Learn to Invest Money in Small Cap Stocks and Make Triple Digit Profits (Part Three)

Are you tired of earning 5%, 8%, even 15% annual returns from your stock portfolio? Want to earn triple digit gains from your stock picks? Not only is it possible but it’s absolutely probable with a few solid strategies.

In Part Two of this article, I reviewed the importance of having strict buying rules to minimize your risk when investing your money in small and micro cap stocks. Here, in Part Three, I’m going to further expand and modify rule number two.

Rule Number Three: Don’t try to buy at “perfect” prices.

In buying small and micro cap stocks, know that you will almost never buy in at the “perfect” price. If you’ve researched a company thoroughly and are confident that its price will move upward over the short or long term, then do not wait for a “perfect” price. Chances are you will almost never buy in at a perfect price. Small and micro cap stocks almost always have greater volatility than large cap stocks and inevitably will have days of rapid price spikes upward and downward. And it’s impossible to be right all the time about when these spikes will happen.

Furthermore, the law of averages should even out for you over time when buying into small and micro cap stocks. Sometimes the price will dip after you buy into a stock and you may experience immediate regret. Other times the stock’s price will rise upward from the moment you buy in and you would have never been able to buy the stock at a lower price. But if you’ve applied rule number one, even scenario in which the stock dips immediately after you buy in shouldn’t cause you to lose faith in your stock pick, because it does take a strong stomach to invest like this. I’ve had scenarios where a stock lost 10% on the same day I had purchased it, only to rebound by 60% in the next month.

So instead of using a specific price point to buy a stock that seriously interests you, use a price range instead. Using hypothetical company YYY as an example, if you absolutely love the future prospects of company YYY, determine a price range that you would be okay with after studying its historical price charts. If you decide that you would be happy buying this stock at a range of $2.90 to $3.10, and the stock is sitting at $3, then go ahead and buy.

I know other financial advisors that will disagree with this advice and declare that if the stock’s technical charts show weakening indices, the wait for a dip in price before deciding to buy. Unless those technical charts are negative in almost every index, I wholeheartedly disagree. Technical indicators are never right 100% of the time, often giving “false” positives and “false” negatives. Furthermore, they are even less accurate with volatile small and micro cap stocks because their inherent volatility makes their technical charts harder to evaluate for optimal buy-in prices. If an “unknown” stock’s story eventually passes through media filters to reach the public masses, its price could spike very rapidly without any technical indications. If you’re solely using technical analysis to decide the optimal buy-in price, you’d be left behind in the dust when this happens. That’s why you should determine a buy-in range, and not an exact price.

Rule Number Four: Invest a smaller portion of your portfolio in riskier small and micro cap stocks.

This is a self-evident rule but I’ll review it anyway, because greed sometimes makes even the most rational of human beings do crazy things. I recommend devoting no more than a maximum of 50% of the total value of your portfolio to small and micro cap stocks. Using a combination of micro and small-cap stock picks and safer large cap stocks can help you easily outperform the S&P 500. But when your small and micro-cap stocks really start to outperform the large cap portion of your portfolio, it is inevitable that the following question will invade your mind:

If my small/micro cap stocks are up 75% and my large cap stocks are only up 15%, why not just shoot for 75% gains in my entire portfolio?

The only reason I recommend against this is because, hopefully, from part I of this article, you gained a sense of how research and time intensive the process is of uncovering great small and micro cap stocks. Frankly it’s not that difficult but it does take LOADS of time. If you build an entire portfolio with stocks like these, unless you have LOADS of time to constantly monitor every one, it’s a much better strategy to just boost your portfolio’s performance every year with great small/micro opportunity stocks while also investing in some less volatile ones that will give you a smoother ride.

About The Author

John Kim is the founder of Global Market Opportunities. He has over thirteen years of experience in finance and financial services, and has earned a BA in Neurobiology from the University of Pennsylvania, a Master in Public Affairs from the University of Texas at Austin, and an MBA with a concentration in finance from the McCombs Business School, University of Texas at Austin. To learn how to discover small and micro cap stocks that consistently and significantly beat the market indices, click http://www.globalmarket-opps.org.

