****How to make Money in the Stock Market? Video on Value Investing

http://www.youtube.com/watch?v=40RTmUlzOVw

This news is positive for Coastal

Company Name : COASTAL CONTRACTS BHD
Stock Name : COASTAL
Date Announced : 28/01/2010



Type : Announcement
Subject : Coastal Contracts Bhd (“Coastal” or “Company”) – Memorandum of Understanding (“MoU”) between Ramunia Fabricators Sdn Bhd (“RFSB”) and Pleasant Engineering Sdn Bhd (“PESB”)



Contents : The Board of Directors of Coastal is pleased to announce that its wholly-owned subsidiary, PESB, has on 28 January 2010 signed a MoU with RFSB for the proposed collaboration to undertake the tendering, bidding and fabrication in relation to any contract involving the engineering, procurement and construction of any topsides, jackets or any structures for the oil and gas industry.

RFSB is a wholly-owned subsidiary of Ramunia Holdings Bhd (“Ramunia”), and is involved in civil, structural and building maintenance, mechanical engineering and maintenance, as well as offshore facilities and tanks/tanks farm construction.

PESB owns a yard with facilities to carry out fabrication and engineering works at Seguntor, Sandakan, Sabah, measuring approximately 52.37 acres in aggregate.

The MoU shall take effect on the date of its execution and shall continue to be of effect until the occurrence of any of the following, whichever is the earlier:

1. the execution of the appropriate legally binding agreement or agreements regarding the parties’ intended collaboration; or

2. the expiry of a period of 2 years from the date of the MoU’s execution or such later period as mutually agreed between the parties; or

3. the MoU’s early termination by either party by giving 2 months’ written notice of termination.

Except for Lembaga Tabung Haji which is the common substantial shareholder of both Ramunia and Coastal, none of the directors and/or substantial shareholders of the Company and persons connected with them has any interest, direct or indirect, in the above transaction.

http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/LsvAllByID/0B091A5A5420EC44482576B900324BF2?OpenDocument

Over the long term, shares have proved both less risky and more lucrative than other main forms of investments

Shares less risky in long term

Shares are generally thought of as far more risky than investing in bonds or putting money into a bank account. In many ways they are not.

It is true that if someone puts their life savings into the shares of one or two companies in the expectation of a rapid return they are taking a big risk. If they are lucky they could make a substantial gain but they could equally make large losses.

But there are two main ways in which investment in shares can be made less risky.

• One is to diversify from one or two firms to a mixed basket of different types of shares – this is discussed elsewhere on this site (see Advantages of fund investment).
• The other is to extend the duration of the investment to a longer time span.

The longer an investor’s time horizon the safer it is to invest in shares. For long term investment it is actually safer to invest in shares than in bonds or cash.

One definitive study of this phenomenon is by Jeremy Siegel, a professor of finance at the University of Pennsylvania, in Stocks for the Long Run (McGraw-Hill 2002). From a study of American stockmarket returns from 1802-2001 he shows that shares beat bonds and bills (short term government debt)

• 80% of the time with a 10-year horizon,
• 90% of the time with a 20-year horizon and
• almost all the time with a 30-year horizon.

Article ridiculed

Historically this has meant that even if someone has started to invest in shares at the worst time possible they have generally made good returns in the long term. Indeed Professor Siegel starts his book with a discussion of an article published in the summer of 1929 – just before the Wall Street crash - which argued for regular stockmarket investment. The article was subsequently ridiculed as it was published just before a three-year fall in the market which led to a cumulative decline of 89%. But Professor Siegel estimates that even taking this decline into account an investor who had invested in shares regularly for 30 years from 1929 would have made an average annual return of 13%.

Although Professor Siegel’s study concentrates on America the British market has behaved in a similar way. Over the long term shares have easily outperformed other asset classes.

Perhaps the most definitive study of long-term investment trends in relation to the British market is Triumph of the Optimists (Princeton University Press 2002) – the title itself is based on the fact that shares have outperformed other assets in the long term.

• According to this study an investment of £1 in shares in 1900 would have grown to £16,160 in nominal terms by the end of December 2000.
• In contrast the figure for long-term bonds was just £203 and
• for short term Treasury bills only £149.

Of course once inflation is taken into account the increases are not quite so dramatic. Once the 55-fold increase in prices over the century is incorporated into the calculations the return on

• shares would have been 291 times in real terms,
• on bonds 3.7 and
• on bills 2.7.

Inflation risk

Indeed one advantage of shares over bonds is that they tend to perform much better in periods of high inflation.

• Whereas inflation tends to quickly erode the capital value of bonds the stockmarket generally at least keeps up with rising prices.
• In other words one way in which shares are less risky than bonds is their relative immunity to the risk of inflation.

Another factor that can affect relative returns is taxation.

• For instance, if a government decided to impose a punitive tax on share dividends it would clearly hit returns.
• But historically companies have often found ways round this problem – such as distributing income by buying back their own shares – and all the main political parties now support wider share ownership.

As with all forms of investment the past is not necessarily a guide to the future. Returns in the next two decades may not be nearly as great as during the great bull market of 1982-99.

