1. BUYING STOCK 101

2. STOCKS – TAKING STOCK ELON MUSK DISNEY CO. Katsuaki Watanabe
CHECKING THE STOCKS

3. Stock = Ownership in the Corporation
Shares represent individual ownership in the corporation.
1 share of per share.
*corporations raise investment capital by selling stock.

4. How are stock values established?
1. Historical earnings.
2. Estimates of the company’s future earnings made by corporate officers.
3. Perceived strength of the company’s product or services.
4. Perceived strength of the company’s sector.
(health care, retail, auto, oil)
How is picking the right stock similar to picking the right spouse?

5. Benefits of buying stock
1. Dividends = quarterly profit paid to shareholders.
ex. If a company pays .15 per share x 100 shares = 15.00
2. Capital gains = profit from selling stock.
ex buy in 1998
sell in 2006
capital gains of $ 6.30 per share.
Find the quarterly dividend of Cisco Systems if they had $8.2 million dollars profit and have 55 million shares publicly traded.
Yahoo IPO:
$13.00 per share
$ per share

6. How do you buy stock?
1. Broker = Fee based/commission “middle man” * full service or online.

7. 2. Corporate Stock Options
- Employers offer discounted stock offering to its employees as part of compensation package.

8. How much stock (quantity) can I buy?
Round Lot = Multiples of 100.
Ex. $21.00 = $2,100.00
Odd Lot = Smaller than 100. (commission is higher).

9. Stock Split
If price of stock is too high to attract investors, company may split stock.
ex. 1 share at $50.00= 2 at shares at $25.00
Total value does not change, just the number of shares.

10. Disney Offers 2 for 1 Split
You have 100 shares of Disney stock at $89.00.
100 x $89.00 = $8,900.00
To attract new buyers………………
2 for 1 split $44.50 = $8,
3 for 1 split- 300 shares @ $29.66 = $8,
Note - The total value of the portfolio does not change, just the amount of shares.

11. How do you measure the health of the stock market?
Widely used indexes:
1. Dow Jones Industrial Average (DJIA)
30 U.S. companies
Standard & Poors 500
500 U.S. Stocks

12. Types of Markets
Bull Market – When the market rises steadily over a period of time. (Buyers exceed sellers = Stock prices rise)

13. Bear Market – When the market falls for a period of time
Bear Market – When the market falls for a period of time. (Investors sell to cut losses)

14. Diversification- spreading out investments to reduce risk
Ways to diversify:
Industry- buy stocks in unrelated industries so that you are not exposed to a down turn in one particular industry
Allocation
Example: $10,000.00
$2, = Microsoft/Technology
$2, = Ford/Automobile
$2, = Chevron/Oil
$2, = Wal-Mart/Retail
$2, = Disney/Entertainment
Five different industries.
Putting $2, in each stock is a form of diversification by allocation.

15. How to look up stock…
Go to

16. How to fill out your buy sheet?
Name of stock symbol price # of shares total investment
1. ___________ _______ ______ X _________ = _______________
2. ___________ _______ ______ X _________ = _______________
3. ___________ _______ ______ X _________ = _______________
4. ___________ _______ ______ X _________ = _______________
5. ___________ _______ ______ X _________ = _______________
Name of Commodity Price Quantity Total Investment
1. ________________ ________ X __________ = _______________
2. ________________ ________ X __________ = _______________
Total investment= _____________ (cannot exceed $10,000)
My portfolio is
diversified three
ways
1. Industry
2. % of money
3. Price of stock
1,323
Oracle
ORCL
17.64 75
Nike
NKE
58.32 25
1,458
Pfizer
PFE
17.35 80
1,388
Exxon
XOM
71.38 15
1,070.70
Ford F
2.45
844
Lean Hogs
56.55 18
1,017.90
Wheat
558 3
1674
9,999.40

17. Things To Consider
Spend all of your $10, Read the“looking up stocks” handout to find answers to your questions. Not all companies are publicly traded. Some companies are owned by bigger companies and do are not traded under the company name. - search“company stock price” Some companies have multiple stocks.

18. Random Walk Theory
You can do just as well picking stocks by throwing a dart at the list of stocks on the financial page as you can be spending time and effort doing research or listening to a particular adviser, broker, or strategist.

19. The Big Picture
Why is the stock market important to the overall economy?
Why would a person want to invest in the stock market?
Why would a company want to go public?