Papa John’s PizzaPapa John’s Pizza In 1984, "Papa" John In 1984, "Papa" John

Schnatter knocked out a Schnatter knocked out a broom closet located in broom closet located in the back of his father's the back of his father's tavern (Mick's Lounge), tavern (Mick's Lounge), sold his prized 1972 Z28 sold his prized 1972 Z28 Camaro in order to Camaro in order to purchase $1,600 worth of purchase $1,600 worth of used restaurant used restaurant equipment, and began equipment, and began selling his pizzas to the selling his pizzas to the tavern's customers. tavern's customers.

Investment BankersInvestment Bankers

Long term Long term financial planningfinancial planning MarketingMarketing of security issues of security issues Arrangement of Arrangement of private loansprivate loans NegotiationNegotiation of mergers of mergers

Rights of ShareholdersRights of Shareholders

Receive a Receive a stock certificatestock certificate Share in Share in profitsprofits Voice in Voice in managementmanagement (vote for Board Dir) (vote for Board Dir) Receive Receive financialfinancial information information Sell Sell stockstock at at anytimeanytime

Common vs. Preferred StockCommon vs. Preferred Stock

Preferred has preference in claims to Preferred has preference in claims to assetsassets and and dividendsdividends – must be paid – must be paid before common.before common.

Preferred dividends – Preferred dividends – fixedfixed Common dividends – Common dividends – fluctuatefluctuate Preferred usually have no Preferred usually have no votingvoting rights rights

Initial Public Offering (IPO)Initial Public Offering (IPO)

First time company offers First time company offers stockstock to the to the public for cash.public for cash.

Can only have Can only have oneone.. Also known as going Also known as going publicpublic

Once hot, now notShare prices for these former highflyers have cooled from their IPO price.

Company  IPO date 

IPO price 

First Trade 

Current Price 

Change from IPO price 

Va Software (LNUX)  12/99

 $30  $320  $1 -97% 

TheGlobe (TGLO.OB)  11/98

 $9  $90  1 cent  -99% 

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 Tombstone Ad – for new issues

ProspectusProspectus

CharacterCharacter of the business of the business Bios on the Bios on the officersofficers FinancialFinancial Statements Statements Reasons for Reasons for raisingraising fundsfunds

SEC – Securities and Exchange SEC – Securities and Exchange CommissionCommission

GovernmentGovernment agency charged with agency charged with enforcement of the nation’s securities laws enforcement of the nation’s securities laws and regulations.and regulations.

PolicePolice of the of the investment communityinvestment community Monitor Monitor insiderinsider tradingtrading Prevent Prevent fraudfraud

How to read stock quotesHow to read stock quotes

Yahoo Finance

Stock Exchanges and MarketsStock Exchanges and Markets

NYSENYSE – over 2,800 stocks – over 2,800 stocks AMEXAMEX – over 700 stocks – over 700 stocks NASDAQNASDAQ – over 3,200 stocks – over 3,200 stocks OverOver thethe CounterCounter (OTC) – (OTC) – over 4,000 stocksover 4,000 stocks

Markets can look chaoticMarkets can look chaotic

View of JFK airport

Specialist on the NYSESpecialist on the NYSE

Busy Specialist on NYSEBusy Specialist on NYSE

Commodities TraderCommodities Trader

NASDAQ in New York CityNASDAQ in New York City

Types of ordersTypes of orders

MarketMarket order – buy or sell ASAP at the order – buy or sell ASAP at the going or market price.going or market price.

LimitLimit order – buy or sell at a specific price order – buy or sell at a specific price and time limit.and time limit.

Good till Good till canceledcanceled Good for the Good for the dayday

Dow Jones Industrial AverageDow Jones Industrial Average

Developed by Charles Dow in late Developed by Charles Dow in late 1800’s1800’s 3030 stocks stocks No longer a pure No longer a pure averageaverage due mainly to due mainly to

stock splitsstock splits

Dow Jones Industrial StocksDow Jones Industrial Stocks

3M COALCOA INC

ALTRIA GROUP INC

AMER INTL GROUPAMERICAN EXPRESSBOEING COCATERPILLAR INCCITIGROUP INCCOCA-COLA CO

DISNEY (WALT) CO

DU PONT (EI)

EXXON MOBIL CORP

GENERAL ELECTRICGENERAL MOTORSHEWLETT-PACKARD

HOME DEPOT INCHONEYWELL INTLIBMINTEL CORP

JOHNSON&JOHNSON

JPMORGAN CHASE

MCDONALDS CORPMERCK & COMICROSOFT CORPPFIZER INC

PROCTER & GAMBLE

SBC COMMUNICATIO

UNITED TECH CORP

VERIZON COMMUNIC

WAL-MART STORES

Dow Jones since 1928Dow Jones since 1928

Stock Split ExampleStock Split Example

SharesShares PricePrice Current Mkt. Current Mkt. ValueValue

100100 IBMIBM $80$80 $8,000$8,000

2 for 1 split2 for 1 split

200200 $40$40 $8,000$8,000

What stock has the highest What stock has the highest price?price?

Berkshire Hathaway

Is it expensive?Is it expensive?Should it split the stock?Should it split the stock?

Warren Buffett’s view on splitsWarren 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.”

