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Alcoa Slips!

WSJ:

NEW YORK (Dow Jones)–U.S. stocks opened slightly lower Tuesday as a disappointing first-quarter report from Alcoa and a wider-than-expected trade deficit dampened sentiment, pushing the Dow Jones Industrial Average back below the 11000 level.

The Dow Jones Industrial Average was down 20 points, or 0.2%, at 10986 in early trading. Alcoa was the measure’s worst performer with a drop of 2.8%. The aluminum giant reported a narrower quarterly loss and held out hopes for improvement in the year ahead, striking a positive note as the first major company out of the gate to report first-quarter earnings. But its earnings excluding items merely met analysts’ estimates while revenue came in weaker than expected. UBS cut its investment rating on the stock to neutral from buy following the report.

Intel is the next heavyweight to report, with the world’s largest chip maker slated to post its first-quarter numbers after the close of trade Tuesday. Ahead of the report, Intel edged up 0.2%, making it the Dow’s best performer.

The Nasdaq Composite slipped 0.1%. The Standard & Poor’s 500 index declined 0.2%, with the materials and energy sectors leading its decline.

Tuesday’s small drop in stocks comes after the Dow on Monday closed above 11000, something it hadn’t achieved since the financial system began teetering nearly 19 months ago. By inching past the milestone, the Dow continued what amounts to a stealth rally in a market characterized by below-average trading volume and small daily moves.

The market is now looking to see if the S&P 500 can climb above the key 1200 mark. It closed Monday at 1196.48, its highest close since Sept. 26, 2008. However, the measure appeared unlikely to reach that level Tuesday, as investors were disappointed by Alcoa’s report and data that showed the U.S. trade deficit rose more than expected in February.

The wider U.S. trade deficit came as soaring imports of consumer goods and industrial supplies outweighed the impact of oil imports falling to their lowest level in 11 years. The deficit rose 7.4% to $39.70 billion in February, higher than the $39 billion shortfall Wall Street was expecting.

High chance tomorrow Ausgroup will drop also. What a bad timing!

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Why isn’t value investing more popular?

From GuruFocus

Even though there are many extremely successful value investors, few money managers and individual investors choose to follow the value investing strategy. They don’t follow it because it doesn’t work all the time, meaning that investment returns are not positive every day, every quarter, and every year. Because it is a long-term strategy, investors do not have the discipline to stick with it even though over long periods of time, it works wonderfully. Instead, they keep searching for other strategies that work all time, or at least appear to work all the time.

Today, Wall Street is dominated with tech-savvy investors, who instead of putting in the effort to analyze individual companies based on their valuations, the quality of their management, and the strength of their competitors, use complex formulas and super-fast computers to take advantage of various market inefficiencies. Because these inefficiencies tend to be small, many times these investors use a significant amount of leverage to magnify their investment results. The positive aspect of their strategy is that it seems to work most of the time, which is why it gained popularity. However, during the times that it doesn’t work, even if it is only less than one percent of the time, it completely collapses. It is equivalent to playing Russian roulette with a 100-bullet revolver with only one bullet loaded. Every time you pull the trigger and it doesn’t kill you, you make lots of money. However, the one time that you are unlucky and get the bullet, you are dead. With these kinds of odds, would you want to play this game? I wouldn’t, but this is exactly how some of the “brightest” minds on Wall Street manage money. In his book, The Quants, Scott Patterson of the Wall Street Journal, argues that a swashbuckling breed of mathematicians and computer scientists nearly destroyed Wall Street and are behind the financial meltdown.

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Recent counters that had a darn good run is HL Asia and Z-Obee. Both are featured in NextInsight. And both are based on value investing, which is why I’m giving this philosophy a higher credit. The problem always is how are you going to do the valuation? In order to do ratio analysis, how are you going to make them comparable given different form of accounting and financing etc.

Another blogger I really like is musicwhiz, whose ability to analyze the counter in detail, is just awesome.

Categories: article, investing Tags: ,

Stocks pull back from recent peaks

NEW YORK (CNNMoney.com) — Stocks slipped Tuesday as investors stepped away from the recent rally that left the Dow industrials just shy of the 11,000 mark.

