Does the Motley Fool’s Stock Advisor Newsletter provide good stock recommendations and is it worth the price?
At HowTheMarketWorks, one of the services we provide our users is that we subscribe to dozens of stock advisory services and we buy all of the recommended stocks in a virtual account. In this article I will reveal our experience with this Motley Fool newsletter. I will show you some of their stock picks that were excellent stock picks and gave us huge profits. I will also show you how we used stop-loss orders to protect our initial capital. If you want to know how it rates against other stock picking services, then read our stock newsletter review.
It’s important that you read this whole article, because at the end I will give you a coupon link so you can save 50% off of their usual price. They have a special offer going thru the end of this month, so you need to decide quickly if you want to order this service.
Here are the 4 main things you get when you buy the Stock Advisor service. This is directly from the Motley Fool’s webpage:
First of all, note that Motley Fool service is totally legitimate and you do get the first 3 email alerts and access to their community and investing resources just like it advertises. So far so good.
Motley Fool Background
The Motley Fool has been providing stock market commentary and specific stock recommendations to the general public since 1993. They truly exist to help you make money in the stock market. Currently they offer about a dozen stock recommendation newsletters that cover a variety of investment strategies. The price for these stock advisory services ranges from $99 a year to $8,000 a year. The Motley Fool Stock Advisor is their most popular service and their most affordable.
They office is located in Alexandria, Virginia. I have even been to their offices several times over the 20+ years I have been in the stock market education business. Based on the size of their offices, they probably have 200+ employees.
The Motley Fool’s “Stock Advisor” newsletter is their most popular and their most advertised stock picking newsletter. They claim this service has returned over 300% versus the SP500’s 80% over the same time period. That claim is enough to get everyone’s attention. In fact, this is the first service we bought so we could paper trade their picks to find out if their performance claims were realistic.
My Motley Fool Stock Advisor Review
With the Stock Advisor newsletter, they generally send out a few NEW stock recommendations each month. You will also get updates on previous recommendations, and occasionally a few sell recommendations. The emails are short and concise, and if you want to click to get more information, you can read their full analysis.
This Motley Fool Stock Advisor review is based on my own experience as a subscriber for the last few years. My father and uncle have both been subscribers for over a dozen years. I have heard both of them brag about the success of their stock portfolios and how a lot of their picks came from the Motley Fool Stock Advisor newsletter. Upon a little investigation I saw that the Motley Fool said their Stock Advisor Service was up over 300% compared to the SP500’s 80% as this graphs shows.
WOW! That’s an amazing graph if it is true!
Doesn’t every investor want to outperform the SP500 like that. As I dug down into their existing portfolio and their current recommendations, I found how how they got those returns. To have returns like that you need to have a couple stocks in your portfolio that double or triple every year. And upon review, the Motley Fool does have a great knack for finding a few stocks each year that have fantastic returns. Think about it. If you buy 24 stocks a year, lose 8% on a 4 stocks, make 10% on 16 of them, have 2 that double and 2 that triple, your portfolio will be up 30% in one year. In 3 years you will double your portfolio. That is essentially what the Motley Fool Stock Advisor Service has done for the last few years.
To find out if it really works, I purchased it myself and I am now sharing my results.
Since I work for HowTheMarketWorks, at first I set up a virtual account with $100,000 and just started buying $5,000 of each of the stocks they recommended. Like most of you, I am a busy person. I can’t always stop what I am doing when I get their emails. Generally I would place my buy orders as a market order within a day or 2 of after getting their recommendations. I have been burned (ie, lost money) from other stock services. So to be cautious, I placed a stop loss order at 8% below my purchase price.
After seeing the positive returns on 8 of the first 10 buy recommendations that I paper traded in my HowTheMarketWorks account, I decided to start buying their stocks picks with my real brokerage account using my real money. At first I started buying $5,000 of each of their stock recommendations. I have to say that I am very, very pleased with the results. I just wished I had more money to buy more of their picks!
