Fort Myers Florida Weekly

Ask the Fool


Q: What does “street name” refer to?

— F. B., Kankakee, Illinois

A: In the old days, you’d buy stock and receive a paper certificate. These days, most brokerages actually hold any stock you buy in “street name” (their own name) instead of putting the shares in your name and mailing you the certificates. This is routine, and the shares still belong to you. Many people prefer the new system, as it permits the shares to be sold more quickly, without your having to find and mail back the certificates.

You can learn more about brokerages and find an inexpensive one at


Q: What’s the difference between market value and intrinsic value?

— M. G., Santa Maria, California

A: Imagine Tattoo Advertising Co. (ticker: YOWCH). Its intrinsic value is what it’s really worth, based on factors such as its assets and debt, its anticipated growth rate and, ultimately, the amount of cash it’s expected to generate over its lifetime. Unfortunately, that’s not easy to determine, and different smart analysts will arrive at different numbers. Intrinsic value can change, too, if the company’s competitive position, performance or prospects change. A competitor offering a new and better product can shrink a company’s intrinsic value.

Market value, meanwhile, is what investors are willing to pay for a company, reflected by its stock price. It’s typically measured by calculating the company’s “market capitalization” (or “market cap”): If Tattoo Advertising has 100 million shares outstanding and the current share price is $80, then its market cap is $8 billion (100 million times $80 is $8 billion).

If a high-quality company’s estimated intrinsic value is significantly higher than its market value, then its stock is likely undervalued and worth considering for your portfolio.

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