Stock Investing Guide

KEYS TO BEING A SMARTER INVESTOR - -PART 3

noreply@blogger.com (okey) — Tue, 17 Mar 2009 14:06:00 +0000

KEYS TO BEING A SMARTER INVESTOR - -PART 3

11.DON'T OVER LOAD ON COMPANY STOCK

As many employees at Enron and other large bankrupt
companies learned the hard way, loading up your 401(k)
with your employer’s stock can be disastrous. Both your
job and your retirement security are riding on the fortunes
of a single employer and a single industry.
Financial planners typically recommend limiting company
stock to no more than 5 or 10 percent of the account’s
value. But this can be difficult to do if the employer will
only match your plan contributions with company stock
while restricting how soon you might sell the stock
and diversify through other investment options offered.
Consequently, you may need to try to diversify your overall
portfolio through other types of assets you hold outside
your 401(k) plan.

1 2.DON'T CHASE 'HOT' PERFORMANCE

Today’s hot investments are often tomorrow’s cold
turkeys. The most recent glaring example of this was
tech stocks, represented by the NASDAQ stock index. The
NASDAQ returned a record-smashing 85.6 percent in 1999,
but fell nearly 40 percent the following year, and lost
another 21 percent the next year.
The major problem with chasing the current hottest
investments is that by the time most investors discover
that an asset category or specific investment is “hot,” the
investment often has already realized much or most of its
run-up in value. Consequently, investors often get in at
about the time the investment is ready to fall.
Calculations by DALBAR, a consulting firm, show that
stock investors who frequently trade in and out of mutual
funds earned a meager 3.51 percent annually between
1984 and 2003—dramatically below the 12.98 percent
annual average earned by the S&P 500 stock index over
the same period.

13. DON'T IGNORE 'COOL' PERFORMANCE

The opposite of chasing hot investments is ignoring those
suffering through tough times. Real estate investment
trusts, for example, did poorly in 1998 and 1999, but
boomed in 2000 and 2001 when stocks faltered.
Government bonds lost money in 1994, but returned
nearly 14.5 percent the next year.
A time tested way to avoid the problems of ignoring cool
performance and chasing hot performance is to stay
diversified and stick with the asset allocations spelled
out in your investment policy statement.

14. STAY IN THE MARKET

Nervous investors often sit on the sidelines during
down markets until they’re “convinced” the market is
rebounding. But by the time they get up enough nerve to
get back in, they’ve likely missed much of the rebounding
market’s gains, which commonly occur in the early stages
of recovery.
SEI Investments studied 12 bear markets since World War
II. Investors who either stayed in the market through its
bottom, or were fortunate to enter at the bottom, saw the
S&P 500 gain an average of 32.5 percent (not counting
dividends) during the first year of recovery. Investors who
missed even just the first week of recovery saw their gains
that first year slide to 24.3 percent. Those who waited
three months before getting back in gained only 14.8
percent. The secret is time, not timing!

15. START INVESTING EARLY

Remember the famous image of Archimedes moving the
world on the end of a long lever? Investing over time
provides that same kind of leverage. The longer you invest
money (the longer the lever), the more it “works” for you
by growing faster and faster.
For example, invest $10,000 at an eight percent annual
return inside a tax-deferred account, such as an IRA, and
you end up with $21,589 after ten years. Keep the money
in for 20 years and it grows to $46,610. Keep it in for 30
years and the same $10,000 initial investment balloons
to $100,627.

KEYS TO BEING A SMARTER INVESTOR - -PART 2

noreply@blogger.com (okey) — Sat, 14 Mar 2009 12:14:00 +0000

KEYS TO BEING A SMARTER INVESTOR - -PART 2

6. EDUCATE YOURSELF ABOUT INVESTMENTS AND INVESTING

Even if you work with a financial planner or other
investment professionals, you need to have a solid
understanding of how different types of investments
work, their potential returns, their risks and how you
can assemble them in a cohesive portfolio that’s right
for your needs and goals.
Pay particular attention to investment risk. All investments
carry some degree of risk. While stocks in general tend to
perform well over long periods of time, for example, their
short-term risk can be high, as many investors painfully
learned during the market decline of 2000–2002. Risk is
not limited to stocks, either. You can lose money in real
estate, corporate bonds, gold and commodities. This is
why it is important to note that diversification among
different asset classes may help reduce risk.
Even so-called “safe” investments carry some risk. U.S.
Treasury bonds, for example, are federally guaranteed
against loss of principal as long as you hold them until
they mature. Because they are subject to interest-rate
risks like any other type of bond, however, it’s possible
to lose money if you sell them before maturity.
Don’t understand interest-rate risk? If you don’t
understand how a particular investment works, or
the risks that come with it, ask for help before you invest.
Invest a little in education first. Ask your financial planner
or investment professional for resources to help you make
the best decisions.

7. HOLD REALISTIC MARKET EXPECTATIONS

One of the downfalls for many investors during the
booming market of the late 1990s was their belief that
high double-digit returns were normal for stocks. But
historical investment returns reveal otherwise.
According to Ibbotson Associates, large-company
stocks, such as those found on the Dow and the S&P 500,
returned an annual average of 10.4 percent from 1926
through 2006. During the same period, small-company
stocks returned 12.7 percent and long-term government
bonds averaged 5.4 percent.
But these are only averages over many years. In any given
year, you will probably not earn the annual “average”
return. You’ll earn either more or less than the average.
Knowing the historical average returns can keep these
fluctuations in perspective.

8. FOLLOW A DETAILED WRITTEN PLAN

Formally, this is called an investment policy statement.
It’s a road map to keep you on course through good times
and bad, to eliminate investment ideas that don’t fit your
circumstances, and to provide a way to monitor the actual
performance of your investments. This plan is, of course,
subject to changes over the course of your investing
lifetime and should be reviewed periodically.
The plan outlines such things as:
• Investment goals and time horizons
• Minimum average annual return needed
to achieve those goals
• Current income needs from the portfolio,
if any
• Types of investments you will and
won’t include

9. ALLOCATE INVESTMENTS ACCORDING TO GOALS AND NEEDS

How will you divvy up your investment dollars among
various asset categories such as large-company and small company
stocks, international equities, government and
corporate bonds, cash, real estate and other assets?
The answer depends on several factors. Key among them
are your investment goals and your time line for achieving
them. The sooner you’ll need the funds, usually the more
conservative your investments should be.
Also, what other financial resources are available to you?
If Social Security and a good pension will generate most
of your income needs in retirement, you may feel
comfortable with a more aggressive approach to your
investment portfolio. You may opt for a more conservative
approach, however, if your investment portfolio will be
a primary source of retirement income.

10. DIVERSIFY YOUR INVESTMENTS

Too often, individual portfolios invest heavily in a single
type of asset, often to the near exclusion of other types.
A popular choice in recent years has been large-company
U.S. stocks, also called “large-caps.” These stocks
outperformed other major asset categories in 1989 and
from 1995 to 1998. Yet, in all other years between 1965
and 2006, large-caps were outperformed by small company
stocks, international stocks, intermediate
bonds or investment real estate.
Because it’s almost impossible to identify in advance
which asset classes will lead the way during any given
time, it’s wisest to spread dollars among several
investment classes. Research has shown that this
diversification reduces risk while at the same time
maintaining or even improving portfolio performance.
Investors also may want to diversify within broad
categories. Among stocks, for example, they might divide
their money between value and growth stocks, or between
large-cap and small-cap. They may also want to include a
variety of industries or sectors like technology, consumer
goods and health care.

URBANIZING INCOME IN CHINA GIVES US A QUICK 17% GAIN---ALERTING MY VISITORS

noreply@blogger.com (okey) — Sat, 14 Mar 2009 11:41:00 +0000

Urbanizing Income in China Gives Us a Quick 17% Gain

Shares of American Oriental Bioengineering Inc (AOB: NASDAQ) are up more than 17% in the past week on news of a strong fourth quarter. The company posted revenue of $96.3 million – a 68% jump – and net income of $21.7 – up 43% on the quarter.

While pharmaceutical companies here in the U.S. are struggling to keep up, AOB is catching fire. This solid growth is what attracted us to the company in the first place. After almost a full 12 months of holding it, we are still impressed every earnings announcement.

The company recently expanded its capacity and product line. It also has ambitions to reach further into the rural Chinese market. As we noted when we first recommended AOB, rural China is the place to be. Our colleague, Chris Mayer, recently found this chart, which sums up our point:

As you can see, China is currently in a heavy period of urbanization. With this many people moving to major cities, average income will rise. When that happens, we’ll see a large increase in discretionary spending, which means more money for supplements and pharmaceutical products.

AOB is, and will continue to be, the country’s leading pharmaceutical provider as long as they reach as many customers in rural areas now. If they can do that, these customers will stay loyal when they move to the cities and have larger incomes.

We are already seeing this take place, and should continue to see results like these for a while. If you haven’t already, we recommend you buy shares of AOB.

Action to take: Shares of American Oriental Bioengineering Inc (AOB: NASDAQ) remain a buy at current prices.

Finally, a Bull Indicator For Our Silver Play

We just got word that for the first time in many months, the short interest in Coeur d’Alene Mines Corp (CDE:NYSE) is down. That means, the number of people now shorting – or betting on it to fall – is 18% lower than it was two weeks ago.

One of the common complaints on Wall Street last year was the amount of people shorting the banks. Many of those companies blamed the shorters for causing a panic and depressing share prices. We found out they were wrong in that case, but they still have a point: shorting can depress share prices.

This is one of the reasons our shares of Coeur have fallen in value. There’s been a massive short interest since we bought in 2007. These shorts are now finally leaving this trade. They’ve done well over the past year, but now it’s our turn.

Coeur, as we’ve said, is about to start production at its Palmarejo mine this month. You’ll want to be on board when that happens.

Action to take: Shares of Coeur d’Alene Mines Corp (CDE:NYSE) remain a buy at current prices.

KEYS TO BEING A SMARTER INVESTOR - -PART 1

noreply@blogger.com (okey) — Fri, 13 Mar 2009 13:37:00 +0000

1.UNDERSTAND THE DIFFERENCE BETWEEN SAVING AND INVESTING

Saving is for smaller, near-term goals, such as the next
family vacation, a car or a financial emergency. Keep
cash in a savings account, money market or short-term
certificate of deposit where you would have little or no
risk of losing principal and can have immediate access
to your funds.

Investing is for larger, long-term goals—at least five years
away — such as retirement or college. Investing carries risk
such as loss of principal or not earning as much as
anticipated. But wise investing also provides a greater
opportunity for earning a significantly higher rate of return
over the long run than you can earn through savings.

