Monday, September 30, 2013

Investing in Beer

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While giant brewers like Budweiser (BUD) and Molson Coors (TAP) still dominate the U.S. beer market, craft brewers have managed to carve out a decent sized niche for themselves reports Zacks Investment Research. And on a recent ‘fact finding mission’ that I took to the headquarters of Boston Beer Company (SAM) in Massachusetts, I can see why many have embraced these smaller brewers.

Not only do companies like SAM offer an arguably better beer, but you can tell that there is a great level of care put into the product as well. Many consumers have noticed the flavor—or at least the uniqueness-- and have allowed SAM to grow into the great position it finds itself in today.

Yet even with the solid level of growth that the company has seen so far, SAM makes up less than 1.5% of the total U.S. market, suggesting that Boston Beer clearly has plenty of room to grow. For this reason, and America’s current obsession with craft beer, this brewer of Boston Lager could be worth a closer look.

SAM in Focus

The growth for SAM can best be seen in the recent earnings estimate revision trends for the company. Analysts clearly like the craft beer story too, as not a single estimate has gone lower for SAM in the past 60 days, while when zeroing in on the current year, three estimates have gone up.

The magnitude of the increases has also been impressive, with the current year surging from $5/share 90 days ago, to the current level at $5.36/share. Current quarter estimates have also jumped, suggesting that analysts are quite bullish on the company’s prospects.

But don’t worry about SAM being able to live up to the hype, as the firm has a pretty solid track record at earnings time. It has beaten in three of the last four earnings release dates, while its Zacks ESP is positive, suggesting that it is well positioned to beat this quarter as well.

Thanks to these factors, SAM has earned itself a Zacks Rank #1 (Strong Buy), meaning that we are looking for some more outperformance in the weeks ahead. And considering how well SAM did following the last earnings report, this should definitely be a stock on your radar.

Not all craft beer is equal

While SAM is well positioned for further gains, it is important to remember that not all the stocks in the ‘beverages-alcoholic’ industry are as highly ranked. In fact, SAM is actually the cream of the crop from the Zacks Rank perspective, as it is the only one that has a #1 Rank.

Meanwhile, one of its top craft brew competitors, the Craft Brew Alliance (BREW) is one of just two stocks that has a Zacks Rank of 5 (Strong Sell) in this industry. So, if you are looking for a beer play in the craft space, you should probably look to SAM over BREW for hopes of better performance in this in-focus industry.

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Tuesday, September 24, 2013

The Beginner’s Guide to Options Trading

By Market Authority

Are you making as much money as you can from your investments?

If you invest purely in stocks, the short answer is “no.”

If you’re not trading options, you’re missing out on one of the fastest-growing, most lucrative investment vehicles.

The options market has exploded in popularity over the last decade’ along with investing in general.

Despite that, though, the naysayers and skeptics remain out in force, proclaiming that options are too complex, confusing, and risky.

Talk about misconceptions…

If options confuse you, or you’re reluctant to give them a shot, let me say that options are not at all difficult to master.

In this guide, we’ll break down the basic fundamentals of the options market for you, shaking off stigmas, destroying myths and stereotypes, and showing you exactly how to profit.

Options are only risky if you don’t have the understanding.

Once you have that understand, you can decrease your risk and overall cost. They can be ultra-lucrative and are an excellent way to complement your portfolio.

Let’s first dispel the myths.

1. Options are only for the professionals with years of experience.

Not true. If this were true, you couldn’t find the thousands of sites and software solutions offered for beginners. This just isn’t true. In fact, if it were true, Options Trading Coach wouldn’t exist.

2. You have to be rich to trade options.

Again, not true. You don’t have to be rich. In fact, it’s oftentimes recommended that options traders start out with small accounts. I very rarely see new investors starting with gobs of money. They typically start off small and grow the monies risked after they’ve built up confidence.

3. Options trading isn’t so popular

Really? That’s like saying cable TV was a fad. Or that the Internet was a fad. Right now, as much as 5% of all accounts are approved for options trading… and that’s only growing.

4. 80% to 90% of all options expire worthless.

Wrong. Only about 30% of all options, as explained by the CBOE, expire worthless. The idea that 85% of options expire worthless is from a famously flawed SEC study… which didn’t account for exiting options prior to their actual expiration.

5. Options trading is far more riskier than stock trading

Again, not true’ Options allow you to invest with much less money for greater returns than stocks. Nice try with that one, though.

