Question

Cloud Nine provides its clients with a monthly newsletter that offers recommendations about stocks to buy or sell. Doug Layton, Cloud Nine’s president, has asked your opinion on whether dot-com stocks might be good investments for the future. He specifically mentioned Google, eBay, Amazon.com, and Yahoo!, but he said you could suggest other companies. Doug wants you to do some Internet research to learn more about these Web-based companies and their prospects. You can use a search engine or start by visiting the Web sites of publications such as Forbes, Fortune Magazine, Business Week, or The Wall Street Journal, among others.

To perform this task:

1. Find out how the stock market works and how stocks are valued.

2. Research the Web to find IT companies whose stocks are traded publicly.

3. Choose two companies and pretend to buy $5,000 of its stocks.

4. Explain why did you choose those companies?

5. What is the current price per share? and what is the total value of investment per stock?

6. Report each week to your class.

Answer 1

1. Find out how the stock market works and how stocks are valued.

Not sure if anyone in his / her entire life had been able to figure out how stock market works. However, one can safely say that a stock market is a trading platform that brings the buyers and sellers of the stocks together. Sellers are willing to sell the stocks at their ask prices. Buyers put across their bid prices. An exchange just matches th bid and ask price and enables the trade to take place.

Stocks are valued based on multiple methods like discounted cash flow, relative valuetion, comparable transaction valuation, net asset value and what not. However their prices fluctuate on a particular day driven by their demand and supply on the exchange.

2. Research the Web to find IT companies whose stocks are traded publicly.

Some of the American information tech companies whose stocks are traded publicly are :

• Microsoft
• IBM
• Oracle
• SAP
• Hewlett-Packard Co.
• Fiserv
• Intuit Corp.
• VMware, Inc.

3. Choose two companies and pretend to buy $5,000 of its stocks.

Let's choose Microsoft and Hewlett-Packard Co.

4. Explain why did you choose those companies?

• Both the companies are leaders in their respective field.
• I had been using their products and servies since my college days.
• I understand their products and services.
• I have an understanding of their business models
• They have touched the lives of millions and they make product for masses.

5. What is the current price per share? and what is the total value of investment per stock?

Stock	Symbol	Price, P ($ / share)	Nos. of shares bought, N	Investment value = P x N
Microsoft	MSFT	218	22	4,796
Hewlett-Packard Co.	HPQ	19	263	4,997

6. Report each week to your class.

No one on this planet can help you here. You have to report this yourself.