Trendvesting Introduction

Guest Post: Introduction to Trendvesting

Trendvesting.wordpress.com is a blog that focuses on the relationships between stocks and keyword search trends in an attempt to identify particular industries and stocks that are primed for growth. Subscribe today to gain access to unique analysis of stocks and macroeconomic indicators that will bring value to your existing stock analysis approach.

Google Trends has been in existence for a number of years albeit under different names. The platform is mostly used by Internet marketers to isolate keywords to focus websites around in an attempt to boost website traffic. The more popular a keyword, the greater the cost to have your website/blog listed as the first result when someone searches that particular keyword.

As long as you have an Internet connection and access to Google, you can access Google Trends for free and find out search volume trends for almost any keyword/search phrase (given that the number of searches are significant enough).

If Google had it’s own hedge fund, I would imagine it to be one of the more successful funds in play. Imagine having real time statistics on Internet search trends at your fingertips, you would have been able to detect trends in 3D Printers long before the herd of portfolio managers, advisors, and analyst ever caught wind of the industry. Imagine knowing the exact moment in time when searches for 3D printers increased from next to nothing to say 1 million, 2 million or 10 million searches a day.

A very successful and popular portfolio manager by the name of Peter Lynch utilized the same concept, of using trends and “local knowledge” which is essentially being aware of the products and services you or others around you use on a regular basis. At a high level, his investment strategy suggested the companies that produce the products and services that you or those around you use on a regular basis or that are increasing in popularity could be a good investment given that the underlying fundamentals hit all his high water marks. To give you an idea of the success he had with this strategy, Lynch averaged 29.2% annually and holds the record for the best 20-year return of any mutual fund EVER!

With Google Trends, you could literally never leave the comfort of your home and have an infinite amount of current trend data equal and in some cases better than what was used by Lynch during his time. Google search data gave multiple hints before and during massive appreciations in share price in companies such as Apple, Tesla, Stratasys, Amazon, and many more. On the same note, Google Trends can also inform you when a particular keyword is falling out of favor. When searches for a particular keyword begins to fall, this would suggest it is falling out of the public’s favour and would bode negatively for the company’s future prospects, especially if it is web based in nature. For instance, search the term “Facebook” and you’ll see an exponential increase in searches since 2004 but over the past year, searches have seen a very alarming depreciation in searches that coincides with a statement by the CFO that engagement among teens is in decline. Now if you’re a long-term investor that is thinking about taking a position in Facebook, this is one trend that you would want to know and think about before committing your hard earned dollars.

Google Search Trends are NOT a replacement for fundamental or technical stock analysis as they are still very important methodologies used in stock selection. On the contrary, Google Search Trends can be used in conjunction with both fundamental and technical analysis and frankly, as the world becomes more and more intertwined with the internet, I would dare to say that any analysis of a company should include a review of search trends whether the company in question is web based or not.

This is where Trendvesting.wordpress.com seeks to arm readers with the same foresight that Peter Lynch had by identify relationships between companies and related google search trends with the goal of identifying companies that are primed for price appreciation. Trendvesting focuses on providing insight into macro economic indicators, and company search trends. Subscribe to Trendvesting today for the latest in Google search trend analysis and the latest stock picks!

Should You Invest Your Money in the Stock Market?

plan to invest your money in the stock market

Do you plan to invest your money in the stock market?

When should you invest your money in the stock market? It’s a really great question and one that I often hear from from readers of StockIdeas.org.

So…

In this short blog post we’ll look at the answer to the common question of “when do you invest your money in the stock market?”

I’ll also touch on some other questions that can help you decide whether or not to invest your money in the stock market.

Sound good?

Invest Your Money in The Stock Market… Or What?

People often want to know when they should invest their money in the stock market. And while each person’s situation is a little bit different, the basic truth is that you should invest your money in the stock market as soon as you can!

So how much savings do you need to invest your money in the stock market?

To be honest… getting started in the stock market doesn’t require as much money as you might think!

That’s because:

We’re lucky enough to live in an era of technology that enables us to take advantage of tons of opportunities. And this is especially true when it comes to investing your money in the stock market. Investing online is easier than ever thanks to the internet.

So I’m telling you, it’s in your best interest to learn how to trade stocks online. Now let me show you why that doesn’t have to be complicated…

Getting Started Investing Your Money In the Stock Market:

invest your money in the stock market

Investing your money in the stock market doesn’t have to break the bank.

There are (of course) a number of ways to get started investing your money in the stock market.

But…

If you’re truly clueless I would recommend reading an introductory book like The MoneySense Guide to the Perfect Portfolio.

That’s because:

This easy to read book will bring you up to speed with best practice very quickly.  Knowing the best practice options can really go a long way to helping you decide exactly how you can invest your money in the stock market.

Now if you’re a little further along the path, there are some other articles you might find helpful in deciding how to invest your money in the stock market. So check out…

As you can see from the articles above, getting stated investing your money in the stock market is actually quite easy. And you can definitely approach it one step at a time. It’s not like you have to

Why Investing Your Money in the Stock Market Makes Sense:

I know investing your money in the stock market over the last 20 years has been a bit of a bumpy ride. Between the dot com crash and the 2008 financial crisis it’s hard to believe that stock investing for the long term can ever be profitable. But…

Hopefully this long term chart will show you why you should invest your money in the stock market:

long term chart for investing your money in the stock market

As you can see: Over the last 100 years, investing your money in the stock market has been a winning proposition. So what are you waiting for?

