What Are Stock Holdings?

In the investment management industry, the term “holdings” or “positions” is used to refer to what you own in an investment account.  For example, if you have a 401K account that has a few stocks, like Apple and Amazon, then you have 2 holdings or 2 positions in your account.  
The general term “holdings” can refer to any type of investment, including stocks, bonds, mutual funds, ETFs, real estate, etc.  Additionally, investment professionals typically refer to “stock holdings” as “equity holdings.”  Equity sounds a lot fancier!

What Is the Market Value a Stock (Equity) Holding?

The market value is of a stock is how much you can sell it for (similar to the market value of your house, your car, etc.).  Therefore, we use the price of the stock from the exchange it is being sold on to compute its market value.   And since you can own multiple shares of a stock, the calculation of its market value will require 2 items:
1) Price
2) Number of shares
Value of Stock (Equity) Holding = Price * Number of Shares
For example, if you own 100 shares of Apple and were given the following prices, what would the market value be as of November 12th?

Price of Apple Stock from NASDAQ exchange (source: Yahoo Finance)

Wow, there’s many prices here.  Which one do we use?  Well, if you used the open price, you would calculate the market value of the stock when the exchange opened on that day.  Using the closing price, you would calculate the market value of the stock when the exchange closed that day.  Typically, in the investment industry, the market value of a stock will use the closing prices from the exchange or an average of the closing prices from different exchanges.
For our purposes, we will use the closing price from the primary exchange Apple trades on which is the NASDAQ.  The closing price on November 12th was 194.17.  You hold 100 shares.  Using our formula from before, the market value will be:
Market Value of Apple Stock Holding in Your Account = Price * Shares = 194.17 * 100 = $19,417.00 
 
However, some stocks also pay dividends.
And dividends are can cause a bit of an issue when calculating market value due to delayed payment of them – the time between you are owed the dividend (called “ex” date) and the time you get the cash (called “payment” date). 
In between ex and payment date, the dividend will be reflected as something called an “accrual” in the accounting system.  That is a fancy way of the system saying you are owed this cash. 
For example, Apple paid the following dividend with an ex date of 11/8 and payment date of 11/15.

Since we own 100 shares, and the “cash amount” is per share, we will be owed $73 (100 * .73).  Some systems will add this accrual amount to the value of the equity holding.  In that case, the market value of our Apple holding would be:
Value of Apple Holding = (Price * Shares) + Unpaid Dividend Accrual = ($194.17 * 100) + $73 = $19,417 + $73 = $19,490
Other systems will include the unpaid dividends in cash, which would give you:
Value of Apple Holding = $19,417
Value of Unsettled Cash = $73
Which is right?  From a perspective of measuring returns, my personal opinion is that it should be included in the cash value and not the stock.   This is typically done in equity benchmarks and attribution systems, so the stock return matches the price change in between ex and payment date.  However, there are some advantages to including it in the value of equity.

 

A Call For Your Input

Did you like this post?  Or feel that something is missing?  Please comment below or contact me at info@learninvestmentperformance.com and give me your feedback!

 

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