How can I make sense of the numbers?
Pictures often tell a story far better than words or numbers. I could describe a dragonfly as an insect that has four wings, a long slender body and huge eyes. But that lacks power. A picture tells you so much more. We have often heard the phrase “a picture is worth a thousand words.” A picture or graph can often take a thousand numbers and paint a helpful view for a probing investor.
Here are three reasons I think charts can be helpful to an investor: A chart…
- Can reveal trends in the price of a stock, the changes in a dividend or the direction earnings have gone and may likely continue to go.
- Makes it possible to quickly compare two different investments.
- Can help you estimate future results or opportunities based on past behaviors. For example, if a stock bounces up and down between two prices several times in a year, it might be possible for a wise trader to use that information to “buy low and sell high.”
One good tool is the free Stock Charts tool. Here is a link that shows the price of AT&T (T) stock against a competitor, Verizon (VZ). A chart doesn’t tell you about the quality of an investment, so there are other data elements to consider. You should also evaluate how news stories or the performance of a sector might be influencing prices. The Stock Charts view will not tell you which company is more diversified or has growing earnings.
Here is the chart after I tweaked some of the default settings for “color scheme” and to add the Y-Axis ending values: