Creating a Stock Journal
USE THE TEMPLATE THAT I WILL PROVIDE AND ONLY WRITE FOR WEEK TWO
Scenario
Capital markets and the ability to raise funds for corporate uses are essential to the U.S. economic system. For this assignment, imagine you have $25,000 to invest in U.S. companies. You are buying used stock.
You are investing, or buying, the stock because you believe the three companies you chose will make money and pay you a dividend in cash. Each share of stock that you buy entitles you to any dividend declared and a vote at the annual stockholders' meeting.
The stocks you choose also allow you the ability to earn your money back by selling the stock. Of course, investing in stocks is risky, and there is the possibility that the stock you buy will be worthless when you want your money back. The company is not obligated to give you any of your money back. You will only get your money back if another investor wants to buy your stock.
Instructions
Using the above scenario and the resources listed below, complete the following directions for your Week 2 Stock Journal entry:
Select three publicly traded U.S. companies, using your knowledge and experience, and make sure you are practicing good diversification. Diversification means you are not selecting three companies from the same industry. For example, you would not want to choose Target, Walmart and Sam’s because they sell the same types of products. A better choice would be Amazon, Uber, and Kroger, because they sell different products and/or services.
Ideas for sources of information: Go to Statistics, Surveys and Government Resources to find such companies. For stock price information, you may use the New York Stock Exchange, NASDAQ, Yahoo! Finance, or The Wall Street Journal Online.
Determine how you will divide $25,000 across the three companies (for example, $10,000 in Company 1, $10,000 in Company 2, and $5,000 in Company 3).
Decide the amount you are investing in each company. You do not have to provide any analysis to justify your decisions.
Provide a reason for picking each company.
For example, you might invest in Ford because that company gets a lot of your money, and you hear that Ford is doing well and will continue to do well.
Identify the number of shares you are buying, and the price of the shares you are buying for each company.
Once you decide the companies and the amount you will invest in each company, determine how many shares you can buy. For example, if Company 1 is selling for $42.16, then you may buy $10,000/$42.16, or 237.19 shares. But you cannot buy a part of a share, so you decide to buy either 237 or 238. In this example, you buy 237 shares at $42.16 per share, investing $9,991.92. You won’t be able to buy exactly $10,000, or $5,000, or $25,000, but it will be relatively close.
Week 2 Stock Journal
By (Name)
FIN100M: Principles of Finance
Instructor's Name
Date
Week 2 Stock Journal
Based on the scenario, the three publically traded US companies I would select include Microsoft, Tesla, and Wal-Mart. These companies will help me earn my money back by selling the stock. So out of the $ 25,000, I would invest $ 10,000 in Microsoft, $ 8,000 in Tesla, and $ 7,000 in Wal-Mart.
Reasons for Picking Microsoft
The primary reason for picking Microsoft Incorporation is growth in cloud services. Cloud is the company's most prominent and fastest-growing business, with about 34% growth last year (Nasdaq, 2020). I hear investors generally consider cloud services the future of enterprise computing, and Microsoft's Azure's offering is the leading player in the space. Currently, it is available in over sixty regions worldwide, which strengthens the organization's competitive position (Investorplace.com, 2021). Therefore, an increase in Microsoft's sales cloud increases the company's overall profitability, making it one of the strongest choices for investment. I also selected Microsoft due to its free cash flow and dividends. The company's lucrative software deals have produced high-profit margins and free cash flows. In the last quarter, Microsoft increased free cash flow by about 17%, bringing the total to around $50 billion over the last four quarters (Investorplace.com, 2021). That cash generation level also makes Microsoft an excellent dividend stock. Over the last decade, the company's quarterly dividend surged from $ 0.13 per share to $ 0.56, bringing the annual payout to $ 2.24 per share (Nasdaq, 2020). That provided investors a dividend yield of 0.94% at the time of writing (Nasdaq, 2020). The software giant is established and extremely profitable, so it is the perfect technology stock for my portfolio.
Reasons for Picking Tesla
The reason for selecting Tesla is its sales growth. The company sells cars as quickly as it can manufacture them, and this is boosting its revenue. In previous years, Tesla stock was buoyed almost entirely by top-line revenue growth and the increase in the number of vehicles sold. Last year, it achieved its target of 500,000 sales (Lisa, 2021). This ...