LESSON 11
RESEARCHING COMPANIES
LEARNING, EARNING, AND INVESTING
FOR A
NEW GENERATION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
SLIDE 11.1
LESSON 11 – RESEARCHING COMPANIES
Thinking Economically About
Researching Stocks
• Investors face scarcity: Investors’ time is limited while the
information available regarding stocks is vast.
• Here are some recommendations to consider:
■ Recognize that you cannot know it all.
■ Select a few companies to research. Then follow their progress
closely.
■ Find a few good sources of information about stocks. Many online
sources have great data and are easy and fast to use.
■ Stop looking for new information when you think the benefits
received from more information are less than the costs of additional
research.
LEARNING, EARNING, AND INVESTING
FOR A
NEW GENERATION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
SLIDE 11.2
LESSON 11 – RESEARCHING COMPANIES
Surprises Are Rare
• Many individuals spend a great deal of time and effort trying to
find companies whose stock prices might increase faster than
average for the market.
• Many financial institutions – brokerage companies, banks, life
insurance companies – spend even more time and effort trying to
identify companies whose stock prices might increase faster than
average for the market.
• It is very difficult to earn unusual gains in the stock market
because most of the information about most companies is already
know.
• People who earn above-average returns from their stocks are
usually surprised. But it is hard even for experienced investors to
find surprises in the market.
LEARNING, EARNING, AND INVESTING
FOR A
NEW GENERATION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
SLIDE 11.3
LESSON 11 – RESEARCHING COMPANIES
Fundamental Analysis
• Fundamental stock analysts examine the basic
performance of a company and use results to make
investment decisions.
• They pay special attention to these factors:
■ Size of the company
■ Changes in sales
■ Changes in earnings
■ Demand for the company’s goods and services
LEARNING, EARNING, AND INVESTING
FOR A
NEW GENERATION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY
SLIDE 11.4
LESSON 11 – RESEARCHING COMPANIES
Stock-Selection Data Used by
Fundamental Stock Analysts
• Symbol
• Stock exchange
• Share price
• Market capitalization
• Price/earnings ration
• Annual revenue or sales
• Earnings per share
LEARNING, EARNING, AND INVESTING
FOR A
NEW GENERATION © COUNCIL FOR ECONOMIC EDUCATION, NEW YORK, NY