1 2 Politics is one of those topics many of us avoid discussing at family meals. We know it can lead to disagreements and ruin a perfectly enjoyable evening. Another topic usually avoided in polite company is money, a subject that can also lead to disagreements. But, there are many times these two topics merge into professional discussions since political decisions can affect financial markets and determine how much money investors earn. Politics and money also come together in disclosure statements that reveal what might be the richest group of Americans own. Members of Congress, senior ...

1 2 Last month, we applied a simple seasonal strategy to find potential buys for January. Now, we can review the results of this strategy. Of the 8 stocks, six moved up, a win rate of 75%. Half of the stocks beat the market, delivering a gain larger than the gain of the S&P 500 index. Results are summarized in the table below. This strategy outperformed because of the large gain in Illumina, Inc. (Nasdaq: ILMN). This demonstrates the value of trading a strategy. We never know whether a trade will be a winner or loser and we never know which stocks will deliver the biggest gains. That ...

1 2 Value investors are familiar with a problem most experienced investors have faced. Identifying value stocks to buy is relatively easy to do but the problem is that stocks can remain undervalued for extended periods of time, years in some cases. That means they buy an undervalued stock and then wait for it to move higher. Sometimes, they wait for months or even years before other investors discover their undervalued gem. There are a number of ways to deal with this problem but one of the simplest could be to combine value investing with relative strength analysis. This is the approach ...

1 2 In a recent article, we looked at the traditional approach to a trading strategy known as the Dogs of the Dow. Several readers have questioned how a simple strategy like the Dogs can work. In this article, we will explain why the Dogs of the Dow can work and look at a variation of the strategy that can be implemented at a relatively low cost. A common question among investors is how a strategy can work when a large number of investors already know about it. Researchers have shown that if a strategy is based on sound investing principles, it can work no matter how well known it is. Thi...

1 2 It’s finally January and now could be the time for traders to take positions intended to benefit from the January Effect. Investment managers and the academic community have long recognized that stocks do well in the first month of the new year. They called this tendency “the January Effect” and defined it as “a seasonal increase in stock prices during the month of January. Analysts generally attribute this rally to an increase in buying, which follows the drop in price that typically happens in December when investors, engaging in tax-loss harvesting to offset realized capital gains,...

1 2 In a recent article, we highlighted the latest Dow Theory buy signal. Rather than repeat the details of Dow Theory and explain the signal here, we recommend reading the original article. In this post, we want to address specific stocks that can benefit from the signal. Dow Theory relies on the principle that both production and transportation are important. This is a logical relationship. If factories are producing goods and no one is buying the output, inventory will stack up because there will be nowhere to ship the completed products to. In that environment, transportation companie...

1 2 In a recent post, we introduced Cloud Charts, formally known as Ichimoku Clouds. We received several questions about how to interpret the charts. While we generally like to provide answers to questions in the comments section of the blog, some answers require more space than that. When more space is needed, we sometimes devote a post to the question as we are doing now. Rather than cover Clouds in detail here, we will provide a quick review. The chart is visually distinctive. The most prominent feature on the chart is the shaded areas. These are the Clouds. There are actually five ...

1 2 Ben Graham is considered to be the founder of the value investing philosophy. He began investing in the 1920s, just in time to suffer large losses in the 1929 stock market crash. Graham decided to learn from the crash and began studying how to buy safe stocks. Within a few years, he coauthored the first book on the subject of value investing with a former student, David Dodd. That 1934 book, Security Analysis, is still found on the bookshelf of many investment professionals. Although Graham’s work is important on its own right, it was the work of another student, Warren Buffett, that wou...

1 2 Under normal circumstances, elections are often followed by selloffs in the stock market. Two examples many investors may remember are the selloffs that occurred in 2000 and 2008. Stocks were already in bear markets as those elections were held, but the selloffs that occurred after the votes were counted still seemed to catch many investors by surprise.   The circumstances associated with the 2000 election may have been unique. That year, a close election required several weeks of recounts and a decision by the US Supreme Court to finalize the results.  The uncertainty associated with...

1 2 We’ve all seen the analyst on CNBC explain with a sense of authority that the S&P 500 index has just crossed above or below an important moving average (MA). We are led to believe this foretells a trend reversal but we never really see data supporting that idea after the statement is made. This leads to the logical question, “are analysts talking about MAs simply to have something to say or are MAs useful?” The answer, as so many answers are in the financial world, is that “it depends.” Sometimes MAs work spectacularly well. This was the case in 2008 when proponents note they warn...