Monthly Archives: December 2013

British Petroleum (BP) Quick Analysis

BP Analysis

Despite all the controversy, is BP a good stock idea?

British Petroleum (NYSE:BP) is a stock idea I’ve been looking at lately. So I wanted to share a part of my analysis with you. I’ll give you a quick overview of my fundamental thesis. And then I’ll share some charts with you so you can see the thought around my buying and selling plans. Does that sound okay?

So let’s cut to the chase, here’s my Quick Analysis of British Petroleum (BP) going into 2014…

BP Quick Fundamental Analysis:

The fundamental value case for BP is pretty obvious. The company’s valuation is still suffering from undefined and somewhat open-ended liabilities from the Gulf of Mexico oil spill a few years ago. Since then, the company’s share price has languished. As a result…

BP’s stock is trading at a huge discount to peers like XOM and CVX on practically every valuation metric. Arguably, money managers are paying a significant premium for the safety of these bigger oil giants. The stock has been dead money since the disastrous spill, but litigation is coming to an end and the company might be on the verge of turning over a new leaf. But there’s something else you should keep in mind.

BP has a book value in the low $40s. These are hard assets that will continue to generate cash, so there is somewhat of a floor in the price of the stock. BP is also winning contracts in the Middle East and Asia. You might also argue the price of oil has been relatively subdued in 2013… (especially considering all the QE!)… Thus materials might be a significant theme going into 2014 and BP could be a profitable way to play the upside. Not only do you get possible capital appreciation from earnings growth and oil prices but, the company pays a high dividend yielding about 5%. That’s not a bad proposition, is it?

But you don’t have to take just my word for it…

Seth Klarman’s Baupost Group also has a sizable position in BP. They’ve reduced their holdings a little bit, but still hold 5.5M shares. I don’t usually pay too much attention to what other traders are doing. But Seth Klarman’s Margin of Safety Philosophy is one I am particularly interested in. On that note, if you invest with the Graham Number, you get a price target of BP for somewhere north of $70.

BP is also becoming more aggressive in pursuing fictitious lawsuits. To be sure, BP should be held accountable for all of the liabilities of their oil spill. But as a shareholder (the cold truth is) it is nice to see management flexing their muscles for you. Another reason I’m interested in BP is because I need some exposure to the energy/commodity/oil space. A lot of my portfolio is focused on financial service companies right now and BP provides a relatively safe play in energy markets where I lack exposure.

But the reason I’m interested in quickly analyzing BP isn’t only fundamental…

British Petroleum (BP) Long Term Technical Analysis:

When I’m considering trading around stock ideas I always want to keep the technical analysis in mind. While I get my conviction from the fundamental analysis I also take technical analysis into consideration for trading. To be fair, my chart work isn’t anything groundbreaking. But looking at the price action keeps you in an objective frame of mind…

Below is a Long Term Weekly chart of BP. You’ll notice that the stock has been trading in a relatively low range for the past few years. More recently, the trading range has tightened up and the stock might be breaking out of the consolidation pattern.

BP Long Term Technical Analysis

BP Long term technical picture might indicate a large base to jump higher from (click to enlarge).

Now let’s zoom in on the technical analysis of BP…

British Petroleum (BP) Short Term Technical Analysis:

While the long term chart pattern analysis for BP is encouraging, the short term technical analysis is also looking increasingly promising. You’ll notice the strong buy volume on the chart below. It looks like large buyers are supporting the price as it slowly gaps higher from the long term consolidation pattern.

BP Short term technical analysis

In the short term, buy volume seems to support a BP breakout to areas of low overhead resistance.

Another interesting feature is the blue horizontal line on the above BP daily chart. This represents long term resistance (also seen on the weekly chart) – and there is something of a “volume vacuum” above that price area. This could indicate a quick move higher for BP in January 2013 if the stock keeps pushing higher. Of course BP is riding the upper Bollinger band so it’s a little tough to chase at this point.

For Full Disclosure: I am long BP from just over $46 and am looking to buy any pullback. Please do your own research as this analysis is for educational purposes and is not intended as a recommendation to buy or sell BP stock.

