Starting Your Stock Investment Journey

You may have certain products and companies that are part of your day to day life. In some cases, if they’re public, you may be able to take part in their success via stock investing. Senior Director of Investor Relations at IBKR, Nancy Stuebe, joins Cassidy Clement,  Senior Manager of SEO and Content, to discuss how new investors may frame their search to start their investment journey.

Summary – Cents of Security Ep. 13

The following is a summary of a live audio recording and may contain errors in spelling or grammar. Although IBKR has edited for clarity no material changes have been made.

Cassidy Clement

Welcome back to the Cents of Security podcast, I’m Cassidy Clement, senior manager of SEO and content at Interactive Brokers. Today, I’m your host for our podcast. Our guest is Nancy Stuebe, she’s the senior director of Investor Relations here at Interactive Brokers. We’re going to discuss getting started in investing. You may have certain products and companies that are part of your day-to-day life, but in some cases they may be public and that means you may be able to take part in their success via stock investing. So let’s get into it, welcome to the program Nancy.

Nancy Stuebe

Thank you.

Cassidy Clement

Sure. So, let’s give the listeners a little bit of a background on you and your investment journey. So, what do you do for the company and when did you get started in getting interested in investing?

Nancy Stuebe

Investor Relations means I speak to Interactive Brokers shareholders and investors. Interactive Brokers is a public company, meaning that it trades in our case on the Nasdaq exchange. And how I got started, for anybody listening, nobody had less experience than I did. I started at age 13 when my father wanted me not to spend money on whatever junk I was spending it on and suggested that I look at companies that I might know about and see if they were public, and we could buy a couple of shares of stock. And at the time, I’m sure he was thinking that maybe I would buy General Motors since we had a GM car at the time, but as a typical 13 year old, I liked Friendly’s because they had the best ice cream sundaes and at the time it was a public company. I liked Pizza Hut because I love their pizza and then finally, I loved MCA because yes, they had Universal Studios, but they also were the record label that Olivia Newton-John sang on and at the time, I thought she was really terrific. And therefore, those are the three companies I chose and after my father rolled his eyes a bit, he bought a couple of shares of each of the stocks for me and I signed up to get their annual reports delivered. And I kept up with them over time, even as a young teen, just because it was so interesting.

Cassidy Clement

Well, pizza, ice cream and music sound like the perfect mix to me, and probably the most easy to relate to at that time because they seem to be the most important things, especially at 13. Those are the best things around. We touched a little bit on this when you’re talking about IB (Interactive Brokers) being public, so, when you were looking at those companies, when you were starting out investing, they had to be public obviously in order for you to invest in them. So from the general, the 10,000 feet look, what’s the difference between a public and a private company? Like what does it mean to be public?

Nancy Stuebe

So, a private company has one or maybe a small group of owners and it does not trade on an exchange, you or I cannot buy a piece of ownership in that company. They also cannot sell stocks on the public market to get cash to fund their growth. There can be very small private companies like your neighborhood deli or there are very large private companies like Mars Candy or Fidelity Investments which are multi-billion dollar companies that are still majority family-owned. The public company has sold its shares right, usually through an investment bank, to interested investors, and these shares trade on an exchange.

Cassidy Clement

Got it.

Nancy Stuebe

Just lastly, the reason why a company might want to go public is they can raise capital to grow the business and raise more capital than they could on their own or among their friends and family. And B, to provide liquidity to the owners because many of them have built businesses up over twenty 30-40 years and they might have put all their money into it and they want to cash out or send a kid to college. So, when you’re public, not only do you get access to cash for either yourself or to grow the business, but it also gives the company like reputational prestige and media attention, and it allows you to pay your workers in things like stock-based compensation, which you couldn’t do before.

Cassidy Clement

These public companies, what other obligations do they have? I know that you can view some public companies’ financial reports and some other business information publicly online but what are some general obligations they have with now having that designation?

Nancy Stuebe

Yeah, totally. To go public, first, a company has to file a registration statement which is called an S1, and it describes the business, any risk factors and gives its financial information so you can see how well or not well it’s doing. The company then also has to commit to keeping shareholders updated and informed on a regular basis and it files reports every quarter and has to file other required material with the regulators and in the US, that’s the Securities and Exchange Commission, or SEC. You can go to sec.gov, type in the name of a public company and see years’ worth of filings and disclosures that they’ve made, which can keep you very well informed.