Here is a sample email that they sent in May 2018 of their Starter Stocks recommendations. Here are 10 solid stocks.
Of those 10 stocks (AAPL, AMZN, ANET, FB, HAS ,MA, MAR, MKL, NFLX, PYPL), they have all gone up since I received that email. Remember, I use 8% trailing stops on all of my positions, so I have been stopped out on several of those positions, but ALL at a profit.
The cost of the Motley Fool Stock Advisor service has fluctuated over the years from as low as a few hundred dollars to $995 a year. For the last year or so they show the price at $199 a year, but they currently have it on sale for only $99 a year. I paid the $99 (see the link at the bottom of this article) and I made that money back within the first 2 months with my purchases of AMZN and NVDA and then I continued to make lots of money with their other recommendations like MAR and SQ.
If you subscribe to the Motley Fool Stock Advisor service, you might find yourself making more stock trades than you normally do. So be careful of the commissions you pay with each trade. Commissions will eat up your profits if you are only investing a few hundred or thousand dollars.
If you don’t already have a real stock brokerage account, then open a new account and take advantage of the special “Commission Free” offers that a lot of the brokers have right now. To review all of the “Commission Free” stock broker offers for new accounts, CLICK HERE.
If you already have a brokerage account, don’t be shy to switch brokers or open a second or third account. I have 4 brokerage accounts myself. It has literally saved me thousands of dollars! I have 4 brokerage accounts for a reason. I take advantage of special offers to trade commission free, and you should too. A penny save is a penny earned.
Also be warned, the Motley Fool business model is they use this service as their entry level subscription service. Once they have your email address, they try to upsell you to their other services. They don’t call you, they just send you emails. So I don’t find them annoying at all.
Some people ask me if the Motley Fool is a legitimate business. Yes, absolutely they are legit and they are there to help you make money. I have visited their offices in Alexandria, VA several times. I have met several of their key personnel and I see them at investor education conferences. They take their job seriously and are truly focused on helping their subscribers make money in the stock market. If you are ever unhappy, you can always cancel. And yes, when you call they will answer their phone!
The Motley Fool Stock Advisor services is the best value for the money. If you are just getting started investing in the stock market, or even if you have been managing your stock portfolio for years, the Motley Fool Stock Advisor is a great service for the money. I never would have bought SQ, MAR and NVDA without their recommendations. If you want to try the service, click on the link below…
The Stock Advisor newsletter is currently on sale for only $19 a month or $99 a year. At this price it is a NO-BRAINER to spend $99 and get their next 12 months of stock picks and market commentary. All of their stocks will probably NOT go up. From my experience, however, most will go up over the long term. Most importantly, they seem to have a way of finding stocks that double or triple in a year. Stock like NVDA, MAR, AMZN, and SQ did that for me. It’s always great to have a few stocks that double in a year to offset a few of their losing picks.
Presidential Poll of College Students Trump Leads by 3.4%
Presidential Poll of High School Students Trumps Leads by 19.1%
Stock-Trak Inc., the leading provider of educational stock market simulations for the high school and college markets, posted polls on its websites from November 1 to November 3 asking its users for whom they would vote. Participation in the polls was optional, the strategy was admittedly unscientific, but the the results were amazing.
Our www.StockTrak.com site is used in over 1,100 college finance classes and by 75,000 students each year. The demographic tends to be slightly more males than females, and roughly 75% undergraduate students, 23% graduate students, and 2% other.
Our www.HowTheMarketWorks.com site is used by a mix of middle school, high school, college and adults clubs that want to learn about the stock markets and practice trading. The middle school classes using HowTheMarketWorks.com tend to be Math or Social Studies; the high school classes are mostly Economics, Personal Finance, and Business; and the college classes are mostly Finance or Economics classes.
Based on the self-reported age, users over 18 years old were directed to one Presidential Poll and users under 18 were directed to another Presidential Poll.