And By The Way: If you’re still looking for more stock ideas I encourage you to sign up using the email form below. You’ll get free exclusive-email-only stock ideas and analysis not seen anywhere else. Why not give it a try?

No Bull (Book Review)

No Bull Book Review

No Bull about what it takes to win in the stock market

No Bull by Michael Steinhardt is an autobiographical account of his “life in and out of markets.” So what should you expect?

No Bull details the rise of Steinhardt Partners, an incredibly successful hedge fund with billions of dollars under management. Michael Steinhardt is the chief investment officer and ultimate trading decision maker at his enormously profitable firm. Not only did he pioneer the hedge fund industry, but Steinhardt is also one of the founders of Birthright Israel – one of his many philanthropic ventures. Impressive, right?

No Bull gives an insightful account into how Michael Steinhardt ran such a successful stock trading firm. But it also goes much further and describes the personal and cultural influences that shaped the life and philosophies of Steinhardt. Overall, the book does a great job profiling the life of one of Wall Street’s most successful traders.

Since I just finished reading No Bull, In this book review I’ll give you a quick overview of what I liked most about the book and what you might not like about it.

Why “No Bull” is a Good Read:

No Bull first came up on my radar when I was reading Market Wizards. Jack Schwager’s interview mentioned the book by Steinhardt. I immediately ordered it. And I’m glad I did. No Bull is an excellent read that shows you exactly how to climb to the top of the Wall Street ladder.

No Bull starts out with some background on Michael Steinhardt and the circumstances under which he grew up. No Bull shows the lucky turn that got him into business school, and it shows you how he first became interested in the stock market. From there, No Bull gives a very clear look at how Steinhardt developed his trading strategy – and what he thinks it takes to be an ultra-successful stock trader.

No Bull provides an in-depth and behind the scenes look at the personal and professional life of how a top hedge fund trader makes it to the top, and stays there.  But seeing how Michael Steinhardt climbed to the top of the financial services and investment industry isn’t even the best part…

My Favourite Part of No Bull:

No Bull contains a lot of great information. But I found one chapter called “The Steinhardt Style” to be incredibly insightful. And while it was cool to see Steinhardt’s career path to the top, I really enjoyed when he focused on discussing his trading methodology in this chapter. Let me explain…

While No Bull is peppered with information about how Steinhardt makes money in the stock market, this one chapter goes into a lot of detail about how Steinhardt consistently beats the other money managers on Wall Street. At one point in the book, Steinhardt breaks down his investment thesis into four simple and easy to read points. This makes it easy to get a lifetime of investing wisdom in a couple digestible bites. That sounds pretty good right?

No Bull is filled with insight but this chapter dedicated to explaining how Steinhardt came up with his trading philosophy, stands head and shoulders above the rest. I loved how he consistently grinds out trading gains and his gritty determination to extract profits regularly. No Bull really helps you understand the tips and tricks a top money manager used successfully to pad his returns and improve performance for his investors year after year.

No Bull – One Word of Warning:

No Bull, more than other stock trading biographies, focuses on the personal life of the author and protagonist. While I found this comprehensive view of the author very interesting, others might not. So if you’re looking for a book on specific trading techniques or a book that focuses only on trading ideas then you should be warned No Bull has a few chapters about personal and life events.

To be sure, I found the personal insights very interesting. No Bull definitely helps remind you that there is more to life than just trading the stock market. While it’s invigorating to find and analyze your own stock ideas, you need to find other outlets for passion and happiness, even if you have billions of dollars. No bull!

No Bull – The Final Word:

No Bull is an exciting read that details the rise of Steinhardt Partners. The book gives an entertaining and easy to read look at how one of the most successful traders in Wall Street history developed his trading strategy and ran an immensely successful hedge fund. For those reasons I’m happy to recommend you buy No Bull on Amazon right now. There are a couple of very actionable ideas that made this book a very worthwhile investment for me.

