Can Investors Trust The P/E Ratio?

Initially popularized by the legendary value investor Benjamin Graham (one of Warren Buffett's mentors), few stock market metrics have cycled in and out of favor as often as the P/E ratio. Price/earnings ratios are used to assess the relative attractiveness of a potential investment. Trailing P/E uses the current share price and divides by the total earnings per share (EPS) over the past 12 months. Forward P/E uses the current share price and divides by expected EPS in the future period. The resulting number can provide some insight into the value of an investment, though just how clear a view is still up for debate.

What's a Good P/E Ratio?
In his book "Security Analysis," which was first published in 1934, Graham suggests that a P/E ratio of 16 "is as high a price as can be paid in an investment purchase in common stock."

Does that mean all 16s have the same value? No.

"This does not mean that all common stocks with the same average earnings should have the same value," Graham explained. "The common-stock investor will properly accord a more liberal valuation to those which have current earnings above the average, or which may reasonably be considered to possess better than average prospects."

To Graham, P/E ratios were not an absolute measure of value, but rather a means of establishing a "moderate upper limit" that he felt was crucial in order to "stay within the bounds of conservative valuation." He was also aware that different industries trade at different multiples based on their real or perceived growth potential.

How a "Good" P/E Ratio Changed Over Time
Of course, this moderate upper limit was all but abandoned some 20 years after Graham's death, when investors flocked to buy any issue ending in ".com". Some of these companies sported P/E ratios best expressed in scientific notation. Even before the dotcom madness, however, there were those who felt comparing a stock's price to its earnings was shortsighted at best, and pointless at worst.

Is the P/E Ratio Accurate?
Not every time, as William J. O'Neill, the founder of Investor's Business Daily, asserts in his 1988 book "How to Make Money in Stocks." He concluded that "contrary to most investors' beliefs, P/E ratios were not a relevant factor in price movement."

To demonstrate his point, O'Neill pointed to research conducted from 1953 to 1988 that showed the average P/E ratio for the best-performing stocks just prior to their equity explosion was 20, while the Dow's P/E ratio for the same period averaged 15. In other words, by Graham's standards, these soon-to-be-superstar stocks were overvalued.

Does P/E Revert to Industry Norms?
In theory, stocks trading at high multiples will eventually revert back to the industry norm - and vice-versa for those issues sporting lower earnings-based valuations. Yet, at various points in history, there have been major discrepancies between theory and practice where high P/E stocks continued to soar as their cheaper counterparts stayed grounded, just as O'Neill observed. On the other hand, the reverse has held true during other time periods, which then supports Ben Graham's investment process.

Further, over the last 20 years, there has been a gradual increase in P/E ratios as a whole, despite the fact the stock market has been no more volatile than in years past. Using data presented by Yale University Professor Robert Shiller in his 2000 book "Irrational Exuberance," one finds that the price-earnings ratio for the S&P 500 Index reached historic highs toward the end of 2008 through the third quarter of 2009. The index posted a remarkable 38% gain during the same period, despite abnormally high investment ratios.

Years	Median P/E Ratio
1900-1910	13.4
1911-1920	10.0
1921-1930	12.8
1931-1940	16.2
1941-1950	9.5
1951-1960	12.6
1961-1970	17.7
1971-1980	10.4
1981-1990	12.4
1991-2000	22.6
2001-2010	22.4
Table: S&P 500 Index Median P/E Ratios
Source: Schiller, Robert. "Irrational Exuberance" [Princeton University Press 2000, Broadway Books 2001, 2nd ed., 2005]

Can the P/E Ratio Be Adjusted?
Was O'Neill right to assume P/E ratios have no predictive value? Or that, in today's technology-driven economy, the ratios have become passe? Not necessarily. The key to effectively using P/E ratios, many experts claim, is to exam them over longer periods of time while integrating forward-looking data like earnings estimates and the overall economic climate.

PEG ratios present a simple way to accomplish this. Made fashionable by famed money manager Peter Lynch, PEG ratios are similar to P/E ratios, but are divided by annual EPS growth to standardize the metric. For example, if a company has a P/E of 10 and growth rate of 5%, its PEG ratio would be 10/5=2. The rationale behind PEG ratios is that higher growth prospects justify a higher P/E ratio. Therefore, if the P/E ratio is the same for two companies, the one with higher growth rate i.e. lower PEG ratio is better since it costs less for per unit of growth. "One Up on Wall Street," (first published in 1989) Lynch wrote, "the P/E ratio of any company that's fairly priced will equal its growth rate."


