Stock Market
All comments and Stock Market Ananlysis are made by Guy Brumley. Guy has been trading the Stock Market daily since 1992.
Trading, evaluating stock prices and predictions
Market Commentary 2-27-2009
Even with good news from IBM yesterday the DOW could not advance. IBM was up over 3 points (24 points on the DOW) on news they were holding their earnings estimates for 2009. It seems they have contracts already locked in for the year. IBM should be one of the strong stocks over the next 6 months, and should be very tradable. IBM has helped lead the market recovery on a couple historic occasions. In 1987, IBM announced they were buying their own stock back, which caused the selling to stop at the bottom of the crash. This brought in buyers.
Some people are uncomfortable with the $80-$90-$100 price on these stocks. I want to make sure you understand that price is only half the equation on cost of a stock. The other factor is called float. The float is the number of shares of a company that exist.
Here is an example.
ISRG is trading at $100.00, and GE is trading at $9.00. Which company is more expensive?
GE
Why?
ISRG has 39 million shares in its float, GE has 10.5 billion.
This means the cost to buy the entire company of ISRG is
$100 x 39,000,000 = $3,900,000,000 ($3.9 billion)
GE has a cost of $9 x 10,500,000,000 = $94,500,000,000 ($94.5 Billion)
Therefore, the $9.00 price is not the cheapest.
To further explain, I suggest using one hundred million shares as a standard when evaluating a company’s worth. This will keep the numbers in order.
Using the above example, if ISRG had 100 million shares the equivalent stock price is $39.00
If GE had only 100 million shares, the adjusted stock price is $945.00.
This is very important to understand a company’s cost.
The next step is to calculate the value and compare it with the cost. We will calculate value in another posting.
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