No Bull Book Review [VIDEO]:

Other Books You Might Like:

      

Stock Chart Technical Analysis

stock chart technical analysis

See why stock charts are so useful for technical analysis…

Stock Chart Technical Analysis is a useful tool to help you evaluate your stock ideas. And while I’m primarily a value investor with a long term focus, I use stock chart technical analysis to help time my buying and selling in the short term. So to be honest…

Stock chart technical analysis can be a very useful tool for any investor. Even if you have only a passing interest in managing your own stock portfolio then getting familiar with stock chart technical analysis is an important step. The good news is:

Using stock charts for technical analysis is incredibly easy to get started with. And in this short blog post we’ll take a look at some of the best free online tools you can use to improve your stock trading with stock chart technical analysis.

Sound good?

Free Stock Chart Technical Analysis Market Quotes and Tools:

Free stock chart technical analysis is available online, and it’s easy to use. We’re very lucky today with all these great online tools. Any investor interested in getting stock market quotes can just fire up some free stock charting tools. My favourite tools for free stock chart technical analysis online can be found at http://freestockcharts.com. This website is the most robust online stock charting tool.

Another useful website for stock chart technical analysis is stockcharts.com. StockCharts.com has a huge variety of technical indicators that you can overlay onto charts of any stocks. And if you’re just getting started with your stock chart technical analysis you can check out their Chart School. It’s another great free resource to help you harvest the advantage of using stock chart technical analysis online.

But beyond just learning about stock charting tools, you need to learn how to use stock chart technical analysis in practice…

Stock Chart Technical Analysis in Action:

Stock chart technical analysis can be tricky to understand if you’re just getting started with analyzing investments and stock ideas. But it is an important step that often jumps to life when you see stock charting used in action. So…

Check out how I use stock charts for trading ideas. You’ll see that (by making a free account at the website above), you can annotate your charts and leave notes. This makes it really easy to get oriented with your analysis of that given stock. Do you see how that makes it easy to always know where you stand with your stocks?

But that’s not all…

You’ll also notice in the link above that I don’t use too many fancy indicators in my stock chart technical analysis. I pay attention to some of the common moving averages, and I include Bollinger bands to help me understand how relatively overbought or oversold a given stock idea is. Another indicator I use is “volume at price” which you can see overlaid on the left hand side of these stock chart trading ideas. I find price often moves quickly in areas of low volume. But other than that my charts are pretty clean. I

If I am looking for more advantaged charting with specific indicators or overlays, I usually look up the chart on stockcharts.com. For zooming in on the technical analysis of specific stock ideas I think stockcharts.com does a very good job. So just one more thing…

Stock Chart Technical Analysis Video:

Stock Chart Technical Analysis videos can really help you take advantage of stock charts in your trading. For that reason, I really strongly recommend you check out the best technical analysis trading videos. These can go a long way to really helping you see stock chart technical analysis in action, cool?

And By The Way: If you want to learn more about how I use stock charting to improve my trading returns, sign up using the form below. I’ll send you a free copy of my mini-ebook which goes into more detail on how I use stock charts and technical analysis to improve my long term investments. What do you have to lose?

Stock Chart Trading Ideas

Stock Chart’s allow you to easily visualize your trading ideas, which I find really helpful. To get even more value from my stock chart trading ideas I like to annotate my stock charts with running commentary. This isn’t something I usually write about on StockIdeas.org, but…

Since I’m traveling around visiting family for the holidays, I needed to have my stock chart trading ideas easily accessible. And unfortunately the stock trading notes I keep on charts are linked on one computer at home. To get access on my Macbook as I travel across Ontario I’ll upload my stock chart trading ideas below.

So:

You can see how I use stock chart’s to keep track of my trading ideas, as well as manage my buying and selling of common stocks. While these charts below are strictly for managing my personal stock trading ideas, you might find them useful in learning how to organize your own stock chart trading ideas.

And if you want to learn more about the stocks mentioned below, check out my December 2013 Stock Ideas for a little more analysis of the stock ideas below. Click on any of the charts below to enlarge.

Stock Chart Trading Ideas:

AEG Stock Chart Trading Ideas

AEG stock chart trading idea

AEG is a great insurance company that might make for a good stock trading idea.

BP Stock Chart Trading Ideas

BP Stock Chart Trading Ideas

BP is an under-appreciated stock trading idea.

