Financial Markets Book Financial Markets For The Rest Of Us
An Easy Guide To Money, Bonds, Futures, Stocks, Options, And Mutual Funds
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by Robert Hashemian

Page 181

ADRs

ADRs (American Depository Receipts) represent shares of a publicly traded foreign company that have been deposited with a US bank. ADRs are traded on US exchanges just like any other stocks. Each ADR does not necessarily equate to one equivalent share of the foreign company's stock. It may represent a fraction of one share or a few shares bundled together. This is done to keep the prices of the ADRs in line with their American counterpart stocks. ADRs are a good way to invest in foreign companies without having to buy their stocks on their domestic exchanges where their stocks are traded. And many foreign companies are interested in having their stocks traded as ADRs because it is the fastest and easiest way to attract American investors. Many companies issuing ADRs are reputable and well-known, such as Nokia, BP Amoco, and SAP. So while there are differences between ADRs and domestic stocks (caused by matters such as currency fluctuation and domestic market effects), the average investor can invest in them with the same approach as investing in US stocks. ADRs are also known as ADS (American Depository Shares).

Blue Chip Stocks

Blue chips refer to well established, well recognized, and prestigious companies whose stocks have proven themselves as good and safe investments over the years. This is a reference to the blue chips used in poker, which have the most value among all chips. Blue chip stocks are perhaps the safest stocks one could invest in. The 30 stocks which make up the DJIA, such as GE, IBM, and Exxon Mobil, are all considered blue chips. For years IBM has been referred to as the Big Blue, as its stock reputation for safety and growth potential outstripped all others. Blue chip stocks could be thought of as the opposite of pink sheet stocks. Keep in mind, however, that just being labeled a blue chip stock does


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