Tuesday, December 19, 2006
GE- Bringing Good Things to Life in the Market
General Electric has broken out of a long funk. The stock closed today @ $38/share. The stock broke out on Dec 15 trading 88 million shares. These weren't mom and pop buying up shares, it was big money moving into the stock. GE is considered a Mega-Cap stock, which means it generates yearly revenues in excess of some countries gross domestic product. Anyhow, the charts don't lie. GE is trading at a new 5 year high. Many money managers feel GE is just as good as "cash". In other words, its stable, offers a dividend yield, and has predictable earnings. No telling how long the big money will stay in GE, but I dont think its leaving until GE hits $40. See other post for GE stock chart.
Saturday, December 16, 2006
The Citi Isn't Sleeping Now
Im talking about Citigroup( NYSE:C) here of course. Full disclaimer, I am empolyed by Citigroup. Over the last 5 years Citi's stocks has traded roughly between the $40-50 levels. Technicians of the stock market call this a "trading range". However, recently Citi's stock has been on a tear, closing at new highs near $54/shares as of December 15. So why the move? No one really knows for sure, but here are some ideas being thrown around:
1. The stock is simply cheaper that its peers with respect to its price to earnings ratio. In English, what you are paying for a share of Citi stock in relations to what the company can earn in profits over the next couple of is relatively cheap. Citi's competitors include JPM Morgan/Bank of America/Capital One/Goldman Sachs.
2. The FED is not expected to increase interest rates in the future. Citi's credit card business borrowing costs will remain stable or possibly decrease in the future. Also, the big money managers may be rotating money into the Financial sector in anticipation of a rate reduction by the Federal Reserve.
3. The overhang of intergrity and litigation problems from the late 90's and early 2000's seem to be waning.
4. The make a ton of money. Citigroup's profits come in around $4-5 billion EVERY 90 DAYS. That puts it up there with the top 5 most profitable companies in the world.
5. Citi's dividend yield in near 4%. So you get paid to hold on to the stock.
1. The stock is simply cheaper that its peers with respect to its price to earnings ratio. In English, what you are paying for a share of Citi stock in relations to what the company can earn in profits over the next couple of is relatively cheap. Citi's competitors include JPM Morgan/Bank of America/Capital One/Goldman Sachs.
2. The FED is not expected to increase interest rates in the future. Citi's credit card business borrowing costs will remain stable or possibly decrease in the future. Also, the big money managers may be rotating money into the Financial sector in anticipation of a rate reduction by the Federal Reserve.
3. The overhang of intergrity and litigation problems from the late 90's and early 2000's seem to be waning.
4. The make a ton of money. Citigroup's profits come in around $4-5 billion EVERY 90 DAYS. That puts it up there with the top 5 most profitable companies in the world.
5. Citi's dividend yield in near 4%. So you get paid to hold on to the stock.
Thursday, December 07, 2006
Getting Rich Is Simple by Harry Domash
Here is the single most important thing you will ever hear about investing: Getting rich is simple.Not easy, but simple.And here is the second most important thing you will ever hear about investing: You have no excuse not to do it.Only three ingredients are needed: income, discipline and time. Chances are, you already have two of them, income and time. All you need to do is add the third, discipline. And armed with the following knowledge, that key third ingredient may be a lot easier to find.Here's how it works: Say you start with nothing, invest $500 (of your income) a month (a healthy discipline), and let your money ride (over time) in diversified investments. Long term, the stock market returns at least 10% annually. Assuming a 10% return, you'd have $102,000 after 10 years, $380,000 after 20 years, and $1.1 million in 30 years. Here's a similar scenario: If you start with a nut of $50,000 and add only $250 per month, you'd have $180,000, $516.000 and $1.4 million after 10, 20, and 30 years, respectively. All this happens through the power of regular investing and a simple-but-powerful concept called compounding. Compounding What is compounding?
Compounding is the reinvestment of the interest you receive from the money you set aside. For example, if you invest $1,000 and earn 10% interest on your principal at the end of each year, you'll get in $100 interest at the end of the first year. If you reinvest that interest, the second year you would start with $1,100, and thus would earn $110 interest. If you stay with it, you'd more than double your money every eight years."Compounding," Albert Einstein said, "is mankind's greatest invention because it allows for the reliable, systematic accumulation of wealth." Einstein was a smart man. But you hardly have to be a genius to make this concept work for you.The real magic of investing comes when you combine the surprising power of compounding with continuous and regular investments -- in other words, discipline.