Fundamental Analysts Still Like P/E
People who follow a rigorous fundamental analysis approach to investing still think P/E is quite useful, citing the tech bubble pop as a prime example of the sticky mess investors can find themselves in when they don't take heed of earnings and price.

Key Points to Consider About P/E

1. It is best to compare P/E ratios within a specific industry. This helps ensure the price-earnings performance is not simply a product of the stock's environment.

2. Be wary of stocks sporting high P/E ratios during an economic boom. The old saying that a "rising tide lifts all boats" definitely applies to stocks - even many bad ones - so it's wise to be suspicious of any upward price movement that isn't supported by some logical, underlying reason outside of the general economic climate.

3. Be equally dubious of stocks with low P/E ratios that appear to be waning in prestige or relevance. In recent years, investors have seen a number of formerly solid companies hit the skids. In these instances, it's foolish to think the price will magically increase to match the earnings and boost the stock's P/E ratio to a level consistent with the industry norm. It is far more likely that any P/E increase will be the direct result of eroding earnings, which isn't the P/E "bounce" bullish investors are looking for. The Bottom Line
While investors are probably wise to be wary of P/E ratios, it is equally prudent to keep that apprehension in context. While P/E ratios are not the magical prognostic tool some once thought they were, they can still be valuable when used in the proper manner. Remember to compare P/E ratios within a single industry, and while a particularly high or low ratio may not spell disaster, it is a sign worth considering.

Best Value Stocks To Invest In Right Now

By investing in an IPO ETF, investors gain exposure to IPOs during their introduction to the market, while also helping them diversify their investment across a pool of IPOs from varying sectors and industries. This will benefit investors with possibility of better returns and lower risks, and it is more convenient than investing in all these IPO�� individually.

Many investors are attracted to IPO ETFs because they follow a large pool of IPOs, rather than exposing the investor to one or a few selected companies. This gives the investors the advantage of the potential upside in the share price from the date of IPO, and also gives them an entry into good companies at lower prices than they are likely to get later on.

However there are no guaranteed returns when investing in stocks, and particularly in IPOs, the stock values are prone to irrational swings - both on the upside and downside. It is good to bear in mind that unlike a traditional mutual fund or compared to directly investing in an IPO, these ETF�� will give the investor a lower cost structure since they are passively managed.

Best Value Stocks To Invest In Right Now: Tupperware Corporation(TUP)

Tupperware Brands Corporation operates as a direct seller of various products across a range of brands and categories through an independent sales force. The company engages in the manufacture and sale of kitchen and home products, and beauty and personal care products. It offers preparation, storage, and serving solutions for the kitchen and home, as well as kitchen cookware and tools, children?s educational toys, microwave products, and gifts under the Tupperware brand name primarily in Europe, Africa, the Middle East, the Asia Pacific, and North America. The company provides beauty and personal care products, which include skin care products, cosmetics, bath and body care, toiletries, fragrances, nutritional products, apparel, and related products principally in Mexico, South Africa, the Philippines, Australia, and Uruguay. It offers beauty and personal care products under the Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo, and Swissgar de brand names. The company sells its Tupperware products directly to distributors, directors, managers, and dealers; and beauty products primarily through consultants and directors. As of December 26, 2009, the Tupperware distribution system had approximately 1,800 distributors, 61,300 managers, and 1.3 million dealers; and the sales force representing the Beauty businesses approximately 1.1 million. The company was formerly known as Tupperware Corporation and changed its name to Tupperware Brands Corporation in December 2005. The company was founded in 1996 and is headquartered in Orlando, Florida.

Advisors' Opinion:

• [By Eric Volkman]

  Tupperware Brands (NYSE: TUP  ) is reaching into its corporate bowl for a fresh payout to shareholders. The company has declared a quarterly dividend of $0.62 per share. This will be paid on July 8 to stockholders of record as of June 19. That amount matches the firm's previous distribution, which was paid in early April. Prior to that, Tupperware Brands was rather less generous, handing out $0.36 per share.

