Papa John’s Pizza  In 1984, "Papa" John Schnatter knocked out a broom closet located in the back of his father's tavern (Mick's Lounge), sold his prized 1972 Z28 Camaro in order to purchase $1,600 worth of used restaurant equipment, and began selling his pizzas to the tavern's customers.

Investment Bankers  Long term financial planning  Marketing of security issues  Arrangement of private loans  Negotiation of mergers

Rights of Shareholders  Receive a stock certificate  Share in profits  Voice in management (vote for Board Dir)  Receive financial information  Sell stock at anytime

Common vs. Preferred Stock  Preferred has preference in claims to assets and dividends – must be paid before common.  Preferred dividends – fixed  Common dividends – fluctuate  Preferred usually have no voting rights

Initial Public Offering (IPO)  First time company offers stock to the public for cash.  Can only have one.  Also known as going public

Once hot, now not Share 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 $ % Yahoo (YHOO)4/96 $.50 $1.20 $12 2,300%

Tombstone Ad – for new issues

Prospectus  Character of the business  Bios on the officers  Financial Statements  Reasons for raising funds

SEC – Securities and Exchange Commission  Government agency charged with enforcement of the nation’s securities laws and regulations.  Police of the investment community  Monitor insider trading  Prevent fraud

How to read stock quotes  Yahoo Finance Yahoo Finance Yahoo Finance

Stock Exchanges and Markets  NYSE – over 2,800 stocks  AMEX – over 700 stocks  NASDAQ – over 3,200 stocks  Over the Counter (OTC) – over 4,000 stocks

Markets can look chaotic  View of JFK airport View of JFK airport View of JFK airport

Specialist on the NYSE

Busy Specialist on NYSE

Commodities Trader

NASDAQ in New York City

Types of orders  Market order – buy or sell ASAP at the going or market price.  Limit order – buy or sell at a specific price and time limit. Good till canceled Good till canceled Good for the day Good for the day

Dow Jones Industrial Average  Developed by Charles Dow in late 1800’s  30 stocks  No longer a pure average due mainly to stock splits

Dow Jones Industrial Stocks 3M CO ALCOA INC ALTRIA GROUP INC AMER INTL GROUP AMERICAN EXPRESS BOEING CO CATERPILLAR INC CITIGROUP INC COCA-COLA CO DISNEY (WALT) CO DU PONT (EI) EXXON MOBIL CORP GENERAL ELECTRIC GENERAL MOTORS HEWLETT-PACKARD HOME DEPOT INC HONEYWELL INTL IBM INTEL CORP JOHNSON&JOHNSON JPMORGAN CHASE MCDONALDS CORP MERCK & CO MICROSOFT CORP PFIZER INC PROCTER & GAMBLE SBC COMMUNICATIO UNITED TECH CORP VERIZON COMMUNIC WAL-MART STORES

Dow Jones since 1928

Stock Split Example SharesPrice Current Mkt. Value 100IBM$80$8,000 2 for 1 split 200$40$8,000

What stock has the highest price?

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

Warren 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  Growth Stocks High P/E ratio High P/E ratio Pay little or no dividend – reinvest their profits Pay little or no dividend – reinvest their profits  Income stocks Low P/E ratio Low P/E ratio Pay dividends regularly Pay dividends regularly  Cyclical stocks Highly dependent on the economy Highly dependent on the economy Airlines and hotels are typical examples Airlines and hotels are typical examples Stock Classifications

Company Sizes  Large-Cap  Mid-Cap  Small-Cap Cap = Market Capitalization = stock price X # shares outstanding Which is generally the safest investment? Which generally has the greatest growth potential? Which company has the largest market cap? largest market caplargest market cap

Making money with stocks  Capital gain – the profit made on the sale of the stock.  Dividends – portion of the company’s profit paid out to its shareholders.  Dividend yield = dividend/stock price or expected dividend over next year/stock price

Stock Brokers  A broker, originally, was a wine seller who “broke open” wine casks.

Types of Brokers  Full-service Merrill Lynch – commissions vary widely Merrill Lynch – commissions vary widely  Discount Ameritrade - $11 trades Ameritrade - $11 trades  Deep Discount Scottrade - $7 trades Scottrade - $7 trades

Market Indexes  Dow Jones Industrial Average – 30 stocks  NASDAQ – 100 stocks  S&P 500 – 500 stocks

Historical Returns of the Market Years Time Period DJIA Ann. Return – % – % – % – % – % %

Bull vs. Bear Market

What is a Mutual Fund?  A collection of stocks, bonds, and other securities.  Owned by a group of investors.  Managed by a professional investment company.

Reasons to invest in a Mutual Fund  Broad diversification  Professional management  Investment objective  Affordability  Ease

Types of Mutual Funds  Growth  Income  Money Market  Index  Specialized

Mutual Fund Performance  From 1985 – 2000, 85% of U.S. actively managed mutual funds underperformed the S&P 500 index.  Typically 75% underperform

Other Mutual Fund Items  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 funds

How the Stingy Get Rich  Invest $10,000 in…  High-expense stock fund (1.5%)  Low-expense stock fund (.2%)  Value in 20 years  $34,451  $44,780 Payoff for cutting costs: $10,329

 “Simple solutions like indexing can feel unsatisfying. You want investing to be complex, so you can feel special when you figure it out.” Jason Zweig – Your Money and Your Brain

Performance over time

Roth IRA – Individual Ret. Acct.  $5,000/yr contributions  Distributions are not taxable  Contributions can be made as long as you live

401k Plans  A 401(k) is a type of retirement plan that allows employees to save and invest for their own retirement.  Through a 401(k), you can authorize your employer to deduct a certain amount of money from your paycheck before taxes are calculated, and invest it in the 401(k) plan.

Why a 401k is a good idea See Fidelity’s website website

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

FICO score and mortgage payment %$1, %$1, %$1, %$1, %$1, %$1,513 $216,000 mortgage for 30 years

Free Credit Report  You are allowed to check your credit once a year for free.  Your credit score (FICO) is available for a small fee.  Go to