During the 3 days of November 1 to November 3, 2016 9,467 users 18 years old and over completed one poll and 11,885 students under 18 years old completed the other poll. The 2 results are as follows:
StockTrak.com and HowTheMarketWorks.com 2016 Presidential Survey
(for users 18 and over)
Democrat – Hillary Clinton: 3,363 votes or 35.5%
Republican – Donald Trump: 3,678 votes or 38.9%
Libertarian – Gary Johnson: 857 votes or 9.1%
Green – Jill Stein: 453 votes or 4.8%
Other: 996 votes or 10.5%
The “Other” votes included responses such as Bernie Sanders, Me, Romney, Paul Ryan, Dak Prescott, and ‘Thankfully not American!.’ Watching the voting throughout the day revealed an interesting trend. During the day when the stock markets were open, Trump seemed to stretch his lead. However, the evening and overnight votes pulled Clinton back closer. “This was a consistent trend for each of the 3 days,” said Mark T. Brookshire, Stock-Trak CEO and Founder. “Perhaps this pyscho-demographic trend suggests that the students who were actively managing and monitoring their portfolio during market hours leaned Republican while the more passive investors leaned Democrat.”
StockTrak.com and HowTheMarketWorks.com 2016 Presidential Survey
(for users under the age of 18)
Democrat – Hillary Clinton: 2,935 votes or 24.7%
Republican – Donald Trump: 5,207 votes or 43.8%
Libertarian – Gary Johnson: 948 votes or 8.0%
Green – Jill Stein: 576 votes or 4.8%
Other: 1719 votes or 14.5%
The “Other” votes for this age group were what you might expect with answers ranging from Bernie Sanders to Obama to Mickey Mouse. “I was amazed that so many students would voluntarily take our Presidential Poll, but I am at a loss to explain why our poll of users under the age of 18 would be so strong for Trump,” says Mr. Brookshire. “Perhaps its because of the strong selection bias of our high school users being from Economics, Personal Finance and Business classes.”
For more information, please contact Mark T. Brookshire at Mark at StockTrak.com or 770-337-7720
Transform your current computer room into a Wall Street Trading Room!
Experiential Learning at its Best
Your high school probably has a “physics lab” or a “chemistry lab”, so why doesn’t it have a Finance Lab?
Engage your personal finance, business, accounting, economics, computer and math students with real-world applications in an exciting Wall Street-style classroom. Stock-Trak’s Financial Literacy Lab is an integrated combination of display hardware and educational software that will have your students lining up in the hallway to enter your school’s Financial Literacy Lab.
Money Talks. Students Listen, Then They LEARN!
Every student wants to know how to make money! The streaming tickers and the colorful LCD screens will pique their curiosity and lure them in to your new Financial Literacy Lab. And when your students sit down in your Financial Literacy Lab and access your custom-built website they will have full access to a wide range of educational tools and content aligned to your state standards:
our Investing101.net (an “Introduction to the Stock Market” online course)
a virtual $100,000 to invest in the stock market on a customized website branded with your high school’s logos and colors
project-based learning curriculum for personal finance, economics, math, social studies, business and CTE
Call Mark at 770-337-7720 OR email mark(at)StockTrak.com for more info.
While learning about the stock market and managing a virtual portfolio of stocks, mutual funds and bonds, they will be led though the site’s built-in curriculum of articles, activities, videos, and quizzes that align to your state standards in personal finance, economics, math, social studies, and/or business. And to add icing to this cake, the top performing student each semester at your school will receive a $500 scholarship to the U.S. university of their choice upon graduation.
Transform your current computer room into the most exciting classroom at school by adding these 4 integrated components:
1.WALL-TO-WALL STREAMING, COLOR STOCK QUOTES AND NEWS TICKERS. These scrolling tickers across the top of your walls will catch the attention of every student (and parent) that walks by your classroom.