So as you can see, even if the short term actions of stocks are a little bit bumpy – you can see that extended growth is very likely over the long term. And since we’ve just had so many bumpy years in a row it seems like we could really be off to the races any week now!

That’s why you should get started investing your money in the stock market as soon as you can. Get started reading some investing books and talk to your financial advisor. Retirement isn’t going to take care of itself. But this proactive approach can really set you up for the rest of your life.

So are you starting to see the value of investing your money in the stock market?

And By The Way: You don’t need to break the bank to learn about the stock market. One great free resources I’d recommend you review is my free ebook which is available below this post. Just enter your information into the form and you’ll get a copy sent straight to your inbox. You’ll also get weekly tips and tools sharing information on how to more effectively invest your money in the stock market. Why not check it out?

Get Started with Green Stock Investing

Green stock investingGreen Stock Investing can help you put your money to work in socially responsible and environmentally conscious ways. That means your money can have an impact beyond just the bottom-line.

So if you want your money to work for the triple bottom line then this short article on green stock investing is exactly what you’ve been looking for.

And to be fair…

This isn’t the first time we’ve written about green stock investing and how to invest in responsible companies. But today we’re going to go a little deeper into the specific different ways you can invest in green stocks. It’s actually easier than you think.

So here are the fastest and easiest ways to get started investing in green stocks.

Green Stock Investing Indexes:

The fastest and easiest way to get exposure to green stock ideas is through one of the green stock investing indexes. There are a number of sustainability indexes you can use to guide you on your way to find green stock investing picks.

For example:

Financial services industry leader like Dow Jones are realizing that green stock investing is more than just a trend. The Dow Jones Sustainability Index covers 24 industry groups with an industry leader in each. You can get detailed reports on corporate social responsibility for a broad array of companies. So if you’re looking for green stock investing ideas within the publicly traded stock markets this is a great place to get started.

Another leader in the field of green stock investing indexes is a company called Sustainalytics. They offer a number of green stock investing options through sustainability indexes. The Jantzi Social Index is one of the most popular and a great way to start finding green stock investing opportunities.

There are also an increasing number of socially responsible mutual funds. These funds work exactly like regular funds except that they are focused on finding socially responsible companies to invest in. If you’re looking for a broad basket of socially responsible investing opportunities these green mutual funds are probably the way you’ll want to go.

Of course, if there are specific areas of the stock market you want to focus on you can also find green stock investing opportunities by sorting through the relevant industries.

Green Stock Investing by Industry:

Green stock investing is made easier when you focus on only those industries that are by their very nature green. The most prominent example would be renewable energy sources like solar energy and biofuels. You could also look into industries that are trying to actively solve environmental problems like these pollution and treatment control companies.

Use free online stock screeners to drill down on the industries that present the best green stock investing opportunities. And…

By focusing your green stock investing analysis on industries that are inherently green you can really improve the chances of your investment having a positive impact. And once you find an industry you like you can easily drill down to do an intra-industry analysis to compare your best green investing ideas based on more traditional financial metrics like P/E ratio and price to book.

On the other hand, investing in green companies doesn’t have to be limited to the public stock market.

Green Investing Outside The Stock Market:

Green Investing Outside Stock MarketIf you really want to invest responsibly to create a positive social impact then your best bet might be to allocate money outside the stock market.

Since stockideas.org is almost exclusively focused on publicly traded common stocks this isn’t an approach we usually talk about.

But in the case of green investing there are lots of opportunities outside the stock market where you don’t need a lot of money to make a difference and you can get started right away. You can also allocate your money to projects that you think are good investments (based on your potential return and the n

Platforms like Zidisha and Kiva are great in this way because you can pick the exact cause you want your money to go towards. And in the case of Zidisha you can even set your own interest rate so that you get the return you want, while still having a positive social or environmental impact. Just keep in mind that unlike the stock market these are debt investments. So you’ll be paid back plus interest, but you won’t be

In any case, analyzing and investing in green stock opportunities is definitely a positive trend. And there are lots of great tools and online platforms to help you get started both inside and outside the stock market. Just be sure to make the company is financially prudent and not a money-bleeding charity.

And By The Way: If you need any help improving your approach to analyzing stock ideas (green or otherwise) I encourage you to download the free ebook below. You’ll also get weekly email tips, tools and updates to help you make smarter investing and swing trading decisions.

fishing for stock ideas

Fishing For Stock Picks

Fishing for Stock Picks is how I describe my stock investment research process. The analogy is a bit cheesy. But bear with me.

Because there are a number of reasons looking for stock investments is like fishing. Do you want to know why?

Well, to be honest, researching stock picks and going fishing have a lot in common. Seriously!

Because in both cases…

You’re going to be doing a lot of sitting around without much result. If you want to fish you need to have lots of patience. And the same goes for diligent stock investment research.

If you still don’t believe me, here are a couple of more specific examples…

Fishing for Stock Picks with Nets

I’m a big fan of using free online stock screeners to speed up your investment research. Of course stock screeners aren’t perfect (they’re constrained by GAAP and can only focus on statistics not management commentary).

stock research net fishingBut stock screens are still a great starting place to accelerate the pace of your investment research.

And in terms of fishing for stock picks…

Researching stock ideas using stock screeners is a lot like fishing with big nets. You put the nets (or stock screens) out in the ocean and you periodically check in to see what comes up.

