Stock MarketStock Market

BasicsBasicsBasicsBasics

1. Proxy1. Proxy

Allows you to have your vote at Allows you to have your vote at shareholder meetings without being shareholder meetings without being present. present.

Similar to an absentee ballotSimilar to an absentee ballot

Allows you to have your vote at Allows you to have your vote at shareholder meetings without being shareholder meetings without being present. present.

Similar to an absentee ballotSimilar to an absentee ballot

2. Primary v. Secondary Markets2. Primary v. Secondary Markets

PrimaryPrimary IPO’sIPO’s Initial buysInitial buys New issuesNew issues Raise moneyRaise money

SecondarySecondary Trading between buyers and sellersTrading between buyers and sellers

PrimaryPrimary IPO’sIPO’s Initial buysInitial buys New issuesNew issues Raise moneyRaise money

SecondarySecondary Trading between buyers and sellersTrading between buyers and sellers

3. Why no dividends?3. Why no dividends?

Companies reinvest profits insteadCompanies reinvest profits insteadCompanies reinvest profits insteadCompanies reinvest profits instead

4. DRIP4. DRIP

Dividend Reinvestment ProgramDividend Reinvestment Program Use cash dividends to purchase you Use cash dividends to purchase you

additional stock automatically without a additional stock automatically without a brokerbroker

Dividend Reinvestment ProgramDividend Reinvestment Program Use cash dividends to purchase you Use cash dividends to purchase you

additional stock automatically without a additional stock automatically without a brokerbroker

5. Stock Split5. Stock Split

Issuing more shares to existing Issuing more shares to existing stockholdersstockholders

Considered a “non-event” because Considered a “non-event” because market value of company stays the market value of company stays the same.same.

Issuing more shares to existing Issuing more shares to existing stockholdersstockholders

Considered a “non-event” because Considered a “non-event” because market value of company stays the market value of company stays the same.same.

6. Ordinary and Reverse SS6. Ordinary and Reverse SS

OrdinaryOrdinary OrdinaryOrdinary ReverseReverse ReverseReverse

7. Why issue splits?7. Why issue splits?

Ordinary Ordinary Makes price look more affordable and Makes price look more affordable and

therefore more attractivetherefore more attractiveReverseReverse

Makes price look higher and more Makes price look higher and more attractive for penny stocks.attractive for penny stocks.

Ordinary Ordinary Makes price look more affordable and Makes price look more affordable and

therefore more attractivetherefore more attractiveReverseReverse

Makes price look higher and more Makes price look higher and more attractive for penny stocks.attractive for penny stocks.

8. Ordinary and Reverse SS8. Ordinary and Reverse SS

Ordinary 2:1Ordinary 2:1 Own 100 @ $50Own 100 @ $50

100 x 2 = 200 shares100 x 2 = 200 shares$50 / 2 = $25/share$50 / 2 = $25/share

Total Value:Total Value:200 x $25 = $5,000200 x $25 = $5,000

Ordinary 2:1Ordinary 2:1 Own 100 @ $50Own 100 @ $50

100 x 2 = 200 shares100 x 2 = 200 shares$50 / 2 = $25/share$50 / 2 = $25/share

Total Value:Total Value:200 x $25 = $5,000200 x $25 = $5,000

Reverse 1:4Reverse 1:4 Own 100 @ $50Own 100 @ $50

100 / 4 = 25 shares100 / 4 = 25 shares$50 x 4 = $200/share$50 x 4 = $200/share

Total Value:Total Value:25 x $200 = $5,00025 x $200 = $5,000

Reverse 1:4Reverse 1:4 Own 100 @ $50Own 100 @ $50

100 / 4 = 25 shares100 / 4 = 25 shares$50 x 4 = $200/share$50 x 4 = $200/share

Total Value:Total Value:25 x $200 = $5,00025 x $200 = $5,000

9. Common vs. Preferred9. Common vs. Preferred

Preferred stockholders have priority Preferred stockholders have priority over dividendsover dividends

Preferred stockholders have no voting Preferred stockholders have no voting rights.rights.

Preferred stockholders have priority Preferred stockholders have priority over dividendsover dividends

Preferred stockholders have no voting Preferred stockholders have no voting rights.rights.

10. Blue Chip Stock10. Blue Chip Stock

Most expensive stocksMost expensive stocksSteady earningsSteady earningsGood reputationGood reputationEX: AT&T, McDonalds, AlcoaEX: AT&T, McDonalds, Alcoa

Most expensive stocksMost expensive stocksSteady earningsSteady earningsGood reputationGood reputationEX: AT&T, McDonalds, AlcoaEX: AT&T, McDonalds, Alcoa

11. Liquidity11. Liquidity

Ability to trade large amounts of stocks Ability to trade large amounts of stocks without any problemswithout any problems

Ease with which assets can be Ease with which assets can be converted to cash.converted to cash.

Ability to trade large amounts of stocks Ability to trade large amounts of stocks without any problemswithout any problems

Ease with which assets can be Ease with which assets can be converted to cash.converted to cash.

