Presented by:

Francesco Maselli Head of Investment Education

Diploma in Investment – Part I

Lesson 2

Fundamentals

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similar to those discussed in any material provided by the Shaw Academy. The past performance of any

investing system or methodology is not necessarily indicative of future results.

Investing serves an important purpose

Different financial markets

Market participants

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Recap From Last Lesson

Today’s Lesson

Fundamentals Comes to the Stock Market

What Drives Price

Investor Activity

Summary

Course Interaction

Next Steps

Q & A

Class Interaction

• A great thank you for all the comments of our

YouTube Channel

• Some will be revealed at the end of the lesson

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How does a Company get into the market?

Coming to The Market

Coming to The Market

Primary Market

Secondary Market

Capital Markets

Where the issuer directly gets money

Requires underwriting

Primary Market

Traded between investors

Issuing company not involved

Secondary Market

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Shaw Lemonade Co

Shaw Lemonade Co

Shaw Lemonade Co IPO

Week One: Sold 250,00 Shares @ 5 GBP Per Share

Week Two: Sold 250,00 Shares @ 7 GBP Per Share

Week Three: Sold 250,00 Shares @ 10 GBP Per Share

Week Four: Sold 250,00 Shares @ 15 GBP Per Share

We made 5 million GBP in the primary market, they made 9.25

million GBP in the secondary market

Shaw Lemonade Co IPO

What Drives Price?

What Drives Price

More buyers then sellers = prices rise

More sellers then buyers = prices fall

The Bulls vs. the Bears

What Drives Price?

Specific Risk = specific to the investment

itself

Systematic Risk = effects the overall

market

What Drives Price ?

What Drives Price ?

Factors that can make share price rise:

- Company has major new contract

- Prices for what company does are going up fast

- The company has a new director

Factors that can make share price fall:

- Bad publicity

- Company says it will cut its dividend

- The company’s product range is

criticized

Buyers and Sellers

Specific Risk and Systematic Risk

Investor Perception

What Drives Price?

Market Mechanics

Market Mechanics

Spread = $2

Highest Bid (Buyer’s) Price $12

Lowest Ask (Seller’s) Price $10

Market Mechanics

Bid and ask price of $5/$5.05

Spread= .05 per share

$500

Market Mechanics

Welcome to NYC

Lets get some USD

Currency Website says 1 EUR = 1.10 USD

Currency Exchange 1 EUR = 1.05 USD

Currency Exchange 1 USD = .92 EUR

Look Familiar?

The Spread Impacts The Price You Pay

Market Makers (Who Cares?)

Market Participants

Momentum Investing Strategy

Growth Investing Strategy

Value Investing Strategy

Income Investing Strategy

What They Do

EPS = Earnings Per Share

P/E = Price Earnings Ratio

Analysis

Net Income – Preferred Dividends

---------------------------------------------------

Weighted Average Number of Outstanding Common Shares

Earnings Per Share (EPS)

Net Income = $2,000,000

Dividends = $400,000

Average Outstanding Shares = 200,000

EPS = $8 per share

EPS: Company A

Net Income = $3,000,000

Dividends = $400,000

Average Outstanding Shares = 520,000

EPS = $5 per share

EPS: Company A

Company A

Net Income of $2,000,000

EPS of $8

Company B

Net Income of $3,000,000

EPS of $5

EPS: Company A & B

Company A or B?

A or B ?

Current Price of Stock

-------------------------------

EPS

Price to Earnings Ratio

EPS = $8 per share

Share Price= $48

P/E = $6

P/A Company A

Invest $6: $1 Earnings

P/A Company A

EPS = $5 per share

Share Price= $20

P/E = $4

Invest $4: $1 Earnings

P/A Company B

Company A or B?

A or B ?

Company A = $6 for $1

Company B = $4 for $1

Company A or B?

Analysis

Market Capitalization = Company size in the market

Market Capitalization = Shares X Price

Large companies = Stable/good performance

Companies with certain market caps are grouped together in an Index

Market Cap

USA= S&P 500

Australia = ASX 200

Japan = Nikkei 225

UK= FTSE 100

Philippines = PSE Financials Index

Ireland = ISEQ 20

South Africa = FTSE/JSE Top 40 Index

France: CAC 40

Index

Attracts a lot of buying interest

Falling out of the index fall hard

Roll on effect

Index

NYSE: New York Stock Exchange

National Association of Securities Dealers Automated Quotations (NASDAQ)

TSE: Tokyo Stock Exchange

LSE: London Stock Exchange

Euronext

BM&F BOVESPA

Stock Markets

Bringing It all together

Bringing It all together

Bringing It all together

IPO

What Impacts Price

Market Makers

Other Market Participants

Analysis

Market Caps and Indexes

Index/Stock Quotes

Summary

Congratulations you have just laid the fundamentals

o Now we can start building on different assets

o Attend all of the lessons live to ask Questions in real time and benefit the most

o We’re here to help, so contact us anytime!

First time float opportunities

Worthwhile information

To be continued…

Stocks and Bonds

Equities

Fixed Income

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