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Stock Investing Strategies – Value Stock Investing

admin — Sun, 23 May 2010 05:45:48 +0000

Value stock investing is a method that involves purchasing stocks that are going at prices below their worth. Value investors search out stocks the market has under priced. They work on the theory that the stock mark over-corrects in relation to fluctuating economic indicators, thus causing stock price changes that do not reflect companies’ long term value. Thus value investors seek to to buy stocks when their price is arbitrarily low.

Value investing is a very well known strategy. The theory of value investing was laid out by two Columbia finance professors, Graham and Dodd, in the 1930s. The theory is simple: Buy stocks being sold beneath their real value.

Good earnings, dividends, and cash flow are earmarks of a good company that can belie a seemingly low trading price. The value investor hunts for companies that are under-rated by the market currently, and looks to profit when market investors catch on to their mistake and share prices rises.

The potential flaw in value investment strategy is that their is truly no objective intrinsic value to stocks. Individual investors working with the same info constantly take the same information and reckon different values for the same stock. This is why the concept known as “margin of safety” is important in value investing. This indicates buying cheaply enough that a profit will still be turned if one overestimates the ultimate rise in share prices when the market fluctuates. In the extreme case, attempting to practice value investment on such junk assets would amount to throwing money into a hole.

Further, there is no exact, objective definition for “value investing”. A certain percentage of value investors look only at a companies present earnings and assets, ignoring future growth, while other value investors craft a more long-term revolving around potential future growth and profit expansion for the company. The value investor must distinguish between a temporarily undervalued bargain company and one that will simply continue falling in value for the foreseeable future. If company X has been trading for the past quarter at $35.00 a share but drops to $15.00 a share, this is not necessarily a value company. It may simply indicate that the company has problems the market is responding to, indeed, the company in question may be going belly-up.

Here is a rundown of the rules of thumb value investors use for choosing stocks.

1. Price per share must be equal to or less than 66.66% of intrinsic worth.
2. Pay attention to companies featuring P/E rations at the cheapest 10% of traded equity securities.
3. The PEG should be below one.
4. The stock price must be less than or equal to book value.
5. Equity should be greater than or equal to debt.
6. Current assets must be at least double liabilities
7. Dividend yield must be at least 66.66% of the AAA bond yield over the long term.
8. Growth in earnings must be at minimum 7% per year, compounded over the previous decade.

Value investing lacks the glamor of the higher risk/reward styles. It relies not on hot tips or intuition, but a simple, cool headed process of screening stocks by the numbers. However, there is something to be said for a method that outperforms the S&P to the tune of thirteen percent over a 40 years.

Stock investing strategies – Growth Stock Investing

admin — Thu, 20 May 2010 18:51:08 +0000

Generally speaking, a strategy employed by an investor selecting stocks with above average growth potential is considered growth stock investing. These targeted stocks are corporate assets whose quarterly earnings are anticipated to grow relatively quickly in comparison to the overall market within its particular industry.

Often termed as capital growth strategy by growth investors, maximizing capital gains is the overall goal. Though many say growth investing is diametrically opposed to value investing, it\’s more appropriate to accept the two strategies in light of a Warren Buffet quote, where he talked about growth as well as value investing being tightly joined. Similarly, another investing mogul by the name of Peter Lynch is credited with first implementing an intermediate approach between the two, commonly spoken of as the GARP strategy, or growth at reasonable prices.

By the end of the 1990\’s, during the big tech stock boom, those employing growth investing tactics yielded extraordinary returns for investors. It should be noted, however, that growth stock investing has some substantial risks. This method is not for the faint of heart, and it\’s potential gains and losses should be well understood prior to making any such leap.

Perhaps the easiest way to illustrate exactly what growth investing is is to show what it isn’t as compared to it\’s counterpart, value investing. The value investor takes into account current expectations. Those stocks trading below their perceived value are considered value purchases, on the speculation they will return to their true value in the short term. In contrast, growth investors buy shares of companies that are expected to balloon from their current value over a considerably greater length of time, with little concern of the stock\’s current pricing. In this type of trading, buying at levels above the perceived worth of the stock can and does occur. The strategy is reliant on the potential for overall growth of that company in the future.