BRKS Stock Chart Trading Ideas

BRKS Stock Chart Trading Ideas

BRKS is an under-watched automation company that might be worth further analysis

C Stock Chart Trading Ideas

C Stock Chart Trading Idea

Citigroup is a well-known but undervalued stock idea

IAG Stock Chart Trading Ideas

IAG Stock Chart Trading Ideas

IAG is a stock chart not for the faint of heart…

SNV Stock Chart Trading Ideas

SNV Stock Chart Trading Ideas

SNV is a regional bank that is one of my favourite stock ideas.

SYA Stock Chart Trading Ideas

SYA Stock Chart Trading Ideas

SYA is a stock chart that might be worth looking at if you need a trade idea.

I hope the stock ideas above can give you some insight into how you can use stock charts to manage your trading ideas and stay up to date with stock investments you are interested in regularly watching. Please don’t put too much faith in the notes on my own annotated stock charts – they are just to help me keep track of all the stock trading ideas I have…

And By The Way: If you want more stock ideas or investment analysis, I encourage you to sign up for the email updates below for exclusive ideas and analysis

How To Make A Million Dollars An Hour (Book Review)

how to make a million dollars an hour book review

Find out why How To Make a Million Dollars an Hour is worth reading…

How to Make a Million Dollars an Hour by Les Leopold is about “Why Hedge Funds Get Away with Siphoning off America’s Wealth.”

How To Make a Million Dollars an Hour is a satirical but compelling look at what it takes to manage a hedge fund in America. Les Leopold gives you a tongue-in-cheek yet very in-depth look at how hedge fund managers make such obscene amounts of money. So…

If you want to learn how To make a million dollars an hour, then this book is definitely worth a read. It’s a fun book that can help bring the financially-minded back down to earth. And since I’ve just finished reading How To Make a Million Dollars an Hour I’m happy to share my thoughts in this book review so you can see if How To Make a Million Dollars an Hour is the right book for you.

An Overview of How To Make a Million Dollars an Hour:

How to Make a Million Dollars an Hour is a great book because it takes a cold hard look at how the top tier of the financial industry works. It reveals the tips and tricks the top hedge fund managers use to earn copious returns. So if you’re curious to learn more about how hedge fund managers are able to make so much money then you will really like How To Make a Million Dollars an Hour.

How To Make a Million Dollars an Hour starts off by showing exactly how much money the top hedge fund managers have recently made. The book also compares the incomes of hedge fund managers to film directors, professional athletes and other celebrities. The difference is astounding: hedge fund managers make WAY more money than even the top Fortune 500 CEOs. And since the book was published after the financial-crisis, the analysis of hedge fund manager income is even more pertinent.

But How To Make a Million Dollars an Hour doesn’t stop there...

How To Make a Million Dollars an Hour goes beyond how hedge fund managers make so much money, it also spends a lot of time discussing the economic (and social) value of hedge funds. This is the part of Leopold’s book that I found especially interesting.

The Best Part About “How To Make a Million Dollars an Hour”:

How to Make a Million Dollars an Hour does a great job showing the (sometimes illegal) tricks of the trade that hedge fund managers use to make an incredible amount of money. But for me the best part of the book wasn’t just talking about how the hedge fund managers make millions of dollars each day, it was the discussion of the economic and societal value the hedge fund industry creates (or, more accurately, destroys).

As a fledgling investor, I’m interested in understanding the impact of my actions. And while I don’t aspire to be  hedge fund manager in the truest sense of the word, I do want to manage more and more money in my portfolio. And I often wonder about the impacts of my investing actions, as well as the economic value high frequency traders actually bring to the world. So I was very happy to see that this is something How To Make a Million Dollars an Hour focuses on in detail.

And while there are a lot of hedge fund apologists and lobbyists out there arguing for the value of hedge funds, How To Make a Million Dollars an Hour takes the opposite side of the argument. The book does a very compelling job debunking a lot of the myths around the value of hedge funds. At the end of the day…

How To Make a Million Dollars an Hour really makes you think about whether or not hedge funds, and the financial services industry in general are doing good for society and humanity as a whole. To be sure, there is a ton of value in efficient capital markets. But How To Make a Million Dollars an Hour shows why there is diminishing and even negative returns when the deregulation of financial services is taken too far.