However, historically there is no doubt that over the long term shares have proved both

• less risky and
• more lucrative

than the other main forms of investment.

http://www.morningstar.co.uk/uk/default.aspx?lang=en-GB

 

When you are caught in a market panic

When you are caught in a market panic

In fact, the only rational thing to do is take courage and make buys. Being gutsy enough to act on our contrarian test - refusing to sell good stocks cheap because Wall Street and Main Street have lost faith for a few days - ensures that your earlier selling at better levels, or not at all, will prove appropriate.

It will be emotionally difficult to buy in a panic. those who can do so are demonstrably rational and therefore also calm enough to sell with discipline as the prior highs approached.

So, should you find yourself in the midst of a crisis in the future, remember:

•Do not engage in panic selling.


•Sit tight and stick to your strategy.


•If you are a long-term, buy-and-hold investor, do hold on.


•If you are an adventurous investor, follow your strategy to buy on dips.


Make sure your overall portfolio is designed to limit your potential losses during a substantial market decline.

http://myinvestingnotes.blogspot.com/2009/10/when-you-are-caught-in-market-panic.html

Fear is your friend

Fear is your friend

When you take a long-term view, the horrific market indicators are actually your friends because they lower prices of the stocks you are interested in. Fear is your buddy. Doom and gloom are close pals. Economic devastation is your friend. In fact, you should want the market to freak out because there is no other easy way to get a fantastic price for a business. Of course, I'm speaking in an investing sense -- obviously a recession is no fun on a day-to-day basis. But fortunes are built in times like these.

Why should you care about a few years of poor results if someone is willing to sell you that business for a song? In two or three years, you could be sitting pretty while the seller will be left with only remorse.

But of course, we want to be choosy with our investments in these turbulent times, so we suggest you focus on:

• Companies with good track records (earnings per share growth, return on equity)
• Companies with strong balance sheets (low debt-to-equity ratios)

http://myinvestingnotes.blogspot.com/2009/04/fear-is-your-friend.html

Graham's thinking was original and he preached value.

Graham preached value - the advantage of paying less for stocks than for the value of the current assets after deducting all liabilities.

One of Graham's favourite teaching strategies was to analyse 2 companies side by side, even if they were in different industries, and compare the balance sheets. 

• He would take Coca-Cola and Colgate, related to one another only by alphabetical proximity, and ask which stock was more of a bargain relative to the net asset values. 
• Graham's primary concern was the margin of safety, a focus which prevented hm from recognising the great growth potential in Coke.

Not all of Graham's tactics worked out.

1.  He would buy a leading company in an industry, such as the Illinos Central Railroad, and sell short a secondary one, like Missouri Kansas Texas, as a hedge. 

• As it turned out, the two securities were not correlated, and the hedge did not work.

2.  Another type of hedge that Graham used repeatedly was to buy a convertible preferred stock and short the common. 

• If the common rose, he was protected by the convertible feature. 
• If it fell, he made money on the short. 
• In either case, he collected the dividend. 
• This approach has become a standard practice in the industry even though it no longer has the tax advantage it once did. 

Graham is seen as a legitimate genius, someone whose thinking was original and often contrary to establish wisdom.  Graham's motivation, was primarily intellectual.  He was more interested in the ideas than in the money, although that too had its rewards.

An equally important strategy: Stay within your circle of competence.

The other term in their strategy is equally important.  This is what the Schlosses shared.


"We don't buy derivatives, indexes or commodities.

We don't short stocks.  We have in the past, and have made some money, but the experience was uncomfortable for us. 

We don't try to time the market, though we do let the market tell us which stocks are cheap.

We did invest in bankrupt bonds at one time, and if the situation presented itself to us, we might again.  But that field has become crowded over the years, and like most value investors, we don't want too much company.

We stay clear of ordinary fixed income investments.  The potential returns are limited, and they can be negative if the interest rates rise.

We buy stocks.  We invest in cheap stocks.

If we find a cheap stock, we may start to buy even before we have completed my research.  We have at least a rudimentary knowledge of many companies and we can consult Value Line or the S&P stock guide for quick check into the company's financial position. 

We believe the only way really to know a security is to own it, so we sometimes stake out our initial postion and then send for the financial statements. 

The market today moves so fast that we are almost forced to act quickly."

Now that the price has fallen ....

"I buy cheap stocks."

Identifying "cheap" means comparing price with value.

What attracts your attention is that the price has fallen. 

Scrutinize the new lows list to find stocks that have come down in price. 

If the price is at a two or three-year low, so much the better.

Some brokers may call with suggestions.  These tend to be at the opposite end of the spectrum from the momentum stocks that most brokers are peddling.

Be especially attracted to stocks that have gapped down in price - stocks where the price decline has been precipitous.

Stock prices sink when investors have been disappointed, either

• by a recent event such as an earnings announcement below expectations, or
• by continued unsatisfactory performance that ultimately induces even patient investors to throw in the towel. 

Some investors put money in

• these companies with shares that have plummeted in price, and
• in those that have slid downward gradually but persistently. 

