4 Ingredients for Beating THIS Market By Steve Reitmeister
I know you don't want to hear this. But 2014 is playing out just as it should. Meaning that the big money from this 5 year bull market has already been made and valuations are fully engorged. Gladly, there is not much fear of a bear market either as economic data remains positive.
When you add it all up, it says the bull market is still on. Just that the pace of gains is slowing down to the 5-10% per year range.
I can appreciate why that doesn't get your heart racing. But compared to the unspectacular returns for cash, bonds, precious metals and real estate, it is a pretty fair shake.
So best that you keep throwing your hat in the stock market ring. And best that you look for the right ingredients in your stock to generate even more attractive returns. Below I share with you the 4 essential ingredients at this time.
Ingredient #1: Value
In March, April and early May investors squeezed the excess premium from overpriced glamour stocks such as:
• Tesla's engine sputtered by 30%. • Yelp cried for help falling nearly 50%. • FireEye got lit up for a 74% scorching.
This was actually a healthy sign as it says investors would not stand for these excesses any longer. Quite simply it was a call for value.
Note that I am from the camp that believes value investing always makes sense. Yet now there is a much more severe punishment awaiting those who miss that memo.
More...
Ingredient #2: Positive Estimate Revisions
You knew that I was going to say this as it is the power behind the Zacks Rank and its 26% average annual return. Let's speed up the discussion and simply say that positive estimate revisions give you an edge in every market environment. That's because these are the companies with the healthiest growth prospects, which is a beacon signaling investors towards the shares.
Ingredient #3: Dividend Income
If the market is only going to provide capital gains of 5-10% per year, then getting a 2-4% dividend yield on top makes a BIG difference. I am not saying that every pick in your portfolio needs to supply dividend income. Rather, take a look at your total portfolio and make sure you have enough positions that supply this edge.
WARNING: There is still some risk that bond rates will continue to rise as QE goes away and the economy heats up. This will be bad news for stocks whose ONLY attractive quality is a big dividend check. Make sure you go the growth and income route for your picks as not to be overly harmed by this potential outcome.
Ingredient #4: Dash of Market Timing
Market timing was a route to failure in 2013 as stocks just went up, up and up. 2014 is marked by more range bound trading, which gives market timers a good chance to squeeze out extra gains.
As stocks break to new highs, then take some profits off the table. Even consider a small ETF short position or VIX play to profit from a likely market pullback. Then ratchet back up to 100% long for the next leg higher.
If you don't have a good track record with market timing, then either just stay long until there is reason to be concerned about a forthcoming bear market.
Source: Zacks
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Investment Strategies 03 (Jul 13 - Mar 19)
Re: Investment Strategies 03 (Jul 13 - Dec 14)
by winston » Sat Jun 21, 2014 6:25 pm
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies 03 (Jul 13 - Dec 14)
by winston » Mon Jul 14, 2014 6:15 am
The Four Best Ways to Beat the Market
by Alexander Green
Source: Investment U
http://www.investmentu.com/article/deta ... 8MCrkDhu1c
by Alexander Green
Source: Investment U
http://www.investmentu.com/article/deta ... 8MCrkDhu1c
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies 03 (Jul 13 - Dec 14)
by winston » Thu Jul 17, 2014 7:50 pm
Learn to Appreciate a Good Crisis
Today's DailyWealth details one of the world's best investment strategies…
It's a strategy used by elite investors like Warren Buffett and Jim Rogers to buy extremely cheap assets.
This strategy involves taking an unconventional way of looking at world events. And once you adopt this mindset, it will put you ahead of 99% of your fellow investors. In the interview below, S&A Editor in Chief Brian Hunt discusses why you should…
S&A: You say master investors and traders are often marked by their unconventional views of crisis situations.
Can you describe these views… and why they are part of master investors' mindsets?
Hunt: Sure. I believe a trait great traders and investors almost always possess is the ability to appreciate a good crisis.
A great investor sees crisis situations for what they usually are… which are tremendous opportunities. They are opportunities to buy assets at cheap, depressed prices… and then earn large gains later.
When a great investor reads a headline like "European stock markets crash" or "Offshore drilling stocks plummet in wake of Gulf of Mexico oil spill," he perks up. He starts wondering if the crisis has created investment bargains.
Most investors don't realize this, but a crisis situation is one of the few times you'll ever get to buy assets for bargain prices. A crisis creates panic. When people panic, they dump stocks and bonds and commodities with little regard to their real values. They just sell first and ask questions later.
This air of irrationality creates irrational asset prices. If you can keep your head, you can take advantage of the irrationality and buy assets on the cheap. This leads to huge gains down the road.
Great investors run toward a crisis. Amateur investors run away from a crisis.
S&A: Discuss the amateur mindset.
Hunt: The amateur investor – the guy who always struggles in the market – sees crisis situations much, much differently than the master.
