Transcript Stock Market

Stock Market
The Stock Market
Objectives
•
•
•
•
Define common and preferred stock.
Understand the term shareholder.
Understand how to buy and sell stock.
Be able to list the three major stock
indexes
• Understand how to follow and research
stocks and mutual funds.
• Define PE, PPE, Vol.%, YTD, high, low, and
“=“
as they relate to the stock market.
• Understand and explain the different
indexes.
God is the source of true riches!
• 2 Cor. 8:9 “For you know the grace
of our Lord Jesus Christ, that
though He was rich, yet for your
sakes He became poor, that you
through His poverty might become
rich.”
(The New King James Version. 1996, c1982 . Thomas Nelson: Nashville)
Private Corporations
• Open
• General public (I.e., shareholders)
• For-profit
• Closed
• Sm. group or family owned
• Non-profit
• Not-for-profit
• “S” Corporations
• Taxed as a proprietorship or a partnership
• Benefits of incorporation
• No more than thirty-six shareholders
Shareholders
• When a person buys common or
preferred stock
• Share certificates - certificate of stock
ownership: a certificate specifying the
number of shares owned by a person
or a company in a corporation's stock.
No longer used within the industry due
to modern technology
• Electronic purchases – ability to trade
within seconds
Stock Certificate from the 19th
Century
Types of Stocks
• Two types of stocks:
• Common
• Preferred
Common Stock
• Most prevalent
• True ownership
• Three rights:
• Shareholders Vote
• Right to sell shares
• Right to share in the profits
Preferred Stock
• Not true owners
• No rights to vote
• No profit sharing – dividends set at a fixed
rate
• Receives dividends first – if firm goes
out of business
Stock Indexes
• Three major stock indexes:
(Remember there are many stock indexes)
• NYSE - New York Stock Exchange
• Nasdaq (National Association of
Securities Dealers Automated
Quotation); or Amex
(American Stock Exchange)
• Dow Jones
NYSE
How to Buy & Sell On the
New York Stock Exchange
(“How A Stock…”)
Owning Stock
• “Owning stock means you own a
piece of a public company.
• These companies span the global
economy and form the core of our
private enterprise system.
• They spur job creation and
economic growth while creating
products and providing services
that improve our quality of life.”
(“How A Stock…”)
Selling Stock
• “When a company needs to raise
money to expand, it sells stocks or
bonds to the public through the
financial markets.”
• “More than 90 million Americans
own shares of stock through
individual investments or through
mutual funds.”
(“How A Stock…”)
The following is an illustration of how a stock is traded.
The illustration looks at three different perspectives – the
buyer, seller, and the stock market professionals who
executes the trade.
• Roger Smith of
Des Monies,
Iowa, decides to
invest in the
stock market
• Diane Whitford
of Hartford,
Connecticut,
decides to sell
100 shares of
Gap Stores stock
(GPS) to help
pay for a new
car.
(“How A Stock…”)
• “Roger consults a
broker who is a member
of the NYSE. They
discuss a number of
possible long-term
investments. Roger
asks his broker for a
quote – the highest bid
(to buy) and the lowest
offer (to sell) for a
stock at any given time
– on Gap Stores stock
(GPS).”
• “Diane calls her
broker, a
member of the
NYSE, and asks
for a quote on
Gap stores
(GPS).”
• “The brokers access an electronic market data system to obtain
quotes on GPS from the NYSE floor. A number of information
vendors offer this service to brokerage houses. The information
vendors get quotes from the NYSE system via direct high=speed
lines.”
(“How A Stock…”)
• “Taking into account
what he already
knows about GPS –
and after a
discussion with his
broker – Roger
instructs his broker
to purchase 100
shares of GPS a the
current market price.
Or Roger can go
online and enter the
order through his
online account which
links to SuperDot.”
• “Diane instructs
her broker to sell
100 shares of
GPS at the
current market
price. Or Diane
goes online and
enters the order
through her
(“How A Stock…”)
online brokerage
account which
links to
SuperDot.”
• “SuperDot is an electronic order-routing
system used by NYSE member firms to send
market and limit orders directly to the trading
post where the security is traded. After the
orders have been executed, SuperDot uses the
same electronic circuit to send post-trade
reports back to the firms.” (“Order Execution”)
• “The two brokers
send their orders to
the floor of the NYSE.
