1. Stock Market BasicsBasics

2. 1. Proxy Allows you to have your vote at shareholder meetings without being present. Allows you to have your vote at shareholder meetings without being present. Similar to an absentee ballot Similar to an absentee ballot Allows you to have your vote at shareholder meetings without being present. Allows you to have your vote at shareholder meetings without being present. Similar to an absentee ballot Similar to an absentee ballot

3. 2. Primary v. Secondary Markets Primary Primary IPO’s IPO’s Initial buys Initial buys New issues New issues Raise money Raise money Secondary Secondary Trading between buyers and sellers Trading between buyers and sellers Primary Primary IPO’s IPO’s Initial buys Initial buys New issues New issues Raise money Raise money Secondary Secondary Trading between buyers and sellers Trading between buyers and sellers

4. 3. Why no dividends? Companies reinvest profits instead Companies reinvest profits instead

5. 4. DRIP Dividend Reinvestment Program Dividend Reinvestment Program Use cash dividends to purchase you additional stock automatically without a broker Use cash dividends to purchase you additional stock automatically without a broker Dividend Reinvestment Program Dividend Reinvestment Program Use cash dividends to purchase you additional stock automatically without a broker Use cash dividends to purchase you additional stock automatically without a broker

6. 5. Stock Split Issuing more shares to existing stockholders Issuing more shares to existing stockholders Considered a “non-event” because market value of company stays the same. Considered a “non-event” because market value of company stays the same. Issuing more shares to existing stockholders Issuing more shares to existing stockholders Considered a “non-event” because market value of company stays the same. Considered a “non-event” because market value of company stays the same.

7. 6. Ordinary and Reverse SS Ordinary Ordinary Reverse

8. 7. Why issue splits? Ordinary Ordinary Makes price look more affordable and therefore more attractive Makes price look more affordable and therefore more attractive Reverse Reverse Makes price look higher and more attractive for penny stocks. Makes price look higher and more attractive for penny stocks. Ordinary Ordinary Makes price look more affordable and therefore more attractive Makes price look more affordable and therefore more attractive Reverse Reverse Makes price look higher and more attractive for penny stocks. Makes price look higher and more attractive for penny stocks.

9. 8. Ordinary and Reverse SS Ordinary 2:1 Ordinary 2:1 Own 100 @ $50 Own 100 @ $50 100 x 2 = 200 shares $50 / 2 = $25/share Total Value: 200 x $25 = $5,000 Ordinary 2:1 Ordinary 2:1 Own 100 @ $50 Own 100 @ $50 100 x 2 = 200 shares $50 / 2 = $25/share Total Value: 200 x $25 = $5,000 Reverse 1:4 Own 100 @ $50 100 / 4 = 25 shares $50 x 4 = $200/share Total Value: 25 x $200 = $5,000

10. 9. Common vs. Preferred Preferred stockholders have priority over dividends Preferred stockholders have priority over dividends Preferred stockholders have no voting rights. Preferred stockholders have no voting rights. Preferred stockholders have priority over dividends Preferred stockholders have priority over dividends Preferred stockholders have no voting rights. Preferred stockholders have no voting rights.

11. 10. Blue Chip Stock Most expensive stocks Most expensive stocks Steady earnings Steady earnings Good reputation Good reputation EX: AT&T, McDonalds, Alcoa EX: AT&T, McDonalds, Alcoa Most expensive stocks Most expensive stocks Steady earnings Steady earnings Good reputation Good reputation EX: AT&T, McDonalds, Alcoa EX: AT&T, McDonalds, Alcoa

12. 11. Liquidity Ability to trade large amounts of stocks without any problems Ability to trade large amounts of stocks without any problems Ease with which assets can be converted to cash. Ease with which assets can be converted to cash. Ability to trade large amounts of stocks without any problems Ability to trade large amounts of stocks without any problems Ease with which assets can be converted to cash. Ease with which assets can be converted to cash.