By putting fishing nets in your favourite spots (or screening for your favourite investment criteria) you have a standing tool to help you see who’s passing through that part of the ocean.

It’s working for you. And you can check in whenever you like. This is especially true when you save your favourite stock screens on sites like finviz.com and check in on them regularly.

But there are other ways to fish for stock picks too…

Fishing for Stock Picks with a Spear Gun:

Sometimes, you see a specific stock investing opportunity and you need to act immediately. Maybe it’s a new IPO, a stock idea that has gotten oversold or it’s just a new stock pick you really want to get a piece of.

In this case, researching stock ideas is kind of like fishing with a spear gun or harpoon. You are out and about cruising the seas for fish (or reading your favourite value investing blogs for ideas) when something catches you eye. You zoom in on the one fish of interest and nail it down as fast as you can.

You’re totally focused on one meaty idea and you do everything you can to get a piece of it as fast as you can.

Fishing for Stock Picks with a Rod:

rod fishing stock researchFinally, researching stock ideas can also be like fishing with a rod.

You pick an investment publication, read it quietly, and see what bites.

The best part of this kind of stock research is…

You don’t have to get wet! And the whole process might even be relaxing.

Sure, fishing with a rod might not be the most effective approach. But it can work if you’re in the right place at the right time. And it doesn’t require any fancy tools.

If you’re just getting familiar with a new area of investment research (or a new body of water) this is an easy way to get acquainted. You might not get lucky with any bites but you’ll start to familiarize yourself with where you should lay your nets or aim your harpoon.

The key of course is to use the right lure and hang your line at just the right depth. Have a vague idea what you’re looking for and be open to possibilities. And be patient.

In Summary…

The whole fishing for stock picks analogy might be a little bit silly. But it pays to think seriously about the different ways you can research stock picks and analyze investment ideas. And if you can teach yourself to fish you’ll always have plenty of opportunity coming your way.

So be effective with your time and conscious of your methodologies. Make sure you’re researching your stock picks effectively – or you’re definitely going to go hungry.

And By The Way: If you’re looking for more investing ideas and tactics to improve your approach to the stock market I encourage you to download the free eBook below. You’ll also get free weekly updates with my favourite tools and tips to help you improve your investing and stock trading decisions.

Happy Easter (and One Year of Stock Ideas)

happy easter from stock ideas

Happy Easter from StockIdeas.org!

Happy Easter! I hope this holiday long weekend treats you well. And that you’re able to spend some time friends and family forgetting about the never-ending caprices of the stock market.

It’s time like these that I like to take a step back and remember why I put so much time and effort into finding, analyzing and sharing investment ideas.

After all, if you aren’t able to enjoy friends, family and some holiday food and drink then what’s the point of working so hard?

Speaking of hard work and gratitude:

Easter weekend also marks the first anniversary of StockIdeas.org. It was just about a year ago that I found this domain and decided to start writing more actively about the stock market. In that time, this little web blog has exceeded all of my expectations. We’re now getting tens of thousands of visitors a month, hundreds of email subscribers and lots of great stock ideas, analysis and discussion each and every day. So…

Thank you to everyone who has come by the site, left a comment and shared a link. I truly appreciate everyone who has reached out to me with compliment or constructive criticism.

If nothing else:

StockIdeas.org has taught me there are tens of thousands of amazing investors and traders online. The access to information and analysis is amazing and I genuinely feel lucky to be alive in a time when financial markets are so easy to access and anyone can take financial freedom into their own hands.

Thank you to all the authors who sent me books for review, thanks for all the commenters who asked insightful and thought-provoking questions and thanks to all the email subscribers who gave great content ideas for what they wanted to see on Stockideas.org.

Now…

If you’re bored waiting for Easter dinner, check out these investing books, stock pick analysis or finance documentaries. Or maybe you will enjoy the most popular blog post on StockIdeas.org, Seth Klarman’s Margin of Safety. Whatever you’re looking for, there’s plenty of great content on stockideas.org to keep you entertain and amused this Easter long weekend.

Thanks again and have a wonderful weekend.

best technology investments for 2014

Best Tech Investments For 2014

What are the best technology investments for 2014? It’s a good question. Especially since high beta social media and biotech stocks have really under performed in the last month. So you might be wondering…

And are there any tech stocks that can make for a great investment in 2014?

Luckily, the answer is yes.  And even though the Nasdaq is down over 1% this year there are lots of great technology investments you can exploit in 2014 to try and make your portfolio outperform. So do you want to know what the best tech investments are for 2014?

The Best (Old) Technology Investments For 2014:

To be sure, there are a lot of exciting developments in technology going into 2014. For example, graphene companies are starting to gain a lot of traction. And cyber security companies remain in the spotlight following the increase in malicious software and hacking of major companies and governments.

old school technology stocks 2014

Are old school tech stocks coming back in style for 2014?

But to be honest…

I think the best technology investments for 2014 are some of the “older” technology companies. 

Let me explain what I mean by that:

A lot of the “bluer chip” value technology stocks that have proven track records of revenue generation have been left behind by investors going in to 2014.

For example…

While there are lots of new technology companies going public, and biotech stocks are forming a “blow off top,” old school technology stocks like Microsoft, Oracle and Apple seem to have been forgotten about by investors.

Just look at the relative performance of Apple vs. Facebook over the last year to see what I mean:

Best Technology Stocks Analysis in 2014

Can social media stocks really keep outperforming other technology investments in 2014?

