Tuesday, December 31, 2013
This Strategy Has Worked Since 1801 and Is a Good Bet for 2014
Individual investors often point to the long-term success of Warren
Buffett as proof that value investing works. They are correct, and
Buffett is just one example of the many long-term investors who have
found success with value investing. While value investing works, many
investors fail to succeed with this strategy.
I believe the reason value investing is so difficult to implement is because it is challenging to define exactly what "value" means. Some investors use the price-to-earnings (P/E) ratio and buy when the P/E ratio is low. Others search for stocks with low price-to-sales (P/S) ratio in their hunt for value. In addition to these two tools, there are dozens of other ways to measure value. In the right hands, and with enough time, any disciplined approach to value investing should work in the long term. (more)
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I believe the reason value investing is so difficult to implement is because it is challenging to define exactly what "value" means. Some investors use the price-to-earnings (P/E) ratio and buy when the P/E ratio is low. Others search for stocks with low price-to-sales (P/S) ratio in their hunt for value. In addition to these two tools, there are dozens of other ways to measure value. In the right hands, and with enough time, any disciplined approach to value investing should work in the long term. (more)
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The Top 2 Tech Sectors For 2014 And Beyond: iShares NASDAQ Biotechnology Index (NASDAQ: IBB), TriQuint Semiconductor Inc. (NASDAQ: TQNT)
There's been a lot of talk about a tech bubble.
Forget about it.
The fact is, there are always parts of every sector that are overvalued and pockets that are undervalued.
The easy story for the talking heads in the financial media is to generalize, inflame and move on. The analysis is usually about as deep as your fingernail.
What I'm here to tell you, is that after huge amounts of research and days of elite conferences and hours of interviews, I know there are two tech sectors that have many glorious days ahead of them, regardless of the silly chatter that you hear from the pundits.
Both of these sectors are just hitting their stride in the "New Economy." This isn't the "old" stuff that you've seen for the past decade or so. These sectors have upgraded their technologies and are taking them to places that no one could anticipate a decade ago. (more)
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Forget about it.
The fact is, there are always parts of every sector that are overvalued and pockets that are undervalued.
The easy story for the talking heads in the financial media is to generalize, inflame and move on. The analysis is usually about as deep as your fingernail.
What I'm here to tell you, is that after huge amounts of research and days of elite conferences and hours of interviews, I know there are two tech sectors that have many glorious days ahead of them, regardless of the silly chatter that you hear from the pundits.
Both of these sectors are just hitting their stride in the "New Economy." This isn't the "old" stuff that you've seen for the past decade or so. These sectors have upgraded their technologies and are taking them to places that no one could anticipate a decade ago. (more)
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Computer Sciences Corporation (NYSE: CSC)
Computer Sciences Corporation provides information technology (IT)
and professional services and solutions in North America, Europe, Asia,
and Australia. The company’s Managed Services Sector segment offers IT
outsourcing services that involve customer’s technology infrastructure,
including systems analysis, applications development, network
operations, end-user computing, and data center management. Its North
American Public Sector segment provides systems integration and
outsourcing, and complex project management and technical services, such
as enterprise modernization, telecommunications and networking, managed
services, base and range operations, and training and simulation
services for government agencies, as well as the department of homeland
security and NASA. The company’s Business Solutions and Services segment
offers consulting and professional services that include advising
clients on the strategic acquisition and utilization of IT and on
business strategy, security, modelling, simulation, engineering,
operations, change management, and business process re-engineering.
To review Sciences’ stock, please take a look at the 1-year chart of CSC (Computer Sciences Corp.) below with my added notations:
After a nice push higher in July, CSC had been bouncing back and forth since August. As the stock found support in the general $50 area, it had also created a strong level of resistance at $54 (blue), which constitutes a 52-week high resistance. A break through that level most likely means higher prices for the stock. As you can see from the chart, CSC finally broke higher last week.
The Tale of the Tape: CSC broke out to a new 52-week high. A long trade could be made at $54 with a stop placed below that level. A break below $54 would negate the forecast for a continued move higher.
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To review Sciences’ stock, please take a look at the 1-year chart of CSC (Computer Sciences Corp.) below with my added notations:
After a nice push higher in July, CSC had been bouncing back and forth since August. As the stock found support in the general $50 area, it had also created a strong level of resistance at $54 (blue), which constitutes a 52-week high resistance. A break through that level most likely means higher prices for the stock. As you can see from the chart, CSC finally broke higher last week.
The Tale of the Tape: CSC broke out to a new 52-week high. A long trade could be made at $54 with a stop placed below that level. A break below $54 would negate the forecast for a continued move higher.
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Little-Known Indicator Signals 'Buy' While Investors Are Running Scared
In the 1930s, a financial editor at Forbes magazine pieced
together chart patterns. Richard Schabacker, who is considered to be the
"father of technical analysis," went beyond identifying how patterns
looked on charts. He also looked broadly at investor psychology and
noticed that it could explain why some chart patterns form.
Psychology can be a valuable tool for traders to understand. We have made some notes on the chart below that describe the feelings of some investors at various times during the past few years.
Investor
psychology does help explain resistance on a chart, for example. After a
bear market, there will be some investors who will be thankful to
recover their losses. They might sell when the market gets back to its
old highs. This appears as resistance on the charts. After resistance is
broken and prices start moving higher, we often see a "market melt up"
as investors rush in since they are worried about missing out on the
upside. (more)
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Psychology can be a valuable tool for traders to understand. We have made some notes on the chart below that describe the feelings of some investors at various times during the past few years.
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Time to buy out of favor ETF’s for 2014?: GDXJ, EWZ, TUR
The
best time to buy cheap is when you are afraid to bring up your ideas
around the water cooler at work for fear of the peer laughter. Our work
centers on looking for oversold conditions and crowd behavioral
anomalies that can give us better low risk entries with good upside
potential. A combination of fundamentals and technical, combined with
Elliott Wave Theory patterns can lead to nice profits with low risk.
For just a few quick ideas that would make sense in this area, we point
out 3 ETF's that you could look at entering now as they are way out of
favor and very oversold.
Gold Stocks: GDXJ
The Junior Miners index is high risk, high reward. However, if you time
the entry right at the opportune moment the upside is very high with low
downside risk. With GOLD out of favor, we have been pounding the table
the last 10 days or so that there are only 4-5 weeks left to buy quality
miner names. Instead of picking through them one at a time, you can
pick up the high beta play GDJX ETF.
How about Brazil?
Everyone hates Brazil stocks now, but they have some of the most
valuable natural resources in the world, and Brazil almost always
bounces back strong off bear cycle lows. Here is a way to play the
commodity rebound we see in 2014: EWZ ETF
It's not too late to eat some Turkey:
For just a few quick ideas that would make sense in this area, we point out 3 ETF's that you could look at entering now as they are way out of favor and very oversold.
The Junior Miners index is high risk, high reward. However, if you time the entry right at the opportune moment the upside is very high with low downside risk. With GOLD out of favor, we have been pounding the table the last 10 days or so that there are only 4-5 weeks left to buy quality miner names. Instead of picking through them one at a time, you can pick up the high beta play GDJX ETF.
Everyone hates Brazil stocks now, but they have some of the most valuable natural resources in the world, and Brazil almost always bounces back strong off bear cycle lows. Here is a way to play the commodity rebound we see in 2014: EWZ ETF
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