Investment Glossary

Pacific Clearing Corporation (PCC)

The clearing corporation of the Pacific Stock Exchange.

Pacific Stock Exchange (PSE)

An exchange operating in San Francisco and Los Angeles.

Par Value

The face value of a bond.

Participating Preferred

A type of preferred stock giving holders the right to "participate" in any dividends payouts for common stock over and above those normally paid to common and preferred stockholders.

Pass-Through Security

Instrument representing an interest in a pool of mortgages, paying interest and principal on a monthly basis.

Payee

The person or business receiving a payment.

Payment Date

The date on which an announced stock dividend or a bond interest payment is to be made.

Payout Ratio

The percent of earnings-per-share that was paid out as dividend, calculated by dividing the quarterly dividend by the quarterly EPS then multiplying by 100.

PCC

See Pacific Clearing Corporation.

PE (Price/Earnings Ratio)

See Price/Earnings Ratio.

PEG Ratio

The price-to-earnings-growth ratio is used to find companies that are trading at a discount to the potential future growth. It is calculated by dividing a stock's forward P/E by its projected three- to five-year annual EPS growth rate. Lower PEG ratios represent a better value, since the investor would be paying less for future earnings growth.

Penny Stocks

Securities priced less than $5 per share, often highly speculative investments.

Percent in Top Five Holdings

Proportion of total assets in the fund's largest five positions.

Phantom Interest

The interest accreted annually from a zero-coupon security, even though payment of interest isn't made until the zero matures.

PIN

A personal identification number, designed for secure access into an account for the account holder only.

Pink Sheets

Daily publication providing dealer names and quotes on over-the-counter penny stocks that are not included in NASDAQ listings. It is actually printed on pink paper.

Pit

The circular area on a trading floor, where futures and options are bought and sold.

Pivot

A price level noted by the market's failure to penetrate or a sudden increase in volume that accompanies the move through the price level.

Point

A price movement of one full increment.

Point and Figure Chart

A chart that only displays whole integer changes in price, disregarding the element of time.

Portfolio

An investor's combined investment holdings, including cash, stocks, bonds, mutual funds and real estate.

Portfolio Turnover

A measure of the portfolio trading activity for a mutual fund, calculated by dividing the lesser of purchases or sales by the average total asset value for the year.

Position Limits

The maximum number of option contracts of a particular listed security that may be held by an investor.

Preemptive Right

An opportunity for current shareholders to maintain their percentage of ownership if additional shares of the same class are issued. The preemptive right allows them to purchase new shares at a specific price.

Preference Shares

See Preferred Stock.

Preferred Stock

Stock that represents ownership in the issuing corporation, with a specific dividend which accumulates if not paid. In the case of bankruptcy, preferred stock has a claim on assets ahead of common stockholders but after debentures.

Premium (Bonds)

A bond selling at a current market price that is above its face value. Bonds sell at a premium when the coupon on the bond is higher than prevailing rates.

Premium (Options)

The price paid by the buyer to the option writer for the rights to the option contract.

Pre-Tax Margin

The profitability of a company before paying taxes, calculated by dividing pre-tax earnings by revenues.

Price/Book

The ratio of a stock's latest closing price divided by its book value per share. Book value per share is obtained by dividing the book value (total assets minus total liabilities) by total shares outstanding.

Price/Cash Flow

The ratio of a stock's latest closing price divided by cash flow per share of the last 12 months.

Price/Earnings Ratio

The ratio obtained by dividing the current share price by the latest earnings per share. The historical average PE ratio for stocks has been around 15.

Price/Sales

The ratio of a stock's latest closing price divided by revenue per share. Since this ratio reveals little about the profitability of a company, it is usually used for companies with no earnings, since those companies have an undefined P/E ratio.

Price Spread

A simultaneous purchase and sale of two options with the same expiration date but different exercise prices.

Price-Weighted Index

An index calculated by adding together stock prices to compute a figure that indicates the general condition of the market, such as the Dow Jones Index.

Primary Dealer

An institution recognized by the Treasury Department as eligible to bid on Treasuries when they are initially issued and to make a market for secondary buyers.

Primary Market

The market for new securities purchase directly from the issuer.

Principal

The role played by a brokerage firm when it acts as a dealer, trading securities for its own account.

Principal (Bond)

The face value of a bond.

Private Company

A company where all ownership is held privately.

Private Placement

An issue offered to selected investors as opposed to being publicly offered.

Privatization

Conversion of a state-run company to a public-limited company by selling its shares to the public.

Profit Margin

An indicator of profitability, calculated by dividing net income by revenue for a specific period.

Program Trading

Trades entered into a computer program to be executed automatically.

Prospectus

A detailed document for a new security issue explaining the terms, issuer, officers, public accounting firms, legal opinion, and core business. Required by the Securities Act of 1933 to be made available to any client who purchases the issues.

Proxy

Document transferring the shareholder's voting rights, usually to a member of the company's management, to represent the shareholder's interests at a shareholder meeting.

Proxy Fight

An attempt by a dissident group to take over the management of a corporation, sending proxies electing them to the board while the current management sends proxies favoring themselves. Shareholders vote between one proxy or the other.

PSE

See Pacific Stock Exchange.

Public Market

The listed exchanges through which zero-coupon investments can be purchased and sold.

Public Offering Date

The first day new security issues are offered to the public.

Purchase Price

The price paid for the purchase of a Treasury or agency security.

Put

An option contract that gives the holder the right to sell a stated number of shares of the underlying security at a specified strike price to the writer of the put, up to the expiration date.