Friday, May 17, 2013
Click Here to Test Drive Risk Free for 60 Days
Adrian F. Manz has earned his living trading equities in his own account since 1998. He holds a Master's degree in Psychology, an MBA in International Business and Finance from the prestigious Peter F. Drucker School of Management and the Claremont Graduate University, and a Doctorate in the Organizational Behavior from the Claremont Graduate University. Dr. Manz has developed a trading style that relies on statistical, technical and fundamental analysis in the planning of every trade. Since 1998, he and a close circle of associates have utilized these techniques to develop trading ideas that have allowed them to persevere even in the face of some of the worst market conditions traders have faced in many years.
Adrian is a frequent speaker at trading conferences and seminars and has been a recurring guest on financial radio. Through MarketAuthority, subscribers can access Adrian's nightly trade selections, and review the planned scenarios as they unfold each trading day. Adrian will provide his input each day in his membership area.
Click Here to Review More Stock Investment Trading Advisory Services
Thursday, May 16, 2013
Free Trial Investing with the Most Profitable Investment Gurus
As a GuruFocus Columnist, we highly recommend this site to investors who are looking for low-risk high-reward stock investment picks.
GuruFocus was founded in 2004 by Charlie Tian, Ph. D. on the philosophy that investors would make a lot fewer mistakes investing if they were to select stocks from the ones that have been researched by the best investors in the world. GuruFocus tracks the stock picks and portfolio changes of the best investors in the world.
GuruFocus is dedicated to value investing. As employed by Warren Buffett, the greatest investor of all time, value investing is the only winning strategy for the long term. GuruFocus hosts numerous value screeners and research tools, and regularly publishes articles about value investing strategies and ideas. GuruFocus also publishes three newsletters: Monthly Ben Graham Net-Net, Buffett-Munger Best Bargains and Microcap Magic Formula Stocks. You can gain full access to GuruFocus with Premium Membership.
Click Here to Review the Invest2Success GuruFocus Value Stock Picks
Click Here to Review More Value Investing Resources
Wednesday, May 15, 2013
By Zacks Investment Research Earnings Estimates Stock Rank
It's that time again. Every few months, I like running this screen to see which Sectors are considered the best Sectors.
Since roughly half of a stock's price move can be directly attributed to the group that it's in, it's important to stay on top of which groups are the best ones.
And with the brunt of earnings season having just completed, some new groups have found their way on this list.
In my testing, I have found that getting into an average stock in a strong group will oftentimes outperform even the best stocks in a troubled group.
Put the Odds on Your Side
Just because stocks in the best groups have a tendency to outperform doesn't mean you can just pick anything and make money. Far from it. But it illustrates how powerful the underlying group is to the success of your stock picking.
There are several ways you can define the best Sectors or Industries.
Today, I'm going to focus on just the Zacks Rank. The best Zacks Rank stocks, on average, nearly triple the market each year. And a sector or Industry is simply a group of stocks in similar businesses. So looking at the average Zacks Rank for all of the stocks in that group will tell you if that group as a whole is enjoying good times or bad.
Stocks that receive upward earnings estimate revisions have a tendency of receiving even more upward earnings estimate revisions. And that leads to an increase in price.
So the better the average Zacks Rank is for the Sector, the better the chances that your stocks have a top Zacks Rank, and move higher.
And given the uneasiness of the market at these new highs, this is something everyone can use right now.
The Top 5 Zacks Ranked Sectors
Currently, the top 5 Zacks Ranked sectors are:
1) Construction - Average Zacks Rank 2.74
2) Aerospace - Average Zacks Rank 2.81
3) Finance - Average Zacks Rank 2.82
4) Utilities - Average Zacks Rank 2.88
5) Auto/Tires/Trucks - Average Zacks Rank 2.91
And here are 5 stocks, each from one of the top 5 Zacks Ranked sectors:
( RYL ) Ryland Group Inc. - Construction
( ATK ) Alliant Techsystems Inc. - Aerospace
( STT ) State Street Corp. - Finance
( IDA ) IdaCorp, Inc. - Utilities
( SMP ) Standard Motor Products Inc. - Auto/Tires/Trucks
All of these stocks are in the top 5 Sectors as defined by the average Zacks Rank, and they all look set to outperform.
Start picking stocks in the best Sectors and Industries on your own today. It's easy to do with the Research Wizard. Start putting the odds of success in your favor.
Click Here to Review More Stock Picking Advisory Services
Tuesday, May 14, 2013
Early Origins of the Money Game
Croesus and Greek Civilization
By Van K. Tharp Ph.D.
