Papa John’s Pizza

In 1984, "Papa" John
Schnatter knocked out a
broom closet located in
the back of his father's
tavern (Mick's Lounge),
sold his prized 1972 Z28
Camaro in order to
purchase $1,600 worth of
used restaurant
equipment, and began
selling his pizzas to the
tavern's customers.
Investment Bankers
 Long
term financial planning
 Marketing of security issues
 Arrangement of private loans
 Negotiation of mergers
Rights of Shareholders
 Receive
a stock certificate
 Share in profits
 Voice in management (vote for Board Dir)
 Receive financial information
 Sell stock at anytime
Common vs. Preferred Stock
 Preferred
has preference in claims to
assets and dividends – must be paid
before common.
 Preferred dividends – fixed
 Common dividends – fluctuate
 Preferred usually have no voting rights
Initial Public Offering (IPO)
 First
time company offers stock to the
public for cash.
 Can only have one.
 Also known as going public
First
Trade
Current
Price
Change from IPO
price
Va Software
Once hot, now not 12/99
$30
(LNUX) Share prices for these former highflyers have cooled from their IPO price.
$320
$1
-97%
TheGlobe
(TGLO.OB)
$9
$90
1 cent
-99%
Company
IPO
date
11/98
IPO
price
Foundry Networks
(FDRY)
9/99
$25
$114
$15
-40%
Microsoft
3/86
$.08
$.11
$18
22,500%
Google (GOOG)
8/04
$85
$101
$340
300%
Yahoo (YHOO)
4/96
$.50
$1.20
$12
2,300%
Tombstone Ad – for new issues
Prospectus
 Character
of the business
 Bios on the officers
 Financial Statements
 Reasons for raising funds
SEC – Securities and Exchange
Commission
 Government
agency charged with
enforcement of the nation’s securities laws
and regulations.
 Police of the
investment community
 Monitor insider
trading
 Prevent fraud
How to read stock quotes
 Yahoo
Finance
Stock Exchanges and Markets
– over 2,800 stocks
 AMEX – over 700 stocks
 NASDAQ – over 3,200 stocks
 Over the Counter (OTC) –
over 4,000 stocks
 NYSE
Markets can look chaotic
 View
of JFK airport
Specialist on the NYSE
Busy Specialist on NYSE
Commodities Trader
NASDAQ in New York City
Types of orders
order – buy or sell ASAP at the
going or market price.
 Limit order – buy or sell at a specific price
and time limit.
 Market


Good till canceled
Good for the day
Dow Jones Industrial Average
 Developed
 30
by Charles Dow in late 1800’s
stocks
 No longer a pure average due mainly to
stock splits
Dow Jones Industrial Stocks
3M CO
DU PONT (EI)
JPMORGAN CHASE
ALCOA INC
EXXON MOBIL CORP
MCDONALDS CORP
ALTRIA GROUP INC
GENERAL ELECTRIC
MERCK & CO
AMER INTL GROUP
GENERAL MOTORS
AMERICAN EXPRESS
HEWLETT-PACKARD
BOEING CO
HOME DEPOT INC
CATERPILLAR INC
HONEYWELL INTL
CITIGROUP INC
IBM
UNITED TECH CORP
COCA-COLA CO
INTEL CORP
VERIZON COMMUNIC
DISNEY (WALT) CO
JOHNSON&JOHNSON
WAL-MART STORES
MICROSOFT CORP
PFIZER INC
PROCTER & GAMBLE
SBC COMMUNICATIO
Dow Jones since 1928
Stock Split Example
Shares
100
IBM
Price
Current Mkt.
Value
$80
$8,000
$40
$8,000
2 for 1 split
200
What stock has the highest
price?
Berkshire Hathaway
Is it expensive?
Should it split the stock?
Warren Buffett’s view on splits
Buffett believes that splitting the stock will
attract shareholders who are more focused
on the stock price than the business results
at Berkshire. These types of shareholders,
according to Buffett, tend to make
emotional or irrational decisions about
buying/selling the stock; hence leading to
wild fluctuations in the stock price producing
what Buffett refers to as “manic-depressive
valuations.”
Stock Classifications

