With 10 minutes of training, anyone can read the significant features of a stock report. Information like current price and change in value over time give broad-strokes information about how a given stock is doing.
However, understanding just those features is like reading only the headline of an article. You miss the nuances that represent the full truth.
If you want to reduce risk and increase profits for your portfolio, you need to understand those tiny details. Today, we’ll talk about factors that show up on most reports that untrained eyes miss far too often.
Stock Report Basics
Look at this chart for soccer team Manchester United PLC (NYSE:MANU) for the past year:
The blue line, called the trendline, shows the average value of stock sales over time.
Up in the top left, you see the price the stock traded for at the time the report was generated. You can see prices peaked in March and again in May as the Euro championships approached, and the lowest point was last February. You can also see the stock price has dropped a little during the year, on average: from $16.50 per share to $15.50 per share.
Those are the basics, but many other details can help you make a more thoughtful decision about stocks you’re considering.
9 Stock Report Details You Need to Understand
1. Time of Generation
Look at the top corner of the MANU stock chart:
The highlighted section indicates the report was generated on June 14 at 3:26 at UTC-4. UTC-4 means “Universal Coordinated Time minus four hours,” or Eastern Standard Time.
If you’re looking up a stock report online or on most apps, you’ll receive these reports in real time. But if you see them in an email or printed out, it pays to check the time and date stamp and research what’s happened to the stock price since the report was generated. A stock price that’s several hours behind a significant announcement or event could be drastically different from the current value.
Timing is vital because presenting out-of-date price information is a trick scammers use when they’re looking to offload unprofitable shares. This small but essential detail can make a big difference.
2. Close, Open, and Change
These measures discuss the stock’s most recent performance.
Close is the stock’s value at the end of the previous day’s trading. Open is the stock’s value at the beginning of the current day’s trading. The change is the difference between the value it’s trading at now (or at close) and the value at the opening.
Close and Open are often very similar in price but can differ if news broke overnight, causing a rush to either buy or sell the stock at the first opportunity.
Opening and closing prices are shown on reports in a “Key Statistics” section. They’re represented as a line for comparison to the day’s values or with these statistics listed. The change is typically shown as a percentage, dollar amount, or right next to the current stock price.
3. Lines of Support and Resistance on a Stock Report
A line of support is a price a given stock is unlikely to fall beneath, based on historical performance.
A line of resistance is a price a stock is unlikely to rise above. Here’s a chart for MANU over the past seven years:
For most of this period, Manchester United has rarely fallen below $15 per share. Advisors might draw a line of support at that number or conservatively set it at $14.
That said, in 2021, it’s spent more time below the $15 mark. An advisor who had set the line of support at $15 might redraw it for $13 or refuse to set one because a new low point has yet to be established.
Likewise, except for some excellent times in 2018, the stock has rarely topped a value of $20. An advisor would be wise to set a line of resistance around that price.
You won’t see these drawn on most generic charts since they require a level of professional judgment that’s hard to automate for real-time reporting. However, custom reports from a broker or advisor will often include them (primarily upon request).
Lines of support and resistance can help you gauge whether — and even when — a pricing trend is likely to continue, slow, or reverse. As a falling stock comes closer to its line of support, investing becomes a better idea. As a rising stock approaches its line of resistance, buying at that high level becomes a worse idea.
4. Dividend Issue and Yield
Dividends are a portion of a company’s profits paid out directly to shareholders. Some regularly pay — for example, at the end of their fiscal year — while others pay at irregular intervals.
You want to know three details about this when you’re considering a stock:
- Do They Issue Dividends? Not all stocks do. Dividends often mean less overall growth but represent more cash in hand. They’re also taxable. Consider the pros and cons in regards to your financial needs.
- When Do They Issue Dividends? You can sometimes find this graphically represented on a stock chart. You can also look it up easily online. If they pay out regularly, this can help you when you buy to maximize the benefit of your stock purchase. If they pay irregularly, look for what patterns you can find to better time your buy.
- What Is the Dividend Yield? This is the annualized dividend paid divided by the stock price, expressed as a percentage. Although there’s no universally accepted minimum you should look for, it can help you determine how much dividend stock to buy if you want to meet specific financial goals. Yield will show on most stock charts in the “Key Statistics” section.
The dividend information on a stock doesn’t necessarily mean it’s a definite buy or to be avoided. However, it can help you choose between similar stocks or make predictions about your overall goals and cash flow.