The best way to make these continuous investments happen is by setting up an account with a broker or mutual fund that automatically deducts a fixed amount from your bank account every month. "Automatic" is the operative word here. Trust me, if you don't set it up that way, it won't happen. Instead, you'll end up pouring money in when the market is soaring and skipping payments when it's heading down. Eventually you'll get discouraged and give up.
Dollar-cost averaging The process of continuously investing a fixed dollar amount is called dollar-cost averaging -- a term that sounds much more technical than it is. Through dollar-cost averaging, you'll end up buying more shares when a stock or fund is down, and fewer when it's up. For instance, say you're investing $500 monthly in a stock trading initially at $50 per share; so the first time, you buy 10 shares. If the next month the stock moves up to $62.50 your regular purchase will net you only eight shares. However, if the stock drops to $41.67, you'll get 12 shares (not including any transaction fees).
It's easy to set up regular-investment mechanisms, thus harnessing the power of dollar-cost averaging. Mutual funds are the traditional way. But there are other outlets, as well, that allow you to apply the strategy with individual stocks or exchange-traded funds, which are baskets of stocks that identically track standard market indexes, such as the Dow Jones Industrial Average ($INDU).
Risk Sure, investing in the stock market has risk. There's always the chance the market will go nowhere for the next 20 or 30 years and you'll end up no better than where you started. But there's risk in everything, even CDs. With CDs, your original investment isn't in danger. Most CDs are insured, and the federal government will step in and make you whole, even if your bank goes belly up.But a problem crops up when something more sinister surfaces: inflation. At this writing, inflation, running at around 2%, is considered relatively benign. But is it?
Let's do some math. Your real return is the interest you receive less the inflation rate. If your CD is paying 3% and the inflation rate is 2%, you're only making 1% in real terms. If inflation takes off, say to 5%, your CD will probably be paying around 4%. In inflation-adjusted terms, you've lost 1%.But it can get worse. Inflation hit 14% in the early 1980s. In such times, CDs and similar fixed-income investments don't even come close to the inflation rate, meaning you're losing serious money, in real terms.By contrast, assets such as real estate and stocks tend to move with prices, and, over time, the stock market has outpaced inflation. For instance, in the 20-year period ending Dec. 31, 2001, the cumulative return of the market, as measured by the S&P 500 Index ($INX), was 1,606%, compared to 88% cumulative inflation over the same period.
What's the point? Yes, there's risk in investing in the market, but the odds are that continuous, regular investing combined with the power of compounding will make you rich.
The odds If you count yourself a member of the "I want it now" generation, the idea of waiting 20 or 30 years to get rich probably sounds like a dumb idea.
Sure, there are faster ways to get rich. You could win the lottery, or pick the next Intel (INTC, news, msgs) or Wal-Mart Stores (WMT, news, msgs). But don't quit your day job just yet. Your chances of winning big in the lottery run around 15 million to 1, at best.
Meantime, naturally, you would be sitting pretty if you had had the foresight to plunk significant cash into Intel or Wal-Mart 20 years ago. But consider this: You would have lost money if you'd picked Advanced Micro Devices (AMD, news, msgs) instead of Intel, and you'd be broke if you'd picked Kmart (SHLD, news, msgs) (which ended up merging with Sears Roebuck) instead of Wal-Mart. In both instances, your retirement plans would be history.Here's the bottom line, like it or not: The fate of your retirement, your comfort in older age, probably lies in your commitment to the concepts laid out in the paragraphs above. For the vast majority of us, wealth creation is a slow and steady -- and powerful -- process. The tortoise almost always beats the hare.It's not easy. But it's very, very simple.
At the time of publication, Harry Domash did not own or control shares in any of the equities mentioned in this column.
Domash publishes the Winning Investing stock and mutual fund advisory newsletter and writes the online investing column for the San Francisco Chronicle. Harry has two investing books out, the most recent being "Fire Your Stock Analyst," published by Financial Times Prentice Hall.
Compounding is the reinvestment of the interest you receive from the money you set aside. For example, if you invest $1,000 and earn 10% interest on your principal at the end of each year, you'll get in $100 interest at the end of the first year. If you reinvest that interest, the second year you would start with $1,100, and thus would earn $110 interest. If you stay with it, you'd more than double your money every eight years."Compounding," Albert Einstein said, "is mankind's greatest invention because it allows for the reliable, systematic accumulation of wealth." Einstein was a smart man. But you hardly have to be a genius to make this concept work for you.The real magic of investing comes when you combine the surprising power of compounding with continuous and regular investments -- in other words, discipline.