• [By Arie Goren]

  After running this screen on May 21, 2013, before the markets' open, I discovered the following eight stocks: Sunoco Logistics Partners LP (SXL), Leggett & Platt Inc (LEG), Copa Holdings SA (CPA), RPC Inc. (RES), Tupperware Brands Corp. (TUP), Herbalife Ltd. (HLF), John Wiley & Sons Inc. (JW.A) and C.H. Robinson Worldwide Inc. (CHRW).

• [By Dan Caplinger]

  Where growth will come from
  One area that Newell Rubbermaid still has to tap fully is emerging markets. The company has done a good job of expanding overseas, with 17% annual growth in Latin America. But with barely a quarter of its sales coming from outside the U.S. and Canada, the company has a lot further to go. Storage rival Tupperware (NYSE: TUP  ) gets fully 60% of its total revenue from emerging markets, and it too has seen impressive gains in South America as well as the Asia-Pacific region.

Best Value Stocks To Invest In Right Now: Caterpillar Inc.(CAT)

Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through three lines of businesses: Machinery, Engines, and Financial Products. The Machinery business offers construction, mining, and forestry machinery, including track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment, and related parts. It also manufactures diesel-electric locomotives; and manufactures and services rail-related products and logistics services for other companies. The Engines business provides diesel, heavy fuel, and natural gas reciprocating engines for Caterpillar machinery, electric power generation systems, marine, petrol eum, construction, industrial, agricultural, and other applications. It offers industrial turbines and turbine-related services for oil and gas, and power generation applications. This business also remanufactures Caterpillar engines, machines, and engine components; and offers remanufacturing services for other companies. The Financial Products business provides retail and wholesale financing alternatives for Caterpillar machinery and engines, solar gas turbines, and other equipment and marine vessels, as well as offers loans and various forms of insurance to customers and dealers. It also offers financing for vehicles, power generation facilities, and marine vessels. The company markets its products directly, as well as through its distribution centers, dealers, and distributors. It was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. Caterpillar Inc. was founded in 1925 and is headquartered in Peoria, Illinois.

Advisors' Opinion:

• [By Rich Smith]

  This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, we'll be looking at why Caterpillar (NYSE: CAT  ) got its target price cut, while Angie's List's (NASDAQ: ANGI  ) was upped. But first, a quick look at why...

• [By Brian Stoffel]

  4. Caterpillar (NYSE: CAT  ) , P/E of 11.7
  Caterpillar's low price tag has everything to do with slow global demand. The company recently cut its full-year forecast, as the world's mining industry doesn't seem to need so many Caterpillar machines as investors hoped for.

• [By Russ Koesterich]

  As I write in my new weekly commentary, the long-delayed and mixed September jobs report was consistent with my view that the labor market is stuck in slow growth mode. And outside of the jobs market, other measures of economic activity - such as orders for durable goods and a sales forecast cut from construction equipment company Caterpillar (CAT) - pointed toward slow growth as well.

10 Best Gold Stocks To Own For 2014: Schlumberger N.V.(SLB)

Schlumberger Limited, together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. The company?s Oilfield Services segment provides exploration and production services; wireline technology that offers open-hole and cased-hole services; supplies engineering support, directional-drilling, measurement-while-drilling, and logging-while-drilling services; and testing services. This segment also offers well services; supplies well completion services and equipment; artificial lift; data and consulting services; geo services; and information solutions, such as consulting, software, information management system, and IT infrastructure services that support oil and gas industry. Its WesternGeco segment provides reservoir imaging, monitoring, and development services; and operates data processing centers and multiclient seismic library. This segment also offers variou s services include 3D and time-lapse (4D) seismic surveys to multi-component surveys for delineating prospects and reservoir management. The company?s M-I SWACO segment supplies drilling fluid systems to improve drilling performance; fluid systems and specialty tools to optimize wellbore productivity; production technology solutions to maximize production rates; and environmental solutions that manages waste volumes generated in drilling and production operations. Its Smith Oilfield segment designs, manufactures, and markets drill bits and borehole enlargement tools; and supplies drilling tools and services, tubular, completion services, and other related downhole solutions. The company?s Distribution segment markets pipes, valves, and fittings, as well as mill, safety, and other maintenance products. This segment also provides warehouse management, vendor integration, and inventory management services. Schlumberger Limited was founded in 1927 and is based in Houston, Texas.

