First off I’m pretty disappointed with the stock market action for the week. The majority of the companies that reported earnings exceeded the analyst’s estimates. I was very pleased with the results. Obviously the market felt otherwise. Friday’s release of a poor consumer sentiment reading of 65 came with some surprise. The consensus estimate was to be 74.5 according to Briefing.com. The consumer sentiment is very important for the market as this determines the confidence of people. By this I mean confidence in the current and future outlook of the economy. A higher # is better and seeing it drop so low is definitely not reassuring for Wall Street and investors.
When there is a possibility of a slow down investors and traders shoot first and ask questions later. That’s why Friday was such a disaster even though General Electric (GE) and Citigroup (C) all reported good numbers. The market was dragged down by an onslaught of selling pressure and the DJIA closed down 2.52% S&P 500 down 2.88% and the NASDAQ off a whopping 3.11%. On the bright side at least the DJIA managed to stay above 10,000. I think Friday was an overreaction to the economy slowing down. I personally have become more optimistic about the future of the economy. I expect some good earnings next week so hopefully the stock market will sweep the negativity under the rug, pull up their pants and quit crying every time some piece of data is negative. Earnings season is here for a reason to gauge the current and future results of companies. The results so far are positive and I feel we were short changed this week with the markets lackluster action. I’m sticking with the fundamentals of an individual company! The economic data has been negative for so long and I’m sick of hearing about it! Referring to an old joke from high school I say “Throw it in the trash” (Dan B you know what I’m talking about)
Enough of the negativity! Next week is my favorite week of earnings. The week the oil service companies report. I’m talking about the largest of the oil service companies. We'll see the likes of Halliburton (HAL) Weatherford International (WFT My favorite) and the largest of them all Schlumberger (SLB) report next week. (HAL) will report tomorrow, (WFT) on Tuesday and (SLB) on Friday. I have confidence that what they have to say will be good. The earnings of these companies will be a toss up since oil prices weakened after the BP oil spill and could have negatively affected earnings for this quarter, but we invest for the future and over the weeks the rig count has increased almost every week for the past 3 months. It may not seem like oil is being drilled but the increased rig count is an indicator that the drilling business is picking up and the earnings of all of these companies will benefit in the near future. The one to watch and pay attention to this week will be Schlumberger. Fund managers always pay attention to the industry leader. Good things out of Schlumberger means higher stock prices for all the oil service companies. I’m going to go out on a limb and say positive news will come from SLB on Friday. I just have a feeling! I have been waiting patiently for the energy sector to come back into favor and I think this may be the quarter that does it!
Lastly, a few other great names are set to report next week, including Apple (AAPL) on Tuesday, Goldman Sachs (GS) on Tuesday, and a family favorite Caterpillar (CAT) on Thursday. This is a very exciting week since many of my recommendations from my stock prediction game will report. I think I’m going to win!
Well that’s it for me. Enjoy the rest of this fine Sunday. I know I will! My wife is making barbecue cheddar bacon burgers for dinner tonight! YEAH BUDDY!!!
(All research was done @ http://finance.yahoo.com/)
Clay-
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Showing posts with label Citigroup. Show all posts
Showing posts with label Citigroup. Show all posts
Sunday, July 18, 2010
Thursday, July 8, 2010
Penny Stocks. Invest? Or Not Invest?
Today I would like to respond to a question I had awhile back about investing in penny stocks.
Comment:
Clay, Great stuff... a lot of good information! Let us know your thoughts on the so called "penny stocks" With the market going to way it is going is it advisable to venture that way? or stick to the bigger stocks?
First off in I would like to say in a market like this a lot of companies have been put into the penny stock category. A penny stock is considered any company that trades for under $5.00 a share. Penny stocks in my opinion are very speculative, volatile, but rewarding at the same time. Should you invest in them? Of course you should. Everyone should make room for at least one speculative company in their investment portfolio excluding retirement money and those nearing retirement. Those who are late in the game cannot afford to lose any money. Penny stocks or stocks speculative in nature should be less than 20% of your portfolio. This is only to reduce your risk and keep you from losing all your money in case your speculative play doesn’t work out.
Penny stocks have the potential for huge upside profits and if nothing else it’s a great way to keep you motivated with stocks. Penny stocks keep you on your toes and are extremely fun to watch when the price moves in the right direction. Not all penny stocks are considered equal. There is usually a good reason why a company trades below $5.00. When investing in a penny stock doing your research to find out that reason is key.
