Tuesday, August 18, 2009

Business Books

Hello to all my faithful readers. I thought I would do a post pointing out some different places on the web with good analyses and reviews of business books. So.. without further ado, let's get to it:

Stock market books

I suppose everyone who would be a reader of this blog probably already has their list of favorites in terms of stock market books. To get another point of view, especially in foundational books about the fundamentals, check out this article about the best stock market book.

Using social media to your company's advantage

The book Trust Agents will soon be out. To get a picture of what that book is and what it purports to be able to do for your business's online reputation, check out this Trust Agents review.

Passive income

Elsewhere around the web, it is always good to get a little refresher on what exactly is passive income. Yes, stocks are one form. But there are other ways to get a nice "passive" cash flow coming in for work you're no longer doing. (Or never did in the first place.) Check out the article about Passive Income on Wikipedia.

Those should keep you reading for awhile. For my regular readers, I will soon be posting an article detailing how my Top 10 Stocks for 2009 picks have worked out thus far (vs. the sky-rocketing S&P over the same period).

Wednesday, July 15, 2009

Stock Market vs. Housing Market 2009

Well folks, it's been a long, long time since I posted anything here on Now Buy Stocks but I am happy to return. I figured that on the heels of my last two posts (Top 10 Stocks to Buy) I would try to make some assessment of where the market is going for the rest of the year. I know, that is a tall task.

Stocks versus Westport CT Home Prices


I thought it would be interesting to compare the prices of Westport CT homes for sale and housing prices in general with my assessment of the other popular investment vehicle of our times: ye almighty stock market. Remember that a luxury community like Westport can actually reflect market volatility a lot because it is populated by many Wall Street tycoons.

So, first let's take a look at the plight of home prices. Basically, everyone knows they have gone significantly everywhere. Also, inventories are lined up and have only just (maybe) begun to move. There are way too many houses on the market so prices have to fall. That is the law of supply and demand. It works when you buy stocks and it works when you buy homes.

Now the S&P 500 has come down even more than Connecticut homes sales have. Remember that the wealthier areas hold up more in a downturn. But the market has just been crazy.

Earnings Disparity

I thought it was more or less all better when it began its March '09 upturn but it has been kind of disappointing of late. Has it moved sideways or thoroughly turned down? Either way it has not continued to rise despite firms like Goldman Sachs reporting very surprising positive earnings (Q2 2009).

Johnson & Johnson did not fair as well. Many people have jumped ship on name brands to save some money. I even heard that they are spending less money by taking less pills, stretching their contact use out, etc.

So the picture we begin to see playing out through the rest of 2009 is really nothing but the same. I expect us to basically just skid sideways. Barring any unforeseen (and unlikely) big bad surprises (and I mean really big) I don't see us dipping down too far. But neither do I see any reason to get excited about buying stocks at this point.

Now, home prices such as we see in Westport, CT, really shouldn't fare any better. Investors will in general not be able to gain any extra money in this placid economy, and so how are they going to upgrade their houses? They just won't. Connecticut and all other stable housing markets are going to just go sideways, too. They may do better than the market. If I had to pick one or the other I'd go with housing, but still it is not very appealing.

Final Prediction: Real Estate and S&P 500 in 2009:

No reason to buy the stock market right now. No sign of a positive recovery in sight. Where's it going to come from? There is nothing to get excited about in stocks (or real estate) right now. So sorry!

Saturday, April 25, 2009

Top 10 Stocks to Buy: Part II

[This article is a continuation of Top 10 Stocks to Buy: Part I.]

6. Research In Motion Limited (RIMM)Top 10 Stock RIMM

I remember when Puff Daddy was the only guy in America using a Blackberry. In the five or so years since then, the Blackberry has become more and more mainstreamed. Pretty soon your grandmother will have one.

Think of RIMM as sort of a Hewlett-Packard for the 21st century mobile generation; a standout technology research and development company.

This is a stock I am comfortable buying at its current 20 times earnings.

7. Parker-Hannifin Corporation (PH)Top 10 Stock Parker-Hannifin

This stock is a cheap buy at 7.5 times earnings, and is even giving out 2.5% of its price through its dividend annually.

