Posts Tagged ‘penny stocks’
Playing turnaround situations is a tough thing to do in the stock market. If a company’s share price experienced a material price retrenchment, it’s usually done so for a very good reason. Penny stocks are that way not because they want to be.
It’s useful scanning the market for 52-week lows and 52-week highs; the process of doing so helps in the generation of lists of stocks for further research.
One company that just experienced a major price reversal on the stock market is Strayer Education, Inc. (STRA). This company provides postsecondary education and degrees online and on campus, and offers executive Master of Business Administration degrees in collaboration with the Jack Welch Management Institute.
The company’s share price bounced off a 52-week low, soaring approximately $13.00 a share to just over $47.00 after announcing 2013 fourth-quarter earnings that substantially beat the Street. Strayer Education’s one-year stock chart is featured below:
Big price moves like this on the back of much higher-than-average trading volume are worthy of further examination as a potential turnaround trade. A stock market speculator could have bet on the company’s earnings results, but this would’ve been total guesswork and an enormous risk. A better bet might be one directly related to the price reversal’s continued momentum on a near-term basis.
Strayer Education said that its fourth-quarter revenues fell 13% to $124.1 million compared to $141.9 million for the same period in 2012. The company experienced higher revenues per student but lower enrollment.
2014 winter term student enrollment dropped 14% to 41,098 students and company management implemented a restructuring of campus operations, … Read More
Tesla Motors, Inc. (TSLA) has been an excellent trade. The position has recovered strongly and is a very good example for traders who speculate on changes in investor sentiment.
Trading a stock like Tesla is about price momentum as much as anything. And every business, no matter how successful or fast-growing, experiences operational difficulty. This creates opportunity for a trader who is comfortable going against the market.
Tesla ran into problems with its “Model S” and was required to do a recall to help prevent battery fires after an accident. It was a short-lived but perfect storm in investor sentiment, which created an attractive new entry point for traders. (See “The Stock Everyone Is Talking About; How Much Higher Can It Go?”) The company’s stock chart is featured below:
While many investors/traders are attracted to low-priced or penny stocks for their turnaround potential, these stocks are usually down for a reason. In buoyant, highly liquid capital markets like we have today, a buy-high/sell-higher type of strategy can pay off.
The risk is that the price momentum ends, whether it is due to a material corporate event or a general decline in speculative fervor. Biotechnology stocks as a specific stock market sector are particularly prone to strong price momentum because of the strong participation from institutional traders.
Tesla is now a $24.0-billion company. The position didn’t do that much after listing, then it just exploded with extremely strong price momentum on much higher-than-average volume.
As a research strategy, scanning the stock market for new highs can yield some very good trades and/or stocks worth following … Read More
Hindsight is always 20/20 when it comes to the stock market, and it’s impossible to be right with your picks all of the time. Recently, in this column we’ve been looking at a number of large-cap companies that I view as being worthy of consideration when they’re down in value on the stock market.
One of the most successful initial public offerings (IPOs) in recent history is MasterCard Incorporated (NYSE/MA). Among large-cap companies, this one only pays a very small dividend, but it’s been a powerhouse wealth creator on the stock market. The stock just hit an all-time record high, and while it did pull back with the broader market during the financial crisis of 2008/2009, it’s been going virtually straight up since being listed in 2006. I remember when both MasterCard and Visa Inc. (NYSE/V) listed on the stock market, and I thought that they would both make for good investments. What a mistake it was not buying shares in these companies. MasterCard’s stock chart is featured below:
Chart courtesy of www.StockCharts.com
MasterCard is now a $65.0-billion company. The stock doubled over the last year and a half, and it tripled over the last three and a half years. A lot of investors might not think those kind of returns are available from large-cap companies, but obviously, the market proves they’re wrong.
Another powerhouse wealth creator among large-cap companies is Alexion Pharmaceuticals, Inc. (NASDAQ/ALXN), which doubled in value on the stock market over the last year and a half. (Alexion has recovered from every major price retreat it experienced over the last 10 years.) Pharmaceutical and biotechnology … Read More
Well, if people haven’t been paying attention to the U.S. policy on the dollar, it’s no secret that the administration is hoping for a massive decline in the currency to help pump up exports. With the Federal Reserve announcement that they are keeping rates low until late 2014, we all know that this means cheap money will be flooding into commodities as the dollar sinks.
What can you do? Several things are important to note. Yes, the first thing I’m sure you’ve thought of is gold, which I completely agree with. But I would also look to diversify your commodity exposure in other areas like copper. We’ve seen a strong move in copper from the bottom in October, up almost 30%, from approximately $3.00 to the current price of $3.88 per pound. But, with more money flooding the system, we could see last year’s copper highs of just over $4.50 reached and exceeded.
But is copper the right investment for you? Not necessarily, as there are a lot of mining companies that dig for copper and are very reasonably priced. One problem with just buying mining companies in the U.S. is that you are exposed to the dollar when it declines. If commodities go up, so should currencies like the Canadian dollar. A better trade would be to look for copper mining companies listed in Canada. This would give you a two-pronged attack: make money off higher copper prices through higher prices of mining companies and benefit from a higher Canadian dollar against a weaker U.S. dollar.
