L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY R ESEARCHING C OMPANIES L ESSON 11

L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY Thinking Economically About Researching Stocks Investors face scarcity: Investors’ time is limited while the information available regarding stocks is vast. Here are some recommendations to consider: ■ Recognize that you cannot know it all. ■ Select a few companies to research. Then follow their progress closely. ■ Find a few good sources of information about stocks. Many online sources have great data and are easy and fast to use. ■ Stop looking for new information when you think the benefits received from more information are less than the costs of additional research. L ESSON 11 – R ESEARCHING C OMPANIES S LIDE 11.1

L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY Surprises Are Rare Many individuals spend a great deal of time and effort trying to find companies whose stock prices might increase faster than average for the market. Many financial institutions – brokerage companies, banks, life insurance companies – spend even more time and effort trying to identify companies whose stock prices might increase faster than average for the market. It is very difficult to earn unusual gains in the stock market because most of the information about most companies is already know. People who earn above-average returns from their stocks are usually surprised. But it is hard even for experienced investors to find surprises in the market. L ESSON 11 – R ESEARCHING C OMPANIES S LIDE 11.2

L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY Fundamental Analysis Fundamental stock analysts examine the basic performance of a company and use results to make investment decisions. They pay special attention to these factors: ■ Size of the company ■ Changes in sales ■ Changes in earnings ■ Demand for the company’s goods and services L ESSON 11 – R ESEARCHING C OMPANIES S LIDE 11.3

L EARNING, E ARNING, AND I NVESTING FOR A N EW G ENERATION © C OUNCIL FOR E CONOMIC E DUCATION, N EW Y ORK, NY Stock-Selection Data Used by Fundamental Stock Analysts L ESSON 11 – R ESEARCHING C OMPANIES Symbol Stock exchange Share price Market capitalization Price/earnings ration Annual revenue or sales Earnings per share S LIDE 11.4