The best way to make these continuous investments happen is by setting up an account with a broker or mutual fund that automatically deducts a fixed amount from your bank account every month. "Automatic" is the operative word here. Trust me, if you don't set it up that way, it won't happen. Instead, you'll end up pouring money in when the market is soaring and skipping payments when it's heading down. Eventually you'll get discouraged and give up.
Dollar-cost averaging The process of continuously investing a fixed dollar amount is called dollar-cost averaging -- a term that sounds much more technical than it is. Through dollar-cost averaging, you'll end up buying more shares when a stock or fund is down, and fewer when it's up. For instance, say you're investing $500 monthly in a stock trading initially at $50 per share; so the first time, you buy 10 shares. If the next month the stock moves up to $62.50 your regular purchase will net you only eight shares. However, if the stock drops to $41.67, you'll get 12 shares (not including any transaction fees).
It's easy to set up regular-investment mechanisms, thus harnessing the power of dollar-cost averaging. Mutual funds are the traditional way. But there are other outlets, as well, that allow you to apply the strategy with individual stocks or exchange-traded funds, which are baskets of stocks that identically track standard market indexes, such as the Dow Jones Industrial Average ($INDU).
Risk Sure, investing in the stock market has risk. There's always the chance the market will go nowhere for the next 20 or 30 years and you'll end up no better than where you started. But there's risk in everything, even CDs. With CDs, your original investment isn't in danger. Most CDs are insured, and the federal government will step in and make you whole, even if your bank goes belly up.But a problem crops up when something more sinister surfaces: inflation. At this writing, inflation, running at around 2%, is considered relatively benign. But is it?
Let's do some math. Your real return is the interest you receive less the inflation rate. If your CD is paying 3% and the inflation rate is 2%, you're only making 1% in real terms. If inflation takes off, say to 5%, your CD will probably be paying around 4%. In inflation-adjusted terms, you've lost 1%.But it can get worse. Inflation hit 14% in the early 1980s. In such times, CDs and similar fixed-income investments don't even come close to the inflation rate, meaning you're losing serious money, in real terms.By contrast, assets such as real estate and stocks tend to move with prices, and, over time, the stock market has outpaced inflation. For instance, in the 20-year period ending Dec. 31, 2001, the cumulative return of the market, as measured by the S&P 500 Index ($INX), was 1,606%, compared to 88% cumulative inflation over the same period.
What's the point? Yes, there's risk in investing in the market, but the odds are that continuous, regular investing combined with the power of compounding will make you rich.
The odds If you count yourself a member of the "I want it now" generation, the idea of waiting 20 or 30 years to get rich probably sounds like a dumb idea.
Sure, there are faster ways to get rich. You could win the lottery, or pick the next Intel (INTC, news, msgs) or Wal-Mart Stores (WMT, news, msgs). But don't quit your day job just yet. Your chances of winning big in the lottery run around 15 million to 1, at best.
Meantime, naturally, you would be sitting pretty if you had had the foresight to plunk significant cash into Intel or Wal-Mart 20 years ago. But consider this: You would have lost money if you'd picked Advanced Micro Devices (AMD, news, msgs) instead of Intel, and you'd be broke if you'd picked Kmart (SHLD, news, msgs) (which ended up merging with Sears Roebuck) instead of Wal-Mart. In both instances, your retirement plans would be history.Here's the bottom line, like it or not: The fate of your retirement, your comfort in older age, probably lies in your commitment to the concepts laid out in the paragraphs above. For the vast majority of us, wealth creation is a slow and steady -- and powerful -- process. The tortoise almost always beats the hare.It's not easy. But it's very, very simple.
At the time of publication, Harry Domash did not own or control shares in any of the equities mentioned in this column.
Domash publishes the Winning Investing stock and mutual fund advisory newsletter and writes the online investing column for the San Francisco Chronicle. Harry has two investing books out, the most recent being "Fire Your Stock Analyst," published by Financial Times Prentice Hall.
Saturday, November 11, 2006
Is Jim Cramer Reading the Stock Junkie Blog ? ? ?
From TheStreet.Com.
