How to Analyze the Stock Market

Look at the economy as a whole to get the big picture. The economy underlies everything the stock market does. By understanding the macroeconomic view you can get an idea of trends in the market. Start by looking at the Gross Domestic Product growth rate to see how fast the economy is growing.
Look up current rates of inflation to see how much a dollar today will be worth tomorrow. Inflation is tracked with indexes such as the Consumer Price Index and Producer Price Index.
Research other economic data such as job growth statistics and reports from the Federal Reserve. The Federal Reserve Board regulates banks, controls inflation and stimulates economic growth. Because it has a powerful regulatory role the market watches the Fed's reports closely and they often become self-fulfilling prophecies.
Read a newspaper to find out what external forces may be affecting the stock market. Look closely at politics, world events and current fashions.



Look at current performance in the stock market. Market indexes such as the Dow Jones Industrial Average or the S&P 500 provide a summary of the market's current performance.
Determine which industries are up and which are down. Also look for companies that are moving opposite their industry. This can be a sign of unique characteristics or it could be a sign of things to come for the whole industry.
Try relating this information with the macroeconomic information that you gathered. It may be helpful to look at financial news sources for additional explanations of current performance.



Choose a company to research in depth. Perhaps you found a company that is behaving differently than its competitors. This would be a good target for further analysis. Otherwise choose a stock you may be interested in buying.
Look up the company's public financial information. A recent annual report or quarterly earnings statement will be sufficient.
Consider information in per share terms. You can't compare across companies with total numbers like revenues or earnings, but if you convert them to per share information, the comparison is easy. You can find per share data on many websites and in some of the financial reports filed be the company. Or you can convert the data yourself by dividing the total figures by the number of shares outstanding.
Compare quarterly growth using percentages. If a company increased its sales from $1 per share to $1.10 last year, then this year it will have to grow by more than $.10 per share to continue growing at the same rate.
Examine the companies' balance sheet. The information there is an effective way to compare the financial strength of two or more companies.



Analyze your stock's technical situation. Technical analysis interprets trends in volume and share price to determine when to buy or sell stocks.
Gather charts showing per share price and volume fluctuations over different periods of time. Check if your stock is below or above its 50 and 200 day moving averages.
Research technical indicators that will help you understand your company's stock better. One helpful tool is the stock's moving average.
Check your stock charts for any indicators that you consider helpful.

How to Invest in Stock Warrants

Understand the implications of leverage in warrants. With successful credit and market timing, returns can easily exceed returns for stocks. Use a spreadsheet program and in column one, insert the issue price of the warrant. In column two, enter the maturity date of the warrant. In column three, enter the current date. In column four, enter the exercise price of the warrant. Subtract column three from column four and compute the time to expiration. Assume that the warrant is below excise price and prorate the price of the warrant over time. This is the rate of decay of the warrant.
Recompute the time decay if the stock is trading above the exercise price. Subtract the difference between current price and exercise price. Subtract the remainder from the warrant price. The remainder is called the premium. Prorate the premium of the warrant over time remaining to calculate decay. Understand that this loss continues as expiration approaches. A rise in the price of the warrant is necessary to offset this guaranteed loss.
Understand that at maturity, if the stock price is not above the warrant excise price, the warrant expires worthless. Understand that warrants gain in value dollar for dollar above the exercise price. Thus, for experienced investors, warrants can create exceptional investment opportunities.
Know the conversion terms of the warrant. One warrant may represent more or less than one share of stock. Probably the best market maker for buying or selling warrants is the investment bank that represented the issuer. Warrants trade irregularly. Thus, technical trading is not useful. Use fundamental analysis for warrant trading. Know that when warrants are redeemed, the capital structure of the firm is improved, but earnings per share decline.
Invest in warrants only after careful credit study. Warrants are often issued when companies come out of bankruptcy as 'sweeteners' to interest investors in the bankrupted companies' bonds. Detach warrants from such an offer and trade the warrants or the bonds to your advantage.
Invest in warrants as a low-cost alternative to buying stock. Warrants have limited downside, but, like options, they do decay over time. Traders buy warrants when they like the underlying opportunity, but are uncertain about near-term market conditions. Warrants are volatile and should be used for investment and not trading purposes. Warrants cannot be used as a proxy for stock as the underlying security in option trading, further limiting their value as a trading vehicle.

