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U. S. Stock Investment Project

Pikes Peak Community College

BUS 115

Introduction to Business

Chuck Bowles/John Rodwick

Revised: August 2001

Investment Portfolio Project

Goal

This is an experiential exercise for you, a beginning business student, which will introduce, demonstrate and reinforce the principles, practices and mechanics of the U.S. stock/equity markets.

Objectives

Develop an understanding of the principles, practices and especially the mechanics of buying/selling stocks over a designated (see Course Outline) period.

Calculate the profit/loss from a series of buy/sell transactions.

Conduct basic research on U.S. companies using the Internet, newspapers, and business magazines.

Read stock quotations on the Internet and in business publications.

Understand and track the major U.S. stock market indicators.

Understand stock market terminology.

Compile a comprehensive report that demonstrates your achievement of these objectives.

Please Note: This exercise is limited to these objectives and is not intended to develop skills in how to pick financial investment instruments for optimum appreciation of potential investments. The exercise is only a simulation and is limited by these conditions:

1) There is a forced market entry and exit (set buy date and set sell date); no market timing is allowed.

2) The project is focused on only one semester or term. This is a very short time frame and is not a practical planning horizon for long-term investors.

Keep in mind that while this exercise is not intended to have you pick instruments that will appreciate substantially, most students do try to pick ones that will show even a reasonable profit by the end of the designated period. This makes the exercise fun and exciting. Nevertheless, your grade on this assignment is not based on whether your investments earn or lose money. The criteria for your grade are outlined in a later section of this paper.

Investment Portfolio Process

1. Project Explanation

2. Research/Select Stocks

3. Submit Buy Statement

4. Continue Research/Chart Weekly Results

5. Make Final Calculations

6. Write & Submit Final Report

U.S. Stock Investment Process

Step 1 - Project Explanation

Your instructor will explain the entire Project, but you should review this document and read Chapter 16: Securities and Investments in your text. During the class in which this chapter is discussed is the time for you to ask questions about what youve read and how it pertains to the Project.

Step 2 Research and Select Investment Instruments

You will select 2 different publicly-traded stocks you will follow for the investment period. (Please note the format for each newspapers, magazines stock and website quotations may be different. Therefore, if you cannot decipher your sources quote, please bring a copy to your instructor and ask for an explanation).

The following guidelines are to be used in the selection of your stocks. If you have any questions about the appropriateness of a particular stock, discuss it with your instructor immediately.

Select any two U.S. stocks. It is recommended you select stocks with which you are already familiar or in which you have a particular interest. Some obvious suggestions would be; your employer if the company you work for is publicly-traded, companies you are routinely a customer of, companies that are located in the Pikes Peak Region, etc. You must select one stock from each of the following major stock exchanges.

New York Stock Exchange (NYSE)

National Association of Securities Dealers Automated Quotations (NASDAQ)

Step 3 - Submit Buy Statement

Purchase your two (2) stocks in any quantity as long as your total purchase does not exceed $50,000 virtual dollars (including commissions) and you purchase at least one of each stock. Note: A well-balanced investment portfolio would be evenly split between the stocks. You must spend as close to your $50,000 limit as possible even if you must purchase odd lots for your stock. On the date identified in the syllabus, complete the Buy Statement contained in this document, and submit one copy to your instructor. Keep a copy for your records which will become part of your final report.

Step 4 - Conduct On-going Research/Chart Weekly Results

Conducting the on-going research on your stocks is usually the most interesting segment of the Project. You should focus your efforts on learning as much as you can about the companies you selected. For example: What is the history of the company? What products/services does it offer? How much of a profit is it making? Who are its competitors? What is happening within its industry? Where would the company like to be five years from now? Have any news releases commented on either an increase or decrease in the companys stock price or its potential for growth? Have there been mergers or rumors of mergers? What do you know about the people who run the company?

While there are many sources of information for you to research your investment selections contained later in this document, the sources for your research are only limited by your imagination. Review business newspapers and periodicals for information on your companies. Research the Internet and check out your companies home pages. Talk to people who own or sell these companies stock. After youve collected as much information as you can find, sift through the materials for use in your final report. This research process needs to be continued throughout the investment period since many things can occur to affect the value of your investments.