These companies can be in different industries, and maybe large, medium and small companies. The unifying them is that the stuff they buy is on sale.

More than 70% of traders will lose nearly all their money!

According to the National American Securities Administrators Association, more than 70% of traders will lose nearly all their money! This is solid proof that the majority of traders and investors are dumb money.

What is the Dumb Money Doing Wrong?

First and foremost, the dumb money act as a herd or mob. This group exhibits very little individual decision making. This is exemplified by how the herd follows the financial news so religiously. The financial news is a severe lagging indicator. This is because reporters only report after the fact. It is so silly that people actually think they will gain knowledge that will allow them to have “the edge” in the markets. This isn’t possible because millions of other competing investors are watching the same news! The news is notoriously bullish right before a bear market and bearish right before the market starts soaring.

http://www.stock-market-crash.net/zero-sum.htm

http://myinvestingnotes.blogspot.com/2009/12/does-everyone-lose-in-crash.html

When to Buy, When to Sell: Value Investors Buy too Soon and Sell too Soon

The notion that an investor can buy a stock that has reached the bottom of its fall is a fantasy.  No one can accurately predict tops, bottoms, or anything in between. 

More often than not, value investors will start to buy a stock on the way down.  The disappointments or reduced expectations that have made it cheap are not going away anytime soon, and here will still be owners of the stock who haven't yet given up when the value investor makes an initial puchase.  If it is toward the end of the year, then selling to take advantage of tax losses can drive the price even more.  Because they are aware that they are - to use the industry cliche - catching a falling knife, value investors are likely to try to scale into a position, buying it in stages. 

• For some, such as Warren Buffett, that may not be so easy.  Once the word is out that Berkshire Hathaway is a buyer, the stock shoots up in price. 
• Graham himself, Walter Schloss recounts, confronted this problem.  He divulged a name to a fellow investor over lunch; by the time he was back in the office, the price had risen so much that he could not buy more and still maintain his value discipline. 
• This is one of the reasons why the Schlosses limit their conversations.

Still, when asked to name the mistake he makes most frequently, Edwin Schloss confesses to

• buying too much of the stock on the initial purchase and
• not leaving himself enough room to buy more when the price goes down. 

If it doesn't drop after his first purchase, then he has made the right decision. 

• But the chances are against him. 
• He often does get the opportunity to average down - that is, to buy additional shares at a lower price. 
• The Schlosses have been in the business too long to think that the stock will now oblige them and only rise in price. 

Investing is a humbling profession, but when decades of positive results confirm the wisdom of the strategy, humility is tempered by confidence.

Value investors buy too soon and sell too soon, and the Schlosses are no exceptions. 

• The cheap stocks generally get cheaper. 
• When they recover and start to improve, they reach a point at which they are no longer bargains. 
• The Schlosses start to sell them to investors who are delighted that the prices have gone up. 
• In many instances, they will continue to rise, sometimes dramatically, while the value investor is searching for new bargains. 
• The Schlosses bought the invetment bank Lehman Brothers a few years ago aat $15 a share, below book value.  When it reached $35, they sold out.  A few years later it had passed $130.  Obviously that last $100 did not end up in the pockets of value investors. 
• Over the years, they have had similar experiences with Longines-Wittnauer, Clark Oil, and other stocks that moved from undervalued through fair valued to overvalued without blinking. 
• The money left on the table, to cite yet another investment cliche, makes for a good night's sleep.

The decision to sell a stock that has not recovered requires more judgement then does selling a winner.  At some point, everyone throws in the towel. 

• For value investors like the Schlosses, the trigger will generally be a deterioration in the assets or the earnings power beyond what they had initially anticipated. 
• The stock may still be cheap, but the prospects of recovery have now started to fade. 
• Even the most tolerant investor's patience can ultimately be exhausted. 
• There are always other places to invest the money. 
• Also, a realized loss has at least some tax benefits for the partners, whereas the depressed stock is just a reminder of a mistake.

Footnote: 
Over the entire 45 year period from 1956 through 2000, Schloss and his son Edwin, who joined him in 1973, have provided their investors a compounded return of 15.3% per year. 

For the nine and a half years that Walter Schloss worked for Ben Graham and for some years after he left to run his own partnership, he was able to find stocks selling for less than two thirds of working capital. But sometime after 1960, as the Depressin became a distant memory, those opportunites generally disappeared. Today, companies that meet that requirement are either so burdened by liabilities or are losing so much money that their future is in jeopardy. Instead of a margin of safety, there is an aura of doubt.

****3 Steps To Profitable Stock Picking

3 Steps To Profitable Stock Picking

Stock picking is a very complicated process and investors have different approaches. However, it is wise to follow general steps to minimize the risk of the investments. This article will outline these basic steps for picking high performance stocks.

Step 1. Decide on the time frame and the general strategy of the investment. This step is very important because it will dictate the type of stocks you buy.

Suppose you decide to be a long term investor, you would want to find stocks that have sustainable competitive advantages along with stable growth. The key for finding these stocks is by looking at the historical performance of each stock over the past decades and do a simple business S.W.O.T. (Strength-weakness-opportunity-threat) analysis on the company.

