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ADMS 3531 (30)
seldrim (1)
Lecture

Introduction

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Department
Administrative Studies
Course
ADMS 3531
Professor
seldrim
Semester
Fall

Description
LESSON 1. What is stock investing? What are stocks? A stock or share represents ownership in a piece of a company. The stock price of a company is the current market price of a single stock in that company. Stocks are traded on a stock exchange, such as the NYSE or NASDAQ Buyers put in a Bid price, sellers put in an ask price which they are willing to buy or sell for. What are some of the key terms? The number of stocks of a single company being traded over any period of time is known as its market volume. Market capitalization = current stock price x No. of outstanding shares The market capitalization of a company is the total value, as determined by the stock market Day range: lowest and highest price traded in a day 52wk range: the lowest and highest price traded in a year Why do people invest in stocks? Capital gain, earnings via dividend and interest. Shareholders are compensated for their risk through a risk premium. LESSON 2. STRATEGIES FOR STOCK INVESTING What is an investing style? Over 2000 companies on NYSE and over 3000 in Nasdaq. - Your timeline - Your personal risk tolerance - Time that you want to spend managing the stock portfolio a. How much should I invest? - Never invest what you truly can’t afford to lose ( 1 or 2 months worth of living expenses in a nest egg) - Find risk-reward balance : Under 40 years – 60-80% stocks, Close to 80years : consistent returns should outpace inflation : 20-40% stock - Do what feels right b. What are large, medium and small caps? - Under $1 billion: small caps : core products, specific markets, high growth potential , more risk for bankruptcy, innovative products. - $1 billion - $10 billion : mid caps - More than $10 billion: large caps / blue caps Young investors, longer investment timelines: more small and mid caps and less large caps Older investors, shorter investment timelines: more large caps c. What are value, growth and income stocks? Value investing: look for stocks which are undervalued: company assets, current earnings, products and competitive advantage. Low P/E Growth investing: look for earnings momentum or future growth in profits and the products of a company. Higher P/E. mostly small or mid caps Income investing: companies with consistently high dividends distributed to shareholders. Large caps Dividend payment = dividend declared x no. of shares you own. LESSON 3. What makes a company valuable and what makes a stock a “buy”? What makes a company valuable? The product - Who buys the product? What could affect the purchase of that product? - What makes the product profitable for the company - Scalability is important Competitive advantage - Economies of scale : intel - Branding: Nike Company assets - Tangible assets - Intangible assets : value investors look into assets - Company assets: (company assets – company liabilities) / no. of shares outstanding KEY INDICATORS Investors look at EPS : company earnings/ no. of outstanding shares Issue of more stocks would lead to stock dilution and steadily rising EPS is the factor to be looked at. PE ratio: current stock price/ EPS The price paid for a company is just as important as the quality of the company Rule of thumb: - PE above 11 : expect positive growth - PE at 11 : zero growth - PE below 11: negative growth Company debt or liabilities: Debt accrues interest and increases chance of bankruptcy Equity: compan
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