Cassidy Clement

All right. So, you mentioned shareholders a few times in there. Most people may think that the shareholders just have that ownership piece, but what are some other rights that those shareholders might have?

Nancy Stuebe

In addition to the ownership rights, you as the shareholder have voting power on items that come up for a vote. You have a claim to any dividends that the company announces are going to be distributed. And the ability to inspect, you know, company documents. So you are an owner, you can be a small owner of a large company, but you are still an owner, and you get the same rights as the very largest owner.

Cassidy Clement

OK, so we covered some of the basics here about the public companies and then like as a shareholder, how you would participate and what actions you can take but now when we move to the second step of getting started in your investment journey, it would probably be making a selection or looking to make a selection. So, you had mentioned that you had looked at stocks initially as things you could relate to at the time, so many people may look around them and say oh this may be a place to invest because I see my family has a car with this brand, my sibling buys a lot of these toys, my electronic device has this name and all my friends have this electronic device. What are your thoughts on looking at what’s around you? What are some ideas that you had initially where you’re like, oh that’s a good idea, maybe I should look into that as if it was public or if it’s a trend?

Nancy Stuebe

That is, I believe, the best way to invest in companies. It’s something that you can relate to that you like and that you want to follow closely. Roblox is a public company, many, many people not only play it or they have relatives who play it. Maybe you were into Nintendo, you can buy Nintendo stock. Maybe you’re into, you know, electric vehicles, you can buy Tesla. There are so many ways and opportunities to invest in either companies you believe in, products you believe in or even themes that you believe in. Perhaps it’s environmental safety and maybe you wanted to invest in a company that does water purification. It’s really basically infinite. There’s thousands of publicly traded companies in the United States alone, not to mention companies like Nintendo, which trades in Japan, or Roblox, which is actually Dutch. You have the ability to invest in whatever catches your fancy or whatever you see catching other people’s fancy. There’s more to life than just investing in something like Apple. I think that’s the company that many people know about but if you dig a little deeper, there might be other opportunities to play that may not have been so picked over.

Cassidy Clement

So, these other opportunities that you thought of, I know that you and I have spoken a little bit about this, but I think this story would be really helpful for our listeners in understanding some consumer behavior going into stock investing or at least looking at a company to see their performance. You had mentioned Olivia Newton-John and how you saw a name on the record and we’re like, hold on I see this name on a lot of records, maybe I should be looking at this company and I keep seeing it everywhere. So could you give our listeners that little anecdote of how exactly that light bulb went off when you said oh hey, they might be something to look into.

Nancy Stuebe

Sure, this is probably the company that most appalled my father in terms of how I chose my stock but at the time I absolutely loved Olivia Newton-John and she had just done Grease and I was a kid. What did I know? But I thought she was great and when I played the played the Grease record you could see the MCA label going around and around on every Olivia Newton-John and you know, I figured if I was wearing out the grooves on my record, there’s probably a whole host of people who were doing the same. So, MCA was something that I absolutely wanted to buy, and I was just frankly fortunate that it was still public at the time. Actually, Friendly’s ended up getting taken over by Hershey’s, Pizza Hut ended up getting taken over by PepsiCo and MCA ended up getting taken over and it escapes me now who bought them, but they are now all much bigger companies. But if I like them and I think the lesson that I took from all this, if I like those companies, not only would other people like them too, but the possibility that if that many people like them then the next step is that a larger company was probably going to like them too, and therefore you had a very high chance that that company is going to recognize what you did and buy it because I used it and I knew. So, while I can thank Olivia Newton-John may she rest in peace, for giving me like one of my first real home runs in stock investing, it really was just because I thought her music was terrific. And I’m sure today there are plenty of artists on labels that you could look into that are probably owned, maybe not as directly as MCA, that’s not public, but are probably subsidiaries of larger companies that you can buy.

Cassidy Clement

Other pieces to maybe some things that you should think about when you’re making your selection like hey, this might interest me and it might continue, but are there any other things that you may just suggest from an outside perspective?

