A New Year - Same Old Tax Tricks

As the year closes, many of us take time to reflect our thoughts. In fact, often this time of the years brings more thought than action, especially with the nostalgia of years past and the intention of our newest New Year's resolutions.

Within the stock market, however, some people are very active.

This might be true, anyway, but I'm referring to one specific thing.

TAXES.

I never have any proof, but it seems to me that the price of many stocks are mildly to strongly affected by taxes.

I see four (4) main things playing this time of year.

Bug Yourself: Take Advantage of Help You Receive

We all have been this bug, and all of us have been in a position to kill that bug sitting on the wall or the floor.

Personally, I've never liked the idea of killing anything, including bugs. (Currently, I'm not a vegetarian, which makes me a HUGE hypocrite, but that is a topic for another area.) So I decided to save this bug.

Accepting Help

When we're in trouble, most of us wish we could just get a little break. Might I even use the word, "help?"

Many people expect help, and these people are not the target of my post, but most of us wish that we could have some help, and, of course, we'd take advantage of it if we got it. Right?

Gold is Not a Golden Investment

That's right. Gold is NOT the golden investment that many people assume it be.

I am not saying that gold will not go up. Then again, I am not saying that gold will not go down, either.

In fact, I am making absolutely NO predictions about the future price of gold.

Why do some people place more value in gold than money, specifically the US Dollar?

Management: In 30 Years who will be King, Wal-Mart or McDonald's?

Who will be tomorrow's king?

30 years from now, will Wal-Mart still rule the bargain retail industry? McDonald's the fast food industry?

I say that only one (1) of them will: McDonald's. The answer lays in the corporate layout of their management..and the way they grow.

Quick Analysis: Home Depot (HD)

HD: Home Depot

Retail for general home contactors and do-it-yourself home repairs

Recent Range: $21/share – $40/share (Current Price: 35.09, as of close of 12/23/10)
Price/Sales (P/S) = 0.85 (0.80, Industry)
Price/Book (P/B) = 3.01 (2.56)
Gross Margin = 34.2% (33.8%)
Pre-Tax Margin = 7.0% (6.7%)
Debt/Equity Ratio = 0.51 (0.42)
Current Ratio = 1.3 (1.3)
Return on Equity = 15.9% (13.4%)
Return on Assets = 7.2% (6.6%)

Analysis: This company has widely recognizable name and has a great company concept. However, I am lukewarm on the stock.

Investing in the Stock Market: Is it like Gambling?

Is playing the stock market gambling?

This is an age-old question, but it requires more than a simply Yes/No answer, I think, because it depends.

Merry Christmas and Good Profits to All

Merry Christmas, Everybody!

We've had a short week in the market this week, but it gives us more time to reflect upon what really is important.

When to Sell Stocks

A lot of people complain that people will tell you when to BUY stocks, but they never tell you when to SELL those same stocks.

Of course, nobody knows exactly when to sell, but here are a few guidelines that I use:

Video: How the Stock Market Works

How the Stock Market Works

Here is a video of a cute cartoon (about 9 minutes long) that explains the basic concept and flow from a beginning business to one that is large enough to issue stock as a publicly held company.



This video uses an example of an oil drum producing company that started as a small but really good company.

Quick Analysis: Baidu Inc. (BIDU)

BIDU: Baidu Inc

Internet Search Engine: uses Chinese Characters

Recent Range: $15/share – $110/share (Current Price: 101.25, as of close of 12/21/10)
Price/Sales (P/S) = 34.92 (10.24, Industry)
Price/Book (P/B) = 32.55 (7.89)
Gross Margin = 70.7% (64.6%)
Pre-Tax Margin = 48.2% (34.3%)
Debt/Equity Ratio = 0.00 (0.04)
Current Ratio = 3.6 (4.3)
Return on Equity = 48.5% (23.0%)
Return on Assets = 37.9% (18.0%)

Analysis: This company is definitely in a hot industry within a hot geographic region (China). It also appears to manage its money really well. I really like the company, but I am afraid of the stock.

Should you get down when your stocks do?

No matter how experienced you are, nobody really enjoys buying in a stock, only to watch it down...down....and down some more.

When your stocks go down, do you panic? More importantly, should you?

Recipe: How to Make the Rich Richer: Give Everyone the Same Amount

Statement: If you want to help the rich get richer (and the poor get poorer), give them the same amount of money.

