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Stock Analysis and Research

The Basics of Fundamental Analysis

The Basics of Fundamental Analysis

Looking to invest in stocks but don't know where to start? Analyzing a business can become complicated unless you have a basic road map. Here are some guidelines that can get you started. By Anna B. Wroblewska   Are you looking to invest in stocks but don’t know where to start?   Fundamental analysis is the process of trying to understand the value of a company by...more

Hot Stock Tips - What to be Wary About

Hot Stock Tips - What to be Wary About

Call it an occupational hazard but at some point at any social engagement I am asked "So what are the hot stocks"? I don't give hot stock tips because, as a practicing financial professional committed to long-term financial solutions, I don't believe they really exist. I believe information that is distributed through dinner parties or on fairways falls into one of three categories: Inside information which if acted upon could result in fines, jail time or both for the investor as...more

A Look at P E Ratios

A Look at P E Ratios

Price/earnings (P/E) ratios are a common measure of stock value, both for individual stocks and the overall market. Calculating a P/E ratio is straightforward - it is simply the price of a single share of stock divided by the company's per share earnings. For example, a stock selling at $50 per share with $2 per share of earnings would have a P/E ratio of 25. However, P/E ratios can be calculated using different earnings numbers. Trailing P/E ratios, which are typically reported in...more

A Return to Dividends?

A Return to Dividends?

During the bull market of the 1990s, dividends fell out of favor. With stock prices rising so dramatically, dividends didn't seem to matter. Historically, however, dividends have been a significant component of stocks' total return. For instance, from 1926 to 1985, dividends equaled approximately 49% of the total return of the Standard & Poor's 500 (S&P 500), with an average dividend yield of 4.8%. In contrast, from 1998 to 2004, the average dividend yield was 1.5%.* A major...more

Coming to Terms with Stocks

Coming to Terms with Stocks

With all of the volatility in the stock market over the past several years, it can be difficult to determine how to devise an investment strategy to help achieve your financial goals. To help you determine a reasonable rate of return to expect on your stock investments, it might be helpful to review some "facts" about the stock market: The stock market's historical return can change dramatically depending on the period considered. For instance, from 1926 to 2004 (79 years), the average return...more

Evaluating Potential Stock Investments

Evaluating Potential Stock Investments

With thousands of stocks to choose from, developing a systematic approach to evaluating stocks can make it easier to make your selections. The first step is to narrow the options from the thousands of possible choices to ones most likely to meet your objectives. That typically involves screening companies based on criteria important to you. For instance, if you are interested in growth stocks, you might look for earnings growth over a certain percentage. Or for value stocks, you might look for...more

Measuring a Stock's Risk

Measuring a Stock's Risk

Basically, stocks are subject to two types of risk - market risk and nonmarket risk. Nonmarket risk, also called specific risk, is the risk that events specific to a company or its industry will adversely affect the stock's price. For instance, an increase in the cost of oil would be expected to adversely affect the stock prices of the entire oil industry, while a major management change would only affect that company. Market risk, on the other hand, is the risk that a particular stock's price...more

Signs It's Time to Sell a Stock

Signs It's Time to Sell a Stock

It's always difficult to determine the proper time to sell a stock. What if you sell and the stock price increases dramatically? Or what if you hold on to the stock and its price goes nowhere or declines? To help you decide when to sell, consider these signs: The price of a stock with a large loss isn't moving. Investors hate selling a stock with a loss, often wanting to hold on until they at least break even. However, just because the stock sold at a much higher price in the recent past...more

The World of Stock Market Indexes

The World of Stock Market Indexes

Historically, stock market indexes have been closely watched as an indicator of the market's overall performance. While that role is still important, the number of stock market indexes has grown explosively as mutual funds and investment managers search for relevant indexes to use as benchmarks to compare performance. Indexes are also increasingly used as the base for investment products, allowing investors to invest in defined segments of the market without purchasing all of the underlying...more

Watch for Slowing Growth

Watch for Slowing Growth

Reports of slowing growth or earnings declines can severely punish a stock's price. So you aren't surprised by this type of news for your stocks, look out for these three warning signs when you review financial reports: Accounts receivable growth Accounts receivable represents amounts owed to the company by customers for goods received. Receivables typically track sales, so as sales increase, receivables increase and vice versa. When accounts receivable start to increase significantly...more

