What Is Alphabet Stock?

An alphabet stock refers to a separate class of common stock that is tied to a specific subsidiary of a corporation. More broadly, it refers to shares of common stock that are distinguished in some way from other common stock of the same company.

It is called an alphabet stock because the classification system used to identify each class of common stock uses letters to distinguish it from the parent company’s stock. Alphabet stock may have different voting rights from the parent company’s stock.

Understanding Alphabet Stock

Publicly traded companies may issue alphabet stock when purchasing a business unit from another company. This unit becomes a subsidiary of the acquirer, and holders of the alphabet stock are only entitled to the earnings, dividends, and rights of the subsidiary, not the entire acquirer. A similar situation would be the issuance of tracking stock, where a firm issues a subclass of shares on an existing subsidiary.

Alternatively, like with all stock issuance, a firm may issue a new class of common stock to raise capital. However, this new asset class of stock may have limited voting rights, allowing insiders and management to maintain control of the firm.

Alphabet shares may be indicative of a complex capital structure. Companies with complex capital structures and several subsidiaries and divisions may have a combination of several different varieties of common stock classes, with each share class carrying different voting rights and dividend rates.

Special Considerations

When alphabet stock is issued, typical nomenclature is to see a period and letter behind the existing stock symbol, indicating a separate share class. So, for example, if ABC company, whose stock symbol is ABC, issued Class A and B shares, the new ticker for these shares would be ABC.A. and ABC.B., respectively.

There is no standard format for alphabet stock in terms of which share class has more voting rights if voting rights differ among them. Typically, Class A shares would have more rights than Class B, and so forth, but it is important to read the details about share classes before investing. To learn more about the issuance of multiple share classes by a firm, check out related writing on the topic.

What Is an Assortment Strategy?

An assortment strategy in retailing involves the number and type of products that stores display for purchase by consumers. Also called a “product assortment strategy,” it is a strategic tool that retailers use to manage and increase sales. The strategy is made up of two major components:

1. The depth of products offered, or how many variations of a particular product a store carries (e.g. how many sizes or flavors of the same product).
2. The width (breadth) of the product variety, or how many different types of products a store carries.

How Assortment Strategies Work

Essentially, a product assortment strategy is a retail industry sales tool with the concepts of depth and breadth at its core. However, not all retailers will be able to use both components of this strategy at the same time.

An assortment strategy can have many layers of sub- and related strategies, as each store will need to tailor the strategy to address its own particular needs and goals.

A deep assortment—the opposite of a narrow assortment—of products means that a retailer carries a number of variations of a single product. A wide variety—the opposite of a narrow variety—of products means that a retailer carries a large number of different kinds of products.

A Challenge for Small Stores

Retailers face a trade-off when determining an assortment strategy. Choosing both a wide variety and a deep assortment of products simultaneously requires a large amount of space, and is typically reserved for big-box retailers.

Stores with smaller spaces may choose to specialize in a certain type of product and offer customers a variety of colors and styles; other stores may offer a deep assortment of products but a narrow variety—one reason why a 7-Eleven (private since 2005) might carry just one brand of canned cat food, for example, while a Kroger (NYSE: KR) likely would have the space to stock 12 brands of canned cat food, if it chose to.

A Brick-and-Mortar Term

Originally, assortment strategy referred only to brick-and-mortar stores because the strategy’s components of depth and breadth had a lot to do with physical space and the visual and tactile interaction between consumer and product. Recently, though, all sales venues—brick-and-mortar, click and mortar, and e-tailing—have used varieties of the strategy to gain competitive advantage.

Adjusting for Demographics

By grouping together items that they believe will appeal to certain types of customers, retailers may fine-tune their assortment strategies to target consumers’ demographic profiles. If a retailer wants to attract customers who are new parents, for example, it might fill the shelves with infant apparel from trendy brands, along with toys, bedding, and other products new parents need.

A Strategic Selling Tool

A strategically arranged product assortment can upsell customers on supplemental items as they search for the item that brought them to the store.

Grouping related items together strategically, whether or not they are necessities, is a common way to stimulate impulse buying:

• By placing garden hoses near sprinklers and other lawn-care products, a retailer might drive more into a customer’s basket. Likewise, installing a luxurious patio dining set—complete with attractive outdoor dishware and bar accessories—in the middle of the more prosaic yard-care products could even send some customers scurrying to the housewares section of the store.
• A presentation of flashlights—or any battery-driven product—could include a nearby display of the batteries needed to use the product. Or a manager could locate the batteries near the check-out counter to remind customers before they leave the store that the flashlight won’t work without batteries.

Potential Disadvantages of Assortment Strategies

Although the depth of product assortment may help attract customers, there are certain caveats to relying only on an assortment strategy. If items in an assortment are placed incorrectly, the demand for these products may vary drastically.

If less-popular items are mixed in with popular items, for example, they could detract from the more-popular items’ appeal. Or, if the assortment is too vast, customers may have difficulty finding the item they are seeking. Overwhelming shoppers with too many buying options can be counterproductive and discourage customer engagement.

What Was the 500 Shareholder Threshold?