5. Trading Volume
Trading volume is how many shares of the stock were traded on a particular day. You will often find it on a bar graph below the prices.
On graphs like this, you can often see a significant spike in volume at the same time prices dropped precipitously. That’s to be expected with people offloading shares to reduce losses while others buy shares anticipating a subsequent price spike.
Volume matters for a few reasons:
- Changes in volume that don’t correspond to normal price fluctuations should encourage you to determine what might have caused the surge in interest.
- Disproportionately high or fluctuating volume might indicate an unstable stock, which can mean an opportunity or a risk.
- Low-volume stocks might be harder to buy or sell in a short period, making them potentially riskier.
- Low-volume stocks often see more significant price fluctuations since high volumes tend to regulate price change.
6. The Chart’s Range
Look at these two charts for Manchester United:
The first shows the stock’s performance for six months. The second chart shows five years of MANU’s history.
If you viewed just the first chart, you might think MANU was in an irreconcilable nosedive and either avoid it entirely or sell all of your shares. The second chart tells a different story.
There isn’t an ideal chart range you should use for all stock trading decisions. Instead, you should consider performance across different ranges for different goals.
7. Cyclical Events
Here’s a stock chart for Best Buy (NYSE:BBY), this time showing its five-year history.
It’s been having a good run, especially during the pandemic when people needed more technology to make their worlds work. Beyond that, though, if you check the last bit of each year — December, specifically — you’ll see that the stock rises dramatically for several weeks.
Look at the end of 2020 in particular. Stocks took a dive all autumn but leaped up in December. Every Christmas season, this electronics giant experiences a surge in sales and stock value.
Most retailers will show some holiday spike in prices, while summer travel companies might see lower winter prices but a reliable increase every summer. This kind of reliable, cyclical event can help you time a stock buy for companies with a long history. It’s not guaranteed but represents an opportunity to take the kind of calculated risk that makes stock market fortunes.
Beta measures a stock’s market risk and volatility as compared to the stock market as a whole. You’ll find it in the “Key Statistics” section of some stock charts, though you might need to indicate you want it when the chart is generated.
The New York Stock Exchange (NYSE) composite index has a Beta value of 1, indicating it’s as volatile as the market on average. This makes sense since the NYSE is, by definition, the market on average.
A stock with a Beta higher than 1 is more volatile than the market as a whole. A Beta of 1.5 is 150% as volatile as a Beta of 1. A Beta below 1 is more stable than the market as a whole, and a Beta of 0.5 is half as volatile as the market overall.Generally, large companies with many operating segments tend to have a Beta of around 1. For instance, Hewlett-Packard (NYSE:HPQ) and GE (NYSE:GE) have their interests widely distributed, which makes their prices self-correcting. As one department experiences trouble, another sees an upswing.
Established companies in inelastic fields like health care tend to have low Betas, while companies with cyclical demand and those in a high-risk industry have higher Betas.
9. Market Cap
Short for market capitalization, this is an indicator of a company’s size and value. You’ll find it in the “Key Statistics” section.
It’s calculated by multiplying the current market price for one share by the number of outstanding shares available. If a company has a million shares available at a price of $100, then its market cap is $100 million.
Market cap allows you to gauge the size of a company based on its perceived value. Publicly traded companies are often grouped as small-cap, mid-cap, and large-cap. Which bucket a company falls in can indicate its relative risk and potential for growth. The larger a company’s market cap, the slower its stock price will change.
You can use this information for your own stock purchases, but also know that market cap is one of the ways mutual funds manage their portfolios.
Final Thoughts on Reading a Stock Report: The Rest of the World
The final detail you need to read a stock chart well doesn’t appear on the chart — it appears in the news. If Manchester United were to make the World Cup finals, it’s likely their stock prices would soar leading up to the final series and potentially fall if they lose.
If you were to see the price soaring while not also following major soccer news, you might make a large purchase on the night before the final game and suffer a catastrophic loss the next day.
Were you in the know, you might have made the purchase when Manchester United made the finals, watched the price soar as the team continued to perform well, and then sold it all the night before the final match to reap a reliable profit.
Any anomalies in a stock’s price have an explanation. That explanation only shows up on a chart once in a while. The rest of the time, you find it in real life.
Bruce Cooke is a longtime finance writer living in New York.