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Bulls and the


                Bears
                  Taking Stock
• Only companies that are incorporated under state and
  federal laws can “go public,” or sell stock.

• There are two basic types of stock:
  –
  –
          Common Stock…
• Is the most common!
• _____________
  – The money paid to stockholders,
  – Are determined by the corporations board
    of directors.
    • If the company had a good year, the board
      might increase the dividend, and…
    • If the company had a bad year, or if the board
      decides the corporation needs to reinvest
      some of its profits to make it stronger, it may
      decide to cut the dividend or even omit it!
             Preferred Stock
• Is so called because its stockholders receive
  preferential treatment.
• Preferred shareholders are paid their dividends
  first and the dividend is not based on the
  corporation’s profits. The amount is fixed.
• Even if the company has a very profitable year,
  the stockholder only receives the specified
  amount. It can be withheld if business is down
  but must be paid later.
     More on Preferred Stock
• Preferred stock is _____ risky than
  common stock, but it does not offer the
  opportunity for exceptionally high
  dividends.
• AND… most preferred stock carries no
  voting rights, whereas common
  stockholders vote for members of the
  board of directors and decide important
  issues.
The New York Stock Exchange
• Stock is bought and sold on stock
  exchanges.
• The largest and most prestigious is the
  New York Stock Exchange, abbreviated
  NYSE.
• The “Big Board,” as it is called is located
  on Wall Street in New York City.
     The Origins of the NYSE
• In the 1700’s an informal gathering took
  place for merchants and traders to buy
  and sell stocks of banks and insurance
  companies.
• In 1792, they decided to meet at the same
  time every day under an old sycamore tree
  on Wall Street to take orders to buy
  and sell stocks.
     On the Floor of the NYSE
• At 9:30 a.m. EST every business day, the
  world’s most fascinating financial drama begins
  and ends at 4:00 p.m.

• The trading floor is the size of a football field and
  five stories high.

• The floor is described as “organized chaos.”

• It is noisy and crowded as brokers, clerks and
  messengers dart about (no running is allowed)
  the four rooms that make up the trading floor.

• All 3,000 people who work here buy and sell
  stock for customers at the best possible price.
            Other Exchanges
• The American Stock Exchange – abbreviated
  ASE or AMEX.
  – Formed 60 years after the NYSE.
• The National Association of Securities Dealers
  Automated Quotation System
  – NASDAQ, an automated communications system lists
    about 5,000 companies.
  – This is the Over-the-Counter market, OTC, and offers
    shares of smaller, younger companies.
  – Almost all new issues trade here before graduating to
    the NYSE or AMEX.
            High-Tech Trading
• One of the strengths of the system is fairness; an order
  for 100 shares from a factory worker in Detroit competes
  equally with an order for a million shares from the
  nation’s largest pension fund.
• Thousands of electronic devices on the trading floor
  practically eliminate paperwork and processing errors.
• Every trade on the NYSE floor is recorded on the stock
  ticker, an electronic device that reports transactions
  shortly after they occur.
• An order placed in Los Angeles can be processed in
  New York within 30 seconds.
              Bulls and Bears
• Popularly used to
  describe ups and downs
  in the market.
• If the market is called
  _________, that means
  more people want to sell
  stocks than buy them.
  Share prices then fall.
• If it is ________, more
  people want to buy than
  sell, and prices rise.
    Reading the Stock Tables
• The newspaper, particularly the financial
  section, is an investor’s best friend.
• Stories printed daily provide clues that can
  help investors spot trends useful in
  developing investment strategies.
• The daily stock market quotations report
  on the previous day’s trading activity.
• Reading the newspaper stock table is not
  difficult.
The total value
of the stock
listed on the
NYSE is $3.9
trillion, making
the exchange
the largest in
the world.
      Here’s the Information
• 1. ______________ – The name of the
  company is abbreviated. The names are
  alphabetized by the company’s full name,
  not by the abbreviation.
• 2.______________ - This indicates the
  ANNUAL payment per share. Dividends
  are usually paid quarterly, every four
  months the stockholder will be paid ¼ the
  amount shown.
              Info Continued
• 3._________________ – The PE ration, or yield,
  is the price of the stock divided by its earnings
  per share. High PE stocks are typically young,
  fast growing companies.
• 4.__________________________________–
  The trading volume for the day is listed in
  hundreds. If the number is 56, then 5,600
  shares were traded that day. If a “z” precedes
  the number, then that was the actual number of
  shares traded. i.e. z30 means 30 shares were
  traded, not 3,000.
              Info Continued
• 5.____________ – This number is the last
  trading price recorded when the market closed
  for the day. It represents the price of one share.
• 6.___________________– This is the difference
  between the last closing price reported for the
  day and the last closing price reported for the
  preceding day. A “-” before the number
  indicates the stock price was down by that
  amount. A “+” indicates the stock price was up
  by that amount.
       Stock Table Footnotes
• 1. pf – This indicates the listing is for
  preferred stock – shares that have a fixed
  rate of return. (If there is no “pf” following
  the company’s name, it is common stock.)
• 2. s – This means the company has had a
  stock split within the last 12 months.
• 3. n – This stands for “new issue.” It
  means the stock has just been offered
  within the last 12 months.
        Footnotes Continued
• 4. u – This letter next to the 52-week high
  figure means the price is a new high within
  the last 52 weeks.
• 5. d – This letter next to the 52-week low
  figure indicates the price is a new low
  within the last 52 weeks.
• 6. v – Trading halted.
• 7. vj – In bankruptcy or receivership.
         Buy Low, Sell High…
• When you decide to buy stock, the first person
  you want to talk to is a _______________.
• Stockbrokers work for a stock brokerage, or
  brokerage house.
• They buy and sell for you, and for this service,
  they earn a commission or fee.

