Archive for Stock Research

Kelly - Kelly Criterion For Stock Trading Size

I’m sure some people know about Efficient Frontier, but I’m guessing that there are less investors that know about Kelly Criterion. So what is Kelly Criterion and who is Kelly? Kelly worked at AT&T, and published his original paper back in 1956.
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Investment - Stock Chart Reading

As an investor you will want to check out any equity before you buy it. Many investors go to Morningstar which is one of the largest providers of mutual fund information in the world. It is assumed that their information is correct. After all that is what you are paying for.
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Penny Stock Research - Penny Stock Research Guide

Penny stocks also referred to as small caps, micro caps and nano caps are low-priced issues, often highly speculative and selling less than $1 a share. Initially penny stocks were mostly a matter of derision but gradually over the years some of them have developed into investment caliber issues. ‘Penny stock is a high-risk stock that has a short or erratic history of revenues and earnings.’
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Finance - Stock Trading Systems - The Lexicon

Charts are visual representations of stock prices over time, and you can familiarize yourself with them in the financial pages of your local news paper. Think back to algebra, and plotting curves the vertical axis is the price, and the horizontal axis is time, usually in days or weeks. Make sure, when comparing graphs, that the vertical axis is the same for multiple stocks. Sparkline graphs are a recent innovation and give you an instant visual impact on a wide range of numbers over time.
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Stock Research - Making Outsized Returns In The Stock Market - Using The Dow Theory

The Dow Theory
Charles H. Dow
Robert Rhea
E. George Schaefer
Richard Russell
The Dow Theory Today
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Globally Registered Shares

Globally registered shares, or global shares, are stocks listed in multiple markets worldwide. They maintain the same class of stock, regardless of the market where they are issued. They are denominated on the exchanges in the local currency, including any dividends to be paid. All shareholder records are kept in the foreign locale also. By issuing stocks in this manner, companies are able to provide shareholders around the globe with equal equity rights and are able to work around foreign ownership regulations.

As mentioned, global shares benefit investors facing restrictions in their holdings of foreign shares. By purchasing global shares of a foreign company listed on a local exchange, the investor is able to avoid any restrictions to foreign stock ownership since the foreign stock is issued locally. Issuing in local currency eliminates any currency conversion fees. Global shares were first issued by Daimler Chrysler in November 1998 in 21 markets and their ability to gain equity in foreign markets has encouraged other companies to issue their own global shares. Celanese AG issued global shares in 1999 and UBS followed suit in 2000. Still, the global share concept remains on the cutting edge of investment development and is likely to become more popular in the future as more companies seek to expand globally.

Global shares also provide opportunities for the firms they represent. By having large amounts of equity in a foreign market a firm can seek to acquire foreign firms through stock swaps. Elimination of currency conversion also provides issuers increased liquidity and higher trading volume. Also, when a company trades its stock around the globe, the trading day never stops but remains in fluid motion.

Finding Information on Mutual Funds

For over 20 years, Morningstar is the recognized, trusted leader in providing current information on mutual funds. Before Morningstar was founded, in 1984, complete information about fund performance, management, and historical fund information was not widely available to the individual investor. Morningstar changed all this by providing essential mutual fund analysis and commentary that was simply unavailable to the individual investor before.

What started out as the quarterly published Mutual Fund Sourcebook in 1984 has evolved today into on online investment information portal serving over 5.2 million investors, 210,000 financial advisors, and 1700 institutions worldwide. Since its inception, Morningstar has operated on the adage that mutual funds were created for individual investors and that affordable analysis and commentary should be available so these investors can make educated decisions with their hard-earned dollars. Morningstar continues with this theme today. For $69, an individual can sign up for a 3 month trial subscription to Morningstar and receive detailed, comprehensive reports and analysis on the 1600 funds out of nearly 14,000 on the market that Morningstar feels are “worthy of your attention.”

Morningstar also offers “Self-Study Investing Workshops” with in-depth instruction on fund investment topics that can be difficult to understand. Topics include: Methods for Investing in Mutual Funds, Five Questions to Ask before Buying a Fund, When to Sell a Fund, and 7 Sins of Fund Investing. Each workshop is priced at only $24.95 – far less than other widely publicized investment seminars. Morningstar really does have the individual investor in mind.