Those stock\’s that are considered growth stocks are shares of companies speculated to grow relatively quicker than other similar interests. It stands to reason that younger companies are of a higher interest to growth investors. This takes into consideration the theory that earnings and revenue growth will translate directly to an increased share price for the stock. Those industries expected to increase rapidly in their asset value are good candidates, most especially ones leading in new technologies. Capital gains are the means to realizing profits here, not dividends, as more often than not these types of ventures are prone to earnings reinvestment leaving very little for dividend pay-outs.

A major player in teaching and utilizing growth stock investing strategies is The National Assn of Investors Corp., or NAIC. They have a five point checklist to assess growth stock candidacy. All five requirements should be met to consider the stock a prime option. These are the five points in paraphrase:

*Does the stock historically show strong earnings?
*Is strong growth expected going forward?
*Is the management of the company effective in controlling revenues and costs?
*Does the management show signs of continual improvement and innovation?
*Does it seem likely that the price of stock can double within the next five years?

Following these guidelines, and an affirmative answer to all of them, will provide a stock that is likely a good candidate for growth stock investing.

Stock Investing Research – How to use a simple stock investing checklist?

admin — Tue, 18 May 2010 02:01:28 +0000

One of the most common terms you hear analysts discussing is the raising and lowering of stock ratings. The rating of a stock directly impacts how well it does on the market, so understanding this ebb and flow can net you quite a bit of significant gain. Doing your own stock investing research can yield quite a bit of knowledge that will let you analyze stock trading trends just as well as any analyst. In order to understand how analysts determine this ebb and flow, I’ll be explaining the process in a simple manner so you can learn how the entire process works. If you are interested in knowing more, there are tons of books that have been written entirely devoted to analyzing stocks. For beginners, it is best not to get too technical.

When picking the right stocks in which to invest, you should conduct a bit of research into the history of the stocks you are considering. Understanding how the company works and the services they offer, as well as their stated business goals will better help you understand the direction the company is likely to take in the future. With your inner understanding of how the company works and their business plans, you will be able to better understand and apply stock valuation techniques to reap the benefits of early stock purchasing.

Since researching stocks is the key, you need to be sure you are researching properly. Understanding the company inside and out is a good start, since it will help you decide whether or not you wish to purchase stock in the company. One of the best ways many people use to form opinions on a company and the stock is by following a stock investing checklist. Understanding information given in press releases, quarterly reports, and industry reports will help you determine the quality of a stock. Another great way to gain an understanding of industry analysis is to follow this simple checklist:

* Find a broker with minimal fees, such as maintenance an inactivity fees.
* Be sure your leverage is kept at a minimum. You don’t want to feed your profits to your broker or bank.
* Insure your account. You can’t afford to go with a broker who will go under and take your money with it.
* See if your broker has a free trial before you invest any large amounts of money with them.
* Understand tax laws. Taxes are the biggest bite when it comes to investing, so understanding what you are allowed to deduct and what kind of records you need to keep is essential.
* Always account for inflation. By investing in stocks that provide equal return when considering inflation, you are covering yourself in the future.
* Always keep in mind there are really no risk free investments.

Following this stock analysis checklist will keep you ahead of your game in many different situations. Since no company and stock investing option is the same, you will need to apply your general knowledge to the situation to determine whether the risk will be worth the reward. Always remember that federal savings bonds are about as close as you can get to a risk-free investment, so keep this in mind when you begin studying the market.

Small Cap Stock Investing – Why is it good to invest in small cap stocks also?

admin — Sat, 15 May 2010 08:57:34 +0000

Many people had watched their retirement funds hemorrhage out over the past several years. The volatile stock market paired with uncertain economic times have left many scrambling for better investment options. Small cap stock investing could be the solution they have been looking for.
Even though the stock market is leveling out, it is far from smooth sailing. Leaving investment decisions in the hands of financial gurus and stock brokers may still be a smart idea for many folks; however, those with meager savings to invest may not be able to sacrifice the handler fees for these services. This leaves financial risk and benefit research left to the individual investor. Small capitalization company stocks may be more lucrative than stocks with larger companies. The values of the small cap have grown annually by over twelve percent compared to large cap values coming in at around ten.

