The stock market is not a single market, but a number of stock exchanges scattered around the world where traders and investors buy and sell shares of publicly-traded companies that change in price constantly in response to the law of supply and demand.
A share of stock is a tiny ownership stake in a public corporation. The stock’s price primarily reflects the expectations of stock investors and market analysts on the company’s future earnings.
Companies sell stocks in order to get capital to grow their businesses. A stock market, equity market or share market is the aggregation of buyers and sellers of stocks, which represent ownership claims on businesses; these may include securities listed on a public stock exchange, as well as stock that are only traded privately, such as shares of private companies which are sold to investors through equity crowd funding platforms. Finding attractive companies in the current market environment is no easy matter even within the entire universe of global equities. Equity markets are the meeting point for buyers and sellers of stocks. The securities traded in the equity market can either be public stocks, which are those listed on the stock exchange, or privately traded stocks.
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When a company offers stocks on the market, it means the company is publicly traded, and each stock represents a piece of ownership. This is attractive to investors, and when a company does well, its investors are rewarded as the value of their stocks rise.
In the global stock markets, investors bid for stocks by offering a certain price, and sellers ask for a specific price. When these two prices match, a sale occurs. Often, there are many investors bidding on the same stock. When this occurs, the first investor to place the bid is the first to get the stock. By targeting the most successful companies, the likes of Tesla, Apple and Netflix or other similar stocks – other investors assume they can obtain truly blue-chip exposure. Yet, at the heart of this decision is an ambition to derive better outcomes than they can otherwise obtain by investing locally.
Therefore, global equities are better thought about as a process of filling portfolios with assets that offer attractive reward for risk. By extension, this requires one to have conviction over the best assets as well as reasoned analysis to support that conviction.
The returns from calculated and well-researched stock investments can be very attractive for our clients as either a short-term hold or a long term hold.
It is important to have a clear and consistent analytical framework that enables investors to make an in-depth assessment of the opportunities. As future returns are a function of both the cash flow generated by an asset and the price paid for that cash flow. It is essential that any assessment incorporates both these factors together including the future risks to that cash flow.