He'll read those same headlines: "European stock markets crash" and "Offshore drilling stocks plummet in wake of Gulf of Mexico oil spill," and think to himself, "Wow… that news is bad. I'm glad I don't own those stocks."
Of course, if he is an owner of those stocks, he panics and sells them. He reacts to the news… not the values.
The amateur investor is almost always focused on buying whatever the most popular story is at the time. He's focused on doing what everyone else is doing. He seeks the comfort of the crowd. You can't blame him. Huddling with the crowd is how humans survived 50,000 years ago. You were either part of the tribe or you would die. But in the investment market, it's a recipe for disaster.
Seeking the comfort of the crowd… buying what's popular… buying what is enjoying rosy headlines leads people to buy expensive, overpriced assets.
The master doesn't like to buy overpriced assets. He prefers to buy bargains.
S&A: What are some examples of a crisis creating trading and investing opportunities?
Hunt: The Gulf of Mexico oil spill during the summer of 2010 is a good example.
That oil spill was one of the worst accidents in the history of the American oil business. It released huge amounts of oil into the ocean. The early efforts to cap the well failed, which made the crisis drag on and on. It was on the news all day, every day for over a week.
In response, offshore drilling stocks of all kinds were crushed. Even good companies that had nothing to do with the oil spill fell more than 33%. Transocean, the company involved in the accident, fell about 50%.
Good drilling businesses were sold down to valuations of around five times earnings. That's a cheap price for them… and it was created by the crisis.
After the selloff, I went long offshore drilling stocks and made a big return in a short amount of time. Most of the offshore drillers rebounded at least 25% in just a few months.
Another example is the European debt crisis of 2012. Back then, everyone was worried that the European banks would explode. They were worried governments would default on their debts. They were worried about a European depression. It was all over the news constantly.
In response, European stock markets crashed. Spain's version of the Dow Jones Industrial Average fell from 8,500 to 6,000 in just a few months. That's a 29% crash. Most other European stock markets crashed as well.
If an investor stepped in amidst all that crisis and pessimism and bought European stocks, he made great returns over the next year. The Spanish stock market gained 66% off its bottom in just 15 months. The Greek stock market doubled off its bottom in less than a year.
A crisis much bigger than the 2012 European crisis was the 1998 Russian debt crisis. Back then, people thought Russia itself was going to implode. The government defaulted on its debt and the currency collapsed. The Russian stock market hit a low in late 1998. Ten years later, it had gained over 6,000%. That's a six with a thousand after it.
Investing during a crisis can produce truly spectacular returns.
S&A: How about the U.S. credit crisis of 2008? That's what comes to mind when most people hear crisis.
Hunt: The wake of the 2008 credit crisis was a fantastic time to invest and trade.
This period was marked by the bankruptcy of Lehman Brothers, which was the largest corporate bankruptcy in U.S. history. The housing market crashed. The stock market fell 39% in 2008, which was its worst year since the Great Depression. We were on the verge of a global economic meltdown.
But the world has a funny way of not ending. It turned out that late 2008 and early 2009 was a great time to buy elite businesses like Apple, Altria, and Starbucks. Apple tripled in value off its 2009 bottom in less than two years. Altria doubled off its bottom in about two years. Starbucks more than tripled in value off its bottom in about two years.
Commercial real estate, as measured by the large commercial investment fund iShares Real Estate, also more than doubled off its bottom in just two years. One of the top mining firms in the world, Freeport-McMoRan, more than tripled off its bottom.
All those assets were deeply depressed because of the mass selling… because of the pessimism. The crisis created bargains. Everything was so depressed and cheap that it was like a coiled spring. When a bit of optimism returned to the market, everything soared.
Keep in mind, when things are truly bad, you don't need them to get "good" in order to make a lot of money quickly. As my friend and colleague Steve Sjuggerud often points out, you make the big money as things go from "bad to less bad."
The greatest trader ever, George Soros, has a good quote about this… or at least it is attributed to him. He said, "The worse a situation becomes, the less it takes to turn it around, and the bigger the upside."
That's a great way to sum up crisis trading. When things are truly bad… and assets are truly cheap… just a tiny bit of optimism can produce giant investment gains.
S&A: Can this apply to individual companies?
Hunt: Absolutely. You can use a crisis to get a good deal on an individual company as well. Warren Buffett is one of the world's greatest practitioners of buying in times of crisis. He comes off as a grandfatherly "aw, shucks" type of guy, but he's a stone-cold crisis hunter.
In 1964, he made a hugely successful investment in American Express after it was rocked by a crisis. American Express had extended loans to a company that was busted for falsifying documents. Its share price fell nearly 50%. Afterwards, Buffett bought the stock. He ended up making a fortune and owning more than 10% of one of the all-time greatest American businesses.
Buffett was also a very active buyer and lender during the 2008 credit crisis. He made a handful of spectacular investments during that time.