Learn to Invest Money in Small Cap Stocks and Make Triple Digit Profits (Part One)

Everyday, there is a new EBay or Microsoft or Dell company that files for an IPO and that will make the early buyers of its stock very wealthy in several years. The trick is how to find them and invest in them safely. Sure a General Electric or Microsoft could possibly have a bump up in share price in one year of 30% or 40% with the release of a phenomenal product or service, but the chances of earning 70%, 100%, or even 300% in one year with large cap companies is quite slim. But it’s not so with small and micro cap stocks. In fact every month, there will be another micro or small cap stock that nobody has heard of that will make loads of savvy investors rich.

So the key is how do you play riskier stocks like this? There are five rules you should always follow. In Part I of this series, I’ll review rule number one.

Rule Number One: Do your homework.

When you find a micro or small cap stock that excites you, make sure you do your homework before making the decision to buy in. Always research the float of a small stock. Why is this important? For a number of reasons. Let’s consider this scenario. You research a small stock ABC that you really like. You discover that ABC only has $10MM of outstanding shares, a float of $5MM because insiders hold the other $5MM, and average daily volume for the past three months of $3.7MM. Well you could be in for a very bumpy ride given the fact that daily volume is averaging 75% of the float (total amount of shares owned by the public). This discovery alone may make you reconsider buying the stock.

Furthermore, if stock ABC has recently had its initial public offering (IPO), then you must absolutely find out when its lock-up period expires. Usually, insiders are restricted from selling off their shares for six months after an IPO. Let’s look at our hypothetical stock ABC again, assuming it is now four months after the IPO. Many times, share prices of companies start falling about two months before a lock-up period expires in anticipation of insiders selling off their shares and flooding the market with volume once they legally can do so. If stock ABC is trading relatively flat and there is no added demand right before insiders unload their stock, an overnight doubling of the stock’s float is bound to dilute the stock price, and possibly do it very rapidly. It’s simply supply and demand at work. There is now twice the supply of stock on the market without any increased demand.

However, let’s look at the flip side. Let’s consider a company XYZ that has $20MM of outstanding shares and a float of $17MM. Positive news surrounding company XYZ has steadily driven its stock price higher, right up until the point the lock-up period for insiders expires. Let’s assume, even though prices have been climbing steadily, that the insiders still decide to cash out and sell off $2.5MM of their shares immediately. Because this company’s float is so small and demand is high, release of additional shares may create a buying frenzy that will drive prices up even more rapidly.

So to summarize rule number one, always do your homework and know everything you possibly can about the stock you are buying. As I’ve demonstrated, in one situation a small float may hurt a stock’s price while in another situation, a small float may tremendously help the stock price.

I’ll review the remaining four rules in the remaining articles of this series.

About The Author

John Kim is the founder of Global Market Opportunities. He has over thirteen years of experience in finance and financial services, and has earned a BA in Neurobiology from the University of Pennsylvania, a Master in Public Affairs from the University of Texas at Austin, and an MBA with a concentration in finance from the McCombs Business School, University of Texas at Austin. To learn how to discover small and micro cap stocks that consistently and significantly beat the market indices, click http://www.globalmarket-opps.org.

© 2006 Global Market Opportunities

Learn to Invest Money in Small Cap Stocks and Make Triple Digit Profits (Part Two)

Want to know what buying strategies to use when buying stocks that can potentially return triple digit gains? In part one of this series, I told you what factors you must consider when buying a small or micro-cap stock. In part two, I’ll review intelligent buying strategies when it comes to buying small caps.

Rule Number Two: Remove emotions from your buying decisions with a disciplined strategy.

Ok, so let’s assume that you’ve done your homework now and discovered a company that you believe will run up at least 60% or higher over the next year. Decide on a predetermined buying price and do not waver from this price. Period. End of discussion.

Why?

Ok, let’s take a look at hypothetical stock YYY. Company YYY is the industry’s leading innovator in a huge growth industry that has seen the biggest growth spurts in history for the last three trailing quarters, yet the general public still does not know about them. In addition, they have patented technology that lets them protect their first mover advantage and high entry costs into the industry gives them nice barriers to entry. On top of all of this, Company YYY is trading at a ridiculously low P/E and a ridiculously low price of $3. In fact, its price would have to appreciate 200% just to equal the P/Es of the giants in the field. You study YYY’s historical price chart and see some volatility, so you decide you will wait until the price drops to $2.80 to get in. But in the two days you wait for company YYY’s stock to drop in price, it unexpectedly shoots up to $5.50. Or perhaps it plummets way below your $2.80 buy in price to $2.00. On no new significant news.

