H

Hands-On Investor

A Hands-On Investor is an individual or firm that actively engages with and supports the management and operations of the companies they invest in. They provide strategic guidance, mentorship, and resources beyond just capital.

For example, a venture capitalist who frequently meets with startup founders to provide advice and help solve operational challenges is a hands-on investor.

Halo Effect

The Halo Effect is a cognitive bias where the perception of one positive trait influences the perception of other traits. In business, it often means that a company with a strong reputation in one area is perceived positively in others.

For example, a well-regarded technology company’s positive reputation might lead consumers to assume all its products are high-quality, even without direct evidence.

Hard Assets

Hard Assets are tangible physical assets such as real estate, machinery, commodities, and equipment. These assets often have intrinsic value and can be used as collateral for loans.

For example, a manufacturing company might list its factories and machinery as hard assets on its balance sheet.

Harvest Strategy

A Harvest Strategy involves reducing or eliminating investment in a product or business to maximize short-term profits. This strategy is often used for mature products with declining growth prospects.

For example, a company might implement a harvest strategy for an outdated software product by cutting marketing expenses and reducing updates while continuing to sell it to existing customers.

Hedge Fund

A Hedge Fund is a pooled investment fund that employs various strategies to earn active returns for its investors. These strategies can include leveraging, short-selling, and using derivatives. Hedge funds are typically open to accredited investors.

For example, a hedge fund might use complex trading strategies to hedge against market volatility and achieve high returns.

Hedging Strategy

A Hedging Strategy involves taking positions in financial markets to offset potential losses in other investments. It is used to reduce risk and protect against adverse price movements.

For example, an airline might use hedging strategies to lock in fuel prices and protect against rising costs.

Hedge Ratio

The Hedge Ratio is the ratio of a position protected through hedging to the total position. It indicates the extent to which the risk is mitigated.

For example, a portfolio manager might use a hedge ratio of 0.8, meaning 80% of the portfolio’s value is hedged against market downturns.

Hedging Transaction

A Hedging Transaction is a financial trade designed to reduce or eliminate risk in another investment position. It often involves derivatives such as options, futures, or swaps.

For example, a farmer might enter into a hedging transaction by selling futures contracts on their crop to lock in a price and protect against price fluctuations at harvest time.

Heat Map

A Heat Map is a data visualization tool that uses color coding to represent different values, making it easier to identify patterns, trends, and areas of interest in complex data sets.

For example, an e-commerce company might use a heat map to analyze customer behavior on its website, highlighting the most frequently clicked areas.

High Net Worth Individual (HNWI)

A High Net Worth Individual (HNWI) is a person with liquid assets above a certain threshold, typically over $1 million. HNWIs often receive specialized financial and investment services from wealth management firms.

For example, a HNWI might work with a private wealth manager to develop a personalized investment strategy and estate plan.

High Water Mark

A High Water Mark is a benchmark used in investment management to ensure that performance fees are only charged on new profits. It prevents managers from being compensated for recovering previous losses.

*For example, if a hedge fund has a high water mark of $10 million, it must exceed this value before charging performance fees on additional gains.

High-Growth Startup

A High-Growth Startup is a young company experiencing rapid expansion in terms of revenue, customer base, or market share. These startups often prioritize scaling quickly and securing large amounts of funding.

For example, a tech startup that grows its user base from 10,000 to 1 million within a year is considered a high-growth startup.

High-Yield Bond

A High-Yield Bond, also known as a junk bond, is a bond that offers a higher interest rate due to its lower credit rating. These bonds carry a higher risk of default but can provide attractive returns for investors willing to take on the additional risk.

For example, an investor might buy high-yield bonds issued by a company with a lower credit rating to achieve higher returns compared to investment-grade bonds.

Historical Cost

Historical Cost is the original monetary value of an asset or liability at the time of acquisition. This accounting method records assets and liabilities at their original purchase price, not adjusted for inflation or market value changes.

For example, a company might record the historical cost of its office building purchased 10 years ago at its original price, even if the current market value is higher.

Hockey Stick Growth

Hockey Stick Growth describes a sudden and rapid increase in revenue, user adoption, or other business metrics after a period of linear or slow growth. The term comes from the shape of a hockey stick on a graph.

