Money Management & Stocks Meeting #2: 13 September 2005

Agenda Re-Statement of Club’s Mission Why Investing is Important Basic Money Management How to Analyze Stocks Guests: Mr. Kirby & Mr. Prokop Sector Sign-Ups

Investment Club’s Mission: 1. Educate Cadets regarding Investing and personal financial planning 2. Maximize returns on the Spragins Fund

We’re here to turn this…

Into This!!!

BLUF of Money Management:  Start saving your money early  Make wise financial decisions  Have a Budget  Know the Tax Code (website)  Help your Soldiers

A quick Cow Loan example  Maxing out your Roth IRA with only your Cow Loan  Earn 10% compounded annually  Equals 65  Or 70

A more Lucrative example  Maxing out your Roth IRA till age 65 (marry at 26)  Earn 10% compounded annually  Equals 65  Start withdrawing $600,000 per 66  You’ll have 100 still in your account earning interest

Compounding Interest Rates “What is ze most powerful force in the universe?” Compound Interest!

Buying a Car  I can buy a $30k Jaguar or stick with my Honda  Perform a Cost/Benefit Analysis  The Jag actually costs me $70k  Is a new Jag going to give me $70k worth more of personal joy than my Honda? No. Go with the Honda.

Create a Budget  Extremely important after Graduation  You’ll be tracking more than a dozen monthly expenses  Form good habits now  Some of you will be amazed at where all your money goes  A budget Now will create good spending habits

Sample Financial Plan

Helping your Soldiers w/ their $$$  AVOID Payday Lenders (see link) Cause a “debt trap” You’re the first line of defense  Educate yourself  More Importantly, know who to refer them to before a problem All Posts have rarely used but high quality people who can help  Show them these slides (bonuses)

What is a Stock?  A Stock (Certificate) represents a small slice of a company that can be bought and sold.  Companies “go public” to raise money; they will never again get money from investors after the IPO (Initial Public Offering).  P/E Ratio and Market Capitalization  Investors hope their company increases its earnings and either reinvests them in the company to increase future earnings or pays them a dividend.

Growth Investing  Find the next MSFT or WMT  Look for continuing earnings growth  They have higher “trailing P/Es” But lower “forward P/Es”

Value Investing  Find a MSFT or WMT that is currently trading at a discount  Make sure of sound fundamentals  Contrarian Investing

Next Time  How to start investing (or make better investment decisions) Setting up an IRA Analyzing Mutual Funds Risk Tolerance and Goals Diversification and Asset Allocation

QUESTIONS???

Guest Speakers Questor Management Company  Mr. Kevin Prokop Director  Mr. Dennis Kirby Vice-President of Private Equity

Sector Sign-ups Prepare to Work! (min of 4-5 hours)  Technology Giles EvansE-3  Energy James McCrayC-3  Consumer Goods David MaroldB-1  Healthcare Bryan SpencerA-4  Financials John HowieH-1

Screening Criteria  1. Minimum Price per Share $5 (has to do with listing requirements and whether or not institutional money can invest in stock)  2. Price to Sales maximum 5  3. Inside Ownership Minimum 1% (management has some stake in the company)  4. Institutional Ownership Minimum 15% (does smart money invest in this company)  5. Price to Earnings maximum 50 (although we prefer something more reasonable compared to sector averages you'll see on Quicken)  6. Price/Earnings to Growth (PEG) < 1.0 (is the market pricing the stock to fully reflect the stock's EPS growth?)  7. EPS minimum of $0.01 (this eliminates companies losing money)  8. Total Revenue minimum $50 million (so it is not a mom and pop store)