If you decide to be a short term investor, you would like to adhere to one of the following strategies:

a. Momentum Trading. This strategy is to look for stocks that increase in both price and volume over the recent past. Most technical analyses support this trading strategy. My advice on this strategy is to look for stocks that have demonstrated stable and smooth rises in their prices. The idea is that when the stocks are not volatile, you can simply ride the up-trend until the trend breaks.

b. Contrarian Strategy. This strategy is to look for over-reactions in the stock market. Researches show that stock market is not always efficient, which means prices do not always accurately represent the values of the stocks. When a company announces a bad news, people panic and price often drops below the stock's fair value. To decide whether a stock over-reacted to a news, you should look at the possibility of recovery from the impact of the bad news. For example, if the stock drops 20% after the company loses a legal case that has no permanent damage to the business's brand and product, you can be confident that the market over-reacted. My advice on this strategy is to find a list of stocks that have recent drops in prices, analyze the potential for a reversal (through candlestick analysis). If the stocks demonstrate candlestick reversal patterns, I will go through the recent news to analyze the causes of the recent price drops to determine the existence of over-sold opportunities.

Step 2. Conduct researches that give you a selection of stocks that is consistent to your investment time frame and strategy. There are numerous stock screeners on the web that can help you find stocks according to your needs.

Step 3. Once you have a list of stocks to buy, you would need to diversify them in a way that gives the greatest reward/risk ratio. One way to do this is conduct a Markowitz analysis for your portfolio. The analysis will give you the proportions of money you should allocate to each stock. This step is crucial because diversification is one of the free-lunches in the investment world.

These three steps should get you started in your quest to consistently make money in the stock market. They will deepen your knowledge about the financial markets, and would provide a of confidence that helps you to make better trading decisions.

http://tradingindicator.blogspot.com/2010/01/3-steps-to-profitable-stock-picking.html

Comment:  There are many ways to make money.  Investing for the long term is profitable for many investors.  Some of those who employ other strategies can also be profitable too.

Banking sector sees 19pc earnings growth this year

Banking sector sees 19pc earnings growth this year
Published: 2010/01/09


The banking sector expects an earnings growth of 19 per cent this year, premised on lower provisions supported by overall improved operating income.

HwangDBS Vickers Research, in its focus on the banking sector, said corporates have switched to the bond market for funding, adding that this served as an impetus for non-interest income expansion.

"We forecast a 10 per cent growth in non-interest income in 2010 and consumer loans will drive loans growth this year as corporates turn to the bond market to raise funds," the report added.

HwangDBS Vickers Research also expects SME loans utilisation to recover this year.

"Judging from loan applications and approvals by banks, we gather that the pipeline will be healthy," it said, projecting loans growth in 2010 between 8 and 9 per cent.

The research house said the top pick for Malaysian banks was CIMB because of its key proxy to Malaysian capital markets and regional expansion.

"We also like Hong Leong Bank for its reach in China which could spice up earnings growth as well as its regional aspirations.

"Hong Leong Bank is currently in talks to acquire EON Capital which is currently tagged for a merger and acquisition activity", the report said.

HwangDBS Vickers Research added there could be further room for earnings upgrade for selected banks such as Hong Leong Bank and RHB Capital when overnight policy rates move up.

For Maybank, there could be an upside on stronger Bank Internasional Indonesia earnings while Public Bank stood out as an excellent proxy of a quality bank.

"Public Bank loans growth still outpaces industry average while asset quality is still the best among peers," it said.

However, HwangDBS Vickers Research pointed out there were key risks to the sector's earnings.

"Key risk to earnings would be slower-than-expected drop in GDP growth which could potentially lead to slower recovery in overall earnings," it added.

As for Dubai's debt woes, it said not all Malaysian banks were exposed to the Middle East, nevertheless, a check with banks revealed that total exposure was less than RM200 million per bank.

HwangDBS Vickers Research said there was significant pick up in interest for banking stocks in 2009, which on the average, outperformed the FTSE Bursa Malaysia Kuala Lumpur Composite Index by 83 per cent. - Bernama

Rubber glove sector downgraded

Rubber glove sector downgraded
Published: 2010/01/27


MIDF Research has downgraded the rubber glove sector to "Neutral" from "Overweight" due to concerns over sustainability of global glove demand growth, expected excess glove production capacity and earnings margin sustainability.

"After the remarkable surge in 2009, the price momentum carried through in 2010 with a 15.9 per cent - 30.3 per cent year-to-date," it said in a research note today.

However, moving forward, MIDF Research said the returns prospect of glove companies are expected to be less promising from the risk-reward perspective.

The research house said the market is expecting global glove demand to hit about 150 billion pieces this year, with a growth rate of eight to 10 per cent annually.

"Although we also anticipate glove demand to continue rising, mainly from developing countries, there is a risk that the growth demand will be lower, considering that the domestic glove production and export values last year were not as high as reflected by consensus estimate of eight to 10 per cent per annum," it said.

For the cumulative 11 months last year, production volume and export value grew by only 2.0 per cent year-on-year and 0.8 per cent year-on-year to 42 billion pieces and RM6.46 billion, respectively.