This stark look at hedge fund managers and the economic and societal impacts of their egregious incomes was an eye-opening perspective that I enjoyed. How To Make a Million Dollars an Hour has given me a lot of food for thought that I’m sure I’ll reflect on for many years after reading this book.

But while How To Make a Million Dollars an Hour was an enjoyable read, it might not be for everyone.

What “How To Make a Million Dollars an Hour” Omits:

How to Make a Million Dollars an Hour is a great book that gives an in-depth view of the financial system. But (despite the title) the book doesn’t actually tell you how to make a million dollars an hour, as much as it criticizes those who do. So…

If you’re looking to learn specific trading techniques or learn the explicit steps in the career path of a hedge fund manager you might be better off reading biographies like Cramer’s Confessions of a Street Addict (which is mentioned at length in How To Make a Million Dollars an Hour). This book is a little bit more introductory in scope and while it provides an informative overview of the industry, it’s probably not a how-to

How To Make a Million Dollars an Hour – The Final Word:

How To Make a Million Dollars an Hour is an entertaining and enjoyable read. It gives a lot of great insight into how the financial industry works. That’s why I can recommend you buy How to Make a Million Dollars an Hour on Amazon. And even if you only have a cursory interest in the financial system this book provides a very great summary.

How to Make a Million Dollars an Hour (Book Review):

Other Books You Might Enjoy:

How to Find Companies That Go Public

how to find companies that go public

Read this blog to learn how to find companies trading on public markets…

How Do You Find Companies That Go Public? Knowing where to find recent and upcoming IPOs can give you the newest investment and trading opportunities on the market. So how do you find companies that are going public?

In this short blog post I’ll show you my favourite place to get information on companies that have just gone public, as well as upcoming IPOs. You’ll be able to see all the new stock tickers coming onto the market, how many shares are on offer and what price they’ll be for sale at. So keep reading to learn how you can find all the information you need on companies that go public.

The Best Place To Find Companies That Go Public:

The best place online to find companies that go public is the Nasdaq.com IPO Page. The Nasdaq IPO activity page is the best place to find new public companies because it gives you all the information you need, it’s free and the information is well organized.

For example…

The Nasdaq IPO activity page is organized into companies that have gone public and are scheduled to go public. You can get all of the filings for the companies going public, and even companies that have withdrawn their IPOs. This makes it really easy to find information on companies at different stages of going public.

But that’s not all. The IPOs listed on the Nasdaq page are not just limited to the Nasdaq exchange – you can find stocks IPO’ing on the NYSE and other American stock market exchanges. It’s a very comprehensive list of companies that go public. And this of public companies isn’t just the company names…

In addition to having the name of the company that is going public, the Nasdaq IPO activity page contains the stock symbol of the new shares, the exchange it is listed on and the IPO price. You can also see the date of the IPO and the number of shares that are being offered. This way you can easily see exactly how much capital a company that’s going public is intending on raising.

If you’re thinking of trading IPO’s or you are looking for companies that are about to go public, this page from Nasdaq.com is incredibly helpful. And while the NYSE website also has IPO listings, their website is not as comprehensive so I think you’re better off using the Nasdaq resources if you want to find companies that go public. If you still don’t believe me, watch this quick video…

How To Find Companies That Go Public [VIDEO]:

By now it should be clear that finding information on companies that go public is actually pretty easy. So what IPO’s are catching your eye these days? Do you see any great trading opportunities?

And By The Way: If you find yourself still hungry for stock ideas, then sign up using the free form below and get exclusive email only analysis and updates on stock trading ideas of public companies. Sound good?

Pre Market Quotes

Pre Market Quotes

Pre Market Quotes help you understand where the stock market is going – before it opens….

Pre Market Quotes can help you get a feeling for what your stocks are going to do, before the stock market opens. Having this advantage can help you adjust your trading plan to prepare for the stock market open. So…

In this short blog post you’ll learn the best place to find pre market quotes online. I’ll also share my favorite place to look at stock index futures and the best mobile app you can use for getting pre market quotes on your phone.

