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  • Security- definition: An investment instrument, other than an insurance policy or fixed annuity, issued by a corporation, government, or other organization which offers evidence of debt or equity.
  • STOCKS- most widely held type of securities are called COMMON STOCKS There is also PREFERRED STOCK - get paid pre-established dividends before common stockholders Stocks are sold on stock markets - this is the medium through which existing stock is traded from one owner to another. - composed of major exchanges (NYSE, AMer SE) and market dealers such at OTC and NASDAQ (national assoc of stock dealers + Automated Quotations) -----Consists of Brokerage firms buying seats on the exchange so they can deal -----Companies buy their listing on the Exchange. NYSE (trace its beginnings to 1790’s) - ---The combined domestic and non-U.S. new listings in 2001 resulted in a total of 2,798 NYSE-listed companies with approximately 341.5 billion shares available for trading AMEX merged with NASDAQ in 1998 and will probably dissolve soon. 800 co’s -- began ticker system NASDAQ – over 5,000 Other stock exchanges – chicago, Philedelphia, boston, Foreign
  • Buyer is essentially loaning indirectly the company/agency money. Termi nology of interest: Yield - For bonds and notes, it is the coupon rate divided by the market price Maturity - The date on which a debt becomes due for payment. also called maturity date. True rate of return for anyone can only be calculated based on the purchase price, time it was held ( 10 yr) and the selling price. Many types of bonds besides corporate bonds: US govern issues Treasury Bonds ( negotiable , coupon-bearing debt obligation issued by the U.S. government having a maturity of more than 7 years NOTE issued by the U.S. government having a maturity of between 1 and 7 years. Treasury Bills (short-term debt). issued by the U.S. government having a maturity of one year or less. also called Bill or T-Bill or U.S. Treasury Bill. Municipal Bonds – bonds issued by state and local governments. Also State created agencies –Urban Development Corp— *** Similar to stocks: both are traded in the market, can be sold anytime, can get dividends and can earn capital gain when sold .
  • Portfolio can include stocks, bonds, municipal bonds, money market , metals. Mutual funds ususally have investment goals – high dividends, appreciation in long term, high risk, high tech, foreign investments Important terms include: load/no-load – whether there is a charge by owners for purchasing shares. ALSO: closed end –sold on stock market as if they were stocks and must be acquired from an existing shareholder Unit-investment trust – issues shares with a fixed life and a portfolio that doesn’t change over the life ( usually tax exempt securities – municipal bonds) -------Few places to get unit investment trust information : Mergent
  • T-Bills – are used by gov to finance about ¼ of national debt. Most actively traded security - so they are sometimes considered closest equivalent to currency. - so many contracts, interests rates are tied to t-bills – such as credit card rates.
  • Market Averages S&P, Dow Jones, NASDAQ
  • WSJ – most frequently consulted financial resource in US. It does do more than stock quotes: [have class discuss from assignment] Stocks, bonds, futures, regional exchanges, treasury securities – bonds, bills, notes, foreign stocks, exchange rates, Mondays – municipal bonds End of year paper has 52 week averages, EOY numbers – KEEPER! Barron s – weekly financial paper,packed with financial tables, started in 1921 first written exclusively for investors. Similar to WSJ but has 5 day high/low/close for WEEK. DSPR – LOOK at HANDOUT
  • Summary Data - Investors often need more than just a quote for one day for one company Many journals and www sites give a set of stocks and assorted variables- stocks with largest market capitalization SEE WSRN.com S&P Security Owners Stock Guide – HANDOUT detailed, important data done in summary format. -single line but two pages across -a lot of information crammed in so there is a detailed guide in front of each -can get ticker, exchange, dividends, S&P ratings for stocks stock splits ALSO charts for name changes, new stocks Often keep year end- January S+P Bond Guide – corporate bonds only on NYSE and AMEX Moody’s Bond Record – easier to use than S&P with more comprehensive financials Wiesenberger Mutual Funds Update - A monthly performance summary and analysis Databases: Principia Pro – Morningstar, FISOnline S&P Net Advantage, Worldscope
  • Mergent/Moody’s since 1909 MANUALS set of books grouped together by type of company: industrial, bank, transportation… -We have looked at Mergent before as a source for company information and financials. - Four different levels of coverage from less than a page to 12 pages, depending upon if you want to pay for more. - Not alphabetical , but arranged by level-------- - “Special Features”include: green pages geographic SIC indexes, statistical data on industries alpha list of companies to find your company. ONLINE now – many of the components are incorporated into database S&P – corporation records news and corporate descriptions ONLINE at S&P Net Advantage
  • Large stockbrokers maintain extensive research departments they traditionally have securities analysts who specialize in particular industries and follow performance in that industry. They write reports/analyses. TALK ABOUT BIAS problems of TODAY Researchers of investments should include these brokerage reports when reading about their companies and industries, but not only source Brokerage reports can be obtained from : financial columnists at WSJ, BARRONS, etc. WSTranscript - secondary source -it reproduces WSJ, Broker reports, paid news releases from companies reprints of speeches of CEO’s… interviews some advice columns from small staff Investext – Investext Plus contains full-text analyst reports from 700 of the world's top investment banks, brokerage firms, and trade associations. It contains over 700,000 reports, with 5,000 new reports added each week. Historical reports are available back to 1996. Updates vary, but reports can appear in Investext Plus 1-2 weeks after the date of initial publication
  • Value Line – HANDOUT if you have only one investment service – Value Line is most popular and best first published in 1930 with its current format beginning in the 60’s Two sets of stocks – 1700 large companies 1800 “expanded edition” small and mid-cap Grouped into 100 industries 3 parts: Summary and Index cumulative index to the entire set, give page and summary of key data for all stocks Best performers Selection and Opinions weekly newsletter – economic outlook, state of market, trends, recommendations ,tables with ratings and changes Ratings and Reports 4 times a year Outlook - weekly – articles and recommendations. Very popular since 1930’s. specific stock recommendations and stock portfolios offerings.
