Contrary to popular opinion, are the stocks not just a piece of paper. If you own a portfolio of stocks you actually own tiny fractions of several companies. If you think that this is not the case, just ask the lucky owner of Petco or Reebok stocks. In each case the company wanted a larger company to buy. The only path to take over a company with publicly traded shares is to buy all the shares.

Had Petco Reebok and stocks at $ 20 and $ 35 per piece, you would sell it to a larger company for less than that? Of course not. For $ 20 and $ 35? Probably not, because if you want these prices you could have sold your shares on the open market. to take The only way for larger firms is smaller, offering a premium to the holders of its shares. Petco in case, for example, shareholders will receive a premium of 50 percent. That is, if you had stock worth $ 10,000 Petco, the very next day, you would have had $ 15,000. Not bad for a day!

big wins like this can happen only when you start to take the initiative investment in shares. But if you still think that the stock no real value, read on.

which shares its value is? shares rise in value because they are needed. Shares are in value because they are not asked. This is the simple truth, but a misunderstanding there, the idea that stocks are “just a piece of paper does.”

Sometimes shares have increased or decreased demand for no good reason. But the root value of the shares, the value to find the underlying companies. Stocks in Action – Fed Ex For example, take a look at a relatively stable companies like Fed Ex (FDX Ticker). It had a net profit of $ 1 Eight billion in 2005. Since Fed Ex 305 million shares of shares outstanding, this represents about $ 5. 1990 earnings per share (EPS).

Fed Ex stock is around $ 112 per share. This means it’s P / E ratio is about 19 (112 / 5 90 = 18 98), which on the average P / E ratio for stocks in the S & P 500. If you have a share of their own Fed Ex, you own a share of their profits. You have a share in cash in his bank account, and once a part of its fixed assets and equipment. In the case of Fed Ex, you own one share of each of their trucks! Now of course if you own 100 shares of Fed Ex, that’s only 100 shares from more than 300 million – even one million shares (worth 112 million U.S. dollars) would be less than one-third of 1 percent the company! In other words, your one shares do not entitle you to a lot of decision making with what is with that $ 5. 90th

Maybe she likes to buy more trucks, Advertise more, or maybe even send a check for $ 5 90 (a dividend). But you’re just a little guy, and no one listens to the little guy. However, you can choose to vote in the elections, shareholder of the Company’s Board of Directors.

The owners of the stocks monitored monitored the Board monitors the Management Board, the CEO and the CEO of the company. More precisely, shares work.

The real value of the shares – if the holdings of other stocks

you can not then decide what to do with, Fed Ex’s $ 5. 90 in profits, because you only have 100 votes of 305 million euros (you get one vote per share of stock you own). But you know who decides what Fed Ex would do, could? Someone who owned all 350 million shares. Let’s say that the stock market took a real nose dive for some reason. That can happen. But let’s also say that Fed Ex kept rolling business to generate profits in the $ 1. 8000000000 spectrum, as it was in 2005.

How deep can the stock go? Imagine the stock went from $ 112 down to $ 45. Now its P / E would 7th 6 (45 / 5 90 = 7 6), provided they continued to produce at $ 5. 90 each in the share data. At that price could be the entire Fed Ex company an attractive candidate for acquisition will be someone like UPS.

UPS bought all 305 million shares of the Fed Ex could do what she wanted with $ 5. 90 – it would be money in the bank. Better still, by a reduction in competition and the elimination of some overlapping costs $ 5. 90 per share could easily turn into $ 6. 50th

How much would you sell your shares of $ 45 Fed Ex? Less than $ 45? Of course not. You will be surprised, but UPS may be willing to offer as much as $ 65 if they thought it could get Fed Ex Win up to $ 6. 50 (so recovering their investments in ten years). Now you could say, “Hey, wait. I bought the stock at $ 112 and I should be happy I can sell it for $ 65?” This is not the point. The point is that stocks have to do real value. If you are a conservative investor, you want to buy stocks that are already beaten, and possibly become a takeover candidate.

only the possibility that someone holds to acquire an entire company shares fall too low. That makes shares more than just a piece of paper.