CLASSES TO GO

1
CLASSES TO GO

• Capitalization

Gretchen Hurt BIVA Board Director
2
Disclaimer

• The information in this presentation is for
  educational purposes only and is not intended to
  be a recommendation to purchase or sell any of
  the stocks, mutual funds, or other securities
  that may be referenced. The securities of
  companies referenced or featured in the seminar
  materials are for illustrative purposes only and
  are not to be considered endorsed or recommended
  for purchase or sale by BetterInvesting National
  Association of Investors Corporation (BI) or
  the BetterInvesting Volunteer Advisory Board, its
  volunteer advisory board (BIVA). The views
  expressed are those of the instructors,
  commentators, guests and participants, as the
  case may be, and do not necessarily represent
  those of BetterInvesting or BIVA. Investors
  should conduct their own review and analysis of
  any company of interest before making an
  investment decision.
• Securities discussed may be held by the
  instructors in their own personal portfolios or
  in those of their clients. BI presenters and
  volunteers are held to a strict code of conduct
  that precludes benefiting financially from
  educational presentations or public activities
  via any BetterInvesting programs, events and/or
  educational sessions in which they participate.
  Any violation is strictly prohibited and should
  be reported to the President of BetterInvesting
  or the Manager of Volunteer Relations.

3
Capitalization

• Companies have three ways of obtaining money to
  grow
• Retained earnings
• Leverage
• Selling additional shares of stock
• Information about Capitalization is found on the
  front side of the Stock Selection Guide

4
Preferred Stock
Insiders
Institutional Holdings
Common Shares
debt to capitalization
Potential Dilution
Total Debt
5
Capitalization

• This section identifies the risk level
• Volatility
• Debt
• Dilution

6
(No Transcript)
7
VOLATILITY

• Too few shares sizable trades can affect price
• Too high institutional ownership price
  fluctuations or stampede on institutional selling
• Too much insider ownership

8
Common Shares

• Should be large enough to carry buy and sell
  orders
• Represents ownership in a company.
• On the bottom of the priority ladder in the
  ownership structure.

9
PREFERRED STOCK

• Convertible
• Redeemable
• Participating
• Cumulative

10
PREFERRED STOCK

• May entitle shareholders to specific dividend
  rates
• Entitle shareholders to first rights to payment
  if the company fails
• Common shares may become worthless if preferred
  shareholders are paid first.

11
Why issue preferred stock?

• To avoid dilution
• For option of suspending the dividend
• To attract a conservative investor
• To use in mergers and acquisitions as a
  guaranty to the seller
• .

12
WHAT IS INSTITUTIONAL OWNERSHIP?

• Blocks of shares held by investing groups such as
  insurance companies, mutual funds, banks, and
  pension plans

13
INSTITUTIONAL OWNERSHIP

• Can make a stock price volatile since funds have
  a short-term view
• Caution Institutional ownership may be
  misleading!

14
INSIDER OWNERSHIP

• Officers and directors within the company
• Original founders of the company

15
INSIDER OWNERSHIP

• Large companies- insiders may own as little as 1
• Small companies insiders may own as much as 30

16
DEBT

• of debt to capitalization
• Remember that interest payments must be met
  regularly

17
Dilution

• Reduces value of the shareholders portion of
  earnings
• May come from conversion of preferred stock or
  issuing of new stock

18
REVIEWCapitalization section identifies the
risk level

• Volatility
• Debt
• Dilution

19
(No Transcript)
20
Information derived from

• The Stock Selection Handbook by Bonnie Biafore
• The Motley Fool Power of Preferred Stocks by
  Todd N. Lebor April 24, 2001
• Investopedia. com

21
Make A Difference In Someones Life

• If you have benefited from
• BETTERINVESTING,
• Please pick up some
• BETTERINVESTING
• materials
• and introduce others to this opportunity.