Stock
shares
Portfolio
IPO
Dividend
Ticket Symbol
P/E Ratio
Understanding Stocks
What are Stocks?
Stocks- a claim on a corporation that
gives the purchaser a share, or small
percentage or part, of the corporation!
Let’s break it down
You own a company and it’s
doing well but you know you can
do better if you had more capital
to expand.
So you file for an IPO (Initial
Public Offering).
What you are offering to the public is stock, also called a
share, or piece of your company.
The Story continues
The idea is that when a person buys a share
both parties win.
Company gets the capital
to expand and grow the
business
The Shareholder hopes the
the value of the share will go
up as the company does
better.
IPO
The day arrives. Your stock will
be traded in the New York Stock
Exchange (NYSE), one market
for buying and selling stocks.
The bell rings the public can now
own part of your company and
you are now considered publicly,
instead of privately, owned
Will people be interested in
buying your stock at the price
you set? The market will answer
that!
How stock prices work
If demand is high for your stock at the price of your IPO and
people buy the price of that stock will go up.
Say I buy 100 shares of
your stock at $10 per
share.
If lot’s of people like that price,
and buy, soon the price is at $17
dollars a share.
I just made 7 dollars for every share I bought. A total of
$700 dollars profit for me!
Of course the opposite
can happen.
This brings down the
value of the stock from
$17 to $8.
People feel like your company
won’t do well for some reason
and they begin to sell off your
stock.
Now you’ve actually lost
200$ of your initial
investment.
How do you buy and sell
stocks?
You can buy and sell
online through a
company that works out
the transaction for a
small fee.
Or
Through a broker who
will do the same for a
larger fee.
You may also invest in a Mutual Fund in which you give a
company money and they invest in a bunch of different
stocks they think are good (safer).
The Dow Jones Industrial
Average (DJIA)
Remember it’s an average
DOW
•The Dow Jones is the most popular cited
indicator of day-to-day stock market
activity
•It is a weighted average of 30 widely
traded stocks (that do change from time
to time) on the NYSE
•Charles Dow created it to tell people
what was happening w/the market
1. 3M Company
(MMM)
11.DuPont (E.I.)
deNemours (DD)
2. Alcoa Inc. (AA)
12.Exxon Mobil Corp.
(XOM)
3. Altria Group, Inc.
(MO)
4. American Express
Co. (AXP)
13.General Electric Co.
(GE)
14.General Motors (GM)
5. American Int'l.
Group (AIG)
15.Hewlett-Packard Co.
(HPQ)
6. AT&T Inc (T)
16.Home Depot, Inc.
(HD)
7. Boeing Co. (BA)
8. Caterpillar, Inc.
(CAT)
9. Citigroup Inc. (C)
10.Coca-Cola Co.
(KO)
17.Honeywell Int'l. Inc.
(HON)
18.Intel Corp. (INTC)
19.International Bus.
Mach. (IBM)
20.J.P. Morgan Chase &
Co. (JPM)
21.Johnson & Johnson (JNJ)
22.McDonalds Corp. (MCD)
23.Merck & Co. Inc. (MRK)
24.Microsoft Corp. (MSFT)
25.Pfizer Inc. (PFE)
26.Procter & Gamble Co.
(PG)
27.United Technologies
Corp. (UTX)
28.Verizon Communications
Inc. (VZ)
29.Wal-Mart Stores, Inc.
(WMT)
30.Walt Disney Co. (DIS)
How people know which stocks
to buy?
Some just buy stocks of
companies that they
know.
You research a companies stock
history and if any factors will
change the company in the near
future.
But mostly it’s all about
research.
Examples: New managment (steve jobs dies), New products coming out
(Iphone 5S), weather (cold weather in Florida and you grow oranges),
this company has done well the last few months (reading stock tables).
NYSE=New
BBY=Ticker
How to Read the Stock
Market
listing—
York Stock
symbol for
Exchange
Best Buy
Best Buy Co., Inc (NYSE:BBY)
Prev. Close:
44.54
Open:
46.98
Previous
High:
Close
=
47.56
what
the
Low:closed
stock
45.69
at
yesterday
Open
= The
price it
started
High
= the high
trading
price
the at
stock
today
traded
Low = for
thetoday
low
price the stock
traded for today
47.46 +2.92 / +6.56% Sep 18
Volume:
47.46+2.92
= price
= the+6.56% = the
24,116,794
the stock
Net Change
closed Net
the
52wk Range:
at today
difference percentage
Volume
= the
41.85
58.49
between theChange the
number
of
P/E
Ratio:
current closing
difference
shares
that
17.51
price & the between the
52wk
Range
= the
were
bought
&
Dividend
Yield:
previous day’s
current closing
lowest
totoday
highest
sold
P/E&Ratio
closing price.
price
the = the price-earnings
price1.10%
this stockratio,
has &
is obtained
theatlatest
closing
previous
day’s by taking
traded
during
the
priceprice.
per share and
dividing
it by the
closing
past
52 weeks
latest available net earning per share.
Dividend Yield:
A high PE ratio usually indicates a
the dividend
stock that is experiencing a higher
divided by the
than average growth in earnings.
closing price
Now let’s try ourselves
Using the “Understanding Stock Tables/Quotes”
handout and a partner answer the questions on the
back, on a separate piece .
Stock Market Game
- You will be in 4 Teams
(consider yourselves owners of a mutual fund)
- Each person in the group will research at least one stock to
buy.
- Monday you will have your first board meeting to discuss
which stocks to buy in the Stock Market Game.
- Each Team will begin with $100,000.
- You must have at least 4 different stocks in your mutual fund a
all times.
- Over the course of the 10 week game your Team will build a
portfolio explaining trades you made, strategies for buying and
selling, and a log of your meetings.
In a moment I will put you on teams. Once with your team one
person will come up and get two (and only two) packets.
You and your team will go through the packets together and
come up with questions for me which I will answer at the end of
the period.
Homework
Deeply research one stock for next Monday’s first Board
meeting.
You will need to bring in the paper filled out to the meeting next
Monday.