This is what Jim Cramer said about Mastercard YESTERDAY:
There are certain stocks that can make market players 50% of their gains, while other stocks in their portfolio "languish" Cramer said. Microsoft (MSFT - commentary - Cramer's Take - Rating) was one of the stocks that always brought people's portfolios higher. Cramer believes he has found another stock which should do the same -- MasterCard (MA - commentary - Cramer's Take). Although MasterCard has already gone up dramatically, Cramer said he has suggested other stocks that have had big runs as well, such as Research In Motion (RIMM - commentary - Cramer's Take - Rating), Cisco (CSCO - commentary - Cramer's Take - Rating) and NYSE (NYX - commentary - Cramer's Take) People might have missed "40-odd points" in MasterCard, but he believes that this stock still has "major upside." "The IPO was priced way, way too low, so forget that it has doubled," Cramer told viewers. "The stock should have opened at $60, maybe $70." Moreover, MasterCard is an "irreplaceable franchise," he said. "When a company gets "demutualized," it becomes a knocking opportunity. That's what has happened at MasterCard." Plus, not only does it have a "big opportunity in China," but also it "blew out" its earnings estimates with two major upside surprises, Cramer said. MasterCard has "pure organic growth" and "earnings power," he said. "I think this goes to $150."
MasterCard closed at $89.20 on Friday
This is what Jim Cramer said about Mastercard YESTERDAY:
There are certain stocks that can make market players 50% of their gains, while other stocks in their portfolio "languish" Cramer said. Microsoft (MSFT - commentary - Cramer's Take - Rating) was one of the stocks that always brought people's portfolios higher. Cramer believes he has found another stock which should do the same -- MasterCard (MA - commentary - Cramer's Take). Although MasterCard has already gone up dramatically, Cramer said he has suggested other stocks that have had big runs as well, such as Research In Motion (RIMM - commentary - Cramer's Take - Rating), Cisco (CSCO - commentary - Cramer's Take - Rating) and NYSE (NYX - commentary - Cramer's Take) People might have missed "40-odd points" in MasterCard, but he believes that this stock still has "major upside." "The IPO was priced way, way too low, so forget that it has doubled," Cramer told viewers. "The stock should have opened at $60, maybe $70." Moreover, MasterCard is an "irreplaceable franchise," he said. "When a company gets "demutualized," it becomes a knocking opportunity. That's what has happened at MasterCard." Plus, not only does it have a "big opportunity in China," but also it "blew out" its earnings estimates with two major upside surprises, Cramer said. MasterCard has "pure organic growth" and "earnings power," he said. "I think this goes to $150."
MasterCard closed at $89.20 on Friday
Thursday, November 02, 2006
Home Run from Mastercard International
Mastercard International, symbol MA, crushed earnings estimates for the 3rd quarter reporting $1.42 share. Estimates were in the $1.05 ballpack. The stock gapped higher yesterday trading over 14 million shares, which is about 14 times its normal daily volume. Many analysts have speculated that the IPO Price for Mastercard ( $38/share) was too cheap. Looks like they might have been correct given its current earnings announcement and future growth potential. Today the stock is trading around $87/share, an all-time high for the company who went public around 6 months ago. Mastercard is going to be a stock to buy and hold in my opinion. This may become a "blue-chip" stock that could become a core holding in a growth portfolio. As I stated earlier, I think Mastercard trades to $100/share by next year (maybe sooner). Big mutual funds are buying this stock as well as the individual investor. I also expect a stock split announcement and that should encourage more retail investors as well.
Thursday, October 26, 2006
Mastercard - Priceless
Above is the chart for Mastercard, symbol MA. MA went public just a few months ago and as this chart illustrates has gone up steadily. MA reports earnings next week. I think the stock will go up further for a couple of reasons: Mastercard is a cash cow. They generate serious cash and they a known brand. I think this may be a "blue chip" stock in the next few years. Also, as the FED lowers interest rates, people start using credit more frequently, which in turn is good for Mastercard. I think the stock can go up to $100 over the next year or so.
