Download Law for Business

Stock Market Analysis and
Personal Finance
Mr. Bernstein
Stocks and Mutual Funds
pp 272-290 and 326-345
February 2017
Stock Market Analysis
& Personal Finance
Mr. Bernstein
Stocks
Companies can issue stocks to raise funds for
startups, expansion projects or other uses
Rather than borrowing funds, companies can
sell slices of ownership of the company
“Shares” entitle owners to a slice of future
profits and, generally, some slice of the
decision-making
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Stock Market Analysis
& Personal Finance
Mr. Bernstein
Stocks
Private Equity slices are sold in customized
transactions
Public Equity slices are sold in regulated stock
markets
Public Corporations must meet various
government regulations on shareholder rights
and dissemination of information about
company activity
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Stock Market Analysis
& Personal Finance
Mr. Bernstein
Dividends
Periodic payments of cash (typically) to
shareholders
Determined by Board of Directors, can vary but
typically is paid quarterly, stable and growing
Subject to “double taxation”: Corporation pays
tax on profits, then shareholder pays tax on
dividends received
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Stock Market Analysis
& Personal Finance
Mr. Bernstein
Capital Gains/Losses
Prices of stocks go up and down constantly
Movements theoretically based on the perception of future
earnings and dividends an investor may receive
EPS: Earnings Per Share
P/E ratio: Price / Earnings
Movements may be based on perception others’ perceptions
Movements may be caused by temporary supply/demand
imbalances
Movement may be caused by perception of supply/demand
imbalances
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Stock Market Analysis
& Personal Finance
Mr. Bernstein
ETFs
Exchange Traded Funds
Trades on an exchange like a stock
Not an operating business, but a trust company
holding shares of stocks, bonds or
commodities
ishares.com, sectorspdr.com
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Stock Market Analysis
& Personal Finance
Mr. Bernstein
Mutual Funds
Pool of assets managed by an investment advisor
Open end funds can be bought or sold at the close of
business each day based on NAV (Net Asset Value)
Closed end funds can be bought or sold during the
trading day like a stock or ETF and can trade at
premiums or discounts to NAV
Common investment vehicle for individuals
The investment advisor charges a fee or fees that are
deducted from the pool of assets
Many asset and investment objectives available
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Stock Market Analysis
& Personal Finance
Mr. Bernstein
Preferred Stocks
Includes limited voting rights
Pays a set dividend rate, typically higher than
common stock
Company commits to paying Preferred
dividends before common dividends
Can be convertible into common stock
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Stock Market Analysis
& Personal Finance
Mr. Bernstein
IPOs
Initial Public Offerings
The first sale of stock to the public
Changes the nature of the company
Due to the lack of a public track record, often
must be priced at a discount to comparable
company valuations
May be a new company or may be a private
company “going public”
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Stock Market Analysis
& Personal Finance
Mr. Bernstein
Types of Stocks
Large Cap (Microsoft - MSFT)
Small Cap (Monmouth Real Estate Investment Corp – MNR)
Value or Cyclicals – companies whose business is levered to the
economy (Caterpillar, US Steel)
Growth – companies whose business growth is less dependent
on overall economic growth (Johnson & Johnson, Kimberly
Clark)
“Blue Chip” – large, predictable companies (IBM, General
Electric)
Income Stocks – pay high dividends
Penny Stocks – small, thinly capitalized companies
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Stock Market Analysis
& Personal Finance
Mr. Bernstein
Finding tickers
Common market data websites:
nasdaq.com
cnbc.com
yahoo.com/finance
cboe.com
bloomberg.com
smartmoney.com
cnnmoney.com
Select a few stocks or ETFs you would like to follow and save
them in an .xls file.
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Stock Market Analysis
& Personal Finance
Mr. Bernstein
Gathering Information
Many brokers offer research to aid investors
Websites post blogs from popular contributors
Websites offer news stories and limited historical data
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