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Chapter 2

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Chapter 2

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  1. Chapter 2 Sources of Investment Information

  2. CHAPTER 2 OUTLINE 2.1 Ways of Wall Street 2.2 Internet Revolution 2.3 Investment Information on the Internet 2.4 Financial Press 2.5 Wall Street Research 2.6 Investments as a Profession

  3. Chartist/Technician Head and Shoulders Stock Quotes Real Time EDGAR Ticker Symbol 10Q Report 10K Report Proxy Statements SEC Form 144 Stock Message Board Bullish/Bearish Stock Broker Security Analyst Portfolio Managers Certified Investment Planner Investment Banker KEY TERMS

  4. Ways of Wall Street • Caveat Emptor (Let the Buyer Beware) • “Where Are the Customers’ Yachts?” • Neither the Advice nor the Wisdom on Wall Street is free

  5. WHAT DID THEY SAY?? Wall Street & Internet Jargon • Trader Terms • Internet Terms • Technician’s Terms • Financial and Investing Glossaries on the Internet: • <> • <>

  6. TECHNICIANS or CHARTISTS • Pick stocks based on patterns of past price and volume data--e.g., “head and shoulders” formation--bearish indicator • Head and Shoulders: Chart formation resembling the head and shoulders outline of a person. • Technical trends can move markets in short term, but fundamentals count in longer term • Tend to look at day-to-day stock movements, often with 20/20 hindsight

  7. Widespread dissemination of information Two-way communication Cheaper and more timely than print sources Makes financial markets more democratic Reduces information-gathering costs Can be fertile space for stock price manipulation and fraud Internet Revolution

  8. THE INTERNETSo Powerful, It Brings Down Walls With a click of the mouse: • consumer news • attitudes • impressions • ideas • variety of new products and services Enemy of despots and dictators

  9. Tool for Consumers Tool for Companies E-commerce and the Internet Ready information is enemy of high prices and high profit margins as consumers shop via the ‘net • Reduce prices • Get closer to customers • Find out how to meet and exceed customer needs

  10. <> <> Financial Informationon the Internet • Stock Quotes in Real Time • Volume Information • Financial Data on: • Companies • Industries • U.S. Economy • World events • Quotes • Charts • News • SEC Filings • Stock Research Reports • Earnings Estimates • Fundamentals

  11. WHO IS EDGAR? <> • Electronic retrieval analysis for SEC filings • Free website for gov. reports filed by individual companies • For-profit company that supplies investors with SEC reports and filings • Ticker symbol: unique 2,3,or 4 letter code for company

  12. 10Q: Quarterly Accounting Information 10K: Annual Accounting Information 13D: 5% Ownership Positions Form 144: Intention to Sell Restricted Stock Proxy statement or annual meeting announcement Members of top management Board of directors Large investors Stock ownership positions by managers Pay-for-performance incentives SEC REQUIRES

  13. REAL TIME QUOTES <> • Fast-moving markets • Up-to-the-minute quotes and news • Free quote information

  14. MUTUAL FUND INFORMATION <> • Morningstar—watchdog group for mutual fund industry • Comprehensive, timely information and analysis • Information on sector funds

  15. STOCK MESSAGE BOARDS • Websites for anonymous individuals to post information about companies or investments • Timely information about what other investors are thinking • Can be manipulated via misinformation, rumor, and gossip <>

  16. Financial Newspapers: The Wall Street Journal (print & interactive versions) Investor’s Business Daily New York Times San Francisco Chronicle USA Today Financial Periodicals: Barron’s,Business Week Forbes Fortune Inc. Money Worth FINANCIAL PRESS

  17. WALL STREET RESEARCHAnalyst Opinion Summaries • Wall Street trading firms’ opinions • Detailed information about: • Companies • Industries • Overall Economy • Global Stock and Bond Markets • Buy/sell recommendations • Bullish Consensus • Bearish Sentiment

  18. WALL STREET RESEARCHCompany Reports • Company Reports • Industry Reports • U.S. Market Outlook • Global Outlooks

  19. Investments As a ProfessionFinancial Job Market Overview • Employment opportunities in financial services expected to grow rapidly • Amount of financial sophistication demanded of finance specialists and nonspecialists expected to rise • Corporate Treasurers/CFOs • Personnel/Human Resources • Boundaries between investment and financial instruments continue to blur--> more account executives in • Commercial banks • savings institutions • insurance carriers • real estate companies

  20. CAREER OPPORTUNITIESStock Brokers & Investment Managers • Stock Brokerage: financial agents who act as go-betweens for individual buyers and sellers • Investment Management • Security Analysts: specialists who identify investment opportunities for individuals • Portfolio Managers: manage investments for individuals and institutions

  21. CAREER OPPORTUNITIESFinancial Planners • Help individuals identify and meet financial goals • Certified Financial Planners: must pass challenging exams from College of Financial Planning--equivalent to CPA • financial plan processing and insurance • investment planning • income tax planning • retirement planning/employee benefits • estate planning

  22. CAREER OPPORTUNITIESInvestment Banking • Help corporate clients meet financial needs, such as issuing stocks or bonds • Arrange to sell new securities to general public • Arrange mergers and acquisitions

  23. Review Quiz T or F Technical analysts generally consider a head and shoulders formation to be a very bullish indication. T or F EDGAR is a nonprofit company that specializes in providing investor access to SEC reports and filings. T or F SEC Form 144 filings must only be submitted by holders of restricted securities, sometimes called letter stock, after they have sold such shares to the general public.

  24. Review Quiz T or F A bearish consensus means that Wall Street analysts expect a stock price to go down. T or F An initial 13D filing would typically be regarded as bearish. T or F Stock trading on the Internet is likely to reduce stock-market volatility.