2.PUT THE REST OF YOUR FINANCIAL HOUSE IN ORDER FIRST

Before investing, consider tackling several other household
financial issues. Create a budget, or spending plan, in order
to free up money for regular investing. Pay off expensive
credit cards or other high-interest consumer debt that eat
up valuable investment dollars. Build a cash emergency
fund that includes three to six months of living expenses
and buy the right kinds and amount of insurance to protect
against a financial setback—otherwise, you may be forced
to raid your investment accounts for cash at a time when
the market is down or with costly tax consequences.

3.CLARIFY YOUR GOALS

Smart investing means investing with a specific purpose—
those life goals such as your desired retirement lifestyle or
passing money on to heirs. Investing with purpose makes
it easier to stick to your investment plan and to invest
income you might otherwise spend. Goals should be
realistic, with a specific amount to accumulate by a
reasonable target date. “Retirement” isn’t a goal. What kind
of retirement you want and when you want to retire are.
Write down your goals and discuss them with your family.

4.DON'T JUST GRAB FOR THE HIGHEST RETURN

One of the most misunderstood aspects of investing is
the belief that investing is all about seeking the highest
possible returns. This misperception is why so many
investors got into trouble during the booming stock
market of the late 1990s when they disdained “average”
returns and began chasing the riskiest of stocks. Their
purpose was simply to “make as much money as possible
in the shortest time.” This example illustrates why
investment goals are important. With reasonable, specific
goals, you can make informed, realistic investment
decisions designed to accomplish your financial goals
without taking unnecessary risk. Making decisions based
on these investment goals is what steers you on an even
course between the rocky shores of greed and fear.

5.UNDERSTANDING YOUR OWN RISK TOLERANCE

In addition to understanding the risks of each type of
asset and investment vehicle, you need to understand
how much risk you’re willing to take and which types
of risk worry you the most. Risk tolerance is partly a
function of your investment goals, how much time you
have to invest, other financial resources you have and,
frankly, your “fear factor.” Investments that keep you
awake at night, regardless of how “good” they might be
for your needs, are not the right investments for you.
Accurately gauging your tolerance for risk can be tricky,
however. It’s easy to feel confident when the market is up
and conservative when it is down. A CFP professional can
help you assess where you truly stand. Questions you and
your planner might ask include:
• Are you more concerned about losing
principal or losing purchasing power?
• How much principal are you willing to lose?
• How worried were you about your
investments during the recent market decline?
• Which of your current investments keep you
awake at night?
• Do you track your investments daily
(a possible indication of unease)?
• How diversified is your portfolio?
• What investment vehicles you’ll use, such
as individual securities, mutual funds,
separately managed accounts, or taxable
and tax-favored accounts
• How assets are to be allocated within the
total portfolio
• Rebalancing procedures
• Potential tax consequences
• Estimated risk level of the portfolio
• Updating income needs due to inflation
and medical costs

OIL RISES TO $48 AHEAD OF OPEC MEETING

noreply@blogger.com (okey) — Fri, 13 Mar 2009 13:02:00 +0000

PETROLEUM PRICES UP.

Oil rose above $48 a barrel on Friday ahead of OPEC's Sunday meeting in Vienna, after two volatile days of trade this week.

The producer group gathers in the Austrian capital this weekend to discuss its output policy and perhaps adjust the 4.2 million barrels per day cut it implemented last September in reaction to the depth and speed of the global financial crisis.

"OPEC has done everything they can to set the market up for some kind of cut to try and push the price a bit higher," said Simon Wardell, director of global oil analysis and forecasting at IHS Global Insight.

"But it might be that what we get in Vienna is talk of implementing full compliance of previous cuts before we get to the next one, to try and give the hard pressed economy of the world a respite," he said

Oil has hovered between $33 and $50 since the beginning of the year after OPEC implemented and began showing compliance to output cuts put in place to arrest its slide off last July's peak above $147 a barrel.

U.S. light crude for April delivery rose 99 cents to $48.02 a barrel by 1220 GMT, having jumped $4.70 on Thursday to settle at $47.03 and erasing the previous two sessions' losses.

London Brent crude rose 61 cents at $45.70.

FURTHER CUTS?

Ahead of its meeting on Sunday, OPEC released a report in Friday showing world oil demand is contracting faster than expected and increasing pressure on prices.

The Organization of the Petroleum Exporting Countries said global demand would fall by 1.01 million bpd on 2009, revising its earlier forecast of a fall by 580,000 bpd.

"With continued economic deterioration and demand erosion as well as the impending low demand season, there is likelihood of renewed pressure on prices," the report said.

Earlier on Friday, the International Energy Agency, which advises 28 industrialized nations on energy policy, said strict adherence to OPEC's September cuts would shrink oil stocks in developed nations, even as it projects further demand contraction, implying OPEC would not lower output curbs on Sunday.

"Our view it that they don't really need to do very much more in terms of new targets," said head of the oil industry and markets division David Fyfe of the Paris-based IEA.

OPEC seaborne oil exports, excluding Angola and Ecuador, will fall to a five-year low in the four weeks to March 28, to 22.76 bpd, down 350,000 bpd, UK consultancy Oil Movements said in its latest weekly estimate on Thursday.

HOW TO TRACK YOUR STOCKS

noreply@blogger.com (okey) — Fri, 13 Mar 2009 12:23:00 +0000

To track how your stocks are doing, you have to look at stock listings. Stock listings are published in just about every newspaper. The listings look confusing at first, since they look like a mixture of numbers, but can be a very useful tool when tracking your stock's progress. The listings are organized into many columns, including the following information:

52 WEEKS HIGH AND LOW: This field is a good indicator about a stocks volatility. Volatility is an indicator of the riskiness and potential for profit that the stock has. The greater the difference between the high and low, the riskier the stock is for loss and gain.

COMPANY NAME: This field is usually abbreviated in the listings, and listed alphabetically.

SYMBOL: This field is a one to five character symbol used as a sort of nickname for the company.

DIVIDEND: This field is listed in currency format, and it is the cash amount of money that the company will pay you each year for each stock.

PERCENT YIELD: This field is calculated by dividing the dividend by the closing price. It just tells you how much of the price of the stock you will be paid in dividends each year.

PE RATIO: The price-earnings ratio calculates the relationship between the price of a company's stock, and the annual earnings of a company. It is calculated by dividing the closing price of the stock by the earnings per share of each stock.

VOLUME: The volume is the amount of stocks that were traded the day before.

HIGH,LOW AND CLOSE: These are the highest and lowest prices of the stock the day before, and the closing price for the day before. This is an indicator of how much the price of the stock fluctuated throughout the previous day.

NET CHANGE: This is the change of the price of the stock from the previous day. This gives you an idea whether the price is dropping or rising.

In addition to the stock listings, stock price charts can sometimes offer a better view of how the stock is doing.

The price charts graphically organize the value of the stock over time. The charts can give you information on the company's historical performance, the stock's stability or volatility, the stock's current price relative to the past, and the stock's growth rate.

DAY TRADING STRATEGIES

noreply@blogger.com (okey) — Fri, 13 Mar 2009 11:31:00 +0000

PATIENCE:

Wait for all the stars to line up! Good things come to those who wait, be it low buy prices or high sell prices. Sometimes if you had only waited, you could have sold higher or bought lower.

Have patience! It's without a doubt one of the golden keys to making money in the stock market. The patient trader has self-control and waits for his indicators to tell him when to enter or exit.

Even if the market "appears" to have ended its rally, if it does not meet certain criteria the trader had previously set for himself, he must wait.

REVERSE PSYCHOLOGY:

If patience is the golden key to trading, then the silver key is doing things opposite from the rest of the market! You want to buy when the average investor is selling and driving the price down.

And when good news is driving a stocks price higher, you want to sell your shares at the over inflated price.

Buying when stocks are falling and selling when they are moving into higher ground is one of the hardest things to learn to do when you first start trading.

We don't have the luxury of holding our stocks for years to help iron out the little highs and lows. We live off the little highs and lows! Buy when there is blood in the streets!

EMOTIONS:

The stock market is very good at playing on your emotions. In order to be a good trader, you must look at the market in a cold, hard way. When the masses are selling in a panic, you must stand fast or step up and buy.

Remember that the market is made up of emotional herds buying and selling in waves. You must be the cold, cunning and calculating wolf looking over the herd for your kill. Don't panic sell and don't buy on hysteria.

MARKET ORDERS:

Don't use them unless you have to. Don't ever place a market order for a stock at the opening of the market, or when a stock is making new ground fast.

Putting in a market order in the first 15 minutes of the market is a sure way of paying the highest possible price for your stock, because as all the built up orders from the previous day go through, it lifts the stock prices for a few minutes.

You can be pretty sure that your order will go off at the high of the day this way. (but keep in mind it's sometimes handy to sell during this time).

STOP LOSSES:

These are almost as bad as market orders. Stop losses are a sure way of selling at a loss.

You can only use them when you are "in the money" and would normally sell your stock, but want to retain a slight possibility that it might continue to go higher.

BUYING LOW:

Sometimes the best way to buy low is to put in an order for a stock at "a price you'd love to own the stock at." Let's assume for a moment that the stock you want is trading at 100, try putting in an order at 95 and wait it out, what do

you have to lose? You never know when you might hit the low for the day that way. It's far better than putting your order at 99, only to find it crashed past that, filled your order and continued down to 95. You'd be surprised what an effective way this can be to both buy and sell. When you get your "dream" price, it's a great feeling.

SELLING: Selling is actually harder than buying in many ways. Try to decide what price you want to sell your stock at as soon as you buy it, so when that price does come along, you'll be ready to move.

FREE LUNCH: If there is a free lunch in day trading, it's picking stocks that are making new medium trend highs to trade with. That way if you do get in at the wrong point, there's a much better chance that your high buy will turn into the next low buy as the stock moves higher in its overall trend. This is one of the only safety nets you have in day trading, when combined with patience and some extra cash reserves.

IF YOU ARE WRONG: Then you are wrong! Don't try to justify a bad trade by convincing yourself it will turn into a good trade. If you buy on the high side, then sell at break even and buy back in on the low side. Talking yourself into believing that your mistakes are actually wise moves in disguise is very costly. Be professional enough to spot your mistakes and move on.

PROFITS AREN'T AS IMPORTANT AS YOUR CAPITAL: If you miss out on some profits, that's okay, you can always find another stock to buy. However, if you lose a big chunk of your trading money then the game is over. Protecting your trading capital is your number one mission, followed, of course by increasing it.

DON'T GET GREEDY: Greed will make you poor! If you experience an overwhelming emotional urge to take a trade because you are sure to make a killing this time, then you are experiencing greed. Greed and fear drive the markets and for the most part drive the average investor to making mistakes. Sell with good profits, but don't get too greedy. A savvy trader once said, "Pigs get fat, hogs get slaughtered".

BIG SWINGS:

Big moves up are sometimes followed by big moves down and visa versa. Sell on abnormally large moves to the upside and buy on abnormally moves to the down side.

They are generally out of character of the stock and can many times be followed by a "snap back" on the stock. Knowing your stock's trading habits can be very helpful.