"In addition to lower volume, the slower growth in export value was also attributable to lower average selling price in tandem with the lower average latex price in 2009," MIDF Research said.

It said there was no guarantee that lower average selling price would lead to higher demand and export volume, adding that the diminishing threat of the H1N1 viral outbreak would be a drag on demand.

MIDF Research said glove makers were expanding their production capacity more aggressively this year with an average increase of 26.6 year-on-year growth.

"An additional capacity of 15 billion pieces of glove is expected to be available by the second half of this year. In 2011, the glove makers planned to expand their capacity by another 16 billion pieces of glove," it said.

MIDF Research said earnings margin should be safeguarded in the first half of this year given the higher plant utilisation rate and better pricing power.

"We believe margin sustainability is highly dependent on the issues of demand sustainability and excess production capacity," it added. - BERNAMA

Merrill recommends specific stock picking

Merrill recommends specific stock picking
By Chong Pooi Koon
Published: 2010/01/27


Merrill Lynch Wealth Management thinks Malaysia is rather fully valued, so the strategy has to be specific stock picking

MERRILL Lynch Wealth Management, which rates China and Hong Kong as its top markets for stocks this year, says it sees limited upside potential for Malaysian shares although selected companies like rubber glove makers can outperform.

"We think Malaysia is rather fully valued, so the strategy has to be specific stock picking," its chief investment officer for Asia Pacific, Stephen Corry, said in a media interview in Kuala Lumpur yesterday.

He said banks with exposure to the improving capital market activities as well as rubber glove makers are likely to perform this year. He did not name the stocks due to the bank's policy.

Merrill Lynch, now a unit of Bank of America following a merger, believes that overall, stocks and commodities will give better returns than bonds and cash this year.

A muted recovery in developed economies will lead to low core inflation and steep yield curves this year, acording to Merrill Lynch.

In contrast, rising longer-term interest rates will make government and corporate bonds less attractive.

"Retail investors are pursuing two strategies as we can see. They believe there could be deflation, so they bought fixed income, specifically A-grade corporate papers. They also thought there could be inflation, that's why they like emerging stocks and commodities.

"People are buying inflation and deflation but they are not buying low inflation and equity, so that's where we see opportunity. That's part of reasons why we think the MSCI All-Country World Index could reach 350 this year, roughly 15 to 20 per cent upside," Corry said.

The combination of huge policy stimulus from governments, a steep yield curve and low volatility are factors that contribute to its bullish view on shares.

Merrill Lynch likes stocks from Europe, Asia as well as emerging market consumer shares.

Emerging market is a secular growth story, Corry said, while European shares are now cheaper than US stocks in terms of price-earnings multiple.

http://www.btimes.com.my/Current_News/BTIMES/articles/scorry-2/Article/

Malaysia may raise interest rates in the first half of the year

Malaysia may raise interest rates in H1: Citi
Published: 2010/01/27


Malaysia may raise interest rates in the first half of the year, said Citigroup Inc, which brought forward its estimated timing of an increase from the fourth quarter, after the central bank said borrowing costs can’t be kept “too low.”

The central bank may boost the overnight policy rate by 25 basis points at the next policy meeting on March 4, followed by another 25 basis points on May 13, Citi said.

Meanwhile, CIMB Group Holdings Bhd says Malaysia’s central bank may raise interest rates “sooner than expected” following yesterday’s monetary policy statement by Bank Negara Malaysia.

The central bank’s overnight policy rate may start rising in the first half of this year from the current level of 2 per cent and reach 2.5 per cent by year-end, CIMB said. -- Bloomberg

Sometimes stock picking can really work out great.

Stock Picking 101

posted in Bricks and Mortar Business |

It’s time for fund managers to “return to their natural stock-picking tendencies,” said Citigroup chief global equity strategist Robert Buckland. “Just when the bear market (and subsequent rebound) has bullied us all into being very macro is the time when a good contrarian should be moving micro.” Over the last few years, the financial advisory business has been playing it close to the vest to protect as much of their clients’ investments as possible. They’re hesitant to move away from safe options because everyone is fearful of market fluctuations these days. However, some analysts say it’s precisely this strategy that’s holding us back. Stock picking is slowly but surely coming back into favor again, offering higher yields and better deals for people who know when to get in and when to get out.

Sometimes stock picking can really work out great. For instance, financial advisory professionals who advised their clients to put money into MacDonald’s fast food chain in 1992 are now enjoying 25% returns each year. Similarly, insightful investors who sunk $10,000 into Microsoft’s stocks back in 1986 would have earned 35,000% back on their investment over an 18-year period! So by 2004, that initial investment would have become a nice $3.5 million, which would be an ideal retirement cushion!

There are many different types of stock picking strategies. Some of the most common include

• Fundamental Analysis,
• Qualitative Analysis,
• Value Investing,
• Growth Investing,
• GARP Investing,
• Income Investing,
• CAN SLIM,
• Dogs of the Dow and
• Technical Analysis.

