Guide to Analysing Companies

Overfunding
There are two meanings.
1 A pension fund is overfunded when, according to its ac-
tuaries, it has received more in contributions than it is con-
tractually obliged to pay out to future claimants. This may
happen when stockmarkets are buoyant and a fund’s in-
vestments are rising strongly in value.
2 A government is said to be overfunded when it has issued
more bonds in a particular year than it needs to finance its
debt. This may also occur during periods of strong economic
growth when a government’s tax revenues are high.
Oversubscribed
An issue of shares or other securities is oversubscribed
when the number of applications exceeds the number of shares
on offer. For example, if there are 600 applications for 100
shares, then the issue is five times oversubscribed. During bull
markets, when shares rise strongly in value, issues can be 20 or
even 50 times oversubscribed. The prices of new issues that are
heavily oversubscribed often rise strongly both in the grey
market, before trading officially begins, and when the shares
are listed on a stock exchange. In the past, investment
banks which underwrite such issues have been criticised for
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underpricing the shares on offer and thus enabling preferential
clients to benefit by later selling their shares in the market at a
healthy premium.
Over the counter
Describes an open market for securities that are not listed on
a regular stock exchange. Over-the-counter (otc) markets
have traditionally been favoured by smaller companies that
need capital to grow but fail to meet the more onerous
listing requirements of established exchanges. A full listing
on a recognised exchange can also be expensive.
In the past, otc markets such as nasdaq differed from es-
tablished exchanges in that all dealing was conducted not on an
exchange floor but by telephone and via computer screens.
However, the drift towards computerised trading even for
recognised exchanges has blurred the distinction. The fact that
high-tech companies such as Microsoft have spurned estab-
lished exchanges in favour of nasdaq has also given otc
markets a boost.
Companies and financial institutions dealing directly in secu-
rities or derivatives of one sort or another are also said to be
trading over the counter.
Overweight
An investment fund is said to be overweight in a particular se-
curity or asset if it holds a higher proportion than the
benchmark against which its performance is measured. So a
mutual fund specialising in Asian equities would be over-
weight in Thailand if it owned a greater percentage of shares
in that market than, say, the relevant msci index that it was
using as a benchmark. Similarly, a fund would be under-
weight if it held too few shares in that market. tracker
funds, which mimic the composition of an index (by holding
in proportion all the shares that make it up), should be neither
overweight nor underweight.