Common Stock Investing Appendix B, Part VI

1. Are Stock Market Indices and Stock Prices Leading Economic Indicators? Is this Information Useful? Common Stock Investing Appendix B, Part VI

2. Here’s what you get when buying Stock Committee on Uniform Securities Identification Procedures OWNERSHIP IS FREELY TRANSFERABLE

3. How are Stock Prices reported? National Association of Securities Dealers Automated Quotations 3,000 US/Foreign Growth/Technology Stocks The Dow 30 Largest and Most Widely Held Public Companies Standard & Poor’s (S&P) 500 Large-Cap (>$3B) Companies traded on NASDAQ and NYSE

4. Why is a Stock’s Price (Value?) what it is? EFFICIENT MARKET HYPOTHESIS Stock Prices “Reflect All Publically-Available Information” Theory: “Prices are Never Under- or Over-Valued” CAN’T BEAT MARKET PRICE= What Market (Seller) Thinks it’s Worth VALUE= What YOU (Buyer) Think it’s Worth

5. "I'd be a bum in the street with a tin cup if the markets were efficient."  Isn’t it all about “Interpreting” Information? How does Information effect a Firm, its Industry and the Economy?

6. What’s the VALUE of an Asset (Stock)? RISK (effects Value) If, When and How Much CA$H EXPECTED RATE OF RETURN Risk Aversion (%) • Future CA$Hto be Received while Owning Asset • For Stockholders = Company’s Future Net Income

7. Net Income (EPS) Expected Rate of Return =Value Compare Your Value to Market’s Price If Price less* than Value, then Buy * How much Less? Factor in Margin-of-Safety (Contingency)

8. If Expected Rate of Return measures Risk, How to Calculate it? Risk-Free Rate of Return (2 Yr. Treasury) + Systematic Risk (Inflation – CPI Change) + Equity Risk Premium (Firm Specific Risk) Total = Rate that Compensates for All Ownership Risks

9. How is a Stock’s Price reported? $70 to $90 = 29% Gain ttm = Twelve Trailing Months EPS = Earnings (Net Income) Per Share Don’t Forget Cash Dividends