HACE 3200 1nd Edition Lecture 24 Outline of Last Lecture I Securities II Trading through Brokers III Investing in Stocks Outline of Current Lecture I Limited liability II Proxy III Blue Chip Stocks Current Lecture Basic Common Stock Terminology and Features o Limited liability the company goes broke you can only lose the amount you invested o Claim on income as a shareholder you have a right to any earnings of the company after all obligations are met o Claims on assets common shareholders can claim their assets only after debtors and preferred stock holders have been paid o Voting rights you have the right to vote however this right is proximally executed through a proxy o Proxy an agreement allowing a designated party to vote your shares o Stock splits the company cuts the stock price and you get more shares but retain the same total investment In a 2 1 split 100 shares selling for 100 will split into 200 shares at 50 each o Stock repurchases companies buying back their own stock o Stock spin out where a company splits off sections of itself as a separate business These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute o The common definition of spin out is when a divisions of a company or organization becomes an independent business The spin out company takes assets intellectual property technology and or existing products from the parent organization o Many times the management team of the new company are from the same parent organization Often a spin out offers the opportunity for a division to be backed by the company but not be affected by the parent company s image or history General Classifications of Common stock Blue Chip Stocks o Stock issued by large well known companies o Normally have sound financial histories o Normally have solid dividend and growth records Growth Stocks o Stocks issued by companies whose sales and earnings growth have outpaced the market o Often are newly formed smaller companies Example Microsoft Income Stocks o Stocks issued by mature firms that normally pays high dividends o Usually have low growth rates Example Utility companies Speculative Stocks o Stocks issued by higher risk companies and generally sold on the OTC market o Some are associated with astronomical gains and losses Cyclical Stocks o Stocks issued by companies whose earnings tend to follow the economy Example Ford and General Motors Defensive Stocks o Issued by companies whose earnings tend to move inversely to the broader economy and may actually increase during economic downturns Large Caps Mid Caps and Small caps o Large caps Stable mature companies billion or more in assets o Mid Cap 1 5 billion in assets o Small cap 100 million 1 billion in assets high volatility higher returns o Micro cap 100 million or less Tracking your stocks o Newspaper o On line o Trade journals Reading Stock Quotes o 52 weeks Hi Lo the range the stock has traded in over the past year o Ticker the companies ticker tape symbol o DIV the stock s annual cash dividend o Yld percentage yield or the cash dividend divided by the closing price o PE Price earnings ratio divide stock price by earnings share from last 4 quarters o Vol 100 s number of shares traded o Hi Lo Close the highest lowest and last trading price o Net Chg the net change from the previous trading day s closing value Bull Market o When stock prices are rising o People are finding jobs o GDP is growing o Everything looks rosy o Most stocks are going up o Do not last forever especially if stocks become over valued Bear Market o Falling stock prices o Recession o High unemployment o High inflation o Tough to prick profitable stocks
View Full Document
Unlocking...