Advisors' Opinion:

• [By Michael Fitzsimmons]

  So what is GE to do? The O&G segment is a very fast growing and nicely profitable business that is synergistic with the rest of GE's industrial operations. Yet it is such a small part of the company, its valuation is being diluted by GE's other businesses. A spin-off would surely unlock value. That said, a spun-off O&G company would be a relatively small player compared to a companies like Schlumberger (SLB), with $42 billion in 2012 revenue and a P/E=19.5, and even Haliburton (HAL), with $24.8 billion in 2012 revenue and a P/E=23.6. But both these companies trade at a premium valuation to GE (P/E=17.8) despite GE's higher dividend yield (3.1%).

• [By David Smith]

  Another angle
  Without taking hindsight issue with that statement, I'm forced to compare it to the assessment of the same subject on the same day by Schlumberger's (NYSE: SLB  ) CEO Paal Kibsgaard, who observed during his company's call that "... the main concern in North America land remains the pricing, where the downwards trend in drilling, wireline, and coiled tubing seen in the fourth quarter continued in Q1. In addition, we also saw further downward pricing pressure on a number of hydraulic fracturing bids during the quarter, adding further uncertainty to the North America land market outlook."�

• [By WWW.DAILYFINANCE.COM]

  Alamy HOUSTON -- Halliburton says it lost $18 million in the first quarter, pulled down by $637 million in charges related to its role in the 2010 Gulf of Mexico oil spill. But it made money if unusual items are excluded, beating Wall Street expectations. The oil services company's loss amounted to 2 cents a share. That compares with net income of $627 million, or 68 cents a share, a year earlier. Halliburton Co. (HAL), which is in talks to settle claims against it related to the oil spill, said that excluding the charges it posted adjusted earnings of 67 cents a share. That beat the 57 cents that analysts expected. The Houston company, which provides a variety of services for the petroleum industry, is benefiting from a boom in U.S. oil production, which is at the highest level in more than two decades. At the same time, Halliburton's natural gas business has slowed as drillers slowed production due to falling prices for the fuel. Revenue rose slightly to $6.97 billion from $6.87 billion. Analysts expected $6.88 billion. Halliburton shares jumped $1.44, or 3.9 percent, to $38.65 in premarket trading an hour before the market opening. Halliburton is the biggest provider of oil field services in North America, including hydraulic fracturing, a technology that has helped unlock large supplies of oil and natural gas from shale rock formations in the U.S. North American revenue fell 11 percent to $3.71 billion, while operating income tumbled 43 percent to $605 million. Dave Lesar, the company's chairman, president and CEO, said a drop in Halliburton's rig count and pricing pressures in North America were more than offset by the company's growing international business. International revenue increased 21 percent from a year ago. For the full year, Halliburton still expects total international revenue growth in the "low teens," he said. Rival Schlumberger Ltd. (SLB), which has a larger international business, said Friday that its revenue climbed in region

• [By Matt DiLallo]

  Oil-field services company, Schlumberger's (NYSE: SLB  ) large size and global presence means that it really has a read on the pulse of the global energy industry. When Schlumberger executives speak, it's a good idea for investors to listen closely because the company can provide important industry insights. With that in mind, I'd like to point your attention to a couple of important quotes from the company's first-quarter conference call.

Best Value Stocks To Invest In Right Now: Dollar Tree Inc.(DLTR)

Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise primarily at the fixed price of $1.00. The company operates its stores under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant, and Dollar Bills. Its stores offer consumable merchandise, including candy and food, and health and beauty care, as well as household consumables, such as paper, plastics, household chemicals, in select stores, and frozen and refrigerated food; variety merchandise, which includes toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and seasonal goods, such as Easter, Halloween, and Christmas merchandise. As of April 30, 2011, it operated 4,089 stores in 48 states and the District of Columbia, as well as 88 stores in Canada. The company was founded in 1986 and is based in Chesapeake, Virginia.

Advisors' Opinion:

• [By ANUP SINGH]

  Dollar Tree (NASDAQ: DLTR  ) is among the most successful single-price-point retailers in the U.S. It operates more than 4,842 stores across 48 states in the U.S. and five Provinces in Canada. The chart below shows that the company has been performing consistently well over the past five years.