2. INTERACTIVE LCDs. These LCD screens contain a built-in Stock-Trak Controller that allows them to connect to your school’s internet and then they can be configured to display live charts, financial news, class rankings, student portfolios, CNBC, Bloomberg TV, etc. They can even be configured to alternate between financial data and school announcements
3. CUSTOMIZED, PROJECT-BASED LEARNING WEBSITE (includes a Virtual Stock Market Trading Application). At the core of the Financial Literacy Lab is a customized website that is branded with your school’s name, colors, logos and images. This site features self-paced activities to guide students through embedded curriculum that is aligned to standards. Features of this site include:
a. Stock market simulation site that allows students to manage a virtual portfolio of stocks, bonds, and mutual funds.
b. Stock quotes, charts, and news.
c. Complete 5 year financial statements including balance sheets, income statements, cash flow statements, SEC filings, Wall Street analyst ratings, company profiles, earnings and economic calendars, NYSE/NASDAQ most actives, gainers and losers, and more
d. Interactive financial calculators including: compound interest, advanced investment return calculators that factor in taxes and inflation, personal budgeting, credit card interest and payoffs, car loan interest, mortgage rates and terms, housing rent vs buy, automotive buy vs lease and more.
e. Robust Education Center with articles and lessons aligned to state standards for personal finance, math, social studies, economics, business and computers.
f. Articles include “pop quizzes” at the end to assess students’ grasps of concepts
g. “Report Card” feature that allows teachers to monitor student activities on the site including stock market portfolio and pop quiz performance
4. COMPLETE ACCESS TO OUR INVESTING101.NET. This online course is designed like an introductory college Investments course. It is available to the general public at $99 per user but is included in the Financial Literacy Lab bundle. This site includes 10 chapters that help students understand what the stock market is, how to research stocks, and how to build a diversified portfolio.
TO LEARN MORE AND GET PRICING INFORMATION:
The scrolling tickers come in 8 foot sections and the LCDs are available in 40 inch and 48 inch models. Each of these comes with a built-in Stock-Trak Controller that connects to your school’s internet either via cable or wi-fi. The customized website takes about 8 weeks to develop and load with the appropriate learning modules depending on your state and the subjects you want included. While the technology and software is not free, if you don’t currently have a budget we can direct you to some organizations that may fund these projects for your school. Schools may be able to use Perkins and CTE grants to cover the cost of adding a Financial Literacy Lab to their school!
Call Mark at 770-337-7720 OR email mark(at)StockTrak.com for more info.
Stop Wasting Money on High Interest Rate Credit Cards
All credit cards are NOT the same–find the credit card that is right for you!
If you get good grades, then choose a credit card that gives you a reward bonus for good grades.
If you can’t pay off your credit card bill each month, then make sure you have the lowest interest rate available.
If you travel a lot, then make sure you are earning frequent flyer rewards.
If you have a credit card and use it, then make sure you are getting something back and have the right card for you.
If you are a college or high school student, you might want to be taking advantage of the credit cards that are designed just for students.
If you are paying a high rate of interest on your credit card, then look at the “Low Interest” and “Balance Transfer” options. Paying high interest rates on your credit cards when you don’t have to is a waste of money. If you have $10,000 of credit card debt and you can drop your rate by 5% then you can save $41.66 a month! Stop wasting money–take 10 minutes and save!
Take a look at this chart and click on the card type that interest you:
Credit Card Payoff Calculator
If you already have a credit card and are not paying if off each month, then use this credit card payoff calculator to see how long it will take you to payoff the card.
Since 2010 the use of credit cards has become more popular than writing checks when paying for everyday purchases. The banks have made it easy for most people to get a credit card, and most retailers have made it very easy to use them.
What is a Credit Card?
A credit card is a payment system that works like this:
A persons signs a bank application for a credit card and agrees to pay the credit card bill on a monthly basis.
The bank gives the person a credit card with a unique 16 digit number on it.
The person presents the credit card for payment at a store and signs a credit card slip indicating they have received the goods.
Every month the bank then sends the person a credit card statement showing all the charges and usually gives the person about 20 days to pay the statement in full.
