The Queen’s Commerce Trading Competition

General MeetingNovember 3rd 2009

Prize StructureI. Overview

Prize Structure

First 1,000

Second 500

Third 250

Fourth 150

Fifth 100

First Risk Adjusted 250

Top stock pick 200

Best short 200

Best option play 200

Buy and hold winner 200

Gainer of the month 1 150

Gainer of the month 2 150

Gainer of the month 3 150

Gainer of the month 4 150

Trading vs. Investing

Timeframe

Decision making methods

Are you a trader or an investor?

Table of Contents

What is an ETF?

Tracking mechanism: Indices, Commodities, Bonds, Currency

Trades on an exchange

How you can use them: leverage, themes, “safer” interim/long term investments

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Limit Buys and Stop orders

Limit Buys Allows you to purchase shares at a designated price Once stock price reaches your lower limit, order gets

executed

Stop Orders Allows you to sell shares at a designated price Once stock price reaches your upper limit, order gets

executed

Helps limit a loss or lock in profit Especially helpful if you do not monitor your portfolio

regularly

Table of Contents

Introduction to Capital Markets

Dow Jones Industrial Average

Founded by Charles Dow – 1986 Business associate/statistician Edward Jones Now Dow Jones & Company (WSJ, Barron’s etc.)

30 largest and most widely held US public companies Trade on NASDAQ and NYSE

I. Overview

Dow Jones Industrial Average Recent Changes

June 8, 2009 - GM and Citigroup replaced by The Travelers Companies and Cisco Systems (third NASDAQ Company)

September 22, 2008 – AIG replaced by Kraft Foods Calculation

Scaled average Sum of prices / divisor Nov. 2 divisor = 0.132319125

Flaws Frequently quoted Only includes 30 companies Higher price stocks have more weight $1 move in smallest component has same effect as

largest

S&P 500

Managed by Standard and Poor’s – Division of McGraw Hill

500 large-cap common stocks in US Some exceptions

Components selected by a committee Not necessary largest ex. Berkshire Hathaway

(Warren Buffet’s company)

S&P 500

Float Weighted – use shares available for public trading

Larger “Market Cap.” -> larger impact on index

Also uses a divisor to keep index constant with regards to financial actions Recalculated every night after closing value is

reported Updated every 15 seconds during trading

S&P/TSX Composite Index

Largest TSX stocks by market cap 70% of market cap. Of Canadian based companies on

exchange 204 companies (Sept 18) Eligibility

Market Cap – min. 0.05% of index, 3 month average $1 Liquidity – volume greater than 0.025% of all eligible

securities Domicile – on TSX, incorportated under Canadian laws

Companies such as Rogers, BMO, Tim Hortons

NYSE Euronext

NYSE Group merged with Euronext Euronext had Market cap of

$2.9 trillion – 5th largest (2006) NYSE

First traded securities in 1792 Address: 11 Wall Street $10.1 trillion in combined

capitalization

NYSE Euronext

Hybrid Market Can route trades

electronically Can utilise

brokers/traders on the floor

NYSE sells one-year licenses to trade directly on exchange

NASDAQ OMX

NASDAQ and multiple European Exchanges NASQAQ:

Approximately 3800 companies listed Electronic Stock Market Highest per hour trading volume in the world

NASDAQComposite Index Essentially all listings on Exchange

TSX

Largest Exchange in Canada – 8th in the world

TMX Group owns the exchange Most Mining and Oil & Gas companies

listed in the world (Canada has abundant natural resources)

Electronic exchange since 1997 Only Canadian exchange to trade Senior

equities

Other Canadian Exchanges Montreal Exchange – derivatives Vancouver & Alberta Exchange – Canadian

Venture Exchange Junior Equities

What’s going on in the market?

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Gross Domestic Product

Q3 GDP released: 3.5% expansion Beat economists’ consensus of 3.2% Goldman Sachs downgraded forecast day

before

Q4 2008 GDP -6.4%

China Q3 2009 GDP 8.9%

Consumer spending 2/3

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Consumer Confidence

Fell below 50 point mark Went from 53.4 to 47.7

2001 recession lowest 84.9

Distinction between exogenous and endogenous events

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What Market-Watchers Are Saying

Nouriel Roubini: “Asset prices have risen too much, too soon,

too fast” “The mother of all carry trades”

David Rosenberg: “Only economists see the recession as being

over”

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Financial Services Sector

“The Banks never lose”

Financial Services Sector Brief Overview

Financial services sector includes such institutions as retail banks, investment banks, insurance companies etc.

Arguably the most important sector in the North American economy

Nearly half of ‘TARP’ participants in U.S. have 1) paid back money

and 2) have posted multi-billion dollar profits last quarter Canadian Banks (no Government relief) are once again

1) posting profits and 2) seeing capital appreciation S&P TSX Capped Financials Sector Index continues to

rise Recovery is well on it’s way for this sector Overall ‘bullish’ outlook

Table of Contents

Earnings SeasonII. Who We Are

Ford Motor Co. – Income Statement

Ford Motor Co. – Credit Reconciliation

Ford Motor Co. – Cash Flow Statement

Apple Inc. – Income Statement

Apple Inc. – Cash Flow Statement

Apple Inc. – Balance Sheet

Earnings Surprises

Apple Inc. (AAPL) Ford Motor Co. (F)

EPS Estimate $1.42 $(0.12)

EPS Actual $1.82 $0.26

Operating Cash Flow

$1.1 billion $1.3 billion

Other Details Substantial Increase in Rev. Cost Cuts / Debt Laden