For Immediate Release
Chicago, IL – August 4, 2022 – Zacks Market Edge is a podcast hosted weekly by Zacks stock strategist Tracey Ryniec. Each week, Tracey is joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how they impact 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.
- (0:30) – How to start investing now: basic stock conditions
- (6:45) – Understand how to use stock valuation metrics
- (20:15) – What exactly is arbitrage and how to use it?
- (25:30) – The Federal Reserve: Hawkish vs. Dovish
- (33:35) – Episode Summary: AAPL, MSFT, XOM, TWTR, TSLA, ATVI, FIVN
Each week, presenter and Zacks equity strategist Tracey Ryniec is joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how they impact your life.
This week Tracey goes alone to help beginners.
Maybe you’re new to stock investing and started listening to this podcast and watching CNBC. But you’re confused by some of the terms being thrown around.
Tracey wants to help you.
Apple is expensive: Huh?
You may have heard analysts say Apple AAPL is expensive.” Yes, it’s trading above $150 a share, but the price isn’t what the analysts are talking about.
Apple is currently trading at an expected P/E of 26. When analysts on TV say it’s “expensive,” they’re probably talking about its P/E ratio.
Apple’s earnings are expected to rise just 8% this fiscal year. Still, Apple has one of the highest P/E ratios among FANGMAN stocks.
Just be aware that the valuation isn’t about the stock price.
ExxonMobil: Forward or Lagging P/E?
Another confusing concept for beginners can be what type of P/E is being used. YahooFinance has the trailing P/E on its main listing page, but Zacks has the forward P/E.
It can be a problem when a company has strong year-over-year earnings growth, such as ExxonMobil XOM.
ExxonMobil is expected to grow earnings by 125% in 2022. The expected P/E is cheap at just 7.8x. But ExxonMobil’s trailing P/E is more than double that at 16.1.
That’s a big difference. Make sure you know what type of P/E you are using.
What is arbitrage? Twitter and Activision Blizzard
Beginners may have heard the word “arbitrage” and wondered what it is all about.
There are two good examples of arbitrage trading currently taking place.
The first is Elon Musk’s bid Twitter (TWTR) and the second is with the Microsoft’s MSFT planned acquisition of Activision Blizzard ATVI.
Arbitrage is when a trader buys shares of a company that has a takeover bid because those shares are below the buyout price. They bet on the deal happening and they make the difference.
For example, Elon Musk offered to buy Twitter for $54.20, but shares recently traded in the $30s. Greenlight Capital’s David Einhorn recently announced that he bought a position at an average price of $37.24.
That’s the arbitrage. He is counting on the court to go through with the deal at $54.20.
Microsoft has an offer to buy Activision Blizzard for $95 per share. But Activision Blizzard is trading around $79 now. Earlier in the year, Warren Buffett announced that he had taken a large arbitrage trade and bought 9.5% of Activision Blizzard, believing that Microsoft would be able to pull off the deal and he would make the difference.
New investors shouldn’t be put off by fancy investment jargon. It’s usually not as difficult as it seems.
What other confusing investing terms should beginners know?
Tune in to this week’s podcast to find out.
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Apple Inc. (AAPL): Free Stock Research Report
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Exxon Mobil Corporation (XOM): Free Stock Research Report
Twitter, Inc. (TWTR): Free Stock Research Report
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