Stock Market: Restricted Stocks Are Better Than Stocks Options !!

Many companies are concerned by the Financial Accounting Standards Board (FASB) recommendation that Stock Options be shown on the company's expense sheet. Especially high-tech and start-up companies are concerned because they fear losing one of their great motivating tools. They needn't worry. There is already a better compensation choice, Restricted Stocks Options.

Motivation Through Restricted Stocks Issuing restricted stock is a better motivating tool than granting stock options for two reasons. First, many employees don't understand stock options. They don't know that they have to take action to realize any gain. It is far easier for them to understand a vesting period on restricted stock. Second, restricted stock can't become worthless like stock options. Even if the stock price falls, restricted stock retains some intrinsic value.

A Stock Option grant with a strike price of $10 has no value when the stock trades at $8. Restricted Stock awarded when trading at $10 is still worth $8. A stock option has lost 100% of its value. The restricted stock has only lost 20%.

Employee Ownership Through Restricted Stocks

One of the advantages restricted stock has from a management perspective is it is better at motivating employee to think and act like owners. When a Restricted Stock Award vests, the employee who received the restricted stock becomes an owner of the company. He or she has to take no further action to make it happen. The employee is now part owner and can vote at the annual meeting.

Actual ownership of part of the company is a powerful motivating tool in trying to get employees to own the company's objectives. This makes them more focused on meeting goals.

Stock Options, on the other hand, do little to instill a sense of ownership. They are viewed by most as a high risk gamble that has a potentially great reward. An individual may very well invest a couple of years helping a company grow and prosper when compensated for that time by stock options. However, their loyalty is to raising the stock price so the can cash out and make a bundle. They have no loyalty to the company and its goals. Often, they will choose actions which raise stock price in the short term, thus increasing their potential gain, rather than taking a longer-term view that will help the company.

Restricted Stocks Supporters

The LA Times reports that Microsoft plans to replace stock options with restricted stock grants. Amazon.co.uk notes that all their employees are allocated a number of Amazon.com restricted stock units when they join. The Altria Group, Inc., points out in their annual report that "in 2003, we made equity awards in shares of restricted stock rather than fixed-price stock options". Dell Computer Corp., Cendant Corp., and DaimlerChrysler AG are also reported to be moving toward restricted stock in lieu of stock options.

Manage This Issue

Restricted Stocks awards are a better tool for motivating employees than stock options. Restricted stock awards are better than stock options for motivating employees to think and act like owners. Restricted stock awards are better treated on the financial statements than stock options. That makes restricted stock awards better for the employees, management, the investors, and the regulators. There is no reason to not make that choice.

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What Is Penny Stocks Investing?

PENNY STOCK is low price share with broad range of market capitalisation. Though penny stocks’ prices are the same as small cap stocks, mid cap stocks or micro cap stocks, they are different altogether. If small cap stocks are companies with $300 million to $2 billion market capitalization, penny stocks may have as high as $4 billion worth; although their stock prices are similar. This can happen if high market capitalization companies decided to issue many shares or to split their stocks to maintain its attractiveness to stock market investors and traders.

But most of the time, Penny Stocks are new companies that just get listed in the stock exchange. This makes almost all the small cap stocks are penny stocks indeed. Because of their smaller capital base, these companies are generally more vulnerable than larger companies during economic downturn.


Why Investors Get Hooked to Penny Stock Investing?

Stock market investors like to make quick gains from its price volatility. Moreover, due to its nature of very cheap in price, stock traders often bought them in very large units. Sometimes, one per cent price fluctuations enough to make millions of dollars.

...That's how profitable it can be.

However, most of penny stocks are under researched and received very low media coverage. Due to not having much publicity, these stocks can be easily syndicated by professional speculative investors. Moreover, it is not easy for average stock investors to verify if the rumours or some ‘Insider Tips’ are true. And because it was heavily syndicated, regular trend from technical analysis won’t work that easy. Due to these very high uncertainties, penny stock investing can be very risky for novice stock investors. Nevertheless, you can still make money from penny stocks from the following approach.


4 Ways to Pick Winning Penny Stocks!

Fundamental Analysis:
Good stock picks from fundamental analysis should consider earnings potential, revenue growth, debt loads, positive cash flows and other important financial ratios. Extensive study of the company’s financial statements is inevitable to discover the best medium to long term stock investment opportunities. To make money in penny stock investing, you must buy the one that have the most effective management and making the most money at the same time.

And don’t forget to compare the standard financial ratios with other stocks in the same industries to predict which companies are destined to be successful. Good fundamental analysis of penny stocks can unleash the two per cent companies with superior stock investing opportunities. They are so profitable that can give better return than 90 per cent of the blue chip stocks.

Undervalued Stocks:
It is not uncommon to see share prices slide dramatically. This has a lot to do with weak market sentiment than the underlying fundamental values. And today’s seamless communication through the internet, information from China can travel to US as fast as a blink of eyes. If this happen, you shouldn’t avoid the stock market, but take advantage on the undervalued stocks instead. Calculate its intrinsic value and buy the stocks if the share prices where within its margin of safety.

Technical Analysis:
Under normal situation, technical analysis able to discover repetitive price trending of penny stocks. These patterns can reveal profitable penny stock trading by buying stocks with high probabilities of moving upward. With all the available technical indicators, you can make money even if the stocks are flat but are traded within some trading range.

Promotional Stocks:
Promotional stock is a common penny stock that is heavily promoted by promoters who have substantial holding in the stock itself. The promoters generate market interest for the stocks in an attempt to drive the price higher. Once the stock prices are at the desired level, they sell their holding and generate substantial personal profits. Then, they simply move on to another stock and leave the original stock and its investors behind. Without any further promotion by new shareholders, the stock price will soon collapse.

The promoters are frequently moved in a group. They form a syndicate with other interested wealthy speculators as well as other professional hedge fund managers. To make money from this type of stocks, you need to participate early in the stock cycle and ride on their promotional effort. Otherwise, you’ll lose fortune against them!

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To Your Stocks Trading Success,
A Professional Stocks and Forex Market Trader
Dan A.