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Marketing / DECA
STOCKS IN REVIEW
STOCKS
What are they?
ownership
Works
1
in a corporation
like a democracy
share = 1 vote
50% + 1 share would constitute enough
voting power for a hostile takeover
BILL GATES TRANSACTION
WHY DO YOU INVEST IN STOCKS?
Better Return than most savings, CD’s, or
Bonds
 Stock market itself offers a 7-9% annual return
since its inception

 Despite
all the events that have happened it will
typically climb
HISTORICAL MOVEMENTS

Bull Markets

1920-1929



Early 1990’s


Roaring 20’s
Industrial Revolution
Tech Boom
Bear Markets
October 1929-1932
 (Great Depression) Stock Market
Crash
 September 2000-2002
 (Y2k, 9/11)
 2008 Financial / Housing Crisis

TYPES OF STOCKS
 Blue
Chip Stocks – Small Growth / Stable / Large
Cap / traditionally safe
 Penny Stocks – Potential for Growth / High Risk /
Small Cap
 Growth Stock- growing companies /expanding
 Cyclical Stock – run alongside the economy
 Restaurants,
Hotels, car companies, clothing stores
MARKET CAPITALIZATION
Types
of Caps
 Mega
= over 250 Billion
 Large = over 5 Billion
 Mid = 1- 5 Billion
 Small = less 1 billion
 Micro = less than 250 million ( risky)
 Formula=
Shares Outstanding x Current Price
 Microsoft Worth
BASIC RISK V. RETURN
 High
Risk = High Return
 Potentially
 Low
stocks
Risk = Low Return
 Bank
Accounts
 Nothing
market
is guaranteed in the
DIVERSIFICATION

Invest across Industry / Sectors
multiple different areas: Stocks, Bonds, Cash
(ex. Mutual Funds)

Harry Markowitz – created the idea
 (Nobel
Prize Economics)
SECURITY EXCHANGES - STOCK MARKETS

NYSE – over 3,000 companies
 Worth:
Approx. 15-20 trillion

NASDAQ – mostly Tech Stocks or internet
based companies

AMEX- smaller stocks (penny stocks)
OTHER PHYSICAL MARKETS
 Regional
Markets
S.F / Chicago / Boston
 Intl Markets:
Tokyo (2nd largest in the world), London,
Paris, Toronto, Sydney
BENCHMARK INDEX
Comparing Stocks to the Market
 S&P 500

 Standard
and Poor's (S&P) is a well-known provider
of indices that measures the performance of the
stock market.
 The
S&P 500 Index comprises the largest 500
companies in the U.S.
 The popular S&P 500 Index, also known as "Spiders" by
its ticker symbol SPY, has more than $1 trillion trades on
the AMEX.
OTHER BENCHMARKS
 Dow

Jones ( more than 100 years old)
The best-known indicators:
 The
Dow Jones Industrial
Average
 Sub
categories are also
available
 Dow
Jones Transportation Average
 Dow Jones Utility Average.
WHAT MAKES A GOOD STOCK
•
Basic Factors:
Low price compared to 52 week
• Multiple Shares held by institutions
•
•
•
Low amount held by insiders
Dividend Paying Companies
•
•
Companies who share their profit with investors by paying them
for simply owning the stock
Dividends are not required
Low Amount Debt
• Good Free Cash Flow
• What are the insiders doing?
•

Important: beware from stocks with “weird” or no financial information new
startups or private gone public
WHAT DRIVES PRICES: NEWS IMPACT ON
STOCKS
 New
Products/ Technology
 Economic
 ex.
Federal Reserve raising
Interest rates
 Natural
Disasters
 Favorable/ Unfavorable
Quarterly Filing with SEC
 Law Suits
HOW DOES THE MARKET WORK?

Auction Format:



Investing strategies



Buyers (bid) & Sellers (ask)
Sample Quote
Buy Low - Sell High
Buy/Hold – Best Investing Strategy for the long term
Stocks are traded with Ticker symbols

Ex. SBUX- Starbucks MSFT- Microsoft
BUYING & SELLING OR TRADES

Market Order
 Buy

at the current market price
Limit order
 Sets
to buy or sell at a particular
price
 Strategy
market
so you don’t have to watch the
WHAT IS SHORT SELLING?

The opposite of the basic trading
A
broker will lend you the stock
 You will sell it immediately
 At a specified date you will return the stock
 You
hope to buy it back at a lower price and collect the
difference
 The

broker will earn a fee for loaning it to you
Sometimes frowned upon by investors
WHY INVEST MORE IF YOU LOSE? IS IT A
GOOD IDEA?
Dollar Cost Averaging
 Two Transactions

 January
 Buys
10 shares @ $20
 February
 Buys
10 shares @ $10
 June
 Current
Price $15
 Actual cost: 20 @ $15 = Break Even
STOCK SPLITS

Amount of Shares – 2x
Price: Cuts in half .5 or 1/2

Example: (2:1)
500 shares @ $100 a share
 = 1000 shares $50 share

WHY DO STOCKS SPLIT?
 Price
too high for investors – attract more investors
 Allows
for growth
 New product developments
 More Research and development
 Most
common splits
 2:1
(common)
 Any combination they want
 Reverse Splits 1:5
Used to increase stock price
 If the stock price gets too low it becomes delisted

IPO’S

IPO’s- Initial Public Offering
 Business
Startups
 Private Companies

Primarily used to generate more cash in the
business
 Expansion
 Research
and Development
 Exit Strategy for Founders

Potentially High Risk
 No
financial history / track record
SEC: SECURITY EXCHANGE COMMISSION


Government Agency who governs the market
– Incorporated in 1934 by President Franklin
Roosevelt
Businesses are Required to file:




Quarterly / Annual financial reports
Dividends
Insider transactions
Search Red Flags


Trading of corporate information
Insider Trading

Friends / Family/ Government officials
MISCELLANEOUS FUN FACTS

Wall Street got its name from the Wall they built
to keep the Native Americans out

The Dow Jones Index came from the original
Publishers of the Wall Street Journal
 Charles
Dow & Edward Jones