THE BASICS OF INVESTING WITH RYAN JAMES: STOCK MODELS

By Ryan James

Growth vs Value Stocks

These terms express the type of company with which the stock is involved. Many investors’ style is to invest wholly into either growth or value. Others, though, will diversify their portfolios by investing heavily in both. The two media contrast one another, and they typically excel during differentiating market conditions. Growth is closely associated with quickly-expanding tech companies. Value correlates to large companies, such as banks, that seem to grow slowly and have high dividend payments. Value stocks tend to be safer investments, but growth stocks have better potential.

Other Types of Stocks

Growth and value stocks are not the only media available despite being the primary obtainable assets. Hybrids additionally exist, and many stocks that are one of the aforementioned also serve as “meme stocks” or “stonks.”

“Experience is making mistakes and learning from them.” — Bill Ackman

Growth

These stocks are typically valued highly by investors, so they have considerable P/E ratios, meaning that stockholders pay more than a dollar for every dollar the company earns. The high valuation can make some companies, such as Tesla Motors, highly valuable without the need for such substantial revenue or own much capital. In the case of Tesla Motors, it is more valuable than the following six car companies globally, even though Tesla’s overall revenue is minuscule in comparison. Much of the monetary gain concerning the high valuations of these companies originates from the speculation of future growth. These companies tend to have nearly exponential growth in earnings despite their high P/E ratios.

Meme Stocks

These companies are unstable, hazardous investments that experience massive volatility. While large profits are possible in the case of impeccable market timing, significant losses tend to occur. The companies that fall under this umbrella term may additionally classify as value or growth stocks. Although, because of recent activity (high P/E ratio and growth), they may exhibit signs comparable to that of a growth stock. Their price fluctuations are rapid and sporadic. Non-speculative volume fuels any monetary gains caused by upticks in these stocks. A group that causes many of these stocks to experience this is a subreddit called r/WallStreetBets, a Reddit community created by Jaime Rogozinski to discuss stock trading. It has evolved into a subreddit with an extensive following of retail investors that trade heavily shorted and unsuccessful stocks without any quantitative or qualitative data to support themselves. A retail investor trades individually as an amateur using electronic trading platforms. Members of the r/WallStreetBets community specifically use Robinhood. Notable meme stocks, also known colloquially as “stonks,” are GameStop, Churchill Capital IV, Naked Brand, Nokia, BlackBerry, Sundial Growers, and Zomedica.

Tickers

Tickers, also known as stock symbols, express a specific security. It allows a broker the knowledge of what asset you would like to trade. A ticker consists of one or more letters, typically similar to the full name of the company. But the format can vary widely depending on the source. For example, the world’s largest and most valuable corporation Apple. The only company valued over two trillion dollars, AAPL, NASDAQ: AAPL, (AAPL), ($AAPL), (^AAPL), or (NASDAQ: AAPL) can represent Apple’s stock. The “AAPL” is similar to the company’s full name, Apple Inc. Notice that the ticker may or may not include parentheses, a dollar sign, and/or the exchange. Because exchange-traded funds do not trade on the same markets, the ticker would have a different index. For example, ARKK, NYSEARCA: ARKK, (ARKK), ($ARKK), (^ARKK), or (NYSEARCA: ARKK) represent ARK Innovation ETF, one of Cathy Wood’s revolutionary funds. Via computers, this symbol represents two numbers that also associate with the security. These numbers are the CUSIP and ISIN. The CUSIP is the Committee on Uniform Securities Identification Procedures which follows the CUSIP International Numbering System or CINS; it is a nine-digit number. AAPL’s CUSIP is 037833100. An ISIN number is an International Securities Identification Number. It is a twelve-digit code of letters and numbers registered with the United States Securities and Exchange Commission (SEC). AAPL’s ISIN number is US0378331005.

Summary and Bottom Line

Many different media of orders execute with varying purposes. An investor may utilize a particular type of trade for speed or to maximize gains and/or minimize losses.

Market Order: a trade that instantaneously executes at the current price.
Limit Order: a conditional order to buy or sell at or below a particular price that one may maximize profits or minimize potential losses.
Stop Quote Order: an order to buy or sell a security at a stop price, at which point it becomes a market order.
Short Order: an order that allows the trader to profit off the shortcomings of a security.

Summary and Bottom Line

This article tackled the issue of the difference between growth and value stocks and other types of stock. It also mentioned the issue of tickers. The next article will bring up the causes of market fluctuation. It will also discuss the price movements of individual stocks and ETFs. If you have any questions, comments, or concerns, express your thoughts below.

Disclosure: All statements and opinions expressed in this article are objective and my own. I am not a financial advisor. I do not recommend the trade or use of any particular stocks or services. I acknowledge the risks of investing.