NASDAQ: The Electronic Market
The National Association of Securities Dealers (NASD) runs the Nasdaq stock market. Unlike the NYSE or AMEX, Nasdaq lets brokers trade from anywhere in the country electronically. It lists 4,700 companies, and is known for listing smaller businesses that are just starting to emerge nationally. However, Nasdaq also lists larger businesses like Microsoft and Intel.
There are two listings of Nasdaq stocks: the Nasdaq National Market Issues are the largest stocks, for which Nasdaq publishes information much like that released by the NYSE. One difference is that symbols for Nasdaq stocks (for example, Microsoft is MSFT) have four or five letters, whereas NYSE and AMEX use symbols of one to three letters.
Let’s look at a sample Nasdaq stock listing in the National Market Issues:
52
Weeks Yld Vol Net
Hi Lo Stock Sym Div % PE 100s Hi Lo Close Chg
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s 60 23½ SomeName SMNM .36 1.3 12 50 28 275/8 273/4 +¾
The "s" in the margin indicates that the stock has split, meaning that there are now twice as many shares as before. If you previously owned 100 shares, now you will own 200. The next two numbers are the highest price and the lowest price of a share over the past year. The reason the high price is so much greater than the low and the current price is because of the split.
Next is the name of the stock (in this case, just a fictional company called SomeName), then its symbol (SMNM). The next number is the dividends paid by the stock: 36 cents per share. For example, if you owned 100 shares, you would receive $36 from the company. Dividends are a way for stockowners to share in the profits of a company without selling their stock. Stocks will often have two varieties: common stock (which does not pay dividends), and preferred stock (which does). The dividend listed is simply the estimated annual amount of the dividend.
After the dividend, percentage yield is listed. Percentage yield measures the relative amount of the dividend, compared to the overall price of the stock. This stock closed at $27¾, or $27.75, so the percentage yield is simply the ratio of $0.36 to $27.75. The next value is the price/earnings ratio. It shows the ratio between a stock’s price by the earnings per share made by the company in the past year. In this case, the stock’s price is $27.75, and the P/E ratio is 12, so the earnings per share in the last four quarters must be $27.75/12, or $2.3125. Although the P/E is not a guarantee of earnings, it does provide a way to measure which companies have earned more over the last year. A low P/E ratio implies high earnings.
Following the price/earnings ratio, you’ll find the volume (in hundreds) or shares traded the previous day. If you see a "Z" in this column, do not multiply by 100. The number listed will be the actual number of shares traded. If you see the stock underlined, it means that some new information has been released about the company, and the volume traded will be unusually large.
The next three numbers tell the highest and lowest price the stock sold at the previous day, and the price of a share at the end of the day. The final column is the net change, which tells you how the stock’s price at the end of the previous day compares to the stock’s price at the beginning of the previous day.
The other listing Nasdaq releases is the Nasdaq Small-cap Issues. These are the smaller companies Nasdaq is known for. For these companies, the name, dividends, volume traded, closing price, and the net change are the only values listed. Most of these companies are too new to have records over the past year, such as a P/E ratio.
Like the NYSE and AMEX markets, stocks must meet certain requirements to be traded on the Nasdaq market. They must have an income of $750,000 before taxes or shares totaling one million dollars. Also, the shares must be distributed over at least 400 owners, and the company must have assets totaling 4 million dollars.
If a company cannot meet the requirements for one of the major markets, their stocks are considered "OTC", or over-the-counter stocks. These are the smallest, newest companies. They also outnumber the stocks traded on the other markets. There are almost 30,000 OTC stocks, compared to a total of about 7600 on the NYSE, AMEX, and Nasdaq markets.