Monthly Archives: April 2013

When Your Stock Ideas Lag…

stock ideas lagSometimes your stock ideas flounder. Read this post when your stock ideas lag…

Sometimes, your stock ideas lag. And it sucks.

You know the feeling, right?

Everybody else on your Stocktwits stream is pumping their fists and ringing the bell. They don’t have a care in the world. Their portfolios are greener than fresh sod.

And your biggest positions are bleeding out, with no end in sight…

“My Current Stock Idea is Lagging – What Do I Do?”

Recently, I featured (NASDAQ:IQNT) as a potential stock idea. Unfortunately, while 79.33% of stocks were making higher highs today, I focused on the 1 in 5 that floundered. Ouch.

In this case…

IQNT has seen a huge decline in volume over the last couple of weeks. Trading volume has been anemic. And as a thinly traded issue in the first place, IQNT hasn’t had a positive news catalyst to alter this short term trend. If you think about it….

IQNT has come down about 20% in the last two weeks without, any big changes to the fundamental story or valuation. When things stabilize a bit, or the price drops low enough to see some violent buying, I may add to my position. The only other factor you want to consider in this decision is, of course…

Your investing time frame!

Makes sense, right? If you are counting on cashing out your investments for retirement in the next couple years, you may not want to dollar cost average on a lagging stock idea. But if you can be patient, and stomach the volatility, it might present a buying opportunity.

Other Reasons Stock Ideas Lag:

There are a ton of other reasons stock ideas lag aside from a lack of volume and interest. But here’s the thing, understanding why your stock pick is under-performing can really help give you some context into whether or not you should sell your stock, buy more or sit tight. So…

Here are some more reasons your stock idea might be lagging…

One reason your stock idea lags is because your sector of choice is out of favor with investors. Junior gold miners, for example, have gotten beaten down because of disfavor with investors. The value relative to the underlying commodity has really diverged. At some point this becomes a bottom. But it’s a very bumpy process. So be careful, buy small positions at a time, and think critically.

stock ideas lag

Junior gold miners are out of favor with investors

A change in the fundamentals might be another reason your stock idea is lagging. It can also be more calamitous. If a clinical trial result, an oil spill or any other major event has occurred you need to factor this into your analysis (because the market sure is!) To avoid surprises make sure you listen to conference calls and follow the news on your investments.

It’s irresponsible not to. And by the way…

As much as fundamentals can hit your stocks, they can hit also hit the market too. The financial crisis is the most recent example. If credit dries up between banks, everybody suffers, right?

That said, if you’re investing for the long term then you are probably optimistic things will improve (and in the short term the federal reserve “should” provide you liquidity). All good, right?

By the way, I’m assuming your stock idea doesn’t suck! I am assuming you are buying under valued assets using a systematic investment assessment framework. So…

Now that you know why your stock idea is lagging…

Here’s How To Avoid Lagging Stock Ideas:

It sucks when your portfolio deflates alongside an improving market. But if you’re careful you can manage your risk and keep the perspective in decline. You can usually weather the storm. For example…

One practical way you can protect yourself from lagging stock ideas is to buy index funds. These are a great hedge against uncertainty at large

If you are going to pick your own stocks and research your own investment ideas, you need to be systematic in your approach. Here’s what I mean…

You should make informed investment decisions by using something like an investment idea checklist. This ensures that all of your stocks meet a certain benchmark that ensures your margin of safety. This is the ultimate way to cope with lagging stock ideas. It’s much easier to hold on to an undervalued asset than a speculative high flier.

You should also get in the habit of looking out for problems in advance. As Charlie Munger says, “invert your ideas!” If you think a stock is going to go up, look for reasons why it could go down – you see what I mean?

Being proactive and armed with a solid game plan can really help youwhen your stock ideas lag.

How Do You Cope When Your Stock Ideas Lag?

AEG Analysis: Is Aegon A Bargain?