Income Growth with Dividends

Income Growth with Dividends

Investors looking for income are increasingly hard pressed to find an inflation-beating yield matched with reasonable levels of risk. However, according to Forbes Magazine and a report cited from Ibbotson Associates in November 2004, we can learn from history that dividend income has accounted for well over half of the long-term real return on big company stocks, during the past 75 years. And yet, despite dividends historical success and recent tax benefits, many investors still pay little...more

Employee Stock Option Basics

Employee Stock Option Basics

If you have employee stock options, consider yourself lucky. If those stock options are "in the money," consider yourself even luckier. Being "in the money" means having a positive spread between the exercise price of the option and the current value of the stock. In contrast, when the strike price of the options is below the current value of the stock, your options are said to be "under water." Whether or not your options are worth anything at the moment, it pays to understand the type of...more

Exit Stage Left: Stock Exit Strategies

Exit Stage Left: Stock Exit Strategies

Selling is probably the most important thing you do in your trading life, yet it is the hardest thing to do. I don't know if it is an ego thing with traders or if they simply get too emotionally attached to their positions and this makes them unable to sell. But, I do know that the single biggest reason traders under perform is simply because they can't pull the trigger and move to the next issue. Money management is one of the most important aspects of trading. Many traders, for instance,...more

Changes in Market Orders

Changes in Market Orders

When trading securities people don't think much about the order that they've placed. Today many people place orders through an advisor while some prefer to place their orders online. Either way, the order is being routed to a stock exchange. Not all exchanges are created equal and profits can be had by the various prices the same security can be trading on at various markets simultaneously. This technique is called arbitrage. Let's take one company's stock ? we'll use IBM as our example....more

Stock Options: Bailout and Perhaps Abandonment

Stock Options: Bailout and Perhaps Abandonment

The premise of stock options is to tie the long-term financial performance of a corporation to its employees. This provides an "upside" where employees can make substantial profits if they all work in harmony and cause the business to perform well and increase the share price. Stock options are often "granted" to employees with no cost to the employee and a 'strike' price. This strike price is the floor where the employee can begin making profits. If you were issued options in ABC stock and...more

Value & Growth?

Value & Growth?

In the world of finance the most difficult part is just understanding the definitions. Unfortunately, all definitions aren't consistent ? some pacts have various twists on the definitions of terms. For this conversation I'd like to take you through the two main categories of a security or investment theory. A security can also be referred to as stock, equity, certificates & shares. People often put stocks or their stock buying theory into the ?growth? or ?Value? category. This phenomenon...more

Maximize Your Employee Stock Purchase Plan (ESPP)

Maximize Your Employee Stock Purchase Plan (ESPP)

Participating in your ESPP can make a substantial difference in the amount of money you are able to accumulate over your working years. Your ESPP gives you the right to purchase company stock at a discounted price. This is such a valuable benefit that the IRS caps the level at which you may participate. You can use up to 10% of your salary to buy stock as long as the total amount purchased does not exceed $25,000*. Let's go through an example and see how you might use this plan to your...more

Considering Your Options

Considering Your Options

To attract and keep top employees, more companies are offering them employee stock options. If you receive employee stock options as part of your compensation package, careful planning can help you make the most of them. What Is an Employee Stock Option? Employee stock options give you the right to buy stock in the corporation that employs you at a specified price ' the exercise or 'strike' price ' at a future time. Usually, the strike price is equal to the stock's market value at the...more

Separating the Decision vs. Outcome in Investing

Separating the Decision vs. Outcome in Investing

When you make a decision to buy a stock, you have to realize that the outcome is independent of the decision. That is, you won't always achieve the outcome you would like - that of making money. But over time, if you use successfully tested risk management tools properly, which are designed to improve your probabilities, you will likely have more positive outcomes than not. In investing you must realize that nothing is a guarantee or a lock. The best you can do is to stack the odds of...more

Technical Analysis: A Potential Lifeline?

Technical Analysis: A Potential Lifeline?

