stock market basicsbasics. 1. proxy allows you to have your vote at shareholder meetings without...
Post on 20-Jan-2016
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Stock MarketStock Market
BasicsBasicsBasicsBasics
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1. Proxy1. Proxy
Allows you to have your vote at Allows you to have your vote at shareholder meetings without being shareholder meetings without being present. present.
Similar to an absentee ballotSimilar to an absentee ballot
Allows you to have your vote at Allows you to have your vote at shareholder meetings without being shareholder meetings without being present. present.
Similar to an absentee ballotSimilar to an absentee ballot
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2. Primary v. Secondary Markets2. Primary v. Secondary Markets
PrimaryPrimary IPO’sIPO’s Initial buysInitial buys New issuesNew issues Raise moneyRaise money
SecondarySecondary Trading between buyers and sellersTrading between buyers and sellers
PrimaryPrimary IPO’sIPO’s Initial buysInitial buys New issuesNew issues Raise moneyRaise money
SecondarySecondary Trading between buyers and sellersTrading between buyers and sellers
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3. Why no dividends?3. Why no dividends?
Companies reinvest profits insteadCompanies reinvest profits insteadCompanies reinvest profits insteadCompanies reinvest profits instead
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4. DRIP4. DRIP
Dividend Reinvestment ProgramDividend Reinvestment Program Use cash dividends to purchase you Use cash dividends to purchase you
additional stock automatically without a additional stock automatically without a brokerbroker
Dividend Reinvestment ProgramDividend Reinvestment Program Use cash dividends to purchase you Use cash dividends to purchase you
additional stock automatically without a additional stock automatically without a brokerbroker
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5. Stock Split5. Stock Split
Issuing more shares to existing Issuing more shares to existing stockholdersstockholders
Considered a “non-event” because Considered a “non-event” because market value of company stays the market value of company stays the same.same.
Issuing more shares to existing Issuing more shares to existing stockholdersstockholders
Considered a “non-event” because Considered a “non-event” because market value of company stays the market value of company stays the same.same.
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6. Ordinary and Reverse SS6. Ordinary and Reverse SS
OrdinaryOrdinary OrdinaryOrdinary ReverseReverse ReverseReverse
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7. Why issue splits?7. Why issue splits?
Ordinary Ordinary Makes price look more affordable and Makes price look more affordable and
therefore more attractivetherefore more attractiveReverseReverse
Makes price look higher and more Makes price look higher and more attractive for penny stocks.attractive for penny stocks.
Ordinary Ordinary Makes price look more affordable and Makes price look more affordable and
therefore more attractivetherefore more attractiveReverseReverse
Makes price look higher and more Makes price look higher and more attractive for penny stocks.attractive for penny stocks.
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8. Ordinary and Reverse SS8. Ordinary and Reverse SS
Ordinary 2:1Ordinary 2:1 Own 100 @ $50Own 100 @ $50
100 x 2 = 200 shares100 x 2 = 200 shares$50 / 2 = $25/share$50 / 2 = $25/share
Total Value:Total Value:200 x $25 = $5,000200 x $25 = $5,000
Ordinary 2:1Ordinary 2:1 Own 100 @ $50Own 100 @ $50
100 x 2 = 200 shares100 x 2 = 200 shares$50 / 2 = $25/share$50 / 2 = $25/share
Total Value:Total Value:200 x $25 = $5,000200 x $25 = $5,000
Reverse 1:4Reverse 1:4 Own 100 @ $50Own 100 @ $50
100 / 4 = 25 shares100 / 4 = 25 shares$50 x 4 = $200/share$50 x 4 = $200/share
Total Value:Total Value:25 x $200 = $5,00025 x $200 = $5,000
Reverse 1:4Reverse 1:4 Own 100 @ $50Own 100 @ $50
100 / 4 = 25 shares100 / 4 = 25 shares$50 x 4 = $200/share$50 x 4 = $200/share
Total Value:Total Value:25 x $200 = $5,00025 x $200 = $5,000
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9. Common vs. Preferred9. Common vs. Preferred
Preferred stockholders have priority Preferred stockholders have priority over dividendsover dividends
Preferred stockholders have no voting Preferred stockholders have no voting rights.rights.
Preferred stockholders have priority Preferred stockholders have priority over dividendsover dividends
Preferred stockholders have no voting Preferred stockholders have no voting rights.rights.
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10. Blue Chip Stock10. Blue Chip Stock
Most expensive stocksMost expensive stocksSteady earningsSteady earningsGood reputationGood reputationEX: AT&T, McDonalds, AlcoaEX: AT&T, McDonalds, Alcoa
Most expensive stocksMost expensive stocksSteady earningsSteady earningsGood reputationGood reputationEX: AT&T, McDonalds, AlcoaEX: AT&T, McDonalds, Alcoa
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11. Liquidity11. Liquidity
Ability to trade large amounts of stocks Ability to trade large amounts of stocks without any problemswithout any problems
Ease with which assets can be Ease with which assets can be converted to cash.converted to cash.
Ability to trade large amounts of stocks Ability to trade large amounts of stocks without any problemswithout any problems
Ease with which assets can be Ease with which assets can be converted to cash.converted to cash.