While there is limited space to delve deeply into these complex strategies here, more information can be found at Investopedia (www.investopedia.com/university/stockpicking/stockpicking1.asp). Even when consumers learn financial investment techniques, there is no guarantee, however. According to Investopedia: “The bottom line is that there is no one way to pick stocks. Better to think of every stock strategy as nothing more than an application of a theory; a ‘best guess’ of how to invest.”

Stock picking can be done by individuals or by professionals. Top financial advisors work to assist clients in selecting a winning stock portfolio. While these individuals are undoubtedly more experienced in watching economic market fluctuations, they are still human and ultimately fallible. One should not simply entrust an enormous sum of money with a financial advisor, without looking over the periodic statements and watching the DOW/NASDAQ activity. All investing is a gamble, so expectations should be clear when getting started. Perhaps the best advice is still “don’t put all of your eggs in one basket!”

As a leading expert in the field of anxiety disorders and panic attacks, Beth Kaminski is always on the lookout for how to end panic attacks. Visit her site for more information on her treating panic disorder and much more.

http://growthbyaction.com/bricks-and-mortar-business/2145-stock-picking-101

How to Value a Stock like Buying a Business

How to Value a Stock like Buying a Business

Major task of a right stock market investor, especially value investor, is the valuation of stocks. There are thousands of methods available to evaluate a stock or a business to identify the best in it before taking an investment decision. For an ordinary investor, valuation is not so easy as it pronounces. Most of the stock investors or emerging investors feels stock valuation required high knowledge in numerical. It is just a myth. If you study the approach and characters of world famous investors, you could find none of them have above average numerical skills to evaluate the stocks or a business to invest. Great investor Warren Buffett can be a best example on this.

There are multiple stages to get knowledge. It begins with our school and collage study. Next level is from our experiences and final level is from the life itself. These rules are highly applicable to stock investors too. There is no investor in this world that is ahead of any mistakes or errors with their selection or investments. Success of these investors totally lies on how they avoid the same mistake not happening again to them in the rest of their investing career. In this sense, mistakes are the best tools to learn real investment and reach to maximum success.

This article highly intend to ordinary investors who have basic skills and average with numerical. Of course, numerical skills required to an extent, but not to an expert level. An ordinary investor can select a right stock same like buying a new business. It is so easy to understand and simple to apply.

Suppose you are looking for a good business to buy in your locale and receives an offer from a local business owner to buy his business.

• If you don't have any interest on his business, you will certainly reject that offer.
• But if you have interest, you will proceed with further.
• Whether buying or not, you will approach him to know more about the business to understand whether it is suitable to your interest or not.
• the next step would be preparing a set of questions to ask to the present owner to identify how much this business meets your requirements.

Below are some of the important questions if I might be the person there to buy the business.

1. When did you start this business and what is your product or service?
2. How familiar and comfortable the public is, with your product or service?
3. What was the total capital employed to start this business and what is its present status?
4. How many owners or stake holders involved into this business?
5. Do you have any loans or other debts? If yes, from where and how much?
6. Who all are your immediate competitors in the area doing same business?
7. What is their market share compare with your business?
8. What is the profit you have received from the beginning year till today?
9. Does your business have any kind of legal issues or judicial cases against?
10. How qualifies and efficient your employees are?
11. What you have done to market your products or service?
12. What is the real cost associated to manufacture each product and what would be the real profit if sell the same?
13. Why do you want to sell the business now?

Of course the above are 13 simple questions anyone can easily ask to a business owner who presently want to sell his business to you. it is not highly complicated questions or not required much efforts to prepared. Only common sense required to ask these questions because each of the answers to these questions either makes you close to buy the business or take away from the buying decisions. Another truth is, you will get answers to these questions. But it is your duty to confirm the received information are true. Slightly complicated areas like profit and spending areas that can cover using your average numerical skills.

If you are a real buyer, what would you do after getting answers to all these questions? You may buy or may not buy. Why? there would be some solid information about the company that may support your decision or take away from the decisions. If you are able to identify the same easily, then why don't apply the same skills to evaluate a stock or business to invest. It is so easy isn't it?

Answers to the above questions pointing its fingers to some of the best information about the company as follows:

• First question points its finger to the reputation of the company. How old it is and how established it is in the market.
• Second question is to understand how popular the product or services to the people or markets.
• Third is to get information about its total worth or assets.
• Fourth, information of its stake holders and how much each of them holding.
• Fifth, is the company suffering from debt or has any debt that is unmanageable.
• Sixth gives information about the competitors.
• Seventh is to understand the monopolistic position of the company.
• Eighth, year to year profit growth and thus earnings growth.
• Ninth, understand legal issues against companies that may lead to shutdown or lead to bankruptcy.
• Tenth is to the managerial efficiency of the company and work force capacity.
• Eleventh, company network information to promote the product.

Next, identifying the capability of surviving bad situations like economic recessions and related business bottlenecks and finally, understanding any critical possible situations that may drag the company out business or total loss.

I still wonder, why don't people able to pick right stocks or businesses to invest by asking these questions against them? It is so easy to identify if one spend little time to research. All the information about these questions are easily available from the company websites or stock exchange sites where companies filing their information. Along with collecting such highly useful information, add little commonsense to confirm the suitability of a stock or business for you to invest.

