provides information on what a company does, its financial performance, as well as its plans for the...
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Buy, Sell or HoldWhat Causes Stock Prices
to Change
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Provides information on what a company does,
its financial performance, as well as its plans for the future
Companies with more than $10 Million in assets whose stocks are held by more than 500 owners are required to file annual and other periodic reports
Annual Report
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www.nyse.com www.nasdaw.com Company website home page
Getting a Company’s Annual Report
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The money collected for providing a product or
service
Revenue
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Total earnings after all expenses have been
paid
Net Income
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What remains after subtracting a company’s
costs from its revenue. Profit is a company’s reward for taking a risk and successfully producing what people want to buy at prices they are willing to pay.
Profit
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People buy to make a future profit People buy to save for retirement
Why People Buy
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People sell to collect their profits, or protect
against further loss because the stock price is dropping
Why Sell
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People hold because historical trends suggest
that over the long-term, stocks have the greatest return
Why Hold
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Make an educated decision Look at the annual reports for the company
How do you know the right action to take?
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It is extremely important to research other
companies in the same industry Check the revenue and profits from your
companies and compare them to other firms in the same industry
If the other companies are doing much better, you would tend to sell.
If they are doing worse, you would tend to hold
Sector Analysis
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Check current events surrounding companies Check how the sector is performing This is important because if a sector is
growing, you may still want to purchase the stock despite the poor performance of other companies
If the sector is collapsing, you may want to sell even if your stock is outperforming
More Research
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A stock price is an indication of what investors
believe a company is worth Stock price not only reflects a company’s
value, it also reflects the investor’s expectations of future growth and earnings
Stock Price
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A number of factors contribute to the minute-
to-minute changes in a stock’s price Market forces such as supply and demand If more people buy a stock than sell it, then
the price goes up If more people sell than buy, the price goes
down
Price Influence
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News events together with public opinion play
a role in creating rises and dips in stock prices Reports on internal corporate activity, industry
trends, and national/international events are interpreted as either good or bad news by the public, who in turn determine whether a company is a good investment or not
Price Influence
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Projected earnings of a company Public companies report their earnings four
times a year (once each quarter) Wall Street carefully watches earnings results Analysts base their opinions about future
value of a company on its earnings projections
Other Data That Influences Stock Prices
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If a company’s earnings report is better than
analysts expected, the stock price rises If a company’s results are worse, stock price
falls