The Stock Market
                                       Finance 301: Winter 2004

Instructor: Alan Krause               ...
receive the same grade for the project. Peer grades will be awarded on an individual basis. Projects will
be graded on bot...
Stock Analysis Weekly Assignment Grade
Each week, one or more of the above sections of the Stock Analysis Group Project is...
FIN 301-001/002
                                                                         Fall 2003
Date   “Class   Learning objective                                                               Reading (Fontanills & Gen...
Date   “Class   Learning objective                                                                Reading (Fontanills & Ge...
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  1. 1. The Stock Market Finance 301: Winter 2004 Instructor: Alan Krause Office Phone: 503-725-8159 (no messages) Office: SBA 691 Home Phone: 503-239-0426 (9AM – 5PM) Office Hours: M/W 2:00 – 2:45; W 4:30 – 5:20 Email: Home Page: Course Learning Objectives Understand stock market operations, investment analysis, and portfolio diversification through study of the following: • The history, characteristics, rules and regulations of U.S. stock markets • How to research a company and its environment and perform basic stock analysis before investing • Investment risk and investment return and the relationship between the two • How to create a diversified investment portfolio Required Text and Course Packet Fontanills & Gentile: The Stock Market Course, Wiley, 2001 At Clean Copy, you will find: a packet containing lecture materials to be used in this course Grading Procedures Class Participation 5 points Stock Analysis Group Project 25 points Weekly Project Worksheets 10 points Peer Grade (group project) 5 points Mid-Term Exam 25 points Final Exam 30 points Total 100 points • Academic honesty is required to pass. Cheating will result in automatic failure. • Attendance at lectures is instrumental to performing well in the course. • You are responsible for announcements made in class. Class Participation The class participation grade evaluates a student’s contribution to the classroom. Participation grades are not determined solely by the quantity of a student’s comments, but also by the quality of those comments. Participation grades are determined largely by student’s contributions to discussion of current events at the beginning of each class. Each team (see Stock Analysis Group Project below for description of student teams) will lead discussion one week. Discussion of current events covers events from the prior week in the stock market, interest rates, business and consumer activity, and general economic issues. Discussion should last approximately 15 minutes. Each group will complete the Current Events discussion worksheet and provide one copy of the articles referenced. Stock Analysis Group Project (2 students per group) Using the skills you learn in the course, analyze a stock of your choosing and make a buy/sell recommendation. Be sure to pick a stock for which there is ample information. Each group member will Finance 301 Page 1 Winter 2004
  2. 2. receive the same grade for the project. Peer grades will be awarded on an individual basis. Projects will be graded on both content and form. Late projects will loose one-third of a grade for each late day (i.e. A becomes A-; A- becomes B+; B+ becomes B). Your analysis must be typewritten, no longer than 10 pages (not including attachments/appendixes, tables, references, endnotes, etc.), with all names on each page of the paper and the appendices. The paper will analyze your selected company, project its future earnings, and evaluate its stock as an investment. Future earnings depend on corporate performance, the general economic/political environment, the general stock market performance, and the performance of the stock’s sector within the market. As such, your paper must contain the following: 1. Executive Summary: a summary of your analysis (summary of purpose, key points of analysis, and recommendation, ½ page); 2. Review of the Company and its Business: analysis of the company and its business. Key product line, strengths, Strategic Competitive Advantage; 3. Economic Forecast : a forecast of the economic environment over the next 2 years; 4. Market Forecast: a forecast for the general stock market over the next two years; 5. Sector & Industry Forecast: (of the sector your company is in) a forecast for the company’s economic sector and where the sector is headed in the next two years; 6. Ratio Analysis: calculate key solvency and profitability ratios to identify strengths and weaknesses; 7. Company Forecast: how will the company evolve? Project five year sales growth. 8. Financial Forecast : translate the company forecast into financial pro- formas; 9. Valuation: use the five year financial forecast to calculate stock value in five years; 10. Recommendation : of whether or not to buy the stock and why; 11. Appendixes and References : Supporting documents such as ratio calculations, financial statements, and references for all the data you uncover and report. Each section should be approximately one-page in length (approximately 500 words per page, this is average for most single spaced, 12 point fonts, with standard margins). If one section is more/less than one page, compensate with other sections of the project so that the final project totals ten pages (with the exception of section #11, Appendixes and References). You are free to determine the length of section #11 Appendixes and References; it will not be counted in the 10-page limit. Weekly Project Worksheets You will prepare worksheets for one or more of these sections each week. Worksheets are available at the class website and must be competed on the computer (not handwritten). Each worksheet is brief, but requires research and insight into the topic at hand. The worksheet must be turned in at the beginning of class and will be returned to you the following class. You will be able to do most of your writing directly from the worksheet. Be sure to include the factual information pertaining to the topic, an analysis of that information, and a statement of how it will impact your recommendation. WARNING!!!! Plagiarism is a serious offense. If you use copyrighted/published sources (the Internet, newspapers, TV, magazines, etc.) to obtain information used either directly or indirectly in your paper, you must cite and/or quote them. Failure to do so will result in a score of ZERO on the project. This includes both direct citations, e.g. stock quotes, financial data and indirect thoughts picked up from watching the news, surfing the net, etc. Finance 301 Page 2 Winter 2004