With governments broker than ever, aerospace-manufacturer Parker-Hannifin could appear to be in a bit of a bind. Its type of heavy, advanced technologies may have to undergo a longer (if not deeper) drought than other elements of the economy, but I can tell you that this is a very well-managed company with a long period of growth awaiting it in its future.

Listen to management’s conference calls and you will see why PH is in my top 10 stocks to buy for the long-term.

8. Yahoo! Inc. (YHOO)
Top 10 Stock Yahoo YHOO
Yahoo stock is way down since it totally blew an excellent opportunity to allow itself to be bought by Microsoft last year. “Ousted” CEO Jerry Yang made one of the more obviously bad choices of 2008 by letting his ego trump smart business by not selling his crappy ailing company.

However, many knowledgeable people, including the controversial Jim Cramer, seem to be big fans of new Yahoo CEO Carol Bartz. And negotiation has resumed with Microsoft (MSFT) rather quietly.

Buy Yahoo stock for the next 6 or 9 months and see what happens. I give it a 2:1 shot that Yahoo is bought for some premium by Microsoft over that time; or at least the two will team up in their online activities, giving unknowledgeable investors a reason to believe in them and send their stock prices higher.. At that point it’s time to sell, sell, sell! Because Google is the man online, and you don’t want to bet on their competitors in the long-term.

Thus, make buying Yahoo stock a shorter term play, riding the near-term likely occurrences and the stock market’s probable buying action.

9. CVS Caremark Corporation (CVS)
Top 10 Stock CVS
One of the great all-time companies, CVS, is down 33% since last June. This stock is selling at 13 times its earnings and reported a profit increase of 17% in the 4th quarter of 2008.

If you’re going to buy CVS stock, make it a long-term play; think in terms of holding this stock for at least five years. If in the meantime it becomes fairly overvalued, then sell it. But basically this is one of those companies that is a good bet over the long-term whenever it is kind of cheap.

My main concern with buying CVS stock is…

10. Wal-Mart Stores, Inc. (WMT)Top 10 Stock Walmart WMT

Walmart’s selling at 14.3 times earnings, and always seems to be positively surprising that it continues to dominate and grow. I don’t know if any of you saw CNBC’s documentary on Walmart, but the scene that stuck with me most was when they showed people at the company’s headquarters, whose databases update every hour or so with every single item that has sold at every single store over the past hour. Their analytics software is constantly and very smartly analyzing all that data in a very Walmart-ish way.

Personally, I would like to see Wal-mart overcome some of the unpleasantries encountered when shopping there. Specifically: crowded parking lots, long lines, crowded navigation of the aisles. If they could give me a clear path in, through, and out of there I think I’d do 100% of my shopping at Wal-mart.

If you missed my first five top stock picks, you can find them at Top 10 Stocks to Buy: Part I.

Sunday, April 19, 2009

Top 10 Stocks to Buy: Part I

[This article details the top 5 stocks. 6-10 are here: Top 10 Stocks to Buy: Part II.]

Well, here it is, my current list of what I believe to be the top 10 stocks to buy right now. The stock market is up 23% since March 9, 2009, and we don’t want to miss out on what is likely to be a further and significant upside for buying stocks over the next year or so.

1. Google Inc. (GOOG)

I have written previously on my belief that Google is a great stock to buy, so I won’t go into too much detail here again. Suffice it to say, that Google strikes me as being quite capable of creating entirely new industries of profitability which don’t even exist now. GOOG has been more successful than is generally known with their foray into the mobile cell phone world with Android, and they are just generally in an advantageous position to benefit from the entire world’s moving onto Ye Old Information Superhighway.

Well.. I’ve already written more than I meant to. I love this company. Look for them to create many billions of dollars out of thin air over the next five to ten years.

2. The Walt Disney Company (DIS)

Disney for less than 10 times earnings? Buy this stock; it’s a bargain whenever you can get a “hundred” year-old amazing company for less than ten times its profits.

How many families are going straight to Disney World as soon as they can have a sigh of relief at the end of the recession worries? A lot.

