As investors we want the share price to be above a minimum price as this is a key part of learn trading and investing course.
Before discussing a company’s share price lets remind ourselves of the four things that we have been looking at when we’re examining the health of a company and looking for potential investments?
1. Price /Earnings (P/E) ratio
2. Price Earnings Growth (PEG) ratio
3. Some Debt -not too much!
4. Institutional Investors
(Note: Earnings is American for Profits)
The fifth and final factor we look at is share price. As the USA is by far the largest stock market in the world we shall now us US dollars for our unit of currency.
As investors we want the price to be above $5, preferably $10. It has to be above ten dollars because we want to make sure it’s not what’s called Small Cap stock i.e. small capitalisation.
We want to there to be enough liquidity i.e. buying and selling of the stock. Also did you know that no stock below $5 is going to be looked up by the majority of institutions? As investors we want them to cover our stocks. We want the institutional investor to write about our stocks. Why do we want the institutions and analysts to write, to publish, to talk and to tweet? It’s marketing and a lot more potential buyers are going to know about them and are going to invest as well. So it has to be over $10.
In the next lesson we shall look at how we find these companies that meet our five criteria.