Aegon AEG AnalysisIs Aegon (NYSE:AEG) a bargain? It certainly looks cheap. Read this short AEG Analysis to find out if this is the buying opportunity you’ve been waiting for…

This AEG analysis gives you a quick fundamental primer (to help you determine the safety of AEG). Then we’ll dive into the technicals to identify some target entry points. So here’s the AEG analysis you’ve been waiting for…

Q1 2013 AEG Analysis – Video Update

Fundamental Analysis of AEG: Global Insurance Market…

There are a couple of things you should recall about the business AEG operates in. First of all, the insurance market is very competitive. This mutes expectations of growth.  And…

While management has done a good job cutting expenses, streamlining the business and maintaining disciplined pricing, they’re being conservative about forward guidance. This is in large part because of global market trends.

Insurance companies are interesting businesses for investors because they generate a fair amount of cash by collecting monthly and annual premiums. Warren Buffett owns a lot of insurance (and reinsurance) assets.

Unfortunately…

Developed markets are pretty saturated in terms of life insurance (one of AEG’s main products). And the aging of the baby boomer segment means (eventually) fewer premiums and increased claims. Double ouch. By the way…

AEG also engages in pension management services, which may also be liable for a hit (unless baby boomers work until their death, a not impossible theory)

But you should still be careful…

And watch closely to understand how AEG and other insurance companies will fight these demographic headwinds in the coming quarters. How will they monetize emerging markets, and hedge their demographic risks?

Insurance companies that want to keep growing will need to answer these questions. AEG included.

By the way, we haven’t even touched on the fact that AEG is a European asset management company. Sure, by all appearances AEG is a well-capitalized Dutch bank. But who knows what can happen as Euro stress heats up. I’d be scared to own this stock if Spanish and Italian bond yields ever creep up again.

AEG Analysis: Fundamental Valuation Metrics

You might not believe it: But at one point in time, AEG traded above $60 per share. But for the last four to five years, AEG has bounced around in a channel, from $4 to $8. So it shouldn’t come as a surprise that in terms of my stock screening metrics, AEG stacks up pretty well.

Specifically

AEG Analysis Fundamentals

You’ll probably notice: AEG has a ton of cash per share. Management has done a great job here. But the sword cuts both ways. And while cash makes AEG a safer investment, the problem now is a chronically low return on equity. And given European banking capital requirements, it’s unlikely this cash will be deployed anytime soon. See the problem?

That said, the current ratio of AEG is a healthy 1.42 which, gives some color on the higher debt/equity ratio. I can stomach stable long term debt, I think. The 4.2% dividend makes it a little more palatable. And as long as central governments (banks?) keep easy policy, AEG looks relatively safe.

So where should you buy AEG?

AEG Analysis: Technical Price Action

AEG Analysis - Technical

AEG Chart – Does the wedge mark a continuation or reversal pattern? (Click to Enlarge)

For AEG, (and other stocks) you’re best served to do technical analysis on a couple of different time frames (year, month, day, intra-day). It helps get good perspective. For example…

As I mentioned above, AEG has been “dead money” over the last 5 years, bouncing from $4 to $8. This is good context you should keep in mind when you’re planning a buy target in your AEG analysis…

Over the last year AEG has floated up from $4 to $7, and now back to $6. Year to Date, AEG has lagged, while the SPDR S&P Insurance ETF KIE is up 17%…. So, where do you go from here?

Currently, AEG looks to be trading in a wedge formation, resting on prior support. While a continuation pattern appears likely, you should guard against a reversal pattern, or even more churning price action. So what’s my advice to you?

Just try to be patient, and avoid overpaying. This is the kind of stock I like to buy when headline news is getting the market down. Especially if the rumors about hedge funds buying AEG stock are true.

In terms of my own AEG buy targts…

I might look to buy some AEG around recent lows ($5.85) with a stop below the 200 day moving average (depending on your risk tolerance). If the breakdown were purely technical in nature I may even add to my position on a pullback. So long as the moving averages are converging, a move may be in the cards.