Buffett is famous for saying that he likes to invest in great companies that have been hit by a one-time huge, but solvable problem. In other words, he looks to buy great companies after a crisis.
S&A: It's obvious that you can earn big returns buying after a crisis. But it's very hard for people to take action.
Hunt: Yes. It is hard when you are starting out. As I mentioned, humans are hardwired to seek the safety of crowds. Fifty thousand years ago, it's how we survived.
But when it comes to investing and trading, you won't succeed doing what everyone else is doing. And during a crisis, almost everyone panics and sells. You must fight the natural instinct to run away from the crisis… and instead runs toward it.
It's like any useful skill. You have to practice. After enough practice, it will get easier… and then it will become an automatic response.
When you're starting out, you can lean on the wisdom of investment masters like Warren Buffett and Nathan Rothschild. One of the best things Buffett ever said about how to succeed as an investor was, "You want to be greedy when others are fearful, and fearful when others are greedy." You also have legendary financier Nathan Rothschild's recommendation: "Buy when there is blood in the streets."
To develop a useful crisis mindset, try this. The next time you read awful headlines about an individual country or a stock market sector, go into the market and buy a very small position in the beaten-up assets. Buy $500 worth of stock.
You'll feel funny doing it. You might get a bad feeling in your stomach. That's actually a good sign that you're doing the right thing. After you do it enough… and make 50% or 100% in a year a few times, you'll develop an appreciation for a good crisis.
S&A: Okay… let's say I buy after a crisis. What are the risks?
Hunt: The biggest risk is that the crisis turns into a long-lasting crisis. For example, a quick military flare up between two countries could turn into a full-blown war. A country's stock crash could turn into a bear market that lasts a long, long time.
That's why it pays to do a lot of research on what you are considering buying. You need to make sure you're buying quality businesses at good values. For example, if a sector experiences a crisis, I simply try to buy the best business in that sector.
You also need to employ risk-limiting techniques like position sizing, which is the part of your trading strategy that tells you how much of a position to buy. You don't want to take a position so large that you get really hurt if you are wrong. You can also set a stop loss on your position, which is a predetermined point at which you will sell if the price moves against you.
S&A: Makes sense. Any parting thoughts?
Hunt: One last thing. I know it may sound heartless to talk about a crisis like this. I don't root for people to lose their jobs or suffer through bad times. But crisis situations are part of life. It's how the world works. I didn't write the rules. I just play by them. And it happens that crisis situations often produce excellent trading and investing opportunities.
Source: Daily Wealth
Today's DailyWealth details one of the world's best investment strategies…
It's a strategy used by elite investors like Warren Buffett and Jim Rogers to buy extremely cheap assets.
This strategy involves taking an unconventional way of looking at world events. And once you adopt this mindset, it will put you ahead of 99% of your fellow investors. In the interview below, S&A Editor in Chief Brian Hunt discusses why you should…
S&A: You say master investors and traders are often marked by their unconventional views of crisis situations.
Can you describe these views… and why they are part of master investors' mindsets?
Hunt: Sure. I believe a trait great traders and investors almost always possess is the ability to appreciate a good crisis.
A great investor sees crisis situations for what they usually are… which are tremendous opportunities. They are opportunities to buy assets at cheap, depressed prices… and then earn large gains later.
When a great investor reads a headline like "European stock markets crash" or "Offshore drilling stocks plummet in wake of Gulf of Mexico oil spill," he perks up. He starts wondering if the crisis has created investment bargains.
Most investors don't realize this, but a crisis situation is one of the few times you'll ever get to buy assets for bargain prices. A crisis creates panic. When people panic, they dump stocks and bonds and commodities with little regard to their real values. They just sell first and ask questions later.
This air of irrationality creates irrational asset prices. If you can keep your head, you can take advantage of the irrationality and buy assets on the cheap. This leads to huge gains down the road.
Great investors run toward a crisis. Amateur investors run away from a crisis.
S&A: Discuss the amateur mindset.
Hunt: The amateur investor – the guy who always struggles in the market – sees crisis situations much, much differently than the master.
He'll read those same headlines: "European stock markets crash" and "Offshore drilling stocks plummet in wake of Gulf of Mexico oil spill," and think to himself, "Wow… that news is bad. I'm glad I don't own those stocks."
Of course, if he is an owner of those stocks, he panics and sells them. He reacts to the news… not the values.
The amateur investor is almost always focused on buying whatever the most popular story is at the time. He's focused on doing what everyone else is doing. He seeks the comfort of the crowd. You can't blame him. Huddling with the crowd is how humans survived 50,000 years ago. You were either part of the tribe or you would die. But in the investment market, it's a recipe for disaster.
Seeking the comfort of the crowd… buying what's popular… buying what is enjoying rosy headlines leads people to buy expensive, overpriced assets.
The master doesn't like to buy overpriced assets. He prefers to buy bargains.
S&A: What are some examples of a crisis creating trading and investing opportunities?