When I first proposed writing a series of articles on the money game, I received a complaint from someone who said that most of my focus was on Americans. What about the Europeans or Asians? Well, there were reasons for my emphasis on Americans. First, while I was concentrating on some of the richest people of all time (including the Rothschilds and the Medicis), most of the people on that list prospered in the United States between 1850 and 1910. The period of time after the American Civil War was one of the greatest times for profit in the history of the world. You could make your own rules for playing the game because there was minimal government regulation in American business and no income tax. Those two factors had a huge impact on wealth accumulation. For example, I believe my net worth would probably be about 100 times what it is now if there was no income tax today. In any case, those who played the game well in the US in the fifty years after the Civil War became money giants.
For much of the history of Europe and Asia, one has to consider the impact of royalty on the wealth factor. If you had a significant amount of money in an area that had an all-powerful ruler, then there was a good chance that the ruler considered everything in the kingdom as belonging to him. Thus, if you didn’t play good politics with the royal family, they could take your money away. In fact, royal families would have to be considered part of the money game in old Europe and that’s not a relevant factor today.
Nevertheless, I just finished a great book, The History of Money, which inspired the next three articles in the money game series. These next three articles will not focus on particular people, but on particular eras.
This article will cover the ancient Greeks and the development of gold and silver coins.
The second will be on the money’s impact on the rise and fall of the Roman Empire.
And the third will talk about the impact of the Roman Catholic Church on the money game with a special reference to the Knights Templar.
The Origins of Coinage
Most everyone has heard the phrase “Rich as Croesus.” Well, Croesus basically changed how the money game was played. The ideas of the Lydian kings, like Croesus, paved the way to incredible wealth and to a culturally rich society — the Greek Civilization. So, how did that happen?
Homer portrayed people of combat and heroism and wrote about anger, war, heroism, passion, violence, honor, etc. Money had no place in the poems of Homer because people were only interested in honor. Towns tried to be as self-sufficient as possible so they would not have to trade with neighbors; neighbors could be dangerous.
Somewhere around the seventh century BC, the Lydian people who inhabited the western part of modern day Turkey, recognized the need for a portable wealth. They manufactured coins made of electrum, a naturally occurring mix of gold and silver. These coins were thick slugs about the size of the end of one’s thumb. Each coin was stamped with a lion’s head to guarantee its authenticity and standardized in weight and size to eliminate the need to assess its value each time it was used. This made trading easy and it opened up trade to new segments of the population.
Around 560BC, Croesus ascended the throne in the kingdom of Lydia and things started to change. During his 14 year reign, Croesus created new coins made of pure silver and gold. This created more opportunity for commerce and the invention of the retail market. Rather than having to find the home or shop of a craftsman, you could go to a central market to purchase items there. Anyone could come to the central market and buy or sell items with gold and silver coins.
Coinage also affected traditional societal roles. The Greek historian, Herodotus, was said to have been horrified to find that women could choose their own husbands because they could have dowries to aid them in their selection. In addition, the first known brothels arose around these times as part of the “market.” Women could work in the brothels long enough to secure a dowry big enough to find the husband they wanted. In addition, the Lydians were credited for creating the first gambling games around this time.
Commerce created the fabulous wealth of Croesus. But he also squandered it on two common weaknesses for kings — buildings and armies. It was said that he conquered most of the other Greek cities, after which he built extensively in them. This process eventually led to his downfall. As he considered a campaign against the Persian Empire, Croesus asked the oracle at Delphi what chance he had and was told a great empire would fall. Croesus interpreted the prophecy as a favorable sign that he would conquer the Persians but it was his great empire that would fall.
The Ancient Greeks
After Croesus fell, the surrounding Greeks adopted the Lydian practice of making coins and commerce began to flourish throughout the Mediterranean. Eventually, the Greeks replaced the Phoenicians as the greatest traders of the Eastern Mediterranean.
Coinage offered stability to this trade because it provided merchants with a permanent medium of exchange. Previously, money had consisted of some prominent, but usually perishable commodity. Once money was based upon rare metals, however, these coins provided people with:
Ease of use
A non-perishable way of storing wealth.
At the time, other civilizations had been based on a strong authority supported by a massive army and by wealth collected as tribute. Kinship and brute force were the primary methods for organizing societies.
Money helped Greece organize its society on a much greater scale than was previously possible. Money didn’t require extensive administration, police or military systems. Money especially suited Greece at that time because it was a loose structure of many relatively independent city states.
Those in power saw the advantages money offered them. They could collect money for taxes rather than collect commodities which could perish before they were used. Even crimes could be monetized so if someone committed a crime, they could pay a penalty rather than being killed.