And one more thing…

Volume on AEG is usually pretty robust. Lately there’s about 1 million shares trading each day. I also like the 2+ Beta that comes from the overnight gaps (given the company’s headquarters in Europe). It makes the NYSE trading a little choppy. It can be fun, but volatile. So…

Is AEG A Buy? Final AEG Analysis:

There are some significant fundamental headwinds that put a damper on significant capital appreciation for AEG. That said, there is a modest dividend (4.2%) and quite a large margin of safety. These two factors make it attractive to me (in fact, a lot of my investments are based on these factors).

And you know, I’m not a boring old buy and hold type guy either. I hope you didn’t see me that way. Usually, I approach it like this: Buy a 1/4 to a 1/3 position at a time on pullbacks, and sell up to 75% of it whenever the stock goes up 7-15%

I’ve found this to be a good tactic for padding my returns. And I think I can apply it to Aegon. That’s my AEG Analysis. Make sense?

So what do you think?

What’s your AEG Analysis?

AEG Video Update:

AEG Technical Analysis Update – Buy the Dip?

My gut tells me no! Even though AEG looks like a bargain based on valuations, I have to heed my cautiousness given the broad market weakness. I also already have some exposure around those levels, so I am entertained enough just crossing my fingers to see if recent support holds true.

AEG Analysis - 30 Minute

April 17 , 2013: Will recent support hold on this zoomed-out 30 minute chart of AEG? (click to enlarge)

What do you think the technical analysis of AEG on this time-frame is saying?

Will GNW Breakout?

Is a GNW Breakout On The Horizon?

GNW Breakout Horizon

Is a GNW Breakout on the horizon?

A couple days ago, I analyzed the fundamentals and technicals of Genworth Financial (NYSE:GNW) for you.

Updated!

And given the excitement the first GNW analysis received from you guys, here’s a quick update on the possibility of a GNW Breakout…

“Can GNW Breakout Off Trendline Support?”

One particularly attentive reader, JoePrivate, pointed out on Stocktwits that GNW is coming up on major trend line support. This is something I excluded from my original GNW analysis, so please see the chart below to reference what my new friend is saying…

Will GNW Breakout?

Is GNW Ready to Breakout Off Trend line Support?

And looking at yesterday’s price action into the close, GNW might be bouncing after all! Looks good, right? We might be in for a bounce. And by the way…

Let me just say: You’re a clever bunch of blog readers! I’m really lucky to have you thinking critically about my musings, and contributing your own stock ideas so thoughtfully. Thanks Joe Private. Seriously.

But even though GNW  appears bullish: be careful playing the breakouts. As the great Scott Bleier says, “Most breakouts fail… until they don’t.”

GNW is coming up on some serious support. And for the most part, even with a month of churning, GNW is dealing constructively with the supply of volume between $8.70 and $9.10, (from last year’s breakdown).

Do you see what I mean?

GNW has turned prior resistance into support, which is always a constructive sign for the bulls. But I get the distinct feeling that to make higher highs in the near term, the stock will have to stretch. And given the increasingly “risk-off” theme in the market these last few weeks, buying GNW here might be a little premature.

Of course, it’s easy for me to say this, since I already have exposure to a GNW breakout. As I mentioned in the last GNW analysis, I do have a small position that I’m planning to hold until GNW hits $14. However, should the stock dip a dollar per share lower, I’ll likely add more. Be patient though. Because it’s just that time of the year.

Seasonality: Possible Headwind to GNW Breakout?

The holiday ramp-up was fun. And January was a blast. So you should not be surprised to see that GNW has enjoyed some massive gains over the last few months. But its April now. And the price appreciation can’t go on forever.

Plus…

It’s already a new earnings season… at the same time, your taxes are due… (and you just finished paying off the holiday gifts you bought on expensive consumer credit) – surprise surprise – investors are suddenly less willing to pay stupidly optimistic multiples for speculative growth stocks.

I know this seasonality stuff feels a little like witchcraft. So to wrap this up let me clarify where we’re at: While I’m positive on the fundamentals of Genworth, and I realize there’s a technical uptrend that could stay in tact. I’m also saying…

Manage Your Risk On a GNW Breakout!