13. 12./13. Penny Stocks Contrast to blue chip Contrast to blue chip Newer companies Newer companies Little history Little history Usually under $5 Usually under $5 Risky and Speculative Risky and Speculative Contrast to blue chip Contrast to blue chip Newer companies Newer companies Little history Little history Usually under $5 Usually under $5 Risky and Speculative Risky and Speculative

14. 14. Cyclical Stocks Rise and fall with business cycles Rise and fall with business cycles Industries: Automobiles, Retail, Housing Industries: Automobiles, Retail, Housing Cyclical vs. Non-cyclical - tied to consumer need and demand Cyclical vs. Non-cyclical - tied to consumer need and demand Rise and fall with business cycles Rise and fall with business cycles Industries: Automobiles, Retail, Housing Industries: Automobiles, Retail, Housing Cyclical vs. Non-cyclical - tied to consumer need and demand Cyclical vs. Non-cyclical - tied to consumer need and demand

15. 15. Influences? Interest Interest Inflation Inflation Unemployment Unemployment Interest Interest Inflation Inflation Unemployment Unemployment

16. 16. Cyclical (can it be profitable?) Yes, if the investor can anticipate changes in the economy. Yes, if the investor can anticipate changes in the economy.

17. 17. Growth and Value stocks GROWTH GROWTH Expensive Expensive Buy expensive and sell at even higher prices Buy expensive and sell at even higher prices High Growth Potential High Growth Potential Grow faster than S&P 500 Grow faster than S&P 500 Ex: Apple Ex: Apple Ex: Apple Ex: Apple GROWTH GROWTH Expensive Expensive Buy expensive and sell at even higher prices Buy expensive and sell at even higher prices High Growth Potential High Growth Potential Grow faster than S&P 500 Grow faster than S&P 500 Ex: Apple Ex: Apple Ex: Apple Ex: Apple VALUE Cheap Stock will resume growth eventually Moderate growth potential Grow slower than the S&P 500 Bargain Hunters

18. 18/19/20/21 Cheap or Expensive GROWTH GROWTH Grow faster than S&P Grow faster than S&P Have a higher P/E than the S&P index Have a higher P/E than the S&P index GROWTH GROWTH Grow faster than S&P Grow faster than S&P Have a higher P/E than the S&P index Have a higher P/E than the S&P index CHEAP Grow slower than S&P Have a lower P/E than the S&P index This ratio measures the stock's value relative to its net assets. Indicates Whether or not it is overvalued.

19. 22. Income Stock Grows slower than the S&P Grows slower than the S&P Will have long-term profits Will have long-term profits Will pay dividends Will pay dividends Grows slower than the S&P Grows slower than the S&P Will have long-term profits Will have long-term profits Will pay dividends Will pay dividends

20. 23. Tech stocks Advantage Advantage High appreciation High appreciation Share price skyrockets Share price skyrockets Very profitable Very profitable Disadvantage Disadvantage Crash Crash Ex: dot com bust Ex: dot com bust Unstable companies Unstable companies Advantage Advantage High appreciation High appreciation Share price skyrockets Share price skyrockets Very profitable Very profitable Disadvantage Disadvantage Crash Crash Ex: dot com bust Ex: dot com bust Unstable companies Unstable companies

21. 24. Market Value or Cap Share price x # of shares outstanding Share price x # of shares outstanding

22. 25. Most risky market cap? Small Cap (under $500 million) Small Cap (under $500 million) Investing in small companies is risky because they are usually newer and less stable Investing in small companies is risky because they are usually newer and less stable DOES have high growth potential DOES have high growth potential Small Cap (under $500 million) Small Cap (under $500 million) Investing in small companies is risky because they are usually newer and less stable Investing in small companies is risky because they are usually newer and less stable DOES have high growth potential DOES have high growth potential

23. 26. Large-Cap Minimum Above $1 billion Above $1 billion

24. 27. High Dividend/Low Growth Income stocks Income stocks

25. 28. PEG Takes into account the GROWTH rate and not just the Price and EPS. Takes into account the GROWTH rate and not just the Price and EPS.

26. 29. PEG amount 1 Meaning stock is fully valued Meaning stock is fully valued 1