Papa Johns Pizza

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Papa Johns Pizza

• In 1984, "Papa" John Schnatter knocked out a
  broom closet located in the back of his father's
  tavern (Mick's Lounge), sold his prized 1972 Z28
  Camaro in order to purchase 1,600 worth of used
  restaurant equipment, and began selling his
  pizzas to the tavern's customers.
  

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Investment Bankers

• Long term financial planning
• Marketing of security issues
• Arrangement of private loans
• Negotiation of mergers

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Methods to sell securities

• Public cash offering
• Private placement 1 or more large investors
• Rights offering sell to existing shareholders

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Rights of Shareholders

• Receive a stock certificate
• Share in profits
• Voice in management (vote for Board Dir)
• Receive financial information
• Sell stock at anytime

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Common vs. Preferred Stock

• Preferred has preference in claims to assets and
  dividends must be paid before common.
• Preferred dividends fixed
• Common dividends fluctuate
• Preferred usually have no voting rights

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Initial Public Offerings
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Tombstone Ad
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Prospectus

• Character of the business
• Bios on the officers
• Financial Statements
• Reasons for raising funds

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SEC Securities and Exchange Commission

• Government agency charged with enforcement of the
  nations securities laws and regulations.
• Police of the
• investment community
• Monitor insider
• trading
• Prevent fraud

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Reading the Stock Table
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Stock Exchanges and Markets

• NYSE over 3,000 stocks
• AMEX 900 stocks
• NASDAQ over 5,000 stocks
• Over the Counter (OTC) over 30,000 stocks

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Specialists at the NYSE

• Specialize in trading one or more specific stocks
  at their particular post.
• Maintains an orderly market if no one will buy
  or sell, he will.
• Keeps track of limit orders.

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Specialist on the NYSE
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Busy Specialist on NYSE
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Commodities Trader
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Placing a trade on the NYSE

• NYSE order process

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Types of orders

• Market order buy or sell ASAP at the going or
  market price.
• Limit order buy or sell at a specific price and
  time limit.
• Good till canceled
• Good for the day

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Stop-Loss Orders

• Sell Stop becomes a market order to sell when
  the stock is at or below the stop price.
• Buy Stop becomes a market order to buy when the
  stock is at or above the stop price

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Selling Short

• When an investor sells borrowed stock in hopes of
  buying it back at a lower price

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NASDAQ Market

• National Association of Securities Dealers
  Automated Quotation System.
• National negotiated market, without a central
  marketplace, composed of a network of thousands
  of brokers and dealers.

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NASDAQ in New York City
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Market Makers

• Similar to specialists
• Act as dealers by creating and maintaining
  markets in selected securities.
• They buy and sell for their own account.
• Can be many market makers for the same stock.
• They buy at the bid and sell at the ask.

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Market Maker on the NASDAQ
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Dow Jones Industrial Average

• Developed by Charles Dow in late 1800s
• 30 stocks
• No longer a pure average due mainly to stock
  splits

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Stock Split Example
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Dow Jones Industrial Stocks

• American Express
• AT T
• Boeing
• Caterpillar
• Coca Cola
• Dupont
• Exxon
• GE
• GM
• Home Depot

• IBM
• Intel
• Johnson Johnson
• McDonalds
• Merck
• Microsoft
• Phillip Morris
• Proctor and Gamble
• Wal-Mart
• Walt Disney

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Dow Jones since 1928
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Bond Basics

• A bond is simply a negotiable IOU, or a loan.
• Investors who buy bonds are lending a specific
  sum of money to a corporation, government, or
  some other borrowing institution.
• Bonds are often referred to as fixed-income
  investments.

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Bond Specifics

• Debt instrument issued by a corp. or government
• Usually has a specific maturity date
• Coupon rate the interest rate paid to investors
  during the life of the bond and is set when the
  issuer first sells the securities into the
  market.
• Par Value face value or principal value of the
  bond assume 1,000

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How to read the Bond quotes
Maturity Year
Coupon Rate
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Types of Bonds

• Mortgage secured with specific assets
• Debenture unsecured
• Zero Coupon pay no explicit interest but
  instead, sell at a deep discount

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Bond Rating Companies

• Moodys
• Standard and Poors

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Bond Rating Categories
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Bond Price Changes

• Risk
• Interest rates

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Value of a Bond

• How much is an investor willing to pay for a 10
  yr., 8 coupon bond if he wants a 12 return?

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What is a Mutual Fund?

• A collection of stocks, bonds, and other
  securities.
• Owned by a group of investors.
• Managed by a professional investment company.

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Reasons to invest in a Mutual Fund

• Broad diversification
• Professional management
• Investment objective
• Affordability
• Ease

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Mutual Fund Performance

• From 1985 2000, 85 of U.S. actively managed
  mutual funds underperformed the SP 500 index.

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Types of Mutual Funds

• Growth
• Income
• Money Market
• Index
• Specialized

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Exchange Traded (Index) FundsETFs

• Diamonds DIA Dow Jones Ind. Average
• Spiders SPY Std. Poors 500 Index
• Cubes QQQ NASDAQ 100 Index

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Ways to value stocks

• Fundamental Analysis looks at financials,
  product, mgt., history, etc.
• Technical Analysis uses charts to predict
  future prices
• PE ratio Price/E.P.S.

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Stock Valuation Models

• Constant Growth Dividend
• No-Growth Dividend
• P/E

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Roth IRA Individual Ret. Acct.

• 3,000/yr contributions
• Contributions not tax deductible
• Distributions are not taxable
• Contributions can be made as long as you live

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Average Annual Returns
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Market Indexes

• Dow Jones Industrial Average 30 stocks
• NASDAQ 100 stocks
• SP 500 500 stocks

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SP, NASDAQ, DJIA 5 years
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Bull vs. Bear Market