STOCK - Classifications

BLUE CHIPS GROWTH STOCKS INCOME STOCKS CYCLICAL STOCKS DEFENSIVE STOCKS VALUE STOCKS PENNY STOCKS

BLUE CHIPS Stocks of the biggest companies in the country. “Blue Chip” comes from poker where the blue chip carries the highest value. Usually are large, established firms with a long record of profit, growth, dividend payout. Usually have a great reputation for QM, products, and services. Generally Blue Chip stocks are the safest stocks to invest in. Examples include: IBM, Coca-Cola, General Electric, Microsoft

GROWTH STOCKS Stocks of companies with profits that are increasing quickly. Stock price will increase based on the profit increase. Growth companies tend to spend lots of money on research and development rather than putting the profits back into the company FYI – potential to make quick money is there but the risk is high!

INCOME STOCKS Stocks of stable companies that pay higher-than-average dividends Usually large, established companies with stable earning. FYI – most large Utility company stocks would be classified as income stock.

CYCLICAL STOCKS Stocks that move up or down in sync with the business cycle. Earnings and stock prices will increase or decrease with changes in the business conditions or cycle. Examples – Automobile, Housing, Steel, and Industrial Equipment companies.

DEFENSIVE STOCKS Stocks that don’t change based on the business cycle. Tend to be generally stable and relatively safe in declining markets. Industries that produce necessity items/goods/services. Examples – Food, Drug, and some Utilities companies.

VALUE STOCKS Stocks that are currently selling at a low price but are considered to be a undervalued. Usually have good earnings and potential growth but their stock prices just do not reflect it. FYI – Investors who buy value stocks believe that these stocks are only temporarily out of favor and will soon be trading at higher price.

PENNY STOCKS Stocks that are priced very low. Tend to be very risky. Issued by companies with a short or erratic history of both revenues and earnings. Typically valued under $5.00

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