HOT STOCKS:

Stocks that are hot move great, but nothing lasts for ever. If you buy a stock for a big, quick gain and find that the stock has "lost its heat," don't allow your money to be dead -- unless you are looking for an investment!

Sell and move on, don't justify your mistakes - it tends to be a costly justification process in the long run. Others in the stock for the hot ride will start to bail out as the stock cools off and looks like it"s not capable of making "hot moves".

JUSTIFICATION IS COSTLY:

Don't hold a losing stock to justify your purchase. If you make an incorrect buy or end up with a stock that is falling when you thought it would climb handle those mistakes quickly.

Do not be tolerant of stocks that are costing you time and money! Get rid of them!

SUDDEN MOVES UP:

Be very careful buying stocks that have just made sudden moves up. Many times they are following very closely with sudden profit taking.

TIME TO BUY:

One of the best times to buy is when a stock is going down on low volume (with no news) as compared to recent increases on higher volume.

This suggests that the selling is lighter and that the holders of the stock that are going to sell have finished selling and the rest are holding.

The sellers of the stocks then may come back into the market when they see the price stabilize. It's also not a bad idea to sell on high volume on the way up, as this usually creates abnormally high prices that cannot be maintained for long.

DAILY VOLUME:

Do not day trade in thinly traded markets, or on stocks that have very low volume. You may find you can't get out of the market as timely as you think.

TRADING TRUISMS ARE LIES:

If it were possible to implement, "Buy low and sell high" or, "Cut your losses and let your profits run" in any meaningful way, then the majority of the people would be making money.

THE SWITCHES:

Your investment method starts losing, so you switch to another, which immediately also starts losing ...

By switching, you open the door to getting the worst results from each method and none of the good and the overall result can be much worse than even the worst system followed faithfully.

THE DIPS:

You can't take advantage of market dips if you are already in the market. It's better to be out of the market more for day trading than in the market.

This will allow you to get in and out with profits fast and be on the sidelines should dips occur. Try to be out of the market more with your trades and in the market more with your investments!

CHARACTERISTICS OF SUCCESSFUL INVESTORS

noreply@blogger.com (okey) — Fri, 13 Mar 2009 10:56:00 +0000

The techniques and the characteristics of the most successful investors are diverse, and there's not a guaranteed formula of success.

Nonetheless, by looking at the mindsets of certain successful investors, we can learn by following 8 of their key traits:

1. REASON:

Arguably the most important characteristic. You need to justify why you hold each company in your portfolio. You must seek out high-quality stocks that are undervalued by the market, and therefore cheap.

2. COMMITMENT:

To exploit your strategy you have to do the research - and keep doing it - including surveying all financial data, online investment resources and company reports. Don't forget that "numbers have no prejudices."

3. DISCIPLINE:

The research process doesn't finish once you've bought a stock.You have to obsessively follow your purchases, to make sure they were sensible.

You'll need discipline, because successful investing is about running your profits and cutting your losses. The stockmarket is a rollercoaster, so you have to ride out the peaks and bottoms.

4. FLEXIBILITY:

If you're going to have rules you need to be able to break them!" The same stocks won't perform well in all markets.

5. Guts:

The best time to buy stocks is the time of "maximum pessimism" - when everyone is selling and fleeing the markets. To do this takes bravery.

6. OPEN MIND:

Seeking out opportunities ignored by other investors prevents prejudices coming between you and an opportunity.

7. PATIENCE:

"Unfashionable stocks" are unlikely to turn around overnight, so you need to know when to hold on.

8. KNOW YOUR LIMITS:

This means accepting you won't be the next Warren Buffett. Professional investors spend their whole day researching companies, have analysts to help them, and can visit companies. That doesn't mean you can't stock-pick successfully as an amateur ...

The best trick is to keep it simple and stick with what you know.

INVESTMENT PORTFOLIO MISTAKES

noreply@blogger.com (okey) — Fri, 13 Mar 2009 10:25:00 +0000

Are you a truly expert investor as you really believe? Do you consider yourself as a well-informed investor who is capable of anticipating and avoiding the majority of the risks that are usually associated with investing? Chances are, you are making many common errors that are costing you a lot of money and may even harm your financial independence and security. Below you can find the two most costly errors investors make with their investment portfolios: 1. Asset Classes and Subclasses How you allocate your portfolio, rather than which investments you select or when you buy or sell them, determines the majority of your investment performance over time.The solution is to allocate your portfolio to many asset classes and subclasses and be careful not to over or under weight any asset class.

Do not mistakenly believe that a properly diversified portfolio is a properly allocated portfolio. Properly allocate your portfolio among the different asset classes first and then diversify the investments within each asset class.

Diversification is the cornerstone of asset allocation and is key to reducing risk, namely company-specific risk. To properly diversify, you should hold sufficient quantities of not-too-similar securities with comparable risk and return trade-off profiles.

2. Inflation

Inflation can destroy the real value of your portfolio over time, thus placing your future financial security at risk.

As a general rule, the longer your investment time horizon, the more you should allocate to equity investments. For shorter investment time horizons, emphasize fixed-income and cash and equivalent investments.

By avoiding these two mistakes -- besides other investing mistakes -- you will be able to design an investment portfolio that will provide the best opportunity to achieve and protect your financial independence and security!

Grab Your Share of a $31 Billion Market-ALERTING MY VISITORS

noreply@blogger.com (okey) — Wed, 11 Mar 2009 15:29:00 +0000

A Blue Chip-Busting Biotech:How One Tiny Drug Developer IsAbout to Take Down Pfizer and Company.

Pharmaceutical behemoth Pfizer currently sports a market cap of $102 billion and annual revenue of $48 billion. Merck, another mammoth drug maker, has a $65 billion market cap and annual revenue of $24 billion. Glaxo SmithKline, with a market cap of $95 billion, generated $22.7 billion in revenue over the past year…
Obviously, these industry leaders know how to make money. Pfizer's annual revenue works out to 47% of its total market cap. The annual revenues for Merck and GSK come out to 36.9% and 23.9% of their market caps, respectively…
This month, we've found a stock that can top the numbers of even the biggest drug giant. It's a penny stock pharma play with a market cap that doesn't even approach $100 million. We don't think it'll stay this way for long, considering the company just signed a commercialization agreement worth more than its entire market capitalization.
You simply won't come across a deeply discounted pharma stock such as this very often. The market has managed to overlook quite a gift…let's take advantage of it.
Grab Your Share of a $31 Billion Market
In 2007, the value of the global pharmaceutical pain relief market was approximately $31 billion. In the United States, two-thirds of the dollar volume of the prescription pain medication market is for drugs used to treat chronic pain, with the remainder going toward drugs used for acute pain.
Javelin Pharmacueticals Inc. (JAV:AMEX) designs products to fulfill unmet and underserved medical needs in the pain-management niche. The company is particularly focused on breakthrough cancer, post-operative, back, orthopedic injury and burn pains. Despite the advances in medicine, the company insists treatments for these types of pain continue to be an underserved medical need.
That's where Javelin's lucrative new contract comes into play…
The company penned an agreement in January worth up to $71 million that includes double-digit royalties on future sales of its new pain drug, Dyloject.
Javelin will receive roughly $12 million in upfront cash payments from European pharmaceutical developer Therabel for the commercialization rights for Dyloject, the flagship product in Javelin's current pipeline. Dyloject is an injectable form of diclofenac, which is a prescription anti-inflammatory drug often prescribed to treat post-operative pain.
Dyloject is undergoing Phase 3 clinical development in the United States - the drug is already available in the United Kingdom. During its pivotal U.K. registration trial, Dyloject's efficacy and safety were shown to be significantly superior to standard intravenous treatments currently marketed in the U.K.
A Faster, Better Treatment
The competition for Dyloject requires dilution and slow infusion into the patient. But Dyloject comes ready to use for immediate IV administration. The drug works faster than its main competitor, and according to a recent study has the potential to save the U.K.'s National Health Service up to $73 per post-operative patient.
Anti-inflammatory drugs such as Dyloject, along with opioids like morphine, are often used post-operatively. They help reduce opioid doses by as much as 50%, thereby decreasing morphine-related side effects on the patient. Some of the opioid side effects reduced by this dose-sparing approach include nausea, vomiting and trouble breathing. Additionally, the less morphine used, the less likely that the patient's body will become dependent upon the addictive drug during recovery.
Dyloject's most significant U.S. competitor in the injectable anti-inflammatory category is ketorolac tromethamine. In January 2006, Javelin announced the results of a Phase 2b U.S. study in which Dyloject showed superior onset of action compared with ketorolac five minutes after intravenous injection.
Bottom line: This drug does what it is supposed to do. And it does it better than all of the leading competitors. That's the ringing endorsement for Dyloject…especially since it's awaiting approval in the U.S.
U.K. Sales and European Agreement Are Signs of Things to Come
Dyloject is already on the market in the United Kingdom, and sales have been growing at an impressive pace. The drug is now on the formularies of 73 hospitals in the U.K., 58 of which were considered gold accounts and 15 silver accounts. In the first nine months of its availability, Dyloject was accepted at 40% of their targeted accounts.
In the most recent quarterly conference call, Javelin CEO Martin Driscoll said that he continues to be impressed with the acceptance of Dyloject in the U.K. This initial trend bodes very well for the pending approval of the drug in Europe and the United States.
The drug has been accepted at 95% of the institutions to which it's been presented. This, Driscoll believes, shows that Dyloject has value to clinicians. It will prove valuable to shareholders, too…
Since Dyloject was introduced to the market, sales of the drug have doubled each quarter. Although that may be a small sample size, it shows the growth potential of the product once it is introduced into a wider market.
Javelin is on schedule to complete its studies on Dyloject and submit applications in late 2009 for approval in the U.S. and European markets. The partnership with Therabel helps Javelin accelerate this process.
Javelin's a Bargain at Current Prices
Javelin has put itself in a fantastic position to succeed. The company currently has $34.6 million in cash and equivalents and no long-term debt whatsoever. Its burn rate during the first three quarters of 2008 was $8.6 million. With $12 million in upfront cash from Therabel, the company is well positioned to wait out approval in the U.S.

