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BUYING STOCK 101

BUYING STOCK 101. STOCKS – TAKING STOCK. ELON MUSK. DISNEY CO. Katsuaki Watanabe. CHECKING THE STOCKS. S hares represent individual ownership in the corporation. 1 share of Pepsi @ 45.00 per share. * corporations raise investment capital by selling stock.

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BUYING STOCK 101

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  1. BUYING STOCK 101

  2. STOCKS – TAKING STOCK ELON MUSK DISNEY CO. Katsuaki Watanabe CHECKING THE STOCKS

  3. Shares represent individual ownership in the corporation. 1 share of Pepsi @ 45.00 per share. *corporations raise investment capital by selling stock. Stock= Ownership in the Corporation

  4. How are stock values established? 1. Historical earnings. 2. Estimates of the company’s future earnings made by corporate officers. 3. Perceived strength of the company’s product or services. 4. Perceived strength of the company’s sector. (health care, retail, auto, oil) How is picking the right stock similar to picking the right spouse?

  5. Benefits of buying stock 1. Dividends = quarterly profit paid to shareholders. ex. If a company pays .15 per share x 100 shares = 15.00 2. Capital gains = profit from selling stock. ex buy Nike @ 15.50 in 1998 sell Nike @ 21.80 in 2006 capital gains of $ 6.30 per share. Find the quarterly dividend of Cisco Systems if they had $8.2 million dollars profit and have 55 million shares publicly traded. Yahoo IPO: 1996 @ $13.00 per share 2000 @ $102.00 per share

  6. How do you buy stock? 1. Broker= Fee based/commission “middle man” * full service or online.

  7. - Employers offer discounted stock offering to its employees as part of compensation package. 2. Corporate Stock Options

  8. How much stock (quantity) can I buy? Round Lot = Multiples of 100. Ex. 100 @ $21.00 = $2,100.00 Odd Lot = Smaller than 100. (commission is higher).

  9. Stock Split If price of stock is too high to attract investors, company may split stock. ex. 1 share at $50.00= 2 at shares at $25.00 Total value does not change, just the number of shares.

  10. Disney Offers 2 for 1 Split You have 100 shares of Disney stock at $89.00. 100 x $89.00 = $8,900.00 To attract new buyers……………… 2 for 1 split- 200 shares @ $44.50 = $8,900.00. 3 for 1 split- 300 shares @ $29.66 = $8,900.00. Note - The total value of the portfolio does not change, just the amount of shares.

  11. How do you measure the health of the stock market? Widely used indexes: 1. Dow Jones Industrial Average (DJIA) 30 U.S. companies www.money.cnn.com/data/markets/dowd Standard & Poors 500 500 U.S. Stocks

  12. Types of Markets Bull Market – When the market rises steadily over a period of time. (Buyers exceed sellers = Stock prices rise)

  13. Bear Market – When the market falls for a period of time. (Investors sell to cut losses)

  14. Diversification- spreading out investments to reduce risk Ways to diversify: • Industry- buy stocks in unrelated industries so that you are not exposed to a down turn in one particular industry • Allocation Example: $10,000.00 $2,000.00 = Microsoft/Technology $2,000.00 = Ford/Automobile $2,000.00 = Chevron/Oil $2,000.00 = Wal-Mart/Retail $2,000.00 = Disney/Entertainment • Five different industries. • Putting $2,000.00 in each stock is a form of diversification by allocation.

  15. Go to www.cnbc.com How to look up stock…

  16. Name of stock symbol price # of shares total investment 1. ___________ _______ ______ X _________ = _______________ 2. ___________ _______ ______ X _________ = _______________ 3. ___________ _______ ______ X _________ = _______________ 4. ___________ _______ ______ X _________ = _______________ 5. ___________ _______ ______ X _________ = _______________ Name of Commodity Price Quantity Total Investment 1. ________________ ________ X __________ = _______________ 2. ________________ ________ X __________ = _______________ Total investment= _____________ (cannot exceed $10,000) • My portfolio is • diversified three • ways • 1. Industry • 2. % of money • 3. Price of stock 1,323 Oracle ORCL 17.64 75 Nike NKE 58.32 25 1,458 How to fill out your buy sheet? Pfizer PFE 17.35 80 1,388 Exxon XOM 71.38 15 1,070.70 Ford F 2.45 844 2067.80 Lean Hogs 56.55 18 1,017.90 Wheat 558 3 1674 9,999.40

  17. Things To Consider Spend all of your $10,000.00. Read the“looking up stocks”handout to find answers to your questions. Not all companies are publicly traded. Some companies are owned by bigger companies and do are not traded under the company name. - search“company stock price” Some companies have multiple stocks.

  18. Random Walk Theory You can do just as well picking stocks by throwing a dart at the list of stocks on the financial page as you can be spending time and effort doing research or listening to a particular adviser, broker, or strategist.

  19. The Big Picture • Why is the stock market important to the overall economy? • Why would a person want to invest in the stock market? • Why would a company want to go public?

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