Novice Investing - Investing Guide For Novice Investors

Date: Tuesday 13th 2008f May 2008 09:06:43 AM

Glossary

HairCut: When a stock is said to get a hair cut, the value has just been reduced dramatically.

Our take: For example, a company's stock may get a 15% haircut due to its disappointing earning outlook.

Hands-off Investor: Investors who are willing to engage in a passive role in managing a company.

Our take: Hands-off Investors believe that current management can do a good job in managing the company. However, if management deliver unsatisfactory result, hands-off investors may begin to get a more active role in managing the company.

Hands-on Investor: Investors that play an active role in managing a company.

Our take: A lot of investors are hands-on investors. They can have a great influence on management if they hold a majority stake in the company.

Hard Currency: Currencies from industrialized nations that are accepted worldwide.

Our take: A good example is: US Dollars, Euro Dollars and Japanese Yen.

Hard Landing: A term used to describe recession as the central bank tries to combat inflation.

Our take: To prevent hard landing, the central bank will try to raise rates high enough to slow down the economy but without causing it to fall into recession.

Hard-To-Borrow List: Refers to a security that is not readily borrowed for short selling.

Our take: Stocks with small market capitalization is normally on a Hard-To-Borrow List.

Hazard Insurance: Insurance protecting homeowners from the like of fire or storms.

Our take: Homeowners still need other form of insurance for natural disasters such as hurricane or severe floodings.

Hedge: An investment decision geared towards protecting investments that are currently held.

Our take: For example: An investor buying a stock might decide to buy a put option to hedge his investment.

Hedge Fund: A managed fund that is able to take positions in both buying long and selling short.

Our take: Hedge fund is unregulated and the minimum investment involved is normally quite high compared to ordinary mutual fund.

Hidden Value: A company that is undervalued due to its assets that are not reflected in the balance sheet.

Our take: An example would be: Land. In the balance sheet, its value will be depreciated year after year even when land normally rises in value over time.

High Beta Index: An index composed of companies with high volatility with respect to the general market.

Our take: Beta for the general market is defined to be one. Companies with high beta normally have a beta value of 2 or more.

Highly Leveraged Transaction: Loan given to a company that already has a high debt level.

Our take: Normally, a high interest rate is imposed on this kind of loan. It is akin to investing in junk bonds where

Hold: An analyst rating that is neither a buy nor a sell.

Our take: Most analysts are reluctant to issue a sell rating as it might result in the company disclosing less information to the sell-side analyst. This will result in a lower accuracy in predicting the company's real financial health.

Holding Company: A company that own a majority stake of another corporation and thus control its board of director.

Our take: Big Multinational corporations will sometimes invest a majority but not 100 % of its subsidiaries. This will enable them to influence the subsidiary with lower cost.

Hostile Takeover: An attempt to buy a company but is highly resisted by the shareholders of the acquired firms.

Our take: Morale and productivity might plummet in a hostile takeover attempt. The acquisitions might fail to achieve the desired result.

Hot Issue: A stock that shoot up on its IPO due to overwhelming demand.

Our take: A stock that goes up 200% in the first day of trading can be considered a hot issue.

Housing Bonds: Bonds that are secured by home loans or properties.

Our take: When house prices soars, the housing bond has a lower chance of default.

Housing Market Index: An index from 300 Home builders which shows the demand of new homes.

Our take: This is used to forecast future demand for housing. Housing market index goes from 0-100 with 50 signaling an average demand for new home.

Hybrid Security: Securities that utilize two or more different financial instruments.

Our take: An example would be a convertible bond which has a characteristic of a bond. However, it can be converted to equities at certain strike price.

Hyper Inflation: An extremely high level of inflation.

Our take: There is no definite rule on what constitutes a high inflation. However, 50 % or more of annual inflation definitely qualifies as hyper inflation.

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