3. Nordic American Tanker Shipping Limited (NAT)

Buy stock in this shipping company and you get in on a 11.5% dividend yield; not guaranteed of course but still. Those shippers sure like to pass on their profits!

Hopefully they arm their seamen to blast those piece-of-**** Somali pirates.

4. General Electric (GE)

This is my other top 2 stock to buy, that barometer of the American economy, General Electric stock. I will try not go into too much detail since you can find a more fleshed out analysis through that link.

Just think about this: if GE and the American economy as a whole mirror each other, then isn’t buying stock in this behemoth a great way to play the Recovery? It truly is a great mirror; what with its hands in both finance and more solid products. The stock just got way too beaten down to not buy it if you’re a long-term investor.

5. Altria Group, Inc. (MO)

Ma-ma-ma Marlboro! The greatest S&P 500 stock of the past 50 years is selling at 11.5 times earnings and giving back out 7.5% of its price tag on an annual basis right now.

Those of us who are smokers probably noticed Altria raising cigarette prices significantly a few weeks before Obama’s new huge tax on the poor went into effect on April 1, 2009. They can do that and they can still sell their cigarettes. I think it’s called an inelastic price?

Altria is as smart a company as there is at making and managing and diversifying to protect and grow profit. Maybe it’s immoral but I would suggest buying their stock.

Read the second part in this series: Top 10 Stocks to Buy: Part II.

Friday, April 10, 2009

Good Time to Buy Stocks Now?

Like the child who has been hiding from an abusive parent, investors are peaking their heads around the corner too see if it is safe to come out and start to buy stocks again. The financial public has had to endure over a year of CNBC and Bloomberg commentators’ constant question to every single guest: “Are we at a bottom yet?.. Is this the bottom?.. How about now?”

I don’t know about you but after a couple months of that constant refrain I started to yell at the TV screen or radio every time Maria Bartiromo or Kudlow The Tax-Obsessed asked Mr. Predictor if we were at a bottom yet. (The most common answer: “I think so, but we still may go lower.”

A bunch of idiots trying not to get caught being wrong by not taking any position but hypnotizing you into believing they just said something which was informed by their years of undocumented beating the S&P 500 and the Dow Jones.

Anyway, I digress. This article is my answer, late as it may be, to the question, “Did daddy pass out yet?” Err.. “Is it now finally a good time to buy stocks?”

The 666 Stock Market Bottom: March 6, 2009

On a date which was numerically fascinating enough on its own, 03/06/09, the Standard & Poor’s 500 Index touched the 666 mark, the sign of the Devil! As of close today, Thursday, April 9, 2009, the S&P 500 stood at 856. This is an amazing gain of 29% in just one month. I would guess that the U.S. stock market hasn’t seen such a gain in so short a time since the 1930’s Great Depression.

I have previously focused on best stocks to buy in 2009: Google and General Electric. Now I would like to state that it is time to buy indexes, buy industrial stocks, buy food stocks, buy penny stocks online for God’s sake! Close your eyes and hover your finger over the business section like it was Ouija board and buy whatever stock it lands on. (Please do not follow that direction, or at least don’t blame me if it doesn’t work out, although chances are it would… But still.)

I was inspired to write this post when I heard Warren Buffett say, “Just because the economy’s going to get worse doesn’t mean it’s not a good time to buy stocks.” This was from his most recent interview with Becky Quick from CNBC.

And the economy is going to get worse. For all I know, another 600,000 will be laid off for the next couple months, lowering national purchasing power, lowering revenues, forcing more layoffs, etc. (By the way, that’s why the government has to intercede, another point Buffett makes well.)

But stocks in all likelihood should not revisit the 666 lows. And even if they do, that does not mean it’s a bad time to buy. Unless you are the next Edgar Cayce, you should not be in the business of calling exact bottoms. And you should certainly not both try and predict the future of the market and invest your family’s money accordingly. Warren Buffett and his second-in-command Peter Lynch never tried to do any of that; they know they can’t. But they have managed small amounts of money into vast fortunes simply by using their own rationality. Be greedy when others are fearful. Now is a high-probability time, a window of investment opportunity if you will. The window is not a little slit like in a prison cell. The window is, say, 350 points wide on the S&P index. And all we can really know is that the longer we wait to buy stocks the more likely the stock market will be more expensive at that time and those corporate earnings will cost more.