For the investment period (note start and end times contained within your Course Outline) track the closing prices of your stocks as of the close of the market on each Friday. You also need to track the closing value on each Friday for the major market indices: the Dow Jones Industrial Average (DJIA) for the New York Stock Exchange and the NASDAQ Composite for the NASDAQ Exchange. You should graph this information using Excel (or comparable spreadsheet software). If you cannot use computer graphing, please use regular graph paper. Chart the stock and the market index on the same sheet as shown on the last page of this document. The purpose of charting both on a single page is to illustrate the uniqueness of each stock compared to its exchange index.

Fridays stock closing prices (after 2:00 PM Colorado Time) and the market indices can be found in several different sources- see Suggested Research Sources in this paper.

Step 5 - Sell Stocks and Make Financial Calculations to Determine Profit/loss

Your investments will be liquidated (sold) at the end of the project according to the date indicated in your Course Outline. At the time of liquidation complete the preliminary Profit/Loss calculations on the forms located later in this document. Also, review the example provided with the forms. This statement will inform you as to how much money you would have made or lost given a real investment portfolio.

Please Note: Your grade on this assignment is not based on whether your stocks made or lost money. The criteria for your grade follow in this document.

Step 6 - Write and Submit Final Report

The final report (refer to the Course Outline for the date due) will include the following three sections requiring a minimum of 4 and a maximum of 10 pages (excluding graphs and calculations) double-spaced, in 12 point font with 1 margins:

Project Summary - This is your opportunity to review each stock purchased and to provide an analysis of your findings.

Begin by presenting an overview of what you tried to achieve with this project. In other words, what were your goals and objectives in doing this project?

(1 full page)

Prepare a history (in your own words) of each company you have invested in which should contain the material used to develop your history and summary of activity for each stock. The section should draw on business-related information you found on your companies. This may include items you found from the Internet, newspapers/magazines, interviews with employees and/or managers of the company, annual reports, etc. Be sure to list all your sources in a bibliography using either a MLA or APA format. Make your bibliography the last page of your report.

(1/2 page for each company = 1 full page for both companies)

Prepare a summary for each stock indicating the investments activity for the project timeframe and why. That is, address any recent developments that impacted the price of your stocks and their profit or loss. Then consider the prospects for each company. For example, what does each company say about its own future and what do others, such as stock analysts and investment brokers, say about the future of these companies?

(1/2 page for each selected stock = 1 full page for 2 stocks)

As backup information for the summaries use the graphs (prepared according to II. in this project material) comparing the stock and its index as reference.

(1 graph for each stock and its markets index)

Finally, what is your personal appraisal of these companies? Would you invest in one or more of them? Why? Be thorough and clear in your reasoning.

(1/2 page for each company = 1 full page for 2 companies)

Calculations and Graph - This section should have your final Profit/Loss calculations, and the completed graphs showing the weekly closing prices for your investment instruments and the market indices. Examples are contained later within this document. You are encouraged to use computer graphics for this part of the project. It will simplify your job and look more professional in its final version.

Project Evaluation

The U.S. Stock Investment Project evaluation will be based on these criteria:

A clearly written project summary with a well thought-out analysis of the financial data and your research findings.

Correct calculations on your investments (Note: Your grade is not affected by the amount of profit/loss your investment selections generated).

An accurate graph showing weekly investments and market indexes movement.

The overall organization and design of your presentation including your ability to use appropriate word processing formats and graphics.

Quality and completeness of the research conducted on your investment instruments.

Evaluation Criteria:

Points

Project Summary/ Company Research

50

Calculations/Graphs

25

Overall Presentation

25

Total

100

Suggested Research Sources

(Expand Upon These Sources. They Are Only Suggestions)

Daily periodicals (Note: The local general circulation newspapers have been excluded. You should be getting your information from business- focused periodicals.)

Wall Street Journal

Colorado Springs Business Journal

Weekly and Monthly Periodicals

Barrons

BusinessweekFortune

ForbesMoney

Kiplingers

Inc.

