WHEN TO BUY AND WHEN TO SELL IN THE

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					WHEN TO BUY AND WHEN TO SELL IN THE STOCK MARKET GAME

When to Buy:
In the stock market game, there will be times when your team will want to purchase a new stock.
As we have learned, the best way to find out what stocks are going to perform well in the future
is through research. Once your team has found a stock that has a bright future, the next step is to
determine a “good purchase price” for that particular stock. Buying stocks is just like buying
anything else (at the lowest price possible). You want to get the most for your money. Here’s
how you do it:

Let’s say my team has done some research on http://finance.yahoo.com/ and we as a team have
decided that Google (Symbol: GOOG) has a good chance to earn us a lot of money. Well, we
need to find out when we should buy Google. In order to find the lowest price for Google we
checked out what the expert stock analysts at Yahoo Finance had to say about when to buy
Google.

This is how we found what the Yahoo Finance analysts had to say:
        -Go to http://finance.yahoo.com/

        -Click ‘Symbol Lookup’ link next to the ‘Get Quotes’ search engine.

        -Type in ‘Google’ (or whatever stock you want to buy)

        -Click the symbol for ‘Google’

        -Find along the left-hand side of the webpage a link that says ‘Analyst Opinions’

-Here’s the chart that we found:

Google Inc. (GOOG) 390.90                0.79 (0.20%)
RECOMMENDATION SUMMARY*
Mean Recommendation (this week):             1.9
Mean Recommendation (last week):             1.9
Change:                                      0.0
Industry Mean:
Sector Mean:
S&P 500 Mean:                                2.42
* (Strong Buy) 1.0 - 5.0 (Strong Sell)
PRICE TARGET SUMMARY
Mean Target:                                 497.42
Median Target:                               500.00
High Target:                                 600.00
Low Target:                                  390.00
No. of Brokers                               29



So, what does all this mean? Well, what is the price of Google currently at? $390.90, right?
Now that we know what the price is at this point in time, we can then find out if this is a good
time to buy Google. Remember, you want the lowest price you can get.

The first section of the Analysts’ Opinion section I want to look at is the ‘Recommendation
Summary’ chart. The ‘Recommendation Summary’ chart let’s me know what all the Yahoo
Finance analysts think about whether or not a particular stock is a good buy or a good sell. Let’s
look at Google’s ‘Recommendation Summary’ chart:

RECOMMENDATION SUMMARY*
Mean Recommendation (this week):              1.9
Mean Recommendation (last week):              1.9
Change:                                       0.0
Industry Mean:
Sector Mean:
S&P 500 Mean:                                 2.42
* (Strong Buy) 1.0 - 5.0 (Strong Sell)

Analysts rank each stock on a buy or sell scale of 1.0 to 5.0. Yahoo Finance averages the scores
of all the analysts and gets the mean recommendation. A mean recommendation of 1.0 means
the experts think you should buy this stock as soon as possible. A mean recommendation of 5.0
means that you should sell this stock as soon as possible.

What’s Google’s mean recommendation? 1.9. Well, 1.9 is pretty close to 1.0, so the experts are
telling me that it’s probably a pretty good time to jump on the Google train and buy it.

Well, I still need to see if I’m getting a good price for Google. Again remember, I need to get
Google for the lowest possible price, so I need to look at ‘Price Target Summary’ chart.

Here it is:
PRICE TARGET SUMMARY
Mean Target:                         497.42
Median Target:                       500.00
High Target:                         600.00
Low Target:                          390.00
No. of Brokers:                      29

What does all this stuff mean? Basically you need to look at three things:
  1. The Mean Target- at the end of the year, analysts expect Google’s average stock price to
      be at the mean target price.

    2. The Low Target- at the end of the year, analysts do not expect Google’s stock price to go
       much lower than this.

    3. The High Target- at the end of the year, this is the highest price analysts expect for
       Google.

How does this information help me? Well, I’m glad you asked.

What’s our goal in buying stocks? We want to buy the stock for as low as possible. The ‘Low
Target’ is the lowest price the experts predict Google’s stock price to reach. In this case, the
experts predict Google’s price not to go lower than $390.00. What’s Google’s current price?
That’s right, $390.90. Hmm, if the experts say that Google won’t go lower than $390 per share,
and it’s currently at $390.90 per share, I’d say that Google is at pretty good price to buy. On top
of that, the expert analysts at Yahoo Finance gave Google a mean recommendation rating of 1.9
and the best score to buy a stock is 1.0.

There’s only one conclusion. BUY! BUY! BUY!
When to Sell:

In the previous section, you learned when a good time is to buy a stock. Well, you also have to
know when it is a good time to sell a stock. Two things can cause you to sell a stock:
    1. The stock stinks. Week after week you keep losing money, and every time you look in
        the research reports on the stock, there are only bad things the expert analysts have to say.
    2. The stock has reached its highest price and analysts do not expect it to go much higher.

We’ll look at each case separately.