This type of investment is not one to be made lightly with the intent to turn around and sell it back almost immediately. One of the reasons this method of investment works is because smaller, more unknown companies, will have stocks available at lower prices than the high profile ones. As the small company builds it’s brand name and becomes more sought after, the stock value will grow with the company. This is not a flash in the pan process.

Giant conglomerates are comprised of many committees who make decisions, or rather, discuss decisions that need to be made and make recommendations that are passed to other committees to deliberate over. As you can see, the larger the company, the larger amount of time it takes to pass new ideas and the longer it takes to get new products out to the market. Smaller companies have fewer employees, fewer levels of red tape, and a strong need for a quick turn around for decisions and products to hit the shelves. Small businesses need to move at a quick pace to stay productive. This also contributes to the climb of it’s stock values.

Another attribute of smaller companies is the potential to merge with slightly larger and possibly better known companies. The strength of both company names together adds a multiplier to the value of stock. When larger companies merge in very public ways, it can shake the confidence the public has with the company. The general masses will assume the company bought out was in trouble and wonders if keeping the stock will be wise. Fear in the economic realms will lead to hasty decisions and the large company stocks feel it the hardest.

For a patient investor, small businesses can be a component to help them grow their portfolios. While small cap stocks should not be the only food on the proverbial portfolio plate, it could be used as the main dish that was slow cooked to satiate the investor. However, with any investing diet, variety is the wisest and healthiest way to go.

The best stocks to buy right now for long term growth

admin — Fri, 09 Oct 2009 09:55:50 +0000

The question that is always there for the stock market investors as well as the stock market beginners as always has been that what are the best stocks to buy right now for that sustainable long term growth.

The answers that you will get are myriad and that also includes the various things as suggested by a lot of experts including those who said all about the various stock trading strategies.

I am someone who always believes in the long term growth and allowing others to the research for me and then I delve into my stock selection criteria and pick the ones which suit my approach. Next Warren Buffett!!

Here are my stocks which I like and which I believe are the top 10 stocks to buy right now.

Procter Gamble (PG) – The best dividend paying stock for you. Plus it is safe as hell for people who want to buy a defensive low risk stock. It has a dividend yield of 3 %.

Coca Cola (KO) – Well sugared water can never go out of fashion. They also the vitamin water in their kitty.

Kraft Foods (KFT)

Apple (AAPL) – Steve Jobs is back and this is one company which has enough design arsenals in their bag for the next few years. iPod should bring them the moolah .

Johnson and Johnson (JNJ)

Walmart Stores (WMT) – Consumers love the rock bottom pricing and especially in this recessionary trends and the company has shown tremendous resilience in the face of all the lawsuits and labor disputes. This also pays a good dividend. The buying power with this company says a lot about its clout in the retails industry.

Sanofi Aventis (SNY) – This is getting aggressive in the vaccine market and bought one company in India called Shantha Biotech. A good play in the pharmaceuticals sector

Goldcorp(GG) – Gold may be at the all time high and naysayers may say that this will not last but the demand is there and GoldCorp is definitely the best when it comes to Gold

Pepsi Co ( PEP)

IBM(IBM) – With hardware and software services this is one company which holds the promise for long term. Technology is here to stay and to cushion the hardware challenges IBM has what it takes (i.e. the services sector to help survive the blues)

Cisco Systems – I like this stocks simply because of the its dominance in the router and the switching world which is the backbone of all the internet related stuff and hence it is poised to grow all the more and more countries get on the internet bandwagon.

Note: This is simply my list and you may choose to ignore or you may buy the stocks based on my recommendations. Use your own stock trading strategy to buy the best stocks. Try and establish your own stock screeners

Stock trading Strategies – Listen to the experts and devise your own strategy

admin — Fri, 09 Oct 2009 09:53:33 +0000

Let us begin with the basics and define what a strategy is? A strategy is a blueprint to achieve your ultimate goal. That said it is the blueprint which is a must if you want to money in the stock market.