Internet

Yahoo Finance

http://finance.yahoo.com/

CNBC.com

http://www.cnbc.com/

MSN Money

http://moneycentral.msn.com/home.asp

Charles Schwab

http://www.schwab.com

The Motley Fool: good place to learn about the stock market. http://www.fool.com

CBS Marketwatch

http://www.marketwatch.com/

Big Charts

http://bigcharts.marketwatch.com

Investment Portfolio Project

Stock Buy Statement

TURN IN THIS SHEET TO YOUR INSTRUCTOR

ON THE DATE REQUIRED IN YOUR COURSE OUTLINE

BUS 115 Section______

Name____________________________________

Date Submitted_________________

Date

Stock

Quantity

Cost/Share

Sub-Total Invested

Commission

Total Invested

(a)

(b)

(c)

(d)

e = (c * d)

f = (e*[.015])

g = (e + f)

Total Invested in Stocks

Please list any questions or comments you may have:

Investment Portfolio Project

Stock Buy Statement

KEEP THIS SHEET FOR YOUR RECORDS AND INCLUDE IT IN YOUR INVESTMENT PORTFOLIO REPORT

Name_______________________________

Date__________________

Date

Stock

Quantity

Cost/Share

Sub-Total Invested

Commission

Total Invested

(a)

(b)

(c)

(d)

e = (c * d)

f = (e*[.015])

g = (e + f)

Total Invested in Stocks

Example of Return Calculation

U. S. Stock Investment Project

Stock Buy Statement - Example

Stock

$ per

Sub-total

Com-

Total

Date

Purchased

Qty

Share

Invested

mission

Invested

(a)

(b)

(c)

(d)

e = (c * d)

f = (e * [.015] )

g = (f + e)

Jan 12, 99

AT&T

374

65.88

$24,639.12

$369.59

$25,008.71

Jan 12, 99

Boeing

316

77.75

$24,569.00

$368.54

$24,937.54

Total Invested

In Stocks

$49,946.25

Return on Market Indices

Beginning

Dow Jones Industrial Average

10,131.46

Beginning

NASDAQ Composite

4,234.33

Ending Dow Jones Industrial Average

10,404.31

Ending

NASDAQ Composite

3,742.15

Difference

272.85

Difference

(492.18)

% increase/(decrease)

2.7%

% increase/(decrease)

(11.6%)

Investment Portfolio Project- Final Profit/Loss Calculations

Date

Stock Sold

Quantity

$/Share

Sub-Total Received

Commission

Net Received

(a)

(b)

(c)

(d)

e = (c * d)

f = (e*[.015])

g = (e - f)

Total Received in Sale of Stocks

Stock (Profit/Loss)

Initial Investment (From Buy Stmt.)

% Return-Profit or (Loss)

Return of Market Indices

Beginning

Dow Jones Industrial Average

Beginning

NASDAQ Composite

Ending Dow Jones Industrial Average

Ending

NASDAQ Composite

Difference

Difference

% increase/(decrease)

% increase/(decrease)

Chart136926369333694036947369533696036967369743698136988

57

53.13

52.25

59.25

71

68

68.88

64

62

59.63

Chart2

Chart336926369333694036947369533696036967369743698136988

57

53.13

52.25

59.25

71

68

68.88

64

62

59.63

Chart4

Sheet1DatesLucent4-Feb$57.0011-Feb$53.1318-Feb$52.2525-Feb$59.253-Mar$71.0010-Mar$68.0017-Mar$68.8824-Mar$64.0031-Mar$62.007-Apr$59.63DJIA4-Feb10,963.8011-Feb10,425.2118-Feb10,219.5225-Feb9,862.123-Mar10,367.2010-Mar9,928.8217-Mar10,595.2324-Mar11,112.7231-Mar10,921.927-Apr11,111.48

Sheet1

Sheet2

Sheet3

Lucent Technology (2/4/04 4/7/04)

Chart136926369333694036947369533696036967369743698136988

10963.8

10425.21

10219.52

9862.12

10367.2

9928.82

10595.23

11112.72

10921.92

11111.48

Sheet1DatesLucent4-Feb$57.0011-Feb$53.1318-Feb$52.2525-Feb$59.253-Mar$71.0010-Mar$68.0017-Mar$68.8824-Mar$64.0031-Mar$62.007-Apr$59.63DJIA4-Feb10,963.8011-Feb10,425.2118-Feb10,219.5225-Feb9,862.123-Mar10,367.2010-Mar9,928.8217-Mar10,595.2324-Mar11,112.7231-Mar10,921.927-Apr11,111.48

Sheet1

Sheet2

Sheet3

Dow Jones Industrial Average (2/4/04 4/7/04)

Graph Example for Stock

(Note: Stock and index on single page)