Orders can be sent to
the floor in two ways:
electronically to a
booth around the
perimeter of the floor
and displayed via
touch screen in an
order management
system called Broker
Booth Support System
(BBSS).”
 “Floor brokers are
given these orders in
printed form or by
wireless voice or data
terminals, and represent
these orders in the
trading crowds. If the
SuperDot system is
used, the order is sent
directly ot the
workstation.”
(“How A Stock…”)
• “At the post, the
specialist who handles
GPS makes sure the
transactions are
executed fairly and in an
orderly manner.”
• “The two floor brokers
compete with other
brokers on the Trading
Floor to get the best
price for their customers.
The brokers representing
Roger and Diane agree
on a price.”
(“How A Stock…”)
• “After the transaction is executed,
the specialist’s workstation sends
notice to the firms originating the
orders and to the consolidate tape
so that a written record is made of
every transaction.”
(“How A Stock…”)
• “The transaction is reported by computer
and appears within seconds on the
consolidated tape displays across the
country and around the world.”
• “The transaction is processed
electronically, crediting Roger’s brokerage
firm and debiting the account of Diane’s
brokerage firm. Both Roger and Diane
receive a trade confirmation from their
respective firms within a few days
describing the trade, its terms and
conditions, and conditions, and the exact
amount to be tendered or credited.”
(“How A Stock…”)
• “Roger settles his
account within
three business days
after the
transaction by
submitting
payment to his
brokerage firm for
the 100 shares of
GPS, plus any
applicable
commissions.”
• “Diane’s trade is
also settled in
three business
days. Her
account will be
credited with the
proceeds of the
sale of stock,
minus any
applicable
commissions.”
(“How A Stock…”)
Dealers Automated Quotation
(Nasdaq)
Nasdaq
• “One of the largest markets in the world for
the trading of stocks.
• In 2001 more than 4,800 companies were
listed on Nasdaq—more than on any of the
other stock exchanges in the United States,
including the NYSE and the AMEX.
• The majority of companies listed on Nasdaq
are smaller or less established than most of
those on the NYSE and AMEX.
• Nasdaq has become known as the home of
new technology companies, particularly
computer and computer-related businesses.”
(“The Nasdaq Stock Market.“)
Nasdaq
• “Trading on Nasdaq is initiated by
stockbrokers acting on behalf of
their clients.
• These brokers place orders with
certain Nasdaq brokers, called
market makers, who concentrate
on trading specific stocks.
• The broker and the market maker
negotiate to reach a price for the
(“The Nasdaq Stock Market.“)
stock.”
Nasdaq
• “Unlike other stock exchanges, Nasdaq has
no central location where trading takes
place.
• Instead, its market makers are located all
over the country and make trades by
telephone and via the Internet.
• Because brokers and market makers trade
stocks directly instead of on the floor of a
stock exchange, Nasdaq is called an overthe-counter market.
• The term over-the-counter refers to the direct
nature of the trading, as in a store where goods
are handed over a counter.”
(“The Nasdaq Stock Market.“)
AMERICAN STOCK EXCHANGE
(AMEX)
AMEX
• “AMEX is one of the largest markets for
financial trading in the United States.
• Based in New York City.
• In 2001 about 700 companies were
listed on the exchange and the market
value of their stocks totaled about $100
billion.
• AMEX is the third largest stock
exchange in the United States, behind
the NYSE and the Nasdaq Stock
Market.”
(“American Stock Exchange.“)
Dow Jones
• “A group of daily and weekly indexes of
selected stock and bond prices.
• Dow Jones & Company, Inc. of New York City
calculates and publishes the indexes in their
flagship newspaper, the Wall Street Journal.
• Investors and economists watch the Dow
Jones averages to monitor the performance of
sectors of the stock market, the stock market
as a whole, and the economy.
• Movements of the indexes up or down
influence when and how investors buy or sell
securities, and may also influence national
economic policy. “
(“Dow Jones Averages.“)
Dow Jones
• “There are seven Dow Jones indexes that
are used most often by investors and
financial analysts.
