October 22, 2015
Hello from Dudley Pierce Baker and Common Stock Warrants,
For our current subscribers and others interested in stock warrants I want to explain how we calculate and determine Our Current Rating on all of the stock warrants trading which we provide to subscribers in our databases.
From day one with our services, we have followed the views and principles of Sidney Fried laid out in 1961 in his booklet, “The Speculative Merits of Common Stock Warrants”.
Click Here to receive your free copy.
Basically the determination of leverage is based upon the premise of “What If”
What If, the price of the common shares rise by 100%, Then, what will the stock warrants do?
Thus, if the price of the common shares doubles (100% gain) we are looking for a leverage of 1.7 or more, meaning we are looking for the stock warrants to greatly outperform the common shares which is exactly why investors look to purchase stock warrants.
Leverage is a mathematical calculation and ignores any premiums associated with the price of the stock warrants trading in the markets.
Most recently we have placed all of the leverage calculations and ratings in a database format providing us with an objective and mathematical determination to determine Our Current Rating.
In our Learning Center we describe the basics and encourage you to review our comments.
“Defining Over Valued, Fair Value and Under Valued
We determine current warrant valuations as follows:
After updating all prices and calculations, we review the leverage calculations once a week on all of the warrants. We are looking at many factors, including the bottom-line leverage and the remaining life of the warrant.
UnderValued = a current leverage of 1:7 to 1 or higher (this is correct, anything over 1.7 is great leverage)
FairValue = a current leverage of 1:1 to 1:6 to 1 (this is similar to a neutral leverage/perhaps buy the common shares.
OverValued = a current leverage of less than 1:1 to 1 (should normally be avoided), at least for now and may indicate the warrants are expiring soon.
Also, remember, the valuations will change as the price of the common shares and the warrants fluctuate. In fact, it is possible for the rating to get a better as the price of the common shares and warrants increase and the warrants to be a ‘better buy’ even though at a higher price due to the relationship of the prices of each. We realize you may be surprised that one warrant at C$.85 is perhaps a ‘better value’ than when the warrant was selling for C$.45.”
There are many great opportunities in stock warrants trading in the United States and Canada, in the resource sector, bio-techs, pharmaceuticals, financials, restaurants, oil and gas companies and many more sectors.
With stock warrants, as with options and LEAPS, timing is everything and the current investment landscape is providing investors with this great buying opportunity.
If you are not a current subscriber to our services, we welcome you to Join Us Now.
Dudley Pierce Baker