First, let’s address when the stock stinks.
My team and I purchased 3 months ago shares of Revlon Cosmetics (Symbol: REV) at $3.56 per
share. Well, kept losing money week after week for 12 weeks and on top of that we just read in
our weekly research that the company is expecting a loss $95 million for the 2nd fiscal quarter.
Not good. We’ve had enough and it’s time to sell. So we check the ‘Analyst Estimates’ to make
sure we’re doing the right thing. Here’s what we found:

Revlon Inc. (REV) 0.87          0.12 (12.12%)
RECOMMENDATION SUMMARY*
Mean Recommendation (this week):         2.7
Mean Recommendation (last week):         2.4
Change:                                  0.3
Industry Mean:
Sector Mean:
S&P 500 Mean:                            2.42
* (Strong Buy) 1.0 - 5.0 (Strong Sell)
                                         Compare to Industry
PRICE TARGET SUMMARY
Mean Target:                             2.00
Median Target:                           1.88
High Target:                             3.00
Low Target:                              1.26
No. of Brokers:                          6

Now, that we know how to read the ‘Recommendation Summary’ chart and the ‘Price Target
Summary,’ this is no problem. There is one new piece of information that the group should
know. It’s the S&P 500 Mean.

The S&P 500 is a list of 500 large U.S. corporations that sell stock on the United States stock
exchanges like the New York Stock Exchange and the NASDAQ. Investors like to look at how
the S&P index (index just means the average of how all 500 stocks are doing each day) is doing
because usually if the large corporations are doing well, then the rest of the markets are usually
doing pretty well. The ‘S&P 500 Mean’ tells us that of the 500 companies on the S&P, the
average buy or sell score is 2.42.

Now let’s go back to Revlon. Revlon’s buy/sell score is 2.7 this week. If the S&P 500 Mean is
2.42, and Revlon’s score is 2.7, the experts are telling me that Revlon is a stronger sell than any
of the 500 companies listed on the S&P index.

So my team and I now know that Revlon is going to lose $95 million this quarter of the fiscal
calendar, plus the analysts tell me with the ‘Mean Recommendation’ score that it’s probably a
good time to sell.
The last piece of information I want to see is in the ‘Price Target’ summary. I see in the
summary that the ‘Low Target’ price for Revlon is $1.26. Houston, we have a problem. Revlon
is $0.87. Revlon’s current price is below what the experts predicted it would be! That’s it!
Revlon is gone! We’re selling.

Now, let’s look at when a company’s stock price has reached its peak.

The company we’ll use is AstraZeneca PLC (Symbol: AZN). AstraZeneca PLC is a prescription
drug company that has seen it’s stock price soar over the last year with the creation of several
new prescription drugs, and most recently drugs dealing with asthma. My group and I bought
the stock on March 6, 2006 for $50.23. AstraZeneca PLC’s price today is $61.37. Well, my
group and I need to find out if AstraZeneca PLC has hit its peak. Again, we go to the ‘Analyst
Opinion’ page.

Here’s what the Analyst Opinion page had to say:

AstraZeneca plc (AZN) 61.37              1.79 (3.00%)
RECOMMENDATION SUMMARY*
Mean Recommendation (this week):               2.6
Mean Recommendation (last week):               2.6
Change:                                        0.0
Industry Mean:
Sector Mean:
S&P 500 Mean:                                  2.42
* (Strong Buy) 1.0 - 5.0 (Strong Sell)

PRICE TARGET SUMMARY
Mean Target:                                   59.33
Median Target:                                 60.00
High Target:                                   67.00
Low Target:                                    45.00
No. of Brokers:                                6
                                 Data provided by Thomson/First Call

Now, there’s some good news and bad news here. The good new is that AstraZeneca PLC’s
stock is up again to $61.37. The bad news is that it looks like AstraZeneca PLC’s price may not
go much higher. How do I figure that out?

Well, first of all, the ‘Mean Recommendation’ for the stock is 2.6, which is above the 2.42 of the
S&P 500, so the analysts are telling me that it’s probably a good time to sell. The next indication
that it’s a good time to sell is looking in the ‘Price Target Summary.’ The highest price
AstraZeneca PLC is predicted to reach is $67.00. Right now the price is at $61.37.

So what should my group do?

My group and I decide that we won’t sell today, but will definitely keep an eye on AstraZeneca
PLC for the next few weeks. Once that stock get near $67.00, we’re going to take the money and
run.
                       Know When to Hold, Walk Away, or Run

                                                       Name _____________________________

Directions:
Part 1: Analyze each of the 10 stocks your group is considering purchasing for the Stock
Market Game by creating a chart that lists the current price of the stock, the mean target price,
the high target price, the low target price, the mean recommendation for this week and last week,
and the S&P 500 buy/sell score.

Part 2: Once you have completed the chart for each individual stock, write one paragraph below
the chart that tells me when the stock is either a good stock to buy or not a good stock to buy and
why. You must use the data in the chart to support your answer to why the stock is or is not a
good buy for your group.

Below is an example of what your chart should contain. REMEMBER, YOU MUST USE
THE DATA IN THE CHART TO EXPLAIN WHY YOUR STOCK IS OR IS NOT A
GOOD BUY.

Example:

Apple Computers Inc. (AAPL)

Current Price                                     61.14
Mean Target Price                                 80.87
High Target Price                                100.00
Low Target Price                                  50.00
Mean Recommendation (this week)                    1.80
Mean Recommendation (last week)                    2.00
S&P 500 Buy/Sell Score                             2.42

				
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