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  1. 1. Trading and Information Sources Jeff Stickel Luke Whitworth Nikhil Shah Corinne Sibly Rohini Vagarali Mike Webb Finance 724 Spring 2003
  2. 2. Trading The Stock Market Class
  3. 3. The Trading Procedure <ul><li>The Analyst (student) has an idea to buy/sell </li></ul><ul><li>The Analyst convinces the Portfolio Manager (class) to take action </li></ul><ul><li>The PM tells the internal trader (GA) to buy/sell </li></ul><ul><li>The internal trader calls a broker with the order </li></ul><ul><li>The broker calls the commission broker on the exchange </li></ul><ul><li>The commission broker goes to the specialist who completes the deal </li></ul><ul><li>Confirmation of the order takes place in reverse </li></ul>
  4. 4. Behind the Scenes <ul><li>Buy/sell order from client </li></ul><ul><li>Broker executes trade </li></ul><ul><li>Broker informs Deposit Trust Corporation (DTC) about trade </li></ul><ul><li>DTC informs State Street Bank (custodian) to transfer shares/cash to the DTC </li></ul><ul><li>Shares/cash are transferred to DTC within T+3 business days </li></ul><ul><li>DTC transfers shares/cash </li></ul>
  5. 5. What Broker to Use? <ul><li>Cost </li></ul><ul><li>Quality of Service & Execution </li></ul><ul><li>Quality of Research </li></ul><ul><li>Availability of Resources </li></ul><ul><ul><li>Soft dollars </li></ul></ul><ul><li>Relationships are key </li></ul>
  6. 6. Trading Costs <ul><li>Actual Cost % Cost </li></ul><ul><li>Commission 6 cents/sh 12 bps </li></ul><ul><li>Market Impact 9 cents/sh 20 bps </li></ul><ul><li>Delay Costs 24 cents/sh 53 bps </li></ul><ul><li>Missed Trades 8 cents/sh 16 bps </li></ul><ul><li>Total 47 cents/sh 1.01% </li></ul><ul><li>* Plexus estimates of one-way trade involving a large-cap stock </li></ul>
  7. 7. Who Do We Trade Through? <ul><li>Our Broker List </li></ul><ul><ul><li>Prudential Securities (5 cents/share) </li></ul></ul><ul><ul><li>Salomon Smith Barney (6 cents/share) </li></ul></ul><ul><ul><li>A G Edwards and Associates (6 cents/share) </li></ul></ul><ul><ul><li>Voyager Institutional Sales (6 cents/share) </li></ul></ul>
  8. 8. Types of Orders <ul><li>Market </li></ul><ul><ul><li>Order is executed immediately </li></ul></ul><ul><ul><li>Execution of order is time-sensitive </li></ul></ul>
  9. 9. Types of Orders <ul><li>Limit </li></ul>Limit-buy order Stop-buy order Limit-sell order Stop-loss order Sell Buy Price below the limit Price above the limit Condition Action
  10. 10. Information Sources The Stock Market Class
  11. 11. <ul><li>Bureau of Economic Analysis </li></ul><ul><ul><li> </li></ul></ul><ul><li>Bureau of Labor Statistics </li></ul><ul><ul><li> </li></ul></ul><ul><li>Federal Reserve Board </li></ul><ul><ul><li> </li></ul></ul>Research – Economic Data
  12. 12. Research – General News <ul><li>WSJ [] </li></ul><ul><ul><ul><li>News, need online account for full access </li></ul></ul></ul><ul><li>CNN [] </li></ul><ul><ul><ul><li>News, stock data, data for many markets </li></ul></ul></ul><ul><li>Bloomberg [] </li></ul><ul><ul><ul><li>News, number of markets covered </li></ul></ul></ul><ul><li>CBS [] </li></ul><ul><ul><ul><li>News, basic data </li></ul></ul></ul><ul><li>Financial Times [] </li></ul><ul><ul><ul><li>Local and global news stories </li></ul></ul></ul>
