dr.zakaria hegazy: investment lecture 2

8/8/2019 Dr.Zakaria Hegazy: Investment lecture 2

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Dr.Zakaria Hegazy, CT

Module Code: BFIN04H02

Title: Investment

Lecture: 3 (Markets and Transactions)

By: Dr. Zakaria Hegazy, CT


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Todays Overview 9:00 Revision of the previous lecture

9:10

10:00 Break (10 minutes)

10:10

11:00 office hours (2hrs)

1:00

2:00

4:00 End of the day


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Markets and Transactions

Learning Goals

1. Identify the basic types of securities markets anddescribe the IPO process.

2. Explain the characteristics of broker markets.

3. Understand dealer markets, alternative tradingsystems, and the general conditions of securitiesmarkets.


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Markets and Transactions Learning Goals (contd)

4. Review the key aspects of global securities markets,including the risks associated with foreigninvestments.

5. Discuss trading hours and regulation ofsecurities markets.

6. Explain long purchases, margin transactions and shortsales.


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Contents 9:00

9:10

10:00 Break (10 minutes)

10:10

11:00 office hours (2hrs)

1:00


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10 minutes workshop Look at the following picture.

Discuss with your group the mechanism of trading inthe financial market.

One of your group presents the results.


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Buying and selling in the stock market


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Explain The Stock Market Terms found onquotation pages


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A: is???????????????????????????????


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A: This is the Ticker Symbol. Every company, when listed, will be assigned aticker symbol. In ABC Ltd's case, it has been assigned ABCC.


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B.


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B: This is the Market Price of the latest transaction. When the market is

closed, this number shows the last transacted price of that particular

day known as the closing price.


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B: This is the Market Price of the latest transaction. When the market is

closed, this number shows the last transacted price of that particular

day known as the closing price.


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C:


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C: This shows how much the price has changed relative to last session's

closing price. On this particular day, the price of ABCC's shares dropped by

$1.12 from last session's closing price of $58.44 ("E")


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C: This shows how much the price has changed relative to last

session's closing price. On this particular day, the price of WMT

unchanged


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D:


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D: This is the amount in C as a percentage of the last closing price

("E") i.e. 1.12/58.44 x 100% = 1.92%.


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D: This is the amount in C as a percentage of the last

closing price ("E") unchanged for WMT


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E:


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E: This is ABCC's last market sessions's closing price or $58.44.


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E: This is WMTs last market sessions's closing price or $54.43.


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F:


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F: This is the volume or the number of pieces of shares that

changed hands on this particular trading session. During this

session, 9.81 million ABCC shares were bought and sold.


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F: This is the volume or the number of pieces of shares that

changed hands on this particular trading session. During this

session, no WMT shares were bought or sold.


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G:


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G: The bid refers to the price offered by a potential buyer. The bid

volume refers to the number of shares that potential buyers want

to purchase at this price.


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G: The bid refers to the price offered by a potential buyer. The bid

volume refers to the number of shares that potential buyers want

to purchase at this price.


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H:


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H: The ask refers to the price that a potential seller would like to sell the stock

for. The ask volume refers to the number of shares that potential sellers want

to sell at this price.


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H: The ask refers to the price that a potential seller would like to sell the stock

for. The ask volume refers to the number of shares that potential sellers want

to sell at this price.


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The Bid-Ask spread is


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The Bid-Ask spread is the difference between the bid price and

ask price. If the bid price is $55 and the ask price is $54, the bid-

ask spread is $1.


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I:


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I: The 52-week high/low is the highest price and the lowest pricethat the stock price has reached in the immediate preceding 52

weeks i.e. the year-to-date. So in the past 52 weeks, the highest

price that ABCC has reached was $63.69 and the lowest was

$46.64.


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I: The 52-week high/low is the highest price and the lowest price

that the stock price has reached in the immediate preceding 52

weeks i.e. the year-to-date. So in the past 52 weeks, the highest

price that WMT has reached was $63.85 and the lowest was

$42.50.


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J:


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J: The charts give you a pictorial representation of historical price

trends. MSN moneycentral provides a useful tool: you can choose

how far back you want the chart to go.


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J: The charts give you a pictorial representation of

historical price trends.


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K:


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K: A dividend is a payment of cash by the company to its shareholders. The dividend shows the

last annual dividend paid, in this case, ABCC paid each common shareholder $1.50 of cash per

share. The yield expresses this amount as a percentage of the closing price. In this case, it is

roughly $1.50/$57.32 x 100% = 2.57%.