CharlesSchwab
  Orders to Buy, Orders to Sell
• When a stockbroker buys or sells stock for a
  customer, it is called “placing an order”.
• There are different types of orders:
  – A _______________ is an order to buy or sell
    immediately at the best price available.
  – Buying “at the market” is the most common form of
    trading.
  – A limit order specifies a price;
     • Example: You tell the broker to buy 100 shares of Nike at
       $50.25 per share, but the price has climbed to $50.75 by the
       time your order reaches the floor, no sale will take place.
     Round Lots and Odd Lots
• Stock orders can be
  placed in either round
  lots or odd lots
  – A round lot is 100
    shares,
  – Any order less than
    100 shares is
    considered an odd lot.
            Fluctuating Prices
• Fluctuations in the price of a stock during the
  trading day can be explained by supply and
  demand.
   –
   –
• The price may rise or fall due to:
   – Factors affecting the company or industry.
   – Whether the stock market as a whole is moving up or
     down.
   – Current events, either national or global.
   – Or for no apparent reason!
     What Causes the Market to

• Ups and downs in the stock market are perfectly
  normal; the bear and the bull balancing each
  other.
• When many people rush to sell their shares, the
  balance is thrown off and gets out of kilter.
• In stock market terms…IT CRASHES.
• The greatest crash to date occurred in 1929,
  thereafter known as Black Thursday.
What Happened on Black Thursday
• Stock prices plummeted as investors suddenly decided
  to sell their stocks for a profit.
• As other investors saw stock prices begin to fall, they too
  hurried to sell.
• The frenzy of selling activity had a negative impact on
  the country for years afterward.
• With nobody investing money in the stock market,
  businesses could not grow.
• When businesses failed, people lost their jobs, and
  without paychecks they could not buy goods and
  services.
• Still more businesses failed and there was a tremendous
  economic decline lasting about 12 years.
  Takeovers, Mergers and Tender
              Offers
• A merger is the acquisition of one
  company by another.
  – It occurs when one company purchases
    enough shares of another company’s stock in
    order to have a controlling interest.
  – Mergers must be approved by the company’s
    board of directors and shareholders.
• If the merger does not have the
  cooperation of the target company’s
  board, it is called a takeover…
                         Takeovers
• A takeover is accomplished in one of three ways:
   – By buying up a company’s stock on the open market,
   – Buying its stock through private transactions,
   – Or issuing a tender offer to the company’s board of directors.
       • A tender offer is an offer to buy a company’s stock at a stated
         price and by a stated time.
       • To gain control of the target company, the tender offer price is
         usually above the current market price.
   – A takeover becomes hostile when the
     target seriously objects to being
     acquired and nothing, not even a
     higher price, is likely to change the
     board’s mind.
        Other Stock Concepts
• ________________ - is the division of a
  corporation’s outstanding shares into a larger
  number of shares;
  – Example: a 2-for-1 split by a company with 1,000,000
    shares outstanding would increase the total shares
    outstanding to 2,000,000.
  – A stockholder with 100 shares before the split would
    have 200 shares after the split.
  – The immediate value of the new stock would be half
    the value of the old.
  – Stock splits make the company’s shares more
    affordable, thereby attracting more investors.
      Other Stock Concepts…
• __________________ – Stockbrokers begin
  taking orders for new stock offerings before the
  new stock is issued.
• Sometimes this results in more buyers for an
  offering than there are shares.
• The stock becomes oversubscribed and the
  price usually goes up when it comes out – a
  classic example of supply and demand.
• Brokers refer to the stock as a “ hot issue .”
      Other Stock Concepts…
• ___________ – When a company buys back a
  portion of its stock, usually because the stock
  has fallen below a certain price.
• Shares reacquired by the company revert to
  treasury stock, meaning:
  – The stock can be sold later for a profit if the price
    rises.
  – It does not pay a dividend or vote.
• After a buyback, the remainder of issued and
  outstanding shares usually increase in value.
      People Invest For Growth or
                Income
• A growth stock is one that pays low dividends, or no
  dividend, but is very likely to increase in value over
  time.
• When you buy a growth stock, you hope to make a
  profit by later selling for more than you paid.
• An income stock is one that has a strong record of
  paying dividends and is likely to continue.
• If you want income, look for stocks with high dividend
  yields.
• The yield is the percentage of a stock’s
  price that is paid out to the investor each
  year.
             Let’s Figure Yield
• To calculate a stock’s yield, divide the annual
  cash dividend per share by the price of the stock.
  – Example: You have stock worth $100 a share and you
    get a dividend of $2.50 per share each quarter, or $10
    a year.


     • 10/100 = .10 or 10% means the
       yield (sometimes called “return”)
       on your stock is 10%
    What the Indexes Indicate
• The Dow Jones Industrial Average
  – Developed in the 1800’s by Charles Dow, an editor of T
    Wall Street Journal,
     • He believed he could track rises and falls in the stock market b
       looking at the performance of a handful of carefully selected s
  – There are 30 stocks used to compute the Dow Jones
    Average.
     • A complex weighted average of those 30 stock prices is calcul
       determine the daily change in the average.
     • The result is a clear reflection of the stock’s performance and
       overall market in general.
     • Some companies included in the Dow are: General Electric,
       McDonald’s Corp., Exxon, Dupont and AT&T.
     A New Day is Dawning…
• The market is open to ALL investors. It is
  a level playing field because all buyers
  and sellers are anonymous.

                  A hundred years ago, it was
                  unusual for women to be
                  involved in the stock market.
                  In fact, they were not
                  allowed on the floor. Today,
                  women play active roles in
                  the market.

				
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posted:8/7/2011
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