Some stocks are put there because people panic and worry that the outlook of the company is grim and many flee out of fear. One stock that comes to mind is Ford (F). Ford from Sep of 2008 into the end of April of 2009 traded below $5.00. Many were worried that the automotive industry would never turn around. GM was struggling and on the verge of bankruptcy, cars weren’t selling and many thought Ford would follow GM's footsteps. There was no reason to own Ford and therefore the stock price fell to levels way past belief. If you would have spotted the potential of the economy turning itself around and buying Ford at that time you would have made a small fortune. (Current Price $10.62 a share) That's over a 900% GAIN since the Nov 17th 2008 low of a $1.01 a share. This is a great example of a penny stock winner.
On the negative some stocks go down into penny stock territory and never come back. A great example of this is Lehman Brothers (LEH) this was a big head liner when the stock market began to crash in 2008 as the financial market began to tighten, banks were losing money on defaults of loans, and one of the biggest financial institutions that didn’t make it was Lehman Brothers. This by far was one of the biggest losses the stock market had to bear. People were in disbelief that a great company like Lehman Brothers was in so much trouble that it had no choice, but to close up shop and file for bankruptcy. The bad/misleading thing is that still to this day Lehman trades on OTC (Over The Counter Market). This is highly unregulated and Lehman continues to trade because brokers continue to make commissions off this company even though it's virtually worthless. This is an example of one stock that will never come back. This is very unfortunate, but this can happen to even the best of companies.
Some people think that investing in penny stocks is a sure fire way to make money. I explained in detail that this isn’t the case for all penny stocks. People think their cheap and would rather buy thousands of shares of a penny stock than to buy 10 shares a good quality company. I would say you have a better chance of keeping your money by investing in the good quality stock, but there is nothing wrong with a speculative play along side a portfolio of good quality stocks. You never know that speculative stock could be the next Apple!
Here’s the thing with penny stocks. Penny stocks go up on large volume. There needs to be a good reason for volume to increase drastically since many fund managers aren’t allowed to touch penny stocks. A great penny stock will have a story that is very enticing. A company may have a new gadget or product that has the potential to be huge. Many drug companies trade at low prices for the potential of a new up and coming drug that could get FDA approval. Penny stocks are driven by positive news. If the volume is stagnant and there is no near term catalyst to move the stock you could end up sitting on your stock for years. Holding onto a loser is not fun and is highly advisable that you dump your stock if the reason you invested your money changes to the negative. Also, if you happen to come across a penny stock newsletter or a pamphlet in the mail please beware that most likely this is a scam to increase the volume of stock to allow for a few people to sell their shares while you lose money. It's called pumping and dumping!
The downfall is penny stocks are volatile in price and can drive a person to panic and sell for a loss. Many will end up going to zero, but the potential to find those hidden gems is still worth looking for as long as you invest a small portion of your money. A good strategy for investing in penny stocks would be to allocate your speculative money over a basket of penny stocks (5-10) this way you can spread your money around and diversify just like you would with any other investment. You will have a few that go to zero, maybe some that don’t move at all, but your odds of finding that potential moneymaker is definitely better than betting on one single stock. Diversification allows you to preserve your capital and continue the fight if some of your stocks happen to flat line.
So yes it’s okay to invest in penny stocks, but be prepared for volatility and the chance to lose your entire investment. On the positive as I said earlier you could stumble upon the next Apple! I have had my fair share of winners and losers in the penny stock territory and continue to believe that money can and will be made investing a small portion of your portfolio in penny stocks. One good penny stock to watch is Citigroup (C). Citigroup trades under $4.00 at the moment and is being held down by the continuous selling of shares by the government. Once the volume lets up I see this stock moving higher. It's a great turnaround story and my buddy/investment guru Jim Cramer has the same opinion. Thanks Jim Cramer for the heads up on Citigroup!
Happy Trading!
Thank You,
Clay-
Have a Question? Send Questions to wheatleycsmk@gmail.com
New Content every Thursday and Sunday.
Occasional Stock Market Commentary during the week.
Feedback Welcome!
Interested? Please become a follower
Comment:
Clay, Great stuff... a lot of good information! Let us know your thoughts on the so called "penny stocks" With the market going to way it is going is it advisable to venture that way? or stick to the bigger stocks?
First off in I would like to say in a market like this a lot of companies have been put into the penny stock category. A penny stock is considered any company that trades for under $5.00 a share. Penny stocks in my opinion are very speculative, volatile, but rewarding at the same time. Should you invest in them? Of course you should. Everyone should make room for at least one speculative company in their investment portfolio excluding retirement money and those nearing retirement. Those who are late in the game cannot afford to lose any money. Penny stocks or stocks speculative in nature should be less than 20% of your portfolio. This is only to reduce your risk and keep you from losing all your money in case your speculative play doesn’t work out.