If the person doesn’t pay the bill in full by the due date, the credit card copy then charges the person interest.
It sounds like a great system, as long as you can pay your credit card statement in full and on time. If you don’t the interest rates charged by the bank can be anywhere from 10 to 30%. That’s why it is very important to choose your credit card wisely!
Check out the latest credit card interest rates below. Click on the card type that most interests you.
Credit Card Payoff Calculator
If you don’t pay off your credit card statement in full by the due date, you can quickly dig yourself into a bad cycle of falling more and more in debt because of the interest rate and fees your may be charged. Use this Credit Card Payoff Calculator to what happens if you don’t pay the full amount due each month.
Here are some popular stories and advice for credit card users:
Simply put, when you have money to invest for an extended period of time (like 20 years or more), the stock market historically has provided the greatest return.
When most people are able to save money, they usually put it in the bank. Banks usually pay interest on the cash in your account, so if you have $1000 in your savings account and the bank pays you 3% interest then at the end of a year you will have about $1030. Once the savings balance gets bigger, a lot of people hope to earn more than what the bank is paying in interest, so they invest in real estate, stocks, bonds, and/or gold.
Historical Returns of Investments
While no one knows for sure what will happen in the future, a look at historical returns shows how these different investments have performed over time.
Here’s a chart of average percentage returns for the 30 year period from 1988 to 2018:
From this chart we see that the stock market has performed the best – between a 9-fold and 11-fold increase, depending on the security types. Gold performed the worst – one major reason being that gold tends to go up in price during years where there is low inflation, and down in years with high inflation.
So what does that mean? Over time there is a HUGE difference between 10% and 2%. Here is another way to look at it–this chart shows the growth of $100 for the 46 years from 1972 to 2018.
So, would you rather have $401 or $1,612! That’s a big difference for just $100. For $10,000 the results would be exactly 100x or $40,100 versus $161,200.
Finally, this chart looks at average returns from 198 through 2018 and shows that the S&P 500 stocks were the best return, with a 12% average annual return – beating out both the large-cap stocks in the Dow Jones Industrial Average and the Small-Cap stocks in the Russell 2000 index.
In this table you also need to note the Standard Deviation column which measures the variance or volatility of the returns. It shows that Small Stocks also have the highest variance. This is why we say “over time” that stocks have the highest returns. If you looked at just one year or even five years, you might not see the same results because stocks are so volatile, but the longer the time period you have to keep the money invested the better it is to invest in stocks.
Simply put, if you want to maximize your personal net worth, if you want to be “rich”, if you want to be a “millionaire”, if you want to retire early–you must start saving and investing TODAY.
The earlier you get started, the more time your money has to grow. And the more time it has to grow, the bigger it will become.
Understanding how the stock market works and how to invest is so important because it determines how much your net worth will be when you retire. Are you going to leave your cash in your savings account at the bank all your life and earn an average of 3%? Or are you going to invest it in the stock market and try to earn 11%?
How To Invest in the Stock Market
The best way to learn anything is to practice. Use this virtual trading site to learn to invest and experiment with trading strategies. Don’t worry if you make mistakes–better to lose our fake money then your real money later.
You can use www.StockBrokers.com to compare special offers, commission rates, and other services of more online brokerages to find the perfect one for you. (Don’t worry, you can click www.StockBrokers.com and it will open a new tab so you won’t lose your place in this course.)
StockLinkU, the stock simulation site launched in 2012 from Greenville SC, has apparently shut down.
StockLinkU has apparently closed its virtual trading site. The site has been unavailable for several months now and there are no comments from its facebook and linkedin pages. Launched in 2012 as a free site, the site struggled to gain an audience or establish a niche. StockLinkU was originally a free site, then changed its model to a pay site, and now has apparently disappeared and gone under.