Like most of the market, shares of Javelin were slammed over the past year. Even after the partnership with Therabel was announced, the stock didn't bounce much. With drug applications expected in late 2009 and shares are low levels, investors have a great opportunity to get in at a bargain level.
Recently, costs have been higher than expected. Javelin expects these costs will continue to be high in the short term, but will decrease as production increases and the company streamlines supply chain issues. Regulatory approval in the U.S. would be a major step toward scaling this business and reducing operational costs.
A Pipeline Filled to Capacity
Javelin feels that self-medication segment is an area of possible growth. It generally takes 15-20 minutes and sometimes as long as 40 minutes for commercially available oral pain medications to provide any meaningful relief. Javelin says that all three of its product candidates appear to work faster than the oral formulations of currently available prescription pain products. Dyloject has shown to relieve pain in as little as five minutes, a mark that has not been achieved by current injectable anti-inflammatory drugs.
Other shortcomings of presently available pain drugs include poor side effect profiles and requirements for invasive routes of administration, such as intravenous infusion. Due to the current delivery methods, undertreatment and overtreatment often result. Javelin currently has two late-stage drugs aimed at helping resolve these issues.
Rylomine (intranasal morphine) and PMI-150 (intranasal Ketamine) are both in Phase 3 trials in the United States. These candidates are less-invasive routes of administration for self-medications. Both of the drugs have IV-like effects without the invasive nature of IV administration or the need for patient-controlled infusion pumps.
These two product candidates present an opportunity for improved drug therapy both in the hospital setting and other medically supervised settings. The company feels that the economic benefit of nasal administration is very compelling. These products would eliminate the need for the staff and equipment needed to set up an IV. Additionally, by eliminating the IV, the incidences of needle injuries and the potential for transmission of blood-borne viruses are reduced.
The ability of the patient to self-regulate the medicine would provide greater control to the patient and thereby help avoid doses that are higher than necessary.

A Vested Interest in Javelin's Success
CEO Driscoll has shown his confidence in Javelin with his money. In May and June of 2008, Driscoll purchased 50,746 shares of Javelin common stock at a value of $169,598.
He wasn't the only one. In total, Javelin's directors and officers purchased 667,776 shares in 2008. That's more than $1.6 million in company stock.
In 2008, Javelin's leadership made their confidence known with large bets on the company's stock. (Refer to insider table on previous page.)
We like the fact that Javelin's leadership has a significant stake in the company's future. And with shares at their current levels, you have the chance to join them in investing in the potential of these pain-management drugs. 2009 will be a huge year for Javelin. Get in on this bargain now.
Action to take: Buy shares of Javelin Pharmaceuticals Inc. (JAV:AMEX) for $1.75 per share or less.

STAYING IN THE LOOP

Believe it or not, the stock market isn't perfect. It's not the omniscient force so many people think. It's not infallible.
Indeed, the market is driven by people. Buy and sell orders dictate where the market's going at any given time. And more importantly, misapprehensions lead to misaligned prices…that's where money's to be made for investors who are willing to think beyond the confines of Wall Street.
Just look at LoopNet (LOOP:NASDAQ), a victim of the free-falling market that's seen a 51% drop in value over the course of the last year.
LoopNet is the leading commercial real estate marketplace. When a company wants to buy a new office building or an entrepreneur is in need of retail space, they turn to LoopNet because it provides more commercial listings than any other real estate Web site. It also gets more traffic. At more than 910,000 unique visitors monthly, the site has five times more traffic than its closest competitor.
The company has been a Wall Street darling since its initial public offering in 2006, but it's not hard to see why LoopNet's price has fallen so sharply.
Commercial real estate took a massive hit in 2008. In New York City - one of the strongest commercial real estate markets in the country - transactions plunged 61% through October, according to Bloomberg.
Prospects don't look great for 2009 either. Even the most optimistic industry analysts see residential and commercial real estate struggling for the entire year. So why then are we writing to you about a company that helps businesses buy and sell property?
The reason is simple: LoopNet is one of those misunderstood companies.
The Company Wall Street Just Doesn't Understand
Believe it or not, the deteriorating real estate market hasn't taken a huge bite out of the company's ability to make money - LoopNet makes its revenues from the premium subscriptions it sells to companies looking for real estate. The company's more than 88,000 premium subscribers pay less than $100 per month for unfettered access to all of LoopNet's listings.
What's unique about LoopNet is the fact that its subscription rates are relatively resistant to a bad real estate market - after all, is a commercial developer likely to cancel its $100 per month subscription just because the economy's in the gutter? Probably not - it's a tool it needs to conduct its business, even when business is bad.
That idea has translated over to LoopNet's income statement in 2008. In its latest earnings release, on Feb. 11, it reported revenues of $86.1 million, a 22% growth from one year ago.
The notion that LoopNet would be hit hard by a slowdown in commercial real estate has been a misapprehension on the part of Wall Street. The analysts and investment firms miscalculated just how resilient this company is, and now's your chance to profit from their error.
Positioned to Ride out 2009
Right now, LoopNet's financial position puts it in a nice spot to ride out any difficulties it could face in 2009…The company's bank accounts are flush with $66 million in cash, and it's debt free. That means it's got enough money to operate for the next five or six years without any cash coming in the door.
But cash is certainly coming in right now anyway.
In the fourth quarter of 2008, LoopNet reported profits of $18.3 million.

Whether or not commercial real estate markets will rebound in 2009 remains to be seen. There's no question that a better environment for commercial real estate will bring huge benefits for a company like LoopNet. That said, there's also little doubt that LoopNet can continue to thrive in the interim.
Our analysis puts LOOP's value around $15.09 per share - the only question is how long it will take to get there, given Wall Street's inability to realize this company's enormous potential. Even so, we see the stock above $10 in the next year.
Action to take: Buy LoopNet (LOOP:NASDAQ) up to $7.10 per share.

Understanding a company's potential is one of the most important aspects of investing… especially for penny stocks. Without knowing what a company is capable of, you have no chance of ever striking it rich.
Today, we must take a step backwards. It's not something we enjoy, but it's fundamental to smart penny stock investing.
Arrowhead Research Corp (ARWR:NASDAQ) is one of the dream companies you tell your friends about. The firm is the majority shareholder in certain businesses that own major intellectual properties over sciences and breakthrough such as carbon nanotubes, RNAi development, and even stem cell technologies.
The company has exclusive deals with major players in all fields - the most important is Samsung in the LCD field. It also has rights, and ambitions, to technologies that have proven themselves in rehabilitating severed spinal cords.
Unfortunately, the investors were just not there to back Arrowhead up. There's nothing we can do about it. We swung for the fences at a fastball right down the middle of the plate and we missed. These patents and intellectual properties alone are worth our investment. The market just doesn't see it that way.
Lucky insiders of Arrowhead, we have no doubt, will someday be rewarded for their scientific progress. Unfortunately, we are not insiders. NASDAQ has sent a letter announcing that if Arrowhead doesn't bring their shareholder equity above $10 million, then it will be delisted. That's our cue to leave the stage.
While this one hasn't panned out for us the way it should have, we have to acknowledge the potential was right and the risk was justified. It's now time to sell and put our money into opportunities equal in potential and risk. Penny Stock Fortunes aren't made on mediocre gains. They are made by swinging for the fences, even if the rest of the market calls you out from time to time.
We'll keep our eyes peeling to see where these breakthrough intellectual properties go. For now…
Action to take: Sell shares of Arrowhead Research Corp (ARWR:NASDAQ) at market.
Sell Share of Terex Corp.

Terex Corp. (TEX:NYSE) reported a net loss of $421.5 million for the fourth quarter due to a one-time charge of impairment to goodwill. This quarter sank the company's entire fiscal year 2008, leaving it with a net gain of only $71.9 million.
With the shock of the impairment, shareholders are selling like wildfire. Shares fell 31% on the day of the announcement.
It's time for us to get out too - but not because of the one-time write-down…
Terex is, and will stay, an industry leader. But after hearing the CEO spout about increased competition, lowered margins and long-term recession problems, it's clear we are on a different page.
There will be plenty of money to be made in the heavy machinery needed to build infrastructure. Unfortunately, Terex isn't going to benefit as much as it should. It's clear the company is cutting back…
The best businesses will look at an opportunity such as this stimulus bill and take advantage of it. Terex's older brother Caterpillar is doing just that. President Obama said, "The CEO of Caterpillar said that if this American Recovery and Reinvestment Plan is passed, his company would be able to rehire some of the employees they've been forced to lay off."
That's a good sign. But Caterpillar is too big for us - and not exactly cheap at the moment. While we are selling one of our favorites, Terex, we will be looking for other ways to get into this coming infrastructure boom.
Action to take: Sell shares of Terex Corp. (TEX:NYSE) at market.
Sell Shares of AudioCodes
Last week, AudioCodes Ltd. (AUDC: NASDAQ) became one of the newest victims of the recession, missing its already-lowered estimates for the fourth quarter last week. Guidance isn't looking any better, either…
The $38.8 million AudioCodes posted in the fourth quarter was almost 10% less than the company brought in a year earlier.
What's even more distressing is how the bankruptcy situation with Nortel - the company's largest customer - is affecting AudioCodes' top line.
As of right now, our timeframe for recovery for this stock has increased dramatically. We feel that it's not worth holding on to this position any longer, instead using our capital for more promising picks.
Action to take: Sell shares of AudioCodes (AUDC: NASDAQ) at current prices.
Sell SOAP for Double-Digit Gains
Close out your position in Soapstone Networks (SOAP:NASDAQ). In light of another quarter of waiting for the company's PNC technology to be deployed on a wide scale - and translated into earnings - we've decided to book the double-digit gains we've made since recommending the stock on Nov. 20, to avoid the volatility we're seeing in the small-cap market right now.
Gains have been hard earned in 2009, but we've been able to capitalize so far over the last several months. Congratulations on your well-deserved gains on this position.

Action to Take: Sell shares of Soapstone Networks (SOAP:NASDAQ) for 20% gains.

ALERTING MY VISITORS

noreply@blogger.com (okey) — Wed, 11 Feb 2009 13:24:00 +0000

DKS Defies the Recession

Dick's Sporting Goods Inc. (DKS:NYSE) defied recession worries this morning when it announced fourth-quarter earnings would fall near analyst expectations. Aside from noncash impairment charges related to its Golf Galaxy acquisition, the company expects to earn 49-56 cents per share this quarter.

Investors were clearly expecting the worst, because the good news sent shares way up this morning. As we type, the stock is up about 17% on the day.

Even better is that the stock is still in your buy range…

Action to take: Shares of Dick's Sporting Goods Inc. (DKS:NYSE) remain a buy up to $16 per share.

Setting the Stage for a Rally in Arena

In just a few short weeks, Arena Pharmaceuticals Inc. (ARNA:NASDAQ) could have the data it needs to move forward with its revolutionary new weight loss drug, Locaserin. The company will release key data from one of the final patient studies sometime in March.

According to CEO Jack Leif, talks continue to find a major firm to partner up with Arena for marketing and distribution. However, Leif told Reuters that potential partners are interested in seeing these new data when they becomes available.

So the timetable is set. If results are everything we're hoping for next month, we should hear about a solidified partnership sooner, rather than later. That will leave us with only one more statistical hurdle -- the second 4,000-patient trial results, tentatively scheduled for release in early autumn.

The stage is set. Good results in March will more than likely be enough for Arena to snag a partner. And we're confident that these data will prove the drug has legs. Remember, Locaserin's efficacy was not the main concern in a majority of its late-stage trials. Instead, it was safety. Arena has made certain not to repeat mistakes made by the makers of Fen-phen -- also a serotonin activator -- that ended in class action lawsuits over heart problems linked to the drug.