Hunt: The Gulf of Mexico oil spill during the summer of 2010 is a good example.
That oil spill was one of the worst accidents in the history of the American oil business. It released huge amounts of oil into the ocean. The early efforts to cap the well failed, which made the crisis drag on and on. It was on the news all day, every day for over a week.
In response, offshore drilling stocks of all kinds were crushed. Even good companies that had nothing to do with the oil spill fell more than 33%. Transocean, the company involved in the accident, fell about 50%.
Good drilling businesses were sold down to valuations of around five times earnings. That's a cheap price for them… and it was created by the crisis.
After the selloff, I went long offshore drilling stocks and made a big return in a short amount of time. Most of the offshore drillers rebounded at least 25% in just a few months.
Another example is the European debt crisis of 2012. Back then, everyone was worried that the European banks would explode. They were worried governments would default on their debts. They were worried about a European depression. It was all over the news constantly.
In response, European stock markets crashed. Spain's version of the Dow Jones Industrial Average fell from 8,500 to 6,000 in just a few months. That's a 29% crash. Most other European stock markets crashed as well.
If an investor stepped in amidst all that crisis and pessimism and bought European stocks, he made great returns over the next year. The Spanish stock market gained 66% off its bottom in just 15 months. The Greek stock market doubled off its bottom in less than a year.
A crisis much bigger than the 2012 European crisis was the 1998 Russian debt crisis. Back then, people thought Russia itself was going to implode. The government defaulted on its debt and the currency collapsed. The Russian stock market hit a low in late 1998. Ten years later, it had gained over 6,000%. That's a six with a thousand after it.
Investing during a crisis can produce truly spectacular returns.
S&A: How about the U.S. credit crisis of 2008? That's what comes to mind when most people hear crisis.
Hunt: The wake of the 2008 credit crisis was a fantastic time to invest and trade.
This period was marked by the bankruptcy of Lehman Brothers, which was the largest corporate bankruptcy in U.S. history. The housing market crashed. The stock market fell 39% in 2008, which was its worst year since the Great Depression. We were on the verge of a global economic meltdown.
But the world has a funny way of not ending. It turned out that late 2008 and early 2009 was a great time to buy elite businesses like Apple, Altria, and Starbucks. Apple tripled in value off its 2009 bottom in less than two years. Altria doubled off its bottom in about two years. Starbucks more than tripled in value off its bottom in about two years.
Commercial real estate, as measured by the large commercial investment fund iShares Real Estate, also more than doubled off its bottom in just two years. One of the top mining firms in the world, Freeport-McMoRan, more than tripled off its bottom.
All those assets were deeply depressed because of the mass selling… because of the pessimism. The crisis created bargains. Everything was so depressed and cheap that it was like a coiled spring. When a bit of optimism returned to the market, everything soared.
Keep in mind, when things are truly bad, you don't need them to get "good" in order to make a lot of money quickly. As my friend and colleague Steve Sjuggerud often points out, you make the big money as things go from "bad to less bad."
The greatest trader ever, George Soros, has a good quote about this… or at least it is attributed to him. He said, "The worse a situation becomes, the less it takes to turn it around, and the bigger the upside."
That's a great way to sum up crisis trading. When things are truly bad… and assets are truly cheap… just a tiny bit of optimism can produce giant investment gains.
S&A: Can this apply to individual companies?
Hunt: Absolutely. You can use a crisis to get a good deal on an individual company as well. Warren Buffett is one of the world's greatest practitioners of buying in times of crisis. He comes off as a grandfatherly "aw, shucks" type of guy, but he's a stone-cold crisis hunter.
In 1964, he made a hugely successful investment in American Express after it was rocked by a crisis. American Express had extended loans to a company that was busted for falsifying documents. Its share price fell nearly 50%. Afterwards, Buffett bought the stock. He ended up making a fortune and owning more than 10% of one of the all-time greatest American businesses.
Buffett was also a very active buyer and lender during the 2008 credit crisis. He made a handful of spectacular investments during that time.
Buffett is famous for saying that he likes to invest in great companies that have been hit by a one-time huge, but solvable problem. In other words, he looks to buy great companies after a crisis.
S&A: It's obvious that you can earn big returns buying after a crisis. But it's very hard for people to take action.
Hunt: Yes. It is hard when you are starting out. As I mentioned, humans are hardwired to seek the safety of crowds. Fifty thousand years ago, it's how we survived.
But when it comes to investing and trading, you won't succeed doing what everyone else is doing. And during a crisis, almost everyone panics and sells. You must fight the natural instinct to run away from the crisis… and instead runs toward it.
It's like any useful skill. You have to practice. After enough practice, it will get easier… and then it will become an automatic response.
