Data Skills & The Stock Market

Transcription

1 Data Skills & The Stock Market

2 Data Skill Building Objective: Gathering data is an important part of the financial decision-making process. Like any skill practice will improve it The amount of data available on line is enormous. We need to be careful where we get the data Make sure we understand what the data is telling us.

3 Keys to data success: Ability to extract data from tables and graphs correctly Realize tables and graphs limitations Take care in source selection Data Skills Before using data: i) know the data source & assess its relibility ii) know how the data in the table or graph was gathered & constructed iii) how data is defined Common Pitfalls

4 Data Skill Building Things a good chart, table or graph should have. - Attribution or Source Data produced or summarized regularly by a reputable source eg. a government body is most reliable - Time period, especially if comparative - A header or description - Well defined x- and y- axis - All data (bars, lines, etc.) well labelled

5 Let s start with Employment Data December Report

6 Labor Participation Rate 62.7%

7 Unemployment Rate

8 Chart and Graph Example - #1 - Who provided the data for the chart? - What is the chart about? - What data are the y and x axes using - What is something we might need to be careful about using this slide?

9 Chart and Graph Example - #2 - Who provided the data for this chart? - Assuming we trust it, what are the y and x axes? - Besides attribution is there anything else you find odd about the chart?

10 Chart and Graph Example- #3 - What can you tell me about this chart? - Why might we not trust it?

11 Chart and Graph Example - #4 - What is this chart about? - What do the y and X represent as data? - Part of this chart is incomplete any ideas? - What are the colors telling us?

12 Chart and Graph Example- #5 - What can you tell me about this chart? - Why might we not trust it?

13 Why Invest? What might be a reason to invest in the stock market? Do these investments always leave us better off? Why not? Investing is like buying something. Should you buy something you don t understand?

14 Stock Market Performance over Time

15 Stock Market Performance since 1895

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17 Risk vs. Return Type of Investment Possible Returns/Risks Most Risky Least Risky Collectibles/Commodities Stocks Corporate Bonds Government Bonds Money Market, CD s, Savings and Checking Accounts Illiquid Market/Impacted by volatile conditions (ie., weather) Subject to risks of the company and broader economy Subject to risks of the company, but, get preferential treatment to company assets Risk depends on the entity sponsoring the bonds Like Cash and have some guarantees from the government

18 Investing in Stock What is stock? What determines its value? Why does the value of stock change? - Both reality and perception matter to stock price - History of performance - Company expectations of future performance - Peer/Competitor performance/behavior - What do investors think about the future

19 Walmart (WMT) Started in 1962 by Sam Walton Incorporated in 1969 Listed on the New York Stock Exchange in Listed = Being Available to trade on a public exchange - What is the advantage of being Listed? Walmart family still owns about 50% of the stock Largest private employer in the world 2.3 million employees 11, 695 stores; in 28 countries; $500B in sales (62% sold in the U.S.) Market value (Capitalization) - $280B Volume 8M shares trade daily

20 Stock Market Charts Let s start with Walmart Charts

21 Stock Market Game Login 1) Write your ID and Password down. - In your notebook - On your phone notes 2) Access the game at: 3) Bookmark the Site

22 Stock Market Project Phase I Objective: Understand what the stock market is by creating and tracking a portfolio of investments Goal: Being the best investor (ie., earning the most on your investments) would be great, but simply learning about how various investments work will be most important Phases of the Project: Phase I: Discussion and kick-off Make Initial Investments Phase II: Additional Research and portfolio selection (1-2 weeks later) Phase III: Tracking progress and making adjustments (weekly, 8-10th weeks) Phase IV: Final tracking, summarizing results and reaching conclusions

23 Stock Market Project Phase I Today we will cover the basic elements of the project and concepts to allow you to get started You will have $100,000 to invest in a portfolio you will individually create (you can increase to $50,000 by borrowing against your investments) Your investments will last until May 1 st You will be investing as you do research You will be measuring how you do vs. the market Grade based on what is learned, NOT investment performance There will be some friendly competition and perhaps some prizes.

24 Stocks and Stock Market - things to know Ticker Symbol Every name (stock) on the market has its own unique symbol: Apple AAPL Alphabet (Google) GOOG McDonalds MCD Prices are always stated in $/share

25 What is a stock? Stock: Ownership in a corporation either private or public You own a % of the company Also known as a Financial Security But. You have no say in business operations of a public company You make or lose money based on the increase / decrease in the stock price Influenced by performance profits, growth The laws of supply and demand apply to stocks

26 Where Stocks are Traded: Exchanges Public Co. can either hire NYSE or Nasdaq to be in charge of their trades The New York Stock Exchange: NYSE Wall Street, in NYC It is the largest stock exchange in the world by dollar volume Nasdaq: National Association of Securities Dealers Automated Quotations It is the largest electronic screen-based equity securities trading market in the United States

27 Stock Market Indictors/Indices: If the DJ and the S&P is UP on average, then overall, the economy is considered to be doing well If the DJ and the S&P is DOWN on average, then overall, the economy is considered to be doing poorly The Dow Jones It is the oldest continuing U.S. market index Today, the averages consists of 30 of the largest and most widely held public companies in the United States. The S & P is a stock index that tracks 500 prominent companies

28 The S & P 500 Standard & Poor's breaks stocks into 10 sectors Best performers within those 10 sectors and dozens of industries. Generally speaking, different sectors are affected by different things. So at any given time, some are doing well while others are not. In most cases health care, and technology tend to be the fastest growing sectors While consumer staples and utilities offer stability with moderate growth The other sectors tend to be cyclical, expanding quickly in good times and contracting during recessions

29 You will definitely run into these terms Volume how many shares are bought in a day/ sold in a day trading activity! EPS Earnings Per Share On average, how much $$ (profit) each share of the companies stock earns Example Walmart earns $13 Billion Walmart has 500,000,000 shares owned by the public They are earning $26/share WARNING That is not the stock price, just a measure of how they are doing

30 Buying Stocks on Margin In the Stock Market Game, as in real life, you can borrow against the value of your stock and invest that money. Example: - You have a $100,000 portfolio - In the SMG, you can borrow $50,000 more and invest that amount - You pay interest (7%) on what you borrow - You are basically betting that your stocks will increase more than the interest you pay - In real life when your investments do badly, this increases the BADNESS

31 Information to check There are many places company performance, like EPS is published A company s recent results are an important indicator on how they might do in the future Net Income (profitability) Analyzes their Revenue (Sales) and Expenses (Bills) This is found on their Income Statement

32 Stock Market Project phase I Resources: Chapters in the Ryan text (p. 239) Yahoo Finance - Google Finance - Investopedia - The Street - Morningstar -