Invest Ed. Students Tracking and Researching the Stock Market. Danya Meadows, Junior. Mr. Bob Bailey, Personal Financial Literacy

Transcription

1 Invest Ed Students Tracking and Researching the Stock Market Danya Meadows, Junior Mr. Bob Bailey, Personal Financial Literacy Weatherford High School Custer County Northwest Region Fall 2016

2 What s this doing in here by the door? I heard that from my parents more than once while growing up. They were asking about my tornado bag that I would pack with my most beloved childhood possessions when there was severe weather nearby. The usual inventory of this bag included my Nintendo DS with games to play, toys, and as I was older, my cell phone. I wasn t particularly afraid of the storms but wanted to be prepared in an emergency situation. Danya England was (and still is occasionally) a nickname given to me as a result of the interest I had in meteorology. Gary England was the inspiration behind the jest, as he was one of the nation s most famed meteorologists at the time and worked right here in Oklahoma. Now as a young adult, my fascination with atmospheric sciences continues to flourish, and I have even more admiration for the field. Through the adolescent years of rapidly changing career aspirations we all go through, one thing remained constant: my dream of becoming a meteorologist. One step on this journey is securing a college degree in meteorology, and it s commonly known that higher education is a costly matter; I plan to attend the University of Oklahoma. But this isn t sufficient for me because I always aim higher and push to achieve more. I also want to run my own business that expands and improves the field. I believe that new advancements can further the prediction and understanding of atmospheric patterns, and I can be someone who helps accomplish that growth. Obviously this requires having financial knowledge and being able to work with money. Previous to taking personal financial literacy, I had little understanding of the financial realm, but I m optimistic that the Invest Ed program will provide a useful platform of knowledge to build on throughout my life and help me reach my dream of working as a meteorologist. 1

3 Initially, I was intimidated by the research process that faced me, as I had limited knowledge of the financial world. But this soon subsided as I became more acquainted with the material. To get a footing in the research task, I first prepared a list of frequently used products in my household. I then sought my parents financial advice and questioned them on their retirement plans and experience with the stock market; they told me about older companies on the market. Our discussion steered into the direction of college where I learned of more financial options for my upcoming years in college. To begin the research process on companies, I turned to Yahoo Finance for statistical data. Finviz stock screener assisted me in discovering stocks in a specific level of market capitalization (market cap). This helped me navigate different sectors and industries to find new, interesting areas to invest in. As a novice in this field, I wanted a second opinion. I referred to The Motley Fool, a website that provides experienced insights on stocks, to learn more about specific businesses. During this research, I recorded data like beta, market cap, dividend yield, and one year target estimate price as well as the total return rate for each investment. This data was used to make my criteria, which were: businesses that had an estimated return rate (ERR) of at least five percent, a maximum beta of two, a mid cap or above, a dividend yield greater than zero, and companies that had been established for at least two years. That being said, I did not completely follow the criteria, as I wished to experiment with the market. For example, I chose some with an ERR lower than five percent, such as Whole Foods Market; Delta Air Lines, Inc. had a relatively high beta, but I wished to see how it fluctuated with the market. These strategies combined with putting money into multiple sectors helped me diversify my portfolio, to help prevent a large capital loss. My goal for the course and project is to take with me a higher understanding of the financial realm and the capability to apply it when 2

4 needed. Ideally, I would also like to excel in my portfolio earnings and become more confident in future financial situations as a result of this course. From all the companies I decided to invest in, I had a particular interest in Carnival Corporation PLC (public limited company). I recently went on my first cruise on their most popular line, Carnival, and it was quite an impressive experience. This prompted me to learn more about the corporation and the cruise industry itself. I conducted an interview with a local Edward Jones financial advisor, Thad Wolgamott, and learned useful information about this investment. He and I discussed generational factors affecting their sales such as baby boomers being more likely to travel after retirement as well as global influences like political tension. Not only are they profitable, but they are also the world s largest cruise company according to their website. The company is based out of Miami, Florida, has around ninety-five thousand full time employees, and was founded in It has operations in multiple continents, and their fleets visit about 700 ports around the world. Carnival Corporation PLC owns ten cruise lines, one hundred ships, and eleven hotels, boasting a range of travel accommodations as well as excursions for their customers. They also accommodate an estimated eleven million guests annually. Their website states that their sales make up fifty percent of the global cruise market, and that they generated three hundred and seventy thousand jobs in 2014 alone. I found an article on The Motley Fool written by Rick Munarriz where he claims that Carnival s stocks are outdoing their biggest rival, Royal Caribbean, this year. As well as handsome statistics, Carnival Corporation PLC s data fit well in terms of my criteria, as it had a beta under one and a dividend yield of nearly three percent. Yahoo Finance analysts gave this stock a strong recommendation rating; seven out of eight advised buying stocks, and the other suggested holding them. The price per earning ratio was about sixteen, a favorable quantity. For this investment, I calculated 3