When you're starting out, you can lean on the wisdom of investment masters like Warren Buffett and Nathan Rothschild. One of the best things Buffett ever said about how to succeed as an investor was, "You want to be greedy when others are fearful, and fearful when others are greedy." You also have legendary financier Nathan Rothschild's recommendation: "Buy when there is blood in the streets."
To develop a useful crisis mindset, try this. The next time you read awful headlines about an individual country or a stock market sector, go into the market and buy a very small position in the beaten-up assets. Buy $500 worth of stock.
You'll feel funny doing it. You might get a bad feeling in your stomach. That's actually a good sign that you're doing the right thing. After you do it enough… and make 50% or 100% in a year a few times, you'll develop an appreciation for a good crisis.
S&A: Okay… let's say I buy after a crisis. What are the risks?
Hunt: The biggest risk is that the crisis turns into a long-lasting crisis. For example, a quick military flare up between two countries could turn into a full-blown war. A country's stock crash could turn into a bear market that lasts a long, long time.
That's why it pays to do a lot of research on what you are considering buying. You need to make sure you're buying quality businesses at good values. For example, if a sector experiences a crisis, I simply try to buy the best business in that sector.
You also need to employ risk-limiting techniques like position sizing, which is the part of your trading strategy that tells you how much of a position to buy. You don't want to take a position so large that you get really hurt if you are wrong. You can also set a stop loss on your position, which is a predetermined point at which you will sell if the price moves against you.
S&A: Makes sense. Any parting thoughts?
Hunt: One last thing. I know it may sound heartless to talk about a crisis like this. I don't root for people to lose their jobs or suffer through bad times. But crisis situations are part of life. It's how the world works. I didn't write the rules. I just play by them. And it happens that crisis situations often produce excellent trading and investing opportunities.
Source: Daily Wealth
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies 03 (Jul 13 - Dec 14)
by winston » Wed Jul 30, 2014 6:40 am
Jim Rogers and Warren Buffett agree… This is the best way to manage your money
by Dan Ferris
Source: Extreme Value
http://thecrux.com/warren-buffett-and-j ... mplicated/
by Dan Ferris
Source: Extreme Value
http://thecrux.com/warren-buffett-and-j ... mplicated/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies 03 (Jul 13 - Dec 14)
by winston » Tue Aug 26, 2014 7:41 am
The Science Of Beating The Markets
By Kevin Matras
Source: Zacks Investment Research
http://www.thetradingreport.com/2014/08 ... e-markets/
By Kevin Matras
Source: Zacks Investment Research
http://www.thetradingreport.com/2014/08 ... e-markets/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies 03 (Jul 13 - Dec 14)
by winston » Thu Sep 04, 2014 6:58 pm
Beat 85% of Investors with These Steps
By Sid Riggs
Source: Money Morning
http://moneymorning.com/2014/08/29/beat ... dium=email
By Sid Riggs
Source: Money Morning
http://moneymorning.com/2014/08/29/beat ... dium=email
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies 03 (Jul 13 - Dec 14)
by winston » Wed Sep 10, 2014 6:43 am
They are the greatest investors you've never heard of. And this is their No. 1 lesson.
by Porter Stansberry
Source: Stansberry & Associates
http://thecrux.com/they-are-the-greates ... -1-lesson/
by Porter Stansberry
Source: Stansberry & Associates
http://thecrux.com/they-are-the-greates ... -1-lesson/
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies 03 (Jul 13 - Dec 14)
by winston » Fri Sep 12, 2014 7:46 pm
The 'World Dominator' Triumph: More Return Without More Risk By Dan Ferris
The results are in…
If you want a low-risk way to make big returns in stocks, buy great business at good prices. Buy "World Dominators."
For the past eight years, I've told my readers (and anyone else who would listen) to buy World Dominator stocks.
World Dominator stocks are the biggest, best businesses in the world. They gush free cash flow, and have strong balance sheets and durable competitive advantages. They pay the world's safest dividends. When you think of World Dominators, think of businesses like Coca-Cola, ExxonMobil, Intel, and Wal-Mart.
Owning these businesses allows you to do something you're not supposed to be able to do. They allow you to beat the market with less risk…
Several months ago, my research partner Mike Barrett created a spreadsheet containing the performance of each World Dominator stock we've recommended, assuming an initial investment of $5,000 per stock.
To compare the results with the overall market, Mike also assumed an equal $5,000 investment in the S&P 500 at the time of each new World Dominator recommendation.
We've recommended a total of 18 World Dominators. So Mike's model assumed 18 x $5,000 = $90,000 invested in World Dominators and $90,000 invested in the S&P 500 on the same day as each new recommendation.
Through the end of last year, the World Dominator portfolio would have been worth $149,232 (excluding trading costs), an increase of 66%. The S&P 500 portfolio would have been worth $127,965, an increase of 42%.
To measure the risk of World Dominators versus the S&P 500, we'll use "beta." Beta doesn't technically measure risk. It just measures the size of a stock's "wiggles" compared with the S&P 500's.