The bottom line is this: Locaserin works. And it will help patients lose weight. All of the safety data so far have been more than acceptable. If this trend continues, even the most skeptical regulator should have what he needs to approve this medication.

Even the public is becoming more confident regarding Arena's prospects. Stock is up more than 35% this week. Most of the gains came Wednesday, when Arena announced it will present at the BIO CEO & Investor Conference next week.

Action to take: Continue to hold shares of Arena Pharmaceuticals Inc. (ARNA:NASDAQ)

Looking Ahead, Terex's Future Shines

Terex Corp. (TEX:NYSE) just trimmed its fourth-quarter profit guidance by 24 cents, to $5.40 per share. In any other market at any other time, this would have caused a massive sell-off. For a company with Terex's growth and market position to miss a number would have caused panic. Luckily, investors are starting to catch on.

Instead of looking at this one quarter -- or even one year -- investors are beginning to pay more attention to the company's long-term outlook. The consensus is clearly shifting. Investors expect the infrastructure spending to grow. For Terex, this will translate into higher heavy equipment revenues.

That's why Terex shares are rising. The stock steadily climbed to $14 from the announcement on Tuesday. That's good for a $2.50 jump, or more than 21%.

Action to take: Shares of Terex Corp. (TEX:NYSE) remain a buy up to $17.50.

Always visit to get these alerts.

A CHANCE TO GRAB THE SHARE OF THE CREDIT SOLUTION OF 2009

noreply@blogger.com (okey) — Wed, 11 Feb 2009 13:06:00 +0000

On an otherwise normal evening in 1964, a woman known as "Miss Witness" received a disturbing telephone call from alleged loan shark Frank Sacco. Here is her account of the call:

That evening, I received a phone call from him to look at my car and that "it" would happen to me if I didn't pay up.

The next day, the woman received another call, this time from her brother-in-law who had been using her car. He told her that a bomb had blown her car to bits.

This is not a scene from a classic mobster movie. This story is, in fact, a true account of a 1960s loan shark case in Yonkers, N.Y. The woman - who remained unidentified in news reports - told just one of the many horrific stories about threats and violence used by infamous loan shark rings throughout the country.

Many of the stories involve physical harm, irrevocable monetary problems and even murder. Luckily, we don't hear of these types of cases anymore. With other financial options opening up over the last several decades, the need for loan sharks has put many of these criminals out of business for good.

Today's first pick is one of these new legitimate players in the loan business. And you don't even have to "pay up" to profit from this fast-growing penny stock…

A Painfully Dismal 2009 Forecast Uncovers a Profitable Opportunity

Millions of people all over the world are facing tough financial times these days. All the pundits have compared this economic downturn to the Great Depression. And yes, there are some similarities.

Economists expect unemployment will reach between 8.5-10% in 2009. The only stock market to post a gain last year was Tunisia - a small North African country. Mega players like the UAE and Iceland were all but wiped off the international investment stage.

Home foreclosures are expected to reach an all-time high this year, which will only add to the unbelievably high rate of homes for sale. Prices are still crashing - currently sitting about 35% below a year earlier.

Credit is nearly frozen. Banks and credit card companies alike are buckling down and leaving very little money free to loan out - even with the drastic actions undertaken in Washington.

We aren't writing this to shock you. But you have to understand how bad it's getting for some families. Bills don't go away when the economy turns sour. And many people will need to turn to short-term lenders to get through these tough times.

The Solution to Millions of Americans' Financial Problems

Many view payday loan shops as corrupt, greedy modern-day loan sharks. That's simply not the case. These payday loan companies are providing a needed service. And as today's current economic situation worsens, payday loan shops are cashing in.

No one likes to hear of families being turned out of their houses because of missed mortgage payments. Cash advance businesses offer a solution to these millions of families. Instead of eviction, one solution for a working family is to take out a short-term seven- or 14-day payday loan. Obviously, this is the last option. But faced with foreclosure, it's becoming a more frequently used solution for many who never thought they'd be in that position.

Families facing foreclosure aren't the only ones running to cash advance stores. Many are taking out payday loans to fund unexpected expenses. With more families living paycheck to paycheck than ever before, even paying for the basics is becoming difficult. Electric, telephone and grocery bills are becoming huge hassles for many.

We found one company that has its hand in many essential services that millions will inevitably look to over the next 12-18 months.

Dollar Financial Corp. (DLLR:NASDAQ) is a key player in payday loans, cash checking, money transfers and even prepaid Visa cards. The company owns or franchises over 1,300 stores in the U.S., Canada, the United Kingdom and Ireland.

Dollar owns brands like Money Mart, The Check Cashing Store and American Payday Loans. While not creatively named, these brands are widely recognized.

With leading market shares in Canada and the U.K. and the second largest share in the U.S., Dollar produces over $600 million in revenue and more than $63 million in profits per year. With a market cap of just over $250 million, you might never find a better deal.

How to Play the Game: Market Position and Cash

Dollar's nearly 30 years of experience has given the company an upper hand on its competition in the ever-changing world of payday loans. Over the past century, federal, state and even local governments have imposed various laws and regulations. The largest concern to many is the out-of-control interest rates in place for these quick loans.

Starting in 1917, limitations on the industry have poured in from every agency and bureau you can think of. It took around 70 years to work itself out, but the industry finally found its footing in the early 1990s. By that time, Dollar was already a top dog.

Market dominance is important in this business. After all, it is still the retail business. In times like these, unsure newcomers will look to the largest of lenders, not the small-time convenience stores.

Besides market dominance, the second most important factor when looking into a payday loan investment is cash. If a company doesn't keep a lot of cash on hand, there's no way it can prosper when a wave of customers is banging on its doors. You can't give out loans if you don't have any money. Dollar has plenty.

With over $200 million in hard cash on hand as of Sept. 30, 2008, the company is in prime position to profit in 2009. Compared with its competition, Dollar is far ahead of the game.

Of course, these numbers don't tell the whole story. There are all kinds of other factors not featured in this chart, like debt and accounts payable and receivable. But it does sum up the main point: It takes cash to successfully run a cash advance operation.

A Better Opportunity Than the Best of 2008

Last March, we recommended a company called First Cash Financial Services (also featured in the "Cash Is King" chart). First Cash is similar to Dollar in that it also offers payday loans and cash checking services. The company also runs pawnshop businesses.

When we recommended First Cash, we were at just the beginning stages of the 2008 sell-off. Foreclosure rates were beginning to make headlines. Precious metals were exploding. And of course, the Bear Stearns collapse was the top story on every news channel.

These reasons, along with many others listed in that issue, brought us to recommend First Cash. In just two months, we closed an 82% gain. The economic situation back then now looks like 1999 compared with today's. The argument for First Cash is even stronger now for Dollar.

Another reason we fell in love with First Cash was its unbelievably low ratios. The company was trading at a P/E of 7.8 and a P/S of just 0.64. Dollar makes these numbers look like those of tech companies at the turn of the century.

With a price-to-earnings of less than 5 and P/S of 0.42, shares of Dollar might as well be free. In an economic situation that will dramatically force higher revenue and earnings for any payday loan store, it's unbelievable how low investors are valuing Dollar's stock.

But there is more to this story - and this timing - than just cheap valuations and hard economic times…

Grabbing a Slice of Other People's Tax Returns

Throughout the long history of payday loans, there has never been a better time to invest than right now. That's because there is a virtually guaranteed flood of business just around the corner. Let me explain…

Along with payday advances, short-term loans and prepaid credit cards, Dollar Financial also offers another critical service that is extremely cyclical - tax refund advances.

A great majority of Americans rely on tax refunds. In good years, they use this money to buy new televisions or fund home improvements. In recession years, they use this money to pay bills. Since we are in one of the worst recessions dating back to the Great Depression, the need for these refunds is astronomical. Dollar is expecting a flood of business, which should create a record quarter for the company.

Over the past 12 months, Dollar set a company best by recording $609 million in revenue and $52.5 million in earnings. The greatest increase came from its tax refund check cashing services in the quarter ending March 31, 2008.

There are two ways for Dollar to cash in on this annual boost in business. The company offers both regular check cashing, which guarantees a quick cashing fee for Dollar, and tax refund advances, which provides the company with an even larger return. The company charges the same for refund advances as for payday advances, but the guarantee of being paid is much greater. A history of pay stubs is great, but a guarantee from the U.S. government is even better.

Of course, Wall Street normally accounts for this cyclical behavior. The company's share price has been relatively flat during third-quarter announcements in past years. This year, we suspect something quite different.

You see, investors have beaten Dollar's stock down. But instead of accounting for a larger amount of business this tax year, these same investors have oversold shares. The company will see this boost in revenue. Yet Wall Street continues to ignore this obvious fact. Once those numbers come out - usually, around the second week of May - we could be in for the ride of our lives.

We couldn't find a better time to buy Dollar Financial than right now. We expect a huge year in this absolutely recession-proof play.

Action to take: Buy shares of Dollar Financial Corp. (DLLR:NASDAQ) up to $11.00.

CXS Breakdown:
Dollar Financial Corp. (DLLR:NASDAQ), www.dfg.com

In a year when millions more Americans (and Europeans alike) will default on their mortgages and struggle with their bills, payday loan centers will prosper. Dollar Financial Corp. will use this opportunity to show its alpha dog status. Now with tax season fast approaching, the company should soon shatter its own quarterly earnings record. It's time to get in on this cash cow.

Top-Line Power: Dollar Financial's long history of growing its revenue is impressive. But the next few quarters should blow these numbers out of the park. Tax time is around the corner, and that's like Christmastime for Dollar investors. Score: 2 of 2

Profit Fortress: There's big competition in the payday loan industry, but Dollar can handle it. With the top spot in the U.K. and second largest market share here in the U.S., the company is as fortified as any short-term loan company can be. Score: 1 of 2

Black Clouds: For some reason, Dollar's shares have collapsed over the past 12 months. After starting 2008 at around $30 per share, its stock fell to a mere $6. We waited for it to find a bottom. It's arrived. Investors are starting to see it as well. Now is the time to get in before shares skyrocket. Score: 2 of 2

Profit Catapults: As we mentioned, tax season is almost here, and Dollar's tax cashing/advance services should provide the company with a record quarter. On top of being both lucrative and timely, these services are practically government guaranteed - after all, Uncle Sam is signing the checks. Score: 2 of 2

Business Shock: Dollar might not be breaking any legs or blowing up any cars, but it certainly does shock some. Even so, individuals and companies have been loaning each other cash all of history. Dollar's approach isn't brand-new, but it does seem to work the best. Score 1 of 2

CXS RATING: 8 out of 10
Financials
Market Capitalization: $254 million
Recent Price: $10.60
Price/Earnings: 4.95
Price/Sales: 0.42
Price/Book: 1.27

How the Worst Year in Automotive History Could Pave the Way For Historic Small-Cap Gains

Now is not the time to be in the car business. As the stock market plunged in October, car sales followed suit. Used cars were hit especially hard, with sales tumbling a massive 20.7% in November alone.