6. It’s too difficult to understand options strategies

If you know the difference between a put and a call, it’s not too difficult to understand the strategies. Once you understand the basics, you can understand even more.

People think it takes years to learn options… that this trading is complicated and tough to learn. But it’s not true. In fact, I’ve had people understanding options in a matter of days… if not hours. Once understood, options are as easy as trading stocks.

Options 101

Options are just another way to invest in stocks.

They give you more flexibility, though.

Simply put, a stock option is a contract that gives an investor the right (but not the obligation) to buy or sell shares of an underlying stock at a set price on or before a set date.

You can buy and sell options contracts on regular stocks, indexes, ETFs and futures contracts. For example, if you wanted to trade options on Microsoft (MSFT), the MSFT stock would be considered the “underlying stock.”

When talking about stocks, each options contract is comprised of 100 regular shares of an underlying stock. If you bought one contract of MSFT, you would be trading 100 shares of the underlying stock.

Four Simple Terms of the Options Trade

No matter whether you’re buying or selling an option, there are two key elements to know:

Strike Price: This is the set price at which your option is exercised. – i.e. the target price of the underlying stock. For example, if MSFT traded at $30, you could trade an option with a “strike price” of 30.

Expiration Date: This is the month and year that your option would expire. If you bought a MSFT October 2013 call option for example, your expiration date would be the third Friday of October 2013. The strike price and expiration date are fixed from the beginning of each options trade. These do not change.

You must also consider if you want to trade the long side or the short side of a stock.

If you believe the stock will trade higher, you can trade a call option.

If you believe the stock will trade lower, you can trade a put option.

You can find a full list of a company’s available call and put options and the various strike prices and expiration dates on the options chain. This can be found on Yahoo Finance, for example.

In, Out, or At the Money

Call and put options come in three forms:

In the money (ITM)

Out of the money (OTM)

At the money (ATM)

Simply put, for call options…

In the money refers to a strike price that is lower than the current price of the underlying stock. Out of the money refers to a strike price that is higher than the current price of the underlying stock. At the money refers to a strike price that is the same as the current price of the underlying stock. These terms are essential.

Buying call options: Using the power of leverage

Let’s say Microsoft is trading around $30 a share, and you think it’s headed to $35.

You want to buy 100 shares, but it would cost you $3,000.

Maybe you don’t want to spend $3,000.

Here’s the alternative:

Rather than pass on the MSFT trade, you can buy one contract on MSFT in anticipation of its value rising in the future.

Buying that one contract, gives you the right to buy those 100 shares at a desired strike price at or before options expiration at a much lower cost.

How to Buy

To execute an option buy, you would “buy to open.”

Having looked at MSFT’s options chain, you want to buy the $32 call, which expires in six months.

To ensure that you get the best execution price, you’d use a limit order when you buy to open the trade.

Say that MSFT 32 call traded at $1.25.

You would take that $1.25 and multiply it by 100 to find your cost of one option.

Instead of paying $3,000 for 100 shares of MSFT stock at $30 a share, you could own 100 shares at just $125 a contract.

As you can see, that’s significantly less than $3,000.

You stand to make an even bigger profit if the stock moves to your $32 strike price.

If your $1.25 option runs to $2, as the underlying stock moves to $32, you stand to make 60%. If you buy $3,000 worth of MSFT, and the stock runs to $32, you make 7%.

Would you prefer 60% or 7%?

Buying put options: A better way to trade downside

The conventional method of trading stock downside is to short a stock.

This is risky, though because you’re borrowing shares and hoping the price falls.

If the price rises, though, you lose money and are often forced to cover your position by buying back at a higher price.

There’s an easier, less stressful way to do the same thing – with put options.

For example, if you think MSFT is ready to fall, you could buy an in the money MSFT 30 put option. This time – to make money – you’d want the stock to fall.

LEAPS options: Long-term Security and Control

LEAPS are long-term equity anticipation securities…

While it may sound a bit long winded, LEAPS are options with longer lifespans – between one to three years.

And it’s a very effective, lower-cost, higher return strategy for a long-term position.

You don’t have to be right about an underlying stock’s near term move.

You just need to be right over a period of one to three years.

Right off the bat, LEAPS are also much cheaper. In fact, if you trade a LEAPS option with an at the money strike price, your overall cost can be just 10% to 15% of the underlying stock price.

How’s that for lower risk and greater leverage?

