Entries Tagged 'Trading' ↓

Earnings season is right around the corner and stock are deeply oversold. So, is now the time to buy or should you wait until after earnings are reported? Is now the time to buy and wait for a quick pop from earnings or should you wait until earnings disappoint and buy the sell-off?

Many stocks are trading at single digit P/E ratios and valuations that make the market look cheap. Although I am not too much into fundamental investing, I have to consider fundamentals when trading. Value investors are working overtime right now trying to distinguish whether these valuations are of actual value or whether they are pointing to a weaker earnings outlook.

What Am I Doing?

Sitting it out for now. If I am not in the market, I can’t lose money. I see companies hoarding cash, retailers reporting mixed numbers, employment not improving, and terrible housing data. The technicals of the markets say there is more room to the downside but with any earnings season around the corner, volatility is the only certain thing in the markets. Some stocks will win and others will lose, I will sit on the sidelines and wait.

Many individual investors and mutual fund managers choose not to invest or trade stocks selling less than $5/share. Many of these stocks, often referred to as penny stocks, will go to zero but what about the ones that don’t? Many mutual funds place limits on stocks they buy; penny stocks are often forbidden by mutual funds. Once these stocks reach the $5/share mark, mutual fund may jump in and push them higher.

Citigroup (C)

Citigroup is in a turn-around phase and once it pays back the government, this stock has the potential to move much higher. This stock is a longer-term trade or more like an investment, which could see a double in price action over the next few years.

SciClone Pharmaceuticals (SCLN)

SciClone is a Chinese pharmaceutical company that operates mostly in Asia but sells its primary drug ZADAXIN in 30 different countries. SciClone Pharmaceuticals recently had a big upgrade, which has driven up the price. SciClone Pharmaceuticals has many products in testing phase which once completed could drive the stock higher, easily reaching the $5/share mark.

Conexant Systems (CNXT)

Conexant Systems is a semiconductor company that recently reported a less than expected earnings loss. The stock currently has a PEG ratio of 0.33. Conexant closed today at $3.64. Although the trend is down, the stock may find support at around $3.00 as the 200 DMA will support the price. This stock is a trade and not an investment: place stop losses and be prepared to take profits quick.

Xinyuan Real Estate Co (XIN)

Xinyuan Real Estate is a Chinese property management company that also engages in residential real estate development. This stock trades at less 3.86 times forward P/E and at a PEG ratio of 0.14. If you believe in the Chinese real estate bubble, stay away from this stock or take it for a quick trade. The stock is currently selling at a discount to book value and presents a promising trade for a couple points.

Global Ship Lease (GSL)

Global Ship Lease leases container ships to various container-shipping companies with long-term contracts at fixed rates. The company is selling at less than book value with the current price/book ratio of 0.66 and a P/E ratio of 3.22. Global Ship Lease has 17 ships currently on the water with two more coming at the end of 2010.

Trading penny stocks significantly increases your risk. Most of the companies listed are microcap companies that can also increase risk. Please research these stocks before making any purchases. Consider penny stocks speculation and allocate the appropriate funds to them.

DISCLAIMER: I do own shares of SciClone Pharmaceutical.

If you are an active trader looking for a way to save on commissions then Interactive Brokers is probably the best choice for you. With their low commissions, many buy and hold investors have started using Interactive Brokers. So what does Interactive Brokers have to offer and at what price?

Investing/Trading Products Available

Stocks, ETFs, options, futures, bonds, warrants, mutual funds…and so on (click here for full list). Interactive Brokers offers everything that a retail investor can trade. With Interactive Brokers, you are not limited to just U.S. investments as Interactive Brokers allows trading in 80 different markets.

Trading Platform

Interactive Brokers has a variety of trading platforms to trade from whether using their desktop platform, web trader platform, or their mobile platform, you will always have a way to get out of a trade whether at your computer or not. As for their software, executions are great allowing you to enter orders on charts or order tickets. Their charting software offers very basic technical analysis tools, so a charting program (QuoteTracker, which is free, or a paid program like eSignal) is almost mandatory when using Interactive Brokers for technical trading. Interactive Brokers is geared toward the active trader so fundamental investors will have to do their research somewhere else.

Fees

Interactive Brokers is one of, if not the, lowest cost brokers. There is a minimum of $10,000 to open an account. Depending on what you products you trade, some additional fees may apply for data feeds. See a full list of fees here.

Overall, Interactive Brokers is the best broker for active traders and is quickly becoming a favorite among passive investors.

Tired of paying high brokerage fees? Looking to lower your brokerage commissions? Charles Schwab recently began offering free ETF trades when you open a brokerage account with them. Are the benefits worth it?

ETFs Available To Trade Free Now

Schwab US Broad Market ETF (SCHB)
Schwab US Large-Cap ETF (SCHX)
Schwab US Small-Cap ETF (SCHA)
Schwab International Equity ETF (SCHF)

Available In December

Schwab US Large-Cap Growth ETF (SCHG)
Schwab US Large-Cap Value ETF (SCHV)
Schwab International Small Cap ETF (SCHC)
Schwab Emerging Markets Equity ETF (SCHE)

Are Charles Schwab’s ETFs Right For You?

If you are a investor looking for longer-term investments or trades and like using indexes; then these ETFs are worth looking at. For traders and shorter-term investors, the volume is too low for me to recommend them. When trading stocks and ETFs (other than the Schwab ETFs listed above), commissions rates are $8.95 – $19.95, depending on the amount of trades placed.

Understand that commission free trading is nice, but with Charles Schwab, you are limited to a few ETFs that you can trade. If the volume rises in these ETFs, it might be worth looking into. For now, the products are too limited and commissions on other ETFs and stocks are higher than most online brokers.

Get more information on opening an account and Charles Schwab ETFs @ www.schwab.com.

Beta, in short, is a measurement of risk a stock or ETF holds against a benchmark index such as the S&P 500. Higher beta usually means bigger movements and visa versa for lower beta stocks or ETFs. Understanding beta can provide your portfolio with a hedging tool and the opportunity for bigger gains (and losses).

Beta, Beta, Beta.

The S&P 500 SPDR (SPY) has a beta of 1, while stocks and ETFs are calculated using an index to compare the correlation. Any beta over 1 means a stock or ETF outperforms its benchmark index. A stock with a beta of 2.0 will usually go up twice the amount of the benchmark that tracks it but also goes down at the same rate. Stocks and ETFs with a negative beta trade inverse to their benchmark index and are useful in hedging long positions.

The more confident you are of a markets direction, the higher beta stocks and ETFs you want in your portfolio. In an uncertain, choppy market, you should stay with lower beta stocks and ETFs or stick to the indexes.

Pairs Trading

When used correctly, beta is an easy way to outperform (and underperform) a benchmark but can also be a tool to hedge your investments. Buying a stock with a higher beta and shorting a lower beta stock is one way to hedge your investments in an upward trending market. In a downward trending market, just reverse the trade selling the high beta stock and buying the lower beta stock.

Things To Remember

• Beta is calculated on past performance.
• Beta can hide negative correlations.
• Beta, alone, should never be used to buy/short any security.

Use beta wisely and always have stop orders.