Former StockLinkU users are encouraged to explore the other leading stock simulation and virtual trading sites:
StockTrak Global Portfolio Simulations: Stock-Trak, now in its 25 year, is without a doubt the leading virtual trading site for university Investments, Portfolio Simulation, Derivatives, and Personal Finance classes. StockTrak allows professors to create a custom virtual trading contest for their class by selecting the trading dates, initial cash balance, and other parameters. Students then register into that contest and compete against their fellow classmates trading stocks, bonds, mutual funds, options, futures, and forex from over 50 global exchanges.
HowTheMarketWorks.com: HowTheMarketWorks, launched in 2004, is a FREE alternative, similar to StockTrak, except students are only allowed to trade U.S. stocks, mutual funds, and ETFs. HowTheMarketWorks was used by over 350,000 users and in 10,000 classes and clubs in the last 12 months.
If you are looking for an alternative to StockLinkU, either of these sites will work and they will be around many years from now.
Born To Sell is all about covered calls. Their award-winning covered call screener has an easy-to-use interface and provides covered calls matching any query you give it.
Every day there are over 350,000 covered calls to choose from. That represents thousands of underlying stocks and ETFs, each with dozens of strike prices and expiration dates (including weeklys). Born To Sell’s covered call screener lets you filter and sort all those options so that you can find ones that meet criteria that you’re looking for.
For example, maybe you want stocks that pay a dividend before option expiration, that do not have an earnings release before expiration, have a P/E of less than 20, and offer in-the-money covered calls with an annualized rate of return over 20%. Set the filters and you’ll see the results. Change any filter and the results update immediately.
Or maybe you want to see all the covered calls that have an annualized return over 15%, sorted by downside protection (deepest in the money on top). Easy to do.
In addition to screening for covered calls, Born To Sell also offers portfolio management features that track your covered call positions. You can see at a glance how much time premium remains in each position, and use their Roll Me tool to help you decide which option to roll to. The software helps you stay organized, stay diversified, and maximize your income each month.
Although it is a subscription service, there is a 2 week free trial for anyone who wants to try before they buy. Click here to read more about it or sign up for the free trial.
Click here to try it.
McGraw-Hill and Stock-Trak, the leader in educational portfolio simulations, have joined together to offer students that purchase a McGraw-Hill college finance textbook a FREE account at Stock-Trak’s new real-time, streaming stock simulation at HowTheMarketWorks.com, used by over 200,000 students and beginning investors each year!
Buying and selling stocks is a fantastic educational experience for students not only to expose them to the stock market, but also to help them understand more about the economy, Wall Street, interest rates, dividend policy, current events, etc.
Activating your free virtual trading account, and creating your own private stock market contest, is easy and takes less than a minute.
1. At www.HowTheMarketWorks.com, professors/instructors should register for FREE and click on Create a Contest.
2. When creating a contest, professors (or students or anyone), can select the trading period dates, the initial cash balance, the commission structure and other trading parameters.
3. After the contest is created, a unique URL will be given displayed to the professor and then that link should be distributed to the students.
4. Students click on the link, and register for free!
5. Students can then start trading.
6. Professors and students can then monitor the class rankings.
Register for free, create your own contest for your class or club, and start practicing trading and learn How The Market Works!
Click here to register for HowTheMarketWorks.com
Opening a Brokerage Account is Easier Than you Think
Be Ready for the next 5% pullback in the stock market and open your real brokerage account today!
Given that most market analysts are predicting a pullback of 5% or more from the recent market highs in the coming days, now may be the best time to open your real brokerage account so that you can buy in to the real stock market when the market dips.
Opening your first real brokerage account is easier than you think! You can do it all online now in less than 5 minutes and be up and trading in just a few days.
Gone are the days that opening a brokerage account required $10,000 cash just to open an account. Now you can open a brokerage account online and there are no minimum cash balances required. So if you just want to get started with $100 you can.
Trade free for 60 days + Get up to $600 with TD Ameritrade.