The gains can be wild, too.

For example, let’s say a stock is trading at $60 and a two-year LEAPS contract trades at just $5 a contract.

If you were to buy five call options, your cost is $2,500 ($5 x 100 x 5) or (strike price x # of stocks in a contract x # of contracts). In the meantime, a regular stock investor would shell out $30,000 to own those same 500 shares

If the stock then rises from $60 to $75, you can exercise your option and take control of 500 shares at $60 a piece. Or, you can walk away with a sizeable gain of at least 200%.

Here’s the math

LEAPS option

$5 (option cost) x 100 (number of shares in one contract) x $15 gain = $7,500.

That’s a percentage gain of 200% per contract.


Buying 500 shares at $60 (for $30,000) and cashing out at $75 would give you 25%.

The point is LEAPS can catapult a stock significantly higher than buying stock.

If you own a $50 stock and it runs by $5, you have a 10% gain. Not bad. But if you owned LEAPS for $1 a contract that same $5 move gives you a 400% gain.

When to use LEAPS

To diversify your portfolio for significant gains

When your outlook is one to three years ahead

To lower your cost…

To hedge against near-term company and market risks.

Not Sure which way the market is headed?

Straddle both sides of the fence

You can always count on the stock market for two things – volatility and unpredictability.

But while many investors sit back and wait for uncertainty to play out before making a move, you can still profit – even if you have no idea which direction the market or stock is heading next.

The flexibility of these two very closely related strategies means that you don’t have to be correct in order to walk away a winner. You can simply play both sides of a stock / index and then wait to see which way it goes before riding the profitable side.

Try doing that with a regular stock buy.

You can do this with a “straddle,” which allows you to straddle both sides of a trade.

Or you can “strangle” a position.

When to use an options straddle

The best time to use a straddle is when you think an index or stock is set for a big move in one direction.

Rather than buying or shorting the stock or index and hoping you’re right, you can plan for either scenario by hedging your bets in a much simpler, safer way. You can straddle.

A Biotech Straddle Example

Let’s say you’re looking at a biotech stock up for FDA approval next month.

The FDA decision is very likely to have a substantial impact on the stock going forward.

You’re just not sure how things will pan out so close to an FDA date. So you straddle.

With the stock trading under $40 – for example – your best bet is to trade an in the money strike price. With a straddle, you’d buy a call and a put at a 40-strike price in the same month. For example, you could buy a November 2013 40 put and a November 2013 40 call.

That’s a straddle.

Let’s say the price of a call option is $3.50 a contract, while the put side costs $4.75.

That’s a combined cost of $8.25.

You then multiply $8.25 x 200 for a total price of $1,750. That’s the price of your straddle.

With the straddle now in place, you’re positioned for whatever the FDA decides to do.

When the news finally breaks, here are your scenarios:

Drug Approval – The stock soars… taking the call higher, and punishing the put.

Drug Denied – The stock plummets… taking the put to the moon, and send the call option much lower.

How to Profit

Once the news is known, the goal is to exit the option that gets hit, while letting the profitable side run. You’ll profit from the overall trade set up if the combined total of your call and put exceeds $8.25.

Finally, here are some important options terms that you’ll come across.

Time Decay: The Force that Erodes Value

Time decay is an essential term.

It plays a big role in determining when and where to exit a trade.

As an option moves closer and closer to its expiration date, the chances of you turning a profit diminish. Time decay can erode the value of an option.

For example, you wouldn’t want to buy a lot of options with less than 30 days to expiration, unless you’re confident that the underlying stock will be in the money by that time.

When talking about time decay, it’s represented by a Greek term, known as Theta.

Theta refers to how fast an option will lose value as it approaches expiration.

Delta: It’s not just an airline

Delta is another Greek term, which refers to the value of an option, relative to the movement and value of the underlying asset.

Simply put, delta is the amount by which the option’s price will change for every $1 change in a stock. Every option carries its own delta valuation. Call options have positive deltas. Put options have negative delta.

For example, a delta of 0.80 means that for every $1 gain in an underlying stock, a call option would increase by 80 cents per share. Remember, because there are 100 shares in an options contract, a delta of 0.80 means that for every $1 the underlying stock rises, you make $80 per contract.

Prepare to Profit

Don’t let options scare you.

It’s very easy with repetition and practice.

There’s very little reason to get nervous with options. It’s simply a case of coming to grips with the basics and knowing what you’re doing.