Friday, March 27, 2009

Buy Penny Stock Online

If you are going to buy penny stock online, there are a few things you should know first.

1. Online manipulation of penny stock prices

The online world, including Internet forums and e-mail newsletters / spam, can really move the penny market. Because of the obscurity of most of these stocks, and the fact that they don’t have the same reporting regulations as bigger stocks, the penny stock market can be heavily manipulated or just plain moved by online rumors or spam e-mail sent out to bought or compiled lists of possible buyers or sellers. (Don’t get caught up in the “pump and dump” hype!)

2. Research your broker before you buy any penny stock

Everywhere you look nowadays, you’re hearing about financial fraud. Bernie Madoff, sketchy bank dealings, shoddy online brokers, etc.

Well, guess what? Penny stock brokers operate in a much darker world than those big players. There is less regulation in the Pink Sheets and OTCBB, because the government has an attitude of, “If you want to go play with the wolves, fine, but we’re not going to waste tax-payer dollars protecting your wild adventures.. Good luck.. Tax you on the other side!”

3. Research the **** out of any company before you buy penny stock online

I have talked about the lower regulation requirements on the OTCBB elsewhere, but it bears repeating. These companies do not have to meet such stringent legal requirements in order to trade on the penny bulletin board. That means that you have to do 5 times the work before you invest in these micro-caps.

This is an especially good are of investing to actually go to the factory or office and talk to the owners, the managers, salesmen, or their customers, as is suggested by the late-great stock-man Phillip Fisher in his Scuttlebutt method. Penny stocks are a wasteland, like the Old West. Few will probably emerge victorius, aside from the many insider scoundrels selling you the dream, or the ax-pick, if you get what I mean.

4. Invest with the same principles you would use investing in a large-cap stock

When buying penny stock online, through an online bulletin board like the OTCBB, do not abandon your principles. If anything, you should magnify your principles. Many penny stock investors, when they are first starting out, treat this market as if they were going fishing: “I’ll just cast my line out there and see if anything bites.. Afterall, all I have to lose is a few pennies!”

Ha! Whatever you have to lose in this sort of speculation is also what you have to gain. Money is no joke. It feeds the world, it waters the trees. Why would you want to throw even a penny away to some shady shark?

Go ahead and buy penny stock online, but be smarter than smart before doing so. There’s no doubt countless real, profitable companies behind many penny stocks but you must have a lot of confidence about what you’re buying before dipping your toes into these shark-infested waters. (Once they get your toe, they can pull the rest of your body underwater and eat you at their leisure – through such mechanisms as leverage or gamblers’ addiction.)

5. Nevertheless, buying penny stocks online can be profitable

Buying penny stocks online can certainly be profitable but it takes a certain special mind to wade through the murky waters. You will have to ignore a ton of information which is only a thinly veiled pump and dump scheme, where promoters drive up the price of the stock temporarily through hyping it to unaware amateur speculators, and then sell it short and cash in on the “stupid” public’s huge “penny” losses.

If you can become aware of these sorts of schemes populating the online penny stock market, then you may have a shot at making a profit. Follow the previous 4 tips in this post, and apply them and your specific principles of investment to any individual issue you take a fancy to, and then find an online broker who is not just out to game amateurs. It will take a lot more work to stay reliably up to date on the news that you need to know when to get in and out of your trade. And you may have to stomach a certain amount of illiquidity in the market, and maybe even more volatility than you are used to. This is why the only way to buy penny stock online is to apply the age-old principles of fundamental analysis on each individual company.

Saturday, March 21, 2009

Top 2 Stocks to Buy in 2009

The recession of the past year has cleaned the stock market’s clock, creating an overwhelming amount of appealing stocks to buy. Here are my two stand-out favorites.

#1 Stock to Buy in 2009: Google (GOOG)

I bet you found this page through Google, eh? If not, you probably used the company’s search engine within the past 24 hours. I have to admit, Google is my favorite stock to buy in 2009. I believe it is the pre-eminent company in the world today, one with vast capabilities to invent huge and totally new markets (blue oceans as they like to say nowadays). Furthermore, while Google may bow down to its end-user a little bit too much, it is the Big Bully to any other company online who gets in its way or has something it wants. Like Warren Buffett, I am always looking for stocks that have that special extra something; I believe he simply calls them “great, wonderful companies”.

