11/17/2009

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Corporations sell a share of stocks to raise $ to fund their operations
• Just like bonds
• Loan
When you purchase a share you are purchasing ownership in that company
• If you buy 1 share of a 100 share company
People buy stock to make money
Why would a company rather borrow from you rather then the bank?

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Share – Piece of stock
Portfolio – list of all stocks you own
Every stock has a symbol
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• F
WMT
GOOG
YUM

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PROFIT
• Ways to make profit
 Dividends – a portion of profits paid to stock holders
 Done quarterly (4x a year)
 No profits, no dividends
 Capital Gains – Sell for more then you bought it for
 Capital Loss – lose money when sold
 Taxes

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Types of stock
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• Income Stock - Pay out their profits
 Dividends
Growth Stock – Keep Profits
 Capital Gains
 Grow faster
 Riskier

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Stock Splits – the division of a single share into more than one
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• Number of stocks doubles, price is cut in half.
Occurs when $ of a stock is getting too high
Dicks Sporting Goods
200 Shares
$100
$2000 Total
Dicks Sporting Goods
400 Shares
$50
$2000 Total

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Risks of Stock
• Firms may earn little to no profit which would cause stock prices to fall
 Company goes bankrupt
 You lose all the stock’s value
 Capital Loss – sell at less than you bought it for

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Stock Size
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• Micro Cap – less than $500 M
Small Cap - $500 M - $2 B
Mid Cap - $2 B - $10 B.
Large cap - $10 B. - $100 B.
Mega Cap - $100 B or more •
Large stocks are more stable, but have less potential for growth.
Small companies are more likely to grow, but are less stable.
Name
Exxon Mobil
Microsoft
Wal-Mart Stores
Apple Inc.
Symbol Mkt cap
XOM $353,562
MSFT $250,166
WMT
AAPL
$194,538
$183,506
JPMorgan Chase JPM $178,147
Google Inc.
GOOG $175,282
Procter & Gamble PG $168,251
Johnson & Johnson JNJ
General Electric GE
$166,837
$161,528
Int'l Business Mach. IBM $157,778
Berkshire Hathaway BRK.A
$156,099
Chevron
AT&T Inc.
CVX
T
$153,783
$151,807
Bank of America BAC
Cisco Systems
Wells Fargo
CSCO
WFC
$140,308
$140,009
$137,194
Coca-Cola
Pfizer Inc.
KO
PFE
Hewlett-Packard HPQ
$123,197
$116,423
$115,139
Intel Corporation INTC $110,728

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Diversify Sectors
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• Communication – VZ, T
Capital Goods – Cat, DE, BA
Consumer Staples – JNJ, KFT
Healthcare – Pfizer, Merck
Technology – Dell, IBM
Transportation – F

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What makes price change?
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• Rumor
Speculation
Good News
High Profits
Bad News
Low Profits
Mergers
Corruption/Scandal
Recalls
Luck

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Contact a stockbroker
• Stockbroker – a person who links buyers and sellers of stock – experts
 Charge commission
Stock is bought/sold at a stock exchange
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• Stock exchange – markets for buying/selling stock
The major stock exchanges are NYSE and NASDAQ

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NYSE – New York Stock Exchange.
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• 9:30 am – 4pm
Located on Wall Street in New York City, NY
Largest and most established companies
Blue Chip companies are the largest and best known companies – safe and steady investments
1-3 letter symbols

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NASDAQ – (National Association of Securities Dealers
Automated Quotations)
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• 4 letter symbols
Technology Co’s
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• No trading floors
Prices are broadcast over TV/Computers
Usually riskier

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Bu Market - market rises
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• Investors expect GREATER profits and BUY stock
Bear(Bare) Market – Market drops
• Investors expect LOWER profits and SELL stock

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Dow Jones Industrial Average (DJIA) – an average of 30 companies on NYSE
• 14093 Oct 12, 2007