float is an important issue for smaller companies which commonly have several strategic shareholders and where directors can be significant shareholders.
Small cap stocks range from $400 million to $2 billion, middle market ranges from $2 billion to $10 billion and large caps are $10 billion.
Small cap stocks have the potential to rise at a rapid pace as they increase their revenue versus the more established large caps which have a lower growth potential. Keep in mind that it is much easier to increase revenues starting at a base of $7 million versus a base of $500 million. However, small caps tend to have a less seasoned management and are more likely to run into trouble.
When you try to figure out which market cap fits your style, remember the ride of a growth stock can be exciting one minute and depressing the next when the growth slows or even worse, it tanks. The era of the dot com is a good example.
Monday, April 12, 2010
Accumulation
One thing I have learned on my journey is that consistent investment success depends on the synthesis of many indicators, one of which is accumulation (buying of stocks).
Institutional investors accumulate stock over a period of time to avoid raising the share price with one large purchase while insiders accumulate stock based on their knowledge of the company. As an indicator, accumulation can indicate the near term price performance of a stock but will not serve too much benefit other than letting you know whether the stock price is advancing or declining.
Basically, an accumulation day occurs when a stock closes higher and trades more volume compared to the previous day. The intensity of the accumulation factor intensifies when the increased volume is higher than the daily average volume. While accumulation is a good thing, an increase in the intensity is even better. The intensity increases because more people are buying the stock which in turn reduces the number of shares available for purchase thus increasing the value of the stock. Simply put, it is the law of supply and demand. Economics 101.
When you are trying to determine the overall trend for a particular stock, you can use accumulation days in your analysis. Normally, if a stock has had a couple of accumulation days, I view it as a bit bullish. The opposite of accumulation is distribution or the selling of stocks. I generally look for stocks that show signs that people are buying, not selling.
It is important that you rely on your own judgment when making investment decisions after all, it is your hard earned money at risk.
You can find the average volume per day and whether or not a stock has had an accumulation day by using the information on many of the free on-line services such as Yahoo Finance or Google Finance.
I hope this posting was helpful.
Institutional investors accumulate stock over a period of time to avoid raising the share price with one large purchase while insiders accumulate stock based on their knowledge of the company. As an indicator, accumulation can indicate the near term price performance of a stock but will not serve too much benefit other than letting you know whether the stock price is advancing or declining.
Basically, an accumulation day occurs when a stock closes higher and trades more volume compared to the previous day. The intensity of the accumulation factor intensifies when the increased volume is higher than the daily average volume. While accumulation is a good thing, an increase in the intensity is even better. The intensity increases because more people are buying the stock which in turn reduces the number of shares available for purchase thus increasing the value of the stock. Simply put, it is the law of supply and demand. Economics 101.
When you are trying to determine the overall trend for a particular stock, you can use accumulation days in your analysis. Normally, if a stock has had a couple of accumulation days, I view it as a bit bullish. The opposite of accumulation is distribution or the selling of stocks. I generally look for stocks that show signs that people are buying, not selling.
It is important that you rely on your own judgment when making investment decisions after all, it is your hard earned money at risk.
You can find the average volume per day and whether or not a stock has had an accumulation day by using the information on many of the free on-line services such as Yahoo Finance or Google Finance.
I hope this posting was helpful.
Stock Market Trends
My quest for knowledge has led me to the belief that I can determine which direction the stock market is heading over time if I learn to use the price and volume data together with good old fashioned common sense. When I put them together during analysis, I can figure out whether there are more buyers or sellers in the market. The volume tells me that there is movement and the price lets me know the direction of the movement.
A high volume day along with an increase in price for the stock market tells me the market is in an up trend most likely caused by institutional investors or another one of the big boys. On the flip side, higher volume lower price days tell me the market is in a down trend.
Now here is where common sense comes in. Sometimes the market sends false signals when it incurs sharp price movements with no real volume movement. Your common sense should tell you to keep an eye out for a change in market direction.
Keep in mind that not all stocks follow the trend of the overall market. An uptrend occurs when a stock experiences a string of higher highs and higher lows versus a down trend which results from a series of lower highs and lower lows. As a rule, stocks trend about 30% of the time and move sideways the rest of the time.
I look at trends as unpredictable as the only thing constant about the market is change. I try to use trends in conjunction with other information in an effort to minimize my risks and hopefully get one step closer to achieving financial freedom.
Remember that unless you personally understand the risks of the investment don’t make emotional or rash trading decisions and risk losing your money.
I hope this article helps you along your journey.
A high volume day along with an increase in price for the stock market tells me the market is in an up trend most likely caused by institutional investors or another one of the big boys. On the flip side, higher volume lower price days tell me the market is in a down trend.
Now here is where common sense comes in. Sometimes the market sends false signals when it incurs sharp price movements with no real volume movement. Your common sense should tell you to keep an eye out for a change in market direction.
Keep in mind that not all stocks follow the trend of the overall market. An uptrend occurs when a stock experiences a string of higher highs and higher lows versus a down trend which results from a series of lower highs and lower lows. As a rule, stocks trend about 30% of the time and move sideways the rest of the time.
I look at trends as unpredictable as the only thing constant about the market is change. I try to use trends in conjunction with other information in an effort to minimize my risks and hopefully get one step closer to achieving financial freedom.
Remember that unless you personally understand the risks of the investment don’t make emotional or rash trading decisions and risk losing your money.
I hope this article helps you along your journey.