  13. 13. Research – Company Data <ul><li>Yahoo [] </li></ul><ul><ul><ul><li>Historical quotes, basic stock data, news, charts </li></ul></ul></ul><ul><li>Hoovers [] </li></ul><ul><ul><ul><li>Company capsule, competitors, news, executives </li></ul></ul></ul><ul><li>MSN [] </li></ul><ul><ul><ul><li>Real-time quotes, news, up/down-grades </li></ul></ul></ul><ul><li>BigCharts [] </li></ul><ul><ul><ul><li>Pretty Charts </li></ul></ul></ul><ul><li>Quicken [] </li></ul><ul><ul><ul><li>Competitor Comparisons, Portfolio Tracking/Analysis </li></ul></ul></ul>
  14. 14. Research – Annual Reports <ul><li>Company Websites </li></ul><ul><ul><li>For pretty annual reports available to investors </li></ul></ul><ul><li>Edgar Online [] </li></ul><ul><ul><li>Go to [] for free registration (10 docs/month) </li></ul></ul><ul><ul><li>Access to 10Ks and other company filings </li></ul></ul><ul><ul><li>[] </li></ul></ul><ul><ul><ul><li>Improved site w/ excel-download capability </li></ul></ul></ul><ul><li>Report Gallery [] </li></ul><ul><ul><li>Includes domestic and international reports </li></ul></ul>
  15. 15. Recommended Research Sites… <ul><li>For industry information </li></ul><ul><ul><li>Check out S&P Industry Guide on closed reserve in Bus. Library </li></ul></ul><ul><ul><li>Lexis-Nexis </li></ul></ul><ul><li>For company information & research </li></ul><ul><ul><li>Visit the company website </li></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><ul><li>K’s,Q’s, benchmarking assistant, and more </li></ul></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><ul><li>Must be in, or access through the library </li></ul></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><ul><li>LoginID: 724class </li></ul></ul></ul><ul><ul><ul><li>Password: royce </li></ul></ul></ul><ul><ul><li> </li></ul></ul><ul><ul><li> </li></ul></ul><ul><li>For one-pager </li></ul><ul><ul><li> </li></ul></ul><ul><ul><ul><li>Login ID: 724class </li></ul></ul></ul><ul><ul><ul><li>Password: royce </li></ul></ul></ul><ul><ul><li>StockVal </li></ul></ul>
  16. 16. Sell-Side Research Sites <ul><li>AG Edwards </li></ul><ul><ul><li> </li></ul></ul><ul><ul><ul><li>LoginID: sim </li></ul></ul></ul><ul><ul><ul><li>Pass: simport </li></ul></ul></ul><ul><li>Bear Stearns </li></ul><ul><ul><li> </li></ul></ul><ul><ul><ul><li>LoginID: Spellman </li></ul></ul></ul><ul><ul><ul><li>Pass: simport1 </li></ul></ul></ul><ul><li>Merrill Lynch </li></ul><ul><ul><li> </li></ul></ul><ul><ul><ul><li>LoginID: kspellman </li></ul></ul></ul><ul><ul><ul><li>Pass: SIMP1X </li></ul></ul></ul><ul><li>Prudential </li></ul><ul><ul><li> </li></ul></ul><ul><ul><ul><li>LoginID: SIM </li></ul></ul></ul><ul><ul><ul><li>Pass: SIM </li></ul></ul></ul><ul><li>Salomon Smith Barney </li></ul><ul><ul><li> </li></ul></ul><ul><ul><ul><li>LoginID: SIMOSU </li></ul></ul></ul><ul><ul><ul><li>Pass: SIMOSU </li></ul></ul></ul><ul><li>UBS Warburg </li></ul><ul><ul><li> </li></ul></ul><ul><ul><ul><li>LoginID: simp </li></ul></ul></ul><ul><ul><ul><li>Pass: simpxxxx </li></ul></ul></ul>
  17. 17. Other Useful Investment Sites <ul><li>Standard and Poors [] </li></ul><ul><ul><li>Benchmark information </li></ul></ul><ul><li>CFA exam stuff [] </li></ul><ul><li>Morningstar [] </li></ul><ul><ul><li>Lots of mutual fund & stock analysis </li></ul></ul><ul><li>Fisher library access to Investext Plus [] </li></ul><ul><ul><li>Access to sell-side research reports </li></ul></ul><ul><li>The Street [] </li></ul><ul><ul><li>Lots of commentary, analyst info </li></ul></ul><ul><li>Stock Tips [] </li></ul>