In this article, I have given an idea to only identify the stock. There are various article available in the data base of this blog to give you knowledge to understand the right time to buy or sell. I have simplified the buying information of a business with number of articles and you can easily collect them by clicking on the label named 'investment' under this blog.

Now it is your turn. I have given an idea and shared some experience from life on that idea to make you understandable how I am picking the stocks. I have also given the idea to you to improve much better than me and take better decisions than me by using your own sense.


http://www.investinternals.com/2010/01/stock-valuation.html

Britain is out of recession at last – but are you?

Britain is out of recession at last – but are you?

While the nation’s output of goods and services grew in the final quarter of last year, according to the latest official figures, many people will be wondering whether their own finances are actually in better shape.

By Richard Evans
Published: 9:33AM GMT 26 Jan 2010


For many the answer will be no.

Recovery can bring its own problems; for a start, rising demand tends to stoke inflation, which could prompt the Bank of England to raise interest rates – good news for savers, but not something that hard-pressed home owners would welcome.

 “The danger is that, with a return to growth, Britons will underestimate the hardships of recovery,” said Stephen Barber of Selftrade, the stockbroker.

So what are the prospects for our personal finances as the economic recovery takes hold?

Tax
With Britain borrowing record amounts of money, many expect public spending cuts or tax rises – or both – as the Government attempts to balance the books. Income tax could have to rise by as much as 5p in the pound, said Mark Dampier of Hargreaves Lansdown, the asset manager.

“We have been living through a phoney war, mainly because of the electoral cycle. No political party has the heart or the courage to tell it as it really is,” he said. “So we won’t get a real Budget until after the election and this will probably be worse than the infamous 1981 Geoffrey Howe Budget. So the real war will begin probably some time in July.

“What can we expect? I strongly suspect that the big tax takers – basic-rate tax and VAT – will rise, VAT to 20pc and basic-rate tax by 2p to 5p in the pound.”

He added: “The high level of government and consumer debt makes me feel quite pessimistic. It took over 300 years for us to have £380bn worth of public debt. It has taken this government 12 years to bring it to £850bn. Reducing it will mean a huge shock to our finances – the recession is not over for most of us.”

Adrian Shandley of Premier Wealth Management said: “After the election taxes will rise and, if this is coupled with a rise in interest rates and inflation, individuals could find themselves much worse off, with higher mortgage payments, higher taxes and a lower real value of their wages.”

Interest rates and inflation
Commentators are divided on the likelihood that interest rates will rise from their current unprecedented lows. Mr Dampier said official rates were unlikely to rise this year because a tough post-election Budget “would equate to a significant interest rate rise”.

But he pointed out that you don’t need the Bank of England to put up official rates for mortgage costs to rise. Lenders are by and large able to change their standard variable rates at will, while Skipton Building Society recently abandoned a pledge to keep its SVR within three percentage points of Bank Rate.

“Money is very expensive at the moment even though base rates are at a 311-year low,” Mr Dampier said. “While for home owners with a tracker mortgage 2009 probably proved to be rather good in terms of income, I think for the consumer who has kept their job the recession is only just about to start. I believe people are going to be in for a real shock. They have got used to a standard of living that goes up every year. I expect that standard of living for the next four or five years to fall.”

Ros Altmann, a governor of the London School of Economics, said interest rates would have to start rising at some point. “They cannot possibly stay at these low levels as the economy picks up,” she said. “But I fear that the Bank of England might keep rates too low for too long. This leads to a significant risk of rising inflation – indeed inflation is already well above the official target – and once inflation takes hold it may not be easy to bring it back under control.”

Higher interest rates might seem like good news for savers, who would finally see better returns on their money, she said. But if inflation rose faster than interest rates, pensioners’ and savers’ incomes would not keep up with increasing household bills. “Rising rates also means higher mortgage rates, which will put further pressure on many households’ incomes.”

Vicky Redwood of Capital Economics, the consultancy, said rises in interest rates looked unlikely. “So at least mortgage costs should stay low. But house prices still look overvalued and could start to fall again, leaving more households in negative equity,” she added.

Investments
While you would expect the end of a recession to be good news for the stock market, it’s worth bearing in mind that markets generally look ahead, so much of the good news will already be “in the price”. So instead of simply expecting the FTSE100 to soar, investors may have to be selective if they want to profit, experts say.

“A return to growth does not mean a return to pre-credit crunch investment strategies,” Mr Barber said. “Investors would do well to build portfolios which are both defensive and which take advantage of the new opportunities in Britain and across the world.”

Mr Dampier agreed, saying: “I think it becomes a real stock picker’s market. There are some areas of the stock market – high yielding defensives and special situations – which I think could blossom through a difficult time in the economy. But the general indices may well tread water.”

Bond investors may have to be more careful, Ms Altmann warned. “As the Bank of England begins to unwind its policy of quantitative easing, it will have to try to sell gilts. This will push bond yields up and prices down. Bond investors would lose money, while rising yields could also unsettle the stock market later on.”

