Lafayette College Investment Club

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Lafayette College Investment Club

• 1st Meeting 9/8/2006

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Introductions

• Officers
• Advisors
• Audience

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What is the Investment Club?

• To educate club members in investing in the stock
  market
• Encourage involvement, but in the end how much
  you put in is how much you will get out
• (We have something optional for next meeting)
• http//finance.yahoo.com/
• Meets every other Friday, Officers meeting the
  preceding Friday.

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Why join the Investment Club?

• Gain insight into how financial markets function
• Great networking opportunities
• Shows employers that you have a true interest in
  finance

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Presentations

• Presentations encouraged!
• Can be done at a meeting, or on club website.
• Buy OR sell presentations welcome
• Be sure to talk about the risks, as well as the
  potential benefits.

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What is a Stock?

• Stock represents a claim on the company's
  assets and earnings
• As you acquire more stock, your ownership stake
  in the company becomes greater. Your voting
  rights always increase when you fill out a proxy.
  
• Whether you say shares, equity, or stock, it
  all means the same thing

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Debt vs. Equity

• Why does a company issue stock?
• The reason is that at some point every company
  needs to raise money
• A company can borrow by taking a loan from a bank
  or by issuing bonds which is called debt
  financing
• Issuing stock is called equity financing
• Why Issue Stock?
• Does NOT require the company to pay back the
  money or make interest payments

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However

• Risks
• There is NO guaranteed return
• Some companies pay out dividends but theyre at
  the discretion of the company
• Taking on greater risk demands a greater return
  on your investment

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Source The Future for Investors by Jeremy Siegel
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What Causes Prices To Change?

• Stock prices change everyday by market forces
  (i.e. supply demand)
• The price movement of a stock indicates what
  investors think (based on future earnings
  expectations) a company is worth
• Earnings are the profits a company makes, and in
  the long run no company can survive without them

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3 Factors to Remember when Investing in Stocks

• 1- At the most fundamental level, supply and
  demand in the market determine stock price
• 2- Stock Price Number of shares outstanding
  Market Capitalization (the market value of a
  company)
• 3. Comparing just the share price of two
  companies is meaningless. Example Berkshire
  Hathaway is 96,000 a share and is considered
  inexpensive compared to Comcast at 35 a share.

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How To Read a Stock Table
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The Bulls and the Bears

• A bull market is when everything in the economy
  is great, people are finding jobs, GDP (Gross
  Domestic Product) is growing, and stocks are
  rising
• There is always a bull market somewhere Jim
  Cramer
• A bear market is when the economy is bad,
  recession is looming, and stock prices are
  falling

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Recap

• Stock means ownership in the assets and earnings
  of the company after all creditors have been paid
• Stock is equity, bonds are debt
• You can lose all your investment with stocks but
  you can also make a very good return if you
  invest in the right company
• Stocks consistently give the highest return of
  any asset class. The risk of stocks is lower than
  bonds over long time horizons of 20 years or
  longer. Jeremy Siegel

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Source The Future for Investors by Jeremy Siegel
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Recommended Reading

• Wall Street Journal (A2, A3, International as
  well as the Money Investing section)
• Barrons
• BusinessWeek
• The Economist
• Business pages of the New York Times and the
  Washington Post
• Please post questions and ideas on our website
  for discussion!
• http//finance.groups.yahoo.com/group/lafayetteinv
  estment/

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First Vote

• 2nd Annual Finance Day in NYC
• Overall, we want this to be a learning experience
  from your fellow club members.

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Portfolio Management

• Problem Currently we have over 18,000 of cash
  sitting in our Ameritrade stock account. This
  cash is only generating 1 interest each year.
• Proposal We transfer our cash to SHY (iShares
  Lehman 1-3 Year Treasury Bond Fund), an ETF

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Why?

• Higher Yield on Cash 3.7
• Risk
• None
• Management Fee
• Only 15 Basis Points

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Payouts
This data shows both historical and future
dividends as reported by fund sponsors to our
data
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Sell Proposal

• IMGC, Intermagnetics General Corp has been
  purchased by Royal Philips Electronics for 1.3
  billion in Cash

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Another Sell

• IVII, InterVideo Inc has been purchased by Corel
  Corp for about 196 million in cash.