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SMG Stock Research Worksheet 201: Answers to Students' Questions
- 1. SMG Stock Research Worksheet 201 Nancy King Alaska SMG Coordinator Creator of Stock Research Worksheet Vincent Young, AVP Curriculum Initiatives, SIFMA Foundation Moderator
- 2. SMG Stock Research Worksheet 201 Nancy King, Alaska SMG Coordinator NanKing@gci.net
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- 4. SMG Stock Research Worksheet 201 • Review: – SMG Stock Research Worksheet Watch the video • New Today: Stock Research Worksheet 201 – Answers to often asked questions
- 5. Frequently Asked Questions • Where do I get ideas for stocks? • How many Worksheets do I have to do? • I have found a company; now, what do I do? • I have purchased a stock; now, what do I do?
- 6. #1. Where DoI Get Stock Ideas? Start with a known company, but add a twist
- 7. Competitors of aKnown Company Company Worksheet Results 2013 EPS Growth Rate Profit Margin McDonald’s 3.5% 19.5% Yum Brands -30.8% 10.8% Sonic 6.7% 7.5%
- 8. A Lesser KnownCompany • Quality competitors of the super hyped company • Find competitors at – Morningstar – Yahoo! Finance – Market Watch
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- 12. Quality Stocks inTop Industries • Leading Industries • Locating the Leading Industries – Wall Street Journal online – Bloomberg (visual data) – MarketWatch (tools--map of the market) – FinViz (financial visualization)
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- 17. #1. Where DoI Get Stock Ideas • Recap – A Company’s Competitors – A Hyped Company’s Competitor – A Quality Stock in a Top Industry
- 18. #2. How ManyWorksheets Do I Have to do? • It depends on: – Quality of your stock ideas – Current stock market action – Economy
- 19. #3. I HaveFound a Stock; Now, What Do I Do? • Check company news and price chart – Yahoo – Morningstar • Decide how many shares to buy • Decide and record your plan for selling the stock • Place the order to buy the stock
- 22. #4. I Boughtthe Stock; What Do I Do now? • Watch It • Build a Watch List • Set up an online portfolio to track your Watch List You can make money doing this homework. How often in life does that happen?
- 23. Investing • isa craft • is an art, not a precise science • requires patience, persistence, consistency • requires objectivity, discipline, responsibility
- 24. SMG Stock Research Worksheet 201 Nancy King, NanKing@gci.net Vincent Young, vyoung@sifma.org www.stockmarketgame.org
Editor's Notes
- #2 Good afternoon. Welcome to Stock Analysis 201. Thank you for spending an hour to learn more about researching and choosing quality stocks.
- #3 The SIFMA Foundation and the Stock Market Game bring you the SMG Stock Research Worksheet 201. I am Nancy King, Alaska Coordinator for the Stock Market Game and the creator of the SMG Stock Research Worksheet.
- #4 The Stock Reseearch Worksheet can be found in the SMG Teacher Support Center: go to In The Classroom section and click on Publications.
- #5 If you missed Stock Analysis 101 or would like a refresher, go to Vimeo. This link takes you to the slides and the recording of last spring’s webinar, Stock Analysis 101. Today’s presentation will answer questions your students often ask. The questions are the ones most new stock investors ask. I certainly asked them when I started learning to invest in individual stocks, and I still find myself repeating them from time to time.
- #6 The Questions: Where do you get your stock ideas? How many Worksheets does it take before I find a good stock? What do you do after you have found a quality stock? What should I do after I buy the stock? What should I do to follow it? As you listen to the presentation this afternoon—if you have a question—please type it in the box and submit.
- #7 Probably the most frequently asked question: “Where do I get ideas for stocks to look at/to analyze?” Unfortunately, there is no pat answer to this question. So, in the absence of an easy answer, I offer 3 suggestions with the “how-to” that goes with each suggestion. The first idea is to start with a known company, but add a twist. Look at 1 or 2 top competitors of the “well known” company. There is even a line in the Worksheet that asks for the company’s top competitors. 1. Often, I have found that a competitor is an even better stock than my original idea. 2. Have your students start with a familiar company and also fill out the worksheet on 2 of its competitors. This gives your students an immediate comparison of companies. They will become acquainted with each company’s history, products, financial strength, and sales and profit growth rates. Your students will quickly learn about the similarities and differences in companies within the same industry. Frequently, they will be amazed by those differences and many times will find an even better stock.
- #8 Here is what I was just talking about. Look at the significant differences in the earnings-per-share growth-rates and the profit margins of MCD, Yum Brands, and Sonic.
- #9 The Second Idea for finding a stock: Look for a good lesser known company. Start with a highly touted stock, one that is everywhere in the news. Yet, the problem with such a stock is that it tends to be toward the top of its price range. Because of all the hype and everyone buying it, its next major price move is often down. Therefore, consider a main competitor. It may be a solid, quality company but has been out of the lime light, and its price still has a ways to go before it tops and starts down. Students can locate the competitors of hyped stocks the same way they find any company’s main competitors—such as on Morningstar, which we checked while ago. However, I have included two other links that list a company’s competitors. Generally, each site gives a slightly different list of competitors. Let’s see what companies Yahoo and Bloomberg list as competitors for MCD. Which ever site or sites you students use, be sure the listed competitors they choose to research are actually close competitors. Not all listed competitors seem to be direct competitors.
