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Stock

Stock. 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

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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

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