Investing 101

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Investing 101

• Investing for the Long Term
• Steven Novakovic
• David Rogal

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A Penny Saved is a Penny Earned

• When is the right time to start saving?
• The power of compound interest
• What are my best investment options?
• Risk attitude determines your investment vehicle
• A guide to building a successful portfolio
• Think long term and stay diversified

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The Power of Compound Interest
FV (1r)t
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The Numbers do not Lie!

• If you invest 1,000 today, with a modest return
  of 8 per year, it would be worth . . .
• 1,166 in two years
• 2,159 in ten years
• 6,849 in twenty-five years
• 46,902 in fifty years
• Your investment would double in nine years and
  grow more than 37 times by the typical retirement
  age of 65

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Low Risk, Low Return

• Savings Accounts
• 1 3 per year
• Checking Accounts
• 1 3 per year
• Certificates of Deposits (CDs)
• 1 4 per year
• Depends on time commitment

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Low - Medium Risk, Medium Return

• Treasury Bonds
• 3 5 per year
• Municipal Bonds
• 4 6 per year
• Tax sheltered
• Investment Grade Corporate Bonds
• 4 7 per year

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Medium Risk, Medium High Return

• Index Funds
• SP 500, 15 years, AAR 12 per year
• Mutual Funds
• 8 10 per year, average
• Fund of Funds
• 5 7 per year
• REITs
• Variable

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High Risk, High Return

• Equities
• IPOs
• High Yield Bonds
• Derivative Instruments Hedge Funds
• Angel Investing
• Speculative Real Estate
• Exchange Markets
• Developing Markets

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• With the knowledge of various investing
  instruments and their associated risks...
• Begin to construct your personal portfolio around
  
• Specific risk attitude
• Capital constraints

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Equities

• Common Stock
• Voting rights
• Preferred Stock
• No voting rights
• Dividend every year

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Investing in EquitiesPortfolio Management

• Value vs. Growth
• Large Cap vs. Small Cap
• Long Term vs. Short Term
• Risk Profile
• Industry Diversification

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Before you Invest...

• Analysis and Research
• Website
• Annual / Quarterly Reports
• News
• Financials
• Numbers
• Industry
• Economy
• Lookout for Red Flags

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Take the Next Step...

• Come to CIC Meetings
• Check out the Parker Center
• Pick up the Wall Street Journal
• Watch the News
• Macro trends govern overall movement
• Courses, books, periodicals
• Internet

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Cosi Inc.
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Profile

• Restaurant/coffee chain known for its sandwiches.
• Recently began to franchise.
• Federated Department Stores will be using them to
  expand the consumer experience in Macys stores.

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Income Statement
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Balance Sheet
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Marvel Enterprises Inc
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Profile

• Entertainment company with a proprietary library
  of over 4,700 characters.
• Includes Spider-Man, X-Men, Hulk, Blade,
  Daredevil, The Punisher, Captain America, The
  Fantastic Four, Silver Surfer, Iron Man.
• Makes most of its revenue from licensing these
  characters.
• Revenue also comes from toys and from comic book
  sales.

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Income Statement
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Balance Sheet
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Microsoft
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Profile

• Develops, manufactures, licenses and supports a
  wide range of software.
• Windows has 95 of the desktop market
• That means any new product has 95 market
  leverage
• Research and development is 4.66 billion!
• 32 billion in revenue.

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Income Statement
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Balance Sheet
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Pixar Inc.
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Profile

• Pixar is a digital animation studio with the
  creative, technical and production capabilities
  to create a new generation of animated feature
  films.
• Has created and produced Toy Story, A Bug's Life,
  Toy Story 2, Monsters, Inc. and Nemo that were
  marketed and distributed by The Walt Disney
  Company (Disney).
• Have hit a rough patch with Disney and a new
  contract is on the horizon.

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Income Statement
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Balance Sheet
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Vodafone Group
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Profile

• Provides a range of mobile telecommunications
  services, including voice and data
  communications.
• Largest telecom in the world.
• 28 nations focused in America, Europe and Asia
• 62 billion revenue.
• 45 interest in Verizon Wireless.

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Income Statement
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Balance Sheet
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Case Study on Pixar Animations (PIXR) Jim Cao
Stop Limit Set _at_ 74
Buy Presentation Limit Set at 62.00
Bought at 62.00
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Initial Buy Reasons

• Premium Valuation Warranted
• Record of big hits Highly profitable
• No debt Safe
• King of the hill
• Solid Management
• Steve Jobs and PIXR / AAPL
• Anticipation of New Deal with DIS or some other
  studio that would change the distribution of
  profits from films.
• Predicted run up for The Incredibles

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What Has Changed?

• Valuation fairer
• Finding Nemo and other movies set DVD sales
  record over the summer
• Still free of debt
• Still undisputed leader, but some competitors
  getting stronger.
• Lucas in asia
• DreamWorks Shrek II
• Disney?
• Solid Management
• Steve Jobs is a lucky , smart man
• Eisner going home in September 2006 (Could be
  even earlier now)
• Run up for The Incredibles is incredible.
• CIC is richer.

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Careers in Financial ServicesIndustry

• Jon Gilman

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KEY DECISIONS

• Buy-Side or Sell-Side?
• Sales Trading or Investment Banking?
• Fixed Income or Equities?

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Buy-Side or Sell-Side

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Buy-Side

• Mutual Funds
• Private Wealth Management
• Hedge Funds
• Institutional Investors
• Pension Funds

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Sell-Side

• Investment Banking
• Trading
• Research
• Sales
• Capital Markets

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Investment Banking or Trading

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Investment Banking

• Mergers Acquisitions
• IPOs, Secondary Offerings
• Debt Offerings
• Recapitalizations
• Leveraged Buyouts
• Connecting companies with capital

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Trading, Research and Sales

• Executing Trades for Clients
• Researching Stocks and Bonds
• Selling Clients New Issues or Investment Ideas
• Forecasting Economic Data

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Equities or Fixed Income

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Equities

• Priced off Earnings Capacity (Growth Prospects)
• Very Liquid Market
• Analyze Business Strategies and Growth Plans
• More Volatile/Risky

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Fixed Income

• Priced off Cash Flow
• Includes Currencies Commodities
• Less Liquid Markets
• Mathematical
• Much More Product Variety

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Derivatives, Options, Swaps

• Integrated into both Fixed Income and Equities
• More Technical
• Hedging Devices

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Resumes and Interviews

• Words of Advice

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Resumes/ Interviews

• Get involved with Clubs (CIC Preferably)
• Differentiate Yourself
• GPA is NOT All That Matters
• Interviews Practice, Practice, Practice
• Know Your Story
• Know the Job Youre Applying For