Depending on what scenario happens, you may be thinking “I’m so dumb not to have bought at $3. I guess I’m just going to have to bite the bullet and dive in at $5.50,” or “This is so great. I wanted to get in at $2.80. Now it’s so much cheaper at $2.00 that I’m definitely going to buy now.”

Right? Wrong.

Stick to your original plan. If you throw your buying strategy in the trash and decide to get in at $5.50, you’re letting emotions drive your decisions instead of logic. If you were only willing to pay $3, why would you possibly be willing to pay 83% more for the same stock just 48 hours later? And if we consider the second scenario where the stock plummets to $2 a share, don’t you think that this merits more caution instead of haste? Remember, in both hypothetical situations, we are assuming there is “no new significant news” surrounding stock YYY to justify these huge price movements. Under these assumptions, the volatility of the stock is probably occurring because of jumpy day traders taking profits off the board or dumping shares.

But let’s take a closer look at why letting emotions creep into your decisions is a bad idea. Let’s look at the situation again where stock YYY blew through your designated buy in price of $2.80 and went to $5.00 in two days. Let’s assume you stick to your guns, wait two weeks, and buy-in when YYY stock finally dips to $2.80. Now employing a stop loss of 15% against your buy-in price, your sell-out price of the stock is $2.38 versus $4.68 if you had bought the stock when it spiked up to $5.50. This huge gap in stop-loss price points may very well be the difference between holding on to the stock and earning 80% gains versus selling out 48 hours later and feeling confused as to whether or not you should buy back in.

To summarize, never throw out a pre-designated buying price for a risky stock due to unexpected price spikes. If this happens, stick to your original buying strategy if you still believe in the stock and wait until volatility decreases before you buy at your pre-designated buy-in price.

Remember, there are literally hundreds of stocks every year that make rapid double or triple digit gains. If it turns out that you missed out on one opportunity because the stock soared right through your buy in price and kept soaring higher or the stock’s price took a sudden plunge, know that there are hundreds of other opportunities waiting to be discovered. If the stock you loved so much never returns to your buy-in price, move on. You’ll find a better stock to buy soon enough.

About The Author

John Kim is the founder of Global Market Opportunities. He has over thirteen years of experience in finance and financial services, and has earned a BA in Neurobiology from the University of Pennsylvania, a Master in Public Affairs from the University of Texas at Austin, and an MBA with a concentration in finance from the McCombs Business School, University of Texas at Austin. To learn how to discover small and micro cap stocks that consistently and significantly beat the market indices, click http://www.globalmarket-opps.org.

© 2006 Global Market Opportunities

Easy And Simple Tips And Buying And Selling Stocks

Many people who want to start buying and selling stocks in the stock market have never gotten started simply because they are intimidated by their perception of the process. They are afraid it is either too complicated or expensive for the average person. Nothing could be further from the truth. In fact buying and selling stocks in the stock market is a simple process.

First of all you need to have an understanding of what stocks are. A stock certificate is a unit of ownership in a company. By owning a share of stock in a particular company you are actually owning part of that company.

There are two kinds of stocks you should be familiar with. First of all, there is common stock. This is the most common type of stock that is traded and held by the public. If you own common stock you have voting rights along with the right to share in dividends. Preferred stock on the other hand, gives the owner fewer rights except in one important area. Those who own preferred stock usually receive consistent dividends. In fact investors buy preferred stocks for the income from dividends.

The majority of people who buy and sell stocks do so through a stock broker. The most popular stockbrokers have now become online Internet stock brokerage firms. This is much less costly than using a traditional broker. In fact you can trade for about $20 at many online brokerage firms.

Buying and selling stocks is not unlike the other transactions except there is sometimes some haggling. There is what is called the market value and there is the asking price. The asking price is the price that the seller is willing to sell the stock certificate for. The difference between the market value and the asking price may sometimes only be a few cents.

If you are selling stocks you'll need to keep in mind the bidding price and also the price someone is willing to pay to buy the stocks from you.

Although you can always buy a stock for the current market value or sell it for what you'd like to there usually is not a huge difference. The difference may only be a penny. Stocks that are traded a lot on the market will often have little or no difference.

When you found a stock you want to buy and have determined the asking price all you then need to do is tell your broker how many shares you want to buy in your broker buys stock for you.

