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IDENTIFYING SYMBOLS AND INTERPRETING STOCK QUOTES
DIVIDEND P/E RATIO SHARE • Part of a company’s profits (earnings) paid periodically to stockholders • Stands for price-to-earnings ratio. The P/E is the relationship between a company’s earnings and its share price. It is calculated by dividing the current price per share by the earnings per share. • A share is a unit of ownership in a corporation or mutual fund
STOCK VOLUME • A type of security that signifies ownership in a corporation and represents a claim to a part of the company’s profits or losses. Companies usually issue stock to raise money for a variety of reasons, including expanding or modernizing their operations. • The number of shares traded in a company’s stock. Unusual market activity, either higher or lower than average, is typically the result of some external event.
Would you buy stock in the companies that make these products? Why not?
TICKER SYMBOLS • • General Electric General Motors Dell General Mills GE GM DELL ? ? ?
CAN YOU IDENTIFY THE TICKER SYMBOL FOR THE COCA COLA COMPANY? • • • CCLAY CCLAF KO KOF CCH CCHBF COKE CCE GO TO HTTP: //FINANCE. YAHOO. COM TO PERFORM A SYMBOL SEARCH FOR COCA COLA
PARENT COMPANIES VS. SUBSIDIARIES
YUM! BRANDS, INC. • Google Yum! Brands, Inc. • Do you recognize some of its subsidiaries?
ACTIVITY SHEET 1: READING A STOCK QUOTE
WHAT IS STOCK?
• What is the best sneaker on the market? Why? • How do you know it is the best? • If it is the best, would you want to own all or part of that company?
Why did the founders of companies like Nike, Apple and Sony give up a portion of their ownership to sell shares to the public?
ACTIVITY SHEET 1: WHAT IS A STOCK?
YOU HAVE 1 TOOL NEEDED WHEN PURCHASING STOCK: KNOWLEDGE OF PRODUCTS PEOPLE LIKE • Select 5 products in which you are familiar • Which companies make the products? • Which are publicly traded or privately held? • What other products do the companies make?
ACTIVITY SHEET 2: STOCK MARKET CALCULATIONS
WHAT IS A COMPANY?
COMPANY • A business or association usually formed to manufacture or supply products or services for profit – Can be a partnership, LLP, corporation or a proprietorship – All companies are setup in accordance with government regulations
PUBLIC CORPORATION • A company with publicly traded shares that anyone can buy in a stock market – Legally separated from the stockholders who own it and the managers who run it
PRIVATE CORPORATION • A corporation that doesn’t sell shares to the public. You cannot buy shares of a private company in the stock market
WHAT DO THESE PEOPLE HAVE IN COMMON?
THEY ALL STARTED THEIR OWN FAMOUS COMPANIES! • Each is a company that makes products or provides services to customers. • The Trump organization is owned by one person but Microsoft and Martha Stewart Living Omni Media were founded by one person but became public corporations.
• Why would a company change its ownership? • Why would a private company want to become a public corporation?
ACTIVITY SHEET 1: P&G – PRODUCTION & GROWTH
WHAT IS DIVERSIFICATION?
DIVERSIFICATION • It’s hard to predict how a company will perform over time. • Diversification is a way to protect your money. • It’s a successful way to reduce risk.
HOW IS YOUR LIFE DIVERSIFIED? • The clothes your wear? • The classes you take? • The food you eat? • What are the pros and cons of being diversified in these areas?
HOW DIVERSIFIED ARE THESE PORTFOLIOS?
How many different industries are represented in each portfolio? What do you notice about the portfolios? Are any “heavy” with one particular industry?
Portfolio A=very diversified, contains stocks from a variety of industries Portfolio B=not as diversified, several technology related companies Portfolio C=not as diversified, several companies that sell or create personal luxury items
INDUSTRY/SECTOR RESEARCH http: //www. nasdaq. com/markets/barchart-sectors. aspx
RULES FOR THE GAME • Select investments from at least 3 different industries • Diversify holdings evenly within an industry (for example: invest in the stock of high cap company such as Disney vs. start-up, low cap, animation company that appears to have potential for growth)
WHAT CAUSES STOCK PRICES TO CHANGE?
Stock price = what investors believe a company is worth Supply < Demand $$$$ Supply > Demand $
GOOD OR BAD • Internal corporate activity • Industry trends • National/international events (political, social, and scientific news)
Go to an online news website, read through Economy/Business headlines and answer the following questions: 1. Do any of the headlines affect the portfolio your team is managing in The Stock Market Game? 2. Does any of this news make you want to investigate industries or companies you hadn’t considered investing in before?
DATA • P/E ratios • Quarterly earnings results • Earnings projections
How do you think this situation impacted both companies and prices of the shares of stock in their companies?
INFLUENCES ON THE MARKET
A. cut into earning, legal fees to cover the investigation and a lawyer in court TOYS FOR EVERYONE B. could make parents buy from other companies with a good reputation C. as sales decrease the price of stock will go down D. bad headlines=falling stock price E. could take awhile to bounce back and rebuild reputation F. it will drop but not as much until found guilty G. guilty or innocent? ? ?
A. Earnings will go down to pay for further tests and because they can’t sell it for 10 years THE GOOD HEALTH PHARMACEUTICALS COMPANY B. Hurt the company short term but if approved help in the long term C. Price will drop and stay low until approved to sell D. Price will stay low until they can get another drug approved E. It will increase as long as it is popular and doesn’t have bad side effects F. I would not due to high risk and long time for approval
a. Price will go up because materials costs will go up, huge demand same supply of materials THE GOOD HOUSE BUILDERS COMPANY b. Put pressure on the company to work quickly, they will need to increase productivity c. Huge demand for new homes, they will have to hire more workers and buy more equipment d. They will make a lot more money but also have greater expenses for supplies e. They will become bigger and more profitable f. Price of stock will go up as investors see potential g. It would have gone up but not as fast h. Yes, they will be making a lot of money
A. High interest rates will make cars more expensive to finance, so demand for Ford cars will decrease B. As sales decrease, so will earnings for the company FORD MOTOR COMPANY C. The company will have to come up with a way to make it cheaper to buy a car, may have to sell more cars overseas where costs are lower D. People will sell their shares if sales decrease, so stock prices will go down E. Hurt sales and make it more expensive for the company to borrow money to finance the development of new cars or open new showrooms F. Yes, they need to find a way to decrease expenses G. Stop production on least profitable models, close some plants, or provide lower interest loans to customers
IN YOUR SMG TEAMS… • Stocks are easily influenced by world events. Select a stock in your portfolio that is most likely to be influenced by the news. Explain how current events may increase or decrease the value of the stock.
STOCK PRESENTATIO N