Options should be an essential part of any investor’s toolkit as they help diversify, lower cost, lower risk, and offer attractive upside.

Naturally, there are risks.

But when you have a firm grip of the fundamentals, you can greatly mitigate those risks.

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Monday, September 23, 2013

Investing in Fiber Optic Products

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Alliance Fiber Optic Products (AFOP) was profiled back on August 2, and the stock is up 45% since then. The ride isn't over for this fiber optic play and it is again the Bull of the Day as a Zacks Rank #2 (Buy).

Back in July I wrote about my "Best Tech Stocks For 2nd Half of 2013" and I discussed the idea of more devices coming soon and how they will create demand for more bandwidth. To satiate the demand for that bandwidth, service providers are increasingly turning to fiber optics.

Over the last few weeks companies that service the fiber optic market have been on fire. Ciena (CIEN) recently beat earnings and guided higher pushing its stock higher by 14% and Finisar (FNSR) reported earnings which they had previously revised guidance for, and then came out with another increase in guidance.

Company Description

AFOP designs and manufactures components, modules, and subsystems that empower dynamic optical network, and facilitates the migration of fiber optics from the long haul through the last mile. That is all industry jargon for they make a fiber optic connection to your business or home a reality.

Earnings History

The most recent quarter was viewed by Wall Street as a beat of two cents. Zacks has the quarter and the one before it as a meet.

The main idea with a company the size of AFOP is to look at revenue growth. Recently, the company increased its revenue guidance for the next quarter from a range of $19M-$20M to more than $22M. The chart below shows how expectations for revenue have grown throughout this year.

Stock Split & More Shares

The company recently split its stock 2 for 1. Some investors like when this happens as the stock appears to be "cheaper". Savvy investors understand that the split is a mathematical equations that does nothing to the valuation of the stock or the amount of dollars invested in the stock before the spilt. The end result of a split like this is that there are more shares, and thus the divisor in the EPS equation requires more net income to move the needle in a meaningful way.

The Company is holding a special shareholder meeting on October 21, 2013. The purpose of the Special Meeting is to consider and to vote on three proposals. One of the proposals is to increase the number of shares of authorized Common Stock from 20,000,000 to 100,000,000 shares. This move will cause some dilution to shareholders, but it will also make the stock much more attractive to the institutions that would make an investment, but are fearful of the current concentration of shares. Right now, only 31% of the stock is held by institutions and greater availability of shares should serve to push that metric higher.

Earnings Estimates Adjusted

In March the Zacks Consensus Estimate for 2013 was calling for $0.49. The number bumped up to $0.53 in April and was again raised to $0.66 in May. Analysts went on vacation in June, as the consensus didn't change, but they really kicked estimates higher following earnings in July. The consensus now stands at $0.86. That means earnings estimates have increased by 71% since March.

Estimates in the paragraph above were adjusted from the most recent profile of AFOP as Bull of the Day due to the stock split.


Since the last time I profiled AFOP as the Bull of the Day, the valuation has move higher. But when you consider that the stock moved up by 45%, you have to expect the valuation metrics to move higher. The forward PE moved from 18.6x to 26.6x while the industry average has held still at roughly 20x the next twelve months earnings. Price to sales also jumped from 5x to 7.4x and again the industry average has held still. For the most part, the valuation story is moving higher, but it’s not out of control expense at this point.

The Chart

The price and consensus chart for AFOP shows how the earnings movements have helped push the stock higher. The chart has not updated the prior estimates to reflect the recent stock split. So for the chart I thought I would show where it was when I last profiled the stock. I expect this ride to continue.

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Friday, September 20, 2013

What Do You Trust? News Noise or the Stock Charts?

Forget The News and the Noise, Trust the Charts by Market Authority

As technical traders, it’s our job to follow the money flow. Over millions of years there have been cycles, and patterns that have repeated over and over. Take the seasons for example, there is summer, spring, winter, and fall. These seasons tell us when to prepare for cold weather, warm weather, when to plant, when to harvest, and more. The ancient hunters used to watch the footprints of animal tracks to find their lairs; this is how they were able to feed their families. This is basically the same thing that technical traders do with charts.

Profitable Chart Patterns Repeat Themselves

As a technical trader we look for patterns that repeat over and over again in order to find solid trading opportunities. Often, when that chart pattern appears, it gives the technical trader a chance to make a solid investment decision. While technical trading is not perfect, it will allow the discipline trader to enter at the most optimal time and exit the investment with a small loss when wrong.