• [By Lawrence Meyers]

  The finance sector, as mentioned, can make money in many ways. The second-highest growth sector is expected to be consumer discretionary, with a 6.2% increase. When you look at earnings from luxury brands like Tiffany & Co. (TIF), and that the hotel sector continues to do very well, it suggests that those people who are in good financial shape are spending their money. Meanwhile, dollar players like Dollar Tree (DLTR) continue to perform very well, suggesting that folks with less money are spending it on cheaper items.

• [By John Maxfield]

  If you're anything like me, two things went through your head when you saw this. First, you regret that you missed out on the investment opportunity. Since the end of 2009, shares in all three of these companies, led by Dollar Tree (NASDAQ: DLTR  ) , have simply trounced the broader market. Even the worst performer of the bunch, Family Dollar (NYSE: FDO  ) , beat it by nearly a factor of two.

• [By Rising Dividend Investing]

  Falling Stock Correlation: What It Says About Consumer Spending

  As we mentioned in the Take Aways from the August 26th Investment Policy Committee meeting, the correlation index has been steadily declining. In 2008-09, macroeconomic events drove nearly every stock downwards. Specific sectors and stocks moved in tandem with one another. Today, stocks and sub-industries within each sector are performing very differently – which indicates a return to a more normal stock market environment.
  The Consumer Discretionary (also known as Consumer Cyclicals) sector is an example of an industry that has been rewarded for its fundamental success over the past 12 months. As a whole, the sector grew sales 6.1% and earnings 9.2% in the second quarter - much better than the 1.4% sales and 3.3% earnings growth of the S&P 500. While the overall sector did well in the second quarter, the table below shows how differently the 5 sub-categories of Consumer Discretionary performed:
  
  (click to enlarge)
  As we drill down even further, sub-categories of sub-sectors differ even more dramatically. Below is a snapshot of the Retailing sub-sector and its notable components:
  
  (click to enlarge)
  Specific stocks within each sub-category are varying in performance as well. General Merchandise retailers were significantly differentiated in the second quarter. Target’s (TGT) adjusted EPS were up 6.1% from 2012, while Dollar General (DG) and Dollar Tree’s (DLTR) earnings were up nearly 12% and 9%, respectively.
  The differences in sales and earnings growth amongst these different industries tell a story. The economy is not improving enough that people feel like they can let go and spend money on pure pleasures, but it is improving enough that they can afford to replace their cars and fix the doors on their houses. As these items wear out and need to be replaced, we expect the pent up demand will drive increased economic activity from cons

3 Stocks Rising on Unusual Volume

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

>>5 Hated Earnings Stocks You Should Love

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

>>5 Stocks Poised for Breakouts

With that in mind, let's take a look at several stocks rising on unusual volume today.

Hollysys Automation Technologies

Hollysys Automation Technologies (HOLI) is a provider of automation and control technologies and applications in China. This stock closed up 5.6% to $16.63 in Monday's trading session.

Monday's Volume: 1.42 million

Three-Month Average Volume: 149,486

Volume % Change: 756%

>>5 Breakout Trades Under $10

From a technical perspective, HOLI ripped higher here right off its 50-day moving average of $15.60 with monster upside volume. This move is quickly pushing shares of HOLI within range of triggering a big breakout trade. That trade will hit if HOLI manages to take out Monday's high of $16.78 and then its 52-week high at $17.66 with high volume.

Traders should now look for long-biased trades in HOLI as long as it's trending above its 50-day at $15.60 and then once it sustains a move or close above those breakout levels with volume that hits near or above 149,486 shares. If that breakout hits soon, then HOLI will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $23 to $25.

JinkoSolar

JinkoSolar (JKS) is a solar power product manufacturer. This stock closed up 11.3% at $28.93 in Monday's trading session.

Monday's Volume: 3.08 million

Three-Month Average Volume: 1.49 million

Volume % Change: 137%

>>5 Rocket Stocks to Buy in November

From a technical perspective, JKS ripped sharply higher here into new 52-week-high territory with strong upside volume. This stock has been uptrending strong for the last six months, with shares moving higher from its low of $7.25 to its intraday high of $29.39. During that uptrend, shares of JKS have been consistently making higher lows and higher highs, which is bullish technical price action. Market players should now look for a continuation move higher in the short-term if JKS can make a new 52-week high soon.

Traders should now look for long-biased trades in JKS as long as it's trending above Monday's low of $25.58 and then once it sustains a move or close above Monday's high of $29.39 with volume that this near or above 1.49 million shares. If we get that move soon, then JKS will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that move are $35 to $37.

