My Experiment is Over!

For a while, I was experimenting with a stock trading technique.

The Idea

I picked a stock based upon its Beta value, which indicates the volatility of the stock price. The higher the Beta value, the more the stock price fluctuates.

I tried this, because I tried to extend my test with the Slow Stochastic technical indicator, telling me when to buy and sell. The more volatile the stock price, I figured that it would provide me with more opportunities to buy and sell--and MAKE A PROFIT.

Note: The Slow Stochastic indicates when a stock is theoretically overbought (time to sell) or oversold (time to buy).

Stock Market: When Shoud You Care?

Should you care what the stock market is doing?

It depends!

If you're a trader, probably. I'm not a trader--usually.

If you're an investor, you should be more concerned with your company and industry and the price that YOU paid to own part of it, but you should NOT be too overly concerned.

Why not?

European struggles are making people scared. The Dow is below 10000. Get out your checkbook, stockholders!

The Dow went below 10000. I don't know how much more it will drop...and it might drop more.

There are a lot of people panicking about the whole European debt situation. There is plenty of reason to pay attention to what is happening there, but it should only affect us--not decimate us.

Stockowners, are you getting in position?

My second rule of investing is...Buy it ON SALE! (Get a good price on it.)

Since learning how to manage money, I've learned that it's not important HOW MUCH money you make, it's HOW MUCH YOU KEEP.

This has been invaluable, as this has allowed me to accumulate more money than many of my former coworkers who earned more than me. However, it's not the whole story.

The whole saying should read...

Beginning Investing Tip: Use Play Money

When you first begin trying to learn the stock market, don't use real money--use "Play Money."

Like anything else, you need to practice before you stop being rotten. You definitely have no chance of being the best if you never practice, even if you're a natural.

Stock Market: Am I the only one excited by this sale?

The stock market is going DOWN!

Isn't that awesome?

If you've been following my blog, you'll realize that I'm NOT being sarcastic about this.

Foreclosures sets new record: Are you surprised?

I don't know whether we set a record with foreclosures, but the news this morning said that we set a new record. The number of outstanding mortgages where the borrower has missed, at least, one payment is at an all time high.

Ummm...DUH! What did we expect?

China Economy: Is Copycating US Contagious?

This will be a quick post today.

As recently as this week, I've heard that all of us in the United States should move to China. Their economy is doing really well. It's growing. They basically own a good part of the US, anyway.

I've heard plenty, and plenty of it is true. There really are a lot of good things happening in China.

However, we might want to take a closer look.

Stock Investors: Are you panicking? Should you be?

Oh, no! The stock prices keep falling!

Oh my gosh! What do we do now?

A lot of people start panicking. These people are the same people that only saw good things coming when the market was going upward. Now that the market is sliding, many of these same people can only see doom.

These people are REACTING--NOT PLANNING.

Are they wrong? They might be right, but I suggest taking a couple of steps. (Panicking is NOT one of them!)

It's Splitsville for Baidu (BIDU)

Wow! I just looked at the price for Baidu (BIDU), the China version of Google.

The indicator said that it went up, but the price was below $100/share.

Eventually, I figured what happened.

Quick Analysis: ITT Educational Services (ESI)

ESI: ITT Educational Services

For Profit Education Company

Recent Range: $45/share – $125/share (Current Price: 103.16, as of close of 5/11/10)

Price/Sales (P/S) = 2.52 (3.40, Industry)
Price/Book (P/B) = 22.91 (7.83)
Gross Margin = 65.9% (56.9%)
Pre-Tax Margin = 37.8% (16.5%)
Debt/Equity Ratio = 0.96 (0.16)
Current Ratio = 1.3 (1.7)
Return on Equity = 192.3% (47.8%)
Return on Assets = 50.2% (20.0%)

Analysis: I get the feeling that this stock will rise, but I don’t feel comfortable recommending it.

Quick Analysis: Magna International (MGA)

MGA: Magna International

Automotive supplier

Recent Range: $25/share – $95/share (Current Price: 71.92, as of close of 5/11/10)

Price/Sales (P/S) = 0.42 (0.84, Industry)
Price/Book (P/B) = 1.06 (1.86)
Gross Margin = 11.2% (14.2%)
Pre-Tax Margin = 0.0% (1.0%)
Debt/Equity Ratio = 0.02 (0.66)
Current Ratio = 1.5 (1.6)
Return on Equity = -1.0% (1.6%)
Return on Assets = -0.6% (0.9%)

Analysis: OK.

