Extending Chapter 9: Stocks

What You'll Do and Learn

• You'll learn how Standard & Poor's analysts evaluate stock investments.
• You'll review a Standard & Poor's stock report and identify the key information it contains.

Introduction

In this activity you will review a stock report prepared by investment analysts at Standard & Poor's.

Chapter Notes

One of the ways individuals can participate in the growth of a successful company is to buy its stock. In Chapter 9 you learned that there are many different reasons for investing in stock, including income from dividends, potential increases in value, and the opportunity to participate in the governance of the company through shareholder voting rights.

Shares of stock represent ownership of a fraction of the issuing company. Many companies pay dividends--cash payments made from a company' current or past earnings. These cash payments may be reinvested in additional shares, or used for other purposes. Stock prices fluctuate on a daily basis. The potential that share prices will increase over time is one of the primary reasons people invest in stocks. Of course, there is also a chance that the value of your stock will fall rather than rise.

There are several approaches to selecting stock investments, and the method you choose is a matter of personal preference. There is no "right" way to choose stocks. However, it's always a good idea to diversify your investments among several holdings in order to reduce the risk of loss.

Newspapers, magazines, and the Internet provide information about different industries and individual companies. Brokerage firms and independent research companies such as Standard & Poor's also conduct in-depth stock research and provide this information to their customers. Among the factors stock analysts consider in determining a "buy," "hold," or "sell" recommendation for a given stock are: projected earnings growth, new product lines, consumer demand for the company's products, new technologies, and the overall strength of the company management team. In addition to reviewing a company's financial statements, stock analysts typically meet with the company's managers and may also speak with its customers and suppliers to assess its future business prospects.

Site Notes

Standard & Poor's equity research analysts conduct research on hundreds of different companies in many different industries. Their research findings are provided to individual investors primarily through brokerage firms and other financial institutions.

Let Me Try

Go to the attached Stock Report, print it and then print the Worksheet activity.

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