Apple Nears the US$3 Trillion Market Cap

Apple, the American tech giant, is inches away from reaching a market capitalization of US$3 trillion dollars just over a year after it surpassed the two-trillion mark. This incredible milestone is as big as the equity markets of the United Kingdom or Germany.

After a decades-long run as one of the world’s best performing stocks, shares of Apple were up at 1.6% at US$174. The company needs to trade at US$182.85 to hit the goal. Nonetheless, the stock risen to about 30% this year on top of an 80% jump in 2020.

Oanda’s Senior Market Analyst Craig Erlam said: “There’s so much still to come from Apple, which makes you wonder what milestone they’ll pass next and how big they can become.”

Back in 2018, Apple reached the US$1 trillion in market capitalization and it took the company two years to double that valuation. Reaching the three-trillion mark will establish a strong rally that has been fueled by investors betting on its brand. Moreover, its peers in the trillion-dollar club include Microsoft, Amazon, and Tesla.

“Apple does seem to be more immune to the ebb and flow of economic forces just because of this really strong brand. Its new product pipeline is pretty strong too,” according to Hargreaves Lansdown’s Senior Investment and Market Analyst Susannah Streeter.

QUICK TRIP DOWN MEMORY LANE

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Owing it to the steady stream of products that attracted a loyal following, Apple became the world’s most valuable business. In late 2000, the company had a market value of merely US$4.5 billion and the investors were fleeing the stock. Nowadays, investors cannot get enough of the stock. The stock has breached Wall Street’s median price target by US$4, with most experts and analysts covering the stock rating it buy or higher.

Despite the wobbling status of markets because of higher interest rates and the effects of the coronavirus pandemic, investors view Apple as a relatively safe place to keep their money due to its consistent sales growth.

You see, Apple is “kind of in that sweet spot of not being too expensive, having a nice mix of products and services, and being a great innovator across its entire product line,” said Ingalls & Snyder’s Senior Portfolio Strategist Tim Ghriskey.

Sources: 1 & 2

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What On Earth Is A Buyback?

Highlights

  • A buyback occurs when a company purchases its own shares in the stock market.
  • A repurchase reduces the number of shares outstanding. Thus, it inflates earnings per share.
  • A buyback can demonstrate to investors that the business has sufficient money set aside for emergencies.

WHAT IS A BUYBACK?

A stock buyback occurs when a company purchases shares of its own stock. It either retains the stock for resale to the market in the future or permanently removes the stock from the circulation.

This process reduces the total shares of stock outstanding and increases ownership stake that each remaining share of stock represents. It increases the value for the shareholders.

HOW DO BUYBACKS WORK?

Stock buyback plans are usually authorized by the company’s board and proposed by its executives. However, a planned buyback does not always occur. In some cases, the target share price a company chooses may not be met or a tender offer may not be accepted.

WHAT ARE THE DIFFERENT TYPES OF BUYBACKS?

The diverse types of buybacks include the on-market and off-market buybacks. The former refers to when a company buys its own shares on an exchange in the ordinary course of trading.

In contrast, the off-market buybacks occur when the company makes its offer directly to the shareholders.

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WHAT IS AN EXAMPLE OF A BUYBACK?

Company XYZ had one million dollars in earnings and one million outstanding shares before the buyback. Thus, it equates to earnings per share of S$1. Trading at a S$20 per share stock price, its P/E ratio is 20.

With all else being equal, one hundred thousand shares would be repurchased and the new earnings per share would be S$1.11. To have the same P/E ratio of 20, shares would need to trade up 11% to S$22.22.

WHAT ARE THE ALTERNATIVES TO BUYBACKS?

Buyback programs have come under scrutiny over the past few years. So, alternatives are important to know when understanding buybacks.

Other options include:

a. Using capital to acquire other companies or securities,
b. Returning cash on hand to investors in the form of dividends, and
c. Re-investing the capital in research and development.

