Why stocks go Up and Down PDF presents the basic fundamental knowledge that all investors need. This will enable you to get more value from other books which deal with specific aspects or approaches to investing.
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Introduction- Why stocks go Up and Down PDF
There are many popular books about investing which try to convey wisdom without first conveying adequate knowledge. Why Stocks Go Up and Down does just the opposite. It presents the basic fundamental knowledge that all investors need. This will enable you to get more value from other books which deal with specific aspects or approaches to investing. Why Stocks Go Up and Down goes well beyond other introductory investment books. It will not insult your intelligence. In fact, it will go into more detail in some areas than you may need, but by doing so, the major concepts should stay with you, and you will not find yourself having more questions than you started with.
The book is the outgrowth of introductory investment courses we have taught at the college level and through professional organizations such as the Boston Security Analysts Society for more than 20 years. Our students are newcomers to the investment business who have had little or no experience with accounting, finance, or the stock market. The book has evolved to provide them —and other interested investors—with the fundamentals needed for successful investing.
Part 1 introduces the basic concepts of business ownership and financial statement analysis. The emphasis on accounting may not seem relevant at first, but stock prices are directly related to financial statements. To ignore this would be an over simplification, and would leave readers with major gaps in their knowledge. Part 1 also covers the process of “going public” and the difference between primary and secondary equity stock offerings. This section will clear up many common misconceptions.
Part 2 is about bonds and preferred stock (which is quite different from common stock). To understand a company and its stock price behavior, it is important to understand all the instruments a company can use to raise capital. It is, however, possible to skip over Part 2 without losing the continuity of the other parts of the book. In fact, many readers skip from Part 1 to Part 4 in their
first time through the book.
Part 3 explains more fully how income statements and balance sheets relate to stock prices. When you understand concepts such as write-offs, or the difference between earnings and cash flow, you will be better able to understand stock price behavior.
Part 4 discusses stock price valuation. It will give you a framework for understanding stock prices, and point to what you should watch for in your investments. It will help you avoid many mistakes that new investors make. This is the part that most interests new investors, but readers will get more value from Part 4 by reading the other parts first. The final chapter is an investment analysis of Abbott Labs that draws on many of the concepts in the book, and takes readers through the thinking process of a professional investment analyst.
A glossary at the end gives succinct definitions of many terms used in the book. Investing is like many other aspects of life: the more thoroughly you prepare, and the more you work at it, the better you will do. There is no substitute for watching your stocks respond to day-to-day news concerning the economic environment, the stock market, and the company you are analyzing. The background that you should take from this book will help you gain that experience much faster.
William H. Pike, CFA
Patrick C. Gregory, CFA
Table of Contents- Why stocks go Up and Down PDF
To the Reader
PART 1: Basics: Starting a Business, Financial Statements, and Common Stock
CHAPTER 1: STARTING A BUSINESS
CHAPTER 2: OWNERSHIP AND STOCK
CHAPTER 3: BORROWING MONEY AS THE COMPANY GROWS
CHAPTER 4: RATIOS INVESTORS WATCH
CHAPTER 5: GOING PUBLIC—PRIMARY AND SECONDARY OFFERINGS
CHAPTER 6: EARNINGS DILUTION—JMC GOES PUBLIC
PART 2: Securities Other Than Common Stock: Bonds, Preferred Stock, and Hybrid Securities
CHAPTER 7: FINANCING GROWTH: SELLING NEW STOCK VS. SELLING NEW BONDS
CHAPTER 8: BONDS
CHAPTER 9: WHY BONDS GO UP AND DOWN
CHAPTER 10: BONDS: ADVANCED TOPICS
CHAPTER 11: CONVERTIBLE BONDS
CHAPTER 12: PREFERRED STOCK
CHAPTER 13: CONVERTIBLE PREFERRED STOCK AND HYBRID PREFERRED SECURITIES
PART 3: Company Assets and Cash Flow
CHAPTER 14: FIXED ASSETS, DEPRECIATION, AND CASH FLOW
CHAPTER 15: COST VERSUS EXPENSE, CAPITALIZING ASSETS, AND WRITE-OFFS
CHAPTER 16: CASH FLOW
CHAPTER 17: INVENTORY ACCOUNTING—IMPACT ON COMPANY EARNINGS
PART 4: Why Stocks Go Up (and Down)
CHAPTER 18: PRICE/EARNINGS AND OTHER EVALUATION RATIOS: WHEN IS A STOCK HIGH OR LOW?
CHAPTER 19: WHY STOCKS GO UP AND DOWN
APPENDIX: SHORT SELLING
About the Authors
“This book educates its readers on fundamental analysis of stocks. It’s a great book for any non-professional analyst who wants to pick his/her own stocks.
The book broadly has three sections:
1. It uses the example of a small business to explain how financial statements are constructed and how capital flows in and out of the business.
2. It dives deeper into various types of funding available to businesses and explains the various types of securities that an analyst might encounter on the balance sheet.
3. It uses the example of an actual company and shows how the concepts taught in the previous sections tie together to create an investment case for the company.
Overall, I would say this book deserves a place on the same shelf as other investment classics such as Security Analysis, The Intelligent Investor, Common Stocks Uncommon Profits, and One Up On Wall Street. Highly recommend it!”– Ganesh K.
“There is A LOT of information in this book. This is a great place to start for anyone thinking they might like to go to school in Business/Finance/Accounting. It doesn’t cover theory on stock prices, but rather the actual calculation of stock and bond prices. In other words it’s not a book for those attempting to make it rich in the stock market, but rather one to help understand how a business works, and what goes into deciding whether the price of a stock or bond is over/undervalued. I enjoy having it as a reference guide for calculating ratios, even though it’s probably quicker to simply google them. Still, it’s one of those books that has so much useful information that it’s worth having on your shelf.”- TJ
About the author
William Pike‘s background includes experience as both an equity and high yield bond portfolio manager at Fidelity Investments. He taught the introductory investment course sporsored by the Boston Security Analyst’s Society for more than 20 years. The early editions of this book are the outgrowth of that course.
He is a Chartered Financial Analyst with a degree from the Massachusetts Institute of Technology and an MBA from Columbia University. He has provided investment commentary on radio and television and has spoken to a variety of investment groups.
Patrick Gregory is an analyst and portfolio manager with 18 years of multiindustry experience. He is currently working as a Senior Equity Analyst for FM Global, where he manages the healthcare sector of a $4.8 billion portfolio. Prior to joining FM Global, Patrick was a full-time faculty member at Bentley College. While at Bentley, he served as the Managing Director of the Hughey Center for Financial Services and was the recipient of the Davis Fellowship and Innovation in Teaching Award.
Patrick has taught graduate and undergraduate courses in investments, risk management, and portfolio management for many years. Given his experience in industry and academia, Patrick has appeared on CNN and CNBC and provided commentary to a number of news sources, including the Wall Street Journal, Business Week, and LA Times. He holds advanced degrees in both Finance and Financial Planning. Patrick is a CFA Charterholder and member of the CFA Institute and Boston Security Analyst Society (BSAS).
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