For example, a beta of 1.0 means a stock's price wiggles the same amount as the S&P 500. A beta of 1.5 means it wiggles 50% higher and lower than the S&P 500. A 0.5 beta means a stock wiggles half as much as the market. Most investors hate it when stock prices wiggle around too much, soaring up only to plunge back. Our 18 World Dominators had an average beta of 1.03, just 3% more stock-price wiggle than if you had invested in the overall market, perhaps through an S&P 500 index fund.
World Dominators earned a 57% higher return than the S&P 500. And as measured by beta, they required you take just 3% more risk.
Based on experience, I believe World Dominators are LESS risky than the overall market, not more (as indicated by beta). Think about it… The S&P 500 has 500 stocks in it. We picked just 18 stocks and achieved nearly the same beta… with a much higher return.
This is the triumph of World Dominator stocks. Real investors who followed our advice and put real money into World Dominators trounced the overall market. And they did it without taking more risk.
Finance professors, advisors, and most brokers will tell you that to get market-beating returns, you have to take more risk. That's not true at all… and the triumph of World Dominators proves it. When you buy the world's best businesses at good prices, you get big returns… without taking big risks.
Source: Daily Wealth
The results are in…
If you want a low-risk way to make big returns in stocks, buy great business at good prices. Buy "World Dominators."
For the past eight years, I've told my readers (and anyone else who would listen) to buy World Dominator stocks.
World Dominator stocks are the biggest, best businesses in the world. They gush free cash flow, and have strong balance sheets and durable competitive advantages. They pay the world's safest dividends. When you think of World Dominators, think of businesses like Coca-Cola, ExxonMobil, Intel, and Wal-Mart.
Owning these businesses allows you to do something you're not supposed to be able to do. They allow you to beat the market with less risk…
Several months ago, my research partner Mike Barrett created a spreadsheet containing the performance of each World Dominator stock we've recommended, assuming an initial investment of $5,000 per stock.
To compare the results with the overall market, Mike also assumed an equal $5,000 investment in the S&P 500 at the time of each new World Dominator recommendation.
We've recommended a total of 18 World Dominators. So Mike's model assumed 18 x $5,000 = $90,000 invested in World Dominators and $90,000 invested in the S&P 500 on the same day as each new recommendation.
Through the end of last year, the World Dominator portfolio would have been worth $149,232 (excluding trading costs), an increase of 66%. The S&P 500 portfolio would have been worth $127,965, an increase of 42%.
To measure the risk of World Dominators versus the S&P 500, we'll use "beta." Beta doesn't technically measure risk. It just measures the size of a stock's "wiggles" compared with the S&P 500's.
For example, a beta of 1.0 means a stock's price wiggles the same amount as the S&P 500. A beta of 1.5 means it wiggles 50% higher and lower than the S&P 500. A 0.5 beta means a stock wiggles half as much as the market. Most investors hate it when stock prices wiggle around too much, soaring up only to plunge back. Our 18 World Dominators had an average beta of 1.03, just 3% more stock-price wiggle than if you had invested in the overall market, perhaps through an S&P 500 index fund.
World Dominators earned a 57% higher return than the S&P 500. And as measured by beta, they required you take just 3% more risk.
Based on experience, I believe World Dominators are LESS risky than the overall market, not more (as indicated by beta). Think about it… The S&P 500 has 500 stocks in it. We picked just 18 stocks and achieved nearly the same beta… with a much higher return.
This is the triumph of World Dominator stocks. Real investors who followed our advice and put real money into World Dominators trounced the overall market. And they did it without taking more risk.
Finance professors, advisors, and most brokers will tell you that to get market-beating returns, you have to take more risk. That's not true at all… and the triumph of World Dominators proves it. When you buy the world's best businesses at good prices, you get big returns… without taking big risks.
Source: Daily Wealth
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
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winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies 03 (Jul 13 - Dec 14)
by winston » Mon Sep 15, 2014 8:20 pm
Three Charts Every Trader Should See Now By Amber Lee Mason
It's one of the biggest disputes in the market…
Folks who do fundamental analysis figure folks who do technical analysis might as well use tea leaves to make investing decisions. Folks who do technical analysis point out the fundamental analysts can be right about a company's value… and still lose huge amounts of money.
Then there's sentiment analysis: Die-hards in both camps call it too "touchy feely."
Me? I don't take sides.
I like to say we're "mercenaries" in my trading service, DailyWealth Trader. We go wherever the market will pay us. And when I'm looking for a good trade, I use all three types of analysis. They all have something to offer…
• Technical analysis is the study of past market prices and trading volume. It will keep you trading with the market, rather than against it.
• Fundamental analysis is the study of business quality and value. It will help you pinpoint great businesses at great prices… and avoid bad businesses at inflated prices.
• Sentiment analysis is the study of the opinions of market participants. You can use it to make sure you're not standing with the crowd just as it's about to get dumped overboard.