So here is the best website to get pre market quotes online:

Pre Market Quotes & Futures Online:

The best place to get pre market quotes and stock market futures information is from FinViz Futures. Not only does FinViz give you pre market quotes for stock indexes and currencies, it also gives you pre market quotes for commodities, bonds and precious metals. It’s the big picture!

The pre market quotes and futures on Finviz are also color-coded, which makes it very easy (at a glance) to get a feel for where the market indices and different asset classes are heading. This way you can instantly get a feel for if the market is going to collapse or push higher at the open – or if there are any other red flags you need to be aware of before the market starts trading.

By using FinViz Futures you can really get a feel for which way your stocks are going to go at the opening bell. But sometimes pre market quotes for indices and asset classes are not enough…

Pre Market Quotes for Individual Stocks:

While pre market quotes for the major stock market indices are helpful in giving you a general feel for market direction, sometimes you need pre-market quotes for individual stocks and securities. So how can you find these specific pre market quotes? Well…

If you’re just looking for a quick pre market quote the easiest way is to use Google Finance. You can just type in the stock ticker you are interested in, and if you do it during pre market trading you can usually get a pre-market quote. The pre market quote will be below the main Google Finance quote. This quote obviously isn’t perfect and doesn’t show you the volume, but you can get a feeling for where your stocks will open.

And if you want to dig a little deeper with pre market quotes for individual stocks:

The best best way get pre market quotes for your securities and companies of interest is simply to log into your brokerage platform. Not only do most online brokerage platforms have pre market trading, but you can also see more in-depth pre market quotes, including the bids, asks and volume. This is probably your best bet for getting pre market stock quotes if you are looking to trade stocks right at the opening bell.

But what if you need pre market quotes and you aren’t at your desk when the stock market opens? Well…

Mobile Pre Market Quotes:

If you’re looking for pre market quotes but you can’t be at your trading station then there are some great mobile apps you can use. Having access to pre market quotes on your cellphone makes it very easy to monitor the positions in your stock portfolio, even if you’re on the go. So what’s the best mobile app for free pre market quotes?

The best mobile app for pre market quotes is the CNBC app.  You can download this app for free from the iTunes store, or for Android devices. It’s definitely worth downloading the CNBC app if you’re looking for pre market quotes on your smart phone. Additionally…

The CNBC app has pre market quotes for all of the global stock markets and major asset classes. The app also allows you to make watch-lists of stocks that you like which is a very handy feature. When the pre-market is open you can click on any stock in your watchlist (or look up any quote) and see the pre market quote including volume. This is really helpful in seeing the strength of the pre market price change and if it’s something you should investigate further. Make sense?

Having access to pre market quotes can make your life as an investor a little less volatile. It’s nice to know which way your stocks are leaning before the market opens so that you can review and refine your trading system. So please review the sources of pre market quotes above, and if you have any other places you like to get pre market quotes let me know in the comments below, okay?

And By The Way: If you’re still looking for more ways to get ahead in your stock idea analysis, I encourage you to sign up for the free email-only investment insights below…

Stock Option Trading Information

Stock Option Trading Information

Which option looks best to you?

Stock Options Trading Information can help you leverage your portfolio returns. But finding reliable stock option trading information isn’t always easy. And the financial landscape is littered with misinformation and confusion – especially for beginner traders moving from stock investing to option trading. So…

In this short blog post I’ll share some of my favourite stock option trading informational resources. And while options present a lot of profit opportunity for proactive stock traders, they can also erode your account if you aren’t careful.  So with that in mind, here’s where you should start…

Basic Stock Options Trading Information and Resources:

The following stock options trading information and resources can help you get acquainted with stock option trading, as well as find more advanced strategies to improve your option trading returns.

Option trading definitions are important to understand. These are the basics of stock option trading information and you may want to study some of the theory behind option trading before you invest any of your own money. Once you’re a little more familiar with the terminology, you can start to learn how to put stock option trading information into practice.