The Federal Reserve and the Taper or Not

Yesterday, the Federal Reserve Bank announced that they would not start to taper their current $85 billion a month QE-3 program. Now, many traders were nervous about taking action ahead of the Fed announcement. A few days earlier I alerted the our members to buy the gold mining stocks. This decision had nothing to do with the Federal Reserve or anyone else, it had to do ONLY with the charts. We were able to pick up the Market Vectors Gold Miners ETF (NYSEARCA:GDX) at $25.60 a share on September 12, 2013. Many members where asking me if a taper of QE-3 would hurt the gold mining stocks. I said to them that the chart is telling us that the GDX is going to rise and if I’m wrong, we will just stop out of the position with a small loss. I said, trust the charts and do not worry about the news and the chatter in the media. Fortunately for us the GDX rallied higher by 10 percent yesterday closing above $28.00 a share earning great profits with ease. This was simple chart reading, a task which many think they have a grasp on, but are too often reading the charts incorrectly.

Profiting from Repeating Chart Patterns

Learn to use the charts to your advantage and you will look at the markets in a way you never imagined. Over the years the charts have often forecasted most market moves before anyone in the media. Technical traders should also have a stop loss in place just in case the pattern on the chart fails, but the loss should be small and you should know your exact stop level before entering the trade. The key to trading is to let the winning trades run to target and cut the losing trade quickly when the chart pattern tells us to do so. Now, there is a lot to learn about the charts, you will not master them in a day. In fact, we are always learning and adapting to the market when trading charts. But one thing is certain, trading charts sure beats trying to trade off of the news or the talking heads in the media which are almost always late to the game.

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Wednesday, September 18, 2013

Herbalife Double Top Forming

Herbalife Ltd. (NYSE:HLF) Hits Double Top: Inside The Trade by Market Authority

Herbalife Ltd is slamming into the highs from 2012. The stock is trading at $73.63, +2.99 (4.23%). The shorts, including Ackman continue to take a beating yet finally there are technical signals of a pull back. While most of these short investors are heavily under water, those entering now have a solid risk reward trade. Not only is the stock at double top but it is extremely extended and still faces major questions about their business. Just last month a major distributor named John Peterson committed suicide. He was their top earning distributor. Other strange things keep popping up about this company that warrants caution. Even if the company is sound, the technical setup on the chart now favors a pull back. No worries Bill Ackman, the stock will start coming in shortly, though your entry may be a long shot. Cheers!

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Monday, September 16, 2013

Investing in Media Communications & Entertainment

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As a result of solid second quarter results, earnings estimates have been rising for Liberty Media Corporation (LMCA) sending the stock to Zacks Rank #1 (Strong Buy) with an ‘Outperform’ recommendation.

About the Company

Liberty Media owns interests in a broad range of media, communications and entertainment businesses, including Sirius XM, Live Nation, Charter Communications, The Atlanta Braves and Barnes & Noble.

Excellent Second Quarter Earnings

Liberty Media reported excellent financial results for the second quarter of 2013. The quarter resulted in earnings of $0.79 per share substantially ahead of the Zacks Consensus Estimate of $0.49 per share. This strong performance was primarily attributed to the contribution from its Sirius XM Radio acquisition. Liberty had acquired controlling interest in Sirius earlier this year.

Total revenue was $1,078 million up sharply from $135 million in the prior-year quarter and nearly in-line with the Zacks Consensus Estimate of $1,079 million.

Positive Earnings Estimates Revisions

After excellent second quarter results, analysts have revised their earnings estimates for the company in the past few weeks. Zacks consensus estimate for the current quarter is now $0.88 per share, up from $0.50 per share, 30 days ago.

More Acquisitions Being Planned

According to some reports, Liberty has been trying for a merger of Time Warner Cable with its cable interest Charter Communication. Per estimates, combined Time Warner Cable and Charter could cut expenses by $500 million a year, 78% of which would come from programming-cost savings.

While reports suggest that Time Warner may not be interested in a linkup with Charter as of now, Liberty could still acquire some of the smaller US cable operators. Cablevision is speculated to be another potential acquisition target for Liberty.

Consolidation in the cable industry would greatly help Liberty in dealing with some of the strategic issues facing the industry like rising programming costs and increasing consumer preference for web-based videos and usage based pricing for broadband.