Tuesday, October 24, 2006
Best Performing Mutual Funds - 5 yrs
According to Yahoo Finance, here are the best performing mutual funds over the last five years with the highest annual average return:
ING Russia A -LETRX 50.21%
U.S. Global Investors WrldPrecMineral -UNWPX 44.31%
U.S. Global Investors Eastern Europe -EUROX 44.07%
T. Rowe Price Em Eur & Mediterranean -TREMX 41.47%
U.S. Global Investors Global Res -PSPFX 40.11%
Third Millennium Russia -TMRFX 40.07%
U.S. Global Investors Gold Shares -USERX 39.32%
Eaton Vance Greater India A -ETGIX 38.12%
Eaton Vance Greater India B -EMGIX 37.59%
Acadian Emerging Markets -AEMGX 36.58%
ING Russia A -LETRX 50.21%
U.S. Global Investors WrldPrecMineral -UNWPX 44.31%
U.S. Global Investors Eastern Europe -EUROX 44.07%
T. Rowe Price Em Eur & Mediterranean -TREMX 41.47%
U.S. Global Investors Global Res -PSPFX 40.11%
Third Millennium Russia -TMRFX 40.07%
U.S. Global Investors Gold Shares -USERX 39.32%
Eaton Vance Greater India A -ETGIX 38.12%
Eaton Vance Greater India B -EMGIX 37.59%
Acadian Emerging Markets -AEMGX 36.58%
Saturday, October 21, 2006
Google Rocks the House with Huge Earnings
Google reported earnings last Thursday and nearly doubled its profits from a year ago. Not many companies can say that they double their profits from a year ago, especially not when we are talking about Billions of dollars in Revenues. The stock didn't move 10% that I predicted, but around 7%. Still many brokerage houses think the stock is relatively CHEAP. How can that be? Well, the current stock price of a company is not based upon the last year or even the last quarter. Its really a projection of the future worth of the company. In other words, how much are you willing to pay today for one share of Google stock one year from now. That amount is quantified by a term called the forward price to earnings ratio. Google future price to earnings ratio is around 35X 2007 earnings. During their heyday, Ebay and Yahoo has a P/E ratio of around 70-80X earnings. Getting the point here? Wall street has with many brokerages houses lifted their 12 months price target on Google to $600 share. Also, don't count on a stock split any time soon. Google has made it clear that they arent concerned about splitting the stock. Some would argue that they are pricing individual investors "out of the market" with its rich price tag. I think its good and bad for the same reasons. Institutional investors tend to buy in bulk and they also tend to hold shares for a long time. In fact, 88% of Google's outstanding shares are owned by either INSIDERS OR INSTITUTIONS. See Google's chart above.
Wednesday, October 18, 2006
Take a Bite of the Apple
Apple : Apple computer reported 3rd Quarter earnings per share of .62 today. The so called "experts" estimated Apple's 3rd Quarter earnings to be .51. Bottom line, the earnings crushed expectations. Traditionally, the 4th quarter of the year, i.e. the holiday season, is Apple's strongest since everyone and their brother wants either an iPod, and updated iPod, or even more significantly, a MAC PC. There has been a debate as to whether or not Apple could increase its personal computers sales as a result of its wildly popular iPod. Well, in the 3rd Quarter, MAC PC sales rose 30% from a year ago. This is a HUGE increase. Some analyst attribute this to Apple's move to make Intel chips compatible with the MAC. Its working. I think investors recognize this fact and the momentum will come back into the stock thru the holiday season. I think Apple stock makes it to $100 by 1st Quarter next year, which basically means about a 25% increase from today's prices.
Tommorrow: Tech Gorilla Google reports its 3rd quarter numbers after the close.
Tommorrow: Tech Gorilla Google reports its 3rd quarter numbers after the close.
Sunday, October 15, 2006
Earnings, Earnings, Earnings
This week two tech bellweather companies will be reporting earnings: Apple Computer and Google. Both companies are extremely profitable, but both companies also have had a nice run up in stock price since 2q earnings. Many experts expect Google shares to pass $500 a share by year end. This is possible with a blowout 2q earnings number from Google. Apple has rebounded from about $50 share a few months ago to about $75 currently. That is a 50% gain, but Apple is still shy of its all time high of around $86 a share. I think both stock are core long term holdings for any technology and/or aggressive portfolios. If the stocks get hit on weaker than expected earnings, I like the "buy on the dip" mentality for this two companies. Technically, both stocks looks good. Apple coming out of a head and shoulders formation when it traded above $75 a share and Google reversing a 6 months downtrend and resistance levels around $420. There is a pretty good likelihood that one or both of these stock may swing 10% or more after the earnings release.
Subscribe to:
Posts (Atom)