How to Find Dow Jones Stock Market Historical Prices and Charts

Access Yahoo! Finance (see Resources). Enter the date you want to check. For example, if you enter 03/04/1965, you will see that on March 4, 1967, the Dow Jones Industrial Average was 846.60. Notice that Yahoo! Finance offers a range of dates so if you pick a wide range of dates for Dow Jones historical pricing, click on 'last' to get to the first day of your range. If you are familiar with using a financial calculator, you can use the Time Value of Money feature to determine the annualized rate of return between a date in the past and today's Dow Jones Stock Market price.
Access the StockCharts website if you prefer to see the Dow Jones historical pricing in chart form (see Resources). You will see a more visual representation of stock market price changes over the past century, particularly the enormous dip that occured during the Great Depression. Also, notice the major downward volatility in 1973-1974 and the crash in 1987. Again, in no way should you use chart to predict the future but it can certainly provide you a quick history lesson. When you see volatile periods, both good and bad, you may find it interesting to research the news headlines of those years.
Use these same websites for other historical information, such as historical individual stock prices. For example, on the Yahoo website, if you change the symbol to KO and enter the date 6/7/2000, you will see that Coca-Cola stock was priced at $53 per share at close of business on June 7, 2000. It will also show you a price adjusted for dividends and splits. While still on the same Yahoo page, click on 'Basic Chart' on the left-hand side to see a chart of Coca-Cola stock. You can adjust the chart from one day to beyond five years.
Use the historical information to make yourself a well-informed stock investor. This will, in turn, make you a more confident investor.

How to Calculate Safety Stock

Before you can calculate your safety stock, you must determine the standard loss function. Subtract the desired fill rate from 1.
Multiply this sum by the demand, which is the amount of items that will be consumed or bought.
Multiply this sum by the time between orders. Write this sum down and set aside.
Add the time between orders (from Step 3) with the lead time. This is the time between your reorder decision and renewed availability.
Take this sum to the 1/2 power.
Multiply this sum by the standard deviation. See the Resources section below for steps to calculate the standard deviation.
Divide the sum from Step 3 by the sum from Step 6. This is the standard loss function.



Refer to a lookup table and determine what the variable 'z' for the standard loss function is.
Take the sum from Step 5 in the previous section (which is the time between orders plus the lead replenishment time taken to the 1/2 power) and multiply it by the standard deviation.
Multiply the sum with variable 'z' found in Step 1.
This sum is the safety stock.

How to Calculate Preferred Stock

Obtain the original price at which the preferred stock was issued. This is called the par value and can be found in the stock's prospectus. The prospectus is located on the company website; if not, you can ask your broker to provide the information.
Obtain the preferred dividend. The dividend can be found in the prospectus or provided by your stock broker. The prospectus may present the preferred dividend as a percentage rate of the par value; this is called a dividend rate. If so, multiply the rate times the par value. This will equal the preferred dividend.For example, if the prospectus gives a dividend rate of 6 percent and a par value of $25, the preferred dividend would equal $1.50 (.06*25=$1.50).
Use an online calculator to determine the required rate of return. This is the minimum rate that investors need before they invest their money. Sites such as Moneychimp.com, Money-zine.com and Investment Analysis Calculator (see Resources), are easy to use and provide accurate calculations for the required rate of return.
Divide the preferred dividend by the required rate of return. The result is the preferred stock price. This price is the highest amount you should pay per share. If you pay any more than this, you will be overpaying.