Liberty’s chairman John Malone, a pioneer in the US cable industry is said to be a strong believer in potential and benefits of consolidation in the cable industry. At the time of acquiring 27% interest in Charter Communications, he told investors he was going to “look for opportunities to do something bigger.”

The Bottom Line

LMCA is a Zacks Rank#1 (Strong Buy) stock and the company also has longer-term Zacks recommendation of “Outperform”. Further Zacks Industry Rank of 36 out of 265 also indicates strong chances of outperformance in the short- to medium- term.

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Tuesday, September 10, 2013

Profiting from the Twitter IPO

Twitter IPO: The Anticipation Trades by Market Authority

If you want to make good money, go in through the back door.

The big boys of Wall Street are at the front of the line…

You’re not even in the building. I’m sorry to say that. But it’s true.

In December 2011, smart investors scoured the markets for the best way to trade Facebook (FB) – a stock absurdly priced at 99x earnings right out of the gate.

The best way to trade it was by buying the First Trust IPOX-100 Index (FPX) months ahead of the Facebook IPO.

By doing so, you stand to profit from the “anticipatory momentum” behind the name.

Instead, at the time, we were politely told:

“Only a fool would buy that here. I’m just going to buy the Facebook stock when it comes out. You have no idea what you’re talking about.”

That’s fine, I thought. Do what you must.

But as you’ll see in the chart, FPX ran from $20 to $26 ahead of the FB IPO.

The Global X Social Media Index ETF (SOCL) exploded.

Facebook – on the other hand – was spoiled by mismanagement and technical glitches that cost investors millions on May 18, 2012.

Facebook plunged…

It was embarrassing.

Why am I telling you this today?

FPX and SOCL are likely to pop again as we near the Twitter IPO.

As we’ve seen with other social networking IPOs, things don’t usually end well out of the gate for the “prized” sought-after stocks.

On the first day of trading, everyone and their grandmother will run out to buy Twitter shares.

Demand will outstrip supply.

And, as with many highly sought-after stocks, the game is rigged. You’re way at the back of the line – behind the Big Boys.

We’ve seen this play out before…

Small investors who took a swipe at LinkedIn (LNKD) on its first day watched their investments crash and burn:

Groupon (GRPN) got crushed just weeks after going public:

And RenRen (NASDAQ: RENN), “the Facebook of China,” fell 75%.

There’s too much excitement.

The only way to profit from these social networking names is to profit from the anticipatory momentum.

Wait for them to crash.

Then buy at the bottom and wait.

I do not expect Twitter’s initial public outing to be successful for long.

If you want to make good money, go in through the back door.

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Monday, September 09, 2013

Investing In Industrial Goods

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There are signs the global economy is finding firmer footing. The August JP Morgan Global Composite Output Index rose 1.2 to 55.0, hitting a two and half year high. Moreover, the August U.S. employment report showed aggregate hours worked rising 2.4% from last year despite disappointing job creation. The boost in hours worked is consistent with the strength in the U.S. ISM production indices which were the strongest going back to 2011.

Signs of reviving economic growth argue for an examination of stocks with exposure to the industrial sector. Graham Corporation (GHM), Zacks Rank #1 (Strong Buy), fits the profile. Graham designs and manufactures vacuum and heat transfer equipment for energy and industrial markets. It has a small dividend yield of 0.34%.

A growing small cap:

Graham is a small cap with a value of just over $350 mln and is expected to post sales of $111 mln in the fiscal year ending March 2014 and $127 mln in the fiscal year ending March 2015. Sales are projected to accelerate and grow 14% between fiscal years 2014 and 2015 after rising 5.7% between fiscal years 2012 and 2013. The company has a goal of doubling organic revenues and achieving sales in excess of $200 mln at the next cycle peak.

The majority of sales, 53%, are in the U.S., but Graham has clear international exposure with 19% of sales coming specifically from Asia. By Industry, the biggest sales are generated from refining (39%), power (23%), and chemical/petrochemical (22%). It may be an indirect play on the growth in natural gas usage in the U.S. It also has exposure to the U.S. Navy’s nuclear propulsion program. Given the geopolitical tensions in the Middle East, the Navy is likely to be active and a focus of military spending.

Financial strength:

Financially, Graham has a history of strong free cash flow generation and is showing limited debt on its balance sheet. It has the capacity to fund organic growth and acquisitions. The market is pricing a bright outlook for the company. It is trading at 26.4 times forward 12 month earnings, but has a more reasonable PEG ratio of 1.47.

