Articles

“Price is what you pay; value is what you get.”– Warren Buffett paraphrasing Benjamin Graham Fundamental analysis is the foundation of investing. While technical analysis uses statistics to predict a stock’s price movements, fundamental analysis uses financial statements to determine a fair value for the stock. Many investors use fundamental analysis to determine what stock to buy and technical analysis to determine when to buy and sell the stock, while others exclusively use one or the other. In this article, we’ll take a look at fundamental analysis in order to understand the language and concepts behind it. Qualitative Analysis Fundamental analysis may be largely focused on financial statements, where things like price-earnings...

Selecting good stocks isn't easy. The sheer volume of companies makes zeroing in on a good stock difficult and the volumes of data on the internet don't make things any easier. In fact, it's hard to sort out the useful information from all the worthless data. Fortunately, a stock screener can help you focus on the stocks that meet your standards and suit your strategy. Stocks screeners are effective filters when you have a specific idea of the kinds of companies in which you are looking to invest. There are thousands of stocks listed on exchanges in the United States alone; it's just not feasible to track all of them on your own. A stock screener limits exposure to only those stocks that meet your unique parameters. How Stock...

When traders and investors look to profit in the markets, they often look to stocks that they believe will grow rapidly in price. However, there is another group of stocks that can not only offer growth potential, but a steady stream of income in almost any market condition. This group is dividend paying stocks. Let’s examine what a dividend is, how it can benefit you financially, and how to choose the correct securities for your portfolio. Additionally, we can explore methods for protecting these investments in market turndowns. What are Dividend Stocks? A dividend is nothing more than a share of the profits of a company. When you purchase shares of stock, you are buying a piece of ownership in that company. Through the company’s...

Warren Buffett once said that as an investor, it is wise to be “Fearful when others are greedy and greedy when others are fearful.” This statement is somewhat of a contrarian view on stock markets and relates directly to the price of an asset: when others are greedy, prices typically boil over, and one should be cautious lest they overpay for an asset that subsequently leads to anaemic returns. When others are fearful, it may present a good value buying opportunity. Keep in mind, the price is what you pay and value is what you get, pay too high a price and returns are decimated. To elaborate on this, the value of a stock is relative to the amount of earnings it will generate over the life of its business. In particular, this value is...

Value investing is an investment discipline that was popularized by Benjamin Graham through his seminal books like Security Analysis published in 1934 and The Intelligent Investor in 1949. Value investing seeks to identify undervalued stocks that are trading below their intrinsic value, and buying and holding them until they turn around. Such value stocks typically trade at price-to-earnings (P/E) and price-to-book (P/B) multiples that are significantly below the valuations at which the market or their peers trade. While Warren Buffett has amassed a colossal fortune by adhering to the principles of value investing, there is little doubt that for us lesser mortals, value investing has its pitfalls in addition to its undeniable benefits...

With the new year only a few days old, there’s still plenty of time for retail investors to craft their strategy for 2015. Like last year, 2015 is full of promise and better overall economic conditions are ahead. Globally, we should continue to improve since the depths of the Great Recession and credit crisis. But the best conditions for stock market gains could be found in the United States. According to several market strategists and analysts, the U.S. is still the best nation to bet on in 2015. For investors, that means staying strong or even adding to their U.S. stock holdings in the New Year. Hoping For a Four-Peat When it comes to picking which stock market may be the best horse to ride, investors may want to stick with the...

Can a sector rotation strategy improve performance of investment returns? In this article the author looks at sector rotation within the US markets. Investors can most certainly use a sector rotation strategy to produce returns which outperform the market, or even some hedge funds, despite what was described in a recent article. Many hedge funds would be wise to consider such a strategy. However it's not as easy as the plan described in the article's abstract. Nor should we expect it to be; the market is not easy-pickings. But recognize what market returns we are talking about: since say 1990, the S&P has had about an 8 pct compounded annual rate of return, while experiencing about a 46 pct maximum drawdown. Those numbers can be...

P: = Paul Mullen (Interviewer) J: = James (Equities Analyst) You can listen or download this interview by clicking this link: Equity Analyst Interview P: Hello, and welcome to everyone. My name is Paul Mullen. I'm also known as Trader333 and I'm the Content Development Editor for Trade2Win. Today, I'm interviewing James, who is an equities analyst working in London, so a very warm welcome to you James. We'll start straightaway by asking you what is an equities analyst, assuming that is what you are? J: Yes, that is what I am. It's quite a complicated role because I think the way it's perceived is people see the end product being written reports, generally, with recommendations and price targets, and so on. That's actually a very...

You should ignore analysts on TV, the radio, the newspaper and all other TALKING HEADS when it comes to investing! What stocks do they talk about? - The same old group, every day of every year - Why? Because they don't know any better, they are sheep like the general public, repeating what every economic textbook says and every other economist tells them to say. Everyday, the same companies are highlighted on the evening news - Why? They aren't going anywhere. Some of the stocks that make the headlines every night were leaders of the market 20 years ago. New cycles bring new leaders; this has been proven year in and year out. So many of these TALKING HEADS shout out about "buy and hold" but what are they really holding? They hold old...

In this article we look at the fundamentals behind stock prices and why the P/E ratio is not perhaps the best indicator. I use the P/E ratio as a secondary indicator for buying and selling stocks but I don't use the ratio in the same a manner as many value investors teach. I will explain the difference in my methodology for using the P/E ratio to your advantage. Many value investors will pass on a growth stock that has a P/E ratio higher than a predetermined level. For example, they may discard all stocks that have a ratio of 15 or higher, no matter what industry group they come from. Some investors will discard any stocks that have P/E ratios above the industry group averages, concluding that they are grossly overvalued. I am not...

It was once one of the darlings of the FTSE, but over the past year the telecommunications sector has had a rough ride. So is it out of woods yet, or is there worse to come? Changes in the telecom sector since the turn of the century have made the telcos a markedly different investment proposition since the high flying days of the tech boom. At the height of the bubble incredibly optimistic industry growth projections propelled the share prices to record heights. Inevitably the bubble burst, and in the aftermath investors shunned the sector. However, today company balance sheets are stronger, prospective earnings multiples are generally in the low to mid teens, and surplus cash is flowing back to shareholders via increased dividends...

Based on comprehensive studies of the greatest stock market winners going back each decade, the biggest winners of all time consistently show the same seven performance common characteristics before they make huge price advances. These are the stocks that produce 100%, 500%, sometimes even 1,000% and a lot more in returns. Most of these winners were not yet household names, and yet, they were well-managed companies that began to build profits, and the necessary steam to make major price moves. CAN SLIM™ represents a checklist for those common performance characteristics, with each letter standing for a key trait any great stock will possess in its emerging stages. Independent studies by The American Associate of Individual Investors...

Some of the best investing and trading results I have had in recent years have been from riding on the coat tails of investors far brighter than myself, investors who have done far more research on a company than I will ever be inclined to do myself. It can be a tedious process following all the dealings that get reported through the RNS announcements, but I try to maintain a list of major stakes and holdings in nearly three hundred UK companies. This allows me to keep track of who is increasing or decreasing their stakes in certain key companies. (see this sample) Companies Act disclosure requirements allow private investors to keep track of the activities of shrewd investors who have a proven track record of successful investing...