Tuesday, July 29, 2008
IBD uses a combination of fundamental and technical analysis as well as market timing to identify stocks that they believe are attractive. IBD is geared more toward Traders. These Traders are looking to buy growth stocks and use more Momentum/Technical indicators to identify stocks to trade with. While this is not a method that I subscribe to, IBD has one of the better market timing indicators that I have found.
IBD watches the technicals and volume in the market to identify attractive times to purchase stocks. They do this by looking for large up moves in the market along with large volume. They believe that when large institutional investors are buying in the market they can be supportive to individual investors.
I'm not a huge fan of market timing. I think that the best way to make money in the long run is to do your homework, buy strong companies, and build a well diversified portfolio that includes many asset classes. Then you monitor your investments and liquidate the investments that no longer look attractive from a valuation standpoint or if there is a problem in the investment that will keep it from increasing in value over the long term.
I do believe that when you are looking to buy stocks it can be beneficial to look at some technical analysis though. Technical analysis can help you avoid falling knifes or value traps, two things that value investors must try to identify and avoid.
In conclusion, IBD has given the all clear to their readers that they can now invest in the market. This can add conviction to your buys but only after you do your own fundamental and technical analysis to identify quality companies that will increase your net worth over the long run.
Sunday, July 27, 2008
No Bite Left in the Dogs of the Dow? is an article that reviews stocks that are part of the Dogs of the Dow strategy. The article talks about why strategy has not worked this year mainly due to the large number of bank and deep value stocks that are part of the strategy. These two areas of investments have not been favored by the market this year.
The other article Investments that Pay You Every Month reviews several investments that pay dividends or income monthly. It goes into three different portfolio tactics based on the amount of risk you are willing to take and the amount of income you are looking for. Some of the investment types mentioned in the article are reality trusts, closed end mutual funds, REIT investments, and bond funds.
Both of these articles are very interesting reads and are important to understand for deep value and dividend investors.
Tuesday, July 22, 2008
There was another run up in financial stocks today even as more financial stocks missed earnings estimates. Wachovia Bank (WB) missed earnings by a wide margin, and said it was going to cut its dividend again. The market responded by driving WB up by more then 25% and with large gains in other financial stocks. I thought that I would take a look at some financial sector ETFs to review options to play a rebound in the financial sector through ETFs. Here are some of the options that I found.
Please remember financial stocks have been very volatile and that investing in any of these ETFs is a risky strategy. Also remember that you probably have exposure to the financial sector if you hold mutual funds or other ETFs that invest in the broad market so you could be significantly overweight in your portfolio if you invest in any of these ETFs. That said the market looks like it was expecting all the financial stocks to go under and since they look like they will not many of the financial stocks are rebounding. There has already been a large run up but after the punishment financials took on the way down there could still be a lot more upside. There could also be downside if it turns out that recent market action was a short term rally and the market decides that it was undeserved many financial stocks could plummet.
Friday, July 18, 2008
You would think with all of this negative news that the markets would have moved down in a big way but this was not the case. The Dow Jones Industrial Average gained 3.6% for the week, and the S&P 500 was up 1.7%. There were a couple of reasons for the gains. First, Oil dropped 11% on the week which hopefully will relieve some of the inflation pressers facing American consumers. Second, there were other banks that were able to beat earnings expectations. With all of the worry about the credit crunch, expectations for financial stocks were very low and there was fear on Wall Street. When some of the financial stocks reported their quarterly EPS were above estimates it triggered a large rebound in financial stocks. Here is a sample of the reporting financial institutions that beat average analysts estimates.
US Bancorp (USB) reported $.64/share vs. $.60/share expectations.
Wells Fargo (WFC) reported $.53/share vs. $.50/share expectations.
JP Morgan Chase (JPM) reported $.54/share vs. $.44/share expectations.
Citigroup (C) reported $-.49/share vs. $-.66/share expectations.
Wells Fargo also increased its dividend showing that management feels it has adequate capital to meet current and future requirements. It appears that all banks may not be going out of business as was worried. Expectations are still low and there may still be bank land mines out there but there was much relief in the market. I hope to look at some interesting financial ETFs this weekend. I hope you will come back to take a look with me.