If there’s one thing I’ve learned trading GNW, it’s that it pays to take profits. And don’t get me wrong…

While I believe higher share prices are on the horizon for GNW, there may be some bumps to endure, too. So here’s what you can do:

You can manage risk by selling a couple hundred shares here and there, whenever the stock goes up 5-6% from your cost basis. C’mon, ring the bell. Put some money in your pocket. It feels good.

And if you do make the mistake of buying back in too high…

It’s not the end of the world. Because we have conviction about eventual higher prices for GNW… (even the possibility of a breakout!) And please remember: you’re only speculating with a small part of your position, within your margin of safety (let’s say as long as you’re buying GNw stock 30% below your target sell price you’re still safe… Get it?)

And that’s how I pad my returns. I’ve had a lot of “luck” swing trading about 2/3rds of my position. And given the strength in recent weeks, I’m looking to reload my shares closer to $8.00 (though my first buys will probably be around $8.45-65)

What’s Your Take On GNW?

Update: Motley Fool has a new article out, entitled, “3 Reasons to Buy Genworth Financial (GNW).” It’s always nice to see your stocks get positive press (even if you’re underinvested). And in fact, GNW has indeed broken out (alongside the major market indices) since this original post – thanks again JoePrivate for calling this bounce!

Update: I wanted to add this new 30 minute chart of GNW to show that any recent attempt at a breakout has faded. Frankly, it would be surprising to see GNW veer higher as the market indices deflate out of control, right?

GNW Breakout Fading

This zoomed-out 30 minute daily chart (April 17, 2013) shows GNW consolidating. A move to $8.50 would not surprise me on broad market weakness. (Click to Enlarge)

Aggressive day traders might tempt an entry at this support in the hopes for a slight bounce. But that risk to reward ratio is not exactly favorable, if you ask me. Personally, I’m looking for a little more stabilization (or further price correction) before increasing my exposure to equity in GNW. Patient swing traders will note that there are some significant resistance levels below supported by heavy buyers on the way up. So I’m waiting to see how that plays out — what’s your hurry?

Best Free Stock Screeners

In my post about stock research, you’ll remember that I talked about stock screeners as a way to save time objectively evaluating stock ideas. I also featured stock screeners as a way to find fundamentally strong stocks under $5 dollars. So…

Here Are The Best Free Stock Screeners Online:

Zacks Stock Screener is a very robust stock screener you can use for free. You can evaluate stocks based on valuation metrics, as well as growth metrics. Another thing that sets the Zacks Stock Screener apart is the ability to scan for broker recommendations. This is something I haven’t seen in many other screeners.

Finviz Free Stock Screener is one of the best free stock research resources online today. The interface is very easy to use and you can scan for an array of technical, fundamental and descriptive factors.  My personal favorite metric to scan using the Finviz Stock Screener is current ratio. The technical pattern rating is also very useful for identifying stocks in a trend. You can also display the results in chart form, which makes it easy to scan through stock picks (see below).

Technical Stock Screener

The FinViz Stock Screener lets you sort by technical pattern and display results in charts

ADVFN Screener: Although the interface on the ADVFN screener is a little bit archaic, you can rely on the functionality. This stock screener boasts the ability to report on a wide variety of metrics and operating ratios. The Graham and Dodd ratios are of particular interest to a value investor like me. Fair warning: it might take you a few minutes to find the functionality as the screener is not very intuitive (see stock screening video above).

So there you have it. Those are the best free stock screeners online. By the way, if you’re looking for criteria to screen your stocks by, you can always check out the stock idea checklist for an objective scorecard you can use to evaluate your stock ideas on a regular basis. Using the stock pick scorecard helps ensure you always make informed decisions buying and selling stock.

So check it out! And start screening for stocks today.

What’s your favorite stock screener?