It's not only the used car dealers that are suffering. Every facet of the auto business is feeling the heat. Credit is tight, meaning prospective car buyers will need a better credit score if they want a car loan. On top of this, consumer uncertainty and economic woes are persuading consumers to hang onto their old cars a bit longer than they normally would.

The results have been nothing short of devastating. Used car dealers have seen about half as many customers on showroom floors this year, according to The New York Times. Industry insiders and experts don't expect a miraculous turnaround, either. Ford Motor Co. execs are predicting industrywide December sales numbers to drop by 35% from last year. And they don't expect the first quarter to be a lot better.

December was especially brutal to General Motors as well. GM posted a 2008 U.S. sales drop the likes of which has not been seen in 49 years, dragged down by a 31% drop in December. With 2008's numbers now officially in the books, GM's total sales of 2.95 million cars was the least the company has posted since 1959, according to Automotive News.

The industry is, indeed, in turmoil. But there's one company in the auto biz that's prepared to weather the storm. And when business as usual finally returns, this industry leader will emerge stronger and more profitable than ever before.

So are we crazy to bet on a car dealer in the midst of this painful downturn? Read on and decide for yourself…

Buying the Business No One Else Wants

CarMax Inc. (KMX:NYSE) is a name we're almost certain you'll recognize. It's a Fortune 500 company - and one of Fortune's "100 Best Companies to Work For." Most importantly, CarMax is the largest retailer of used cars in the United States.

Obviously, the entire business has been hit hard by recent events: retail, auto and credit markets are three of the most (if not the most) damaged sectors right now. But if you look past the carnage, you'll see that CarMax is prepared to take its business to the next level while others continue to slog through the industry's most difficult economy in decades.

CarMax is not your father's used car lot. The company sets itself apart from the competition with its unique business model that includes no-haggle pricing, strict quality controls and trade-in guarantees. It'll even give you a written promise to buy your old car even if you decide to not purchase a new one.

Staying Smart During the Downturn

Like other car dealers, CarMax has seen a considerable decrease in store traffic. To combat lower sales, the company has taken action early and often to defend its margins and get though the recession in one piece. In reaction to lower store traffic, management has made efforts to reduce inventory year over year by $340 million, and has even improved turnover, and subsequently decreased costs.

Management has also made the decision to temporarily suspend store growth until conditions improve. Growth was originally reduced to five-10 new store openings earlier in 2008. In the third quarter, CarMax opened just one store, in the Charlotte, N.C., market. Looking ahead to 2009, the company will finish construction in progress on four new locations, but will open only one of these for the time being.

Staying smart has been the name of the game - and company management says it intends to stick to the business model that made CarMax the leader in used car sales. Even though industrywide sales are down 30-40%, CarMax will not be dropping prices or offering any gimmicks or discounts. Company policy is everyday low prices, and it will not move away from this model - the consensus is that any type of sale or offer would not improve traffic in these economic conditions.

We happen to agree with this stance. The company was built - and will continue to grow - under this model. We believe offering a no-haggle shopping environment attracts buyers that would normally be wary of used car shopping.

Superior Financing Will Help CarMax Survive and Thrive

In today's economic climate, exposure to subprime debt has been a death knell for scores of lenders. And while at first glance you wouldn't expect a car dealership like CarMax to be affected by financing woes, it certainly has been. That's because CarMax has its own lending arm - CarMax Auto Finance (CAF) - that has dealt the company some unwelcome losses this year. Ultimately, CarMax's unique brand of financing should shield the company from troubles down the road.

At most dealerships, selling a car involves two commissions: one for the employee who sells the car and another for the financing team when they originate a loan. CarMax's system is a little different - at CarMax, customers deal with one salesperson throughout the entire process, financing and all, and the sales team doesn't get any incentives for pushing one loan over another. When a car buyer sits down to look over his financing options, he's presented with side-by-side offers so that he can pick the option that works best. That's a novel idea in the auto finance world…

CarMax customers aren't bound to loans offered by CAF - the company uses financing from third-party lenders as well. If you're wondering why CarMax would provide so much transparency to customers (at the risk of losing out on financing a car it sells), the bottom line is this: CarMax is in the business of selling cars.

While CAF has been a profitable enterprise most years, the dealer's financing arm really serves just as a means to get more cars out the door. As a result, the company isn't interested in holding onto the loans it writes; it packages groups of loans into securities and sells them on the debt market each month.

The practice of unloading most loans right away did a good job of protecting CAF from the horrendous potential losses the unit would have incurred had it been holding onto the debt. That said, a lack of liquidity in the market for securitized debt and a lower volume of cars to finance have been the primary drivers of CAF's losses this year.

When liquidity returns to the securitized debt markets that CAF uses, expect the unit to spin those losses into future profits. All told, with plenty of capital to fund its operations in the interim, the credit crunch should take less of a toll on CarMax than on most other lenders.

Scary Numbers Are Combated With Increased Market Share

When CarMax released third-quarter finances in late December, the results were far from pretty. Store traffic was down considerably, used car sales were down 17% and the company reported a 10 cent per share loss. Selling and administrative expenses also increased to 14.9%, squeezing margins even tighter.

But this recession is giving CarMax the opportunity to scoop up market share as smaller independent dealers bite the dust. Recent data indicate that CarMax continues to gain market share in the late-model used car market. And internal customer surveys indicate customer satisfaction rates are at all-time highs across the board.

As we move into what is set to be a very difficult year for the economy, we believe the outlook for CarMax will improve significantly as 2009 winds down as investors begin to see the light at the end of the tunnel.

Preparing for a Massive Comeback

In a recession like this one, consumers put off the purchase of big-ticket items like appliances, furniture and, of course, cars. CarMax is in no way immune to consumer tendencies, and we should expect the company to continue to post negative sales growth from its existing locations in 2009. However, we do not expect this trend to continue for more than four quarters. As consumer confidence returns, we can expect CarMax to return to an annual growth rate that's well in the double digits.

Remember, CarMax's problems are not internal. Rather, they are a symptom of a lagging economy. CarMax's business model itself is nearly flawless. The company has proven this with its impressive track record of year-over-year growth. CarMax will continue to grow its business - and its share price - once the economy improves.

For this play, time is on our side. Right now, CarMax shares trade about $8 per share. We believe we can get a better price during the early part of this year.

Action to take: Buy shares of CarMax Inc. (KMX:NYSE) if the stock dips to $7.40 per share or less.

CXS Breakdown:
CarMax Inc. (KMX:NYSE), www.carmax.com

CarMax Inc. (KMX: NYSE) is a dealer of new and used cars that sells vehicles through its 100 car superstores in 41 metropolitan markets. The company focuses on selling late-model vehicles with less than 60,000 miles. To date, CarMax has sold more than 2 million used cars.

Top-Line Power: Like most other dealers, CarMax has been hurt recently by a slowdown in car sales. That said, the company is one of the best positioned for a recession. In the long term, CarMax should continue its trend of stellar growth.
Score: 1 of 2

Profit Fortress: CarMax's brand recognition is a significant competitive advantage in the used car arena. As cautious consumers opt to purchase pre-owned vehicles, a reputable name like CarMax will be a significant sales factor that other dealers can't measure up to. Score: 2 of 2

Black Clouds: With the economy in recession, cars dealers have been hit harder than ever before as sales have slowed significantly year over year. Locally owned used car dealers are feeling the pinch, and CarMax is ready to step in and fill the void. Score: 1 of 2

Profit Catapults: CarMax's unique customer-centric business model makes the company a standout among dealers. When consumer confidence again favors auto sales, this company will be a first stop for many. Score: 2 of 2

Business Shock: Bringing reputability to the used car market has proved to be a game changer for CarMax, a fact that hasn't lost any of its cachet. Its no-haggle pricing policy attracts a new demographic to the used car market Score: 2 of 2

CXS RATING: 8 out of 10
Financials
Market Capitalization: $1.81 billion
Recent Price: $8.23
Price/Earnings: 42.14
Price/Sales: 0.24
Price/Book: 1.17

THE WAYS TO MAKE MONEY

noreply@blogger.com (okey) — Fri, 02 Jan 2009 19:05:00 +0000

Most people don't spend much time wondering what money is. Their only major concern is how much they have, and how to get more!

What Is Money?

It is a medium of exchange.

What Does it Do?

It ensures the success of exchange by being the one item on offer that is ALWAYS acceptable.

Why Is it Necessary?

Because human beings must exchange to live together in peace, and to prosper!

That IS ALL!

On the other hand, without money, the production and exchange of anything but the most rudimentary goods and services is impossible. It is not difficult, or time consuming, or inefficient, it is IMPOSSIBLE!

Animals don't exchange (or trade) amongst one another. They are self-sufficient, or they take from each other, or they exercise the prerogative of superior strength and/or cunning.

There are some human beings who get along in a very similar fashion, but the overwhelming majority recognize the benefits of voluntary exchange.

Strictly speaking, the use of the word "voluntary" in this context is redundant. The phrase "your money or your life" is not the precursor to an exchange, whether the person uttering it brandishes a gun or a government identity card!

The first rule of any voluntary exchange is simplicity itself. If two people are willing to exchange, each must view the results of the exchange as being beneficial. If either of them is not of that view, the exchange will not take place.

The ways to make money in this world are really very simple:

Marry Someone Who Is Already Rich

Have a Rich Person Die and Will You their Money

Strike Oil

Discover Gold

Win the Lottery

Rob a Bank

Work for it, or ...

Have it Work for You Through Investments!

In investing, you don't have to be an expert to take advantage of real opportunities!

But, in order to invest with confidence, profitable success and consistency and be able to take advantage of opportunities, first you should assure, that all your essential financial needs and responsibilities are met.

Then, start with:

1. Setting aside sufficient liquid funds for cases of emergency.

2. Making sure you are completely and adequately insured.

3. Building a reasonable retirement plan.

4. Getting out of debt -- and staying out!

5. Determining your time frame, and

6. Start investing with the aim of becoming financially independent!

As each of us enters different stages of life, our changing family status and objectives, incomes, expenses and living standards shape our investment strategy.

By having a clear idea of what you want your investment to accomplish, you'll be able to put your money to work more productively.

Investing is generally defined as the conversion of risk-free assets into risky ones with prospects of greater return.

Every investment has a certain amount of risk associated with it. You can minimize risk, if you are able to understand the different characteristics of the various investments and build your portfolio accordingly.

Given the existence of risk, why invest at all?

Because historically, the existence of greater risk is commensurate with greater rewards for investors.

You are almost certain to pick a bad investment sometime. The secret then is to cut your loss as soon as possible.

