Money Games Information

If you’re looking to invest in high growth stocks, the first thing you should be looking for is earnings growth. A high growth company should have year over year earnings growth (EPS) of at least 25% for the past few years. In addition, the current earnings growth rate for the last few quarters should also be high. You don’t want to invest in a company that had explosive growth 2 years ago and is now losing money. After earnings, you should look at sales growth. If sales numbers are not increasing, that’s a warning sign that the company is just growing its earnings by cost cutting or buying back stock and that might not be sustainable in the long run. Other numbers you also want to look at are ROIC (Return On Invested Capital) and ROE (Return On Equity). Both these numbers should typically be greater than 10% for the last few years and increasing.

Photo: current.com 

After you find a stock that meets these criteria, how do you go about buying it? When establishing a new position in a stock you like, you should never invest all the money you have all at once. Even the greatest traders can’t predict the exact bottom and most likely it will go lower after you buy it. I recommend buying half the position first and then after a couple of weeks, if the stock is up or down slightly, then you can buy some more. Now, if the stock moves considerably lower (around 8-10%) after you buy it, then you should sell and cut your losses. If the stock breaks out (up more than 5%) right after you buy it, then wait for the first pullback and buy some more.

What time of day is the best to do your trade? There is no magic answer to this question, however there 2 specific windows that are my favorites. If you want to buy a stock on a strong up day, then you should be buying between 12:30p and 13:15p when trading is light and stocks will mostly likely pull back from their high and give you a better opportunity to get in. If you want to buy on a weak day for the markets, then the best time is the final hour of trading, where losses will usually accelerate. Many times stocks will recover from their losses during the day just to close near their lows in the final hour.

The key thing to remember is that every investor will make bad calls and lose money at some point, however if you minimize your losses and maximize your gains, you’ll be making a lot of money.

In our stock market newsletter, we follow these guidelines and more to give you the best investment advice and help you choose what stocks to buy and most importantly when to buy. The stock picks usually belong to the best performing sectors but could also include some short recommendations.

Marc Azar is a major contributor at the TheMarketNewsletter.com, a subscription based stock market newsletter providing daily commentary on the financial markets and a list of recommended stocks or ETFs.
 

With the price of oil rising to record levels the only way is up for gold.

For better or for worse gold and its sticky partner oil are inextricably linked together, trading within a well-defined range of each other since the Second World War. As the price of oil rises, invariably the price of gold follows suit.

Photo: bloomberg.com

As with all marriages there will inevitably be ups and downs. The undeniable symmetry of gold and oil prices is interrupted occasionally, but the recent bull-run on these commodities provides a hint at the future direction of gold, widely regarded as the ultimate safe haven investment in times of economic uncertainty.

Gold, the most precious of precious metals has a long history as a store of value stretching back many thousands of years.

Oil, meanwhile, has become one of the world’s most important commodities since techniques to refine crude oil were first developed in the mid 1850s. If you take biological processes out of the equation, virtually everything tangible that moves is powered by oil, and demand for it is rising.

As more expensive oil pushes up the price of energy, money also flows to the safety of gold as a hedge against inflation. It is fitting then, that their importance to civilization has pushed this beauty and the beast partnership even closer together in the 21st century. The closer correlation between the rising price of gold and oil provides the answer to the future direction of the gold price.

Inflation is the single biggest threat lurking in the shadows of the global economy replacing the credit crunch as the most serious threat to economic stability. Inflation or more worryingly, 1970s style stagflation is threatening to derail a recovery in the economies of the UK the US and Europe and governments seem powerless to stop it.

From close marriages to uneasy partnerships, The economies of the emerging markets and those of the rest of the world are moving in opposite directions. The blame for the current high price of oil has been placed on the emerging economies of India and China - both racing ahead while Europe and the USA are flat-lining . The voracious appetite for oil to fuel growth in these countries is blamed for pushing up prices with global supply of oil stretched beyond its capacity to deliver - or at least this is the accepted view. The truth is altogether more complex.

Oil has recently surged beyond $130 a barrel - unthinkable as recently as 2007. Yet demand should be cooling as global growth slows. Let’s look again at China and India. Back in 2004 demand for oil in these countries was equally high leading to projections that it would rise indefinitely. Back then, oil was comparatively cheap at around the $38 a barrel mark. Now, in 2008, the same argument is being pushed out yet the idea that emerging economies are somehow guzzling up the global supply of oil doesn’t stack up.

China’s economy has certainly experienced rapid growth in recent years, rocketing to 10.4 percent GDP in 2006. This level of growth has slowed in the past year with the World Bank predicting a fall to 8.7 percent GDP in 2008. China’s economy remains perilously close to overheating with inflation predicted to reach 10 percent this year and the government are tightening fiscal policy as a result.