Much of Morningstar’s information is available online for free – without the in-depth commentary and analysis that comes with a subscription. Morningstar regular publishes its ‘Best and Worst’ list of funds that is freely available. Other lists showing average fund manager tenure are also available at no cost. Morningstar famously rates funds from 1 to the coveted 5-star rating. The 5-star list is available here:

The Two Flavors of Real Estate Index Funds

These funds invest in real estate investment trusts (REITs) which are firms investing in real estate (equity) or mortgages on real estate (debt) or a combination of the two. A fund focused largely on equity would be valued on the property invested in and the rents received from the property. The valuation of property is not tied to interest rates. Funds focused on the debt side of real estate are valued based upon the ability of the financed to pay their mortgages. Interest rates can have a big impact on these REITs. As indexes, both types of funds seek to mimic the performance of the real estate market.

Much has been in the news lately about the American housing market slump and mortgage crunch. It would be easy to think that in today’s market, it would not be wise to invest in a real estate index fund. But the opposite is probably true. One of the most popular real estate index funds, Dow Jones U.S. Real Estate Index Fund (IYR) is down from its 52 week high of 94.99 at 72.65 on August 31, 2007. This shows a rebound from the 52 week low at 66 after the news about mortgage companies going bankrupt broke. IYR is still a bargain at the current price. It looks like the real estate bubble won’t burst any further for this well-established REIT.

The best known mortgage REIT, Annaly Mortgage Management (NLY), is similarly off its 52 week high of a little over 16 at the current price of 14.10 and is similarly making a rebound. This is another investment that is probably bargain priced. After all, mortgages don’t go away once the mortgage house goes under, but are bought and sold by different firms. When the fed meets in September to lower interest rates as speculation leads us to believe it will, that will only drive the stock price of funds like NLY up.

US Global Investor Funds are Evolving

Global funds are mutual funds made up of firms headquartered outside of the United States versus local funds which are those funds concentrated on American domestic firms. At different times, it has been better to invest domestically or internationally though most of the time it has been more profitable to invest in the former. However, we may be in a time period when investing in the global funds may be more profitable.

Themes that drove the US economy so strongly and pushed local funds to regularly outperform the global funds are now practiced internationally. Even in the union-dominated labor forces of Europe, greater productivity is being squeezed out of the workers where it wasn’t before and lessening government regulations are encouraging competition in the European economy that, in turn, encourages consolidation of European firms. Consolidation ultimately brings a greater efficiency as the larger companies are able to exploit economies of scale. Sound familiar? Think about the booming United States economy in the 1990s.

Asian funds have been taboo investments since the market collapses after the US tech bubble burst in 2000-2001. These economies are now “righting the ship” and emerging from the doldrums. China is evolving from a centrally planned economy to a capitalist market economy as it seems to have learned when gaining full rights to Hong Kong from the UK in 1998.

With market globalization the ultimate buzzword of the modern economy what’s a global fund doesn’t really mean the firm’s focus of business is outside of the United States. Global funds today are “global” in the sense they operate globally with significant revenue portions coming from all over the globe. An excellent example of this is Porsche, the world’s most profitable automobile manufacturer, which is headquartered in Germany but its largest market is in the United States, accounting for 40% of annual sales.

Ultimately, global funds look to perform well as tried and true American market efficiencies take root in other parts of the world. This is not to say local funds will perform poorly but investors should at least look into diversifying their mutual fund portfolios by investing in global funds.

Understanding Cash Flow Statement - How To Make And Read Cash Flow Statement

The cash flow statement sometimes is another financial statement that investors should become familiar with. It is another tool for managers and investors that shows how changes in the balance sheet and income affect cash. The cash flows are broken down into three parts: operating activities, investing activities, financing activities and the cash flows from each source. These changes shown on the cash flow statement are useful in determining the immediate health of the firm and its ability to function as an ongoing concern.

Operating activities are the production, sales, and delivery of the company’s products. These are the regular day to day activities of the firm that put it into business in the first place. This category will include figures like depreciation, taxes, and amortization of intangible assets (things like brand-name recognition).

Investing activities include the purchase and sale of long-term assets. Items here will include capital expenditures and investments. All investments made on behalf of the firm are including here. Purchases of plant, property and equipment are included as capital expenditures.

The financing activities represent the equity of the firm. This is the money owned by outside entities such as banks and shareholders as well as the payments to these owners of the company (dividends). If the company made any purchases or sales of its own stock, it will be included here.

The cash flow statement will contain a bottom-line, the net increase (or decrease) in cash. If a company is negative in cash, it will have issues paying its short-term debts and have difficulty continuing to do business. That’s not to say it will definitely fail, but will have to find other ways to generate cash to pay its bills. Remember, this statement does not detail income; just how much cash the firm has on hand. A sample cash flow statement is pictured below.