For example:

Investopedia has fantastic introductory stock option trading information resources for anyone looking to get up to speed with the basics of option trading. You can learn how options are priced, the difference between puts and calls, and what an option chain is. Investopedia puts a nice practical spin on the information, so you  If you’re just curious about option trading information, check out their Basic Stock Option Trading Information.

If you haven’t traded options before, there’s one other thing you should do before diving in…

Practice Applying Stock Option Trading Information:

Before you put your stock option trading information to work in your portfolio, I really encourage you to practice first. Even if you’ve been trading stocks on your own for years, options are an entirely different beast.  Seriously…

While Mock Stock Games are a great idea, option trading simulations (available from the same link) are even more valuable. Even if you read all the stock option trading information in the world, it’s hard to really understand options trading until you see them in action. Check out

Best Stock Option Trading Blog:

Now that you’re familiar with the basics of stock option trading information, let me share my favorite option trading blog with you. Keep in mind, the tactics discussed on this blog are a little more advanced. So be careful and always do your own research before making any decisions about trading stock options based on internet information. With that in mind…

The best stock option trading blog is The Option Addict. The author of this blog is a professional option trader who shares his stock option trading information with you on his blog. The thing that I really like about the information at this stock option trading blog is that the ideas are very actionable. The trading ideas from the blog are ones you can easily follow along with – and since they are often short dated options you don’t need a ton of money to play along at home.

So there you have it! Now you know my favorite sources of stock option trading information. And while trading stock options can be incredibly profitable, I really encourage you to play it safe and definitely get some practice before trying any of the options trading strategies you come across.

And By The Way: If you’re still looking for more ideas for investment analysis, I really encourage you to sign up to the free email updates and analysis below. 

Operating Margin vs Profit Margin

Operating Margin vs Profit Margin

Operating Margins vs. Profit Margins: Return on Sale vs. Take Home Profit

Operating Margin vs. Profit Margin: Understanding the difference between these two margin metrics is important to your investing profit.  So…

Read this blog post to learn how to use both operating margin and profit margin when you’re analyzing the shares of stock for investment.

Luckily the difference between operating margin and profit margin is easy to grasp. I’ll start by going over the definitions of each metric, and then show you how to use profit margin and operating margin together in action.

So here it goes:

Operating Margin Explained:

Operating Margin is a percentage measure of how much the company is earning on its revenues.  So if a company has an operating margin of 10%, it is earning 10 cents (before taxes and interest) on every dollar of sales. Over time, operating margin can show how a company is dealing with the cost of selling more goods.

A steadily improving operating margin might indicate a management team that is conscious of controlling sales expenses. On the other hand, deteriorating operating margins could be an early warning sign to deeper structural problems. If you’re still curious about it, you can read this blog post about what makes a good operating margin to learn more.

Next in the matter of analyzing operating margin vs. profit margin, let’s took a closer look at the latter…

Net Profit Margin Explained:

Net Profit Margin is a percentage measure of how much money your business is taking home on every dollar of revenue. Net profit is the best one-number look at how effectively a business is making money. To calculate net profit margin: Divide the profit your company makes by the sales. High profit margin business may trade at higher earnings multiples, but it may also indicate a strong competitive advantage. Companies with high net profits margins are always worth exploring further.

But one more thing you should know about net profit margins is:

Just like operating margin, net profit margin is best viewed in terms of trends over time, investors can grow their revenues most when looking at changes in profit margin over time. By following along with net profit margins (both in looking at quarterly reports and in listening to management’s commentary on these reports) you can really keep your finger on the pulse of the business. You’re likely to anticipates palpitations and stutters ahead of other investors.

So where operating margin is focused on the profitability of sales, the net profit margins are focused on the profitability of the company as a whole. But there’s one more thing you should keep in mind. So let’s wrap this up…

Difference Between Operating Margin and Profit Margin:

By now you should be seeing the difference between operating margin and profit margin. Operating margin is focused on sales profits. Net profit margin is the big picture profit margins after every phase of the business, including taxation and all other costs. When considering the difference between operating margin and profit margin there’s one more thing to consider…

If there is a big difference in the operating margin and the profit margin you should probably investigate why. It may just be a capital intensive business. But it pays to know. Keep an eye on how these margins fluctuate relatively to each other over time. Does that make sense?