Hot Penny Companies To Own In Right Now

China Yuchai International

China Yuchai International (CYD) manufactures diesel engines in China. This stock closed up 8.4% at $24.42 in Monday's trading session.

Monday's Volume: 209,000

Three-Month Average Volume: 86,889

Volume % Change: 158%

From a technical perspective, CYD ripped sharply higher here back above its 50-day moving average of $23.76 with above-average volume. This move also pushed shares of CYD into breakout territory, since the stock took out some near-term overhead resistance at $24.35. Traders should now look for a continuation move higher if CYD can manage to take out Monday's intraday high with volume soon.

Traders should now look for long-biased trades in CYD as long as it's trending above Monday's low of $23.27 and then once it sustains a move or close above Monday's high of $24.99 with volume that's near or above 86,889 shares. If we get that move soon, then CYD will set up to re-test or possibly take out its next major overhead resistance level at its 52-week high of $26.39. Any high-volume move above that level will then give CYD a chance to tag $30 to $33.

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

>>3 Stocks Rising on Unusual Volume

>>5 Stocks Under $10 in Breakout Territory

>>Buy These 5 REITs to Cash In This Year

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

Apple Continues to Lead U.S. Smartphone Market

For the three months ending in July 2013, Samsung Electronics closed the market share gap slightly between itself and Apple Inc. (NASDAQ: AAPL) in the U.S. smartphone market. Compared with market share totals at the end of April, Apple's share rose from 39.2% to 40.2%, while Samsung's share rose from 22% to 24.1%.

The data was reported by comScore Inc. (NASDAQ: SCOR).

The other OEMs in the top five were HTC, with a July share of 8%, down from 8.9% in April; Motorola from Google Inc. (NASDAQ: GOOG) with a 6.9% share, down from 8.3% in April; and LG Electronics with a 6.8% share, up 0.1% from April.

In the U.S. market, the Android operating system from Google enjoys 51.8% of the market, compared with 40.4% for iOS. The BlackBerry platform from BlackBerry Ltd. (NASDAQ: BBRY) fell from 5.1% to 4.3%, while Microsoft Corp. (NASDAQ: MSFT) remained flat at 3%. Symbian has managed to hold on to 0.3% of the market, but that will dwindle to zero over time.

10 Best Clean Energy Stocks To Watch For 2014

The top smartphone properties measured by reach belong to Google (92.6% reach), Facebook Inc. (NASDAQ: FB) with an 86.3% reach, Yahoo! Inc. (NASDAQ: YHOO) with 81.7% reach, Amazon.com Inc. (NASDAQ: AMZN) with 66.8%, and Apple with 50.2%. The top smartphone apps belong to Facebook with 76.1% of U.S. users and four Google apps — YouTube, Google Play, Google Search, and Google Maps — rounding out the top five.

A Look At Primary And Secondary Markets

Top 5 High Tech Stocks To Invest In Right Now

The word "market" can have many different meanings, but it is used most often as a catch-all term to denote both the primary market and the secondary market. In fact, "primary market" and "secondary market" are both distinct terms; the primary market refers to the market where securities are created, while the secondary market is one in which they are traded among investors. Knowing how the primary and secondary markets work is key to understanding how stocks trade. Without them, the stock market would be much harder to navigate and much less profitable. We'll help you understand how these markets work and how they relate to individual investors.

Primary Market
The primary market is where securities are created. It's in this market that firms sell (float) new stocks and bonds to the public for the first time. For our purposes, you can think of the primary market as being synonymous with an initial public offering (IPO). Simply put, an IPO occurs when a private company sells stocks to the public for the first time.

IPOs can be complicated because many different rules and regulations dictate the processes of institutions, but they all follow a general pattern:

1. A company contacts an underwriting firm to determine the legal and financial details of the public offering.
2. A preliminary registration statement, detailing the company's interests and prospects and the specifics of the issue, is filed with the appropriate authorities. Known as a preliminary prospectus, or red herring, this document is neither finalized nor is it a solicitation by the company issuing the new shares. It is simply an information pamphlet and a letter describing the company's intent.
3. The appropriate governing bodies must approve the finalized statement as well as a final prospectus, which details the issue's price, restrictions and benefits, and is issued to those who purchase the securities. This final prospectus is legally binding for the company.