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K: A dividend is a payment of cash by the company to its shareholders. The dividend shows the

last annual dividend paid, in this case, WMT paid each common shareholder $0.95 of cash per

share. The yield expresses this amount as a percentage of the closing price. In this case, it is

roughly $0.95/$54.43 x 100% = 1.77%.


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L:


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L: This is the all important earnings per share or EPS. In this case,ABCC's profit for the year allocated to each share results in $2.19 a

share. This earnings belong to shareholder. It is either paid out to

the shareholder as a cash dividend or reinvested into the

business.


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L: This is the all important earnings per share or EPS. In this case, WMT's profit

for the year allocated to each share results in $3.36 a share.


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M: The Historical Price-Earnings Ratio or P/E ratio tells you how

much you are paying for each dollar of this year's earnings at the

current share price. In this case, the P/E ratio is calculated:

$54.43/$3.36("L") and yields approximately 16.10. It is an

indication that you are probably paying about $16.10 per dollar of

earnings that the company managed to earn in the past year.


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N:


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N: The Forward P/E is slightly different from "M" because it is basedon the analysts' forecast of the coming year's EPS. In this case, the

analysts expect that ABCC will earn $3.39 per share and therefore

yield a forward P/E of 16.90. Therefore, if you paid $57.32 for ABCC's

shares in this market, it is an indication that you are probably paying

about $16.90 for each dollar ofexpected earnings. Note that this is

just a forecast. Many things can happen between now and the future

that cause the business to either overperform or underperform

expectations.


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N: The Forward P/E is slightly different from "M" because it is based

on the analysts' forecast of the coming year's EPS. In this case, the

analysts expect that WMT will earn $3.53 per share and therefore

yield a forward P/E of 15.40. Therefore, if you paid $54.43 for WMT

shares in this market, it is an indication that you are probably paying

about $15.40 for each dollar ofexpected earnings.


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O:


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O: This is the total number of shares of common stock issued by

the company and currently in the hands of investors. To calculate

EPS ("L"), the total profit is divided by "O". So ABCC has a total of

1.13 billion shares of common stock currently outstanding.


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O: WMT has a total of 3.93 bill ion shares of common stock

currently outstanding.


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P:


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P: The market capitalization or "Market Cap" is the total market

value of a company. It is given by the current stock price ($54.43)

multiplied by the total number of shares outstanding ("O" 3.93

billion shares) to give $214.13 billion (allowance for rounding).


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Viola! Now you know how to read the quotation tables on MSN

moneycentral and your newspaper! That's a lot of stock market

terms eh? Let's take a look at more stock market terms used.


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10 minutes

http://www.beginner-stock-investing.com/stock-market-terms.html


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Other Commonly Used StockMarket Terms People often use stock market terms that seem strange to non-investors. Here are some of these

stock market terms. Bull Market: A bull market is one where stock prices have been showing a rising trend and is

expected to keep rising. Market participants are usually optimistic. Bear Market: This is the opposite of a bull market; a bear market is one where there is a

sustained stock price decrease and is expected to keep falling. Market participants are usuallypessimistic.

Fundamental Analysis: The process of selecting stocks by looking at the financial position,profitability and economic strength of the underlying business. It usually involves the analysisof the business and its financial statements before concluding if the business represents a goodpurchase relative to the price paid. This is a business-like approach and is the main focusof this website.

Technical Analysis: The study of past price movements and buy-sell volume of a stock, usingit as a basis to predict future short to medium term price movements. The speculator then triesto profit from such predictions. I personally do not think Technical Analysis has any meritand it will not be presented on this website .

"Long": When a person says he is "going long" on a stock, he is positioned such that he profitswhen the stock's price increases.

"Short": When a person says he is "going short", he profits when the stock's price falls. People

usually short a stock by borrowing shares of stock from a brokerage firm and selling them first(say at $50). They profit when the price of the stock falls as they buy them back at lower prices(say $45) to return the borrowed shares of stock to the brokerage firm, making the difference($5 profit).


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Have a nice break,

we will start the

class after 2 hours


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Now I know: Short term vehicles include:

Tb C..D. D. A S..EE s..B. M.M.MF Cpwhich include: D., Ch.,CDs and P.N

C..St. F.I..S. Which include: B.., Ps, and CS M.f. De.which include: o.. And F. Short-term investment are important for L.. There are 7 st.for in.


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Afternoon Review


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Thanks for your Great Effort Today!

Next week lecture :

Identify the basic types of securitiesmarkets and describe the IPO process.

Explain the characteristics of brokermarkets.

Understand dealer markets, alternativetrading systems, and the generalconditions of securities markets.

Evaluation of the day

dr.zakaria hegazy: investment lecture 2

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