That in turn means that you need to define your goals when you are investing in the stock market. That goal in most cases can be defined in percentage terms or in pure money terms. It is better to define the length of time in which you want to achieve the goal.

Second point is the timeframe – Timeframe is everything in the stock market. Some people only want to day trade and some want to go in longer term. If you want money in the long term then the stock trading strategies will be different than what you will get when you only want to day trade.

If your timeframe is only for a day that will mean that you are interested is day trading. Now day trading is a concept in which you basically start with cash at the start of the trading day and end with cash. The basic premise is that you buy in large quantities and make huge money with small price movements.

Day Trading Strategies for beginners

A day trader is looking at entry point and an exit point for the stock during the day. The tools used to arrive at the entry point can be several but the must among them are the

Technical analysis – Candlestick Charts

Level II Quotes

Reliable news source

Some of the strategies in the day trading arena are

Scalping strategy

Fading Strategy

Momentum stock picking

Note: In this also you will need to be very adept at picking the correct stocks. You will have start with small volumes and see if your picks are making money. Once you know how to spot the trend then you will start making money.

The next trading strategy which is in demand nowadays is the Trend trading or as is called Momentum stock trading. In this the aim is to pick the stocks which are moving in a particular trend and then exit the stocks which are no longer moving. This stock trading stragey is based on particular sectors research and put forward by analysts. This is a good way to make money only if you know when to exit the stock. You can hold the stock for up to six months in this month .

Trading based on the news – Day traders use this lot and that means that you buy the stock base on the news regarding that company. In this after hours trading or the pre-market trading plays a major role.

Dividend stocks – A lot of people want to have some income alongside their regular income so they only buy stocks which have good dividend payouts

Picking up penny stocks – A lot of people trade only penny stocks. These are stocks which are less than $5.00. These stocks are very risky to trade so beware.

Elliot Wave principle trading – In this the trends and reversals are used as away to enter and exit the stocks.

ETF trading – This is done by the traders who do not want to invest in stocks but they want to invest in the sectors. The ETF funds generally are geared towards sectors or countries or particular commodities.

Enough of those short term investing strategies let us talk about long term investing strategies

This trading strategy is known as buy and hold strategy. In this you do the fundamental analysis of the stock and then just keep on evaluating the company and will exit the company only if you see that company now is not worth investing.

Effectively you are placing the confidence in the management of the company that it will do well and in turn will have the share price in a general upward trend. That said you need to monitor the entire variable for the fundamental analysis that is the company, the industry sector as well as the overall economy.

In the regular word of stock picking for long term there are two strategies and these are known as

Top Down Strategy – You invest in a sector and drill down to pick good stocks in the sector

Bottom Up Sector – In this you only invest in stocks with sound management and they are generally leaders in their sector.

Blue Chip Strategy – This is known as the strategy which I personally brand it as the 30 stocks strategies wherein you only focus on those are the components of the Dow. This works well in most cases unless you get into a situation where your investments go bad like with many people who had Citibank in their portfolio. Well you can also invest in a lot of blue chips apart from the Dow

Then last but not the least is the one which is my personal favorite and I take a stab at it every now and then to make good money and that is the special situations strategy. I keep my eyes open for any stocks in controversy or for that in any sort of negative sentiment and then go for the stock. The major thing to note is that here you will have to pick the stocks that have negative sentiments however they are still having good fundamentals. In short you are playing solely based on the sentiments prevailing in the market.

EMini Trading – E-mini S&P 500, E-mini NASDAQ and Emini Dow Jones

admin — Thu, 08 Oct 2009 06:10:52 +0000

What is emini trading?

Emini trading is kind of a stock market future trading which is more suitable for the smaller investors. There are many types of emini trading including Emini S&P 500, Emini NASDAQ 100 and E-Mini Dow Jones. Out of these the Emini S&P 500 is most popular and most widely used among traders. This is because the S&P 500 index represents more companies and a broader index as compared to Dow Jones and NASDAQ.

Emini are called contracts for smaller investors because the size of a emini trade is almost 1/5th of the regular contract which makes it more accessible to the smaller investor. Even then, small here means around $60,000 which is comparatively smaller than $300,000 which you will need for regular future contracts.

