Wall Street Warriors: Summarizing the March stock market
April 5, 2013
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We are both currently sophomores taking Mr. Page’s Investing in the Creative Economy (ICE) class, and we have decided to share what we have learned to try to help out fellow students. Blake was the winner, along with Michael Goodman, of the Massachusetts Stock Market Game, in which students compete to make the most money with their fake investments. Nate was the Massachusetts winner of the InvestWrite competition. Together, we will talk about different trends, industries, hot and not so hot stocks, as well as investing tips. We hope WHS students will use them to make money and save for important events in their lives. Without further ado, here is the first ever edition of Wall Street Warriors.
Since its collapse in 2008, the stock market has had its highs and lows, has been turbulent and has been typically hard to predict. Recently, however, we’ve been seeing a nice turnaround. On March 5, the Dow Jones Industrial Average (DJIA) closed at a record high of 14,254.38. According to Google Finance, we saw the Dow rise for 10 straight days, and the Standard & Poor’s 500, an average based on 500 companies that are publicly traded, skyrocketed as well. On March 28, the DJIA was at 14,578.54.
Along with the DJIA’s gains this past month, other major corporations like Apple (AAPL), which went up 2.83% (a big deal after their huge drop after the release of the iPhone 5) and Yahoo! Inc. (YHOO), which is up by 7.24%, are having more success. This rise in the market will increase investor confidence and cause more stock purchases, driving the prices higher. In the coming months, we predict that there will be a bull market. By “bull market,” we mean a market where the stock share price is continually rising.
Because of this rise in investor confidence, it is likely that people will buy consumer products and stocks with the market at this all-time high. Students who have taken Mr. Page’s ICE class, however, have the words “buy low, sell high” drilled into their minds. Buying when the prices are so high simply indicates that the investment will most likely fail to turn a profit because it has less room for growth.
Now, we are not advising you to hold off on buying any stocks during this upcoming bull market, but we are simply advising you to be cautious in your investments. Surely there is room for growth even during a bull market, but you still must be careful when buying at an all-time high.
What we are trying to get at is that to invest in a bull market, you must not simply blindly believe that the prices will continue to go up. It is more important to look for the companies that aren’t at an all-time high or aren’t following that upward trend. In other words, to make money from trading stock shares you want to find the best bargain on the market. You must evaluate your individual investments and decide whether there is room for growth in each one. It is okay to buy during a bull market, but make sure you are buying stocks that will continue to rise.
This can be harder than it sounds, but there are a few ways to help your odds: First, you can review a company’s resources. These resources make the company valuable to the market and can indicate the company’s true value.
For example, Steve Jobs was a resource for Apple. He was the company’s face and was an amazing innovator and marketer. With his death, a valuable resource was lost, and this is something to consider before you invest.
Second, you can look to see how much money per share the company makes, otherwise known as the company’s earnings per share (EPS). You will be able to determine how profitable and therefore potentially stable the company is.
Lets say Apple had a negative EPS. This would tell you they are losing money. This doesn’t always mean the company will go bankrupt, but it is something to be aware of when investing.
Third, you can check the market cap, the number of shares times the share price, and the price-earnings ratio (P/E ratio), which indicates the company’s current share price to its per share earnings.
A great way to learn more about evaluating stocks is to sign up for an investing business class in high school. WHS students have the opportunity to take Mr. Lehmann and Mr. Page’s ICE class. Stay tuned for our next post where we’ll cover more of the basics of the stock market, and feel free to leave comments below if you have any questions.