In a much-anticipated initial public offering (IPO), Dunkin’ Brands (NYSE/DNKN) was set to debut on the New York Stock Exchange yesterday. The company owns two big-name franchises — Dunkin’ Donuts and Baskin Robbins — and could be much sought after.
The second-quarter earnings season has started strong. As of July 20, 88 of the S&P 500 companies have reported, with 78% beating estimates and 10% falling short, according to Thomson Reuters.Strong earnings from technology have provided the catalyst for the buying, helping to offset the significant debt issues in Europe and the U.S.
Two news items this morning I want my readers to be aware of as we start June…
The New York-based Conference Board’s index of consumer confidence fell “unexpectedly” in May to a six-month low. It wasn’t “unexpected” by readers, as I have been warning about the economy cooling in 2011.
Sitting at my desk this morning, getting ready to write today’s lead article for PROFIT CONFIDENTIAL, my economically slanted mind started wandering…
Will the Dow Jones Industrial Average be successful at penetrating through the 13,000 level, or will the bear-market rally just slowly fade away? If I was a betting man, I’d have to go with Dow Jones 13,000.
We are living in unprecedented times of government and monetary stimulus. The Federal Funds Rate has remained at zero for so long, most people can’t remember the last time U.S. T-bills paid 6.5% interest. (It was 20 years ago, back in 1991.)
As of late, I’ve been expressing my concern about inflation, how I believe our overly generous monetary policies of the past two years and other factors would give rise to sudden and unexpected inflation in America. Inflation, as you know, is already a big problem in many countries.
Stocks are facing some upside resistance at this juncture. Blue-chip companies continue to lead the way this year, with small-cap and technology companies trailing.
My best stock market advice to you is to make sure you are diversified. You need to add small-cap stocks in an effort to increase the expected return of your portfolio.
I would like to discuss the concept of asset allocation as a critical part of any prudent portfolio management strategy.
Asset allocation refers to the asset mix of your portfolio, which is divided into the three major asset classes: cash; fixed income; and equities (stocks).
As the macro and micro factors change, as well as your investment objectives, you should rebalance your asset mix accordingly to the new conditions.
In general, without getting too theoretical, the risk and expected return of an investment rises as you move along from cash to fixed income to equities. The higher the risk assumed, the higher the expected rate of return, albeit this is not always the case in reality. For instance, adding penny stocks and micro-cap stocks could add to your total return.
The relationship between risk and return should be used as a guideline.
The proportion of each asset class within your portfolio is dependent on your individual risk profile. For instance, the more risk-adverse investors and people who are close to retirement may want a higher mix of fixed income/cash and to steer clear of too much equity. On the other hand, risk-tolerant investors and those investors who are young may want to take a more aggressive approach and maintain a higher mix of equities in … Read More
The key first-quarter earnings are coming to an end, and it has proved to be a decent quarter. With 445 S&P 500 companies having already reported as of May 9, 69% have exceeded expectations, while 20% of the companies were on the short side. The blended growth rate for the first quarter has been impressive at 18.5%, up from 12.2% on January 3, 2010. Again, these are decent results; but, keep in mind that 31% of the companies failed.
And whether it is penny stocks, micro-cap stocks, or S&P 500 companies, you have to be impressed by the sustainability of the positive sentiment. The real test now comes as stocks edge higher. We need to see a strong break higher or risk a relapse.
Did you also realize that the best part of the year for making money is over? The period from November to April is historically the best six months of the year for stocks, according to The Stock Trader’s Almanac. This period has come to an end. May started with three down days. In addition, the six months from May to October have been the subpar versus the November-April period. This is a generalization, so good stock picking will succeed.
A red flag remains, as the associated trading volume continues to be light on up days, which fails to help confirm a strong buy signal. Unless we see increased volume on the up days, I question the lack of mass market participation in the current rally.
The near-term signals have a positive bias, but watch the neutral Relative Strength and overbought condition.
The sentiment in the … Read More
Chinese stocks are again the focus of increased attention and speculative trading. In China, the benchmark Shanghai Composite Index (SCI) had been rallying. It’s up over nine percent this year, which is encouraging given that the index lost 14.31% in 2010.
An area that we continue to see some action is in Chinese initial public offerings (IPOs), but to a lesser degree due to the negative publicity of Chinese reverse mergers.
There are so many Chinese penny stocks and micro-cap stocks waiting to cross the ocean in search of U.S. dollars and exposure. The key to successful stock picking in this area is research.
The first-quarter earnings season is upon us again and, depending on the results, it could help to drive trading over the next several months. Traders are looking for direction and reasons to invest, but the overseas risk in European debt and higher interest rates in China are not making it easy.
The first quarter is completed. For stocks, it was positive in spite of several bouts of volatility. The small-cap Russell 2000 finished the quarter tops, advancing over seven percent. Technology has also been showing some attraction in the recent weeks.
My best stock market advice to you is to embrace the concept of investment diversification and the need to add small-cap stocks in an effort to increase the expected return of your portfolio.
I would like to discuss the concept of asset allocation as a critical part of any prudent portfolio management strategy.
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