  • Understanding developments and economic changes are important to making good sound investment decisions. It is important to know key players in industry, forecasts, structure of industry. You are buying stocks or bonds, but are investing in an industry as well.

Transcript

  • 1. Investments INLS 227 Fall 2002
  • 2. Types of Securities
    • Stocks
    • Bonds
    • Investment Companies
        • (mutual funds)
    • Money Market
  • 3. Stocks
    • An instrument that signifies an ownership position, or equity, in a corporation, and represents a claim on its proportionate share in the corporation's assets and profits; also called equities.
  • 4. Bonds
    • A debt instrument issued for a period of more than one year with the purpose of raising capital by borrowing. The Federal government, states, cities, corporations, and many other types of institutions sell bonds.
    • A bond is generally a promise
    • to repay the principal along
    • with interest on a specified
    • date (maturity).
  • 5. Investment Companies
    • Medium for small investors to pool resources/funds so they can participate and be represented like large investors.
      • Most common investment type is the MUTUAL FUND company.
  • 6. Money Market
    • Securities having less than one year maturity
      • Treasury Bill – T-bill is a good example.
  • 7. Basic Investment Information Needs
    • Stock quotations
    • Financial information
    • Investment advice
    • Current news and industry outlook
    • Market Averages
  • 8. Types of Investment Sources
    • Quotations
    • Financial Manuals
    • Investment Advisory Services
    • News Sources
    • Market Averages
  • 9. Stock Quotations
    • Wall Street Journal - weekdays
    • Yahoo!Finance
      • http://finance.yahoo.com
    • Barron’s - weekly quotations
    • Daily Stock Price Record – accumulation of daily figures/yearly publication, print only
    • Wall Street Research Net
      • http://www.wsrn.com
  • 10. Quotations
    • Summary data
          • S&P Stock Guide
          • S&P Bond Guide
          • Moody’s Bond Record
          • Wiesenberger
          • Mutual Funds Update
          • Investment Companies Yearbook
          • FIS Online
          • Morningstar Principia Pro-10 yr summaries
  • 11. Basic Investment Sources Financial Information
    • Annual Reports
        • Income statements, balance sheets, ratios, profits
    • Graphs
        • Charting patterns
    • Stock change
        • Change patterns
  • 12. Financial Manuals
    • Mergent Investor’s Services / Manuals
    • Standard & Poor’s
    • Hoover’s Handbooks
  • 13. Investment Advisory Services
    • Offers commentary, analysis, forecasts or recommendations
  • 14. Investment Advisory Services
    • Brokerage reports
      • Investext
      • Wall Street Transcript
        • “Broker Reports”
        • “Wall Street Roundup”
        • “Corporate Reports on File”
      • WSJ
      • Zack’s Investment Research
  • 15. Investment Advisory Services
    • Commercial Advisory Sources
      • Value Line Investment Survey
        • 1,700 stocks (additional 1,800 in expanded set)
        • Summary and Index
        • Selection and Opinion
        • Ratings and Reports
        • Mutual Fund Survey
      • Standard & Poor’s “ The Outlook ” stocks
      • Morningstar Mutual Funds
      • Wiesenberger Investment Companies Service – annual with updates – mutual funds
  • 16. Investment Advisory Services
    • Investment Analysis
      • S&P Industry Surveys
      • Mergent Industry Reviews
      • S&P Monthly Investment Review
      • Morningstar
  • 17. Market Averages
    • Standard and Poor’s Statistical Service
    • WSJ
    • Stock, Bond, Bills and Inflation Yearbook
  • 18. Special Investment Situations
    • Follow Investment News
      • Quarterly reports, interim reports
        • Reports of changes in corporate control, acq. of sale of assets, bankruptcy, change of auditing, change in executives, activities, changes in fiscal year
    • New Securities Offerings -IPO’s
        • Look for registration statements in SEC – form, some type of “S” form -S-1 for brand new.
  • 19. Special Investment Situations
    • Merger-related Activities – M&A
        • LexisNexis Academic (choose Business-M&A)
        • Mergernetwork.com
        • SEC
    • Tracking Corporate Change
        • CCH Capital Changes Reports
    • Dividend Announcements
        • Moody’s Dividend Record
        • S&P Stock Guide
  • 20. “ Demystifying Investment Information” Selected Resources for Investment News and Data Preconference presented by the BRASS Education Committee, Ala Annual Conference, 1994, Miami, FL http://www.ala.org/rusa/brass/lavbib.html