For example, a startup might experience hockey stick growth after launching a successful marketing campaign that significantly boosts user sign-ups.

Holding Company

A Holding Company is a parent corporation that owns enough voting stock in another company to control its policies and management. It does not produce goods or services itself but earns income from its subsidiaries.

For example, a holding company might own controlling stakes in several different businesses across various industries, generating income from their profits.

Holding Pattern

Holding Pattern refers to a temporary situation in which an activity or decision is delayed until further notice. It is often used in business to describe a period of waiting for more information or better conditions before proceeding.

For example, a company might put its expansion plans into a holding pattern until market conditions improve.

Holding Period

Holding Period is the length of time an investment is held by an investor before being sold. It is an important factor in determining tax treatment and investment returns.

For example, an investor might have a one-year holding period for a stock purchased in January and sold the following January.

Home Run Investment

A Home Run Investment is a highly successful investment that generates extraordinary returns, often far exceeding expectations. It is the opposite of a conservative, steady investment.

For example, investing in a small startup that eventually becomes a billion-dollar company would be considered a home run investment.

Horizontal Integration

Horizontal Integration is a business strategy where a company acquires or merges with a competitor operating in the same industry. This strategy aims to increase market share, reduce competition, and achieve economies of scale.

For example, a beverage company might pursue horizontal integration by acquiring another beverage company to expand its product line and customer base.

Hostile Takeover

A Hostile Takeover is an acquisition attempt by a company or individual that is strongly opposed by the target company’s management and board of directors. This type of takeover is usually carried out through a public offer to shareholders.

For example, an investor might launch a hostile takeover by offering to buy shares of a company at a premium, bypassing the company’s management and appealing directly to the shareholders.

Hot Issue

A Hot Issue refers to a newly issued stock that is in high demand, often leading to a significant price increase shortly after it begins trading. These issues are typically associated with initial public offerings (IPOs).

For example, an IPO of a well-known tech company might be considered a hot issue if it attracts substantial investor interest and trades at a much higher price on its first day.

Hot Money

Hot Money refers to funds that are quickly moved between financial markets to take advantage of higher short-term interest rates or favorable currency exchange rates. These funds can cause volatility in the markets they enter or leave.

For example, an investor might move hot money from one country’s stock market to another’s to benefit from a temporary spike in interest rates.

House Account

A House Account is an investment account managed by a brokerage firm or financial institution for its own benefit, rather than for an individual client. These accounts are used for proprietary trading and investments.

For example, a brokerage firm might use its house account to trade stocks and bonds for its own profit.

Human Capital

Human Capital refers to the economic value of an employee’s skill set, knowledge, and experience. It emphasizes the importance of investing in employees through education, training, and professional development.

For example, a company might invest in human capital by offering training programs to enhance employees’ skills and improve productivity.

Human Resources (HR)

Human Resources (HR) is the department within an organization responsible for managing all aspects of employee relations, including recruitment, hiring, training, benefits, and compliance with labor laws.

For example, the HR department might handle the onboarding process for new employees and ensure they understand company policies and benefits.

Hurdle Rate

Hurdle Rate is the minimum rate of return that an investment or project must achieve to be considered viable. It is used as a benchmark to compare potential investments and ensure they meet the required level of profitability.

For example, a company might set a hurdle rate of 10% for new projects, meaning any project must be expected to generate at least a 10% return to be approved.

Hurdle Rate Analysis

Hurdle Rate Analysis is the process of evaluating investment opportunities by comparing their expected returns to the hurdle rate. It helps determine whether an investment is worthwhile and aligns with financial goals.

For example, a venture capital firm might perform hurdle rate analysis to decide whether to invest in a startup, ensuring it meets the firm’s required return criteria.

Hybrid Financing

Hybrid Financing is a method of raising capital that combines elements of both debt and equity financing. It includes instruments such as convertible bonds, preferred shares, and mezzanine financing, offering flexibility and benefits of both forms of capital.

For example, a company might use hybrid financing by issuing convertible bonds that can be converted into shares, providing both immediate funds and potential equity conversion.

Hypergrowth

Hypergrowth refers to a period of rapid and exponential growth in a company’s revenue, user base, or other key metrics. Companies in hypergrowth typically experience annual growth rates exceeding 40%.