Today, I'm going to show you how the market looks through all three "lenses"… and how that's dictating our trading strategy.
If you're a longtime Growth Stock Wire reader, you're familiar with Jeff Clark's brand of technical analysis. Jeff looks at lots of different indicators that can give readers an idea of what to expect from a market, sector, or stock… And he draws on more than three decades of experience to guide his views.
But when you look at a long-term chart of the benchmark S&P 500 Index, it couldn't be simpler.
It's in an uptrend – a series of higher highs and higher lows. As I told you last week, we mind the overall trend. With the market moving higher, most of our trades will be on the "long" side – the bullish side.
Please Enable Images to See this
On the fundamental side, there are a lot of ways to measure whether the market is trading at a good price… or an inflated price.
But one of the best-reasoned arguments I've heard comes from my colleague and mentor Steve Sjuggerud, who writes the excellent True Wealth newsletter.
At the recent S&A Conference Series event in Los Angeles, Steve explained his view… "I'm sure you've heard a lot of talk about how stocks are expensive," Steve told the audience. "But in our office, we think very rationally about this… And we think stocks are particularly cheap."
His True Wealth Value Indicator is simple… It's based on just two metrics: the price-to-earnings ratio and short-term interest rates. (You can get full details in this free essay.) And it works…
When the indicator is in "expensive" territory, the average one-year return is slightly negative (-0.2%). When the indicator is in "cheap" territory, the average one-year return is more than 12%.
And right now, stocks are well below the "expensive" line. It's still a good time to buy.
Please Enable Images to See this
What about sentiment? Again, you can find a sentiment indicator to confirm just about any belief you hold about stocks… The challenge is to find one that works without triggering a lot of "garbage" signals.
In Los Angeles, my boss Porter Stansberry introduced the S&A Complacency Composite Indicator. (The indicator was actually made by Steve's True Wealth analysts, Brett Eversole and Rick Crawford.)
It has accurately signaled seven of the nine stock market corrections over the past 25 years. And the average lead time was only five months before a substantial correction. (Of the two market corrections the indicator missed, one was after the 2002 bottom when stocks bounced off their low and then fell back near that low.)
Also, unlike many other indicators, the Complacency Composite Indicator doesn't give false signals. Of the seven times it issued a warning, all but one led to corrections of 10% or more beginning within 12 months. And the one that didn't led to an 8.4% correction.
"What the model tells us is when conditions are euphoric," Porter explained… "When the market has reached a period of unsustainable euphoria, you can bet there's going to be a correction." (You can find a list of the "ingredients" that go into the indicator in this recent issue of the S&A Digest.)
As you can see, the indicator isn't in "euphoric" territory. Investors aren't overly optimistic about the market. Bullish traders aren't standing with the crowd.
Please Enable Images to See this
In sum, the trend is in our favor… stocks aren't overly expensive… and the crowd hasn't gotten dangerously bullish. According to our three "lenses," the smart bet is on the market moving higher.
I'll be watching these indicators… and I'll let you know when they change. For now, though, we'll stick with a bullish strategy. That's where the market is paying the biggest, safest money.
Source: www.growthstockwire.com
It's one of the biggest disputes in the market…
Folks who do fundamental analysis figure folks who do technical analysis might as well use tea leaves to make investing decisions. Folks who do technical analysis point out the fundamental analysts can be right about a company's value… and still lose huge amounts of money.
Then there's sentiment analysis: Die-hards in both camps call it too "touchy feely."
Me? I don't take sides.
I like to say we're "mercenaries" in my trading service, DailyWealth Trader. We go wherever the market will pay us. And when I'm looking for a good trade, I use all three types of analysis. They all have something to offer…
• Technical analysis is the study of past market prices and trading volume. It will keep you trading with the market, rather than against it.
• Fundamental analysis is the study of business quality and value. It will help you pinpoint great businesses at great prices… and avoid bad businesses at inflated prices.
• Sentiment analysis is the study of the opinions of market participants. You can use it to make sure you're not standing with the crowd just as it's about to get dumped overboard.
Today, I'm going to show you how the market looks through all three "lenses"… and how that's dictating our trading strategy.
If you're a longtime Growth Stock Wire reader, you're familiar with Jeff Clark's brand of technical analysis. Jeff looks at lots of different indicators that can give readers an idea of what to expect from a market, sector, or stock… And he draws on more than three decades of experience to guide his views.
But when you look at a long-term chart of the benchmark S&P 500 Index, it couldn't be simpler.
It's in an uptrend – a series of higher highs and higher lows. As I told you last week, we mind the overall trend. With the market moving higher, most of our trades will be on the "long" side – the bullish side.
Please Enable Images to See this
On the fundamental side, there are a lot of ways to measure whether the market is trading at a good price… or an inflated price.
But one of the best-reasoned arguments I've heard comes from my colleague and mentor Steve Sjuggerud, who writes the excellent True Wealth newsletter.
