Money Management & Stocks

Meeting #2: 13 September 2005

Agenda

Re-Statement of Club’s Mission

Why Investing is Important

Basic Money Management

How to Analyze Stocks

Guests: Mr. Kirby & Mr. Prokop

Sector Sign-Ups

Investment Club’s Mission:

1. Educate Cadets regarding Investing and personal financial planning

2. Maximize returns on the Spragins Fund

We’re here to turn this…

Into This!!!

BLUF of Money Management:

Start saving your money early Make wise financial decisions Have a Budget Know the Tax Code (website) Help your Soldiers

A quick Cow Loan example

Maxing out your Roth IRA with only your Cow Loan

Earn 10% compounded annually

Equals $1,770,316.88 @ 65 Or $2,851,113.04 @ 70

A more Lucrative example

Maxing out your Roth IRA till age 65 (marry at 26)

Earn 10% compounded annually Equals $6,104,684.41 @ 65 Start withdrawing $600,000 per year

@ 66 You’ll have $8,941,887.22 @ 100 still

in your account earning interest

0

10

20

30

40

50

60

70

Number of Years

FV

of

$1

0%

5%

10%

15%

CompoundingInterest Rates

“What is ze most powerful force in the universe?”Compound Interest!

Buying a Car

I can buy a $30k Jaguar or stick with my Honda

Perform a Cost/Benefit Analysis The Jag actually costs me $70k Is a new Jag going to give me $70k

worth more of personal joy than my Honda? No. Go with the Honda.

Create a Budget Extremely important after Graduation You’ll be tracking more than a dozen

monthly expenses Form good habits now Some of you will be amazed at where

all your money goes A budget Now will create good

spending habits

Sample Financial PlanExpense Breakdown

Total Taxes

Rent

Cow Loan

Auto Insurance

Renters Insurance

Life Insurance

Groceries

Gas

Car Maintenance

Utilities

Cable TV

Electricity

Water

Trash

Local Phone

Long Distance

Cell Phone

Internet

Credit Card Payment

Other Debt Payment

Entertainment/Leisure

Other

Available for Saving

Helping your Soldiers w/ their $$$

AVOID Payday Lenders (see link) Cause a “debt trap” You’re the first line of defense

Educate yourself More Importantly, know who to refer

them to before a problem All Posts have rarely used but high

quality people who can help Show them these slides (bonuses)

What is a Stock?

A Stock (Certificate) represents a small slice of a company that can be bought and sold.

Companies “go public” to raise money; they will never again get money from investors after the IPO (Initial Public Offering).

P/E Ratio and Market Capitalization Investors hope their company increases its

earnings and either reinvests them in the company to increase future earnings or pays them a dividend.

Growth Investing Find the next MSFT or WMT Look for continuing earnings growth They have higher “trailing P/Es”

But lower “forward P/Es”

Value Investing Find a MSFT or WMT that is

currently trading at a discount Make sure of sound fundamentals Contrarian Investing

Next Time How to start investing (or make

better investment decisions) Setting up an IRA Analyzing Mutual Funds Risk Tolerance and Goals Diversification and Asset Allocation

QUESTIONS???

Guest Speakers

Questor Management Company

Mr. Kevin ProkopDirector

Mr. Dennis KirbyVice-President of Private Equity

Sector Sign-upsPrepare to Work! (min of 4-5 hours)

Technology Giles Evans E-3

Energy James McCray C-3

Consumer Goods David Marold B-1

Healthcare Bryan Spencer A-4

Financials John Howie H-1

Screening Criteria 1. Minimum Price per Share $5 (has to do with listing

requirements and whether or not institutional money can invest in stock)

2. Price to Sales maximum 5 3. Inside Ownership Minimum 1% (management has some

stake in the company) 4. Institutional Ownership Minimum 15% (does smart money

invest in this company) 5. Price to Earnings maximum 50 (although we prefer

something more reasonable compared to sector averages you'll see on Quicken)

6. Price/Earnings to Growth (PEG) < 1.0 (is the market pricing the stock to fully reflect the stock's EPS growth?)

7. EPS minimum of $0.01 (this eliminates companies losing money)

8. Total Revenue minimum $50 million (so it is not a mom and pop store)