At some point, it’s hard to believe that investors will continue to ignore older and more established technology companies. So where specifically should you be looking?

Some Technology Stock Picks for 2014:

As we head into the second quarter of 2014, I remain focused on finding high quality technology companies trading below intrinsic value. Rather than obsess over momentum favourites, this approach allows for investing in cash generating businesses at a fair price.

And after all, that’s the Warren Buffett Strategy for investing. So some of the tech companies I’m analyzing in 2014 are…

In addition to the list above, I’m also interested in ORCL and MSFT. But I haven’t gotten around to analyzing them in depth yet. For now, the list above could be a good place to get started looking for long term value in technology stocks.

But it’s not always smooth sailing when you’re investing in technology…

The Best Technology Stocks in 2014 – A Word of Warning:

To be sure, nothing in the stock market is a sure thing. And as these enterprise technology companies adopt to the future of cloud computing there will definitely be some bumps along the road. But…

Rather than give up on proven company’s like IBM when they miss earnings, long term investors might be able to find a nice entry point at a discounted price. If you do your homework there could be some great profits in the right technology investments in 2014.

And by diversifying across some of these “old technology” favourites you can reduce your risk further, by owning a nice basket of cash-flow generating technology stocks at very reasonable valuations. Now given the recent Nasdaq correction I’m not diving in head first. But I’m doing lots of investment research and adding these stocks to my stock market watch list so I can be proactive with investing opportunities when the time is right.

If you’re investing for the long term and looking to find value I think these technology stocks present an interesting opportunity. What do you think make the best tech investments in 2014?

And By The Way: If you want more information on how to analyze technology companies in 2014 you might enjoy my free ebook below. I created the ebook to share what I wish I had known when first refining my approach to the stock market. You’ll also get free tips and tools sent each week with the best resources for improving your stock market investments.

Get a clear view of what works with a stock market watch list.

The Importance of a Stock Market Watch List

The Importance of a Stock Market Watch List cannot be over-estimated. It’s hard to stay oriented without one. And that’s why using a watch list to manage your stock market portfolio and potential investing opportunities is a winning strategy used by successful stock traders and investors everywhere.

So…

In this blog post we’ll look at why a stock market watch list is so important. I’ll also share some ideas you can use to build your own stock market watch list. This way, you’ll be able to track opportunities and strike when the time is right.

Now on that note…

Let’s get into the benefits of a stock market watch list:

Why a Stock Market Watch List Can Improve Your P&L:

The reason you’re probably interested in a stock market watch list is because it can improve your profit and loss statements. In fact, in my experience, using a stock market watch list is truly the best way to consistently stack the deck in your favour.

Just think about it…

stock market watch list examples

Get a clear view of what works with a stock market watch list…

When you build, maintain and regularly update your stock market watch list, it’s like you have a dashboard of all the best trading or investing opportunities right in front of you.

Using a stock market watch list lets you be proactive. It lets you make a trading plan and be ready to exploit investing opportunities just when the time is right. And it puts you back in the driver’s seat.

Without a stock market watch list you’ll always be on your heels reacting to the latest financial news headline. On the other hand…

When you use a stock market watch list effectively you can start investing on your own terms and being proactive about where you choose to place your capital. A watch list makes sense for a lot of reasons.

But we haven’t even mentioned the best part about stock market watch lists…

The Best Part of Stock Market Watch Lists:

The best aspect of using a stock market watch list is that there isn’t really one single best practice version of stock market watch lists you should refer to.

Instead:

You can build a customized and totally personalized stock market watch list that shares the information you need most. That way, you only get the important facts – and you can see everything with one quick glance. Sounds pretty good, right?

What you include in your spreadsheet will primarily be a matter of whether you are a short-term trader or a longer term investor. If you’re a trader looking to track technical patterns then your stock market watch list will have a lot more information about price trend, volume and relative strength.

Whereas, if you’re a longer term investor looking for buy and hold opportunities your stock market watch list will contain fundamental measures and valuation metrics to help you compare different investing opportunities.

The beauty of a stock market watch list is that you can choose what to include. The only important thing is that it reflects your trading or investing style and allows you to compare different stock ideas against the same criteria.

Plus:

Getting started making your stock market watch list is really easy. All you have to do is it fire up your favourite spreadsheet program (be it Microsoft Excel, Apple Numbers or Google Spreadsheets). And then create a table to compare your favourite stock market characteristics. For example…

Here’s a screenshot of one of my stock market watch lists:

Stock Market Watch List ExampleAs you can see from my stock market watch list above, things don’t have to be that complicated. The left hand side contains information on the name and ticker of the company. Then I look at the current price, my ideal entry and a target price based on intrinsic value calculations. The rest of the spreadsheet is just about other fundamental criteria that I want to keep an eye on.

But do you know what the most important part of this stock market watch list is?

One Take Home Point for Building a Stock Market Watch List:

One of the things I find most useful about the stock market watch list example shared above is the ability to rank stocks based on their potential percentage gain (column G). Why is that so important?

When you catalogue your stock ideas and use objective measures to determine entry and exit targets then you can also get a critical look at your potential percentage gain if the trade goes right. By ranking your stocks based on profit potential you get valuable perspective on where you should put your money.

Seriously:

This approach works for both fundamental investors and technical traders. The only difference will be the factors that help you determine your price target and entry price. But at the end of the day…

When you can clearly see where your money can be earning the highest return it really helps you improve your portfolio returns. This way you’re focused on the highest profit opportunities, rather than the exciting news headline of the day or a recommendation from a broker or Twitter follower. Make sense?