It's that simple. Do some research into the various online stock brokerage firms and find one that you can feel comfortable doing business with. You will soon be buying and selling stocks on the stock market.

About The Author

Robert Michael is a writer for http://www.yestocks.com which is an excellent place to find stocks links, resources and articles. For more information go to: http://www.yestocks.com

The Basics On How To Research Stocks

Dealing with stock investments is a very tricky and risky job. Some even compare it to gambling because there is always no guarantee on what the outcome of the trade will be. What separates the gamblers from the investors is research. Data gathering and analysis is an important part in the success of a particular trade.

You may not have the time or the patience to conduct experiments; however, there are individuals or firms available to offer you their services for a certain fee. There are brokerages, especially the larger and more stable ones, which offer research for the existing clients.

The most successful investors consider research as a part of the entire trading process. When you give importance to research before buying or selling, you are already investing. And the result of such research will be beneficial.

The first thing you should do if you want to know how to research stocks is to gather data about the current trade practices being employed in the stock market. You should also be aware of the different companies playing in the market. The most unbiased sources you will be able to acquire are actual filings of publicly traded companies.

There are different reports that can be presented by a company. One is the 10-K. This is somewhat similar to annual reports, and they are available for download at the website of SEC. The report that is filed quarterly is called the 10-Q and the one that is filed for certain important changes in between is called the 8-K.

The reports contained in the aforementioned reports are the latest information on the company's financial status - their income, expectation, competition, lines of businesses and the members of the board. Fundamental analysts use this information as tools to be able to come up with their trading strategies.

Companies produce quarterly and annual reports to be circulated among its share holders. However, the contents of the reports are available for public knowledge and scrutiny. These reports have some data similar to 10-K's and 10-Q's, but there are several subtle and minimal changes as well. These reports can be very beneficial on how to research stocks.

For a minimal fee, certain brokerages offer copies of chart data of the different companies participating in the stock market. Most of these companies are their clients for whom they also offer research services.

Another source of data are newsletters. These newsletters contain the most recent events and updates that are happening in the stock market and its active players. There are so many newspapers available to help aid investors. However, with the large number of these newsletters, it would be a little bit challenging to find reliable publication.

CEOs, CFOs and other members of the board often give interviews or conferences to the financial press. They give information on the company's financial status and assures the public their companies are sustainable and strong.

All the data that has been gathered during should kept in mind and used to be able to make it big in the stock market. It is very important to know how to be able to research stocks in order to find reliable data to help aid in the formulation of trading strategies.

About The Author

Luke Cameron is owner of Top Finance News - an online magazine offering news, tips and articles on finance related topics. His website can be found at: http://www.topfinancenews.com.

Cyclic Stocks vs. Growth Stocks

In the long run the economic performance of most countries is showing an upward trend. But, although this is true, the global economy and that of individual countries is always subjected to ups and downs.

Many sectors are especially exposed to these up and down swings.

Building and construction companies, automobile companies or steel manufacturers are all hanging on the economy like a marionette on strings. Large profits are taking turns with setbacks or even huge losses during a recession.

And the shares of these companies and sectors are substantially affected by the up and down swing of the economy. When profits increase in good times, more often than not, these stocks skyrocket disproportionately. But when profits decrease, investors let go of these stocks as if they carry the plague.

OK. You might say that this ain't a problem. You just buy cyclic stocks when prices are down and sell when prices are up. By low and sell high!

But unfortunately the economy isn't quite that reliable. Especially not the stock market. If it was that easy to make money with stocks, lottery companies would all go out of business in no time.

There are all kinds of factors that can get in your way like wars, a financial and currency crisis like we had in Russia and Asia in the 90's. Or oil prices are giving us a hard time again.

So you can't tell with absolute precission when your stocks have reached the bottom just like you can't accurately tell when your stocks are at their very peak before the market corrects again.

A nice example for cyclic stocks are General Motors and Ford. The stocks of these 2 companies have performed so badly in the past that they were downgraded to junk status by the rating company Standard & Poors.

The headlines at marketwatch.com read this:

GM, Ford debt cuts take toll on stocks.

S&P slashes automakers' credit ratings to junk status.

Shares of General Motors slid 5.9% while Ford shares fell 4.5% after Standard & Poor's cut its long- and short-term corporate credit ratings on GM and Ford to such a low level, that the word "junk status" was out faster than the 2 stocks fell that day.