- #10 These are the companies Morningstar lists as competitors of McDonald’s. To me Compass Group does not seem to be a direct competitor of McDonald’s.
- #11 Yahoo, Finance concludes that Burger King and Yum (Taco Bell and Kentucky Fried Chicken) are direct competitors of McDonald’s. PVI stands for a privatelly held company. Its data is not available to the public. I like this site because it also gives an industry average.
- #12 The competitors on the MarketWatch list seem to be the closest competitors. Their list is the most extensive.
- #13 The Third Suggestion for where to obtain stock ideas: Leading stocks in leading industries. Focus on the leading industries and pick the best companies in those industries. As the economy changes, the types of Industries that are doing well change. Leading industries are the ones that are performing the best in the current economy. Its stocks are in demand, and that demand drives up the stock price. How can you determine which industries are current leaders? The following are four examples of online resources for making that determination. Let’s quickly check out each of these. Note the different ways the data is presented. Remember that the Leading Industries change.
- #14 The Wall Street Journal lists the leading industries in table form—the industries are listed on the blue lines with three or four companies listed under each industry.
- #15 Bloomberg lists the leading industries in horizontal bar form. Each segment of the bar represents a separate company; the company is denoted by its ticker symbol.
- #16 MarketWatch presents the leading industries in its Map of the Market. The industries are the large rectangles with the industry title at the top of the rectangle. The rectangles inside the industry rectangle represent the companies witnin that industry. The larger the company, the larger the rectangle. The darker the green, the more the stock has increased in price; conversely, the deeper the red, the more the price has fallen.
- #17 FinVis is short for financial visualization. They use visuals to present data. Here they present price charts of each industry. It is fascinating to thumb through the charts and see which industries are overall up and which are down in price. By clicking on other choices along the bar with charts, you can view the data as a grid, a bar chart, in a spectrum, etc. Some of your students may be very visual and will really enjoy this site.
- #18 A quick recap of the three approaches for finding stocks to analyze: 1. Competitors of a well-known company 2. Quality competitors of an highly-hyped company 3. A quality stock in a top industry
- #19 The second question individuals new to investing ask: How many of these worksheets do I have to do before I find a good stock? Well, the answer is “It depends . . .” #1. It depends on the quality of their stock ideas. #2. It depends on the current stock market. If the market is down, it may be difficult to find a quality stock whose price is in an uptrend. If the market has been up for 6 months to a year or longer, it may be hard to find a quality stock that is in the buy range—that falls within the PEG criteria on the Worksheet. #3. It depends on the economy. If the economy is lagging, it may be challenging to find companies whose earnings and sales growth-rates meet the criteria for a quality growth stock. Students may have to complete several worksheets before finding a company with more Yes’es than No’s. However, by knowing and understanding the company, they can better predict how news and changing market conditions will effect their stock. Having an idea of how their stock will behave increases your students’ chance for success.
- #20 The Third Most Often Asked Question: “I have found a company that has more yes’es than no’s; now what do I do” • Begin by checking current news for anything adverse. Also, check the price chart—is the price still in an uptrend? If the news is okay and the price is moving upward, decide to buy it—but before placing your order, do the following things. . . . • First, decide how many shares you want to buy or what percent of your money you want to invest in this particular stock. • Second, before buying, decide and make a note in your investing notebook under what circumstances you will sell the stock. In other words, how much money are you comfortable loosing on this stock if the price goes down. At what percent down will you sell this stock? A good rule of thumb is to sell a stock if it is down 7 to 10 percent. Protect the money you have left in it, and redeploy that money to purchase another stock. It’s called protecting your capital so you can play another day. The four most hollow and over-used words in the investing vocabulary are, “it will come back.” Sometimes the price does come back, but more often, it does not, or at least not for a long time.
- #21 Students can check current stock news on Yahoo right from their SMG portfolio site.
- #22 Morningstar is another choice for checking stock news.
- #23 The Fourth Question You Will Hear: “I have purchased the stock, now what do I do?” 1. The short answer is watch it. If the price drops to your predetermined sell price, sell the stock. If the price goes up, let your winners run. 2. The longer answer is: Keep doing Worksheets to build a Watch List 1. A Watch List is important because it provides immediate choices should one of your stocks drop to its sell price and needs to be sold and replaced with another stock. 2. Also, in preparing a Watch List, you may find a stock that is better than one you currently own. You can then sell your under-performer and purchase the better stock. 3. Track the stocks on your Watch List. You will find yourself adding to the list from time to time, as well as deleting underperforming stocks. This is homework you make money doing! How often in life does that happen?
- #24 In parting, I would like to remind you and your students that Investing: • is a craft • is an art, not a precise science • requires patience, persistence, consistency • requires objectivity, discipline, responsibility
- #25 Thank you for being here this afternoon to learn more about investing in stocks to guide your students. Open for Questions? Were any questions sent in during the presentation?