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Tuesday, November 29, 2005
Market Recap
The stock market is doing exactly what it should be doing – resting before the next leg up. Today, there was little in the way of direction as both bulls and bears battled it out with no meaningful move in either direction. The Dow dropped a measly 2 points while the Nasdaq was down 6 points and the S&P hugged the flat line. This is good news considering the run-up the market has had recently. There are virtually no sellers or real profit taking to be found. Despite the market resting, many of our bulletin stocks were up nicely today, including FNSR, CELL, CNVR, ESRX, HOLX and FTO. GOOG was slaughtered today on an analyst downgrade. These things happen; there is never a shortage of idiots on Wall Street. Some how, I have the feeling it will recover.
“Show Me the Money”
In last night's commentary, we talked about “knowing your stocks”. Tonight, we will take it a step further. The stock market is based largely on economics and business with some emotion and perception thrown in. As a result, I personally feel it is a good idea to trade stocks on companies which are currently showing a profit, as opposed to companies which "might” show a profit someday. Great ideas are a dime a dozen and you do not have to look hard on Wall Street to find stock in companies that are using other peoples' money to test out their great ideas. Think about it for a minute. Companies that are not profitable are using investor's money to fund their businesses. This is a scary thought but it happens all the time. This is the highly speculative part of the market and can lead to serious losses for investors over time.
I would much rather be trading stocks in companies that are currently profitable. If I do take positions in these speculative stocks that have no earnings, they are strictly on the basis of technical chart patterns, and stop loss orders are an absolute must in case the technicals break down. The last thing you want to happen is not having a stop loss order protecting you if the stock tanks. Without a stop loss, you may become stuck in an investment of a company without any earnings. That is not a place I would want to be invested. Additionally, keep in mind that even companies that are making money on the top line may not be profitable from a net (bottom line) profit standpoint. There are many companies out there that have racked up a tremendous amount of debt and/or have business models that, while they bring in a lot of cash, are unable to actually show a profit at the end of the year.
Let's take for example our three portfolio losers: NTES, FTO, and HGSI. All three are profitable companies and both NTES and FTO have very low PE's. Now a low PE does not mean that a company is a good company; there may be other issues like debt that would detract from making it a sound company but our three are in great shape. Still, this is no excuse to still be holding these stocks, but at least we know these the companies are not in danger of going out of business and leaving us with a 100% loss.
Generally speaking, stocks which are currently showing a profit or are very close to and very likely to show a profit in the near term, trade better and are somewhat less risky than stocks which are either in the red or struggling to show profits on their financial statements. If you trade stocks of companies with tangible, consistent earnings when doing your trading you will drastically reduce your risk.
Stockcharts Listing
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http://stockcharts.com/def/servlet/Favorites.CServ...
Thank-you for voting!
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts we have annotated for each stock listed in the past.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings you can either use this link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
http://www.earnings.com
For New Members:
Please take a moment to read the "How To Use The Bulletin" link at the bottom of the Bulletin page on the website. It is critical you understand how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented. |
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