The Dow Jones industrial average (INDU) lost 28 points, or 0.3%, after ending the previous session at 10,973.55, the highest point since Sept. 26, 2008, when it closed at 11,143.13.

The S&P 500 index (SPX) slipped 3 points, or 0.3% after closing the previous session at its highest point since Sept. 26, 2008, when it topped 1200. The Nasdaq composite (COMP) fell 9 points, or 0.4% after closing at its highest point since Aug. 15, 2008.

Can it be true that my previous post on bond stock divergence is in effect?

Oil Surges to 17-Month High on Signs of U.S. Economic Growth

April 6, 2010 1 comment

April 5 (Bloomberg) — Crude oil surged to the highest level in 17 months as growth in American jobs and service industries signaled that the economy is recovering from the worst recession since the 1930s.

Oil climbed 2.1 percent amid optimism that fuel demand will increase with an economic rebound. The U.S. is the world’s largest energy-consuming country. The Standard & Poor’s 500 Index rose to an 18-month high.

“The market is in full embrace of the recovery thesis and is pricing it in accordingly,” said John Kilduff, a partner at Round Earth Capital, a New York-based hedge fund that focuses on food and energy commodities. “It’s enthusiasm that we’re coming out of this recession.”

Crude oil for May delivery increased $1.75 to settle at $86.62 a barrel on the New York Mercantile Exchange, the highest closing price since Oct. 8, 2008. The contract has risen for five consecutive sessions, the longest stretch in six weeks. Crude has climbed 65 percent in the past year.

Oil traded within a range of $68 to $84 a barrel in the six months ended March 31. Prices rose the past two months as improved investor confidence boosted world equity markets.

The S&P 500 gained 0.8 percent to 1,187.44 in New York, also on the jobs report.

U.S. payrolls rose by 162,000 last month, the Labor Department reported April 2, when U.S. financial markets were closed for the Good Friday holiday. The report included 48,000 temporary workers hired by the government to conduct the Census.

more…

Oil is one of the main factor to watch in a economy because to a certain accuracy, it does show the bullishness or bearishness of the market. However, oil has been speculated quite badly during the 2008 bull run.

Having too high a oil price will not help the economy either cos people will have to spend more on oil and less on other things.

USO is one of the nyse counter and seems to be a ascending triangle in making. We can use the breakout strategy to enter this counter. Oil will also drive the gas and commodities up. Take a look at UNG for entry as the downward trend has only been broken 2 days ago.

Commodities stock such as StraitsAsia, GoldenAgri and IndoAgri seems to be weakened by the major 4 day run  with a spinning top and might have to consolidate to go higher.

Pre-empt those “sell in may and go away?”

April 3, 2010 1 comment

Will seasonal factor work this time round? Those who sold their shares last May had a heart pain seeing the market go all the way up. But that may be because the world economy just happen to rebound from a recession. And hence it is very compelling for people to buy no matter what happens.

But now after a good whole year of run, stock has become expensive. And hence the compelling reason to buy stock will not be there. So this may, what will happen?

From MarketWatch
Should you try to get a head start on those who are planning “sell in May and go away?”

If so, then you will be looking for an opportunity to sell your stocks in April and go to cash, thereby beating the many investors who will instead wait until a month from now.

But before you rush to sell everything, bear in mind that the odds of success are quite low. Stock market timers in general have very poor success rates, rarely doing better over the long term than simply buying and holding. Why would we think that they can do any better timing their entries and exits in October and April than in any other month of the year?

Well, the proof of the pudding is in the eating.

And over the past eight years, one of the two market timing services that I monitor that regularly second-guess the “Sell in May and Go Away” system has significantly increased that seasonal pattern’s performance. While the other one has not improved on the Halloween Indicator, it at least hasn’t done appreciably worse — and has still beaten a buy-and-hold strategy.

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Categories: article, investing, market, stock Tags: , ,

Video: Cramer on when value investing won’t work

April 2, 2010 1 comment

From CNBC:
When the Dow’s come down thousands of points in a matter of months, listening to some guy on TV telling you that this or that stock is cheap is going to get you killed, Cramer said. A lot of stocks look cheap after the market’s taken such a beating, but that doesn’t make them so. Besides, you know what happens to stocks that look cheap in an ugly market? They tend to get even cheaper.