Turning Ideas into Profit

If you have ever wanted to know how to invest in stock. the best place to start is doing your own research. For new investors. this can be daunting. Fortunately, there are a few good places to start. I’ll walk you through them.

Public vs. Private

Before one can invest in a business, he must discover if it is public or private. A publicly traded company is one which has shares of stock traded on the open market.

Private companies. on the other hand, do not have shares available for public purchase. Private companies may be owned by an individual, a family, a partnership, employees, or a small group of investors.

To illustrate the difference, consider Hershey and Mars, two of the largest candy companies in the world. The late Milton Hershey’s chocolate business is publicly traded on the New York Stock Exchange. An individual investor could take his paycheck and acquire shares in the company, profiting from every Hershey bar or Reese’s peanut butter cup sold. The multi-billion dollar Mars company, however, is still owned by the Mars family. An investor could not buy shares unless the members of the family allowed him to acquire some of their closely held, personal stock.

How does one determine if a company is public or private? The simplest, most effective way to answer this question is to call the company and ask. At the same time, many corporate web sites offer information on their ownership status; rest assured, if you see an “investor relations” section, the company is public. The lack of such a section does not necessarily mean anything. Take, for example, Fruit of the Loom. The undergarment manufacturer is not publicly traded because it is owned by Berkshire Hathaway. Inc. Berkshire, on the other hand, is traded on the New York Stock Exchange. Hence, an investor may be able to indirectly invest in a business entity through a publicly traded parent company.

Ticker Symbol

Once the investor has discovered a company is publicly traded, he must look up the company’s ticker symbol. A ticker symbol is a collection of letters that represent a particular stock on an exchange or the over-the-counter market. Microsoft, for example, is MSFT. Cisco Systems is CSCO. Berkshire Hathaway has two ticker symbols, one for its class A shares (BRKA) and one of the class B shares (BRKB). Coca-Cola is KO. The Washington Post is WPO.

To discover a company’s ticker symbol, the investor can call his broker or go to a site such as Yahoo Finance. Once at the main page, he can choose the “symbol lookup” option. The resulting page will allow him to enter the company (or parent company in the case of a subsidiary such as Fruit of the Loom) name.

With the ticker symbol in hand. the investor can return to the main Yahoo Finance page and enter it. After pressing the “get quote” button, he will be taken to a summary page that includes a current quote for one share of the company’s stock, the total market capitalization of the business, recent dividend payment and yield information, the price-to-earnings ratio for the trailing twelve months and other items of interest.