12./13. Penny Stocks12./13. Penny Stocks

Contrast to blue chipContrast to blue chipNewer companiesNewer companiesLittle historyLittle historyUsually under $5Usually under $5Risky and SpeculativeRisky and Speculative

Contrast to blue chipContrast to blue chipNewer companiesNewer companiesLittle historyLittle historyUsually under $5Usually under $5Risky and SpeculativeRisky and Speculative

14. Cyclical Stocks14. Cyclical Stocks

Rise and fall with business cyclesRise and fall with business cycles Industries: Automobiles, Retail, Industries: Automobiles, Retail,

HousingHousingCyclical vs. Non-cyclicalCyclical vs. Non-cyclical - tied to - tied to

consumer need and demandconsumer need and demand

Rise and fall with business cyclesRise and fall with business cycles Industries: Automobiles, Retail, Industries: Automobiles, Retail,

HousingHousingCyclical vs. Non-cyclicalCyclical vs. Non-cyclical - tied to - tied to

consumer need and demandconsumer need and demand

15. Influences?15. Influences?

InterestInterest InflationInflationUnemploymentUnemployment

InterestInterest InflationInflationUnemploymentUnemployment

16. Cyclical (can it be profitable?)16. Cyclical (can it be profitable?)

Yes, if the investor can anticipate Yes, if the investor can anticipate changes in the economy.changes in the economy.

Yes, if the investor can anticipate Yes, if the investor can anticipate changes in the economy.changes in the economy.

17. Growth and Value stocks17. Growth and Value stocks

GROWTHGROWTH ExpensiveExpensive Buy expensive and Buy expensive and

sell at even higher sell at even higher pricesprices

High Growth High Growth PotentialPotential

Grow faster than Grow faster than S&P 500S&P 500

Ex: AppleEx: Apple

GROWTHGROWTH ExpensiveExpensive Buy expensive and Buy expensive and

sell at even higher sell at even higher pricesprices

High Growth High Growth PotentialPotential

Grow faster than Grow faster than S&P 500S&P 500

Ex: AppleEx: Apple

VALUEVALUE CheapCheap Stock will resume Stock will resume

growth eventuallygrowth eventually Moderate growth Moderate growth

potentialpotential Grow slower than the Grow slower than the

S&P 500S&P 500 Bargain HuntersBargain Hunters

VALUEVALUE CheapCheap Stock will resume Stock will resume

growth eventuallygrowth eventually Moderate growth Moderate growth

potentialpotential Grow slower than the Grow slower than the

S&P 500S&P 500 Bargain HuntersBargain Hunters

18/19/20/21 Cheap or Expensive18/19/20/21 Cheap or Expensive

GROWTHGROWTH Grow faster than Grow faster than

S&PS&P

Have a higher P/E Have a higher P/E than the S&P indexthan the S&P index

GROWTHGROWTH Grow faster than Grow faster than

S&PS&P

Have a higher P/E Have a higher P/E than the S&P indexthan the S&P index

CHEAPCHEAP Grow slower than Grow slower than

S&PS&P

Have a lower P/E Have a lower P/E than the S&P indexthan the S&P index

CHEAPCHEAP Grow slower than Grow slower than

S&PS&P

Have a lower P/E Have a lower P/E than the S&P indexthan the S&P index

This ratio measures the stock's value relative to its net assets. Indicates Whether or not it is overvalued.

22. Income Stock22. Income Stock

Grows slower than the S&PGrows slower than the S&PWill have long-term profitsWill have long-term profitsWill pay dividendsWill pay dividends

Grows slower than the S&PGrows slower than the S&PWill have long-term profitsWill have long-term profitsWill pay dividendsWill pay dividends

23. Tech stocks23. Tech stocks

AdvantageAdvantage High appreciationHigh appreciation Share price skyrocketsShare price skyrockets Very profitableVery profitable

DisadvantageDisadvantage CrashCrash Ex: dot com bustEx: dot com bust Unstable companiesUnstable companies

AdvantageAdvantage High appreciationHigh appreciation Share price skyrocketsShare price skyrockets Very profitableVery profitable

DisadvantageDisadvantage CrashCrash Ex: dot com bustEx: dot com bust Unstable companiesUnstable companies

24. Market Value or Cap24. Market Value or Cap

Share price Share price xx # of shares outstanding # of shares outstandingShare price Share price xx # of shares outstanding # of shares outstanding

25. Most risky market cap?25. Most risky market cap?

Small Cap (under $500 million)Small Cap (under $500 million) Investing in small companies is risky Investing in small companies is risky

because they are usually newer and because they are usually newer and less stableless stable

DOES have high growth potentialDOES have high growth potential

Small Cap (under $500 million)Small Cap (under $500 million) Investing in small companies is risky Investing in small companies is risky

because they are usually newer and because they are usually newer and less stableless stable

DOES have high growth potentialDOES have high growth potential

26. Large-Cap Minimum26. Large-Cap Minimum

Above $1 billionAbove $1 billionAbove $1 billionAbove $1 billion

27. High Dividend/Low Growth27. High Dividend/Low Growth

Income stocksIncome stocks Income stocksIncome stocks

28. PEG28. PEG

Takes into account the GROWTH rate Takes into account the GROWTH rate and not just the Price and EPS.and not just the Price and EPS.

Takes into account the GROWTH rate Takes into account the GROWTH rate and not just the Price and EPS.and not just the Price and EPS.

29. PEG amount29. PEG amount

11Meaning stock is fully valuedMeaning stock is fully valued

11Meaning stock is fully valuedMeaning stock is fully valued