But what can one expect if you look at the stock charts of these two corporations.

To view the charts, please click the following link: http://www.stockbreakthroughs.com/Newsletters/cyclic-vs-growth-stocks.htm

Holding on to these stocks makes no sense and is a waste of time and money!

Often the reallity with cyclic stocks is, that investors get in to their trade too late and also get out too late. The media is also to blame for this. When the word of an upswing is out, it's in full swing already. It hasn't just started. Buying then is senseless for an investor that speculates on buying low and selling high.

And when the headlines scream "Recession", the bottom of the valley has already been reached long ago. Selling now makes little sense because by now prices are in the red again.

Also with growth stocks there's no guarantee for the fast and easy buck!

But they have one huge advantage:

In the long run, their prices only point in one direction...UP!

The entry point for a long-term investor is by far not as important as with cyclic stocks. Setbacks are more seldom and, with few exceptions, also not so violent.

A stock like Johnson & Johnson (J&J) or General Electric (GE) is the perfect example for a strong and solid growth stock:

Again, just click http://www.stockbreakthroughs.com/Newsletters/cyclic-vs-growth-stocks.htm to view the charts.

The 3 dips in J&J's chart and the one in GE was only due to the overall global recession between 2000 and 2003 after the big "Internet Bubble" popped. But while most cyclic stocks are still at the bottom, J&J and GE have long been on their way up again.

These kind of stocks you can always buy without any second thoughts.

In my experience, cyclic stocks will lose you more money and cost you more nerves than you can ever make up for with a few lucky "cyclic" trades.

Yours in Successful Trading,

Ricky Schmidt

About The Author

Ricky Schmidt's website http://www.stockbreakthroughs.com was created out of frustration in trying to decode books, magazines and newsletters on the subject, which are supposed to be forbeginners but are not because they’re too difficult tounderstand. Too many “Big Words” and too much intelligent sounding grammar is used which is not very useful.

Penny Stocks

Penny stocks are usually not listed at the major stock exchanges like the New York Stock Exchange (NYSE) or the NASDAQ because they don't meet the listing requirements. Listed stocks must have a minimum number of shareholders, minimum assets and file financial reports regularly. They are also under the strong supervision of the SEC, the Securities and Exchange Commission.

Penny stocks are usually traded on the OTCBB or on the Pink Sheets. The OTCBB (OTC Bulletin Board) is an electronic quotation system for over-the-counter securities that are not listed with one of the national stock exchanges. The only requirement is that the companies file financial reports to the SEC. If not, the company is removed from the OTCBB listing and the stock can only be quoted on the Pink Sheets. The Pink Sheets activities are not supervised or regulated by the SEC.

If the company has less than $10 million in total assets or less than 500 shareholders in total then no filings must be done at all.

Penny stocks are for these reasons wide open to scams and manipulation. The stock price is usually far below $5 and market capitalization is very small as the companies itself are very small. The lack of reporting requirements can make it difficult to find verified information about the company, its financial situation and outlook.

Many fraudsters take advantage of this and publish misleading information to manipulate the stock price. Because of the lack of public interest and low number of shareholders the trading volume is generally low. This means that a few buy or sell orders can have dramatic effect on the share price.

The low liquidity is at the same time the biggest advantage of penny or micro-cap stocks. While a listed stock can almost never move several hundred percent within a few days, a penny stock can do that easily. The low share price makes it possible to acquire a big amount of shares with a small amount of money. Little price increases or decreases have therefore big impact on the performance.

The low stock prices and limited capital requirements often attract novice traders but penny stocks are definitely a playing field for experienced investors only. Penny stocks are high risk investments. Many companies won't probably succeed and go bankrupt. The shares will end up worthless.

Many penny stock companies have no or very limited working capital, assets or are in development stage for months or years before any revenues can be expected. Be aware that you probably can't sell your shares for days or weeks or only at a big discount because of the limited liquidity.

About The Author

David A. Sorenger is a stock market expert and provides detailed information on stocks, options and online brokers at his web site http://www.StockTradingABC.com.