But no stock is worth buying if it’s not the right price, right? Google was selling near $715 in December 2007. A brief trip over to Finance shows me that you can now buy their stock for $330.16. While this is still a P/E ratio of 25, I personally have much confidence that the Big G will grow earnings better than expected throughout the next five years. They have quite a good history of positive earnings surprises, only one of the reasons they are top on my list of stocks to buy in 2009.

#2 Stock to Buy in 2009: General Electric (GE)

Even more so than GOOG, GE is embedded into your everyday life. Most of the time though, you don’t realize it. Here is a list of some areas they operate in:
  • aircraft engines
  • power generation
  • water processing
  • security technology
  • medical imaging
  • business and consumer financing
  • media content
  • industrial products
The only thing I don’t see there, that I would like to is Food.

Whether you’re watching The Celebrity Apprentice, getting an x-ray, putting an alarm system in your office, or flying to Hawaii for a one-week vacation, GE is making money off of you. So doesn’t it make sense to cash in on yourself buy buying some GE stock? Especially this year, as it has fallen to 14 year lows! It’s mind-blowing to me that this stock has fallen to such lows – they are the best diversified company in the known universe! This is the time when fortunes are made. Plant your seeds with a long-term view of the future. And like Buffett says…

“Be greedy when others are fearful.”

Ask yourself these questions: "The stock market has dropped by 50% since 2008, but has the amount of economic activity I see going on around been cut in half? Am I spending half of what I was a year ago? If I still have a job, am I being paid half of what I was last year?"

The answers are probably no. And what does that mean? That it’s time to buy stocks. The government, however inept it obviously is at meddling in the affairs of the market, cannot and will not (cross your fingers) let the recession become a depression. Obama needs business to profit. I know I am ready to buy stocks in 2009, and to ride the market back up when sanity soon returns.

Sunday, March 15, 2009

Buy Penny Stocks

It’s every investor’s dream: to buy penny stocks which eventually grow to become, well, worth a whole hell of a lot more. But buying penny stock is also well-known to be fraught with danger, at least to the uneducated buyer.

Definition of a true penny stock

Don’t listen to anyone who tells you that a penny stock is any stock trading below $1 (or, for pennies). This is absolutely not true, and by this definition Citibank would’ve qualified as a penny stock as recently as last week when it dipped below a dollar. And Citi is definitely not a penny stock.

You need to look at the market capitalization of the company as a whole before you buy stocks, not just the price for one share, which is really almost totally irrelevant to anything. A true penny stock is traded over-the-counter (OTC) as opposed to being listed on any major exchange. Its company will currently not be worth all that much; maybe $30 million, maybe less. But the fact that it trades over-the-counter is really the single best definition of a real penny stock.

How to buy penny stocks

The fact that the stock trades OTC makes it quite a bit tougher to buy penny stocks. And more expensive! You will have to pay anywhere from 25% to over 100% over the quoted price of your penny stock, which means that if you want to buy one share of a penny stock worth $0.50, you could pay anywhere from $0.63 to over $1 for that share.

Many online brokers won’t buy penny stocks for you, and you may have to go through an actual “real-life” broker who deals in OTC stock or do further research into access to the OTC bulletin board (OTCBB) where many of these stocks trade.

A word of caution before you buy penny stocks

Because penny stocks trading on the OTCBB do not have to meet the same rigorous requirements that companies trading on major exchanges do, it can be very risky to buy penny stocks if you don’t really know what you’re doing and who you’re doing it with.

These companies don’t have to meet minimum standards in order to remain trading and there is a lot of “backroom” manipulation of penny stock. Don’t get taken for a ride. Always do your due diligence and then do it again before you buy stocks, wherever they trade over-the-counter or on the NYSE.

The lack of liquidity that obviously exists in the OTC market is an obvious downside, all other things equal. You don’t have to be that big of an investor to drive the price of your own stock down by selling! That’s not the kind of power we really want, is it?

