When dealing with stocks and investing, it can be easy to get sucked into the numbers. When you look at a stock, there are 101 pieces of information to consume. Just to name a few, you can look at the stock’s price movements, P/E Ratio, revenue, net income, profit margins, moving average, and other factors. However, stocks are much more than just numbers on a computer.
Behind every stock is a company. This company is made up of real people who manage the company as well as hundreds or even thousands of employees. It’s also made of up investors of all shapes and sizes who are interested in seeing that company succeed. All of these parties have influence over the price of the stock.
Due to this, understanding who and what is behind a company’s stock is arguably more important than the numbers associated with that stock. This is because these peoples’ decisions will ultimately impact the company’s numbers.
Let’s take a quick look at why you should understand what and who is behind every company’s stock.
The top management is arguably one of the most important stakeholders in a company. These are people like the CEO, CMO, and CFO who have been put in charge of making sure that a company is successful. Having a successful CEO at the helm of a company can easily be the difference between success and failure.
When evaluating the management team of your stock, it’s also important to examine the Board of Directors. This is because the Board of Directors is in charge of choosing the management team.
After management, you should understand who the major shareholders are in your company.
The major shareholders in a company are the people who own the majority of that company’s stock. Depending on the company, the major shareholders are usually the founders and early investors. However, major investment banks and investors with lots of capital can also take large positions in a company.
It’s important to know who has a major position in your company because these parties also have significant influence over the future of the stock. These people are in charge of putting the management team in place as well as setting expectations for the company.
Before they become publicly traded companies, all companies start as small operations. Most startups will have just a few founders who get the project off the ground initially. During this time, it’s common for them to take on venture capital. Sometimes, these venture capitalists can be very public figures.
For example, Mark Cuban, Peter Thiel, and Chris Sacca are examples of famous venture capitalists. If your stock is backed by very reputable investors such as these then it can be a good sign for the future of that company.
We hope that you’ve found this article valuable when it comes to understanding why you should understand what and who is behind every company’s stock. If you’re interested in reading more, please subscribe below to get alerted of new articles as we write them!