Penny stocks have the potential for huge upside profits and if nothing else it’s a great way to keep you motivated with stocks. Penny stocks keep you on your toes and are extremely fun to watch when the price moves in the right direction. Not all penny stocks are considered equal. There is usually a good reason why a company trades below $5.00. When investing in a penny stock doing your research to find out that reason is key.
Some stocks are put there because people panic and worry that the outlook of the company is grim and many flee out of fear. One stock that comes to mind is Ford (F). Ford from Sep of 2008 into the end of April of 2009 traded below $5.00. Many were worried that the automotive industry would never turn around. GM was struggling and on the verge of bankruptcy, cars weren’t selling and many thought Ford would follow GM's footsteps. There was no reason to own Ford and therefore the stock price fell to levels way past belief. If you would have spotted the potential of the economy turning itself around and buying Ford at that time you would have made a small fortune. (Current Price $10.62 a share) That's over a 900% GAIN since the Nov 17th 2008 low of a $1.01 a share. This is a great example of a penny stock winner.
On the negative some stocks go down into penny stock territory and never come back. A great example of this is Lehman Brothers (LEH) this was a big head liner when the stock market began to crash in 2008 as the financial market began to tighten, banks were losing money on defaults of loans, and one of the biggest financial institutions that didn’t make it was Lehman Brothers. This by far was one of the biggest losses the stock market had to bear. People were in disbelief that a great company like Lehman Brothers was in so much trouble that it had no choice, but to close up shop and file for bankruptcy. The bad/misleading thing is that still to this day Lehman trades on OTC (Over The Counter Market). This is highly unregulated and Lehman continues to trade because brokers continue to make commissions off this company even though it's virtually worthless. This is an example of one stock that will never come back. This is very unfortunate, but this can happen to even the best of companies.
Some people think that investing in penny stocks is a sure fire way to make money. I explained in detail that this isn’t the case for all penny stocks. People think their cheap and would rather buy thousands of shares of a penny stock than to buy 10 shares a good quality company. I would say you have a better chance of keeping your money by investing in the good quality stock, but there is nothing wrong with a speculative play along side a portfolio of good quality stocks. You never know that speculative stock could be the next Apple!
Here’s the thing with penny stocks. Penny stocks go up on large volume. There needs to be a good reason for volume to increase drastically since many fund managers aren’t allowed to touch penny stocks. A great penny stock will have a story that is very enticing. A company may have a new gadget or product that has the potential to be huge. Many drug companies trade at low prices for the potential of a new up and coming drug that could get FDA approval. Penny stocks are driven by positive news. If the volume is stagnant and there is no near term catalyst to move the stock you could end up sitting on your stock for years. Holding onto a loser is not fun and is highly advisable that you dump your stock if the reason you invested your money changes to the negative. Also, if you happen to come across a penny stock newsletter or a pamphlet in the mail please beware that most likely this is a scam to increase the volume of stock to allow for a few people to sell their shares while you lose money. It's called pumping and dumping!
The downfall is penny stocks are volatile in price and can drive a person to panic and sell for a loss. Many will end up going to zero, but the potential to find those hidden gems is still worth looking for as long as you invest a small portion of your money. A good strategy for investing in penny stocks would be to allocate your speculative money over a basket of penny stocks (5-10) this way you can spread your money around and diversify just like you would with any other investment. You will have a few that go to zero, maybe some that don’t move at all, but your odds of finding that potential moneymaker is definitely better than betting on one single stock. Diversification allows you to preserve your capital and continue the fight if some of your stocks happen to flat line.
So yes it’s okay to invest in penny stocks, but be prepared for volatility and the chance to lose your entire investment. On the positive as I said earlier you could stumble upon the next Apple! I have had my fair share of winners and losers in the penny stock territory and continue to believe that money can and will be made investing a small portion of your portfolio in penny stocks. One good penny stock to watch is Citigroup (C). Citigroup trades under $4.00 at the moment and is being held down by the continuous selling of shares by the government. Once the volume lets up I see this stock moving higher. It's a great turnaround story and my buddy/investment guru Jim Cramer has the same opinion. Thanks Jim Cramer for the heads up on Citigroup!
Happy Trading!
Thank You,
Clay-
Have a Question? Send Questions to wheatleycsmk@gmail.com
New Content every Thursday and Sunday.
Occasional Stock Market Commentary during the week.
Feedback Welcome!
Interested? Please become a follower
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