The timing is right for opening your first real brokerage account as TD Ameritrade now has one of the best offers and incentives I have seen in a long time. If you open and fund an account with at least $2,000, you will be able to trade commission free for 60 days. This is a great way to get started as this will save you $100s of dollars in commissions if you make must 2 trades a week.
All you need is your name, mailing address and SSN to complete the application. You can then mail in a check, or enter your checking account information online and fund your new account electronically, and/or set it up to add funds monthly.
Once your complete the online application, you should receive an email indicating the application was approved. If you provided funding information, the email will also tell you when the funds will be drawn into the account and on which date you would be able to start trading.
Trade free for 60 days + Get up to $600 with TD Ameritrade.
If you open the TD Ameritrade account and get to trade commission free for 60 days, then take advantage of it! The best thing to do is to dollar cost average into your favorite stocks. This means buy 33% of what you want in the first week, wait for some market dips and buy another 33% and then in a few more weeks (before the 60 days is up) buy the rest of what you wanted to spend on each stock.
And since you are just learning to trade and there are not commissions with TD Ameritrade for 60 days, don’t be afraid to take any profits you might have if you are starting to get nervous about the market. It is ALWAYS easier to sleep at night when you have cash in the bank and you are not worrying what the markets will do the next day.
Open a brokerage account with TDA and trade commission free for 60 days (with just a $2,000 initial deposit).
TEACHERS: Come to New York this Summer and Attend a 5 Day Training Session at the New York Stock Exchange –Financial Aid is available to cover travel!–
Financial Aid requests due May 1st.
Registration Forms due May 17th
NYSE-SEC Summer Teacher Workshops are offered for teachers who want an in depth stock market experience and are hosted at the New York Stock Exchange in New York City.
These NYSE Summer Teacher Workshops are a partnership between the NYSE and the SEC. Teachers learn about how the market works and about Federal involvement in the financial markets. Most of the attendees are high school teachers, although some teach at the college level.
There are scholarships for the NYSE NY portions of the program but the essays are due by May 1st.
Download the information here about the NYSE Summer Teacher Workshops (PDF)
If you have any questions about the Teachers’ Workshop,
please contact the Educational Services Department at
212-656-2907 or email: email@example.com
This year’s dates are:
2013 Teachers’ Workshops (held at the New York Stock Exchange in New York, NY)
• June 24 – June 28, 2013
• July 8 – July 12
• July 15 – July 19
2013 SEC Graduate Program (held at the SEC’s headquarters in Washington, DC)
• July 23 – July 26
2013 NYSE Euronext Graduate Program (held at the New York Stock Exchange in New York, NY)
• July 30 – August 2
Try these 100% FREE educational and stock trading newsletters to get stock tips emailed to you weekly and start learning How The Market Works!
Click on the offers that interest you, fill in any required information, and then scroll down and click the “Continue” button to start getting some free stock tips!:
The Income Statement is one of the financial statements that all publicly traded companies share with their investors. The income statement shows the company’s sales, expenses, and net profit (or loss) over a period of time–usually 3 months, year-to-date, and twelve months. The income statement also comes with a lot of notes and discussions from the company’s management so that investors can have a clear understanding of the company’s performance. The other two components to the financial statements are the Balance Sheet and the Statement of Cash Flows.
Income statement (also referred to as profit and loss statement (P&L), revenue statement, statement of financial performance, earnings statement, operating statement or statement of operations) is a company’s financial statement that show whether or not the company is making a profit. The income statement shows, for a stated period of time, the total amount of revenue from the sale of products or services, the total expenses involved in running the business, and finally the net profit or loss. The income statement serves 2 main purposes: it shows managers how their part of the business is performing and whether they are keeping to a budget, and it shows investors the overall performance of the company. The important thing to remember about an income statement is that it represents a period of time. This contrasts with the balance sheet, which represents a single moment in time.
