Three Cheap Stocks with Value, Growth and Momentum

Few data series have been studied as exhaustively as the financial markets. Analysts and researchers pore over the same set of data looking for relationships that can help them beat the market. Many are driven by the allure of potential profits. What’s interesting is how little data there really is. Researchers have access to price histories and financial information. Financial data is updated just four times a year. Yet, it not an exaggeration to say that researchers have dedicated their careers to studying this information. Increasingly, researchers have been identifying characteristics of stocks and companies that can outperform. These characteristics are called ...
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What It Really Means When a Company Beats Earnings Estimates

As investors we hear it all the time. The analyst comes on CNBC and tells us a stock is soaring because the company beat earnings estimates. Or, we notice a stock is falling sharply and when we search the news we discover that the company missed analysts’ expectations. These are common explanations for a stock’s market action. But, what do those words really mean? In other words, what are estimates, where do they come from, how often do companies meet the estimates and how do stocks fare, on average after an earnings announcement? We will answer each of these questions today. What Are ...
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Bargain Hunting for Stocks Under $5

Sell offs create panic and that leads to buying opportunities for value investors. This is how great fortunes are made according to super investor Warren Buffett. Over the years, Buffett has offered a wealth of wisdom to individual investors including his advice to “be fearful when others are greedy and greedy when others are fearful.” With major stock market averages suffering their first 10% correction in years, now is potentially the time to be greedy. When looking for buy candidates, we started our search by limiting our list to stocks priced under $5. The reason we like cheap stocks is because these ...
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Indicators That Spot a Market Bottom

  Now that the stock market has finally delivered a pull back, it is important to think about which indicators will signal the likely completion of the down move. It is also important to remember that no indicator will be 100% accurate, at bottoms or at tops. When thinking of indicators, many traders will turn to familiar tools like the stochastics or the MACD. While these tools are popular, they aren’t very useful at turning points. The chart below shows these two indicators for the SPDR S&P 500 ETF (NYSE: SPY). The chart shows that these indicators moved down along with price. Stochastics ...
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Five Cheap Dividend Plays

As market volatility seems to increase, dividends can become more valuable to investors. Safe dividends provide income to investors and, perhaps more importantly, they provide funds that an investor can reinvest in the stock market. It is possible to reinvest the dividends from a company directly into the stock. Some companies offer dividend reinvestment programs directly to individual investors. Additionally, some brokers provide this capability at little or at times no cost. While individual dividends are often just a small amount, the power of reinvesting these small amounts should not be underestimated. The chart below shows that an investor would have increased ...
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Indicators that Spot a Crash

  Is the stock market ready to crash? This is a near constant concern for some investors. But, it probably shouldn’t be. Crashes are rare, having occurred just a few times in market history. There are many ways to define a crash but the most significant stock market crash in history might have come in 1929. Near the end of that year, stocks sold off sharply. The selloff occurred as the economy was entering the Great Depression, an economic downturn that lasted throughout most of the 1930s. The Dow Jones Industrial Average collapsed after the 1929 crash, losing almost 90% of its value ...
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Playing Defense in an Overvalued Market With Ben Graham

Ben Graham was Warren Buffett’s professor in business school. Graham was also the author of one of the widely cited investment books of all time, Security Analysis, which he cowrote with David Dodd. This book is considered to be the first text on value investing and it is still read by investment analysts. Graham believed that individual investors should begin by understanding how much time they have to devote to the investment process. Graham described the difference in terms of the amount of "intelligent effort" they are "willing and able to bring to bear on the task." He cited the example of ...
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How to Use the P/E Ratio and Other Tools When the Market Is Overvalued

In the current market environment, it almost seems as if value investing is dead. It’s been this way for at least the past few months. This means value investors have been struggling in many cases and at least one hedge fund manager is discussing his concerns with investors. In October of last year, David Einhorn of Greenlight Capital described the problem in his quarterly letter to investors: “Given the performance of certain stocks, we wonder if the market has adopted an alternative paradigm for calculating equity value. What if equity value has nothing to do with current or future profits and ...
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