Sunday, November 10, 2013

Take Advantage of cheap Evaluations Now!

                Markets end Friday higher, marking the 5th straight week they had done so, but if you’re like your portfolio has plateaued after the dizzying gains of October. But don’t worry there is still plenty of opportunity out there.

                Last week I made recommendations on two stocks that I thought had a decent chance of revitalizing your portfolio, Melco Crown Entertainment and Capital One. Both stocks ended the week higher but truth be told neither saw the explosive gains I had hoped.

                Melco Crown is an Asian based casino company whose stock I thought would surge on Tuesday after the company announced earnings. So I bought the stock on Monday at 33.72 a share and waited for it to shoot up. 3rd Quarter earnings were not that bad, revenue for the third quarter of 2013 was $1.252 billion, a sizeable increase over last years $1.01 billion. Total profit also increased to $179.4 million, or $0.33 per share, from $104.9 million, or $0.19 per share.

                It was these type of earnings that I hoped would send my stock up yet it didn’t shares were down .59% on Tuesday, following the news. But the stock jumped 3.37% on Wednesday and just as I was starting to think that my gamble was paying off when Thursday came around and proved to be the worst day I had ever had on the Stock market. Melco Crown stock fell 5%, adding on to the massive losses I took on Qualcomm and Spirit stock that day. The stock recovered slightly on Friday gaining 2.9%, and I managed to end the week with a slight gain on Melco Crown stock but these gains were light and insignificant, falling short of my expectations.   

                My recommendation for Melco Crown stock is to avoid it, the company is massively overvalued, trading at over 51 times earnings and the stock has the volatility of a penny stock. If you are looking at investing into casino’s there are a number of better options such as Las Vegas Sands and MGM.

                Another stock I hoped would revitalize my portfolio was Capital One. I bought this stock at 69.58 a share, and truly this stock has been flat all week rising only .17%. But this should not discourage you, considering this stock is undervalued and unlike Melco Crown not prone to volatility. My recommendation for Capital One stock is to buy and hold, considering that eventually the stock will rise to fit into the company’s evaluation.

                In the beginning of this post I mentioned that there are still a number of opportunities out there to make money, and apparently some people saw Twitter as an opportunity.

                Twitters market debut on Thursday was the number one story on the market that day, and it was a resounding success. Stock was initially offered at $26 a share and closed 72% higher at above $44 a share. But this market debut gives Twitter an evaluation of over $22 billion, why does a company that has not made a cent in the last three years deserve an evaluation of over $20 billion? The answer to that is simple, it doesn’t.

                The stock is tremendously over valued and the stock sunk 7.2% on Friday, after a number of analysts on Wall Street downgraded the stock from buy to sell, and many voiced their concern that the stock was overvalued.

                My recommendation for Twitter is to avoid buying into social media in general, but if you are set on buying into Twitter stock at least wait a few weeks until the stocks drops to the mid 30’s, at least at this price you might benefit from a rally later on.

                In my opinion much better alternative to Twitter is Ford. Unlike Twitter Ford is undervalued, trading at just under 12 times earnings (less than the market average of 15). I bought Ford stock on Wednesday at 16.91 a share, which was a mistake since the stock fell over 2% on Thursday alongside everything else, but recovered somewhat on Friday, and I’m still currently in the red on this investment but even so Ford is a recovering company with good numbers and a cheap evaluation. So my evaluation for this stock is to buy and hold.


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I will be posting an article every weekend and looking back at the political and economic events of that week, both personally impacting events and suggestions about my opinions on the future of the market