The portion of the income statement that deals with operating items is interesting to investors and analysts alike because this section discloses information about revenues and expenses that are a direct result of the regular business operations. For example, if a business creates sports equipment, then the operating items section would talk about the revenues and expenses involved with the production of sports equipment. The term “bottom line” refers to the net income of the company because when you look at an income statement, the bottom line is usually net income.
The non-operating items section discloses revenue and expense information about activities that are not tied directly to a company’s regular operations. For example, if the sport equipment company sold a factory and some old plant equipment, then this information would be in the non-operating items section.
Steps in Understandings the Income Statement Sheet
In order to best understand how to read and understand an Income Statement Sheet, it’s important to understand the order of which information is displayed.
Date: At the top of the Income Statement is the date that the statement was created and reflects all data up to that point. The Income Statement will read “For the period ending xxx”
Net Sales: represents the total amount of income received from customers paying for the company’s goods and services.
Cost of Sales (also known as Cost of Goods Sold): is the amount of money the company has spent in the production of its goods. Raw materials, labor, manufacturing overhead are included in this figure.
Gross Profit or Margin: represents the profit a company has earned only after taking into account the Cost of Sales (#3)
Operating Expenses: This figure represents the amount spent on operational expenses, and is normally broken down in to two figures: (i) Research and development (ii) Selling, general and administrative.
Operating Income: This figure represents earnings from normal operations without taking in to consideration taxes and special one time occurring items (e.g.: settlement of a court case.)
Interest Expense: This figure reflects the cost of borrowing money.
Pre-tax Income: This figure represents total earnings not including taxes. This may also be labeled Income before provisions for income taxes.
Income Taxes: The income tax amount is an estimate as taxes are normally paid once a year, while Income Statements are released four times a year. This figure best represents what taxes the company expects to pay and may also appear on an income statement as Provision for income taxes.
Special or Extraordinary Expenses: This figure represents “special” expenses, which do not normally occur on a continued basis. For example, the purchase of a new warehouse is not a regular occurrence.
Net Income: This figure represents the residual income after adding total revenues and subtracting this figure with all expenses.
Example of Income Statement
When you get a stock quote on the HowTheMarketWorks site, you can also view the company’s financial statement. Below is Apple’s Income Statement as of September 2015 (NOTE: In the upper right corner it says all numbers are in MILLIONS):
Note how the Income Statement flows in the same order as listed above.
Since Apple has no debt Interest Expense, (#7) is not included.
Apple had no Extraordinary Expenses (#10) so this is also not included.
Finding A Company’s Balance Sheet On HowTheMarketWorks
You can find the balance sheet of every company trading on a major US, Canadian, or even many international exchanges on HowTheMarketWorks.
First, go to the Quotes page.
From here, look up any company’s ticker symbol that you are interested in, and click the tab for “Financials”:
From here, you can use the drop-down menu to switch between their most recent income statement, cash flow summary, or balance sheet.
Investors pay close attention to an Income Statement because it is an accurate snapshot of a company’s performance over a specific time period.
Lenders also evaluate the suitability of a loan based on the Income Statement.
The Income Statement is a direct result of all financial information incurred during the time period and is transformed into easy to understand figures.
Comparing Income Statements to those in the past periods is a great indication of the direction a company is heading in.
Investors pay close attention to the “bottom line” Net Income and expect this figure to increase on a consistent basis over time. The “bottom line” figure is often the first set of data an investor looks at before determining its suitability for investment.
An increasing Net Income over time can be indicative that the company is heading in the right direction, while a decreasing Net Income can reveal the opposite.
For more financial statements, read our article on balance sheets
Definition: Profit or loss resulting from the sale of certain assets classified under the federal income tax legislation as capital assets. This includes stocks and other investments such as investment property.
Example: Long-term capital gains are usually taxed at a lower rate than regular income. This is done to encourage entrepreneurship and investment in the economy. For example, if you own your home for more than one year, if you had bought your home for $200,000 and sell the home for $$225,000, then you have a capital gain of $25,000. There is a move by many in government to increase capital gains taxes as they see this lower rate as unfair???