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12./13. Penny Stocks12./13. Penny Stocks
Contrast to blue chipContrast to blue chipNewer companiesNewer companiesLittle historyLittle historyUsually under $5Usually under $5Risky and SpeculativeRisky and Speculative
Contrast to blue chipContrast to blue chipNewer companiesNewer companiesLittle historyLittle historyUsually under $5Usually under $5Risky and SpeculativeRisky and Speculative
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14. Cyclical Stocks14. Cyclical Stocks
Rise and fall with business cyclesRise and fall with business cycles Industries: Automobiles, Retail, Industries: Automobiles, Retail,
HousingHousingCyclical vs. Non-cyclicalCyclical vs. Non-cyclical - tied to - tied to
consumer need and demandconsumer need and demand
Rise and fall with business cyclesRise and fall with business cycles Industries: Automobiles, Retail, Industries: Automobiles, Retail,
HousingHousingCyclical vs. Non-cyclicalCyclical vs. Non-cyclical - tied to - tied to
consumer need and demandconsumer need and demand
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15. Influences?15. Influences?
InterestInterest InflationInflationUnemploymentUnemployment
InterestInterest InflationInflationUnemploymentUnemployment
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16. Cyclical (can it be profitable?)16. Cyclical (can it be profitable?)
Yes, if the investor can anticipate Yes, if the investor can anticipate changes in the economy.changes in the economy.
Yes, if the investor can anticipate Yes, if the investor can anticipate changes in the economy.changes in the economy.
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17. Growth and Value stocks17. Growth and Value stocks
GROWTHGROWTH ExpensiveExpensive Buy expensive and Buy expensive and
sell at even higher sell at even higher pricesprices
High Growth High Growth PotentialPotential
Grow faster than Grow faster than S&P 500S&P 500
Ex: AppleEx: Apple
GROWTHGROWTH ExpensiveExpensive Buy expensive and Buy expensive and
sell at even higher sell at even higher pricesprices
High Growth High Growth PotentialPotential
Grow faster than Grow faster than S&P 500S&P 500
Ex: AppleEx: Apple
VALUEVALUE CheapCheap Stock will resume Stock will resume
growth eventuallygrowth eventually Moderate growth Moderate growth
potentialpotential Grow slower than the Grow slower than the
S&P 500S&P 500 Bargain HuntersBargain Hunters
VALUEVALUE CheapCheap Stock will resume Stock will resume
growth eventuallygrowth eventually Moderate growth Moderate growth
potentialpotential Grow slower than the Grow slower than the
S&P 500S&P 500 Bargain HuntersBargain Hunters
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18/19/20/21 Cheap or Expensive18/19/20/21 Cheap or Expensive
GROWTHGROWTH Grow faster than Grow faster than
S&PS&P
Have a higher P/E Have a higher P/E than the S&P indexthan the S&P index
GROWTHGROWTH Grow faster than Grow faster than
S&PS&P
Have a higher P/E Have a higher P/E than the S&P indexthan the S&P index
CHEAPCHEAP Grow slower than Grow slower than
S&PS&P
Have a lower P/E Have a lower P/E than the S&P indexthan the S&P index
CHEAPCHEAP Grow slower than Grow slower than
S&PS&P
Have a lower P/E Have a lower P/E than the S&P indexthan the S&P index
This ratio measures the stock's value relative to its net assets. Indicates Whether or not it is overvalued.
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22. Income Stock22. Income Stock
Grows slower than the S&PGrows slower than the S&PWill have long-term profitsWill have long-term profitsWill pay dividendsWill pay dividends
Grows slower than the S&PGrows slower than the S&PWill have long-term profitsWill have long-term profitsWill pay dividendsWill pay dividends
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23. Tech stocks23. Tech stocks
AdvantageAdvantage High appreciationHigh appreciation Share price skyrocketsShare price skyrockets Very profitableVery profitable
DisadvantageDisadvantage CrashCrash Ex: dot com bustEx: dot com bust Unstable companiesUnstable companies
AdvantageAdvantage High appreciationHigh appreciation Share price skyrocketsShare price skyrockets Very profitableVery profitable
DisadvantageDisadvantage CrashCrash Ex: dot com bustEx: dot com bust Unstable companiesUnstable companies
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24. Market Value or Cap24. Market Value or Cap
Share price Share price xx # of shares outstanding # of shares outstandingShare price Share price xx # of shares outstanding # of shares outstanding
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25. Most risky market cap?25. Most risky market cap?
Small Cap (under $500 million)Small Cap (under $500 million) Investing in small companies is risky Investing in small companies is risky
because they are usually newer and because they are usually newer and less stableless stable
DOES have high growth potentialDOES have high growth potential
Small Cap (under $500 million)Small Cap (under $500 million) Investing in small companies is risky Investing in small companies is risky
because they are usually newer and because they are usually newer and less stableless stable
DOES have high growth potentialDOES have high growth potential
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26. Large-Cap Minimum26. Large-Cap Minimum
Above $1 billionAbove $1 billionAbove $1 billionAbove $1 billion
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27. High Dividend/Low Growth27. High Dividend/Low Growth
Income stocksIncome stocks Income stocksIncome stocks
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28. PEG28. PEG
Takes into account the GROWTH rate Takes into account the GROWTH rate and not just the Price and EPS.and not just the Price and EPS.
Takes into account the GROWTH rate Takes into account the GROWTH rate and not just the Price and EPS.and not just the Price and EPS.
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29. PEG amount29. PEG amount
11Meaning stock is fully valuedMeaning stock is fully valued
11Meaning stock is fully valuedMeaning stock is fully valued