Professional Documents
Culture Documents
Sources of Investment
Information
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CHAPTER 2 OUTLINE
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Ways of Wall Street
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Ways of Wall Street
Wall Street is a real place with real people
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Wall Street Has a
Language of Its Own
Trader Terms
Internet Terms
Technician’s Terms
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TECHNICIANS or
CHARTISTS
Chartists – Are Wall Street analysts who study trading
volume to develop successful trading strategies
Chartist pick stocks based on patterns of “past” price and
volume data
Tend to look at day-to-day stock movements, often with
20/20 hindsight
However, you can’t count on past patterns of price and
volume data to indicate the future!
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TECHNICIANS or
CHARTISTS
“Head and Shoulders” Formation: Chart
formation that resembles an Upper Torso
The stock price reaches a peak and declines (shoulder)
Rises above its former peak and again declines (head)
Rises again, but not to the second peak, and then again
declines (shoulder)
The Head and Shoulders Formation is considered a
“Bearish Indicator”
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TECHNICIANS or
CHARTISTS
Bearish – Pessimistic – prospect of falling prices
Metaphor –> Bear - “Go into Hibernation”
Underperform the market
Potential to go down
Bullish – Optimistic – prospect of rising prices
Metaphor –> Bull – “Charge ahead like a raging
bull”
Outperform the market
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Harcourt, Inc. Potential to go up 2-11
Internet Revolution
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Internet Commerce
The Internet is the enemy of high prices and high profit
margins:
Brings down geographical boundaries
Increases competition
Consumers can jump on the internet, do a search, get info
on hundreds of providers willing to sell high-quality
products at extremely attractive prices.
The Internet is a tool for the consumer:
Improves access to info about products, quality, prices, and
performance.
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Internet Commerce
The Internet can also be a tool for companies:
Reduce costs and therefore prices:
Potential to reduce: # of locations, inventory levels,
distribution facilities and shipping networks,
catalogs and special direct mailings.
Get closer to more customers:
open anytime, anywhere, more info
Find out how to better meet and exceed customer
needs and aspirations
site feedback
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Financial Information
on the Internet (Pg 39)
Financial News and information is a big interest on the
Internet
Stock Quotes (Share prices) in Real Time (Up to the
minute, current) are sought by investors several times
during the trading day.
Several sites provide:
Pertinent financial data on individual companies, industries,
and the overall economy.
Late-breaking news tied to individual companies on a real-
time basis
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Financial Information
on the Internet (Pg 39)
Access to more detailed and timely info than
Wall Street professionals previously enjoyed.
Some sites provide:
Charts
Stock research reports
Earnings estimates
Magazine articles and fundamentals
Securities and Exchange Commission (SEC) filings
<http://cbs.marketwatch.com>
<http://www.dailystocks.com>
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Financial Information
on the Internet (Pg 39)
Table 2.2 (Pg 40)
“Where to Look for Investments Information on
the Internet”
Provides a list of Web Sites to obtain Financial
Information
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WHO IS EDGAR? (Pg 39, 40)
EDGAR: An Electronic retrieval analysis system for SEC
Filings (government reports filed by individual companies)
“For-profit” company that specializes in providing
investor access to SEC reports and filings
A trusted source of SEC report information on the
Internet
<http://www.edgar-online.com>
Ticker symbol: unique 2,3,or 4 letter
code for a company (MSFT -
Microsoft)
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SEC
REQUIRED FILINGS
SEC required filings are:
Filed in plain text
Emphasize the the firm’s:
Investment Risks
Legal Challenges,
Major Competitors, etc.
As compared to the “colorful” Annual Report:
“marketing” document which often seems to tell
investors “buy this stock”
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SEC
REQUIRED FILINGS
10Q: Quarterly Accounting Information filed with
the SEC
10K: Annual Accounting Information filed with the
SEC
13D: Filing made to the SEC within 10 days of an
entity attaining a 5% or more position in any class of a
company’s securities
Typically regarded as bullish
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SEC
REQUIRED FILINGS
14A or Proxy Statement: Annual meeting
announcement
Contains information regarding:
Who are members of top management
The board of directors
Other large investors in the firm
How much company stock is owned by
management and the board of directors
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Ownership Positions by
Management
Significant “insider” stock ownership
suggests:
Management has a “positive” view of company
prospects
Strong incentives for management to maximize
shareholder value
Especially, if management has a large portion of its
current income, in terms of salary and bonus,
dependent on the company’s stock price performance.
Aligns management’s self-interest with stockholder
interests
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Ownership Positions by
Management
“Immaterial” insider stock ownership:
Difficult to argue that -
Management has a positive view of company
prospects
Or strong incentives to maximize the stock’s price
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REAL TIME QUOTES
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MUTUAL FUND
INFORMATION (Pg 45)
<http://www.morningstar.com>
Morningstar—watchdog
group for mutual fund
industry
Comprehensive, timely
information and analysis
Also provides
information on top-
yielding money market
accounts
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STOCK MESSAGE
BOARDS (Pg 45)
<http://quote.yahoo.com>
Stock Message Boards: Websites where anonymous
individuals post information about individual
companies or investments styles.
Timely “views” of other investors on company
prospects:
Late-breaking news
A company’s investment potential
Risks facing investors
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STOCK MESSAGE
BOARDS (Pg 45)
Info can be manipulated:
Misinformation
Rumor
Gossip
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WALL STREET RESEARCH
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WALL STREET RESEARCH
Company Reports
Industry Reports
Global Outlooks
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Investments As a Profession
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Investments As a Profession
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Investments As a Profession
Brokerage Business
Stock Broker: financial agent who acts as a go-between
for stock buyers and sellers
Usually works with individual investors and institutions in
advising and executing orders for individual common stocks or
bonds
Investment Management
Security Analyst: financial specialist who seeks to identify
investment “opportunities”
Portfolio Managers: financial specialist engaged in
managing investments for others
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Investments As a Profession
Financial Planning
Certified Financial Planner: financial
professional who helps “individuals” identify and
meet financial needs
The planner gets to know the individual client and tries
to match client risk and return preferences with
appropriate investment opportunities.
Certified Financial Planner (CFP) Designation: Financial
plan processing and insurance, investment planning, income
tax planning, retirement planning and employee benefits, and
estate planning.
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Investments As a Profession
Investment Banking
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Investments As a Profession
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Chapter 2
Answers to Selected
End of Chapter Questions
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