Buy what you know What product do you family or friends like If it is popular will it be so in the future Research Markets Current amp Future Does everyone have the product now ID: 1028987
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1. Strategies For Stock Selection
2. Buy what you knowWhat product do you, family or friends like?If it is popular, will it be so in the futureResearch
3. Markets: Current & Future Does everyone have the product now? (The stock of a rapidly growing company is more likely to increase in price.)
4. Markets: Current & Future cont. a. Global market possibilities ex. McDonalds’s (Will these countries want these products/services?)
5. Markets: Current & Future cont. a. Demographics(population) (Who will buy it & the number of potential customers)
6. Economic CycleRecessions: buy stocks in defensive industries ( medicines, food, clothing, public utilities)Defensive stocks generally decline less
7. Economic CycleExpansions: buy cyclical such as high-prices goods like cars & appliances; raw materials like aluminum, steel, and cement, and tools & equipmentOffer higher returns & growth
8. Avoid the obviousIf stocks on the front page then all knows about themStick with the boring stocks
9. Current industry conditionWill current events affect a specific industry (a group of companies of same product or service)
10. Changes in technologyEx. IBM vs. personal computer
11. Special stock situationIf a company is in trouble maybe their stocks have issues.
12. Peter Lynch’s Activity 1What is Peter Lynch’s advice for picking stocks?Buy what you know. Stock tips are all around us. 2. Give an example of a stock that you think has a growing market.
13. What is an example of a good stock to buy in a recession?Buy a stock in a defensive industry (Ex. Medicine, food, clothing, public utilities) To buy in an expansion?Cyclical stocks (these stocks move with the business cycle. Ex. Cars, housing, raw materials- steel & aluminum, industrial equipment comp.)
14. Why should you beware of front-page stories?If the stock is news, then everyone else knows about it.
15. Explain how changes in technology affect stock prices.Changes in technology could make the product obsolete, thus depressing the stock’s price, or changes could increase demand for the product, thus increasing the stock’s price.
16. Activity 2:Widget Manufacturing CompanyStrategy: Avoid obvious risk—specific stock situationReasoning: Although the technology factor is important, the risk of losing the lawsuit is probably more important.
17. WonderWalkersStrategy: Buy what you know: marketsReasoning: Recognize a good product before everyone else; early phase of development means markets could expand and sales could grow rapidly.
18. GMStrategy: Economic Cycle—Good times and Cyclical stocksReasoning: During periods of expansion, automobile stocks, which are cyclical, are more likely to show greater growth than defensive stocks. People are more confident about the present & future so they are more willing to make a large expenditure.
19. Kellogg’s, Wisconsin Valley Electric Company, GMStrategy: Economic Cycle—Not so good times and Defensive stocksReasoning: During periods of recession, Kellogg’s and Wisconsin Valley Electric Co., both defensive stocks, generally decline less than other stocks. However, GM, a cyclical stock, be likely to decline more than other industries.
20. Where may stocks be traded in the SMG? NYSE and NASDAQTRUE-FALSE: Over-the-Counter stocks may be traded only once during the SMG. FALSE- never can be traded
21. The broker’s fee for all trading is _____%. 1%