• Three of the indexes are daily averages of
the cost-per-share of selected stocks in
three major economic sectors:
• industry
• transportation
• utilities.”
(“Dow Jones Averages.“)
Dow Jones
• “Another Dow Jones stock index,
the Equity Market Index, is an
average of the cost-per-share of a
wide variety of stocks traded on
the New York Stock Exchange
(NYSE), the American Stock
Exchange (AMEX), and The Nasdaq
Stock Market.”
(“Dow Jones Averages.“)
DOW Hour by Hour
Abbreviations
• PE is stock price-to-earnings
• ratio based on earnings per share in
last four announced quarters.
• PPE is projected P/E ratio
• based on analysts’ consensus
earnings estimate for the next four
quarters.
Abbreviations
• Vol % - indicates whether there was
unusual sales volume activity in a
stock.
• An “=” indicates that yesterday’s
volume
matches that average.
• S&P = Standard & Poor’s Index
Stock Market Activity
• Research five companies
• No Beverage - Brewers
• (Alcoholic Companies - Anheuser-Busch Companies Inc.,
Molson Coors Brewing Company, etc.)
• No Immoral Companies
• (Playboy Enterprises Inc., Hustler Magazine, etc.)
• Research Source:
http://finance.yahoo.com/lookup
Finding the “Ticker” Symbol and type of industry the company
is associated with in the market of business.
If you do not know the trading symbol type in the name of the company
here
Example: To research DirectTV I would come up with this page.
This is
the
Ticker
Symbol
and the
type of
industry
Click on the symbol!
We will ONLY deal with the LAST Trade and the
CHANGE
Scroll down to find the profile page!
Read the company profile and look at the history of the company. Use other
internet research tools to aid you in researching your companies.
Tracking a Stock
- Use the last trade price as the purchase
price
Each day track the last trade price of the day and
keep track of whether your stock made a profit or a
loss.
Stock Market Survey Chart
Amt. of shares: 100
Company Symbol DTV
Company Name
DirectTV
Type of Company Communication
Purchase Price:
Date
2/9/09
2/10/09
2/11/09
2/12/09
2/13/09
2/16/09
2/17/09
2/18/09
2/19/09
2/20/09
Sell price: 25.07
$22.07
Price per
share
$22.07
$22.17
$25.07
Increase
----0.10
0.90
Decrease
-----
Total Amt.
$2207.00
$2217.00
$2507.00
Stock Market Assignment
• After your research is complete and you have
chosen five companies it is time to begin your
assignment.
• Next, after the close of the market on Monday (4pm
EST), you will purchase $10,000 worth of stock –
using only the five companies you have chosen.
(Try to come as close as you can to $10,000
without going over!)
• Use the charts provided to keep track of your
stocks daily. The charts will be checked each class
session.
• A week from Monday you may sell and buy stocks,
however, you must maintain five companies at all
times with no more and no less than five.
• All stocks are to be sold at the close of the market
a week from this next Friday. Then, your stock
market report should be completed. All charts and
reports will be due the following class session.
• We will only be tracking the market for a total of
two weeks.
Good Luck!
The student(s) who can invest their $10,000 to the
penny will receive a homework pass.
Plus, the student with the greatest profit and greatest
loss will also receive a homework pass and a fabulous
prize.
Works Cited
• “The Nasdaq Stock Market." Microsoft® Encarta® Online
Encyclopedia
2007. 27 Jun 2007.
http://encarta.msn.com/encyclopedia_
761588166/The_Nasdaq_Stock_Market.html
• “American Stock Exchange." Microsoft® Encarta® Online
Encyclopedia 2007. 27 Jun 2007. http://encarta.msn.com/
encyclopedia_761588049/American_Stock_Exchange.html
• “How A Stock Is Bought And Sold.” NYSE Euronext. 27 Jun 2007.
http://www.nyse.com/pdfs/StockBoughtAndSold.pdf
• “Order Execution” NYSE Euronext. 27 Jun 2007.
http://www.nyse.com/productservices/nyseequities/
1095202040263.html
• “Dow Jones Averages." Microsoft® Encarta® Online
Encyclopedia
2007. 27 Jun 2007.
http://encarta.msn.com/encyclopedia_
761588100/Dow_Jones_Averages.html