Sources: 1 & 2

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Follow These Steps To Acquire Stocks In Singapore

With an abundance of low-cost investment brokerages and a wide range of investment products, we believe that anyone can get started on investing. Unless your ambition is to become a day trader, you do not need to master technical analysis or complex charting techniques.

Simply carve out your path by following these steps.

#1: OPEN AN INVESTMENT BROKERAGE ACCOUNT

Unlike your comfort food, stocks cannot be bought at a store and taken home in a paper bag. You need to go through an account with an investment brokerage. A brokerage is a company or firm that acts as the middleman to connect you to the stock exchange.

Brokerage companies usually receive compensation by means of commissions or fees that are charged once the transaction has been completed. Brokerage accounts charge through minimum fees (i.e., to pay on each trade) or trading fees (i.e., percentage of each trade). These fees will affect your profits, so ensure that you do your research.

#2: FUND YOUR ACCOUNT

It is necessary to transfer money to your account to begin trading. Take note of the brokerage company’s requirements such as the minimum fee.

These companies generally accept multiple funding methods such as PayNow transfer, FAST transfer via online banking, or overseas remittance. Use a method that suits you best.

#3: DETERMINE WHICH STOCKS TO INVEST IN

Do your research, ask financial questions, and compare the facts to determine which stocks to invest in. There are different types of investment products such as Blue chip stocks and Real Estate Investment Trusts (REITs).

Blue chip stocks are the stocks of well-known, high-quality companies that are leaders in their industries. Investors usually hang on to these stocks for long periods and collect its dividends. Local “blue chips” include Singtel, DBS, and ComfortDelGro. Many Singaporean investors prefer to invest in blue chip stocks because of its perceived certainty and stability. Local blue chips are deemed to be less risky and are often common household names that most Singaporean investors can relate to.

Real Estate Investment Trusts (REITs) allow you to buy shares in a variety of properties. For instance, CapitaLand and Ascendas gives you access to purchase shares in commercial properties such as shopping malls and office buildings. It is one of the most popular options for investors seeking regular income.

#4: ACQUIRE YOUR FIRST SHARES/STOCKS

Once your funds have been sorted out, you can buy your first shares/stocks using your brokerage’s online platform. As a beginner, you may make investing a regular habit by spending a fixed amount every month on generic Exchange Trade Fund. The Exchange Trade Funds (ETFs) are similar to mutual funds in many ways. Although, ETFs are bought and sold throughout the day on stock exchanges.

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The idea is that over the long term, the ETFs will rise. By buying a fixed sum every month, you will be able to spread out your risk through ups and downs. Consistently funding your account is key.

Sources: 1 & 2

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Fundamental Differences Between Stocks And Bonds

As a novice in the world of investments, it is important to know the basic differences between stocks and bonds. Stocks provide partial ownership in a corporation, while bonds are loans from an individual to a company or government.

One of the biggest differences between these two is how they generate profit. Stocks must appreciate in value and be sold later on. On the other hand, bonds pay fixed interest over time. Continue reading this article to know other notable differences between stocks and bonds.

STOCK MARKET VERSUS BOND MARKET

A place where investors can trade equity securities such as common stocks is called the stock market. Buying stocks (i.e., equity securities) entails that you are buying a very small ownership stake in a company. Equity holders purchase stocks in a company on a belief that it will perform well and that the value of the shares they purchased will increase. These stocks are traded on stock exchanges.

The key function of the stock market is to bring sellers and buyers together into a regulated, fair, and controlled environment where they can execute their trades. This regulated environment not only helps the investors, but also the corporations whose equity securities are being traded. The economy thrives when the stock market remains its robustness.

Let us move on to the bond market. The bond market is where investors go to trade debt securities (e.g., bonds), which may be issued by the governments or the corporations. The bond market is also known as the credit or debt market. Buying a bond or a debt security entails that you are lending money for a period of time and charging interest. You can compare the process to how banks charge interests to its debtors.

The key function of the bond market is to provide its investors with a steady, albeit nominal, source of regular income. In some cases, investors receive bi-annual interest payments. Many investors choose to hold bonds in their portfolios to save money for long-term needs such as retirement and their child’s education.

