Stocks!Unit 4

Homework: Due Wed, 4/17/13

Choose 10 corporations that you think will increase in value over the next 5 weeks. Type a paragraph for each.

In each paragraph, discuss

1) What good or service this corporation sells,

2) Why you think it’ll gain in value

3) What the stock ticker symbol is (finance.yahoo.com)

4) What market is it traded on (NYSE, NASDAQ or AMEX)?

Forming a corporation

To become a corporation, a business needs to incorporate

Why Incorporate??

Expand the business

Gain capital

Initial Public Offering (IPO):

AKA: Stock Market Launch

First sale of a stock from a private company to the public

how to incorporate:

initial public offering

how to incorporate:

initial public offering

Example: Small airline wants to incorporate

Hires Goldman Sachs as an investment bank

Files the necessary papers to the Security Exchange Commission (SEC)

Has an Initial Public Offering

10 Million shares are sold to the public at $50 each

Goldman Sachs takes $5 Million for fees

The airline raised $495 million for resources

What is a stock?

Certificate of ownership in a corporation

Represents partial ownership of a corporation

Share of a stock

Share of a Stock: piece of ownership in a corporation

The value of the share changes when the value of the corporation changes

Ticker Symbol

The abbreviation used to represent a stock

Ex) Apple = AAPL

Ex) Google = GOOG

Is it a game of luck?

A stock could either increase or decrease in value

Because of this, many choose to have a diverse portfolio

Portfolio diversification

Portfolio diversification means having different types of stocks.

Why?: To offset any declining stocks

Determining the value of a stock

Potential for growth

Reputation (past history)

Internal and external events

How to Purchase a stock

Hire a stockbroker to buy or sell stocks

Go through a discount brokerage firm online (i.e. E-Trade)

Organized Stock Trades

Organized securities exchange: places where buyers and sellers meet to trade stocks

New York Stock Exchange (NYSE)

American Stock Exchange (AMEX)

New York stock Exchange (NYSE)

Oldest, largest, most prestigious stock exchange in the U.S.

Lists stocks from 2,800 companies

American stock exchange (AMEX)

Also prestigious

Companies on AMEX are smaller than on NYSE

Has about 750 listed stocks

Over-the-counter markets

OTC Markets: Electronic marketplace for stocks not exchanged in organized stock exchanges

NASDAQ

NASDAQ

National Association of Securities Dealers Automated Quotation

Largest electronic stock market

Has mostly technology-related companies

Measurements of stock performance

Dow-Jones Industrial Average

Standard & Poor’s 500

Bull vs. Bear Markets

Dow-Jones Industrial Average

Most publicized and popular measure of stock market performance on the NYSE

Looks at the stocks of 30 top corporations

Standard & Poor’s 500 (S&P 500)

Looks at the prices of 500 different stocks

Includes stocks from NYSE, AMEX, and NASDAQ

Bull vs. bear markets

Bull Market: “Strong” market that is moving up

Bear Market: “Mean” market with falling prices