At the recent S&A Conference Series event in Los Angeles, Steve explained his view… "I'm sure you've heard a lot of talk about how stocks are expensive," Steve told the audience. "But in our office, we think very rationally about this… And we think stocks are particularly cheap."
His True Wealth Value Indicator is simple… It's based on just two metrics: the price-to-earnings ratio and short-term interest rates. (You can get full details in this free essay.) And it works…
When the indicator is in "expensive" territory, the average one-year return is slightly negative (-0.2%). When the indicator is in "cheap" territory, the average one-year return is more than 12%.
And right now, stocks are well below the "expensive" line. It's still a good time to buy.
Please Enable Images to See this
What about sentiment? Again, you can find a sentiment indicator to confirm just about any belief you hold about stocks… The challenge is to find one that works without triggering a lot of "garbage" signals.
In Los Angeles, my boss Porter Stansberry introduced the S&A Complacency Composite Indicator. (The indicator was actually made by Steve's True Wealth analysts, Brett Eversole and Rick Crawford.)
It has accurately signaled seven of the nine stock market corrections over the past 25 years. And the average lead time was only five months before a substantial correction. (Of the two market corrections the indicator missed, one was after the 2002 bottom when stocks bounced off their low and then fell back near that low.)
Also, unlike many other indicators, the Complacency Composite Indicator doesn't give false signals. Of the seven times it issued a warning, all but one led to corrections of 10% or more beginning within 12 months. And the one that didn't led to an 8.4% correction.
"What the model tells us is when conditions are euphoric," Porter explained… "When the market has reached a period of unsustainable euphoria, you can bet there's going to be a correction." (You can find a list of the "ingredients" that go into the indicator in this recent issue of the S&A Digest.)
As you can see, the indicator isn't in "euphoric" territory. Investors aren't overly optimistic about the market. Bullish traders aren't standing with the crowd.
Please Enable Images to See this
In sum, the trend is in our favor… stocks aren't overly expensive… and the crowd hasn't gotten dangerously bullish. According to our three "lenses," the smart bet is on the market moving higher.
I'll be watching these indicators… and I'll let you know when they change. For now, though, we'll stick with a bullish strategy. That's where the market is paying the biggest, safest money.
Source: www.growthstockwire.com
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
Re: Investment Strategies 03 (Jul 13 - Dec 14)
by winston » Thu Sep 18, 2014 6:35 pm
How to Invest Your Money for the Long Haul
One of the best, most conservative places to put your money for the long-term is in shares of what Extreme Value editor Dan Ferris calls World Dominating Dividend Growers (WDDGs).
These companies are leaders in their industry. And they pay their shareholders large and increasing dividends. Specifically, you look for four things in a WDDG...
1. Consistent profit margins. This is the amount of money a company earns from each dollar of sales. A great business should have consistent profit margins, so it can pay you a consistent stream of dividends... but that company should also have a sustainable, long-term competitive advantage so it can consistently earn those profit margins.
2. Huge free cash flow. Free cash flow is the final "cash in hand" number that a business owner has after deducting expenses. It's a vital number for investors.
3. A strong balance sheet. As shareholders of a business, we want to see lots of valuable assets and low debt. We want a strong balance sheet so we don't have to worry about tough times causing a bankruptcy.
4. A history of dividend growth.
Plus, buying WDDGs is one of the best ways to beat inflation.
First, dominant companies with strong brands can raise their prices with inflation.
Second, many of these firms raise their dividends by double-digit percentages every year... So your cash payments far outpace inflation.
Source: ETR
One of the best, most conservative places to put your money for the long-term is in shares of what Extreme Value editor Dan Ferris calls World Dominating Dividend Growers (WDDGs).
These companies are leaders in their industry. And they pay their shareholders large and increasing dividends. Specifically, you look for four things in a WDDG...
1. Consistent profit margins. This is the amount of money a company earns from each dollar of sales. A great business should have consistent profit margins, so it can pay you a consistent stream of dividends... but that company should also have a sustainable, long-term competitive advantage so it can consistently earn those profit margins.
2. Huge free cash flow. Free cash flow is the final "cash in hand" number that a business owner has after deducting expenses. It's a vital number for investors.
3. A strong balance sheet. As shareholders of a business, we want to see lots of valuable assets and low debt. We want a strong balance sheet so we don't have to worry about tough times causing a bankruptcy.
4. A history of dividend growth.
Plus, buying WDDGs is one of the best ways to beat inflation.
First, dominant companies with strong brands can raise their prices with inflation.
Second, many of these firms raise their dividends by double-digit percentages every year... So your cash payments far outpace inflation.
Source: ETR
It's all about "how much you made when you were right" & "how little you lost when you were wrong"
-
winston - Billionaire Boss
- Posts: 112011
- Joined: Wed May 07, 2008 9:28 am
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