Nancy Stuebe

I tend to like look at financials too. I tend to just look at an annual report quickly and just look at what their sales are doing. Are they increasing, are they flat? And then I also look at their net income, which is how much of all those sales after all the costs they have, say, marketing costs or just the cost of producing whatever good they’re producing. After you account for all of them, how much income are they putting into the bank? And to me, those are the two biggest components and if you divide the income by the sales, that’s called your profit margin. So those three elements, the sales, the income and then the profit margin are the three big items that I like to look for. They’re very simple to find and it gives you a good idea of how strong that business is and sometimes you will see that, Gee, it’s not growing so much now but you see everybody adopting it. So, you know that in the future you’re going to see those sales go up. Roblox is a classic example of that, it started out fairly small and then pretty much exploded and people still today, you know, there’s constantly a new generation of young people who want to use Roblox and play the games. It’s not like there’s just one population that’s stagnant. So, if you believe that the population of youth is growing and that they will continue to want to play Roblox, you may want to — I’m not here to to plug Roblox — but you may want to look into them or Nintendo if you believe that the Switch is the product of the century. Maybe you want to own that. You know Netflix, if you find yourself watching Netflix constantly and you believe that there’s going to be a trend towards more and more people watching it, perhaps that’s something you want to look into as well. So, you can look at what you do on a day-to-day basis and I would bet from early in the morning, if you pick up a Starbucks, which is a public company, all the way through to the end of the day when you’re turning on Netflix after a hard day and just sitting there, I bet you interact with a dozen different public companies that you probably hadn’t thought about. And once you do think about it, it’s very hard to not think about everything around you that you could possibly invest in and get interested in. That’s certainly how I started investing and you know, to this day, if I look at a company name on a notebook or on a message, it’s probably one of my first instincts is to check to see if it’s public or not.

Cassidy Clement

So, you’re kind of combining the choice and interest side with like you said, maybe some financials and some other research side because you can’t just go all on feeling, but it’s good to look at what you’re interested in. So, you’d mentioned some of those financials, one of the things is looking just briefly at the stock price chart, which is a really easy thing to find. What would you suggest for that?

Nancy Stuebe

There are many ways to check, Yahoo Finance is one of the most user-friendly. If you go to Yahoo Finance, they have a search box and you can put in either this company stock ticker, which is a three or four letter abbreviation for the company or you can actually type in the whole name and it you can see if it’s public or private and it will come up with a price. Google Finance is also a very easy way to check on stock prices. These are all free and I find them, — and actually Yahoo Finance actually will give you financials on one tab — I find them very easy ways to get started just on tracking a company stock price and seeing if it’s going up or down. Follow it for a week or two, see if you can get a feel for how it’s trading and if it’s something that you believe in then perhaps you might want to find a time where it dips a little and then you can go in.

Cassidy Clement

So, looking at that stock chart you want to see, maybe are we at a peak? Are we at a valley? What’s it looking like for a while? And a lot of these places, like you said, this information isn’t some secretive thing, it’s public. Anybody can access it and there’s a few different places that you can easily access it from the Internet. But in general, you want to be able to tie some of these things together, maybe look at more than a month, as you mentioned. Maybe more than the day, because there’s always headlines saying this is the greatest thing today. But yeah, tying in your interest with some of the performance over time may help you get an idea of where you want to start to look for investing and how to get started in it. Before we close out are there any other things that you’d like to say to investors getting started in the financial space?

Nancy Stuebe

Start small. Don’t just put everything in one basket and also just really don’t be afraid … to me, it’s the greatest, most exciting thing you can do, and it’s something that if you do well, you can do quite well and earn money for yourself. Some of our greatest investors and business leaders, whether it was, you know, Warren Buffett, who believed in buying what you know and sticking with it or somebody like Elon Musk who has a passion for electric vehicles or going into space and colonizing Mars. Whatever end of the spectrum you are, you can do well by really investing in something that you feel passionate about and that is relatable to you. And I think everybody should do it because that’s really the way to build your own personal wealth and help share that with others.

Cassidy Clement

I think that’s a great point. So, you’re able to with this asset, with stocks, you’re able to take part in hopefully, the success of a company and be able to translate that to hopefully some growth in your own financial situation as well. So, thank you for joining us Nancy.

Nancy Stuebe

Thanks, Cassidy.

Cassidy Clement

Sure, and as always, listeners can learn more about an array of financial topics for free at ibkrcampus.com. Follow us on your favorite podcast network and feel free to leave us a rating or review. Thanks for listening everyone.