In addition to money providing a medium of exchange for goods, it allowed payment for services. People could work and get paid for doing a service and that service had value. Not only could you buy a loaf of bread, you could also pay someone to clean your house, commission a poem, or obtain sexual services – all because of money. People began to work to get paid rather than being forced to do so.
Money enabled an artistic culture to develop. People could produce a work of art (music, painting, a play, etc) and get paid to do so. Athens became a center for artistic culture and flourished as one of the wealthiest Greek city-states. Interestingly, the basis for most of Athen’s money was silver for which they had an ample supply after discovering rich deposits in Laurium, south of the city.
Politics too started to change as a result of money. The Greeks had to deal with debt and at one point they passed a law canceling it. It didn’t work, but at least they tried. Prior to money, you could only vote if you owned land. But after the development of coinage, having wealth also gave you the privilege to vote. Essentially a great civilization flourished, and the center of that civilization was the marketplace.
Too little was written during that particular era of history to understand how individuals played the money game; however, it was obvious that the rules of the game changed considerably as coinage emerged and evolved. Greece went from a society dominated by honor to one dominated by commerce, in which culture was now able to flourish. Those who had the ability to see what was happening could easily dominate the money game, however, there are insufficient records to know who those people were and how they played.
About the Author: Trading coach and author Van K. Tharp, Ph.D. is widely recognized for his best-selling books and outstanding Peak Performance Home Study Program, a highly regarded classic that is suitable for all levels of traders and investors.
Click here to learn more about Dr. Van Tharp Home-Study Trading Education Programs and Training Workshops
Monday, May 13, 2013
Click Here for a Free Trial of the "Profit Rockets" Stock Picks Service
Financials have been strong performers in this latest leg of the recovery, as these once beaten down companies have come back strong over the past six months. Yet while many investors might focus in on big banks for their exposure to this segment, one corner of the financial world has been doing even better; insurance.
This segment has seen even better performances than both the broad financial sector and the S&P 500 in the past few months, including a nearly 20% gain YTD for many broad insurance benchmarks. And with some shakiness on the revenue front for many big banking institutions, those who want to make a play on financials could be better served by looking at the insurance segment for exposure.
While many investors might focus in on big names like Progressive ( PGR ) or Travelers Companies ( TRV ) for exposure, taking a closer inspection of some overlooked smaller caps could be a better way to go. This is especially true if these firms are seeing solid estimate revisions and a clear path for growth, such as in the case of XL Group PLC ( XL ) .
XL Group in Focus
XL is an Irish-based global insurance and reinsurance company providing property, casualty and specialty products to a variety of organizations around the globe. The vast majority of their revenues are derived from premiums, though their investment income and underwriting business also contribute meaningfully as well.
The company has largely benefited from a lack of huge catastrophes in the recent past, which has helped them to keep earnings elevated. This trend, plus the added boost from the underwriting division—which increased threefold year-over-year—has helped to put the company in a very solid position (in a top performing industry no less) going forward.
Analysts have also begun to take note of this positive trend and have begun to increase their expectations for the company. While the near term picture for this metric is still mixed from a revision look, the current year and next year figures are pretty rosy.
In fact, in the last 60 days, we have seen 12 estimates move higher for the current year and ten move higher for the next year time frame. This compares to zero downward revisions for the 2013 fiscal year, and just one down for the 2014 time frame; a ratio (when combined) of 22 to 1 in favor of positive revisions.
But analysts haven’t just been revising their numbers up a little bit either, as the consensus has been shooting higher for both time frames. Just 90 days ago the 2013 consensus stood at $2.44/share while today it is at an impressive $2.87/share, a 17% increase in a quarter’s time.
While some might think this is too lofty of a goal for the company to reach, it is worth noting how admirably the firm has performed in earnings season. XL has beaten estimates by double digits in each of the past four quarters and has seen an average surprise of over 56% in the time frame, meaning that the firm is definitely capable of some big beats.
Click the Image for a Larger View
This impressive earnings picture has bumped up XL to a Zacks Rank #1 (Strong Buy), putting it in elite company, and suggesting that it is a great investment right now. This is even more true when you consider that the stock has a Zacks Recommendation of Outperform, and that the insurance- property & casualty industry is one of the top 10 (out of 261) industries in the entire market.
If this solid earnings picture and top Zacks Rank wasn’t enough, it is also worth pointing out some of the shareholder friendly initiatives that the company is undertaking. These items look to help boost interest in XL and make it stand out even more when compared to its peers.
The firm bought back eight million shares and still has a big chunk of capital to buyback more shares in the weeks and months ahead as well. Additionally, the firm also boosted its dividend by 27%, to 14 cents a share, so it is doing its best to make shareholders happy on this front too.
