Word Document: Overview of Stock Pick

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Word Document: Lessons for participants

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Word Document: Instructions on playing this software

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1. Introduction

This is a simulation game. It teaches you to pick the right stocks that will hopefully give you a better return, compared to the market.

You are presented with the statistics of 45 stocks in 3 countries (USA, Europe, Japan), 5 industries (consumer, energy, food, property, technology) and 3 category (large cap, medium cap, small cap).

You are also given the summary statistics for each country, industry and category, with the
forecast of 3 analysts.

You have to pick 5 stocks for each year. You play the game for up to 10 virtual years.

2. Statistics

You are given the following statistics for each stock:

EPS - earning per share
PER - price earning ratio
PPS - price per share
R10 - total return over past 10 years
R5 - total return over past 5 years
R1 - return for the most recent year

Generally, a high PER indicates an expensive stock. It can only be justified, if the earnings are expected to grow better than market over the next few years.

Sometimes, a stock with a high return over the past 5 or 10 years may continue to give a high return. Sometimes, it becomes too expensive and may give a low return for the future.

You have to watch how the stock behave, and use this knowledge to make a better judgement for next year's selection.

3. Summary Statistics

You are given the summary statistics for each country, industry and category.

For example, a certain country may be giving a better return for its stocks, compared to another country. This could be due to ecnomic factors, such as its growth rate, inflation rate and other reasons.

A certain industry may be experiencing strong growth. The stocks in this industry will perform well, and it will probably apply to all the three countries. However, the impact on each country may be influenced by its own economic trends.

A certain category (size of capitalisation) may perform better than another category, depending on investor sentiment. It may rotate from one category to another.

In all cases, you have to watch the trends and make your best judgement.

Although you read the indicators from the summary statistics, you have to apply them to
select the individual stocks (from the universe of 45 stocks).

4. Analyst Forecast

You are given the recommendation by 3 analysts, as follows:

1 - strong sell
2 - moderate sell
3 - neutral
4 - moderate buy
5 - strong buy

The recommendation are given for each country, industry and category.

The three analysts follow different indicators to make their forecast. Their method is not disclosed to you. You have to follow the results and see which analyst gives you is more accurate or reliable.

5. Stock Code

For each year, you have to pick 5 stocks to invest in.  Each stock has a 4 letter code, as follows:

1st letter indicate the country, ie E=Europe, J=Japan U=USA
2nd, 3rd letters indicate the industry, ie CO=consumer, EN= energy, FO=food, PR=property, TE=technology
4th letter indicates the category, ie L=large cap, M=medium cap, S=small cap

For example, UFOL = USA, food, large cap

6. Benchmark

You are assumed to invest $1 million in each stock. The program measures the actual return for the year on this stock compared with the benchmark return (ie the average return for all 45 stocks).

If you selected stock gives you a return of 10% and the benchmark return is 7%, you will show a better performace of 3% or $30,000 for this stock.

Your total results for all 5 selected stocks is computed for the year. This is accumulated for 10 virtual years to get your final results.

If you pick your stocks well, you will get a positive return (ie higher than the benchmark).

7. Conclusion

To pick the right stocks, you need the following:

* knowledge of the fundamentals
* learning from experience
* judgement on interpreting from the statistics and trends

This game gives you the chance to practice the art of picking the right stocks in a simulated environment. By playing this game many times, you will develop the skill of using the right information to make the right judgement