Drop any questions in the comments below. Take some time calculating these margins on your favourite companies and compare them to industry peers. Digging through the differences between operating margins and profit margins is always interesting so I hope this post has helped you understand the difference between them.

And By The Way: If you’re still hungry for more ways to analyze stock ideas then sign up using the free email form below…

Compounding an Investment

Compounding An Investment

Learn why Actively Compounding an Investment presents a lot of opportunity you can harvest

Compounding an Investment is the key to earning a high return. Compounding can also generate a lot of passive portfolio income.

And sure, we’re taught about the value of compounding investments at a young age. But nobody really talks about the different ways you can actively apply compounding to improve your investing returns.

So…

In this short blog post we’ll look at how you can compound an investment. I’ll also share with you some ideas I have on how to compound your investments more actively so you can improve the returns you’re seeing from your stock portfolio.

Compounding an Investment – The Basics:

Compounding an investment is pretty simple math. When you have an investment, you expect to earn a percentage on your invested capital. So as an example, if you invest $10,000 and get a 10% return, your capital gain would be $1,000. Simple, right? Now, compounding comes into effect when you let the $1,000 of investment income continue to earn income for you. Any percentage return you earn next year on the interest from last year, is compound interest. Does that make sense?

If you want to experiment a little more with the basics of compounding, I suggest you check out this compound interest calculator. It’s really robust and let’s you experiment with the different way you can grow your savings. A little experimentation here can really illustrate the value of compounding your investment.

But if you’re already familiar with the basics of compounding and looking for more active ways to pursue passive portfolio growth, then keep reading…

Compounding an Investment – Active Compounding Tactics:

While every financial planner under the sun can preach the value of compounding your investments, they never talk about how to actively compound. Common wisdom says  you should just keep buying stocks, re-invest dividends and re-balance your portfolio once or twice a year. I’m sure you’ve heard that before. But let me ask you…

What if there was a better way to compound your investments? What if you could actively compound your investments every quarter, month or week? Would that be interesting to you?

The Best Trading System Book was the first investment book I discovered that really put the power of active compounding front and centre. That investing book is quite simple but focuses exclusively on the idea of actively compounding your investments and how this can super-charge your portfolio returns. I also talk about it in my free mini-ebook (accessible on the side of this site). Here’s how it works…

First of all, even active compounding takes time for you to reap big investment rewards. So active compounding is still predicated on owning great companies at fair prices (which is what most fundamental buy and hold investors should aspire to anyways). But the key difference in active compounding is that you don’t just forget about the investments in your portfolio and keep reinvesting the dividends (as traditional compounding wisdom dictates).

Instead, active compounding requires that you watch the price chart of your fundamental investments. Even if you’re not a technical analyst you can still use short-term market inefficiencies and exaggerated price movements to manage the size of your investment position and take advantage of compounding opportunities. For example, if your stock jumps up 5% on low volume and no news items, you may want to sell 1/3 or 1/4 of your position. Then, when the stock pulls back 2-3% you can re-buy it. Obviously this takes some practice and you’re not going to get it perfect every time. But that’s okay. Just remember…

Since you are only focusing on stocks you like long term for fundamental reasons, you don’t have to be perfect. You can hold your positions if they go against you the same way a long term investor would. But when you re-buy companies at lower prices you actively compound your gains.

And I guess if stock picking isn’t your thing you could even practice active compounding of your investments using ETFs like the SPY. You would have to maintain a long bias, where something like 50% of your portfolio would always be invested as a long term buy and hold investor, but then you could also use the other 50% of your portfolio to compound actively. Does that make sense?

Active compounding of your investments doesn’t have to be rocket science. If you just look a little harder than most to apply the magic of compound investing you can really improve your stock portfolio performance. Sound good?

And By the Way: If you’re looking for more information on how to compound your investments, then sign up using the form below. I’ll send you a free copy of my mini-ebook “The Intelligent Swing Trader” which explains in much more detail how I actively try to compound my investments. So check it out! What do you have to lose?