India, too, is facing the same inflationary pressures with the central bank already tightening monetary policy. GDP is predicted to slow from 8.5% to 8% this year as global demand for its exports softens.

The economies of India and China are still growing fast, but not as fast as they were. It is safe to assume, therefore, that the supply of oil will be adequate to meet current demand in the two Asian powerhouses. While growth in these emerging markets is a factor it is by no means the only factor.

Rising inflation has cut consumer demand for gold in India by half as consumers wait for the price to fall to more affordable levels. This was part of a trend which has seen consumer demand for gold fall globally, yet the price of a troy ounce rose to record levels in March. So with plenty of gold and oil already in the system, why are prices rising if real demand is falling?

Speculative demand for oil and gold goes some way to explaining this year’s hike in prices. But this isn’t the only factor, a perfect storm of political and economic factors are threatening to plunge the world into an oil crisis, the like of which hasn’t been seen since the 1970s. Firstly there is the threat to supply. Attention has been focused on events in Africa with investors seizing opportunities when the supply of oil and gold is threatened. For gold it is South Africa’s problems with supplying power to its gold mines, while in West Africa, attacks by militants on pipelines in Nigeria has intermittently fueled surges in oil this year.

Another factor is the increasing tension developing between the US and Iran and, more recently, Venezuela. The two countries are major thorns in the side by the United state government. The leaders of both OPEC countries are blaming the US dollar for rising oil prices. Venezuelan president Hugo Chavez even went as far as blaming "the fall of the American empire". While President Bush was busy negotiating with the less hostile regime in Saudi Arabia in the hope of boosting oil production, Iran and Venezuela were declaring that supply was adequate. This may well be true with news that as Saudi Arabia upped its production, Iran currently has 20 tankers full of oil floating in storage and this number is likely to increase.

With the possibility of hostilities between the US and Iran erupting into armed conflict, the chances of oil rising further this year are high. This would be seriously bad news at the pumps with the price of petrol and diesel rocketing as a result.

More expensive energy will act to slow growth worldwide as inflation rises and governments tighten fiscal policies in the hope of controlling inflationary pressures. Hope may yet come from the election of democrat candidate Barak Obama and a likely softening of the hard line policy pursued by the Bush administration. Until this happens, expect to see gold and oil continue to break records this year with the nightmare scenario of $200 a barrel looking increasingly more likely. If this happens, gold as a hedge against ensuing inflation will also be pulled upwards to record highs.

The long term average gold to oil ratio is 15 barrels of oil to one ounce of gold. An ounce of gold at current prices will buy you around 7 barrels of oil. With oil moving relentlessly towards $140 a barrel this week, this makes a powerful case for investing in gold right now.

By Brett Tudor

Editor of goldpricecrash.com
http://www.goldpricecrash.com
 

Internet and electronic trading have revolutionized the way a common man investor can invest in the markets. We use the term markets very loosely and need to understand specifically the options we have. Each of these markets needs specific skills and knowledge. All are not the same. Each investor need to identify his /her goals , skill set, level of interest and then choose an appropriate investment route.

Photo: www.sharemarketbasics.com

Stocks are probably the largest in all financial investment mediums. There are several stock exchanges where one could buy stocks through a variety of on line and offline stock brokers. There are also direct purchase options for shares. This involves buying shares directly from companies by avoiding charges etc through share transfer agents such as "Computershare". Bonds are debt instruments where an investor buys a part of the debt through a Bond. This gives a fixed rate of return for each period, quarter, half year or annual. You could again buy a bond through an on line or off line broker. Purchase of shares and bonds requires one to develop certain skills in understanding markets, terminology, identifying safe investment opportunities and so on.

Mutual funds are a method for the investors to participate in stocks and bonds. Mutual funds collect small amounts from investors pool it into a large fund and actively manage their funds. The returns after deducting expenses and taxes are reinvested or paid out as dividends. Investors spend less effort as the mutual fund money managers manage the investments for them. There is a lower risk due to diversity of stocks and bonds held by a balanced fund. Mutual funds are actively managed and hence have a higher expense quotient. The friction caused by purchases, sales and brokerage also adds to expenses.An index fund is passive, just tracks a market and has less expenses.

Derivatives are a more recent phenomenon. It is named as a derivative as it is derived from underlying assets. It is very speculative and has potential for huge gains or huge losses. Common examples are forward contracts, options swaps etc. This needs a very high level of sophisticated skills and understanding.

Participation in any investment needs skills and knowledge. Most of it is gained while actually investing. There are a number of free resources for one to learn. Paper trades- where one trades on paper and not with real money are a way of getting knowledge without burning a hole through your pocket.

Easwar has an extensive knowledge of issues related to stocks, currency,exchange,taxes,cost savings ideas and loves to write about it. For additional resources please visit his blog http://investforgreatreturns.com