Also, watch out for new listings or startups. There exists a lot of irrational hype for penny stocks out there which can be magnified when you can’t even access the company’s past performance because it doesn’t exist.

All this said, it’s a verifiable fact that some stocks do rise from the penny stock level into what I would call micro-caps, on into mid-caps and even large-caps. You can buy stocks of any size and make a profit. Maybe you have investing in your blood. Maybe you're a natural-born stock picker. Maybe you are the next Buffett ;-) Someone's got to be. I don’t mean to put out your (or my) dreams to buy penny stock that soars; I wish us well.

Buy Stocks Online

Want to buy stocks online but don’t know where to start? I know from personal experience that it can be a little intimidating to try to sift through all the online stock brokers on the Internet, but their prices can’t be beat, so it’s worth a little investigation.

The brief history of buying stocks online

As time has passed and online discount broker competition has continued to heat up exponentially, we the stock-buying public have been the beneficiaries. Minimum accounts, commissions, other fees, all have trended downward consistently over the 10 or so years that it has been possible to buy stocks online. At the same time, the increase in online brokers has made things a little more complicated in determining who you’re going to invest through.

(Some investors even buy penny stock online. They are either the brave or the stupid, depending I guess on the outcome of their "market speculations". That is not the focus of our topic here, though.)

Is it safe?

Is it safe to buy stocks online? Yes, it is. Your account is insured up to $500,000 by the Securities Investor Protection Corp (SIPC). This is the same protection you would receive if you were to buy stocks through a “normal” broker. Understand that any online broker big enough to advertise is legit and has had to pass through stringent examination and continues to have to do so in order to be allowed to buy stock with your money.

Who are the best discount brokers?


This is too complicated a question to get into in detail in this post. You should take a look at the very helpful Stocks For Dummies for many insightful beginner hints on trading the stock market. I also suggest you visit the companies’ pages before you buy stocks online through them. Take notes, compare, and think about how you plan to invest. Are you going to be buying stock daily, weekly, monthly, quarterly? What amounts will you be purchasing at a time? Do you need to have access to small-cap or obscure stocks? Online brokers may or may not be able to buy those stocks for you. Each discount broker caters to a little different type of investor (or trader).

In the meantime, you should check out these 5 discount brokers and see which one seems like the best fit for you:

Scottrade
TradeKing
Zecco
Sharebuilder
E*TRADE

As is always the case in investing, the ancient axiom “Know Thyself” is particularly important in selecting an online broker. You will have to determine what will be your most likely style of buying and also who will serve you best, for the least. But then again, over-thinking can morph into paralysis. So be wise when you buy stocks online and avoid Pink Floyd’s “10 years have got behind” curse.

Why Buy Stocks?

Are you ready to buy stocks? To jump into the greatest passive wealth-building venue available to you, i.e. the ownership of companies through the stock market? I hope you are, because when you buy stocks you are holding assets which have exponentially outperformed all other investments over any long-term period within the last 200 years.

Maybe you are a bit anxious to invest in the stock market since as of this writing it has plummeted some 50% over the past year. If so, I think it would be helpful to consider this quote from the American economist and risk expert, Peter Bernstein:
Stocks must remain “the best investment for all those seeking steady, long-term gains” or our system will come to an end, and with a bang, not a whimper.

The richest man in the world, Warren Buffett, has done nothing but buy stocks – and this is how he has gotten wealthy. As he recently said, “I have no talents myself, so I found a way to leverage others’ talents [by buying stocks].”

I have never seen any better reason to buy stocks than this graph, which appeared in Jeremy Siegel’s great primer on buying stocks, Stocks for the Long Run:

Note that the graph is vertically logarithmic, and that the $12.7 mil that stocks would have grown to since 1802 is almost 700 times larger than the $18,235 returned by bonds over the same period. An emphatic reason to buy stocks!

Unless you are a super-talented and in demand worker on the order of a Michael Jordan or Madonna, the best way to make a lot of money has always been to own a company or companies, and thanks to the stock market, you can do this without even ever having to step foot on the grounds of that business. You can just buy stocks.

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