Dividend

Stock

IPO

Ticket Symbol

P/E Ratio

Portfolio

shares

Understanding Stocks

What are Stocks?Stocks- a claim on a corporation that gives the purchaser a share, or small percentage or part, of the corporation!

Let’s break it down

You own a company and it’s doing well but you know you

can do better if you had more capital to expand.

So you file for an IPO (Initial Public Offering).

What you are offering to the public is stock, also called a share, or piece of your company.

The Story continuesThe idea is that when a person buys a

share both parties win.

Company gets the capital to expand and

grow the business

The Shareholder hopes the the value of the share

will go up as the company does better.

IPOThe day arrives. Your stock will be traded in the New

York Stock Exchange (NYSE), one market for buying and

selling stocks.

The bell rings the public can now own part of your

company and you are now considered publicly, instead

of privately, owned

Will people be interested in buying your stock at the

price you set? The market will answer that!

How stock prices workIf demand is high for your stock at the price of your

IPO and people buy the price of that stock will go up.

I just made 7 dollars for every share I bought. A total of $700 dollars profit for me!

Say I buy 100 shares of your stock at $10

per share.

If lot’s of people like that price, and buy, soon the price is at $17 dollars a

share.

Of course the opposite can

happen.

People feel like your company won’t do well for

some reason and they begin to sell off your stock.

This brings down the value of the stock from $17 to $8.

Now you’ve actually lost 200$ of your initial

investment.

How do you buy and sell stocks?

You can buy and sell online through a

company that works out the transaction

for a small fee.

Through a broker who will do the same

for a larger fee.

Or

You may also invest in a Mutual Fund in which you give a company money and they invest in a bunch

of different stocks they think are good (safer).

The Dow Jones Industrial Average (DJIA)

DOW •The Dow Jones is the most popular cited indicator of day-to-day stock market activity•It is a weighted average of 30 widely traded stocks (that do change from time to time) on the NYSE•Charles Dow created it to tell people what was happening w/the market

Remember it’s an average

1. 3M Company (MMM)

2. Alcoa Inc. (AA)

3. Altria Group, Inc. (MO)

4. American Express Co. (AXP)

5. American Int'l. Group (AIG)

6. AT&T Inc (T)

7. Boeing Co. (BA)

8. Caterpillar, Inc. (CAT)

9. Citigroup Inc. (C)

10.Coca-Cola Co. (KO)

11.DuPont (E.I.) deNemours (DD)

12.Exxon Mobil Corp. (XOM)

13.General Electric Co. (GE)

14.General Motors (GM)

15.Hewlett-Packard Co. (HPQ)

16.Home Depot, Inc. (HD)

17.Honeywell Int'l. Inc. (HON)

18.Intel Corp. (INTC)

19.International Bus. Mach. (IBM)

20.J.P. Morgan Chase & Co. (JPM)

21.Johnson & Johnson (JNJ)

22.McDonalds Corp. (MCD)

23.Merck & Co. Inc. (MRK)

24.Microsoft Corp. (MSFT)

25.Pfizer Inc. (PFE)

26.Procter & Gamble Co. (PG)

27.United Technologies Corp. (UTX)

28.Verizon Communications Inc. (VZ)

29.Wal-Mart Stores, Inc. (WMT)

30.Walt Disney Co. (DIS)

How people know which stocks to buy?

Some just buy stocks of companies that

they know.

But mostly it’s all about research.

You research a companies stock history and if any factors

will change the company in the near future.

Examples: New managment (steve jobs dies), New products coming out (Iphone 5S), weather (cold weather in Florida and you grow oranges), this company has done well the last few

months (reading stock tables).

How to Read the Stock Market listing—

Volume:24,116,79452wk Range:41.85 - 58.49P/E Ratio:17.51Dividend Yield:1.10%                                       

Prev. Close:44.54Open:46.98High:47.56Low:45.69

Best Buy Co., Inc (NYSE:BBY)

47.46 +2.92 / +6.56% Sep 18

NYSE=New York Stock Exchange

BBY=Ticker symbol for Best Buy

47.46 = price the stock closed at today

+2.92 = the Net Change the difference between the current closing price & the previous day’s closing price.

+6.56% = the Net percentage Change the difference between the current closing price & the previous day’s closing price.

Previous Close = what the stock closed at yesterdayOpen = The price it started trading at today

High = the high price the stock traded for todayLow = the low price the stock traded for today

Volume = the number of shares that were bought & sold today

52wk Range = the lowest to highest price this stock has traded at during the past 52 weeks

P/E Ratio = the price-earnings ratio, & is obtained by taking the latest closing price per share and dividing it by the latest available net earning per share. A high PE ratio usually indicates a stock that is experiencing a higher than average growth in earnings.

Dividend Yield: the dividend divided by the closing price

Now let’s try ourselves

Using the “Understanding Stock Tables/Quotes” handout and a partner answer

the questions on the back, on a separate piece .

Stock Market Game- You will be in 4 Teams (consider yourselves owners of a mutual fund)

- Each person in the group will research at least one stock to buy.

- Monday you will have your first board meeting to discuss which stocks to buy in the Stock Market Game.

- Each Team will begin with $100,000.

- You must have at least 4 different stocks in your mutual fund at all times.

- Over the course of the 10 week game your Team will build a portfolio explaining trades you made, strategies for buying and selling, and a log of your meetings.

In a moment I will put you on teams. Once with your team one person will come up and get two (and only two) packets.

You and your team will go through the packets together and come up with questions for me which I will answer at the end of the period.

Homework

Deeply research one stock for next Monday’s first Board meeting.

You will need to bring in the paper filled out to the meeting next Monday.