Transcript STOCK - Classifications

STOCK - Classifications
• BLUE CHIPS
• GROWTH STOCKS
• INCOME STOCKS
• CYCLICAL STOCKS
• DEFENSIVE STOCKS
• VALUE STOCKS
• PENNY STOCKS
BLUE CHIPS
• Stocks of the biggest companies in the country.
• “Blue Chip” comes from poker where the blue chip carries the
highest value.
• Usually are large, established firms with a long record of profit,
growth, dividend payout.
• Usually have a great reputation for QM, products, and services.
• Generally Blue Chip stocks are the safest stocks to invest in.
Examples include:
IBM, Coca-Cola, General Electric, Microsoft
GROWTH STOCKS
• Stocks of companies with profits that are increasing quickly.
• Stock price will increase based on the profit increase.
• Growth companies tend to spend lots of money on research and
development rather than putting the profits back into the company
FYI – potential to make quick money is there but the risk is high!
INCOME STOCKS
• Stocks of stable companies that pay higher-than-average dividends
• Usually large, established companies with stable earning.
FYI – most large Utility company stocks would be classified as
income stock.
CYCLICAL STOCKS
• Stocks that move up or down in sync with the business cycle.
• Earnings and stock prices will increase or decrease with changes
in the business conditions or cycle.
Examples – Automobile, Housing, Steel, and Industrial Equipment
companies.
DEFENSIVE STOCKS
• Stocks that don’t change based on the business cycle.
• Tend to be generally stable and relatively safe in declining
markets.
• Industries that produce necessity items/goods/services.
Examples – Food, Drug, and some Utilities companies.
VALUE STOCKS
• Stocks that are currently selling at a low price but are
considered to be a undervalued.
• Usually have good earnings and potential growth but their
stock prices just do not reflect it.
FYI – Investors who buy value stocks believe that these
stocks are only temporarily out of favor and will soon be
trading at higher price.
PENNY STOCKS
• Stocks that are priced very low.
• Tend to be very risky.
• Issued by companies with a short or erratic history of both
revenues and earnings.
• Typically valued under $5.00
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Research Assignment – Stock Worksheet