  3. 3. Stock Analysis Weekly Assignment Grade Each week, one or more of the above sections of the Stock Analysis Group Project is due (see Class Calendar for specific due dates for each portion). To receive full credit, the assignment must be completed in whole and turned in at the beginning of class. Due to the pace of the class, late assignments receive only half credit. You may change these sections as you integrate them into your final Stock Analysis Project. In the final stock analysis, each section must integrate with the others to create a complete and consistent picture. Peer Grade Each team member will grade the other members based on participation and effort in the completion of the group project. Divide 100 total points between you and your partner according to your relative contribution to the project: if you contributed equally to the project, assign 50 points to both members. If one of you completed 60% of the project and the other 40%, assign the points accordingly. Points must total to 100. The score you your partner will be anonymous. Be honest, fair and accurate. Peer grades should be submitted by email immediately after completing the project. Exams This class has a mid-term exam (the first half of class during week six) and a final exam (the 11th week of class). Exams are not cumulative. Exams are closed book. You will be allowed to bring one page of notes, 8 ½” by 11”, written on both sides. It is essential to take exams on the scheduled date. Absences that are not cleared with me one week in advance will not be recognized and will not be allowed make- ups. If you know you will miss an exam, see/contact me immediately. Other • An incomplete will only be given for documented extenuating circumstances. • No withdrawals will be granted past the standard date without documented extenuating circumstances. • Earning a poor grade in the course in itself does not constitute an extenuating circumstance. • Academic honesty is required to pass the course. Finance 301 Page 3 Winter 2004
  4. 4. FIN 301-001/002 Fall 2003 SCHEDULE Other than the Mid-Term and Final-Exam dates, this schedule is approximate. Assignments are due on the dates indicated. The reading is to be completed, before the class in which it is first discussed. Date “Class Learning objective Reading (Fontanills & Gentile) Project and Exams ” 1/13 1 Introduction to the course Inverted course overview Discuss use of numbers in the course Stock Basics Define a stock Discuss the different classes of stocks Discuss the major types of stocks Discuss company size classifications Discuss Concepts for Business Overview: • Value Chain • Key Success Factors • Strategic Competitive Advantage 1/20 2 Economic Theory Chapters 1 & 6 Company Business Understand basic Economic Theory – key elements and their interrelations Overview • GNP/GDP and Demand • Inflation and money supply • Interest rates and borrowing • (Un)Employment Understand the four phases of the business cycle 1/27 3 Market Facts and History Chapters 1 & 3 Economic Forecast Learn stock market history and how stocks are traded Learn about stock exchanges Learn about types of stock orders Learn some stock investment methods/vehicles Learn about stock market indexes Learn how to read a stock table Discuss why one might invest in stocks Calculate stock returns Learn about historical returns Finance 301 Page 4 Winter 2004
  5. 5. Date “Class Learning objective Reading (Fontanills & Gentile) Project and Exams ” 2/3 4 General Stock Market Research Chapters 4, 9, 10 Market Forecast Be able to do General Stock Market Research Understand General Stock Market Indexes Understand the concept of and importance of Volume Understand the concepts of and importance of New Highs and Lows Understand the concepts of and importance of Bull and Bear Markets Understand the definition of Technical Analysis 2/10 5 Midterm Mid-Term Exam Industry Analysis Be able to do basic Economic Sector Research Be able to research and understand Sectoral Reports Be able to research and understand Sectoral Market Indexes 2/17 6 Ratio Analysis and Company Analyisis Chapters 7 & 8 Sector Forecast Understand basic financial statements • Income Statement • Balance Sheet • Cash Flow Statements Understand and perform calculations for the following ratios: • Liquidity • Profitability • Du Pont Formula • Stock Valuation Research and understand the company’s business Performa a SWOTanalysis Understand and perform Standardized Financial Statement calculations • Calculation of operating cash flow • Calculation of cash flow from assets Understand the goals of, the tools of, and the concept of Fundamental Analysis Finance 301 Page 5 Winter 2004
  6. 6. Date “Class Learning objective Reading (Fontanills & Gentile) Project and Exams ” 2/24 7 Valuation Company Forecast & Time Value of Money Ratio Analysis Understand the difference between simple and compound interest Calculate future value and present value of lump sums Formulate correct solutions to time value of money problems Risk and Return Time Value of Money Price Multiple Valuation: • Price to earnings • Price to Sales • Price to Assets • Price to Cash Flow from Assets Discuss Discounted Cash Flow Valuation 3/2 8 Portfolio Strategy Financial Forecast & Revisit the concept of Return Company Valuation Understand and be able to quantify (calculate) Risk Understand the relationship between Risk and Reward Understand the basics of Efficient Market Theory Understand the concept of and the purpose of diversification Understand the concept of a portfolio Understand the guidelines for creating an Investment Portfolio Discuss sample portfolios 3/9 9 Options and Mutual Funds Chapter 5 Stock Analysis Understand options, how they are traded, and how they are exercised. Project Due Understand how to calculate return on an option investment. Understand Mutual Funds Discuss the types of Mutual Funds Discuss/understand the different Mutual Fund categories Be able to read a Fund table Understand the factors that should be considered when investing in Mutual Funds 3/16 10 Final Exam (one 5 1/2 x 8 1/2” page of notes Final Exam allowed - both sides) Finance 301 Page 6 Winter 2004