ASK THE FOOL
The Nasdaq vs. the NYSE
Q: I read that PepsiCo left the New York Stock Exchange (NYSE) and is now listed and trading on the Nasdaq stock-market index. Why would a company do that?
A: It makes little difference to us investors buying and selling shares of NYSE and Nasdaq companies, but there can be meaningful differences for the companies. Two common considerations are prestige and cost.
The NYSE dates back to 1792 and is more prestigious. The Nasdaq was born in 1971 as a computerized trading system, while the NYSE, long relying on people to execute its trading, now uses both humans and electronics
It generally costs more to be listed on the NYSE, and that’s where you’ll find many old, established blue-chip companies, such as Coca-Cola, Disney and Boeing. The Nasdaq is home to many tech-heavy and faster-growing businesses, including large ones such as Amazon.com, Microsoft, Facebook and Apple.
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Each market has its own rules and requirements for listed companies, with Nasdaq being less demanding. Most companies debuting on the market via an initial public offering (IPO) do so on the Nasdaq.
Q: Last year I noticed that two companies in the same industry had similar stock prices. One has seen its price rise, while the other has fallen. Can you explain why?
A: The similar prices were pretty much a coincidence. No two companies are exactly the same, even if they’re in the same business. Each will have its own strengths, weaknesses, risks and growth prospects. The stock of each might be overvalued or undervalued, and it might be about to rise or fall. Much depends on how investors view the company, and what they expect of it.
MY DUMBEST INVESTMENT
Dear Fool: Selling Netflix back in 2010 is definitely the costliest mistake I’ve made, even though it was a four-bagger at the time, quadrupling the value of my investment.
I sold after holding it for about three years. I thought I did the right thing after I saw it plummet, but then it shot straight back up. I could be sitting on about a 25-bagger, if I’d just held on. Lesson learned — have patience.
The Fool responds: It may sound trite, but patience really is powerful in investing.
Netflix’s history has been a bit volatile. In 2011 the company announced plans to split its DVD-by-mail business from its video-streaming business, naming the DVD business “Qwikster.” The…