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Technology has always driven the economy and the winners in tech have been the winners in the stock market. This was recently highlighted in a report from Barclays that noted total output per hour across both the UK and the USA from 1760 onward, using an index where that year is considered to be 100. Productivity in 2018 is around 3,000 on this index. The increase in output has led to dramatic improvements in the quality of life for people all around the world. Those gains in the quality of life often result form changes in technology. For example, the ...
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Market volatility has increased and that makes cheap stocks potentially more appealing. Cheap stocks tend to be value stocks. They also tend to be beaten down from previous highs which is the reason that they offer value. But, value is a strategy that has been proven to work, in the long run. We began our screen by focusing on stocks that trade at a low price. These stocks could be appealing for two reasons. One reason is that the low price means they have little down side risk in dollar terms. The second reason is that low priced stocks are generally ...
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Source: Facebook.com Last week, Facebook’s founder and CEO, Mark Zuckerberg, endured two days of questions from members of the House of Representatives and Senators. Testifying before Congress must have been uncomfortable for Zuckerberg but the question for traders is how this could impact the stock. Congressional interest can carry a number of consequences. It could result in new regulations that limit the company’s operations. Or, the interest in the company could even lead to changes in the company’s operating structure. One extreme example of how Congress affected a company is found in the case of Standard Oil. The company was founded in ...
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It’s often said that cash is king. This is especially true for companies because they can use cash to reinvest in their business operations, pursue new business opportunities such as acquisitions or return cash to share holders in the form of dividends and share buy backs. Any of those uses for cash should increase share holder value. This indicates that cash, and the sound use of cash, are important to creating wealth for investors. This week, we focused on the availability of cash when we searched for companies as potential investments. We started our screen by searching for firms with high proportions of ...
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Stocks always go up, in the long run. At least that’s what every financial adviser seems to say. Because stocks always go up in the long run, many advisers tell us we should sit tight and never worry about a market decline. Patience will be rewarded. There are at least two problems with this line of reasoning. First is the fact that, as the economist John Maynard Keynes pithily noted, “in the long run, we are all dead.” Many will ignore Keynes wisdom here because it seems to be a hyperbole. But, it’s important. What Keynes was saying is that the long run ...
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Each week, we screen for stocks that could be headed higher. This week, we focused on just four criteria. This demonstrates that stock screens can be relatively simple, although we are harnessing hours of Wall Street research to help us speed up our own search. To benefit from Wall Street’s research, we included analyst’s ratings in our screen. According to one study, more than 3,000 analysts work for more than 350 sell-side investment firms in the United States. They provide analysis, earnings forecasts, and buy and sell recommendations on individual companies. Analysts are biased and tend to rate stocks as buys ...
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Analysts seem to move quickly from indicator to indicator. When markets are rising, analysts often claim there’s no need to consider extreme valuations or overbought technical indicators. When prices start falling, it seems like we need to worry about those indicators. However, no matter what the market is doing, analysts do tend to agree that we should consider the state of the economy. Economic growth is synonymous with bull markets and bear markets tend to unfold when the economy is contracting. There are hundreds, if not thousands, of economic indicators. Some are forward looking and others are lagging. For example, unemployment tends ...
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Source: FINVIZ.com With stocks down in the past few weeks, it could be reasonable to look for low priced stocks. These would be stocks that have little downside risk since they trade at low prices. These would also be the stocks that statistically have the highest probability of delivering a large gain in the next quarter. One study looked at how low priced, or cheap, stocks performed relative to more expensive stocks. The study found that cheap stocks delivered more than six times the average return of the more expensive stocks in a typical quarter. That’s why we started our search ...
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