Jobs
An immediate improvement in employment prospects is unlikely, experts say. Ms Redwood said: “Jobs will remain hard to find, with employers likely to remain nervous about hiring when the economic recovery is still sluggish. In fact, we expect unemployment to start rising again and it could even reach 3m.

“Even if employment holds up, that is only likely to be because firms are controlling costs by cutting or freezing pay instead. For many people, it will still feel very much like a recession.”

Ms Altmann agreed. She said: “Companies will not suddenly rush to recruit new staff until they are more confident that the recovery will last, so unemployment is likely to stay high and pay will not increase much if at all for most of us.”

Household bills
There is further bad news for consumers when it comes to council tax and household energy bills. “We can expect council tax to rise further as we are paying for the public sector pensions,” Mr Dampier said. “Utility bills will continue to rise, not only because of rises in commodity prices but also because of environmental taxes.”

http://www.telegraph.co.uk/finance/personalfinance/consumertips/7077807/Britain-is-out-of-recession-at-last---but-are-you.html?utm_source=tmg&utm_medium=TD_rec&utm_campaign=pf2701am

Forget bubble fears

Questor share tips: forget bubble fears, Templeton Emerging Markets remains a buy

Questors does not believe emerging markets have quite become a bubble yet and recommends buying Templeton Emerging Markets.

Published: 5:30AM GMT 26 Jan 2010

Are emerging markets in a bubble or not? This is the debate that has been raging for a couple of months now. Although there is the chance that a bubble may emerge, Questor feels we are not there yet – and Citigroup agrees.

“Asset price gains in emerging markets have been particularly strong recently, although we’re not convinced that it’s right to talk about bubbles just yet,” according to economist David Lubin. “There is little to suggest that the price appreciation we’ve seen in emerging equity markets exhibits the kind of characteristics seen in previous equity market bubbles,” he added

However, this does not mean it is all plain sailing. By their nature, emerging markets are volatile and risky. There is a valuation risk once stimulus packages are withdrawn later this year.

Valuations are also likely to be supported by a wave of money as investors continue to releverage into risk positions. Some commentators have suggested selling part of their holdings and running with the rest of the investment. This is a perfect strategy for cautious investors.

However, for now Questor is comfortable maintaining a buy stance on Templeton Emerging Markets Investment Trust, which was recommended on January 5 last year and is up 78pc compared with a market up 16pc.

As of January 22 the funds net asset value stood at 542.97p.


http://www.telegraph.co.uk/finance/newsbysector/epic/tem/7073100/Questor-share-tips--forget-bubble-fears-Templeton-Emerging-Markets-remains-a-buy.html

Buy and Hold vs. Market Timing: Some personal observations

Short term traders do not hold their stocks for too long.  They often take their profit.  They then plough them back into another new trade when they perceive the upside is better than the downside.  They are not the buy and hold types.  To them, rightly so, buy and hold is a very dangerous strategy, especially so too if they are not picking carefully the stocks they trade in.   Short term trends are totally unpredictable.  They react to graphs depicting volumes and prices; searching for and attributing meanings to these.

When the market is on the uptrend, everyone benefits.  Postings were similarly optimistic.  "Why I like stock XXX?"  "Why I like stock XYZ, very much?"... Blah. Blah. Blah.   Now that the market has shown some volatilites and uncertainties, the postings turned pessimistic.  "Beware the black swan..."  Blah. Blah. Blah.  Such thinking is typical of a market timer. 

Yet, the reality is:  No one can predict the market with any certainty.  If he can, he will own the world.  But one should invest with some knowledge of the probabilities of likely outcomes. Even more importantly, is knowing the consequences arising from these probabilities, however unlikely these maybe.  Nassim Taleb is right to point these "fatal downsides" of unintelligent or emotional investing in his two classic books.

Let me share with you a "well known' secret.  Do you know that the richest persons  in the world are all mostly "buy and hold" type investors?  Look at the KLSE bourse.  Who owns the major wealth in the KLSE?  Lee family of KLK, Lim family of Genting, Yeoh family of YTL, Teh family of PBB, Lim family of TopGlove, Lee family of IOI, .......  They are the major shareholders of the good quality successful companies.  Do they buy and sell their shares in their companies regularly?  Do they make more of their money from trading their shares or from holding onto their shares over a very very long period?

Buy and hold is safe.  It is very safe for those with a long term investing horizon.  However, there is one provision:  You need to be in the right stock.  You will need to be a stock-picker.  Pick the good quality successful companies and you will have few reasons to sell them. 

Buy and hold is certainly very safe for selected stocks.  Do not react emotionally to price volatilities.  Price volatility is your friend to be taken advantage of:  giving you the opportunity to buy these companies at a bargain and to sell them if they are overpriced.  Often, the price is correct and fair, and you need not do anything.   For the super-rich whose wealth are locked in a "buy and hold" mode for umpteen years in their good quality successful companies, this strategy has benefitted them immensely.  If they can grow rich, so can you.  After all, you can be a co-owner in their companies.  Think about this and you may wish to follow them too, buying into their companies at fair or bargain prices.  For this, you will need to be rewired appropriately.