How To Find New Traders On Stocktwits

Here’s how you can find new traders on Stocktwits

If you’re wondering How To Find New Traders on Stocktwits, you can watch the short video above. You’ll quickly see how Stocktwits is home to a wide breadth of amazing real time investment ideas. So…

You’re well served to find new Stocktwits traders and get the most out of the stock trading ideas they have to offer. It’s a veritable gold mine of stock picks. Seriously…

Here’s How To Find New Traders On Stocktwits:

Howard Lindzon, the founder and CEO of Stocktwits is very diligent about welcoming new users to his social trading information platform. Not only is it an awesome insight into the community he fosters… But, it’s also where you can find new traders (with new stock ideas)…

Just swing by Howard Lindzon’s profile every couple of days. You’ll see him welcoming all the new traders to Stocktwits. You can easily hover over their name to see a pop up of their trading bio. From there, it’s easy for you to engage and see what new stock ideas you can learn from these new traders.

Here’s a screenshot of Howard’s profile, as you can see, his welcome messages make it very easy way to find new traders…

Howard Lindzon New Stocktwits Traders

Howard Lindzon does an admirable job welcoming new traders to Stocktwits.

Since Howard personally welcomes all these new traders, you can just browse his profile to view the newest additions to Stocktwits. These investors are new to the service and very open to sharing and learning new trading ideas – otherwise they wouldn’t have recently taken the action to sign up for Stocktwits!

I recommend you browse Howard’s profile regularly so you can get acquainted with new and engaging traders. And by the way…

How To Find New Traders On Stocktwits

The Welcoming Committee is a great place to find new Stocktwits traders

Stocktwits has recently created a Welcoming Committee – so I guess they are really running with this idea of identifying new traders! The Welcoming Committee will make it even easier to browse new traders as they join this fantastic stock picking platform. Amazing!

And since this video shows you how to find and engage new traders as soon as they’re coming online, you’re more likely to catch them when they’re trying to grow their network.  Thus you can create a lasting and meaningful relationship. It’s a wonderful learning opportunity for everyone.

What do you think though?

How do you like to use Stocktwits to find new traders?

Weekend Stock Pick Research

Weekend Stock Pick Research


If you’re looking to get some research in on your stock picks this weekend, the video above will point you in the right direction. Watch to see where I go for weekend stock pick research.

The weekend is a great time to further research your stock ideas. During the week, I often screen for stocks and quickly add them to my watchlist. I don’t often have time to analyze if they are a buy or a sell until the weekend comes around.

My girlfriend is at yoga, and I can dive deep into data.

To save time, I usually try to leverage the curation of financial knowledge by others. Josh Brown The Reformed Broker usually features the 361 Capital Weekly Research Brief. Barry Ritholtz over at the Big Picture also usually has a weekend wrap-up.

Next up is my twitter feed. Then I head to my favorite blogs, read the newspaper and review my watchlists. I listen to conference calls or devour the transcripts alongside black coffee. Note taking furiously ensues, I plan entry points and sell targets on charts. I update my watchlist to reflect all these changes, and I make plans for the opening bell.

And before I know it, I’ve run out of time to research stock ideas this weekend. Sound familiar?

If you have any favorite weekend stock pick research tips share them below!

Update: Here’s another weekend stock research resource from Ragin’Cajun.

Use a Stock Watchlist To Manage Your Stock Ideas

Use a Stock Watchlist To Manage Your Stock Ideas

If you use a stock watchlist to effectively manage your stock ideas, you consistently earn a higher rate of return. Regular use of your stock watchlist ensures you always make disciplined investment decisions.

Plus, if you review your stock watchlist each day, you have a low-effort yet systematic approach to examining the most pre-qualified stock ideas. It’s about working smarter. This is especially true if you are actively managing your investment portfolio while holding down a full time job.

I can only speak to you from personal experience, but when it comes to managing your stock picks…

“Using and maintaing a stock watchlist can drastically improve the efficacy of your investing.”

As you can see in the video above, I only add pre-qualified stock ideas to the stock watchlist. And I am careful to review the fundamentals of the securities involved every 2-3 months. I also am sure to review the technical strength of the stock I’m thinking of buying.

