A balanced investment portfolio should contain both value and growth stocks. Value stocks, or those that are undervalued, can often provide both short-term profits and long-term gains. That’s because value stocks trade below where it appears they should be trading based on both fundamental and technical indicators. A value stock might have a high dividend yield or low price-to-earnings or price-to-book ratio. A value stock’s share price also may have fallen for circumstances beyond the company’s control, perhaps due to public perception or even troubles with a competitor. Value investors look for fundamentally solid companies that have seen their share prices give up ground and buy into the deep, with the understanding that rationality will prevail and the stock will rebound.
Looking at the stock market, I can't say I would’ve done that much last week, as the current action is somewhat dull for my liking. The way I see it, as a trader, I need a major unexpected event.
Why Stock Market Chaos Can Be a Good ThingI need another currency collapse like what we witnessed with the ruble in Russia that ultimately led to a broad sell-off in Russia’s stock market, from oil to technology to steel. This selling wasn’t a surprise, given the massive collapse in the ruble means imports become much more expensive. But with the chaos in Russian stocks, I saw aggressive trading opportunities to make some quick money, primarily via the use of near-term call options that give me added ... Read More
There's an ongoing debate over whether the stock market is overvalued and vulnerable to a bigger correction than we have seen in the recent year. Based on the earnings growth, the valuation of the stock market may be somewhat high, but pricing is more based on the prospects going forward. One area in which investors need to beware of valuations, though, are in the newest IPO debuts.
Pre-IPO Valuations Utterly RidiculousWhat really concerns me is the insane valuation given to many of the venture capital–backed pre-initial public offering (IPO) companies. In my view, the valuations are not sustainable and deserving; albeit, there is so much froth swirling around here. Take the case of Uber, the provider of private car servic ... Read More
What if I told you the best six months for investing in the stock market are drawing to an end? Not good news, is it? As we enter the second quarter, there is optimism based on the price action of the stock market in 2014. Yet as I mentioned, what is historically recognized as the best six-month period during the year for investing in the stock market, particularly the S&P 500 and Dow Jones Industrial Average, according to the Stock Trader's Almanac, is coming to a close at the end of April. With the S&P 500 having returned only 0.44% in 2015 (better than the 0.26% decline in the Dow Jones Industrial Average), can we really expect much for the stock market following what was supposedly the historically ... Read More
It has been a while since I talked about the prospects for Tesla Motors, Inc. (NASDAQ/TSLA), which continues to be one of the more actively traded momentum plays in the stock market. In the past, I was encouraged by Tesla and felt a downside move to $185.00, based on my technical analysis, could be an aggressive investment opportunity. I no longer feel that way.
How Tesla Reached Its $24-Billion ValuationWhile other momentum plays in the stock market are easier to evaluate, that has never been the case with Tesla. If you solely look at the number of units sold, it would make no sense why the stock market pl ... Read More
While many seem to be comforted by continued stock market highs, bad news could be brewing for the first-quarter 2015 earnings season.
1Q15 Earnings Season to Affect the Markets?The stock market continues to see record after record. We had the NASDAQ breaking back above the psychological 5,000 level last Friday; now it’s within distance of its all-time high, but we are heading into the key first-quarter earnings season of 2015. Small-cap stocks, which had been the doormat in 2014, have regained their luster with a 2.4% advance in March, now sitting at a new record-high. Everything appears to be firing on all cylinders for the long side, but let me remind you ... Read More
Yesterday, I wrote about how a raft of weak first-quarter results could trip up the S&P 500 and put a dent in its unblemished bull run. My theory: the S&P 500’s stellar performance in 2013 was a result of financial engineering (share buybacks and cost-cutting) and the Federal Reserve’s monetary policy, not strong revenue and earnings growth. As a result, the S&P 500 and other key stock indices are overbought and overpriced, meaning stocks will have a tough time justifying their lofty valuations if first-quarter results fail to wow investors. And odds are good that they will disappoint. A record 94% of S&P ... Read More