Stocks - Getting Started in the Market

Hollywood loves the stock market. The chaos of the stock exchange floor, the tension of boiler room day-trading, devious power brokers making back room deals; it all makes for great drama. Then you have the true-to-life stock market stories in the news: insider trading, big money IPOs, the dot com bust. All of it is enough to make you steer clear of the market for good and travel down a safer investment path. But don’t be frightened, history shows that long-term, there’s no better place to put your money to watch it grow. Here are a few tips to get you started.

Stocks 101

Simply put, when you purchase stock in a company, you become part-owner of that company. Along with other shareholders, you all combine as investors in the business, and therefore reap its rewards, or suffer its losses. Stocks are most commonly divided into separate categories depending on the size and type of the company (e.g., mid-cap, small-cap, energy, tech, etc.).

While speculation can drive stock prices in the short term, it’s long-term company earnings that determine a stocks gains or losses. Speaking of short term, that’s when stocks are extremely volatile. Over a span of just a few months or years, stocks can climb to astronomic heights or drop to pitiful lows. But, since 1926, the average stock has returned over 10 percent per year. That’s better than any other investment vehicle out there, and that’s why stocks are your best bet for long-term investment.

Picking Stocks

Before you dive head-first into the market, there are a few things you should know about picking stocks. First, the market’s performance as a whole is not necessarily a reflection of its individual stocks. Good stocks can keep growing even in a down market, while bad stocks have the frustrating tendency to drop or remain stagnant in a strong market.

Also, remember that history is not indicative of a stock’s future performance. Even solid stocks can slip from time to time. Remember that stock prices are based on a company’s earnings outlook, not its past performance. If the future looks bright for a company, a $100 dollar stock is probably a good buy. If earnings look less than promising, even a $5 stock can be a waste. Finally, investors determine a stock’s value by measuring a handful of primary criteria, most notably cash flow, earnings, and revenue.

“Diversify”

It’s the rallying cry of all smart investors. When compiling an investment portfolio of stocks, it’s smart to own shares in companies from several different industries. Consider it a “hedge bet”. When one part of the economy experiences a downturn, you’ll have other stocks in your portfolio to put your faith in.

When building your portfolio, the safest bet is to pick from financially strong businesses with earnings growth above the average. Surprisingly, that limits the lot to choose from, as only around 200 stocks today fit that bill. A solid portfolio features somewhere in the ballpark of 20 stocks selected from seven or more industries. A general rule of thumb is to invest in stocks with an above-average rate of growth and reasonable valuations.

Buy and Hold

Day trading is a great way to lose your nest egg, but quick. As we noted before, stocks over the short term are highly volatile. Sure, brokers today are offering cheap trades, but beware. There are a ton of hidden fees and taxes involved with day trading, not to mention the amount of attention required by you to monitor the blow-by-blow proceedings of the market. Our recommendation: buy and hold. A ten percent return over the long term is nothing to sneer at.

About The Author

Joseph Kenny writes for the Loans Store which offers more information on home loans, secured loans and other loan topics available on site.

Visit Today: http://www.ukpersonalloanstore.co.uk

Analyze Your Stocks And Double Your Profit

An investor buys a share of stock by resorting to various approaches that validate his investment by reaping rich profits. Before investing, however, it is necessary for a value investor to study the financials of a business, so that the stock he buys at the company’s intrinsic value promises a greater return at its liquidation value (the value of a company if all its assets were sold). A typical investor would buy growth stocks that have an upward trend, and seem likely to keep growing for a long time. Whereas, a technical investor (also known as a Quant) makes decisions based upon the psychology of the market and related factors, which involve much higher risk but may prove to be more profitable, or, can conversely result in much greater losses. The fundamental analysis of any business can depend on various factors: efficient market theory, value and growth, growth at a reasonable price and the quality of the business.

1. Efficient market theory pertains to stocks being always correctly priced, as all the requisite information is available on the current price.

2. The stock market sets up the price.

3. Analysts decide upon the value of a company based on the potential for its growth.

4. Price and value may not be equal, due to certain irrationalities governing the market.

Value investors need to rely on certain stringent rules governing the nature of the stock which adhere to the following criteria:

1. Earnings: company earnings are profits after taxes and interests.

2. Earnings per share (EPS): the amount of recorded income (on per share basis) available to the company to pay dividends to stockholders, or to reinvest in itself.

