Cheap Stocks Analysts Believe Could Double

Analysts are almost always wrong. In an average quarter, for example, about two thirds of the companies reporting earnings will deliver results that exceed analysts’ consensus estimates. The consensus estimate is an average of all published estimates. Of the remaining companies, usually more than half miss the consensus estimate. That means, in a typical quarter, the consensus earnings forecast will be right for just 10% of the companies. Analysts are wrong, in other words, about 90% of the time. Despite that fact, analyst estimates are important to consider. Ignoring them because they a...
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When Is It Safe to Buy a Dip?

“Buy the dip.” We hear this advice all the time. Every market sell off, even a dip of just a couple percent, leads to a chorus of analysts telling us to buy the dip. Left unsaid is that every major decline and every bear market begins with a dip. As investors, our challenge is to distinguish the dip from something more significant. Doing this seems to require knowledge about the future. To be 100% accurate, it would require that knowledge. But, there are some useful guidelines investors can use to determine when a bear market is beginning. 1987 There is no doubt October 1987 was a bear ma...
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When an Overbought Indicator is a Buy Signal

The stock market is overbought. That is a common theme on CNBC as analysts talk about how extended averages are. They are certainly correct that the S&P 500 and some of the other major averages are overbought. But, that is not necessarily bad news for the bulls. Overbought is a term used by technical analysts to describe a market that seems to have moved too far to the upside. It usually results from a relatively rapid gain. After a market becomes overbought, technical analysts look for a pullback in price. The theory of overbought, and the converse of that idea which is an oversold ...
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The Best Trades for August, From a Strategy Up More Than 20% This Year

You may recall that we began sharing real time buy recommendations for a successful trading strategy at the beginning of the year. Each month, we provide a list of stocks that have historically delivered gains for the next month. This article continues with that process. And, as we have each month, we also continue reporting our results. The strategy is among the simplest seasonal trades possible. Few traders follow seasonal strategies although these strategies are often profitable. They are also relatively low risk because they limit market exposure to short periods of time. To apply this ...
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Magic Formula Stocks

There are a number of ways value investors hunt for stocks. Among the techniques is the Magic Formula, a trading strategy first detailed by Joel Greenblatt in his book, The Little Book that Still Beats the Market. This book was a New York Times bestseller and the book’s web site indicates over 300,000 copies are in print. The book completely explains a formula that screens for value investments. The author maintains a free web site that offers access to lists of stocks meeting the criteria of the Magic Formula right now. Before addressing the formula, let’s look at the question of wh...
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What a Low VIX Really Means

VIX is low. Market analysts have been telling us that for months. And, many of the analysts are telling us that the fact that VIX is low means we should be worried. They believe a low VIX reading is a sign of complacency among investors. Complacency is considered to be bad. Under this interpretation, complacency indicates investors are not paying enough attention to risk. They might become too aggressive when they forget about risk. Or, the market may simply fall when investors are least expecting. This has become a popular theme among market analysts. One Bloomberg pundit has summed up ...
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Cheap Peter Lynch Stocks

Peter Lynch is one of the most successful investment managers of all time. But, he retired many years ago and many new investors are unfamiliar with him. That is unfortunate since there is much to learn from studying Lynch’s record. Lynch’s record is among the most remarkable in market history. He managed the Fidelity Magellan Fund, and grew it into the largest mutual fund in the world by the time he retired. From 1977 until his retirement in 1990, Lynch delivered average annual gains of 29.2% to investors in his fund. Lynch’s gains were more than double the average annual return for the...
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Some Short Term Trading Strategies that really works

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...
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Potential Buffett Acquisitions

Warren Buffett is always on the hunt for potential acquisitions. His investment vehicle, Berkshire Hathaway, ended the latest quarter with nearly $100 billion in cash and equivalents on the books. This gives Buffett a lot of investment capital for potential deals. We know Buffett is looking for deals. Berkshire was part of the team that put together the failed $142 billion Kraft-Unilever attempt earlier this year. More recently, Berkshire Hathaway Energy, a subsidiary of Berkshire Hathaway, announced a definitive merger agreement with Energy Future Holdings Corp. which will ultimately resul...
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Here’s Why Small Investors Need to Consider Short Term Trading

If you’re a small investor, you may have learned that many financial advisers don’t want your money. It’s common in the business to see minimum account sizes that are well beyond the means of small investors. While there are advisers with account minimums of $1 million or more, some investors are starting with less than $25,000. It might be frustrating to find that many financial professionals want nothing to do with small investors. But, sometimes advisers give meaningless advice, even to investors that meet their account minimums. Many advisers will spend a great deal of time talking a...
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