Earnings estimates biased higher:

Earnings estimate revisions have been benign over the last 30 days, but are up $0.12 to $1.16 for the fiscal year ending March 2014 and $0.22 to $1.56 for the fiscal year ending March 2015 over the past 90 days. EPS growth is projected to be a vibrant 34.4% between fiscal years 2014 and 2015. The price to consensus earning chart shows earnings per share estimates stair stepping higher between fiscal years 2012 and 2015.

Concluding thoughts:

Grahman’s exposure to the defense, energy, and industrial sectors fits well with the current upswing in economic growth and the landscape of geopolitical uncertainty in the Middle East. This small cap may be food for thought when you are thinking about your portfolio.

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Friday, September 06, 2013

How Small Trading Wins Turn Into Big Trading Wins

How to Turn Small Trading Wins Into Big Retirement Dreams by Market Authority

You don't need to be a millionaire to retire early. All you need is $5,000-10,000 and the ability to act on Ian Cooper's trading alerts. Alerts that have delivered an average of 184.46% annually since 2007, or enough to turn $10,000 into over $1.3 MILLION in that time.

If you're serious about retiring faster, forget home runs and focus on little wins.

Why? Because just a few wins a month, along with the right money management, is all you need to retire at a breathtaking rate.

Consider this:

Since 2007, on nearly 500 verifiable closed trade recommendations, Ian Cooper has averaged 184.46% annual return each year. That includes all losers. This is where it gets really interesting... with just the same $10,000 repeatedly invested in those trades-YOU COULD HAVE POTENTIALLY FINISHED WITH AS MUCH $254,000 IN YOUR ACCOUNT.

That's a 2,444% return in just three years!

Click here to watch a video where Ian gives away his strategy.

As you'll see, these small wins keep compounding, and the numbers only get better. Your capital could have potentially produced a consistent six-figure (or seven-figure) annual return in the years that followed, allowing you to retire comfortably.

You'll never think about traditional retirement again after you see this.

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Wednesday, September 04, 2013

Learning a Very Valuable Trading Lesson

Learning a Trading Lesson by Dr. Van Tharp International Institute of Trading Mastery

One of the biggest mistakes I have ever made in my business as a trading coach relates to publicly promoting the trading performance of my Super Traders. During the 1990s, I asked the first set of Super Traders to make statements about how they were doing as they progressed through the program and posted those statements online.

I believed what they said as I assumed they would want more coaching if they were not doing well. In reality, however, I had no way of verifying any statements they made about their performance. I simply made the assumption that when someone tells me how much they have improved after I help them, that they were being honest. I ran an education company and had never been in a position to track the money the clients were trading. Why would they lie to me?

My big mistake was to never seriously answer that question for myself before the universe provided me with the answer. The answer was — someone would lie about their performance improvement under my coaching in order to attract more clients or more money through my public or implied endorsement.

I discovered this after one of the original Super Traders, with whom I had formed a very close personal and professional relationship, turned out to be a mini-Bernie Madoff with a Ponzi scheme that attracted nearly $50 million in investor money (rather than Madoff’s take in the billions). With the exception of the amount of money lost, everything else about them seemed very similar.

Some of the money this mini-Madoff managed came from my other clients because I was willing to relay what he wanted me to say about his performance. I talked about his performance even though I had no way of tracking it. I even had money placed with him. The news about his Ponzi scheme broke and the net result was that I settled a lawsuit against me— brought by clients who had placed money with him. In addition, most of our company’s retirement funds, which had been placed with him, disappeared. The incident nearly destroyed our company.

I vowed to never again endorse the performance of any of our clients. I now trade the company’s retirement funds personally and do very well with it. Never again would I consider putting any of it with our clients because I have no way of verifying their performance to my satisfaction. Consequently, when you read information about our Super Trader program now, you won’t see any track records or statements about how people are doing.

I do sometimes put client track records into my books as long as I can see no reason the person would make false statements about it. For example, in my book Super Trader, I showed the track record of someone who had an SQN® score of 15 in a particular Forex trading system. He never asked me to mention his accomplishment and he seemed sincere in communicating his gratitude for what he had learned from my materials. I didn’t mention his name in the book so I was not that concerned about his/her performance records being inaccurate or about him benefiting from the mention.