Financials seem like a great play and have seen strong momentum over the past few months. However, the real winning play in this segment has been insurance, as this corner has surged higher that both broad financials and the overall market.
While a broad play on the space could be an interesting idea, a look to XL could be a better choice. This firm has a tremendous earnings story, an increasing dividend, and stock buybacks, making it a great triple threat for investors as we approach the summer months.
By Zacks Investment Research
Thursday, May 09, 2013
5 Secrets of Wall Street by Zacks Investment Research
Investing can be a jungle, a battlefield, even a nightmare if you don't follow sound principles of diversification and risk management. The good news is that in the age of the Internet, the self-directed investor has been given access to the research and tools of the professionals.
The bad news is that the business of investing still has its own unwritten rules that can trip you up if you're not careful. You could call them "secrets" because when you listen to a pro talk about how he or she is making money on a particular stock, they don't tell you this part.
Secret #1: They Have to Buy
What is the business of institutional investors who manage other people's money? It is to deploy that capital. Lots of different equity portfolio managers have mandates and performance benchmarks that create certain behavior, such as being fully invested even when the market is peaking.
I am not even addressing how analysts or brokers work on the Street to facilitate this business. I'm just talking about fund managers having a bias to buy stocks, not short them. How strong a force is this bias? Trillions strong.
The combined assets of the nation's 4,500 equity-only mutual funds stood at over $7 trillion in March. It is the business of these portfolio managers, along with hundreds of others at pension funds, insurance companies, and endowments to put this capital to work in stocks.
On top of this money ear-marked for equities, there is over $2.6 trillion in money market funds, and another $3.5 trillion is sitting in various bond funds, based just on the reported data of 2,500 funds in the Investment Company Institute survey. This is all "cash on the sidelines" that could help PMs do their primary job: buying stocks. While they "have to buy," we enjoy the freedom to control our investment cash and decide what to buy and when.
Secret #2: They Don't Have to Sell
In this secret, I exaggerate (only slightly) to make the point about the pain tolerance of the aforementioned groups, whose job it is to buy stocks with other people's money. It's easy to watch stocks lose 30%, 60%, even 90% when it's not your money.
Do you know what the greatest risk is for a fund manager? It's not losing money or clients. It's underperforming their benchmark (most commonly either the S&P 500 or the Russell 2000). So if stocks are peaking and then turn down, who knows if it's the top? What if the index surges higher again?
For the most part, they can handle the 20% downturn. But they can't miss the last 10% of upside, especially if they've struggled in their stock-picking at all that year and are at risk of underperforming their peers or benchmark. When you understand at what points in the year fund managers are likely to feel "underinvested," you can take advantage of their fear and greed.
Secret #3: Sector Rotation
This one is simple: money doesn't leave the markets, it just moves around. Especially when interest rates are near zero. Especially when equities still offer the best risk/reward overall compared to other asset classes.
And this one also has quite a bit to do with the economic cycle. During the early expansion phases, it's good to be in "cyclical" sectors such as industrials, materials and energy. As the cycle starts to approach its peak, money will move back out of these areas.
But lately the moves seem hair-trigger in nature. The media loves to call it the "risk on/risk off" trade. With fast-money hedge funds taking short term positions in cyclical stocks, commodities, currencies and ETFs, risk on/off is a very accurate way of describing the "light switch" nature of this trade flow.
Just keep in mind that while the momentum players, who are using lots of leverage in their risk taking, have to move in and out fast, there still exists a longer, slower approach to economic cycle investing that you can benefit from. Knowing where we are in the cycle and which sectors are trending accordingly can put a tailwind behind your investment ideas.
Secret #4: Technology, Liquidity & Speed Rule
Speaking of hedge fund momentum players, this secret explains why they move markets and make so much money doing it. It also explains why you have to work harder & smarter to beat the pros.
I call the world of institutional traders one of "total immersion, instant access." Pro traders are swimming in rich information networks, amid oceans of research, and surrounded by analysts who can summarize it all for them instantaneously. They also have amazing technology, tools and systems to help them quickly capture a majority of high-probability trading opportunities.
Then there are the automated trading systems, the "algos." Algorithmic trading has overtaken markets in many ways. It's not that the machines rule. It's more that they have entrenched themselves by providing constant streams of liquidity that almost can't be matched by human traders.
And the technical "model" funds - essentially, computer programs that use price and volume formulas to trade - will never stop inventing new systems to capture market swings. They run stocks up and they run stocks down, without regard for fundamentals, or sanity.
But while sharks abound in Wall Street's waters, we can profit using their same tools and tactics.