Among people who trade the stock market, the concept of technical analysis produces a wide range of reactions. Attitudes range from "emotional voodoo" to "only fools trade without it" and plenty of ambivalence in between. As investors or traders, we need to keep our minds open to new ideas, lest we miss something that could be quite useful. If you already trade using some form of technical analysis, it's always a good idea to keep sharpening those skills. If technical analysis is new to you,...more

Understanding Stop Orders

Understanding Stop Orders

First, let's discuss the use of stop orders. They are meant to be "NO-BRAINERS," a way to get out without having to think about it when you are in a state of confusion. These stop orders are normally placed at prices that technically 'signal' that an exit is the wisest move that should be made at that time. You don't have to believe exit signals. You just have to obey them. Such signals do not involve forecasting what a stock is going to do. We use them to prevent possible substantially...more

Growth versus Value: Is the Tide Turning

Growth versus Value: Is the Tide Turning

Let's start off by giving you a few definitions: Value Stocks: Most stock market experts would define a value stock as one that is priced too low when you compare its earnings and book value, per share, to other companies in the same industry. Put another way, its financial strength indicates that the stock price is a bargain. However, not every "value" stock is a good value. Rather than bargain, sometimes it's just half-priced junk. Growth Stocks: Companies whose sales and earnings are...more

Spotting Companies that may be Headed for Trouble

Spotting Companies that may be Headed for Trouble

I want to deviate just a bit from our normal technical education and take a look at a bigger concern for today's investor. Most investors truly ignore the warnings signs thrown off by a company in distress. How many of you remember WorldCom and Enron? In the not too distant past these companies owned market caps worth hundreds of billions of dollars. Today, they don't exist. Their collapses came as a surprise to most of the world, including their investors. Even large shareholders, many of...more

Six Powerful Ways to Fail With Stocks

Six Powerful Ways to Fail With Stocks

Get excited about the next "new thing", and then load up on companies who are the early entrants for that theme. This is a trap because it appeals to the common sense of most people. Yet there is little evidence that it works, or that it is consistent with the nurturing of an investor's healthy mentality. The public doesn't know this, but the 'promoters' do, and they are ready to exploit you - a person ' even as they are telling you to exploit an "opportunity." (Most of us were taught...more

Covered Call Options

Covered Call Options

The use of "covered call" writing is an investment strategy that offers the INVESTOR (as opposed to the speculator) several advantages of stock ownership. First, the use of a covered call strategy offers downside protection and secondly the call option generates cash flow. Here's how it works: Lets assume you buy 500 shares of a stock in April at $50 a share. At the same time you sell the July 55 call option with a price of $2.5. Because you have sold covered call options, the stock can...more

Taking a Closer Look at Dividend-Paying Stocks

Taking a Closer Look at Dividend-Paying Stocks

During the 1990s, there was an intense focus on capital appreciation as companies sought to foster growth and keep up with an unprecedented bull market. Profits were often reinvested at the expense of dividends, which fell steadily. More recently, however, companies have been eager to demonstrate sound fundamentals and strong balance sheets and provide shareholders with tangible benefits in exchange for their commitment to a stock. The result has been a noticeable increase in dividend...more

Dividends: Cash in Your Pocket

Dividends: Cash in Your Pocket

After a recent ill-fated spin in the fast lane, many investors are rediscovering the value of a more conservative approach toward increasing wealth: the cash dividend. For most of the 20th century, dividends were an important component of the stock selection process, and with good reason. From 1926 through 2001, about 40% of the total return on an average large-cap U.S. stock was generated by its dividend (Fortune, July 2004). Remember, past performance is not a guarantee of future results...more

How to Relax During the

How to Relax During the "Summertime Blues"

Summer is here and many investors turn their thoughts away from investing money and toward investing time into rest and relaxation. After all, why make a killing in the stock market if you can't enjoy the fruits of your labor from time to time? There's an old stock market adage, 'sell in May and then go away?. But should this concern anyone other than Wall Streeters that move to the Hamptons for the summer? To answer this question, it may be worthwhile to take a look at seasonality...more

Creating Free Options

Creating Free Options

?We must dare to think `unthinkable? thoughts. We must learn to explore all the options and possibilities that confront us in a complex and rapidly changing world. We must learn to welcome and not fear the voices of dissent. We must dare to think about `unthinkable things? because when things become unthinkable, thinking stops and action becomes mindless.? - J. William Fulbright, March 27,1964. Having a good plan is crucial to investment success, and this involves thinking not just about...more

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