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Value and Growth Stocks

In: Business and Management

Submitted By balahfc
Words 973
Pages 4
Ownership of a corporation is divided into shares is called Stock. The person who owns a stock is a shareholder. The major shareholders of the corporation elect board of directors. The shareholders would not have direct control because, in a corporation, direct control and ownership are often separate. Board of directors makes rules on how the corporation should run and delegates the decision making to corporate management team. The Corporate management team will consists of Chief executive officer (CEO) and Chief financial officer (CFO). The main important job of a financial managers is to make best decision to increase the value of the company which would increase the value of stock invested by the investors. Corporation would also make invest on other big corporations to increase their value. The chief financial officer takes responsibility for making those financial investment decisions on other companies by purchasing those company’s stocks. There are two options of stock available in the stock market which is Value and Growth stock. Value stocks are usually low price to earnings ratio and low price to book ratio. Sometimes a company may have weak temporary earnings and had fallen on bad times. Sometimes poor quarterly earnings depress the company’s stock price temporarily and create a long-term stock buying option. Many investors look for these corporations called as Margin as Safety which means the market has discounted the price of the stock more than its intrinsic value, the present value of its future cash flows. Investors buy these stocks in the hope of these stock’s value will rise in the future. Investors bargain these stocks to purchase at very low price and potentially increase more value than the higher priced stocks. Value stocks trade at a discount to the true value of the stock or to comparable stocks, appearing cheap to some, says John Reese,…...

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