Stock Choice Unit: Teacher's Instructions

Teacher's Instructions for Stock Choice Unit

The CELOP Student Activity Web Page for the Stock Choice Unit is a personalized business simulation, similar to the old Boston Globe Stock Market Game, although it has the following advantages:

1) It is more flexible; any number of students can participate, for any length of time, and starting on any date. In the Boston Globe game only classes could participate, for a set period, all starting on the same day.

2) No complicated forms to fill out. Students set up their portfolios following simple on-screen directions, and any time the choose they can check the value of their personal portfolio by entering their login and password.

3) Integrated stock market research. The unit begins with guided discussion of what the stock market is and what constitutes a smart investment. Then the students are directed in using the WWW hypertext links to gather information about possible companies to invest in. After the material collected is analyzed, students select three companies to invest in.

The Objectives of this Unit are:

1) To teach the basics of investing in stock as well as the concepts of shareholders, stock markets, profits and risk through a realistic simulation of creating an actual stock portfolio.

2) To enable students to do real research on the investment worthiness of publicly traded companies using a limited selection of links to financial information sites on the World Wide Web.

3) To capitalize on student motivation and media impact to reinforce the following English Language skills: business vocabulary, reading comprehension, speaking (oral reports), listening (teacher instructions and explanations) and optionally, writing (written reports on stock choices and explanations of eventual results)

Nature of the Unit

It should be noted from the start that the Unit is best taken advantage of as a semester-long project. Most of the activities described on these instructions concern setting up the portfolios, and are more effective if done early in the semester. The fun part is following the portfolios over time, and getting regular updates on what went up, what went down, and how much each students' initial investment of $30,000 is now worth.

The setting up of the project took my low advanced business core class three 90-minute sessions in the Multimedia Learning Lab. I had originally planned to do it in two sessions, and could have but the students requested additional time to collect more information before making their stock choices and I feel the activity benefited from the additional time. Now that the portfolios are set up the students spend the first 5-10 minutes of each MLL session checking them and discussing their results.

Specific Procedures for Instructors

Pre-Surf: The unit is best introduced in the normal classroom, one or two classes before the first scheduled on-line session. I like to do it as part of a larger unit on Investment Options, but it is fine to do it as a stand-alone stock unit. Before students hit the web they should have a basic understanding of: What is "stock"? Why do companies issue stock? What does a stock market do? Basic stock related vocabulary (the stuff in the worksheets). What is a stock portfolio?

In addition, they should have already mastered basic computer skills like typing, mouse control, and the functioning of their WWW browser. No other skills or knowledge is required.

Stage One: In this stage the students brainstorm the search for good stocks to buy. Discussion of what makes a company a good investment should be encouraged. At this stage, I always pass on to my students the most common advice of investment counselors; invest in what you know. As the page advises students, "Most experts say to start with a company you know about, one which produces goods or services you use. Believing in a product is not enough to risk your life's savings, but it's a good place to start."

This usually engenders a discussion of Levi-Strauss, Coca-Cola and Apple Computer (or Microsoft). Students should be reminded to jot down names of interesting companies to investigate.

The page includes an on-line worksheet for student to write down the names of five products or services they use or know about and the names of the companies that produce them. Eventually, students will be able to save this information directly to a file, but since the electronic forms are not yet functioning I have provided a photocopied worksheet (Worksheet 1) so that the student can write down their five investment possibilities. When they each have five viable possibilities, stage one is over.

Stage Two: In stage two students begin to collect information about their five prospective companies, in order to decide which THREE companies to invest in. To this end I have provided, both on-line and in the photocopy packet, five copies of a detailed Company Report worksheet (Worksheet 2). The idea here is that only a fool would invest his or her money without first doing some homework. I have included all of the basic information included in a company profile, and some harder to find information. The categories I have included in the worksheet are the following:

Full name of the company:

Field or type of company:

Location of headquarters:

Stock symbol:        

Exchange where the stock is traded:

Current price for one share:

Price for one share one year ago:

Highest price in the past year:

Lowest price in the last year:

Last yearly dividend:

Sales last quarter:

Profit last quarter:

Change from one year ago:

Price/earning ratio:

Who is the CEO of this company:

Who are their main competitors:

Prospects for this industry:

New products, new markets:

Possible problems:

It is important that the instructor explain to the students that they do not need to find every bit of information for every single company. No one should be made to feel unsuccessful because they could not fill every singe category for each company. However, they should understand that the more information they can find in the time alotted, the more informed and intelligent their stock choices will be.