WHERE STOCKS AND BONDS ARE TRADED

Stocks are traded on exchanges, which are places where buyers and sellers decide on a price. Some exchanges are carried out on a trading floor or other physical locations. While, other exchanges are carried out virtually and are composed of a network of computers.

In contrast, the bond market does not have a centralized location to trade. Bonds mainly sell over the counter. As such, individual investors do not usually participate in the bond market. Those who participate include large institutional investors like pension funds foundations, asset management firms, and investment banks. Individual investors who wish to invest in bonds do so through a bond fund managed by the asset manager.

RISKS OF STOCKS VERSUS RISKS OF BONDS

Investors of stocks may be exposed to risks such as currency risk, liquidity risk, interest rate risk, and geopolitical risk. Moreover, stocks run the risk that the company could perform poorly or fall into bankruptcy and disappear altogether.

When it comes to bonds, investors are more susceptible to risks such as interest rates and inflation. When the interest rates are high and you need to sell the bond before it matures, you may end up getting less than what you paid for. If you are purchasing a bond from a company that is not financially sound, you are embracing the risks of credit. The bond issuer may not be able to make the interest payments, leaving itself open to default.

BOTTOMLINE

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Many people opt to invest in both stocks and bonds to diversify. The appropriate mixture of stocks and bonds in your portfolio must consider your tolerance for risks, personal timeline, and investment objectives. Typically, stocks and bonds do not fluctuate at the same time. Think about that.

Sources: 1 & 2

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Bear & Bull Markets: Animals In The Stock Market

For investors, the terms “bull” and “bear” carry distinct weights as they frequently describe the market conditions. These terms are used to describe how the market is doing. It is your responsibility as an investor to know the direction of the stock market, because it will significantly affect your portfolio. Examine how each of these market conditions may impact your investments.

INVESTORS’ ATTITUDES AND THE MARKET

Since the financial markets are greatly influenced by the investors’ attitudes, these terms also denote how they feel about the current economic situations. A bear market occurs in an economy that is receding and where most stocks are depreciating in value. Interestingly, it is named for the way the bear attacks its victims. You see, a bear swipes downward during an attack. Thus, it became a metaphor for the market activity during this condition.

On the other hand, a bull market exists in an economy on the rise. This is where conditions of the economy are generally favorable and positive. Investors usually have faith that the uptrend will continue over a long period of time during the bull market condition. In the case of equity, a bull market denotes a rise in the prices of companies’ shares.

In a bear market, share prices are continuously dropping. This affects the investors’ attitudes negatively, which later perpetuates the downward spiral. During this time, the economy slows down and unemployment rises as companies begin laying off workers. One can only imagine how the investors felt last March 2020 when the U.S. stock market fell into the bear market due to the pandemic!

SUPPLY AND DEMAND FOR SECURITIES

More investors are looking to sell than to buy in a bear market. The demand for securities is significantly lower than the supply. As a result, share prices drop. A bear market can be more dangerous to invest in, because many equities lose value and price.

In contrast, there is a strong demand and weak supply for securities in a bull market. Many investors wish to buy securities, but only few people are willing to sell them in a bull market. As a result, share prices will rise and investors compete to obtain available equity.

SHIFT IN ECONOMIC ACTIVITY

A weak economy is often associated with the bear market. Most businesses and companies are unable to bring in huge profits due to the unwillingness of consumers to spend money. This decline in profits directly affects the way the market values stocks.

In a bull market, the opposite happens. People have more money to spend and are very much willing to spend it. This relationship towards the consumers strengthens the economy.

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THE CONCLUSION

A bear market occurs in an economy that is receding, where more stocks are depreciating in value. While, a bull market exists when the economy is sound. Both of these conditions will have a significant influence on your investments. It is a good idea to determine how the market is doing when making an investment decision.

How long a bear market will last varies wildly due to the situation. Some can last for several weeks, while others last for years. Over the long run, the stock market always has a positive return. A grand comeback, which we all have been waiting for!

Sources: 1 & 2

 

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