Unfortunately, most people find this very difficult to do. No one likes to think that he has made a mistake and there is a big temptation to hold on and hope for better days.

But there is almost always a time when an investment starts to turn sour that you can get out with only a small loss.

If you hold on you could be on the losing side for many years and then lose even more money in the end.

Having the courage to admit that you were wrong is an essential technique of successful investment as well as in other aspects of life.

A Swiss banker put it rather well:

"If you are losing a tug-of-war with a lion, give him the rope before he gets your arm ...

You can always buy a new rope!"

MONEY

noreply@blogger.com (okey) — Fri, 02 Jan 2009 18:57:00 +0000

Money permeates every relationship in life, every interpersonal interaction:

Friendship and Courtship,

Partnerships,

Investments,

Living Together,

Marriage,

Divorce,

Death and etc!

Money is a commodity which takes on other meanings and emotions.

Money becomes the emotional football that everybody may use to throw back and forth at all others and never resolve their real issues.

Workers earn it,

Spendthrifts burn it,

Bankers lend it,

Women spend it,

Forgers fake it,

Taxes take it,

Dying leave it,

Heirs receive it,

Thrifty save it,

Misers crave it,

Robbers seize it,

Rich increase it,

Gamblers lose it,

Stock brokers sometimes (?) multiply it and ...

We will all always can use it!

19 TRADING POINTS

noreply@blogger.com (okey) — Fri, 02 Jan 2009 18:51:00 +0000

1. Plan your trades and trade your plan.

2. Keep a positive attitude, no matter how much you lose.

3. Buy the bad news and sell the good ones.

4. Do not be AFRAID to buy high and sell low.

5. Continually strive for patience, perseverance, determination, and rational action.

6. Limit your losses and learn how to use stops.

7. Avoid getting in or out of the market too often.

8. Losses make the trader studious - not profits. Take advantage of every loss to improve your knowledge of market action.

9. Remember that a bear market will get back in 10 days what a bull market has taken six months to build.

10. Expect and accept losses gracefully. Those who brood over losses always miss the next opportunity, which more than likely will be profitable.

11. In trading there are the quick and the dead.

12. Accept failure as a step towards victory.

13. Have you taken a loss? Forget it quickly. Have you taken a profit? Forget it even quicker! Don't let ego, fear and greed inhibit clear thinking and hard work.

14. One cannot do anything about yesterday. When one door closes, another door opens. The greater opportunity always lies through the open door.

15. Beware of trying to pick tops or bottoms.

16. If you don't know who you are, the markets are an expensive place to find out.

17. In the world of money, which is a world shaped by human behavior, nobody has the foggiest notion of what will happen in the future. Mark that word -- NOBODY! Thus, the successful trader does not base moves on what supposedly will happen but reacts instead to what is happening.

18. Lose your opinion … Not your money.

19. Finally, don't you ever forget that when the ship starts to sink ...

Don't pray … Jump!

STOCK MARKET VOLUME

noreply@blogger.com (okey) — Fri, 02 Jan 2009 18:47:00 +0000

Before investing in any stock, one major element that you have to look at is the company's daily volume.

The daily volume of a company (Liquidity) is the amount of shares that are traded on any day.

Most of the stocks that have minimal volume, 15,000 shares per day or less, have a problem, and there are numerous reasons you should try to avoid such low volume stocks.

One reason is that stocks with low volume often have very large price swings.

These fluctuations are due to the laws of supply and demand. If there is only a few available sellers of the stock you want to buy, you are forced to pay what they want for the stock.

On the other hand, when you decide to sell the stock, you may be forced to keep the shares because there are no buyers of the stock, or to sell them in a really low price.

Since the low volume stock is "handled" by only a few persons, the stock is usually get hammered down harder than most stocks, and it is also more easily "treated" going up.

Stockholders of these type of companies are often very easily frustrated, and unless they are prepared to hold them for long periods, they very easily panic and sell their stock to the very first offer.

Nevertheless, you shouldn't judge companies solely on their average volume.

If the company's fundamentals are strong, you should not rule out the possibility of purchasing any stock of the company, but you must do a thorough research before making any final decisions.

STOCKS AND LIQUIDITY

noreply@blogger.com (okey) — Fri, 02 Jan 2009 18:35:00 +0000

There are two aspects of liquidity:

A. How readily an asset can be turned into cash (the ease with which buyers and sellers can be brought together and can agree on a price) is called liquidity.

An important consideration in assessing risk is how liquid various financial assets are. Therefore, assets that are less liquid tend to have a wider spread between the "bid" (the price offered by a would-be buyer) and the "ask" (the seller's asking price).

Cash Is King!

You need cash and liquidity for freedom and security. The cash in reserve provides money for not only emergencies but opportunities as well.

A cash reserve provides the foundation for your entire financial position. You should get your cash reserve in order before taking on any risky investments with money you can not afford to lose!

Boring but Prudent!

Five to six months "salary or seven to eight months" expenses are guidelines generally considered reasonable for emergency reserve funds.

B. An important factor when choosing which stocks to buy is liquidity.

This type of liquidity is best measured with volume. Higher the average daily volume is, higher the liquidity is.

High liquidity ensures that at the moment when we want to buy or sell shares, there will be enough sellers/buyers on the other side of the fence!

INFLATION,SAVINGS AND INVESTMENTS

noreply@blogger.com (okey) — Fri, 02 Jan 2009 18:04:00 +0000

Most people think a market crash is the biggest danger to investors ...

Think again!

Nowhere on your bank or brokerage statement are you likely to get a report on what inflation is doing to the real value of your savings and investments.

So if your money is stowed in a "safe" investment, like a savings or money market account, you'll never see how inflation is gobbling up virtually all of your return!

Inflation is the rise in price of goods and services.

We all know that things seem to cost more every day, but how many fully realize just how much that thief called inflation steals? Even with relatively low inflation, you steadily lose buying power of any money you just hold on to!

To stay even, you must invest at rates of return that at least match inflation rates. Your real rate of return, in terms of buying power of your money, is your savings or investments rate of return less the inflation rate.

If inflation is 4 percent per year and your return is 5 percent per year after taxes you have managed only a 1 percent gain in real buying power. If your after-tax return is only 3 percent, you lose 1 percent in buying power.

Inflation occurs when demand increases relative to the supply available. During periods of economic growth moderate inflation is expected.

However, hyperinflation which is inflation of 100% a year or more is a major concern as people lose confidence in the currency. During hyperinflation hard assets like gold and real estate rise as they usually retain their value in inflationary times.

Cost-Push Inflation:

Is inflation caused by rising prices of raw materials. When demand exceeds the supply of raw materials manufacturers pay higher prices. The manufacturers then charge merchants more for their finished products. The merchants then raise the prices they charge consumers.

Demand-Pull Inflation:

Occurs when supply is not adequate to meet demand. This causes higher finished goods prices that merchants must pay leading to higher consumer prices.

Deflation:

Is a decline in the prices of goods and services. Deflation is the opposite of inflation. When prices are falling due to deflation, economic activity is negatively effected as the price weakness is usually due to very weak demand factors.

Deflation is a significant aspect of economic depression as economic recession is accompanied by declining prices and a shrinking economy.

Stagflation:

Is the term used to describe an economy that is growing very slowly accompanied by high inflation. Usually when the economy is growing slowly the inflation level is low.

How The Central Bank controls inflation?

The Central Bank attempts to control inflation by adjusting the cost of money to member banks by raising or lowering interest rates.

Low Interest Rates

Low interest rates tend to stimulate economic growth as the cost of money is less and leads to increased borrowing which encourages additional economic activity.

High Interest Rates

High interest rates tend to depress economic growth as the high cost of money limits economic activity.

During periods of low inflation the Central Bank allows interest rates to remain low and monitors economic activity to keep growth at a sustainable but non-inflationary pace.

During periods of rapid economic expansion and high inflation the Central Bank raises interest rates to slow the pace of economic activity and limit inflationary pressures.

NEVER INVEST ON TIPS

noreply@blogger.com (okey) — Thu, 13 Nov 2008 14:12:00 +0000

Betting on information from people who supposedly have the inside story on a company is extremely dangerous!

Everyone has an opinion and chances are they do not have all the facts. In my experience, trading on tips from these "reliable" sources have always given me the same results:

I lose money!

There is also "Your Brother-In-Law" theory, not highly recommended by anyone ... but followed all too often by many investors!

Your brother-in-law, or "some guy at work," tells you about a stock that is "really going to make you a lot of money." You know nothing about the stock but you rush out and buy a hundred shares nevertheless.

I think the right word for this group is "losers."

Would you buy a stock because an "expert" on TV or a paper says it is a great investment?

Chances are, they or their company own too much of this stock and need to get rid of it.

It is called "Pump and Dump."

Pump up how great the stock is, then dump it when unwitting investors buy it because they think it is a great investment and it is really not.

I am not saying that every "great" stock that is mentioned on TV or in the papers is actually a dud; sometimes they really are high flyers, but I would not put money on them just because some "expert" recommended them!

Would you invest in a stock because of a friend's tip?

It depends ...

But before you decide, check out what he "really" knows about it, and do a thorough research of your own!

Would you place your trust and invest your hard earned money on rumors and street talk?

No!

While we do actually say "buy the rumor" and "sell the fact," on the other hand, how many times didn't the rumor just remained a worthless rumor?

Always try to get unbiased opinion. Ask yourself about the motive behind the "tip." This might save you from a lot of trouble. Besides, you don't need the "tip!"

All it takes to "beat the market" is commonsense thinking, plain good old time dealing and ...
Patience!

STOCK ANALYSIS,RESEARCH AND RECOMMENDATIONS

noreply@blogger.com (okey) — Thu, 13 Nov 2008 13:53:00 +0000

Stock research analysts study publicly traded companies and make buy and sell recommendations on the securities of those companies. In this way they can exert considerable influence in today's stock marketplaces.

Stock analyst' recommendations and reports can influence the price of a company's stock - especially when the recommendations are widely disseminated through public appearances.

The mere mention of a company by a "popular stock analyst" can temporarily cause its stock to rise or fall - even when nothing about the company"s prospects or fundamentals recently has changed!

While analysts provide an important source of information in today's markets, investors should try to understand the potential conflicts of interest analysts might face.

For example, some analysts work for firms that underwrite or own the securities of the companies the analysts cover. Analysts themselves sometimes own stocks in the companies they cover!

The fact that a stock analyst - or the analyst's firm - may own stocks they analyze does not mean that their recommendations are flawed or unwise.

But it's a fact you should know and consider in assessing whether the recommendation is wise for you.

As a general matter, investors should not rely solely on an analyst's recommendation when deciding whether to buy, hold, or sell a stock.

We strongly suggest that a little more digging on your part, beyond what brokerage companies are recommending, will always be to your benefit!