And By The Way: Using a stock market watch list is just one of the tips I recommend to help you make the most out of your stock market investing. If you want more free tools and resources I encourage you to sign up for updates below. You’ll also get a copy of my free value investing/swing trading ebook. Check it out for free below!

agco your agriculture company stock analysis

Your Agriculture Company (NYSE:AGCO) Investment Analysis

Introduction and Overview – Analysis of AGCO:

Your Agriculture Company (NYSE:AGCO) is the world’s largest farm equipment manufacturer, selling tractors, combines, and all kinds of other farm equipment to customer all around the world. When this AGCO analysis was written AGCO had a market capitalization of $5.1B and shares are trading around $55.

So let me tell you what the AGCO investment case is all about…

AGCO has roots going back to the 1800′s. But it’s current form was founded in 1990 by the purchase of Deutz Allis Corporation from Kloeckner-Humboldt-Deutz AG.  Since then AGCO has continued to expand through organic market growth and strategic acquisitions.

Now luckily…

The AGCO business model is pretty easy to understand. I need to dig deeper into the specific sales channels and how the company retains customers. But despite competition from the likes of John Deere and CNHI, it seems that making and distributing farm equipment through a network of dealers  is relatively straightforward.

On that note, let’s take a closer look at the market AGCO operates in, and the products it sells.

AGCO Competitive and Market Analysis:

At first glance the farm equipment business might not be that exciting. But at the end of the day, everyone needs food. So learning where it comes from, and what’s changing in the farming industry is important to understanding the competitive advantage of AGCO.

So as an investor…

You’ll be pleased to know AGCO appear to be at the leading edge of farm productivity. They are innovators with their precision farming  platform. And while you might not think growing and harvesting crops is high tech business, agricultural output gains in productivity enabled by technology are impressive. From a recent interview with AGCO (emphasis mine):

“Frankly, we have a lot of customers who are looking for efficiency tools, and one of the advantage of new equipment is the efficiencies we build into these machines be it a baler or a tractor. You can talk about fuel economy, the ability to get more work done, the ability to make a bigger or more dense bale of hay; all of those things contribute to the farmers ability to make money, and they’ll prove their worth in a market like we have in 2014.”

See for yourself, from this AGCO analyst day presentation,

AGCO market opportunity analysis

AGCO sees a lot of opportunity in emerging and developing markets based on their ability to improve farming efficiency.

From the slide above you can see AGCO sees a lot of opportunity to have an impact and improve quality of life in emerging markets. AGCO is also investing aggressively in R&D to keep finding new solutions and innovative product offerings.

AGCO R&D Analysis

AGCO continues to grow their investments in R&D – driving their strong pipeline of new products.

In addition to actively exploiting the future of farming, AGCO management has built (and acquired) some leading brands over the years. You can read the full AGCO history here. Fendt, Massey and Valtra are all respected brands in their respective markets.

AGCO Product Line Analysis

AGCO has developed and acquired a competitive offering of brands.

So as you can see, AGCO is pretty well-positioned in the farm equipment business. And global population growth continues to drive demand for their products. Now that you have an overview of AGCO and the market they operate in, let’s start analyzing the performance of AGCO shares over the last couple years.

Price Performance Analysis of AGCO Stock:

Shares of AGCO have had lumpy price performance over the last couple of years. Just take a look at the weekly chart below.

AGCO Long Term Weekly Chart Technical Analysis

AGCO Long term technical analysis shows lumpy price performance over the last couple of years. Keep reading to learn what this means to investors.

You should be able to see for yourself that shareholders of AGCO have been jerked around a little bit. The good news is, while AGCO stock has been slow to recapture prior highs, it isn’t overvalued either. And even based on conservative intrinsic value calculations I think AGCO has significant upside from here.

So although it’s not entirely smooth sailing from a technical analysis perspective, AGCO should be able to keep pressing higher. Just don’t expect any sudden explosions in price (upside earnings surprises not withstanding). Speaking of earnings, let’s look at the current valuation of AGCO.

If you’re a value investor like me, I think you’ll like what you find…

AGCO Fundamental Analysis – Financial Valuation

AGCO initially caught my eye because the stock appeared to be pretty well valued. At a glance, AGCO is appealing because it’s trading only about 25% above book value. And with a P/E hovering around 9 it’s hard to argue this stock is expensive relative to earnings.

The PEG ratio also comes in below 1, (0.94 to be precise), which is consistent with managements 2014 guidance of $6 EPS - showing future earnings aren’t being valued at a premium by the market. And I’m not the only one who thinks AGCO’s low expectations may make it a buy.

But wait. It gets better…

You see while these fundamental metrics are interesting, the long term performance of AGCO is even more impressive. Here are the key stats from Morningstar:

AGCO Key Financials Fundamental Analysis

AGCO has consistently grown revenue, earnings, free cash flow and book value. To a long term investor this looks like a pretty good track record. (Click to enlarge)

The fundamental picture for AGCO looks pretty good. Top and bottom line growth have improved quite a bit.  This boring old farm equipment company has a cap rate of almost 15%, which in this inflated stock market is a rare find. And operating margins have slowly improved due to factory efficiency upgrades.