Blue chip

Growth Stocks



Income stocks



High P/E ratio
Pay little or no dividend – reinvest their profits
Low P/E ratio
Pay dividends regularly
Cyclical stocks


Highly dependent on the economy
Airlines and hotels are typical examples
Company Sizes

Large-Cap
 Mid-Cap
 Small-Cap
Cap = Market Capitalization =
stock price X # shares outstanding
Which is generally the safest investment?
Which generally has the greatest growth potential?
Which company has the largest market cap?
Making money with stocks
gain – the profit made on the sale
of the stock.
 Capital
– portion of the company’s profit
paid out to its shareholders.
 Dividends
 Dividend
yield = dividend/stock price or
expected dividend over next year/stock
price
Stock Brokers

A broker, originally,
was a wine seller who
“broke open” wine
casks.
Types of Brokers
 Full-service

Merrill Lynch – commissions vary widely
 Discount

Ameritrade - $11 trades
 Deep

Discount
Scottrade - $7 trades
Market Indexes
Jones Industrial Average – 30 stocks
 NASDAQ – 100 stocks
 S&P 500 – 500 stocks
 Dow
Historical Returns of the Market
Years
Time Period
70
50
25
10
5
5
1932 – 2002
1952 – 2002
1977 – 2002
1992 – 2002
1997 – 2002
2002 - 2007
DJIA Ann.
Return
12%
11%
14%
10%
1%
4%
Bull vs. Bear Market
What is a Mutual Fund?
A
collection of stocks, bonds, and other
securities.
 Owned by a group of investors.
 Managed by a professional investment
company.
Reasons to invest in a
Mutual Fund
 Broad
diversification
 Professional management
 Investment objective
 Affordability
 Ease
Types of Mutual Funds
 Growth
 Income
 Money
Market
 Index
 Specialized
Mutual Fund Performance
From 1985 – 2000, 85% of U.S. actively
managed mutual funds underperformed
the S&P 500 index.
 Typically 75% underperform

Other Mutual Fund Items
 Load


(44%) vs No-Load (56%)
Average load – 4.75%
Average annual expense – 1.1%
 Over
9,000 mutual funds
How the Stingy Get Rich

Invest $10,000 in…

Value in 20 years

High-expense stock
fund (1.5%)

$34,451

Low-expense stock
fund (.2%)

$44,780
Payoff for cutting costs:
$10,329
 “Simple
solutions like indexing can
feel unsatisfying. You want investing
to be complex, so you can feel
special when you figure it out.”
Jason Zweig – Your Money and Your Brain
Performance over time
Roth IRA – Individual Ret. Acct.
 $5,000/yr
contributions
 Distributions are not taxable
 Contributions can be made as long as you
live
401k Plans
A
401(k) is a type of retirement plan that
allows employees to save and invest for
their own retirement.
 Through a 401(k), you can authorize your
employer to deduct a certain amount of
money from your paycheck before taxes
are calculated, and invest it in the 401(k)
plan.
Why a 401k is a good idea
See Fidelity’s website
What affects your credit score?
 Your
payment performance history (35%)
 Your current level of indebtedness (30%)
 The age of your credit history (15%)
 Your pursuit of new credit (10%)
 The type of accounts in your credit report
(10%)
FICO score and mortgage payment
760 - 850
5.93%
$1,285
700 - 759
6.15%
$1,316
680 - 699
6.33%
$1,341
660 - 679
6.54%
$1,371
640 - 659
6.97%
$1,433
620 - 639
7.52%
$1,513
$216,000 mortgage for 30 years
Free Credit Report
 You
are allowed to check your credit once
a year for free.
 Your credit score (FICO) is available for a
small fee.
 Go to www.annualcreditreport.com