Mar 18 • 24M

Building Equity via Public Companies

Wall Street Meets Main Street, Part 1

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Episode details

This segment first appeared in the 12/30/22 episode of the Atlanta Real Estate Report…

Discussion Outline

  • What defines a “public” company?

    • They go from private to public via an Initial Public Offering (IPO)

    • Securities trade in the public markets (NYSE, NASDAQ)

    • Business and financial information disclosed to the public on a regular basis

  • Ways to invest in publicly traded companies

    • Stocks = Equity = Owner = Wealth Creation

    • Bonds = Debt = Creditor = Income Generation

    • Derivatives (options & futures) — hedging, speculation and income generation

    • Investing vs. Trading (own vs rent; local vs tourist)

  • Many people own public companies directly in the form of individual stocks and/or participate indirectly via ETFs, mutual funds and 401k plans

  • Typically, larger than private companies

  • Regional, national or international footprint

    • Private companies tend to be local, especially in the residential RE space

  • Continuous and real time “price discovery” while the markets are open

    • Subtle but important point

    • Makes them highly liquid

    • Contrast this to direct ownership of real property

    • Highly efficient vs highly inefficient pricing (objective vs subjective)

    • This is the key difference between stocks and real property!

  • Stock prices are a leading indicator of…

    • Economic activity at the index level (DJIA, S&P 500, etc.)

    • Industry trends at the industry level (banks, home builders, etc.)

    • A company’s outlook at the stock-specific level

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