The other important factor about this stock watchlist you’ll notice is that I have pre-determined sell prices. You really need to know your potential return before you act on any of your stock ideas.

And even then…

I often take profits on half my investment as soon as the stock jumps 7-10% – regardless of my target sell price. Then I let the rest of the position ride until it’s within 5-10% of my target sell price.

So that’s how I use a stock watchlist to manage my stock ideas effectively. It doesn’t take much time but I always know which stocks I think are best. The color coding makes it quick to scan, and the cloud based nature of the spreadsheet I use to host the stock watchlist means I can access my stock ideas anywhere.

How do you manage your stock ideas? Do You Use a Stock Watchlist?

Stock Ideas Under $5 Dollars

Stock Ideas Under $5 Dollars

Stock Ideas Under $5 are not always easy to find. Watch the video above to understand how you can find fundamentally sound stocks that are starting to show technical strength, – all for under $5 dollars.

If you’re interested in a more detailed plan of action for what to do when the market turns red, you can read my recent blog post: When Your Stock Ideas Go Wrong

GNW Analysis – Genworth Financial Revisted

GNW AnalysisOne stock idea you may want to revisit is Genworth Financial (NYSE:GNW). So if you haven’t been paying attention, this GNW Analysis will bring you up to speed…

But before you read my analysis of Genworth, you should know my bias… Here’s my position in the stock:

I’ve been long GNW for awhile. But I’m a modest guy. And I like to take profits where possible. So at this point, I’m clutching a meagre 1/4 position of Genworth stock that I dare not sell. Got it?

The point is…

I have some exposure to Genworth, but I’d love the opportunity to buy GNW on the dip. Now, let me tell you why. Here’s my GNW Analysis:

GNW Analysis:

I believe the bull case for GNW is strong. On paper, the company has a solid book value. Even after subtracting intangibles and goodwill, the stock is still trading at about half of tangible book value. Not bad, right?

And I’m not the only one clued into this value discrepancy. Recently the Globe Investor featured well known value investor Seth Klarman, who wrote about the hidden value in Mortgage Insurer Genworth Financial.

“So Why is GNW Stock Priced So Low?”

Well, last year’s grim decline in GNW stock was in large part due to poor executive management. Since the new CEO Thomas J McInerney has taken the helm at Genworth, the company appears to be righting it’s course…

For example: The Genworth Australia IPO is expected later this year. And management spun off another business unit with the recent sale of the wealth management business. This allows Genworth to keep focusing on it’s core business.

Speaking of which…

While recent headlines indicate the housing market recovery might be slowing down, Genworth’s Mortgage Insurance business stands to benefit, as long as the FED keeps buying real estate assets from the primary dealers. And… If you look at the BOJ’s latest policy action as the writing on the wall: Monetary policy should continue to be a significant tailwind for GNW shareholders.

It’s the analysis of these fundamental factors that compels me to be long term bullish on Genworth. I believe GNW stock can eventually get to $14 before the risk reward ratio becomes unfavorable.

And hey, this GNW analysis is not to say the road to higher Genworth share prices isn’t without speed bumps and unexpected turns. This is why I manage my position size and take profits where I can. But as an intelligent and opportunistic investor you must be wondering…

Is Genworth Financial (GNW) A Buy Right Now?

It’s hard to say if GNW will go up or down tomorrow. But since I’m only holding a 1/4 position of Genworth Stock, I would welcome the opportunity to buy more shares at a lower price. And…

Even though I’m not an expert technical analyst, it’s my opinion that GNW stock will see lower prices sometime in the next couple weeks. Market breadth has been weak. And GNW has been sliding down.

Given my current exposure to GNW, and the chart above, I will look for further stabilization, or lower prices. Specifically…

My entry targets, based on my pre-determined stock idea assessments, would be to buy another 1/4 position around $8.70. and another tranche of GNW stock at $7.95.

Make sense? Great.

How was that for a GNW analysis?

By the way, if you liked this GNW analysis you can see yesterday’s IQNT video analysis for more actionable stock ideas.