5 an estimated capital gain rate of twenty-three percent. After conducting in depth research, I believe that this business has a substantial potential for growth. The corporation recently advertised the latest and largest addition to their fleet, with another new vessel coming in This shows likely expansion of their company. On top of that, their earnings were twenty-five percent higher in 2014 than in 2013 and forty percent higher from 2014 to All of these qualities and my own personal experience led me to research and invest in Carnival Corporation PLC. I believe that this investment will yield a large capital return in the time to come. While in my personal finance course, I ve learned about various types of fraud and ways to avoid money loss in these plots. I watched brief documentaries on frauds produced by Invest Ed to discover real cases that occurred right here in Oklahoma. Through these documentaries and my own research, I became familiar with Ponzi schemes, affinity frauds, and Internet frauds. Of these types, I was particularly interested in Ponzi schemes because my parents once fell victim to one. They told me that they invested money in a business claiming to produce new software for casino machines. Correspondence came through the mail telling how well the investments were doing and how much the company was growing. My parents went on to inform me that they never received any returns, and it was discovered that the business had not been investing the money at all. It was being shown around to new investors, a classic Ponzi scheme. Fortunately, they did not suffer a major capital loss, as some do in these fraudulent investments. Another sort of financial fraud that I brought to light in my research was affinity fraud. Before learning about these, I failed to realize how simple it is to conduct these schemes on groups of people by preying on a sense of unison and connection. A third type of fraud which is very common today is Internet and social media fraud. In my opinion, this is one of the easiest ways to scam people since the Internet is such an immense part of the world now. It provides a 4

6 veil of anonymity along with a widespread platform for promotion. Every day I scroll past countless advertisements and receive hundreds of spam s that could be fraudulent. It s easy to see how so many online scams take place all around the world every day. I saw while watching Casanova Con by Invest Ed that Internet frauds can also target people who are geographically spread apart, making it harder to catch the scammer. I m pleased to have learned about different types of fraud present all around me and ways to detect it. I believe that this information will help me keep my investments safe in future affairs. When putting money into any type of investment, there is a level of risk to be considered. I consider myself to be moderately risky, but slightly less when it comes to finances. Although in other aspects of my life, I tend to be a bit more intrepid. One s portfolio is typically unique because everyone has different interests as well as varying amounts of risk he or she is willing to assume. That being said, my investments were influenced by my risk tendencies. I wanted to avoid highly volatile stocks; therefore I set a beta criterion of less than two. As previously discussed, I invested in a company with a beta of about six, which has actually paid off seeing that it s currently one of my highest earning stocks. This was an experiment of volatility and not so much of plain daring. Another way I approached minimizing risk was diversifying my investments. I spread out my money into various sectors and industries, the strategy of horizontal diversification. If I were looking to invest seriously, I would also look to vertical diversification; this also decreases risk because it distributes capital into an array of investments. Examples of some are: government and corporate bonds, certificates of deposit, stocks and real estate. I sold all of my holdings in Wells Fargo & Company after their stocks plummeted from the recent controversy, then reinvested the money I gained to minimize loss. These carry varying levels of risk, all the way from zero percent to total loss. Another factor that plays into 5

7 risk is the sturdiness of a business; I tend to favor investments that have been in existence for at least a decade or so because I believe they re less risky than a newer one. Overall, my portfolio was somewhat miscellaneous, but it stayed near my criteria parameters. After completing the Invest Ed program, I hold a higher understanding of the value of money. Also, I now have my own financial tornado bag filled with knowledge I ve gained through the Invest Ed program to help me better recognize fraudulent investments, understanding of different types of schemes and how to protect against them, new money management skills, and diversification strategies. I m now more mindful of long term investments like college and retirement funds. Learning that beginning to save now, even as a teenager, will be more beneficial farther down the road has altered my view on extended financial investments. Along with saving, I was introduced to new ways of diversifying investments as a means of minimizing risk. These findings have lent me optimism in achieving an academic career at the University of Oklahoma and managing my own meteorological business. I ve gained a better understanding of the stock market and the whole financial world that I lacked. With the knowledge that I ve acquired in the Invest Ed program, I have more confidence in my future and can work on achieving my dream of becoming a meteorologist more worry-free. Who knows, maybe one day Danya England will be a household name around the country. 6