In a recent blog post, we highlighted the potential benefits of using short term trading strategies. One advantage of trading frequently can be the fact that it allows a trader to rapidly compound gains. Through that process, wealth can accumulate quicker. Our post drew a variety of responses. Some readers asked for specific examples of short term trading strategies. There are many resources available on this topic. But, most of the best strategies will require a great deal of effort or software that may be expensive. Some of the most popular strategies among short term traders include t...

1 2 The S&P 500 has gained almost 9% since the end of last year, defying the prediction of many experts for a bear market. This is a strong market and the bulls have been well rewarded. As difficult as it is to beat a bull market, we have been doing that this year with a simple strategy. And we have been publishing our trade recommendations in advance each month. At the beginning of the year, we began sharing real time buy recommendations with you for a successful trading strategy. This month, we continue with that process. The strategy is among the simplest seasonal trades possibl...

1 2 Most of us like to believe life is fair. But, in reality, very few market transactions are fair. Economists believe almost all transactions involve asymmetric information. In most transactions, one party knows more than the other party. For example, when consumers are buying a used car it seems fair to assume the seller knows more about the car than the potential buyer. This problem is so well known many states and the federal government have taken steps to level the playing field. Their efforts to create fairness are called “lemon laws” and usually require sellers to compensate buyer...

1 2 It is often said that cash is king. This phrase has many meanings to different people. For investors, it can mean maintain a large cash balance so they have buying power ready when they find bargains in the stock market trading. Or, investors may apply the phrase as a screening tool to identify companies with large cash balances that allow the companies to take advantage of opportunities as they become available. In this article, we look at why companies with large cash balances can make good investments and we identify some companies that could be good Investment Opportunities right now...

1 2 In recent months, traders have seen news stories move stock markets. They have always known this. We often see stock prices make sharp moves after earnings announcements. But, in the past year we have seen widely anticipated events move markets in unexpected ways. Let’s consider the US Presidential election as an example. Heading into election day, it was widely believed that Hillary Clinton would win while a surprise victory by Donald Trump would set off a bear market. As the election results became clear, the overnight markets seemed to validate these opinions. Futures on the S&...

1 2 We’ve all seen it happen dozens of time. A stock sells off sharply after missing analysts’ expectations. Sometimes, earnings per share (EPS) come in just a penny below expectations. But that small miss can cost investors hundreds of millions of dollars. Of course, we’ve also seen the opposite happen. A stock soars after the company delivers EPS that beat expectations. It seems that beating expectations is all it takes for some stocks to end up on the list of the market’s biggest gainers on the day after they report earnings. As we look at these news stories, we noticed a common the...

1 2 In a recent blog post, we described how to create a screen to spot stocks using indicators that appear to be important to Warren Buffett. Our screen focused on a few fundamental indicators and targeted companies with high return on equity, strong cash flow and management teams that maximize the return on assets investors have entrusted to them. We used the free screening tool at the FinViz web site and applied the setting shown below. As we noted, our screen serves as a reasonable starting point for additional research. One avenue for research is in stocks Buffett cannot buy. He...

1 2 In the never ending search for a potential market top, some analysts use sentiment analysis. This type of analysis relies on sentiment indicators which are tools that are designed to identify how investors feel about a market. Sentiment is independent of fundamental information and price data and is based solely on feelings, which can provide significant information not factored into the fundamental or technical picture. Sentiment analysis is based on logic. The general idea is that when everyone is bullish, everyone is fully invested in the stock market and the market is unlikely to ...

1 2 Over the long run, the biotechnology sector has been a consistent winner in the stock market. The chart below shows the biggest winners among sectors over the past five years and biotech is near the top of the list. This has often been the case for most of the past twenty years or so. As a group, biotechs have done well. There are always winners and losers within the group but the winners have usually done so well that the sector is consistently on the list of best performing sectors over the long run. Recently, that has not been the case. The next chart shows the worst performing ...

1 2 Last week we reviewed the failed bid for Unilever that had Warren Buffett’s backing. As the world’s greatest investor, we find it useful to study not just what Buffett says but also what he does. His actions are, of course, more important than his words. Buffett’s actions are usually only known when a deal is announced. With Unilever, we had an opportunity to study a failed deal. The deal failed because Buffett was true to his word. In interviews, he has explained that combining the consumer brands of Unilever with those of Kraft Heinz looked like a good deal. A representative of Kraf...