Revisiting the stock market Mr kuhn

What kind of investor will you be? There are four main types of investors, all based on different animals Bulls Bears Chickens Pigs All options have the opportunities in the stock market except pigs, don’t be a pig…

Bulls: OPTIMISM AND OPPURTUNITY Bulls only buy stocks in what is known as a bull market BULL MARKET: When the economy is going well, people are finding jobs and the GDP is rising. Stocks will rise in this time as well This is an ideal time to buy as almost all stock will go up but it is not without its own risks Stocks often become over valued during these times and stocks fall drastically

Bears: making money off failure Bears only buy stocks in what is known as a bear market BEAR MARKET: A market in which the economy is doing poorly. Often during a recession or depression Bears will either short stocks and bet on their failure, or buy stocks when they believe the bear market is over

Chickens: what it sounds like… Chickens will not invest in anything long term Chickens like over night short successes and little risk Chickens often make no to very little money as they do not take big risks Big risk=Big reward

Pigs: just don’t be one High risk investors with little knowledge looking for a big quick return Pigs are greedy, impatient, and emotional Bulls and Bears often do better because of the failures of pigs “Bulls make money, bears make money, pigs get slaughtered”

WHY DO STOCK MARKET PRICES CHANGE? Supply and Demand! The more people that want to buy a stock the more the stock is going to be worth If a company is doing well, or expected to do well, people will want to buy into that company, making stock go up When people want to sell a stock its price will go down If a company is doing poorly people will want to sell If a company is doing very well, people will sell stocks while they are high to cash in and make profit

COMPANY VALUE AND STOCKS A company’s value is not directly tied to its value. Use Market Capitalization to find true value Market Capitalization: Total number of company’s stocks x price of each stock Which is worth more Company A: 1 million shares at hundred dollars each 1,000,000 x $100= $100,000,000 Company B: 5 million shares at fifty dollars each 5,000,000 x $50= $250,000,000 While company A has more expensive stocks, company b is a more valuable company

Stock value and earnings Earnings are the most important factor when considering stock prices Companies need earnings to stay open, if companies do poorly people don’t invest and demand goes down Public companies are required to post earnings four times a year in what are known as quarterlies Analysts watch this period closely If companies are earning more than was expected stock prices sky rocket If companies are earning less than was expected stock prices fall

So what did we just say 1. At the most fundamental level, supply and demand in the market determines stock price. 2. Price times the number of shares outstanding (market capitalization) is the value of a company. Comparing just the share price of two companies is meaningless. 3. Theoretically, earnings are what affect investors' valuation of a company, but there are other indicators that investors use to predict stock price. Remember, it is investors' sentiments, attitudes and expectations that ultimately affect stock prices. 4. There are many theories that try to explain the way stock prices move the way they do. Unfortunately, there is no one theory that can explain everything.

Helpful websites Google Finance Stock Market Watch Yahoo Finance https://www.google.ca/finance?hl=en&gl=ca Stock Market Watch http://thestockmarketwatch.com/markets/topstocks/ Yahoo Finance https://ca.finance.yahoo.com/ Investopidia http://www.investopedia.com/