AGCO is also throwing off large free cash flows. These revenue streams appear to be sustainable. And when FCF is discounted back to present value, future cash reflect an intrinsic value closer to $70 per share, even when using conservative growth rates.

I love finding investment opportunities that show a margin of safety even with conservative assumptions. I think AGCO is starting to fit the bill. But…

Even though AGCO might already be an interesting investment opportunity, let’s take a more in-depth look at the growth potential anyways.

AGCO 2014 Growth Narrative and Analysis:

AGCO has consistently grown over the years, so mid-single digit growth seems like a reasonable expectation going forward. Management has consistently said AGCO will continue to expand with an emphasis on slow profitable growth, rather than buying market share. As capital-conscious investors that’s what we like to see.

So where does the earnings growth come from? Interestingly enough AGCO has a nice global footprint driving revenue, as seen in their recent 4Q13 earnings results

AGCO global growth analysis

This large global exposure is nice to see in a farm equipment supplier because it provides some diversification against being exposed to nature’s whims in any one part of the globe. With operations on a number of different continents AGCO has some insulation from the hardship of farmers in one locality.

In the coming years, AGCO management is positioned to take advantage of market opportunities in Brazil, Russia and Africa.

That said, earnings for 2014 are expected to be flat compared to the year prior so there may be better opportunities to buy AGCO if there is a sustained stock market correction.

While management is doing a good job tempering shareholder expectations for growth this year, they’re trying to unlock value in other ways. Keep reading to see what I mean.

Analysis: Is AGCO Management Shareholder Friendly?

The AGCO management team seems to be increasingly focused on unlocking shareholder value. Not only are they advocating for profitable growth, but they’re also increasing dividends and authorizing a $500M share buy back. There’s a nice discussion of the merits in this AGCO Seeking Alpha article.

As an investor, it’s nice to see management actively trying to return cash to shareholders. While the dividend yield is still under 1%, there is lots of room for growth given the 7-8% payout ratio.

You might say this is just the beginning. And even more interesting to me…

A $500M share buyback is equivalent to 10% of the float of AGCO shares. This pretty clearly indicates that management thinks the stock is undervalued (as do I). By reducing the outstanding shares they can use their large free cash flows to further boost EPS. Interestingly enough, AGCO insiders are also buying shares at a frenetic pace.

With a management team focused on profitable growth, returning capital to shareholders and macroeconomic tailwinds it seems like the AGCO share price might continue to climb up. Of course, an investment in AGCO isn’t without risk.

Analyzing the Risks of Investing in AGCO:

It’s always hard to analyze the risks of an investment. And AGCO is no different. One risk to keep in mind is the opportunity cost of AGCO. After all…

agco farm equipment market analysis

Farming: Slow and steady wins the race.

The farm equipment market is a little bit boring. This is not a photo sharing app that Facebook will buy out tomorrow for $20B. But it’s also slow and steady. While year to year results might be a little lumpy due to market trends, AGCO has shown over the last 10 years that they can continue to deliver value to shareholders.

And to be sure: People will always need to eat.

But…

I guess there is some risk from Google growing hamburgers in a petri dish. That said, I’m not sure this is an immediate disruption investors need to realistically worry about. Plus, even if lab-grown protein really does take off, I imagine there will always be a higher end segment of consumers who want REAL animal protein that comes from a farm.

A lot of the risks you might think would face a farm equipment company, AGCO is relatively well insulated against. That’s because they have a diverse global footprint that helps reduce impact from regional events like drought or flood. They also operate at various levels of the farm equipment value chain – so in addition to just tractors they provide the answers to irrigation problems and food storage solutions after harvesting.

Management execution is another risk for AGCO, but again, the 10 year track record says “so far so good.” I wouldn’t blame you for being cautiously optimistic here. As long as AGCO management continues acting diligently and executing effectively with an emphasis on earning high returns on capital I think it’s okay to be a little bullish.

While this analysis is neither a recommendation to buy or sell AGCO or any other security, I hope it has educated you about this agriculture company and whether or not it’s worth further due diligence.

And By The Way: If you want to learn to improve your own investment analysis I encourage you to download my free ebook below. You’ll also get weekly tips and tools to help you improve your approach to the stock market.

Apple Inc (NASDAQ:AAPL) Investment Analysis

Read this Apple Inc. (NASDAQ:AAPL) Investment Analysis to see if AAPL is worthy of further investment research. Now let’s get down to business…

AAPL Investment Analysis: Overview and Introduction

aapl stock fundamental analysis

Read this article to learn if investing in Apple make sense.

AAPL is a premium supplier of consumer technology products. The company is well-known for it’s mobile, desktop, laptop and tablet devices, as well as the software products and offerings supported by these devices.

And as you probably know…

Apple generates a ton of cash by selling these devices and services on its website, app store and through retail stores. AAPL has a global foot print, but is headquartered in Cupertino California.

None of this should come as a surprise to you. So let’s start digging into what the market thinks of AAPL as an investment opportunity.

Have Investors Lost Faith in Apple?

AAPL shares used to be all the craze of stock market investors. In fact…

During late 2012 investors were so smitten with AAPL that shares climbed up to around $700 in price! But money managers are a fickle crowd. And after the enormous run-up, AAPL quickly fell over 40% in value. Without Steve Jobs, and facing increasing competition in the smartphone category, investors seem to have lost faith in the shares of Apple.

Just see for yourself:

Apple Price History Analysis

Apple’s share price has seen better days. Since peaking in 2012 AAPL stock has languished.