It's up to you to educate yourself to make sure that any investments you choose match your goals and tolerance for risk.

Remember that stock analysts generally do not function as your financial adviser when they make recommendations - they're not providing individually tailored investment advice, and they're not taking your personal circumstances into consideration!

Above all, always remember that even the soundest recommendation from the most trust-worthy analyst may not be a good choice for you!

That's one major reason why you must never rely solely on an analyst's recommendation when buying or selling a stock.

Before you act, ask yourself whether the decision fits with your goals, your time horizon, and your tolerance for risk.

Know what you're buying, or selling and why!

Hoping to restore investor trust, many regulatory bodies are lately adopting new rules requiring stock analysts to disclose in written reports and in interviews any financial conflicts of interest they have with the companies they cover.

The rules are aimed at bolstering shareholder confidence after financial disasters that called into question the accuracy of company audits and stock analysts reports.

Amongst others, the disasters include the collapse of the dot-com bubbles and the scandals surrounding bankrupt energy traders.

Some analysts misled investors by issuing bullish research reports on poorly performing companies to generate or keep lucrative investment-banking business from those firms.

Many interested groups say that the new rules are better than nothing. But they also say that those rules are years overdue and surely fall short of what is really needed.

These rules take an important first step but do not go nearly far enough to limit the ties between analysts and their firms investment-banking departments.

They also may not be sufficient to resolve some deeply rooted conflicts of interest in the field.

INVESTORS AND THE CIRCLE OF COMPETENCE

noreply@blogger.com (okey) — Thu, 13 Nov 2008 13:47:00 +0000

Investment procedures apply equally to all investors because they are based on unchanging principles. In contrast, the selection process differs for each individual investor because it reflects the circle of competence, or circle of interest which becomes a circle of increasing competence with the accumulation of experience by the individual investor. The circle of competence is a specific application of the general principle of differential knowledge. The economist Friedrich A. Hayek (1899 - 1992) noted that "practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made." The circle of competence of each investor reflects his or her personal qualities including risk tolerance, temperament, interests, knowledge, intelligence, and judgmental ability. Therefore, each step in the selection process will uniquely conform to the particular individual investor. In addition, the circle of competence of each investor represents an arena where he or she has no competition from other market participants. This arena is a confidential monopoly created by the investor. This secret monopoly position is a proprietary interest in intellectual property. With confidentiality, there is no second guessing of an investor's judgments by others. The investor uses the tools and techniques of security analysis, but the investor's job is not the same as the security analyst's job. Where a security analyst must be prepared to appraise the value of every common stock or other security traded in the market, the investor only needs to appraise those stocks in his circle of competence.

DECIDING WHEN TO SELL YOUR STOCKS,THE MOST DIFFICULT DECISION

noreply@blogger.com (okey) — Mon, 13 Oct 2008 18:44:00 +0000

"You gotta know when to hold "em and know when to fold "em!"
Selling a stock is one of the most difficult decision an investor faces, while purchasing it is sometimes much easier!
Like most investment decisions, selling is part science, part art. Unfortunately, for many investors, however, it amounts to sheer panic. They sell when their stock goes down. They sell when the entire market goes down.
In short, they sell for emotional reasons!
Most investors are motivated by things such as fear of loss and fear of regret rather than by rational decisions designed to grow their money. These emotional, and irrational, decisions are just what successful investors must avoid.
Besides, if you don't buy a stock prior to a major climb in prices, all you've lost is a hypothetical opportunity to make a good profit.
But if you hold a stock and make the wrong decision concerning when to sell, you can lose a substantial amount of your profits and sometimes even a part of your capital.
Think about selling before you buy.
Before you buy a stock, you should consider both your motive and your time frame. Monitor your investment and make your decision to sell based on your original goal.
If you reach your goal before your time frame, you can sell and feel good knowing you achieved your objective.
But if your time schedule pass and you're not even close to your goal, you may have to consider selling or readjust your schedule.
Figure out how much you can afford to lose.
Sometimes, the value of many stocks may go immediately down. Some will recover and go up, but others will not.
To avoid the second situation, you should determine well ahead of time how far you're willing to go before you're ready to sell and get out!
Depending on your personal situation, you may be able to absorb a certain percentage of loss, but the main thing is to establish a "stop loss" point for yourself and then stick to it.
Measure the performance of your stock against other similar ones.
Even if your stock's performance is not living up to your expectations, don't abandon your plans without first surveying the overall climate.
If you can find a better return somewhere else, perhaps you should seek that alternative. But if all similar investments are performing at about the same level, maybe you should hold on.
Don't be greedy!
When the value of a stock is going up, well beyond your initial goal, it's sometimes hard to sell it. Remember that selling too early is still preferable to selling too late.
If you insist on keeping it, limit yourself on how far down you will let it drop before you sell.
Strictly speaking, when you sell part or all of your stock holdings, you can't always possibly be 100% right!
If the stock continues to rise, you've sold too soon. If it falls, you should have sold the entire position. But partial sales do make sense within the context of an entire portfolio.
If a stock has done extremely well, so that it seems very expensive compared to the overall market, and yet there seems to be nothing troubling about the fundamentals of the company, it might be time to peel off a few shares to rebalance your portfolio.
It's the core strategy that's important, not your ability to time one stock or another.
Selling really means that you have found an alternative investment whose odds you like better than those of the one you're already in.
And the more alternatives you're researching and getting excited about, the less likely you are to feel ambivalent about a particular sale.
You don't owe your current holdings any more consideration than you do to any potential future holdings!
After all ...
New stocks are only a phone call away!

INVESTING AND STOCK MARKET RISKS

noreply@blogger.com (okey) — Tue, 07 Oct 2008 20:30:00 +0000

"Take a chance! All life is a chance. The man who goes the furthest is generally the one who is willing to do and dare. The "sure thing" boat never gets far from shore."Dale Carnegie (1888 - 1955)
In 1998 Economics Professor and Nobel Prize winner Paul Samuelson (1915 - ) noted that:
"Many people now believe that if they simply hold stocks long enough they will not, lose money for statistics have shown that since 1926 the U.S. equity market has not suffered a loss in any given 15 year."
He called it a fallacy, and conceded that it is truly likely that if you hold stocks over long periods of time that they would tend to produce returns higher than other assets. But to believe that it is a God given statement... Is simply not correct!
Investing and stock market risks do not go to zero over long periods, but there are many articles that reflect how risk goes down the longer the time period. What is seldom introduced is the fact that if there is a significant onetime loss, it can be monumentally overwhelming.
In any case, Samuelson noted that:
"The problem is that when stock prices do turn down (as inevitably happens even in the strongest of bull markets!) your optimistic equity exposure can overwhelm your gut level risk tolerance, leading to poor short-term judgments and even outright panic!"
Risk is a complex, multidimensional concept that manifests itself in various ways. Risk is omnipresent and includes stock market crashes, corporate bankruptcies, currency devaluations, changes in sentiment, in inflation and interest rates, and even major changes in the tax code.
Risk is generally defined as return volatility, or the degree of ups and downs of returns. But there's more to risk than volatility. Risk and long-term reward are generally related. Risk is the chance that your actual return will be less than you expected.
People sometimes think that a good return can be achieved with little or no risk. Unfortunately, that's impossible. To achieve your objectives, you need to assume certain risks and avoid others.
Your ability to handle risk is related closely to your individual circumstances, including your age, time horizon, liquidity needs, portfolio size, income, investment knowledge, and attitude toward price fluctuations.
What's highly risky to one individual may be no problem to another!
Short-term fluctuations are not that relevant for long-term investors who have the discipline, patience, and understanding to deal with them. Stock funds are actually less risky than money market funds for those with long time horizons.
Well-informed investors are far less likely to let risk get the best of them!
Those who understand the various elements of risk are better equipped to enjoy a profitable long-term investment journey.

INVESTMENT PORTFOLIO MISTAKES INVESTORS MAKE

noreply@blogger.com (okey) — Tue, 07 Oct 2008 20:17:00 +0000

Are you a truly expert investor as you really believe?
Do you consider yourself as a well-informed investor who is capable of anticipating and avoiding the majority of the risks that are usually associated with investing?
Chances are, you are making many common errors that are costing you a lot of money and may even harm your financial independence and security.
Below you can find the two most costly errors investors make with their investment portfolios:
1. Asset Classes and Subclasses
How you allocate your portfolio, rather than which investments you select or when you buy or sell them, determines the majority of your investment performance over time.
The solution is to allocate your portfolio to many asset classes and subclasses and be careful not to over or under weight any asset class.
Do not mistakenly believe that a properly diversified portfolio is a properly allocated portfolio. Properly allocate your portfolio among the different asset classes first and then diversify the investments within each asset class.
Diversification is the cornerstone of asset allocation and is key to reducing risk, namely company-specific risk. To properly diversify, you should hold sufficient quantities of not-too-similar securities with comparable risk and return trade-off profiles.
2. Inflation
Inflation can destroy the real value of your portfolio over time, thus placing your future financial security at risk.
As a general rule, the longer your investment time horizon, the more you should allocate to equity investments. For shorter investment time horizons, emphasize fixed-income and cash and equivalent investments.
By avoiding these two mistakes -- besides other investing mistakes -- you will be able to design an investment portfolio that will provide the best opportunity to achieve and protect your financial independence and security!

MURPHY'S LAWS IN THE STOCK MARKETS

noreply@blogger.com (okey) — Tue, 07 Oct 2008 20:11:00 +0000

Developing Trading Strategies
Sometimes it takes several years to recognize the obvious.
The simpler it looks, the more problems it hides.
Buying Stocks
If anything can go wrong, it will.
If anything can't go wrong, it will.
If you know something can go wrong, and take due precautions against it, something else will go wrong.
You will never run out of things that can go wrong.
Failure is the opportunity to begin again more intelligently.
The less you do, the less can go wrong.
You can never tell which way the train will go by looking at the track.
Always assume that your assumption is invalid.
Selling Stocks
You never know how soon it is too late.
When things go wrong, don't go with them.
If you are in a hole, stop digging.
Following Trading Strategies
Being punctual means only that your mistake will be made on time.
A good place to start from is where you are.
To learn from you mistakes, you must realize that you are making mistakes.
Experience is what causes you to make new mistakes instead of old ones.
The best defense against logic is ignorance.
If you enjoy what you are doing; you are probably wrong.
About Diversification
Things go wrong all at once, but things go right gradually.
Customer Service of Financial Sites
If you don't know the answer, someone will ask the question.
You don't have to explain something you never said.
If you want to make enemies, try to change something.
Be kind to everyone you talk with. You never know who's going to be on the jury.
Never be too right too often.
The only changes that are easily adopted are changes for the worse.
The less you have to do, the slower you do it.
Always do exactly what your boss would do if he knew what he was talking about.
The e-mail never comes when you have nothing to do and finally, always remember that ...
The Less You Say ...
The Less You Have to Retract!