The E-mini is traded electronically, and you can do it 24 hours a day. Therefore, there are a lot of traders who do this as day trading activity. What that means is that these traders do multiple trades in a day. They try to buy on small dips and then sell when there is even a small increase in price. This makes emini popular among day traders but this is a very risky strategy to make money in stock market.

E-mini S&P 500 – E-Mini S&P is often abbreviated to a general term “E-mini” and designated by the commodity ticker symbol ES. The E-mini S&P 500 is very popular it has provided excellent results over the period of time. Volatility is also high enough to make it possible for investors to trade profitably.

E-mini NASDAQ 100 – This product was launched following the success of Emini S&P 500 product. It is associated with ticker symbol NQ. As the name suggests, this is based on the NASDAQ index which is a key benchmark of technology, telecom and biotechnology issues.

E-mini DOW JONES – The ticker symbol for this product is YM. The E-mini Dow Jones future contract is especially interesting for the trader with a smaller account, because of the smaller margin requirement.

You can contact your broker or click on the link to the Chicago Mercantile Exchange (CME-GLOBEX) to get up to date information on margin, trading hours etc for emini trading. It is strongly suggested you start with the QQQQ trading before trying the E-mini S&P 500, E-mini NASDAQ 100 or Emini Dow Jones unless you’re an experienced trader and/or have traded futures before.

Investing in Stock Market through Mutual funds – Introduction to Mutual Funds

admin — Sun, 13 Sep 2009 03:05:03 +0000

Not everyone has the knowledge of stock market to be confident enough to start investing in stock market directly. For stock market investors who are beginners, it is even more challenging to find the the right kind of stocks to buy. A easier option for them is to start investing in stock market through mutual funds.

What are mutual funds?

A mutual fund is a professionally managed scheme in which many investors pool their money and the that money is invested in various kind of financial instruments like stocks, bonds, money market instruments or other securities. The advantage of investing through a mutual funds is that these funds are professionally managed by asset management companies. These companies have all the financial analysis tools available to them and they have god amount of experience in investing in the stock market. This way the small time investors or beginners do not have to worry about technical analysis of stocks or the fundamental analysis of stocks.

What are the different types of mutual funds?

There are various ways in which the mutual funds can be cauterized. Very broadly, the mutual funds can be divided as open ended mutual funds and closed ended mutual funds. The closed ended mutual funds are those which accepts money from investors for a limited time period only. Once that time period is over, the fund is closed and no one can invest in that fund. The fund manager has that amount of money to invest in different kind of securities. In case of open ended mutual funds, the scheme is open for investors to invest or withdraw their money any time without any restriction.

Another way in which the mutual funds can be categorized is the type of securities in which the money is invested. A few main types of mutual funds are:
Mutual funds investing in growth stocks
Mutual funds investing in value stocks
Index funds
Funds investing in international stocks
Funds investing in real estate stocks
Convertible funds
Balanced mutual funds
Exchanged traded funds
Tax efficient mutual funds
Hedge funds
Funds based on market capitalization
Funds investing in bonds
Money market funds
Fund of funds

Mutual funds have certain specific features like entry load/exit load, management fees, net asset value (NAV), expense ration etc. All these features are discussed in greater detail in separate articles. Mutual funds are a great ways for investing in stock market for people who do not want to invest time and effort in researching the stocks separately.

Stock market trading tips

admin — Wed, 09 Sep 2009 01:36:20 +0000

Stock market trading is a way to make money and that too way to big money than you can imagine. Hey but wait it is also a way to lose your money very easily. The best thing is that there is no short term thing as a money generating cash flow.

Stock market is all about guts and risk taking ability and confidence in stock research the way you think about the stock. Read this here at best stock investments advice

Before you start your journey as a stock market for beginners advice I would tell you that you ask yourself a few questions. These questions are

1) Are you in the stock market for long term

2) How risk can you take?

3) Do you know all about the stock market terminology?

4) Have you ever traded online?

