Active investing: Investing in which decisions are made to create a portfolio seeking to outperform an index.
American Depositary Receipt (ADR): American depositary receipt (ADR) refers to a negotiable certificate issued by a U.S. depositary bank representing a specified number of shares of a foreign company’s stock. The ADR trades on U.S. stock markets as any domestic shares would.
Basis Point: One basis point is equal to 1/100th of 1%, or 0.01% (0.0001)
Book Value: Book Value is the value of an asset as carried on a company’s balance sheet.
Capital Expenditure (capex): Capital Expenditure (capex) is the amount spent to acquire or upgrade productive assets in order to increase the capacity or efficiency of a company for more than one accounting period.
Compounder: “Compounder” is a reference to companies believed to be able to consistently compound shareholder wealth.
Conglomerates: A conglomerate is a company that owns controlling stakes in a number of separate businesses.
Convertible bond: A convertible bond is a fixed-income corporate debt security that can be converted into a predetermined number of common stock or equity shares.
Credit Default Swap: Credit default swaps are a type of insurance against default risk by a particular company. The company is called the reference entity and the default is called credit event. It is a contract between two parties, called protection buyer and protection seller. Under the contract, the protection buyer is compensated for any loss emanating from a credit event in a reference instrument. In return, the protection buyer makes periodic payments to the protection seller.
Derivative: A derivative is a contract between two or more parties whose value is based on an agreed-upon underlying financial asset or set of assets.
Discount Rate: Discount rate refers to the interest rate used in discounted cash flow analysis.
Discounted Cash Flow (DCF): Discounted cash flow (DCF) is a valuation method used to estimate the attractiveness of an investment opportunity. DCF analysis uses future free cash flow projections and discounts them to arrive at a present value estimate, which is used to evaluate the potential for investment.
EBITDA: EBITDA is a company’s earnings before interest, taxes, depreciation and amortization.
Economic Moat: An economic moat refers to a business’ ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms.
Enterprise Value (EV): Enterprise value (EV) is a company’s market capitalization plus debt, minority interest and preferred shares, and less total cash and cash equivalents.
Enterprise Value to Sales (EV/sales): Enterprise value to sales (EV/sales), is a valuation measure that compares a company’s enterprise value to the company’s sales.
ESG: Environmental, Social and Governance, and refers to the three main factors when measuring the sustainability and ethical impact of an investment in a business or company.
FANG: FANG securities refers to a popular acronym for Facebook, Amazon, Netflix, and Google (now Alphabet).
Form 10-Q: A comprehensive report of financial performance that must be submitted quarterly by all public companies to the Securities and Exchange Commission (SEC).
Free Cash Flow (FCF): Free Cash Flow (FCF) is a measure of a company’s ability to generate the cash flow necessary to maintain operations. Generally, it is calculated as operating cash flow minus capital expenditures.
Free Cash Flow Yield (FCF Yield): Free Cash Flow Yield (FCF Yield) equals a company’s free cash flow per share divided by the current market price per share.
FX: FX is an abbreviation for foreign currency.
Global Financial Crisis: The Global Financial Crisis (GFC) is a reference to the financial crisis of 2007-2008.
Hedge Funds: Pooled funds generally available to accredited investors that invest in a variety of assets.
Intrinsic Value: Intrinsic Value is the estimated appraisal value of a business, calculated using fundamental analysis.
Joint Venture: A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task.
Leverage: Financial leverage refers to the use of debt to purchase assets.
M&A: M&A stands for mergers and acquisitions.
Margin of Safety: “Margin of Safety” is a reference to the difference between a stock’s market price and Southeastern’s calculated appraisal value. It is not a guarantee of investment performance or returns.
Momentum investing: An investment strategy that attempts to take advantage of market trends.
NAV: Net asset value.
Operating Income (OI): Operating income (OI) is the income from a company’s primary business operations, excluding extraordinary income and expenses. It is also referred to as earnings before interest and taxes (EBIT).
P/E Premium: P/E Premium is the amount a stock’s Price/Earnings ratio exceeds that of another stock or average of a group of stocks.
Passive investing: Creating a portfolio intended to track the returns of an index or benchmark.
Price / Earnings (P/E): Price / Earnings (P/E) is the ratio of a company’s share price compared to its earnings per share, expressed as a number or as a multiple of earnings per share (P/E multiple).
Private equity: Investing through an entity or vehicle that is not publicly listed or traded.
Private Market Value (PMV): Private market value (PMV) is the break-up market value of all divisions of a company if divisions were each independent and established their own market stock prices.
Quant power: “Quant power” is a reference to quantitative investment strategies, which analyze historical data and use developed algorithms to assist in making investment decisions.
Reinsurance: Insurance that is purchased by an insurance company in order to transfer certain amounts of risk.
Return on Equity (ROE): Return on equity (ROE) is a measure of profitability that calculates how many dollars of profit a company generates with each dollar of shareholders’ equity.
S&P Ratings: Standard & Poor’s company rates the creditworthiness of many entities that sell debt. Ratings range from AAA (extremely strong) to D (in default).
Shadow Indexing: Shadow Indexing (sometimes called closet indexing) is a term used to describe funds that claim to actively manage investments but have portfolios not much different from the benchmark index.
Spin Off: A spin off is a type of corporate action where a company “splits off” sections as a separate business.
Term Loan A and B: Term Loan A – Debt that is typically repaid evenly over 5 to 7 years. Term Loan B – Debt that usually involves repayment over 5 to 8 years, with a large bullet payment in the last year.
VIX: VIX is the CBOE Volatility Index, which reflects the market’s expectation of near-term S&P 500 volatility based on a range of index options.