Secret #5: Risk Management Isn't a Science
Speaking of super models, one of the most dangerous ever didn't walk a fashion runway, but it did earn its creators a Nobel Prize. The Black-Scholes option pricing model is "dangerous" because it ushered in the era of derivatives.
Not that there's anything wrong with derivatives like options and futures. But other complex financial engineering - like the kind that spawned the sub-prime housing bubble and subsequent banking meltdown - can be very dangerous indeed.
Why? Because they are all based on some variation of the same quantitative methods used in Black-Scholes. Specifically we are talking about standard deviation and the bell curve.
And these quant tools offer Wall Street the illusion of control and safety. If you can measure the past, and its variations, you can model the future. Sounds simple enough. And it sounds so objective and scientific without appearing to offer precise predictions.
"Don't worry," the quants say. "The statistical volatility (risk) is only X."
The problem is that standard deviation was invented to measure the variation in physical phenomena like the anatomy of animals and the structure of the universe. Nature has an order, and science is all about discovering it, measuring it and classifying it so that we can make reliable predictions about the world.
Markets, meanwhile, are anything but natural physical objects that can give us reliable "standard" measurements. Markets are social beasts with unpredictable "wild randomness" as Nassim Nicolas Taleb calls it his book The Black Swan.
What does all this mean to us? While some on the Street would have us believe that markets are efficient and rational, they are actually more subject to bubbles and shocks. And that spells opportunity for traders who can exploit the emotional extremes of optimism and pessimism.
How to Apply These Secrets for Short-Term Profits
A simple way to take advantage of upward or downward movements is to let us do it for you. That's the purpose of our Zacks Market Timer, a unique buy/sell approach to profiting from quick, explosive swings in industries, sectors and the market as a whole.
While cutting losses short, this strategy maximizes gains by 2X with a simple Zacks metric and then 3X again with a twist on a common investment move. If this sounds interesting, I encourage you to check it out right now.
Click Here for a Free Trial of Zacks Investment Research
Tuesday, May 07, 2013
Click Here to Review Technical Fundamental Trading Software and Screeners
Technical and fundamental analysis are the two main types of analysis in the investing world. Technical analysis is mainly concerned with price movement of a security using charts and technical studies to predict its future price movements. On the other hand, fundamental analysis looks at economic factors, which are commonly referred to as the “fundamentals,” hence the term fundamental analysis.
Fundamental analysis looks at the financial data of the company behind the stock to determine whether the company’s business will result in a higher or lower stock price. Fundamental analysis looks at revenues, profits and losses and business trends, as well as seeking growth factors that will affect the stock price. Fundamental analysis may also review more macroeconomic factors such as a company’s business sector and the overall economy in relation to a company’s lines of business. Fundamental analysis is geared toward understanding the company behind the stock. Some of the specific factors we focus on when doing fundamental analysis are:
1: Macro economic factors such as Supply and Demand and other economy new and specific industry factors.
2: Micro or company specific data including such things as Price/Earnings ratios, Price/Sales ratios, Price/book value rations, etc. Profitability: looking at gross sales, gross profit margin, operating margins, earning per share, and net profit margin. Also, factors like growth rates, Potential revenue growth, financial strength, return on investments and return on assets. Sometimes these many company specific factors are complicated and difficult to understand.
Now on the other hand, technical analysis of stocks primarily ignores the company specific issues behind a stock. Technical analysis looks at price action and volume using charts patterns and technical indicators. The theory behind technical analysis is all information about a stock is built into or factored into the share price and analyzing the price movements will predict where a stock price might go. Traders using technical analysis rely on price charts, which include analytical indicators to help traders recognize price trends or reversals and profit from these expected outcomes.
Technical analysis is appealing and has become more so in recent years, due the fact that trading systems can be developed with a specific set of rules to trigger buy and sell orders. There is also a wide range of indicators for a trader to choose from, allowing the trader to set up a trading system to fit his or her trading style. The negatives of technical analysis are using historical data to predict the future – which doesn’t always work or don’t always predict the future price action perfectly, also the different signals the different technical tools can generate make some systems confusing. Fundamental analysis is more dependent on a trader’s judgment concerning a company’s financial data. A trader using fundamental analysis can understand everything correctly about a company and stock and still see the stock go in the opposite direction because of some additional or external factor not taken into account. Fundamental analysis is sometimes favored for longer time investing, while technical analysis is often considered the better style for shorter-term trading.
For short-term trading, I definitely prefer a short-term trading plan based on price action charts using simple technical indicators while also maintaining an awareness of the fundamental factors, especially broad economic factors which may affect a specific stock or industry that I might be invested in.
By Profits Run