Some of the information is important and easy to find; for example, the current stock price, the name of the CEO, which exchange the stock is traded on, the 52-week highs and lows (to see if the current stock price is nearer the yearly high, or the yearly low, indicating the direction it is heading), or price/earning ratio. Others are reflective, and require analytic thought, like "prospects for the industry" or "possible problems" for the company. Some are more difficult to find or complicated to explain, like "Sales last quarter" (revenue) or "Profit last quarter" (earnings). Depending on the amount of time you want to spend on this stage, the reports can be quick and basic, or detailed and elaborate. Depending on the skills you wish to emphasize in your class, in addition to the worksheet you may what to consider having the students do oral or written report on one of their companies.

Stage Three: Now it's time to collect the information. Clicking on Button number Three on the left of the page takes you to a number of Information Links where the students can collect information about their companies. Here are short descriptions of the links and what can be found at each one:

Yahoo Stock Symbol Lookup - A good place to start; you can enter the name of the company, or any part of the name, and find the stock symbol, the exchange, and certain basic information like the current price, P/E, and dividend.

Stock Master - Originally created by an MIT undergraduate as a class project, this site has evolved into one of the best and easiest to use information gathering site, with the year high, year low and a nice 52-week price chart which allows students to see what the price was one year ago.

Corporate Financial Data - Detailed information on a limited selection of about 200 stock picks.

Investor's Edge - Excellent commercial site with lots of general information on stocks and markets, including Industry Reports which will help students with the question on "Industry Outlook", but warn the students that the Nelson Company Profiles are a pay-per-view option.

Wall Street Research Network - I probably should have listed this one first - it GREAT!! Just enter the name of your stock, and get a detailed financial report. Students can find most of the information they need here, and it covers thousands of stocks!

These five should provide more than enough information to complete Stage Three and fill in the detailed company profile worksheets. However, for those students with deeper interest or classes with more time in the lab, I have included three "Extra resources for background data"

Stage Four

This is the stage at which the students choose three of the five companies they have researched and actually create a portfolio. The site where they do this is part of Investor's Edge and is identified by the link 4 - Pick your portfolio. You will probably have to lead the students through this process, so it is a good idea to check it our personally first. It is a free service, but users must register, choosing a personal login and password they will use to check the progress of their investment.

I have set up the simulation in the following way; each student will receive a $30,000 "virtual loan" from the teacher. The loan must be invested in three stocks, and divided evenly, $10,000 on each stock. I recommend doing it this way to make it simpler and more equal for all participants.

At the end of the semester, the students must return the loan to the teacher. If the value of the portfolio is greater than $30,000 I reward the student with a gigantic fake "check" in the amount of their profit. If their portfolio is worth LESS than $30,000 then they owe the teacher "virtual money". Someday I hope to have an extremely wealthy student so delighted with this exercise that he or she presents me with an actual check, but this has yet to materialize.

If the teacher desires, students can make unlimited changes to their portfolios during the time that the simulation lasts. For simplicity I usually do not allow portfolio changes during the game; rather, the students follow their three stocks during 8-10 weeks and then analyze why their stocks went up or down. Allowing unlimited buying and selling would be more difficult to control, but allow for additional teaching opportunities. The unit can be used either way.

The actual steps in setting up the portfolio are the following:

1) In order to set up their portfolios, the students must first select the tree stocks they want to buy and figure out how many shares they can get for $10,000. In order to make this easier, I have prepared the "Portfolio Picking Worksheet". On it the students note the names and symbols of their three stocks, the latest price for one share (change the date on the worksheet), and compute how many shares they can buy for $10,000.

2) Register, clicking the word "here" on the Portfolio Picker login screen. Select a login (I suggest using their same acs login to make it easier to remember) and a password (make it short and easy to remember - and write them down on a list. Every class has at least one student who SWEARS his or her password doesn't work anymore). On the final worksheet (Portfolio Picking Worksheet) I have included spaces for each students login and password, so they have them written down and won't forget them.

3) After registering, the students click on "Stock Portfolio" and proceed to select their first stock. Tell them to move the option line which says "Select Line" and set it to "Line 1". Then enter the Stock Symbol (from the worksheet), the latest price for one share (their purchasing price) and the number of shares they want to buy (quantity).

4) Repeat the above process for "Line 2" and "Line 3". Your portfolios are ready! Note that there is room here for 15 different stocks in the portfolio, but this would be much to complex and confusing for a project like this. If students want, they can establish ANOTHER portfolio, with a different login, on their own time, and follow as many stocks as they want. For the sake of this activity, though, please have them limit their picks to three stocks.

For the same reasons I do not let them buy and sell stocks after the inicial purchase. While it would be perfectly possible to do so, I felt this would require too much class time to control. If a teacher wants to try allowing continuing trades, I would be interested in hearing how it went.

The totals for their portfolios, with individual and global results, appear below line 15 in the portfolio list. To check the value of their portfolios, students need to go to the Stock Choice page, select #4 "Setting up a Portfolio", enter their login and password, and check at the bottom of the screen for the latest results. Have fun!!

Please report any problems, suggestions or comments to mfeldman@bu.edu