Clinical Trial Phases
One area I find of interest is biotech stocks. I quickly understood the importance of understanding the clinical trial process before I invested any money in this arena. The purpose of this article is to share the information I have collected relating to the clinical trial process. The source for the information contained in this article can be found at www.investbio.com/clinical_trials_biotech.asp. If you are interested in investing in biotech stocks, I highly recommend that you check out their website.
In the US, before a drug can be sold to a consumer, over the counter or prescription, it must be thoroughly tested. Clinical trials are the most expedient method of testing provided the studies are structured and deployed in accordance with the Food and Drug Administration (FDA) requirements.
The clinical trial process consists of the following stages:
Discovery
2-10 Years
Pre-Clinical
Testing performed on animals or in a test tube to determine if the drug appears safe and effective in animals prior to requesting approval from the FDA to begin testing the drug in humans. To obtain approval, the FDA must approve an Investigational New Drug [IND] application of which only five out of every five thousand are approved.
Phase I Trials
20-30 volunteers
Testing is normally done on volunteers (healthy preferred) to test for safety, dosage and any signs of effectiveness. The FDA approves approximately 70% of the Phase I Clinical Trials and this stage takes about 2-3 Years to complete.
Phase II Trials
100-300 volunteers
Testing in Phase II checks for the efficacy of the experimental drug and to evaluate the common short term side effects and risks. For Phase II to be approved, the experimental drug must show a unique benefit such as dramatic remissions or recoveries or minimal benefits for previously untreated diseases. The FDA approves approximately 50% of the Phase II Clinical Trials and can take up to two years to complete.
Phase III Trials
1,000-3,000 volunteers
This is a critical phase due to the enormous cost and impact on obtaining FDA approval. In this phase the overall benefit-risk relationship of the drug is evaluated. The FDA approves about 70%-90% of the drugs that reach and complete this phase successfully and can take several years to complete.
Phase IV Trials
Post Market Testing and Post Marketing studies that gather additional data relating to the risks, benefits and optimal use of the drug for submission to the FDA.
After Phases I, II and III are successfully completed and all results are submitted to the FDA, the company can obtain a New Drug Application (NDA) which will enable the company to market the drug to the public and normally takes up to 1 year to complete.
Fast Track, Orphan and Subpart E Status
Patient populations less than 200,000
If granted by the FDA, the company can obtain an expedited review and approval for the drug. As a result of the 1983 Orphan Drug Act, the FDA can provide market exclusivity and tax breaks for companies with Orphan drugs.
If you would like additional information, I found the following websites extremely helpful:
ClinicalTrials.gov - provides frequently updated information about federally and privately supported clinical research.
ClinicalTrials.gov– a glossary that contains the most common terms used in clinical trials.
FDA – U.S. Food and Drug Administration - provides and enormous amount of data that is both comprehensive and educational.
I hope you found this article informative and useful. Remember that investing in the stock market can be risky, so it is important to always do your own due diligence prior to investing your money.
LA
In the US, before a drug can be sold to a consumer, over the counter or prescription, it must be thoroughly tested. Clinical trials are the most expedient method of testing provided the studies are structured and deployed in accordance with the Food and Drug Administration (FDA) requirements.
The clinical trial process consists of the following stages:
Discovery
2-10 Years
Pre-Clinical
Testing performed on animals or in a test tube to determine if the drug appears safe and effective in animals prior to requesting approval from the FDA to begin testing the drug in humans. To obtain approval, the FDA must approve an Investigational New Drug [IND] application of which only five out of every five thousand are approved.
Phase I Trials
20-30 volunteers
Testing is normally done on volunteers (healthy preferred) to test for safety, dosage and any signs of effectiveness. The FDA approves approximately 70% of the Phase I Clinical Trials and this stage takes about 2-3 Years to complete.
Phase II Trials
100-300 volunteers
Testing in Phase II checks for the efficacy of the experimental drug and to evaluate the common short term side effects and risks. For Phase II to be approved, the experimental drug must show a unique benefit such as dramatic remissions or recoveries or minimal benefits for previously untreated diseases. The FDA approves approximately 50% of the Phase II Clinical Trials and can take up to two years to complete.
Phase III Trials
1,000-3,000 volunteers
This is a critical phase due to the enormous cost and impact on obtaining FDA approval. In this phase the overall benefit-risk relationship of the drug is evaluated. The FDA approves about 70%-90% of the drugs that reach and complete this phase successfully and can take several years to complete.
Phase IV Trials
Post Market Testing and Post Marketing studies that gather additional data relating to the risks, benefits and optimal use of the drug for submission to the FDA.
After Phases I, II and III are successfully completed and all results are submitted to the FDA, the company can obtain a New Drug Application (NDA) which will enable the company to market the drug to the public and normally takes up to 1 year to complete.
Fast Track, Orphan and Subpart E Status
Patient populations less than 200,000
If granted by the FDA, the company can obtain an expedited review and approval for the drug. As a result of the 1983 Orphan Drug Act, the FDA can provide market exclusivity and tax breaks for companies with Orphan drugs.
If you would like additional information, I found the following websites extremely helpful:
ClinicalTrials.gov - provides frequently updated information about federally and privately supported clinical research.
ClinicalTrials.gov– a glossary that contains the most common terms used in clinical trials.
FDA – U.S. Food and Drug Administration - provides and enormous amount of data that is both comprehensive and educational.
I hope you found this article informative and useful. Remember that investing in the stock market can be risky, so it is important to always do your own due diligence prior to investing your money.
LA
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