3. Price/Earnings Ratios (P/E) ratio (having a justified upper limit): If the company's stock is trading at $80 and its EPS is $8 per share, it has a multiple, or P/E of 10. This means that investors could expect a 10% cash flow return:

$8/$80 = 1/10 = 1/(PE) = 0.10 = 10%

If it's making $4 per share, it has a multiple of 20 (20 times $4 equals $80). In this case, an investor might receive a 5% return (in the same conditions);

$4/$80 = 1/20 = 1/(P/E) = 0.05 = 5%

However, a low P/E is not an untainted value indicator.

4. Price/Sales Ratio (PSR): is the same as a P/E ratio, except that the stocks are divided by sales per share instead of earnings per share.

5. Debt Ratio: percentage of debt a company has relative to the shareholder equity.

6. Dividend yields above a certain absolute limit.

7. Book value ratio: comparison of the market price against the book value of the stock per share.

8. Market capitalization value: Complete total value of a company’s outstanding shares (Market price per share ´ Total number of shares outstanding).

9. Equity Returns - ROE: Net income after taxes divided by owner’s equity.

10. Beta: comparison of volatility of the stock to that of the market.

11. Institutional ownership: percentage of a firm’s outstanding shares owned by certain institutions: insurance companies, mutual funds etc.

Learning to analyze one’s stocks and thus reaping the desirable profit is in fact a continuous process, as no amount of market efficient theories can ever predict a flawless financial return system. Even though one invests judiciously by studying the market, the over-valuation or under-valuation of stocks can often be determined by market emotions.

About The Author

Joe Kenny writes for CardGuide.co.uk, offering the latest offers on UK credit cards, visit them today for some great credit card applications. Visit today: http://www.cardguide.co.uk

Fast Facts: Trading Stocks in a Fast Moving Market

The U.S. Securities and Exchange Commission warns investors that buying and selling "hot" stocks that have the tendency to rise and fall quickly can be dangerous if unexpected delays occur. Without even realizing it, investors can find themselves losing money.

The U.S. Securities and Exchange Commission warns investors that buying and selling "hot" stocks that have the tendency to rise and fall quickly can be dangerous if unexpected delays occur. Without even realizing it, investors can find themselves losing money.

Just because you can access your account online, doesn’t necessarily mean that your trades are instantaneous. Limit your losses in these fast-moving high tech markets by:

·knowing what you are buying
·understanding the risks involved in your trade
·know the trading process for fast-moving markets

Guard against some of the most common problems investors encounter in fast-moving markets.

Market Orders vs. Limit Orders

When stocks drop or soar suddenly, being stuck in the process of trading can mean the difference between making a sizable profit, and losing a bundle. Delays can develop in fast-moving markets, slowing down executions and trade confirmations. What you thought you were selling at one price, may be end up selling for quite another. Avoid buying and selling at prices higher or lower than you expected by placing limit order instead of a market order. Limit orders are executed automatically when they reach a set upon price, unlike a market order which is filled at the price that second, not necessarily the price set at purchase time.

For example, when you place an order for a $10 stock, placing a limit order will ensure that you don’t end up paying $35. The same is true for selling. The stock will sell when it hits the target limit, eliminating sudden losses. The risk here is a loss of control to hold certain stock just a little longer in the hopes that it will continue to rise. Once it hits the selling target, it is sold.

Remember, Online Trading Isn’t Instantaneous

Trading online can feature its own dangers. Problems with modems, servers, or delayed broker-dealer hardware can all cause a delay or failure in an immediate stock trade. Know what trading alternatives your firm offers (telephone, fax, etc), in the event a technological problem interrupts your transaction.

Avoid Double Buying/Selling

Too often investors mistakenly think that their order did not go through and place another order. This can cause them to buy stock they did not want, or even sell stock they did not own in the first place. Be sure to check with your broker on what to do if you aren’t sure if your trade has gone through.

Choose the Best Broker

Buying and selling in a fast-paced market takes a broker who’s capable of handling transactions quickly. There are no Securities and Exchange Commission rules that require any trade to be executed in a specific amount of time. Finding a broker that doesn’t delay is up to you, the investor. Take your time and research brokers carefully in order to avoid losing important assets unexpectedly.

About The Author

For the past ten years Bob Freeman has been helping people build more money in their retirements. Now he has taken his successful strategies to a new level by offering teleseminar courses to help people make a better retirement for themselves than they ever thought possible. For more tips and strategies see http://www.retirementwealthforyou.com.