Moving Averages

Q

What’s a moving average? — F.D., Norman, Oklahoma

A

A moving, or “rolling,” average is used to smooth out data, to help reveal longterm trends. Imagine a list of a location’s temperatures on Feb. 14 over 25 years. Some unusually high or low numbers would make it hard to see a trend. Instead, a moving average would show you the average temperature over subsets of those years. For example, to get a three-year moving average, you’d first average the numbers for years one, two and three. Then you’d average years two, three and four, then years three, four and five — and so on, ending with years 23, 24 and 25. You’d end up measuring 23 three-year periods. While a graphed line of the original 25 numbers might have been very jagged, the 23 three-year averages would produce a smoother line.

Some investors try to guess where various stocks are headed by studying moving averages of their stock prices. However, it’s better to focus on factors such as companies’ financial health and growth prospects.

Q

I know that Facebook owns Instagram and WhatsApp. How can I know if one company is owned by another? — R.B., Omaha, Nebraska

A

You can call it and ask — or visit its website and click on a link titled something like “About Us.” Investigating on Google can also work.

Many familiar names are owned by other familiar names. For example, among many other holdings, Disney owns ESPN, ABC and Pixar. PepsiCo owns Frito-Lay, and the brands Gatorade and Quaker Oats. Unilever owns Ben & Jerry’s, and the brands Axe and Dove. Google parent Alphabet also owns YouTube. Microsoft owns LinkedIn and Skype. And Berkshire Hathaway owns Dairy Queen, Fruit of the Loom, See’s Candies, The Pampered Chef, GEICO and the BNSF railroad.

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