The 500 shareholder threshold for investors is an outdated rule required by the Securities and Exchange Commission (SEC) that triggered public reporting requirements of a company when it reached that many or more distinct shareholders. Section 12(g) of the Securities Exchange Act of 1934 calls for issuers of securities to register with the SEC and begin public dissemination of financial information within 120 days of the end of a fiscal year.

New regulations now require a 2,000 shareholder threshold.

Understanding the 500 Shareholder Threshold

The 500 shareholder threshold was originally introduced in 1964 to address complaints of fraudulent activity appearing in the over-the-counter (OTC) market. Since firms with fewer than the threshold number of investors were not required to disclose their financial information, outside buyers were not able to make fully informed decisions regarding their investments due to a lack of transparency and allegations of stock fraud.

The 500 shareholder threshold forced companies that had more than 499 investors to provide adequate disclosure for the protection of investors and for oversight by regulators. Although the company could remain privately-held, it would have to file public documents in similar fashion to those of publicly traded companies. If the number of investors fell back below 500, then the disclosures would no longer be required.

Private companies generally avoid public reporting as long as possible by keeping the number of individual shareholders low, which is helpful because mandatory reporting can consume a great deal time and money and also places confidential financial data in the hands of competitors.

The 2,000 Shareholder Threshold

With the ascendancy of startup firms in the technology sector in the 1990s and 2000s, the 500 shareholder threshold rule became an issue for swiftly growing companies like Google and Amazon that desired to remain private even as it attracted more private investors. While other factors were supposedly in play in the decision of these well-known giants to go public, the 500 rule was a key consideration, according to market observers.

The threshold was thus increased to 2,000 shareholders in 2012 with the passage of the Jumpstart Our Business Startups (JOBS) Act. Now, a private company is allowed to have up to 1,999 holders of record without the registration requirement of the Exchange Act. The current 2,000-shareholder threshold gives the new generation of super-growth companies a bit more privacy and breathing room before they decide to file for an initial public offering (IPO).

What Is the 52-Week Range?

The 52-week range is a data point traditionally reported by printed financial news media, but more modernly included in data feeds from financial information sources online. The data point includes the lowest and highest price at which a stock has traded during the previous 52 weeks.

Investors use this information as a proxy for how much fluctuation and risk they may have to endure over the course of a year should they choose to invest in a given stock. Investors can find a stock’s 52-week range in a stock’s quote summary provided by a broker or financial information website. The visual representation of this data can be observed on a price chart that displays one year’s worth of price data.

Understanding the 52-Week Range

The 52-week range can be a single data point of two numbers: the highest and lowest price for the previous year. But there is much more to the story than these two numbers alone. Visualizing the data in a chart to show the price action for the entire year can provide a much better context for how these numbers are generated.

Since price movement is not always balanced and rarely symmetrical, it is important for an investor to know which number was more recent, the high or the low. Usually an investor will assume the number closest to the current price is the most recent one, but this is not always the case, and not knowing the correct information can make for costly investment decisions.

Two examples of the 52-week range in the following chart show how useful it might be to compare the high and low prices with the larger picture of the price data over the past year.

These examples show virtually the same high and low data points for a 52-week range (set 1 marked in blue lines) and a trend that seems to indicate a short-term downward move ahead.

The overlapping range on the same stock (set 2 marked in red lines) now seems to imply that an upward move may be following at least in the short term. Both of these trends can be seen to play out as expected (though such outcomes are never certain). Technical analysts compare a stock’s current trading price and its recent trend to its 52-week range to get a broad sense of how the stock is performing relative to the past 12 months. They also look to see how much the stock’s price has fluctuated, and whether such fluctuation is likely to continue or even increase.

The information from the high and low data points may indicate the potential future range of the stock and how volatile its price is, but only the trend and relative strength studies can help a trader or analyst understand the context of those two data points. Most financial websites that quote a stock’s share price also quote its 52-week range. Sites like Yahoo Finance, Finviz.com and StockCharts.com allow investors to scan for stocks trading at their 12-month high or low.

Current Price Relative to 52-Week Range

To calculate where a stock is currently trading at in relations to its 52-week high and low, consider the following example:

Suppose over the last year that a stock has traded as high as $100, as low as $50 and is currently trading at $70. This means the stock is trading 30% below its 52-week high (1-(70/100) = 0.30 or 30%) and 40% above its 52-week low ((70/50) – 1 = 0.40 or 40%). These calculations take the difference between the current price and the high or low price over the past 12 months and then convert them to percentages.

52-Week Range Trading Strategies

Investors can use a breakout strategy and buy a stock when it trades above its 52-week range, or open a short position when it trades below it. Aggressive traders could place a stop-limit order slightly above or below the 52-week trade to catch the initial breakout. Price often retraces back to the breakout level before resuming its trend; therefore, traders who want to take a more conservative approach may want to wait for a retracement before entering the market to avoid chasing the breakout.

Volume should be steadily increasing when a stock’s price nears the high or low of its 12-month range to show the issue has enough participation to break out to a new level. Trades could use indicators like the on-balance volume (OBV) to track rising volume. The breakout should ideally trade above or below a psychological number also, such as $50 or $100, to help gain the attention of institutional investors.