In my new book, Trading Beyond the Matrix, I did mention the performance of some people who wrote chapters for section 1 of the book. In each case, I was very careful to avoid implying that anyone should put their faith in the performance of one of these people; that’s always dangerous. However, it turns out I did make one mistake; one of the Super Traders wrote about his track record and I allowed him to mention his new coaching web site.

Trading Beyond the Matrix has been out since February and I recently learned that some of my potential clients are using his coaching program in place of the Super Trader program. However his coaching program is not my biggest concern. My big concern came when I saw that his trading coaching website was linked to his money management site. Suddenly the picture changed. Now, the trading performance he wrote about in Trading Beyond the Matrix could appear as my endorsement for his money management skills. Gratefully, he expressed that he had no intentions to present the appearance of my endorsement and he has taken some steps to correct that.

Let me publicly state that I have no way to verify whether the performance information any of my clients wrote about in the book was accurate or not. Originally, this particular client was simply talking about how well he had done with his relatives’ retirement account and I wasn’t that concerned over how accurate that information was; I had no reason to be concerned at the time. Since he has not graduated from the Super Trader program, I have not seen his trading business plan nor have I verified or approved any of the multiple trading systems his money management business now offers. I certainly have not in any way verified his claims about his track record. His track record statements may indeed be accurate, I just have no way to verify them one way or another.

Please be careful. In our Super Trader program, we have hedge fund managers, portfolio managers, financial planners, and many other competent individuals. If, however, you ever read an implied or explicit investment return claim related to the Super Trader program or the Van Tharp Institute, please be aware that I did not verify and have no way to verify anyone’s track record.

Furthermore, I do NOT recommend any traders as mentors or money managers. We are a trading education company and our business is to help people become better traders/investors. We do not provide any sort of advisory service for those who do not want to do the work for themselves. So please be careful about any claims made.

Please do not take any chapter of the Matrix book as an endorsement of any kind for an investment track record.

The client mentioned here remains a good friend and I respect him. This is not meant to disparage him in any way. I just want to be clear that I am not in the business of recommending other traders or coaches. Since my big lesson learned years ago from the unscrupulous client, you will notice that, other than an occasional book, I don’t endorse any products or services outside of my own: no software, brokerage service or trading platform. I may make mention of something I use, but I do not make endorsements.

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Tuesday, September 03, 2013

Investing in DNA Genetic Scientific Instruments

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As a result of unexpectedly strong second quarter, earnings estimates have been rising for Affymetrix (AFFX), sending the stock to Zacks Rank #1 (Strong Buy) with an ‘Outperform’ recommendation.

About the Company

Headquartered in Santa Clara, California, Affymetrix is a leading provider of microarray-based products and services to the global research community. The company utilizes its DNA chip technology in areas of gene expression, analysis, and clinical application to help treat infectious diseases, cancer, and other ailments.

Affymetrix has 1,100 employees globally and has a sales and distribution network across U.S., Latin America, Europe and Asia.

Reports Earnings after Two Years

On July 31, 2013, the company reported its second quarter operating results. The quarter resulted in net income of $2.8 million or $0.04 per diluted share, compared to a net loss of $1.2 million or $0.02 per diluted share in the same quarter of 2012. The results were substantially better than the Zacks Consensus Estimate of a loss of $0.01 per share. The company reported earnings for the first time since the first quarter of 2011.

Thanks to stronger revenue and control of operating expenses, the company generated $10.3 million in cash from operations. Further they also reduced their senior-secured debt by about 25%. As a result, the company ended the quarter with $44 million cash-on-hand.

Turnaround in the results was due to strong growth in Genetic Analysis business and improvement in Expression Business. The management said that the business strengthened in North America and Europe while Japan remained soft. It appears that the company’s restructuring plan is finally working.

Positive Earnings Estimates Revisions

As a result of surprising turnaround in the operating results, analysts have revised their earnings estimates for the company in the past few weeks. Zacks consensus estimates for the current quarter and the current year now stand at $0.02 per share and $0.08 per share respectively, up from a negative $0.01 per share each, 60 days ago.

The Bottom Line

AFFX is a Zacks Rank#1 (Strong Buy) stock. The company also earned a (longer-term) Zacks recommendation of “Outperform”, based on its improved prospects. Turnaround in the quarterly results suggests that the worst may now be over for the company.

The company has highly innovative products and a number of proprietary intellectual property licenses. It has so far failed to monetize on them but new initiatives and shift of focus make it an interesting pick at this time.

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