The important thing to understand about the primary market is that securities are purchased directly from an issuing company.

Secondary Market
The secondary market is what people are talking about when they refer to the "stock market". This includes the New York Stock Exchange (NYSE), Nasdaq and all major exchanges around the world. The defining characteristic of the secondary market is that investors trade among themselves. That is, in the secondary market, investors trade previously issued securities without the issuing companies' involvement. For example, if you go to buy Microsoft stock, you are dealing only with another investor who owns shares in Microsoft. Microsoft (the company) is in no way involved with the transaction.

The secondary market can be further broken down into two specialized categories: auction market and dealer market.

In the auction market, all individuals and institutions that want to trade securities congregate in one area and announce the prices at which they are willing to buy and sell. These are referred to as bid and ask prices. The idea is that an efficient market should prevail by bringing together all parties and having them publicly declare their prices. Thus, theoretically, the best price of a good need not be sought out because the convergence of buyers and sellers will cause mutually-agreeable prices to emerge. The best example of an auction market is the New York Stock Exchange (NYSE).

In contrast, a dealer market does not require parties to converge in a central location. Rather, participants in the market are joined through electronic networks (from low-tech telephones or fax machines to complicated order-matching systems). The dealers hold an inventory of the security in which they "make a market". The dealers then stand ready to buy or sell with market participants. These dealers earn profits through the spread between the prices at which they buy and sell securities. An example of a dealer market is the Nasdaq, in which the dealers, who are known as market makers, provide firm bid and ask prices at which they are willing to buy and sell a security. The theory is that competition between dealers will provide the best possible price for investors.

The OTC Market
Sometimes you'll hear a dealer market referred to as an over-the-counter (OTC) market. The term originally meant a relatively unorganized system where trading did not occur at a physical place, as we described above, but rather through dealer networks. The term was most likely derived from the off-Wall Street trading that boomed during the great bull market of the 1920s, in which shares were sold "over-the-counter" in stock shops. In other words, the stocks were not listed on a stock exchange - they were "unlisted".

Over time, however, the meaning of OTC began to change. The Nasdaq was created in 1971 by the National Association of Securities Dealers (NASD) to bring liquidity to the companies that were trading through dealer networks. At the time, few regulations were placed on shares trading over-the-counter - something the NASD sought to improve. As the Nasdaq has evolved over time to become a major exchange, the meaning of over-the-counter has become fuzzier. Today, the Nasdaq is still considered a dealer market and, technically, an OTC. However, today's Nasdaq is a stock exchange and, therefore, it is inaccurate to say that it trades in unlisted securities.

Nowadays, the term "over-the-counter" refers to stocks that are not trading on a stock exchange such as the Nasdaq, NYSE or American Stock Exchange (AMEX). This generally means that the stock trades either on the over-the-counter bulletin board (OTCBB) or the pink sheets. Neither of these networks is an exchange; in fact, they describe themselves as providers of pricing information for securities. OTCBB and pink sheet companies have far fewer regulations to comply with than those that trade shares on a stock exchange. Most securities that trade this way are penny stocks or are from very small companies.

Third and Fourth Markets
You might also hear the terms "third" and "fourth" markets. These don't concern individual investors because they involve significant volumes of shares to be transacted per trade. These markets deal with transactions between broker-dealers and large institutions through over-the-counter electronic networks. The third market comprises OTC transactions between broker-dealers and large institutions. The fourth market is made up of transactions that take place between large institutions. The main reason these third- and fourth-market transactions occur is to avoid placing these orders through the main exchange, which could greatly affect the price of the security. Because access to the third and fourth markets is limited, their activities have little effect on the average investor.

Conclusion
Although not all of the activities that take place in the markets we have discussed affect individual investors, it's good to have a general understanding of the market's structure. The way in which securities are brought to the market and traded on various exchanges is central to the market's function. Just imagine if organized secondary markets did not exist - you'd have to personally track down other investors just to buy or sell a stock, which would not be an easy task.

In fact, many investment scams revolve around securities that have no secondary market, because unsuspecting investors can be swindled into buying them. The importance of markets and the ability to sell a security (liquidity) is often taken for granted, but without a market, investors have few options and can get stuck with big losses. When it comes to the markets, therefore, what you don't know can hurt you, and in the long run, a little education might just save you some money.