Assignment – Week One
THE STOCK MARKET GAME Part One – Choose Your Portfolio
For this assignment you will choose three publicly-traded stocks that you will follow all quarter.
For this week you will turn in the name of your stocks with an explanation as to why you chose them.
Don’t know anything about the stock market? Don’t panic. We’re keeping it very simple. Some of the links below will give you an introduction to stock market investing. Here’s what you do:
- Choose a method for picking stocks.
First get an overview of the stock market at about.com: There are many (probably hundreds) of strategies for choosing stocks. A very simple one that has been wildly successful in the hands of legendary mutual fund manager Peter Lynch is called “Buy What You Know”. Read about it at Introduction to the Stock Market. And “KISS”–Keep It Simple, Stupid! .
Using this method, choose FIVE of your favorite products or services and find out who makes/offers them, and who the parent company is, if there is one (this information should be available on the company web site, or google parent company: company name). The Ten Parent Companies That Make Your Favorite Brand may surprise you. You are looking for companies that are publicly traded in the United States.
You may also choose companies using your own system.
- Research these companies.
You are looking for information on these companies, their industries, and the economy in general.
The internet is a wealth of information-Google is your best friend here. Some places to start are:
- MSN Money at http://money.msn.com (use the search box)
- Yahoo Finance’s Stock Research Center at http://finance.yahoo.com/ marketupdate
- The New York Times and The Wall Street Journal both have web sites.
Take notes as you research for the written portion of this assignment (see step VI. below). You are trying to get a general idea about the company and its future performance. What products do they sell? How long have they been in business? Are they an industry leader? Are they introducing new products? Based on your experience with them, do they offer customers value (either in the form of a high-quality product or an appealing price, or both?) Who are their competitors?
III. From the five stocks you’ve researched, choose your THREE favorite companies—the ones you think that will perform the best over the course of the quarter.
- Look up the stock symbols and the current stock price on one of the financial sites (MSN’s is at http://investing.money.msn.com/investments/find-symbol). For example, the symbol for Microsoft is MSFT. Once you’ve found the symbol, click on it to find the current stock price.
- Buy your stock. Assume you are spending $10,000 on each stock, for a total portfolio value of $30,000. You will complete a table listing the date, the company you’ve chosen, the symbol, the price per share, the number of shares that you’ve “purchased” with your $10,000. For this assignment we’re not worrying about sales commissions and other transaction costs.
Here’s an example:
- Explain your reasons for choosing this stock. In two or three well-written paragraphs, cover the following points for each stock you’ve chosen:
- Brief company profile for each stock you own during the game. Include a -summary of the company’s products, where it operates, strengths and weaknesses – especially in comparison to competitors.
- What first led you to this stock (you like one of their products, etc.)?
- How will current economic conditions and trends affect this industry? (E.g., aging baby boomers will boost pharmaceutical sales). Here’s a list that may help from howthemarketworks.com.
- Are there any events within the company that may affect performance positively or negatively (new product introduction, a lawsuit pending that’s been in the news, etc.)?
Note: Your analysis should be written in narrative (or paragraph) style, summarizing your research. Do not merely copy and paste quotes off the internet.
Also explain why you rejected the other two stocks answering the same questions.
NOTE: For the last Assignment of the quarter you will look up the stock price again and compute your ending portfolio value. You will briefly discuss your stock’s performance and what you think influenced it, including current events that affected the economy and stock market in general, and your company in particular. You will turn this in, along with an updated table that shows the return on your portfolio.