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Stock

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Stock

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  1. Stock

  2. Common Stock • Buy it for dividend and possible appreciation • It is ownership in the company • This ownership comes with voting rights at annual meetings. • No definite dividend (not required) • Cost difference between common and preferred • More shares available of common than preferred • Last to receive payment if bankruptcy

  3. Preferred Stock • Prices are less volatile than common • Similar to bonds • Guaranteed regular dividends for period of time • Rated similarly to bonds with AAA being best • Convertible-can change to common • Entitled to assets prior to common stock if company goes bankrupt • Alabama Power Example: Common vs. Preferred

  4. Categories of Stock“Market Caps” • Large Cap Stocks • Capitalization of at least $10 Billion • Large, very well-known (MSFT, WMT) • Mid Cap Stocks • $2 Billion - $10 Billion • Fairly well known (KMX, URBN) • Small Cap Stocks • Less than $2 Billion • Unfamiliar (See listing)

  5. Categories of Stock • Blue Chip • must be a leader in industry • proven earnings in good/bad times • unbroken dividend • definite continued performance • Diversified product lines or locations • Growth • quick money makers • higher than usual earnings • leader industry at right time • adequate working capital • Little known at times

  6. Categories of Stock • Defensive-necessity products (Utilities, Customer Staples) • Cyclical-things that can wait • Special situation-unusually popular • Income-company’s that pay out an usually high percentage of the net income after taxes as dividends • Speculative- Newer companies & Penny -less than $1 per share (or less than $5)

  7. Fluctuations in Stocks • Supply and demand affects price • need to invest in long term • bull market-general trend is increase • bear market-general trend is decrease • Hard to see change

  8. What makes prices change • Financial Health of the company • Ex. If dividends are being offered • New management/product • Industry Info. • Economic Trends • World Events

  9. Shareholder’s Rights • Right to vote one vote per share • Can vote at the meeting • Use a proxy statement • Can propose ideas to be voted on

  10. Shareholder’s Rights • Right to maintain ownership • Preemptive right-existing owners get to purchase first to keep percentage of ownership • Rights offering-how you get your preemptive right • Rights have value like stock, you can sell them to someone else, buy the shares yourself or throw them out.

  11. Dividends • Types of dividends • Cash dividend can be given in a check or reinvested automatically • Stock dividend- are given more shares of stock, percentage based on number owned

  12. Dividends • Date of Declaration • Date of Payment • Date of Record • Ex-dividend date, 2 business days prior to date of Record

  13. Split offs • One part of the company becomes a new company • You must decided which one you want, you don’t get both • It is non taxable if you take the new company shares

  14. Spin Offs • Parent company wants to get rid of a subsidiary • All existing shareholders receive stock in this new company • Shareholders can do with it what they want

  15. Stock Splits • Changes the number of shares but not the total value of what you own. • Can Forward split or Reverse split • Reverse splits usually done when the value is so low may stop trading

  16. Ticker Symbols • You can tell which type of exchange by number of letters 1,2,3 on the NYSE or AMEX 4,5 on NASDAQ (can be 1, 2, 3 if moving from NYSE)

  17. Index • DJIA-basket of 30 stocks • Chosen by editors of Wall St. Journal • Three stocks from NASDAQ, 27 from NYSE • Not changed often • Most recent? http://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average • Price weighting-composed of same number of shares of each stock • Divided by divisor to offset splits.

  18. Index • S&P 500 • 500 NYSE companies by Standard and Poors • Large-Caps • Weights based on size of company rather than values of share. • List of companies • http://en.wikipedia.org/wiki/List_of_S%26P_500_companies

  19. Index • Nasdaq Index • Approx. 3,200 securities listed • Weight-based • Most volume world-wide • Nikkei-225 large stocks on Tokyo Exchange weight based • Hang Seng-33 stocks that are weight based, Hong Kong index