Caution: Master Limited Partnerships (MLPs)

There are some AWESOME deals on a few oil and energy Master Limited Parterships (MLPs).

Careful! Even if the numbers look good, there is a HUGE downside to these.

You might be able to make a ton of profit on the stock price that you buy and sell. (This is not true for all of these right now, but there are a couple that look REALLY good right now.)

So what's the problem? Shouldn't I buy as much of these as I can?

No, I don't think so.

Now what? Europe is all better?

The stock market is starting to make huge leaps and bounds.

Europe is all fixed. They are going to bail out Greece after all.

Wait a minute!

What's wrong with Ford (F)?

This is craziness.

I get that the entire market is sliding. There are concerns about Greece's economy and the riots associated with the country's forced cutbacks to address that.

Ford (F) posted over $2 BILLION dollars of profit. They increased their year-to-year sales this past month over 30%. They have a fuel-efficient car that's ready for today's market. They haven't lost their Mustang. They still have their leader, who has shown great direction for the company and seems to be an expert at getting his own people to follow him in that direction.

So why has the stock dropped ridiculously during the past few days?

Quick Analysis: Kimco Realty Corp (KIM)

KIM: Kimco Realty Corp

Real Estate Investment Trust (REIT) that invests primarily in shopping centers anchored by grocery store chains and discount stores located a short distance outside metropolitan areas

Recent Range: $9/share – $45/share (Current Price: 15.30, as of close of 5/5/10)

Price/Sales (P/S) = 7.89 (5.55, Industry)
Price/Book (P/B) = 1.28 (3.19)
Gross Margin = 69.9% (68.6%)
Pre-Tax Margin = -4.4% (3.8%)
Debt/Equity Ratio = 0.91 (2.51)
Current Ratio = Not Available
Return on Equity = -1.3% (-2.2%)
Return on Assets = 0.0% (0.8%)

Analysis: There are more things about this stock to like than dislike. The Price/Book is higher than I like, but it is a lot smaller than its competitors.

Quick Analysis: Career Education Corp (CECO)

CECO: Career Education Corp

For Profit Education Company

Recent Range: $13/share – $35/share (Current Price: 29.47, as of close of 5/4/10)

Price/Sales (P/S) = 1.34 (3.49, Industry)
Price/Book (P/B) = 2.74 (8.06)
Gross Margin = 65.3% (56.8%)
Pre-Tax Margin = 12.2% (15.3%)
Debt/Equity Ratio = 0.00 (0.22)
Current Ratio = 1.4 (1.9)
Return on Equity = 15.6% (47.2%)
Return on Assets = 9.8% (19.9%)

Analysis: Confused…There are a lot of mixed messages here.

Quick Update: Radient Pharmaceuticals (RPC)

On 4/20/10, I posted a Quick Analysis on Radient Pharmaceuticals (RPC). (Click HERE if you would like to see that analysis.)

There is one change really worth noting:

Now people are panicking?

Now what?

The market is tanking, reportedly because people are panicking over Europe's financial situation and commercial real estate concerns.

Don't get me wrong! I like seeing lower prices. (I'd like seeing them even more if I had money sitting on the sidelines to buy all of these things on sale.)

It just doesn't seem to make sense to me.

I realize that the stock market has been creating its own sort of overpriced bubble for a while. Several stocks went from being way too under-priced to costing more than they're worth seemingly overnight. (It's really been over the course of the past year-plus.)

It's just that things I am reading TODAY, just....

Quick Analysis: Linn Energy (LINE)

LINE: Linn Energy

Oil and Natural Gas Company, located in the Southern portion of the US

Recent Range: $14/share – $37/share (Current Price: 27.10, as of close of 4/30/10)

Price/Sales (P/S) = 12.34 (7.33, Industry)
Price/Book (P/B) = 1.37 (2.43)
Gross Margin = 51.1% (64.1%)
Pre-Tax Margin = -109.8% (-40.2%)
Debt/Equity Ratio = 0.65 (0.49)
Current Ratio = 2.0 (1.4)
Return on Equity = -11.4% (1.5%)
Return on Assets = -6.5% (2.4%)

Analysis: Not great…