Blue chip Blue chip

Growth StocksGrowth Stocks HighHigh P/E ratio P/E ratio Pay little or no dividend – reinvest their profitsPay little or no dividend – reinvest their profits

Income stocksIncome stocks LowLow P/E ratio P/E ratio Pay dividends regularlyPay dividends regularly

Cyclical stocksCyclical stocks Highly dependent on the Highly dependent on the economyeconomy Airlines and hotels are typical examplesAirlines and hotels are typical examples

Stock ClassificationsStock Classifications

Company SizesCompany Sizes Large-CapLarge-Cap Mid-CapMid-Cap Small-CapSmall-Cap

Cap = Market Capitalization = Cap = Market Capitalization = stock price X # shares outstandingstock price X # shares outstanding

Which is generally the safest investment?Which is generally the safest investment?Which generally has the greatest growth potential?Which generally has the greatest growth potential?Which company has the Which company has the largest market cap??

Making money with stocksMaking money with stocks Capital gain – the Capital gain – the profitprofit made on the sale made on the sale

of the stock.of the stock.

Dividends – portion of the company’s profit Dividends – portion of the company’s profit paid outpaid out to its shareholders. to its shareholders.

Dividend yield = Dividend yield = dividend/stock pricedividend/stock price or or expected dividend over next year/stock expected dividend over next year/stock priceprice

Stock BrokersStock Brokers A broker, originally, A broker, originally,

was a wine seller who was a wine seller who “broke open” wine “broke open” wine casks.casks.

Types of BrokersTypes of Brokers

Full-serviceFull-service Merrill Lynch – commissions vary widelyMerrill Lynch – commissions vary widely

DiscountDiscount Ameritrade - $11 tradesAmeritrade - $11 trades

Deep DiscountDeep Discount Scottrade - $7 tradesScottrade - $7 trades

Market IndexesMarket Indexes

Dow Jones Industrial Average – 30 stocksDow Jones Industrial Average – 30 stocks NASDAQ – 100 stocksNASDAQ – 100 stocks S&P 500 – 500 stocksS&P 500 – 500 stocks

Historical Returns of the MarketHistorical Returns of the Market

YearsYears Time PeriodTime Period DJIA Ann. DJIA Ann. ReturnReturn

7070 1932 – 20021932 – 2002 12%12%5050 1952 – 2002 1952 – 2002 11%11%2525 1977 – 20021977 – 2002 14%14%1010 1992 – 20021992 – 2002 10%10%55 1997 – 20021997 – 2002 1%1%55 2002 - 20072002 - 2007 4%4%

Bull vs. Bear MarketBull vs. Bear Market

What is a Mutual Fund?What is a Mutual Fund?

A collection of A collection of stocks, bondsstocks, bonds, and other , and other securities. securities.

Owned by a Owned by a groupgroup of investors. of investors. ManagedManaged by a professional investment by a professional investment

company.company.

Reasons to invest in a Reasons to invest in a Mutual FundMutual Fund

Broad Broad diversificationdiversificationProfessional Professional managementmanagement Investment Investment objectiveobjectiveAffordabilityAffordabilityEaseEase

Types of Mutual FundsTypes of Mutual Funds

GrowthGrowth IncomeIncome Money MarketMoney Market IndexIndex SpecializedSpecialized

Mutual Fund PerformanceMutual Fund Performance From 1985 – 2000, 85% of U.S. actively From 1985 – 2000, 85% of U.S. actively

managed mutual funds managed mutual funds underperformedunderperformed the S&P 500 index.the S&P 500 index.

Typically 75% underperformTypically 75% underperform

Other Mutual Fund ItemsOther Mutual Fund Items

Load (44%) vs No-Load (56%)Load (44%) vs No-Load (56%) Average load – 4.75%Average load – 4.75% Average annual expense – 1.1%Average annual expense – 1.1%

Over 9,000 mutual fundsOver 9,000 mutual funds

How the Stingy Get RichHow the Stingy Get Rich Invest $10,000 in…Invest $10,000 in…

High-expense stock High-expense stock fund (1.5%)fund (1.5%)

Low-expense stock Low-expense stock fund (.2%)fund (.2%)

Value in 20 yearsValue in 20 years

$34,451$34,451

$44,780$44,780

Payoff for cutting costs:

$10,329

““Simple solutions like indexing can Simple solutions like indexing can feel unsatisfying. You want investing feel unsatisfying. You want investing to be complex, so you can feel to be complex, so you can feel special when you figure it out.”special when you figure it out.”

Jason Zweig – Your Money and Your BrainJason Zweig – Your Money and Your Brain

Performance over timePerformance over time

Roth IRA – Individual Ret. Acct.Roth IRA – Individual Ret. Acct.

$5,000/yr$5,000/yr contributions contributions Distributions are Distributions are not taxablenot taxable Contributions can be made as long as you Contributions can be made as long as you

livelive

401k Plans401k Plans

A 401(k) is a type of A 401(k) is a type of retirementretirement planplan that that allows employees to save and invest for allows employees to save and invest for their own retirement. their own retirement.

Through a 401(k), you can authorize your Through a 401(k), you can authorize your employeremployer to deduct a certain amount of to deduct a certain amount of money from your paycheck before taxes money from your paycheck before taxes are calculated, and invest it in the 401(k) are calculated, and invest it in the 401(k) plan. plan.

Why a 401k is a good ideaWhy a 401k is a good idea

See Fidelity’s See Fidelity’s website

What affects your credit score?What affects your credit score?

Your payment performance history (35%) Your payment performance history (35%) Your current level of indebtedness (30%) Your current level of indebtedness (30%) The age of your credit history (15%) The age of your credit history (15%) Your pursuit of new credit (10%) Your pursuit of new credit (10%) The type of accounts in your credit report The type of accounts in your credit report

(10%) (10%)

FICO score and mortgage paymentFICO 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 ReportFree Credit Report

You are allowed to check your credit once You are allowed to check your credit once a year for free.a year for free.

Your credit score (FICO) is available for a Your credit score (FICO) is available for a small fee.small fee.

Go to Go to www.annualcreditreport.com