  18. 18. One Pager <ul><li>1 st go to </li></ul><ul><ul><li> </li></ul></ul><ul><li>2 nd </li></ul><ul><ul><li>Click “tools” & right-click on “One Pager” </li></ul></ul><ul><ul><ul><li>Choose “Save Target As” and save it to your disk </li></ul></ul></ul><ul><li>3 rd </li></ul><ul><ul><li>From “Start” menu, navigate to stock-val (in “faculty applications”) and select “SV Connect” </li></ul></ul><ul><li>4 th </li></ul><ul><ul><li>Open your saved one pager template </li></ul></ul><ul><li>5 th </li></ul><ul><ul><li>Enter ticker symbol and hit alt+F5 to update </li></ul></ul><ul><li>6 th </li></ul><ul><ul><li>Enter data where red </li></ul></ul>
  19. 19. The Stock Market Class Portfolio <ul><li>Yahoo! Finance </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li>Sign in </li></ul></ul><ul><ul><ul><li>Yahoo! ID: ALPHA_PORTFOLIO </li></ul></ul></ul><ul><ul><ul><li>Password: BETA </li></ul></ul></ul><ul><ul><li>Click on portfolio name </li></ul></ul><ul><li>Updating done by GA </li></ul>
  20. 20. Library Online Research Databases <ul><li>Library home page: </li></ul><ul><li>Search by Title </li></ul><ul><li>Business Source Premier </li></ul><ul><ul><li>Articles on companies and industry </li></ul></ul><ul><ul><li>Searches over 3,200 business periodicals </li></ul></ul><ul><li>Investext </li></ul><ul><ul><li>Investment research reports on companies and industries </li></ul></ul>
  21. 21. Fisher Resources – Bloomberg <ul><li>Computer #1 </li></ul><ul><li>Good for detailed news, data, and analysis of global financial markets and stocks </li></ul><ul><li>Colorful keyboard </li></ul><ul><ul><li>Use top row of keys to go to primary menus </li></ul></ul><ul><ul><ul><li>Ex: equities, money mkt, govt, munis, commodities </li></ul></ul></ul><ul><li>Uses menu system with either mouse or number + enter </li></ul><ul><li>Lots of real-time data </li></ul><ul><ul><li>News, quotes, earnings estimates, filings </li></ul></ul>
  22. 22. Fisher Resources – Datastream <ul><li>Computer #4 </li></ul><ul><li>Vast resource of economic and financial data </li></ul><ul><ul><li>Equities, fundamentals, economics, indices, interest rates, exchange rates, and futures </li></ul></ul><ul><li>Especially useful with international companies </li></ul><ul><li>Download many different data types for many different securities </li></ul><ul><ul><li>Ex: monthly price data for 30,000 equities </li></ul></ul><ul><li>Use macro w/ DS code to download data into comma-separated file </li></ul>
  23. 23. Fisher Resources – First Call <ul><li>Computer #3 </li></ul><ul><li>Real-time news provider </li></ul><ul><li>Gives analysts reports, research broadcasts, earnings estimates, growth rates </li></ul><ul><li>Use top row of buttons for quick access </li></ul><ul><ul><li>Ex: F1 – F10 </li></ul></ul>
  24. 24. Fisher Resources – Bridge <ul><li>Computers #2, 5, 7 </li></ul><ul><li>Good for real-time news and data </li></ul><ul><ul><li>Primary and emerging markets, real time quotes, technical and fundamental analysis, market displays, charts, and latest news </li></ul></ul>
  25. 25. Fisher Resources – StockVal <ul><li>Computers #2, 5, 7 </li></ul><ul><li>Good for historical data & ratios </li></ul><ul><ul><li>Add-in w/ excel makes analysis easier </li></ul></ul><ul><li>Uses a lot of tabs, buttons, etc. so wonder around with mouse </li></ul><ul><li>Can create portfolios </li></ul><ul><ul><li>Multiple equity analysis at same time </li></ul></ul><ul><li>Application Handout </li></ul>