Stock picking is the process investors or traders use to analyze and buy stocks or equities. The key to success in stock picking is to know how to analyze stocks based on fundamental and technical analysis through a stock picking screening process. For instance, if you are analyzing small-cap technology stocks, there are literally thousands of companies that require a system for analyzing in order to narrow down the list to a more manageable group for closer examination.
I was looking at the chart of priceline.com Incorporated (NASDAQ/PCLN) the other day, as the stock surpassed the $1,000 level. But why would I consider paying so much for a stock when there are cheaper comparables in the same online travel space?
It’s true; there are less expensive online travel stocks than priceline.com. But when you are stock picking, you should look at the comparative valuation and growth metrics, and not simply stock prices. The problem is that many investors will tend to base their stock picking on the share price, but the reality is that determining which stock to buy is not like shopping for goods—you don’t always go for the lowest-priced item. It’s like the old adage, “You get what you pay for.” This also applies to stock picking.
Online travel provider priceline.com beat Google Inc. (NASDAQ/GOOG) to become the first company to break the $1,000-a-share barrier (excluding Berkshire Hathaway Inc.). This is an amazing accomplishment for a stock that debuted at $75.25 on March 31, 1999.
The key to priceline.com is that it was the first company to really drive the online travel segment and innovate its service offering along the way in spite of a growing number of competitors. This is why it is tops in the online travel sector.
Chart courtesy of www.StockCharts.com
Of course, there are competitors such as Expedia, Inc. (EXPE) that you could consider when stock picking, but the company is over seven-times smaller than priceline.com, based on market cap.
Chart courtesy of www.StockCharts.com
Based on comparative valuations, however, Expedia is more attractive, trading at 14.4X its 2014 earnings per share (EPS) … Read More
This is an exciting time of the year if you are a fan of baseball. With the start of the Major League baseball season starting in a few weeks, I’m raring to go.
The interesting thing about baseball is its similarities to the stock market.
Success in baseball circles around the abundance of statistics, as is the case in trading stocks, but there are major and subtle differences. In fact, the key to achieving stock market success is more akin to pitching than batting.
Let me explain. In baseball, the ultimate goal for every batter would likely be to hit over 0.300—that is three hits for every 10 at bat for you baseball neophytes. Of course, there are exceptions for homerun hitters, unless you’re a Willie Mays—one of the top baseball players in history. In trading, winning in only 30% of your trades isn’t considered stock market success—it would quickly send you to the sidelines or the poorhouse.
Stock market success is more like pitching. A pitcher who wins 65% of his starts would win about 21 games based on 32 starts. Winning at a 70% win rate would equate to 22 games, and possibly a Cy Young (top pitcher) award for the mantelpiece. In trading, if your win rate was 65% to 70% and you cut your losers, you would likely achieve stock market success.
The key to stock picking and stock market success is simple—make sure you make more money than you lose. To do this, you need to make sure you cut your losses, while you ride the winners.
Many inexperienced traders often get caught up in … Read More
This is an exciting time of the year, as we near the end of the baseball season with the race to the playoffs heating up. Success in baseball swirls around the abundant statistics, as is the case in trading stocks, but there are major and subtle differences. In fact, the key to achieving stock market success is more akin to pitching than batting.
Let me explain. In baseball, the ultimate goal for every batter would likely be to hit over .300—that is three hits for every 10 at bat for you baseball neophytes. Of course, there are exceptions for the home-run hitters like Willie Mays—one of the top baseball players in history. In trading, stock market success doesn’t equate to winning in only 30% of your trades; this would actually send you to the sidelines or poorhouse quickly.
Stock market success is more like pitching. A pitcher who wins 65% of his starts would win about 21 games based on 32 starts. Winning at a 70% win-rate would equate to 22 games and a possible Cy Young award (top pitcher) for the mantelpiece. In trading, if your win rate was 65%–70% and you cut your losers, you would likely achieve stock market success.
The key to stock picking and stock market success is simple—make sure you make more money than you lose. To do this, you need to make sure you cut your losses and, at the same time, ride the winners.
Many inexperienced traders often get caught-up in the emotional roller coaster by taking profits on the top stocks, while keeping the poor performers and refusing to admit a … Read More
One piece of stock market advice for you at this time—be careful.
Success in stock picking is trading in the right direction, while also making sure you have a defensive strategy should the trade turn against you, and using puts as a hedge.
I see some danger on the S&P 500 chart.
In January, I noted the S&P 500 could test 1,400 this year, writing that how much the index rises will be dependent on the global and U.S. economies. (See “My Market View: A Risky Start to 2012.”)
The S&P 500 is hovering at 1,335 and will need to advance another 4.9% to hit 1,400. Of course, the threat of global and domestic slowing could impede the upward move.
The S&P 500 could fall to 1,180 by the year-end, according to research by the Financial Forecast Center. A break at 1,300 is predicted by the end of August and 1,200 by the end of September.
Following the break at 1,400 in March, on two subsequent attempts at 1,400 in late April and early May, the S&P 500 retrenched and failed to hold.
Since June, the S&P 500 showed three successive higher peaks at 1,363, 1,374, and 1,380. Yet unless we see support at around the 50-day moving average (MA) of 1,332 and 200-day MA of 1,315, the index may falter and head lower towards a pivot point at 1,306.
The moving average convergence divergence (MACD) indicator, an indicator I like to look at, also appears set to be flashing a sell signal; but on the three previous occasions, it managed to hold. The fear is of the S&P 500 … Read More
If you’ve been stock picking the last little while, you know it’s tough just to keep your buck, let alone make one. Stock picking is a lot easier when there’s wind at your back. During the technology bubble of the late 1990s, you didn’t even need to do much stock picking; you could have just bought the NASDAQ Composite. Now, in a slow growth environment, making money from the stock market is a lot more difficult.
Stock picking is a lot harder these days, but that doesn’t mean that there aren’t great companies out there benefiting from the big changes taking place in the U.S. economy. Times might be tough at Saks Incorporated (NYSE/SKS), but things are booming at Ross Stores, Inc. (NASDAQ/ROST) and Dollar Tree, Inc. (NASDAQ/DLTR). Thinking about the retail demographic and weak consumer spending, a great investment strategy was to sell the luxury providers and to buy the discount retailers.
The recent stock market performances of Ross Stores and Dollar Tree speak for themselves. Ross Stores was trading just a bit over $20.00 a share in early 2010; now it’s around $70.00. Dollar Tree was trading at $16.00 a share in January 2010; now it’s at $53.00. Just as simple as it was to buy any big, brand-name technology stock in the late 1990s; some of the best stocks in recent history were discount retailers.
Hindsight is always 20/20, but stock picking in any environment can be as simple as asking: who benefits? In any given time period, some industries do much better than others. The key is to be just in front of the trend, before … Read More
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