There is a lot of information provided everywhere the main aim that you should have is to go for the information in structured manner then apply these strategies to use in your trading account. Yes the first step to learn all about the stock picking and that is done by these two important things

Fundamental Analysis of stocks – Your learn all about stocks, industry segments and the macro economy

Technical analysis – it is all bout trends and making money by catching the trends early.

Then the next step is to read the philosophy of a lot many stock market gurus and get some insight into various theories like the value investing or the momentum stock investing or day trading.

Once that is done then go in for a opening up a discount brokerage account with an online stock broker. Make sure you compare the stock broker before investing. Again the best thing to do is to make sure that you have the best trading platform available to start the investing.

Define your trading strategy – Armed with all this knowledge define your trading style and also build a diversified portfolio.

Once you have all the stock market tips then I would say that now you can begin making money on the stock market however make sure that you are not greedy. Also try to make intelligent decisions rather than rash decisions. Always have some cash available to you for investing just in case you find good opportunity.

Good Stock Investments – Best Small Caps to invest

admin — Tue, 25 Aug 2009 03:28:58 +0000

Small caps companies are a great way to build wealth and secure your future in case you are into stock investments. Small cap companies are a mixed bag when it comes to recommendations from analysts. Some analysts think that small caps are risky preposition since they can be fraud and lack in quality. On the other hand, there are analysts who refer small cap companies since they have a great potential to grow; much better than already big companies.

What are small cap companies?

Small cap companies are those which have the market capitalization between 250 million dollars to 2 billion dollars. Most of the time, small cap companies can trade in any exchanges but you can see most of the small caps on NASDAQ and OTCBB exchanges since the listing rules and regulations are a bit liberal in these exchanges.

Some investors think small caps in a similar way as penny stocks. However, there is a big difference between the two. Usually, penny stocks have a stock price of a few cents but small caps can have stock prices of more than one dollar as well.

Advantages of investing in small caps:

1. Huge growth potential – Since these are small companies, they are lean and mean. Most of the times, these companies are quickest to recover from recession since they are able to mend their ways very fast. Every good contract they get increases the bottom line thus appreciating the value of the share.

2. Since these are small caps, institutional investors don’t touch them until they are recognized. This means that you have the opportunity to find them first before their value appreciates.

3. The recent recession has shown that earnings alone won’t give you returns. If you see blue chip stocks over the last year or so, you will see big blue chip companies like Microsoft (MFST), CISCO (CSCO) and the big car makers having no appreciation at all. Meanwhile, the small caps which are innovative had returns of 2 to 10 times.

4. There are still a lot of opportunities for innovative companies in America. There are a lot of new young entrepreneurs coming up with great innovative ideas unlike dotcoms. If they get the required financial backing, they can make it big.

Some of the best small caps for this year are listed below:

GeoEye Inc. (NASDAQ: GEOY)
Chipotle Mexican Grill, Inc. (NYSE: CMG), (NYSE: CMG.B)
eHealth, Inc. (NASDAQ: EHTH)
PROS Holdings, Inc. (NYSE: PROS)
Zix Corporation (NASDAQ: ZIXI)
Somanetics (Nasdaq: SMTS)
Almost Family (AFAM)
Neutral Tandem (TNDM)
MasTec (MTZ)
Ebix (EBIX)
Thoratec (THOR)
American Italian Pasta Company (AIPC)
Volcano Corp. (VOLC)
Emergent Biosolutions (EBS)
AZZ Inc. (AZZ)
Baytex Energy Trust (BTE)
NVE Corporation (NASDAQ:NVEC)
DG FastChannel Inc. (NASDAQ:DGIT)
Nabi Biopharmaceuticals (NASDAQ:NABI)
Art Technology Group, Inc. (NASDAQ:ARTG)
Sutor Technology Group Ltd. (NASDAQ:SUTR)
Multi-Color Corporation (NASDAQ:LABL)
Orchids Paper Products Company (AMEX:TIS)
Youbet.com, Inc. (NASDAQ:UBET)

Keep in mind that some of these best small caps can give you great returns. Since these stocks are risky as well, a lot of background verification is required while putting in your hard earned money into these small caps. These stocks are good stock investments if done after thorough research and analysis.