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FOLITIC / STOCKS EXPLAINED

Stocks Explained

Understand stock ownership, read the financial evidence and build a disciplined investment research process. Follow six learning stages from market foundations to a complete stock research note.

Start with What a share represents and why ownership matters, then follow the next lesson links. Explore 24 lessons with worked examples, exercises and further reading.

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Stock Market Foundations

Understand ownership, returns, orders and the changing share count.

Beginner

What a share represents and why ownership matters

A share is a claim on a business, not simply a price on a screen. Begin with ownership, shareholder rights and the difference between value and...

Beginner

How stock returns, dividends and losses fit together

Share price changes and dividends contribute to total return, while costs, taxes and inflation affect what the investor actually keeps.

Beginner

How stock markets, orders and execution work

An order is an instruction with tradeoffs. Understand the bid, ask, order type and available liquidity before interpreting the price you see.

Beginner

Share counts, stock splits and dilution explained

A changing share count can alter what each share represents. Learn why a stock split differs from issuing shares to new owners.

Financial Statements

Connect profit, financial position, cash generation and the details in company reports.

Beginner

Read an income statement from revenue to profit

Revenue is the beginning of an income statement. Follow the costs and ownership claims before deciding what the reported profit means.

Beginner

Read a balance sheet through assets, debt and equity

A balance sheet shows how a business is financed and what resources support it. Read liquidity, liabilities and equity together.

Beginner

Why profit and cash flow tell different stories

Cash flow connects accounting profit with the money entering and leaving a business. Working capital and investment often explain the gap.

Beginner

Find the important details in annual reports and notes

The most useful details often sit outside the earnings headline. Build a repeatable route through the annual report, notes and management commentary.

Business Quality

Analyse unit economics, competitive advantages, management and resilience.

Intermediate

Understand a business model through unit economics

Follow the money from customer demand to the cost of serving it. Unit economics reveals whether growth improves the business or expands its losses.

Intermediate

Test competitive advantages with returns on capital

A competitive advantage matters when it supports durable economics. Test the story against returns on capital and the cost of future reinvestment.

Intermediate

Judge management through incentives and capital allocation

Management decisions determine where business cash goes. Evaluate incentives, investment, acquisitions and distributions with the same ownership discipline.

Intermediate

Recognise cycles, operating leverage and financial pressure

Fixed costs and borrowing can magnify changes in demand. Analyse a difficult operating year before relying on the profits of a strong one.

Valuation

Connect market prices with cash flows, scenarios and shareholder returns.

Intermediate

Use earnings multiples and enterprise value carefully

A valuation multiple is a compact set of assumptions. Match the price measure to the profit measure before comparing companies.

Intermediate

Build a discounted cash flow valuation from assumptions

Discounted cash flow turns a business forecast into an estimate of present value. The useful output is a transparent set of assumptions and sensitivities.

Intermediate

Use scenarios and a margin of safety in valuation

A valuation range is more useful than false precision. Scenarios reveal which business outcomes justify a price and where uncertainty remains.

Intermediate

Evaluate dividends and buybacks as uses of capital

Dividends and buybacks both return capital, but their effects differ. Evaluate sustainability, valuation and the shares that remain after issuance.

Portfolio Building

Manage concentration, position size, rebalancing and international exposure.

Advanced

Build diversification beyond the number of stocks

Diversification depends on the risks underneath each holding. Several different stock names can still rely on the same customers, funding or economic cycle.

Advanced

Size stock positions around loss capacity

Position size determines how much an investment outcome matters to the whole portfolio. Start with loss capacity and uncertainty before considering conviction.

Advanced

Rebalance with rules, costs and investment discipline

A portfolio needs maintenance rules as well as purchase decisions. Rebalancing can control drifting exposures while costs and taxes influence how to implement it.

Advanced

Compare international stocks, currencies and stock funds

International investing adds different businesses and different risks. Understand the security structure, currencies and costs before comparing global opportunities.

Advanced Stock Research

Challenge earnings quality, test expectations and complete a stock research note.

Advanced

Investigate earnings quality and accounting warning signs

Earnings quality asks how reported profits connect to sustainable cash generation. Investigate unusual trends without turning a warning sign into an accusation.

Advanced

Connect growth, reinvestment and market expectations

Growth creates value only when its economics justify the capital required. Connect reinvestment, incremental returns and the expectations already embedded in price.

Advanced

Write a stock thesis that evidence can challenge

A research thesis should make clear what must happen, why it matters and what evidence would prove it wrong. Price movement alone is not that evidence.

Advanced

Build a complete stock research note

Bring the learning path together in a complete research note. Connect the business, accounts, valuation and portfolio consequences before forming a conclusion.

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