That might seem a little outlandish.

Might? Ummmmm........

Quick Analysis: WD 40 Company (WDFC)

WDFC: WD 40 Company (Maker of WD-40 Lubricant)

Maker of household product WD-40 lubricant. Also, they make specialty chemicals to help with maintenance, cleaning, and household tasks.

Recent Range: $24/share – $41/share (Current Price: 41.08, as of close of 12/17/10)
Price/Sales (P/S) = 7.89 (5.55, Industry)
Price/Book (P/B) = 3.49 (2.85)
Gross Margin = 51.4% (29.5%)
Pre-Tax Margin = 16.7% (-17.5%)
Debt/Equity Ratio = 0.11 (0.93)
Current Ratio = 2.5% (2.2%)
Return on Equity = 19.5% (14.7%)
Return on Assets = 13.1% (8.1%)

Analysis: This company appears to be in excellent health; however, the stock does not seem like an obvious bargain, even though this seems to be somewhat of a hot stock right now.

Video: Warren Buffett - Value Investing 101

Here is a video of Warren Buffett, perhaps the greatest stock investor who ever lived, giving the most basic advice about stock investing. (It is about 5 minutes long.)



Most of the interview discussion surrounds his purchase and subsequent selling of Petro China.

However, here are the takeaways from what he does:

Reading Suggestion: Blog: Stockerblog

This will be a quick post.

Trying to find good sources of great material, I unearthed one the other day.

I've made it one of my "Links" on the side panel, but it is SO GOOD that I needed to mention it specifically.

It is called Stockerblog, and the website is http://stockerblog.blogspot.com.

Not Having Income Costs Money

The title of my post, "Not Having Income Costs Money" seems like it deserves a big, fat DUUUH!

Obviously, if you don't have any income, you're not going to GET any money.

However, I'm saying that it actually COSTS you money.

Shorting a Stock--Going Short: What does this mean?

What does it mean to "short a stock?" (This is also called "going short" or "selling short.")

I will explain this by starting from the other direction and comparing "shorting a stock" to it.

Quick Analysis: Proctor & Gamble (PG)

PG: Proctor & Gamble

Product Conglomerate, mostly with consumer goods

Recent Range: $47/share – $73/share (Current Price: 65.56, as of close of 12/14/10)

Price/Sales (P/S) = 2.26 (2.06, Industry)
Price/Book (P/B) = 2.87 (5.06)
Gross Margin = 51.8% (52.0%)
Pre-Tax Margin = 19.1% (16.9%)
Debt/Equity Ratio = 0.52 (0.71)
Current Ratio = 0.7 (1.0)
Return on Equity = 17.0% (28.9%)
Return on Assets = 8.1% (9.9%)

Analysis: This company is well-run and in excellent financial health. This stock is SAFE but unexciting.

Upcoming Senate Tax Vote: What it could mean for you

The Senate is scheduled to vote on whether to extend the already existing tax cuts that former President Bush implemented during his term.

Most of you know--by now--that everyone already has this tax break extended, except for people making $250K/year or more.

The people AGAINST it want the "rich" to help buoy the economy since they, theoretically, HAVE the money to be able to afford to contribute. (This is NOT always true, by the way.)

Revisit: Linn Energy (LINE): Looks like I made a bad call.

It looks like you can't trust ALL of my "down" calls.

A little over 6 months ago, someone asked for me to check into Linn Energy (LINE) stock.

Here is the analysis I gave at THAT time: http://theinvestoradvocate.blogspot.com/2010/05/quick-analysis-linn-energy-linn.html.

I mentioned, at that time, that I didn't know enough about the industry; however, based upon the numbers that I saw, I would not suggest taking that risk.

Price per Earnings (P/E): Is it useful?

Investing in the stock market can be tricky, and it really is for a lot of people. Many people think there is some witchcraft or higher power involved that will never let them have any chance of understanding it.

How many people develop ways to “beat” the stock market? Honestly, you never will beat it. You just hope that you’re on the right side of the fight and pick the winner (or loser) correctly.

A lot of people try to offer different ideas, and some seem to make a lot of sense. (Some do not; at least, not to me.)

One thing that many investors check is the Price per Earnings (P/E) figure. In fact, this is one of the most popular ratios (comparisons) used when evaluating a stock.

Is it the best?