But is this market perception of AAPL share price overly-pessimistic? 

In this investment analysis of AAPL, we’ll look at why investors might be over-reacting to the shortcomings of AAPL. And what questions you should research to find out if AAPL presents the right investment opportunity for you. As you can see above…

Since the decline, shares of AAPL have bottomed out around $400, and slowly climbed back, before settling in to a trading range just above $500. So let’s look at what the market has priced in at this current price, okay?

Apple Fundamental Valuation Analysis:

Apple maintains a market cap of about $465B at time of writing (corresponding to a per share price of about $520). The company is in a strong capital position and does not have any liquidity issues or large amounts of short term debt. At this price, AAPL is showing a PE ratio of less than 13 and a free cash flow yield of just under 10%. And really…

That’s not bad for a best-in-class technology hardware company, right?

When we dig a bit deeper into an intrinsic value calculation, it becomes clear that the market isn’t expecting much of Apple. The good news is…

With such a low cost of capital and sustainable free cash flow, even if Apple earnings languish lower by a couple percent points in the coming years it is still worth about $550 per share based on the discounted present value of future cash flows. (And this speaks nothing of the 2.35% dividend.)

On the other hand…

If you look at AAPL’s key statistics from Morningstar, Apple has an impressive track record of growing revenue, EPS and free cash flow over the last 10 years. Check it out:

Apple Cash Flow and Revenue History Analysis

At the current price, the market is discounting Apple’s track record of growth. (All numbers in Mil USD)

To be fair:

Figuring out the intrinsic value of a company isn’t always easy – and the assumptions aren’t always straightforward. But by looking at the conservative growth case we can find opportunities that give us a low-risk option on profiting from future growth. In this case…

The market is currently discounting Apple’s track record of growth… and… that’s a bet I might be interested in taking the other side of.

Plus:

The case for investing in Apple becomes even more attractive when you start to look for catalysts to unlock shareholder value.

For example…

The Icahn Indicator – Do Activist Investors Present Value Catalyst for AAPL Shareholders?

carl icahn apple activist investor analysis

Do you want to partner with AAPL activist investor Carl Icahn?

Apple is a potential under-valued mega cap stock. This anomaly has attracted some of the most exciting activist investors to the scene. And these big players might just present a catalyst for Apple to unlock shareholder value.

Most notably…

Famed investor Carl Icahn has been showing an incredibly active interest in Apple, as of late. Icahn has a track record of building shareholder value, so having him as your partner isn’t a terrible thing. Icahn was originally demanding ever-increasing share buybacks from Apple (to put their large cash pile to use). But after tabling these demands and still holding $4B worth AAPL, investors might speculate Icahn is in it for the long haul.

But Icahn isn’t the only activist investor to voice support. Previously David Einhorn’s hedge fund Greenlight Capital called on Apple to institute a dividend and better manage capital for shareholders. Greenlight has remained an advocate of Apple into mid 2013, citing the dividend and share buyback programs as investor-friendly activities.

A more tacit endorsement comes from Joel Greenblatt’s Magic Formula Stock Screen, where AAPL is currently showing up as a “buy.”

But besides relying on others, what other catalysts are there for Apple?

New AAPL Product Launch Could Excite Investors:

google glass vs iwatch analysis

Will AAPL announce a new product to compete with technologies like Google Glass?

In the last couple of years, Apple CEO Tim Cook has taken the baton from the late Steve Jobs. But other than the iPhone 5C and a couple new operating systems, we haven’t seen any new products from Apple.

In the meantime, it seems like rivals Samsung and Google are diving deep into the world of high tech hardware.

These competitive pressures (especially in the mobile device market) might be responsible for eroding investor exuberance in shares of Apple.

While it’s a bit speculative to bet an investment strategy on a successful new product, such as an iWatch, any new device or compelling product extension could remind investors that AAPL is a growth-focused company with a track record of innovation. Were the stock market to price AAPL shares for growth, they could easily see 15-25% appreciation from current prices (which don’t seem to factor in growth).

Without the catalyst of an activist investor or new produce launch, AAPL shareholders might just have to wait for regularly improving quarterly earnings announcements to paint a picture of ongoing profitability and revenue growth.

Again, the good news for AAPL bulls is that not even low single-digit growth is currently priced in to AAPL shares; so, even without a catalyst there may be potential upside for those considering an investment in AAPL.

But what are the risks of holding an investment in Apple?

Analyzing the Risks of Investing in AAPL Stock:

There are a number of risks associated with investing in Apple stock. And no matter what your opinion on AAPL after reading this article I encourage you to do more of your own thorough due diligence. My interest in buying AAPL is not a recommendation in any way shape or form to you, especially considering the many risks of investing in Apple.

As for the specific risks of investing in AAPL stock:

To be sure: Apple isn’t exactly a small cap start-up anymore. It’s a massive mega-cap company with a strong cash position, established high margin sales channels and one of the most powerful brands in the world.

But the flip side is…

This also means that money managers, hedge funds and major institutional investors are jumping in and out of AAPL stock. This could mean that while AAPL is definitely liquid it’s also likely to be pushed around. If you’re investing AAPL you should be ready for some short-term volatility given the interest by these big players and the major financial news media. You might have to actively guard against getting shaken our of your position.

