Cocktail party vocabulary

1
Cocktail party vocabulary

• Stocks, bonds, mutual funds, life insurance as an
  investment

2
Common Stocks

• The most basic form of ownership of a
  corporation
  
• A shareholder (stockholder) has a claim on the
  assets and earnings of the firm.
  
• Think of a company like sand in a sandbox the
  sand is all of the earnings, all of the
  buildings, all of the assets.
  
• Owning stock is like owning a scoop of sand.

3
How do you make money?

• You can sell your stock for more than you paid
  for it.
  
• The company will give you dividends a share of
  profits distributed in cash.
  
• You can use your dividends to automatically
  purchase more stock (stock dividend)

4
Common Stock

• Equity

5
Preferred Stock

• No voting privileges
• Get dividends first (if there are any)
• Fixed dividends

6
What is in the newspaper?

• There are four basic columns
• Name Volume Last Change
• Albertsn 26264 30.96 -1.10

7
Blue Chip Stocks

• Dominates the industry, has a BILLION dollars or
  more of annual revenues, long history of good
  earnings.
  
• Expected to grow at a consistent but
  unspectacular rate.

8
What else could happen?

• Stock splits If Martha Stewart originally
  issues 5,000 stock shares at 10 each she may
  split them in two and now there are 10,000 stock
  shares each worth 5
• Still 5000,000 worth of stock.
• But at 5 more people will be tempted to buy it.

9
What is the other stuff?

• Dow Jones, Standard Poors 500, NASDAQ
• Composite indices (groups of what some people
  think are representative stocks)
  
• So when the news says the Dow Jones has gone up
  in general, the prices of most stocks when up (or
  visa/versa)

10
Reading Stock Quotes
11
Year to Date Percent Change

• Year to date percent change is the stock price
  percent change from January 1st of the current
  year
  
• If a stock was 43.00 on January 1st and 36.00
  on July 30th,, the percentage change would be
  -16.3
  

12
52-Week High Low
52-Week High Low shows the highest and lowest
prices the stock was sold per share during the
last 52 weeks
13
Stock Name
Stock Each companys stock is provided with an
abbreviated trading symbol name
14
Dividends per share

• Dividends per share is the total cash paid to
  common stockholders per share annually
  
• Helpful when determining the type of stock
• If a company paid 10,000 in dividends for 30,000
  shares, the dividends per share would be 0.33
  

15
Dividend Yield Percentage

• Dividend yield percentage is the dividend
  expressed as a percentage of the price of the
  share
  
• If a company paid 1.25 in dividends for a stock
  with a market price of 50.00, the dividend yield
  percentage would be 2.5 (1.25/50)
  
• Helpful to know how much income to expect. A
  company paying high dividends is not reinvesting
  money to grow.
  

16
Price/Earnings Ratio

• Price/earnings ratio is the closing price of the
  share compared to the annual earnings per share
  
• If the stocks market price is 50.00 and the
  earnings per share is 2.25, the P/E ratio is
  22.2
  
• For every dollar the company earns, the stocks
  market price is worth 22.00
  
• A high number indicates people are optimistic
  about the company and health of the market.
  

17
Volume

• Vol 100s is the number of transactions to the
  share on the reported day
  
• Represented in hundreds (take the number and add
  two zeros)
  

18
High and Low

• High and low entries represent the high and low
  selling price of one share for the previous day
  

19
Close

• Close is the price of the last share sold for the
  day
  

20
Net Change

• Net change is the difference between the closing
  price of the share from the prior day and the
  current day
  

21
How Well the Stock Market is Doing Overall
22
3 Basic Indicators

• Dow Jones Industrial Average (DOW)
• Lists the 30 leading industrial blue chip stocks
• Standard and Poors 500 Composite Index
• Covers market activity for 500 stocks
• More accurate than DOW because it evaluates a
  greater variety of stock
  
• National Association of Security Dealers
  Automated Quotations (NASDAQ)
  
• Monitors fast moving technology companies
• Speculative stocks, show dramatic ups and downs

23
Preferred Stock