Additionally…

Even though AAPL isn’t going bankrupt any time soon, the market perception is pricing in relatively stable cash flow. If cash flows deteriorate significantly in the future, AAPL shares may continue to languish. This slow burn in the share price will be exacerbated if AAPL can’t excite investors with new or improved products. Without a catalyst (either in the form of a new product launch, an activist investor unlocking value or even improved earnings and sales growth), you might be stuck holding “dead money” for awhile if you invest in AAPL. Given the dividend and the margin of safety, this is a risk I’m comfortable with, but you should evaluate it for yourself.

Finally:

While AAPL has a lot of the same top talent it’s always had, some naysayers will undoubtedly proclaim that AAPL died with Steve Jobs. This is made worse because Tim Cook is perceived as a boring but efficient operator/logistician. I think the current valuation reflects this and it’s already baked into the price. But it’s something worthy of consideration.

AAPL Investment Analysis – The Final Word:

Based on the quick fundamental analysis above, I think AAPL presents an interesting opportunity for conservative long term investors, especially those who are fans of AAPL already.

That’s because the current stock price of AAPL is not pricing in any type of growth, and even mid-single digit growth could lead to double digit returns for patient investors in the years to come. Additionally, there is a small dividend of 2.35% and no immediate risks for permanent destruction of capital. For these reasons I encourage you to do more of your own research on AAPL and see if it’s a good investment for you (this article is not a recommendation to do anything in any capacity).

For full disclosure: I own a small AAPL position at a cost basis slightly above the current price. I’m interested in buying more shares of AAPL if the stock slides to 500 or lower.

And By The Way: If you want more information on how to analyze companies yourself, I encourage you to download my free eBook below. You’ll get interesting insight into how to improve your approach to the stock market. I’ll also send you free tools and tips each week to help you improve your long term investing returns.

The Little Book That Still Beats the Market Book Review

little book that still beats the market book reviewThe Little Book That Still Beats the Market, by Joel Greenblatt, shares a “magic formula” for investing.

And in case you didn’t know, the Author Joel Greenblatt is a very successful hedge fund manager. He also wrote the best selling book, “You Can Be a Stock Market Genius.”

So how does The Little Book That Still Beats the Market hold up? Well in this book review I’ll tell you why I believe The Little Book That Still Beats the Market is the best investing book you can read in less than 24 hours.

Plus, I’ll share my favorite parts of the book.

And just so we’re on the same page, I just finished reading this book yesterday. So the ideas presented in this best-selling investment book are still very fresh in my mind. Now let’s get down to business…

What Is The Little Book That Still Beats the Market?

The Little Book That Still Beats the Market is a very popular investing book written by Joel Greenblatt. And actually…

The book was originally published in 1006 as “The Little Book that Beats the Market.” The Little Book That Still Beats the Markets is the slightly updated 2010 edition, which is the book I’m reviewing here.

So with that in mind:

Greenblatt himself says The Little Book That Still Beats the Markets was created when he tried to condense all the most important knowledge he absorbed as a hedge fund manager into an easy to understand book that his kids could learn from. In this capacity, The Little Book That Still Beats the Markets definitely delivers.

The book is short, easy to read and  focused on a single (yet very powerful) investment approach. I’ve written before about magic formula investing. But this book gives the official outlook on how you can use the magic formula to outperform the stock market. So what’s the best part about The Little Book That Still Beats the Market?

Best Part About The Little Book That Still Beats the Market:

The best part about The Little Book That Still Beats the Market is how easy and actionable the approach is. The whole book is designed to give you a ready-to-use strategy that you can put in place today to start outperforming the market.

But The Little Book That Still Beats the Market doesn’t just give you the keys to success. This investing book also gives you a lot of context so that you have the conviction to believe in the magic formula contained within it’s pages.

And actually:

Understanding how the magic formula was devised and the basic principles behind it made a big difference for me.  felt the magic formula advocated in The Little Book That Still Beats the Market was much more credible after understanding where it came from.

And Greenblatt does cover the most important components of value investing – like why you should look for a margin of safety, and to be weary of Mr. Market.

Almost as soon as I picked up The Little Book That Still Beats the Market I wanted to finish it so I could put the magic formula into action for myself. Luckily it’s a really fast read.

But for some traders, therein lies the problem.

What The Little Book That Still Beats the Market Leaves Out:

The Little Book That Still Beats the Market is a really short book. It’s only about 180 pages (and the pages are very small – the book itself is literally little). So in some ways, this strength is a weakness. Since the book is so short it can’t cover everything.

While The Little Book That Still Beats the Market is a great easy to understand read for everyone, you’ll probably get more out of the book if you have some basic understanding of value investing. You don’t have to read The Intelligent Investor to benefit from The Little Book That Still Beats the Market. But if you love Ben Graham I think you’ll enjoy Greenblatt’s book too.

The Little Book That Still Beats the Market is a straightforward book that shows you the exact steps to apply value investing in today’s market. Since the book is so short it doesn’t talk about too much of the other principles of value investing. But it’s still a good read.

Now let’s wrap this book review up.

The Little Book That Still Beats the Market – The Final Word:

The Little Book That Still Beats the Market  is a great book that you can read in less than 24 hours. If you need a book for the beach this summer The Little Book That Still Beats the Market  might be the perfect book for you. It’s fast to read and easy to understand.

The Little Book That Still Beats the Market is incredibly actionable, and for that reason I recommend you buy The Little Book That Still Beats the Market on Amazon today. And if you still want a little more information, check out the short video book review below…

The Little Book That Still Beats the Market Video Book Review: