Investment Strategies for the New Year

        As the trading year comes to an end the Fed has decided to start tapering, cutting down the bond buying program from $85 billion to $75 billion a month. The news that the Federal Reserve believes that the U.S economy is strong enough to warrant less support has sent markets up over 393 points in the last week.
      If you were amongst the traders who has seen their portfolios increase tremendously in the last few trading days congratulations, now though is the time to start planning your investment strategy for next year.
      In light of the Fed tapering announcement many former bears who were predicting a falling stock market in 2014 have changed their minds and instead forecast a slower but gradual increase in the stock market. The number that appears most often is an increase of between 10-15%.
      In my opinion this analysis is correct, the stock market will continue to rise through 2014 but at a far slower rate. In this case many large blue chips like General Electric and Microsoft will continue to see their stock prices rise. What investors have to be wary of are the momentum stocks of this year, companies like Facebook, Tesla, Twitter, and Yahoo, companies whose stocks are overvalued and who face the possibility of becoming the laggards of 2014.
So if you plan on investing into the stock market in 2014 avoid investing into flashy tech companies like twitter who are part of a new social media bubble and instead focus on companies who are part of laggard industries who have trailed behind the rest of the market.
      The industry that appears to show the most opportunity going into 2014 is energy. Energy stocks are only up around 11% this year while the broad market is up almost 30%, coupled with the fact that with shale oil the U.S is about to become the largest energy producer in the world, and like I said last week, Mexico is about to open up its oil market to outside competition. The seeds are set to launch a boom in the U.S energy market and companies like Chevron and Exxon Mobil who are trading below the market average stand to benefit the most. With this in mind I Suggest to start filling your portfolios with energy stocks.
      Last week I provided a short term analysis on Chevron which recommended by call options on the stock, this short term analysis proved to be right with Chevron up 2.5% in the last week. If you bought options at the price I suggested (which was 119) you would of yielded at least a 50% return on your investment.
      If you missed that remarkable opportunity here's another one. After reading an article in the Wall Street Journal (written by Mike Esterl) about how Tobacco makers Philip Morris and Altria Group have teamed up to market electronic cigarettes, I saw an opportunity in the stock of the two cigarette giants.
      It's easy to dismiss an investment into tobacco companies for many reasons, amongst which are increasingly heavy taxation, increasing regulations and lower cigarette volumes. All these concerns are well founded but in the short term Philip Morris and Altria stock provide a unique opportunity to profit. The joint agreement between the two tobacco giants to market electronic cigarettes positions the two to take control of the small but growing alternate tobacco market,
      Taking dominant market share in the e-cigarette market would no doubt set an upward trend in the stock of the two companies, and generate high returns to investors who buy in now.

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Brief Investment Tips and Opportunities

         This week I have decided to try something different. Instead of writing a general overview of the market as I have been doing, instead I am going to give my analysis on a particular stock and the investment opportunities I believe it presents.
         The stock that I believe presents the most opportunity this week is Chevron (CVX) I have had my eye on this company for a while, and I have noticed patterns in the stock which have it rise to around 125 a share and then fall to below 118 and then rise back up.
          Using Put options I have been able to make an almost 50% profit in under a week, as the stock fell below 120. If you missed out on the downward trend of the stock this week, don't worry, next week as the stock falls to below 118 you could buy up call options on the stock, preferably call options offering to buy the stock at 119 or at a price slightly higher then the market price. Or if options are not your thing you could simply buy Chevron shares at 118. Either way you could profit as the stock rebounds and rises above 120-122.
          Using this strategy you could easily make a large profit just in time for the new year. This is a short term play for those trying to make a quick buck and use the profit to buy your loved ones a nice gift for the holidays.
          For those of you reading this who are not willing to risk your money in a short term investment into options, at 118 Chevron is the perfect stock to buy and hold through next year. At 118 the company will be trading at just 9 times earnings, which is way below the market average of 15. Also Chevron will no doubt be profiting from the shale energy boom in the U.S which would make the country the leading oil producer in 2014. Besides the attractive valuation and energy boom, Chevron is part of an energy sector that has been dramatically underperforming the rest of the stock market.
           Chevron stock is up only 11.2% this year, compared to the S&P 500 which is up over 25%. While the rest of the market is overheated and in need of a correction Chevron and other energy stocks seem to be in a perfect position to rise through next year, especially as countries such as Mexico open up their oil markets to outside competition.
            These factors point to a boom in energy stocks, so my analysis  is to buy up shares in various oil companies like Chevron now , and watch them rise through next year.



PLEASE POST COMMENTS ON HOW YOU LIKED THIS WEEKS ENTRY SPECIFICALLY THE NEW FORMAT.

I WILL BE POSTING ONCE EVERY WEEKEND ABOUT MY OPINIONS ON THE MARKET AND VARIOUS INVESTMENT OPPORTUNITIES I HAVE FOUND.

IF YOU LIKED THIS ARTICLE FEEL FREE TO SPREAD THE WORD SINCE I AM CURRENTLY ADVERTISING SOLELY THROUGH WORD OF MOUTH

A New Bubble in Virtual Currency?

                 Five day sell off followed by a massive comeback on Friday, Bitcoin prices continue to fluctuate and the positive jobs report. What do these things mean to you and your money?

                Let’s be honest, it has been a tough and painful week, if it was not for the great jobs report that came out Friday morning sending the market up an astounding 173 points, the Dow would have ended down over 218 points for the week. Luckily if you read my article from last week where I suggested buying put options on major retailers you would have ended the week with a profit.

-          Wal-Mart was down 1.24% for the week.

-          Sears was down almost 25% this week

-          J.C Penny was down over 18%.

-          Amazon was down 2.73%

Wise bets against any of the companies above would have yielded immense profits but let’s not talk about what happened last week let’s talk about what’s going to happen next week. This week was obviously a sell off week, and a much needed one at that. The Dow closed up for 8 straight weeks, and I hate to say it needed to cool down. The very positive jobs report on Friday though stopped the selloff in its tracks; un-employment fell to 7% from 7.3%. The economy added 203 thousand jobs in November, blowing past estimates of 183 thousand.

Unfortunately this positive jobs report might be a double edged sword considering that it might cause the Federal Reserve to start tapering its bond buying program in early 2014. The good news is that Wall Street appears to have gotten over its moodiness and forget the fears of an early taper that have plagued the markets since talk of them began.

In my opinion the sooner the Fed begins tapering the better, and hopefully when they do start to taper it might cause a much needed correction in the market. Now I said in one of my last articles, that although the markets might see a sell off as early as January or February next year the companies that will be hit the hardest will be the ones that have seen their stock surge way past the average of the market without growing their revenues in any substantial way, and the companies that currently see their market evaluation out pace their revenue growth.

Such companies are found, mostly in internet, and specifically social media although companies such as Netflix, Tesla and Yahoo are also amongst the companies I figure will be hard hit in a market correction.

Now this might make me sound like a bear but in truth in the long term I am a bull all the way, I have faith that the U.S economy will continue to recover and that after a correction and the popping of several specific bubbles the markets will surge to well beyond their current all-time highs.

What I am really interested in discussing though is the new virtual currency bitcoin. If you do not know what bitcoin is, it is a currency that exists solely in cyber space, in essence bitcoin represents the future of all currencies. With that said though the price of bitcoin went from $10 in January to over $1,200 dollars in December (before falling 20% to786.40 after China announced that its central bank will no longer accept Bitcoin as a source of payment and that it will not insure any transaction made with Bitcoin)

Bitcoin’s massive surge in price is mostly due to speculation, may I remind people that the cause of every financial bubble is over speculation. With that in mind it is easy to call Bitcoin the perfect bubble, comparable to that of tulips in the 1600’s and the Internet bubble in the 1990’s. My major grievance about Bitcoin is that it is not backed by anything! Nothing the currency really doesn’t have any substance to it. This along with the over speculation in Bitcoin makes me want to discourage any people from buying it.

Off course the second I came up with this analysis I started looking for a way to bet against the Bitcoin bubble. Unfortunately my search proved discouraging; in order to bet against bit coin you must convert your money into bitcoin and invest in certain Bitcoin exchanges that are few and far between. In essence if you want to bet against bitcoin you must first invest into it at its current price.

But in the end virtual currency is the future and although I do not think Bitcoin is the currency that will replace all others I do think that in the near future our world’s major currencies such as the Dollar and the Euro will be configured to the same virtual cyber space as Bitcoin exists in now.    

I would ask that if you may please leave comments about how you liked the article and any suggestions you have about how to make it better. Also if you enjoyed this article I would ask if you please spread the word since currently I am advertising only through word of mouth.

 

 

 

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

Buying into the Holiday Craze? Not So Fast

             It’s been a slow week with the stock market closed on Thursday for Thanksgiving and a shortened day on Friday, but next week could potentially yield large profits.

                All eyes are on the retailers this week, with Black Friday weekend (the number one shopping weekend of the year) drawing to close the pace of the Stock market is going to be determined on how good the results of this weekend were. And unfortunately for those of you holding stocks in retailers like Walmart and Sears I am afraid you are going to be disappointed. Most retailers have been gaming on a good holiday season (especially J.C Penny) unfortunately current numbers show that the holiday season is going to be very slow.  

                The National Retail Federation reported that shoppers, on average, spent 4% less over the holiday weekend then last year. This marks the first decline in consumer spending since 2009, this will come as a shock to most people, considering that with the rising stock market and rising home and car sales most investors thought that retailers were going to have a strong holiday season.  This false feeling sent shares of retailers up, which means it’s the perfect time to purchase Put options on various retail stocks, specifically those of Walmart, J.C Penny, and Sears.

                But before I get into analyzing the weaknesses of the above companies lets discuss why the holiday season has begun so slowly. With the improving economy people should have more free cash to spend on holiday shopping, right? WRONG! It appears that this year consumers are more interested in buying big ticket items such as cars and houses (this may benefit car companies like Ford and GM) this shift to buying big ticket items does cut into how much customers spend at retail stores but what is more destructive to retailers offering bargain prices during the holidays, is that consumers are buying responsibly.

                The whole point of offering large sales at retail stores is that it lures consumers into spending large amounts of money on not only things they need but things they don’t, such as a new T.V, extra presents for their kids, new clothes. This way consumers leave behind twice as much money at retail stores than usual, retailers love this because it instills in peoples mind that they saved money when in truth they saved nothing, they just spent more money than they ever needed to and increased the retailers profit.

                That is the concept of Black Friday, unfortunately for retailers people do not have that extra dollar to throw away on an extra gift or T.V, because that person already used a lot of their free money to buy a new car or a new house. So what happens when consumers feel like they have less money to spend? The answer is they only buy what they need, at the discount prices retailers are offering them. This is what is happening to retailers this holiday season, and it will seriously cut into their profits.

                Another thorn in traditional retailers sides is the continued growth of online retailers and the increased popularity of Cyber Monday (where online retailers offer bargain prices and huge to rival those of traditional retailers) While consumers are spending less money at retailers like Walmart they are spending more money on online stores like Amazon and EBay.  

                ComScore, an internet tracking company reported that online spending was up 17% from last year, and IBM reported that shopping from mobile devices such as smart phones and Tablets jumped 40%. Of course traditional brick and mortar stores have their own online sales; they have nothing on large internet retailers like Amazon.

                Now the numbers do not lie, traditional retailers are losing ground to their online competitors, and this week it is clear that retail stocks will fall, now the question becomes how to capitalize on it. I have chosen to buy weekly Put options on particular retail stocks such as Walmart and J.C Penny, (Put options are options to sell a stock at a certain price, if the stock price falls the value of the options goes up: go to http://www.forbes.com/2006/08/23/investools-options-ge-in_wh_0823investools_inl.html, if you want to learn more about option trading)

                By buying Put options on these large brick and mortar, traditional retailers I am basically betting that the stock in these companies will fall. As for online retailers, by all accounts they should be a good buy, but many like Amazon and Groupon are overvalued and unprofitable. But if you are interested in buying stock in online retailers, I would wait until next year when this buying craze on the market ends and a much needed correction occurs. This way you could buy into companies like Amazon at a cheaper price, because without a doubt online retail is the future.

 I would ask that if you may please leave comments about how you liked the article and any suggestions you have about how to make it better. Also if you enjoyed this article I would ask if you please spread the word since currently I am advertising only through word of mouth.

 

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

Markets are Overheated: Find out Which Ones

All you see on CNBC these days are people arguing about whether or not the stock market is overheated and heading for a massive correction. I am here to tell you why it’s not.

               Now off course some sectors and some companies have become massively overvalued and are bubbles that will pop. But in general most companies are still trading at a fair value, and others are trading below what they're fair market should be, for example, Apple (after having a terrible year on the market) has become a cheap stock, also Microsoft continues to trade at just 14 times earnings (below the average of 15).

               While I’m on the topic of undervalued companies, take a look at
the auto industry, Ford and General Motors trade at well below 15 times earnings and have seen profits and revenues increase dramatically throughout the year. But no one seems to care about these huge corporate automotive giants, the hottest stock in the auto industry this year was Tesla Motors.

               Now Tesla has been in the spotlight recently as 3 all electric Tesla Model S sedans have burst into flames prompting the federal Government to investigate the safety of the car and possible ordering a recall. But  if you are invested in Tesla that is the least of your
worries considering the car has passed all safety test with flying colors, what investors do have to worry about is Tesla’s evaluation and its miniscule profits.

Tesla stock has been soaring all year rising over 500% at its height of 194.50 a share. The catalyst for this rapid growth was Tesla’s first profitable Quarter, which was a big feat for the electric car maker but did warrant the company's market price soaring to $14.8 billion (as of Friday). Tesla is a classic bubble and I am glad to say has finally begun to pop, the stock is down almost 30% in the last month.

My suggestion if you are currently a stockholder in Tesla is to take your money and run, and if you are considering an investment into Tesla I would hold off until the stock falls to around $70-80 a share which might be sooner than you think.

Tesla Motors is not the only bubble out on the market a few more are Amazon, Facebook, Netflix, Yahoo,
and Twitter. Any of these companies sound familiar? They should besides the fact that all these companies are well established brand names all them have also seen their stock soar through the roof over the last year.  

When people worry about a potential market correction they should not worry about stable blue chip components like General Electric and Qualcomm but rather worry about momentum stocks like Netflix.

Let talk about several of these companies, lets take Yahoo for example. Yahoo has seen its stock rise 96.5% this year as investors respond to new Yahoo CEO Marissa Mayer's attempts to turn around the struggling internet giant. Truth be told, she is doing a good job, a new logo new investments, a new image, Yahoo seems to be getting a new makeover, but lets take a look under the surface.

What you find does not justify the rapidly rising
stock price, earnings have been flat, and the company's main revenue stream (internet ads on its search browser) continue to erode. What Yahoo does have going for it is its investments in a number of new Tech startups (such as Chinese e-commerce giant Alibaba, which is planning to go public) that may produce additional revenue for the company later on, but for the time being Yahoo is far from being “turned around” and my recommendation for the company is to avoid buying. Mayer might be able to turn the company around in the long term but not before the company experiences a massive correction.

To emphasize point only a few sectors and
stocks are overvalued enough to be called bubbles and are endanger of experiencing a correction. The most bubbly sector in my opinion is the technology sector and specifically internet based companies such as Facebook, Yahoo, and Amazon, as well as Twitter and Netflix.

I would ask that if you may please leave comments about how you liked the article and any suggestions you have about how to make it better. Also if you enjoyed this article I would ask if you please spread the word since currently I am advertising only through word of mouth.

 

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

Profitable Week? Keep the Momentum Going With these Investments!

An end to several weeks of earnings, Janet Yellen’s senate confirmation, the Dow and S&P 500 at record heights, and a profitable week that wiped out all losses from the previous three.

This week had proven exiting to say the least. The future Chairman of the Federal Reserve, Janet Yellen, announced this week during her senate hearings that the Federal Reserve will not be ending its $85 billion bond buying program for at least another few months. This announcement on Thursday sent the Dow up 85 points to end at a new record high, alongside my own portfolio.

Yellen has been a favorite to take Ben Bernanke’s position as the new Chairman of the Federal Reserve. Wall Street believes that she will continue Bernanke’s loose monetary policies and even more importantly keep pumping cash into the U.S economy.

Personally I think Yellen is the perfect women for the job, for two reasons. First she has the experience; she has served as the Vice Chair of the Federal Reserve since 2010, before that she had served as the president and C.E.O of the Federal Reserve Bank of San Francisco. These credentials clearly show that she has the business talent to guide the U.S through an economic recovery, but more importantly she had been Ben Bernanke’s right hand for years. This is a great thing since it is not the time to completely shake up leadership at the Fed, considering the fact that the U.S is in the middle of recovering from the worst economy since the Great Depression.

Janet Yellen’s senate confirmation did send stocks to record highs but to me personally one event more than any other impacted my stock portfolio. That event was the Justice Department reaching a settlement with U.S Airways and American Airlines allowing those companies to merge into the largest Airline in the world.

The decision was announced by the two airlines on Wednesday, and in response sent shares of American Airlines through the roof (stock soared over 25%). Personally I had hoped that the merger would not go through, this would have caused a selloff in American Airline stock which I could have then acquired at cheap prices, allowing me to exploit the Airlines low evaluation, growing profits and resurgence. I also was very surprised that the merger passed since although it is great for the Airline industry as a whole it is terrible for consumers, who are now going to have to deal with rising airfare and expensive fees. But I cannot change the decision, all I could do is accept it, and at the very least it made stock in other Airline companies go up.

Now that American Airlines is merging with U.S Air what’s next for the stock in the bankrupt airline? The answer to that is simple, it will continue going up, currently the company is undervalued, and I had bought shares in American on Thursday (just in time to see the stock fall on Friday). In any case as soon as the news that a settlement was reached allowing the merger to go through I began to look into investing into the New American Airlines (which will be listed on NASDAQ under the symbol AAL).

What I came up with led me to decide to not invest into the new American. There were a few reasons why, the first one was that I saw the struggles United Continental had after its merger. The newly merged Airline had trouble integrating two different fleets into one, and profits suffered as a result. Another reason not to invest into the New American is because traditional carriers such as United and the New American are rapidly losing ground to smaller low budget airlines, like Jet Blue and Southwest. These low budget airlines are cheaper to operate, more attractive to fliers and as a result are gaining a greater share of the airline market.

                These low budget airlines also got a lot more attractive after details of the settlement were released. It appears that the price of the merger between Americana and U.S air came at the cost of selling slots in Reagan National Airport in Washington D.C to low budget competitors, Jet Blue and Southwest. This was one reason the justice department wanted to ground the merger in the first place, the government did not want a single airline controlling almost 70% of the slots in a key airport. But in selling these slots the New American had empowered low budget competitors in Washington D.C.

                The New American Airlines seems to face a number of large problems that in my opinion, will compromise its position on the market. With strong competition from small low budget airlines increasing I would strongly recommend avoiding stock in the New American. A better alternative would be investing into a low budget Airline like Jet Blue, Southwest, or Spirit. But if you are looking to put your money into a large Airline that will compete internationally with the new American, I would recommend investing into Delta (I am currently invested in Delta Airlines myself). Delta Airlines is expanding in all directions, purchasing slots in JFK Airport in N.Y.C, buying a 49% stake of Virgin Atlantic Airlines, and most importantly reorganizing itself as a low budget carrier.

                Low budget airlines are a fantastic investment at the moment but if you are looking for short term investment opportunities I would suggest investing into Entertainment Arts (EA).

                Electronic Arts is a company valued at over $7.2 billion that manufactures games for gaming consoles such as Sony’s Play station and Microsoft’s Xbox. In addition to producing games for PC’s, networking sites (such as Facebook) and mobile devices. What originally attracted me to this company was that its stock had seen a sell off on Friday of over 7.32%, which was another hit in a serious of sell offs that had driven the stock down 10% over the last 3 months. Now I don’t play video games very often so I normally I would avoid buying into the gaming industry but with the new generation consoles coming out, such as the Play station 4 and Xbox 1 I saw an opportunity to exploit the sale of these consoles without betting on which one would sell better.

                Buying into a company that produces games for both consoles opens the door for immense profits over the next few months, since consumers who buy a new console will be forced to buy a whole new set of games to service them. This tied to the recent sell off in the stock seems like a golden opportunity to invest.

                In the end this week was very profitable but over the next few weeks investments in low budget airlines and Entertainment Arts could send your portfolio as well as mine to blistering new heights.

 

 

I would ask that if you may please leave comments about how you liked the article and any suggestions you have about how to make it better. Also if you enjoyed this article I would ask if you please spread the word since currently I am advertising only through word of mouth.

 

 

 

 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

 

Take Advantage of cheap Evaluations Now!

                Markets end Friday higher, marking the 5^th 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. 3^rd 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.

 

I would ask that if you may please leave comments about how you liked the article and any suggestions you have about how to make it better. Also if you enjoyed this article I would ask if you please spread the word since currently I am advertising only through word of mouth.

 

 

 

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

Portfolio has Stagnated? Here's Some Tips!

                 I wake up in the morning to the tune of CNBC’s alarm clock telling me the current status of S&P 500 futures, and in an odd twist of irony I found that one of the common phrases the CNBC alarm clock uses to inform me about S&P 500 futures fits my opinion of the market perfectly.

                “Futures are flat and opportunity is in the air, come on, time to make some choices!” I could not have said it better myself.

                Although the DOW added another 85 points this week, the NASDAQ index declined slightly and many companies have seen their stock prices plateau. Personally I managed to squeeze out a very minor profit this week, this marks my second week in a row where my portfolio has remained more or less flat, and this aggravates me. So over the last few days I have searched for lucrative investment opportunities that could revitalize my portfolio and I believe I have found a few stocks that could just do the trick.

                But before I get to them I want to discuss some of this week’s notable events, one of the most important was the Federal Reserve’s decision not to end its $85 billion monthly stimulus program. This was expected, and I said as much in last week’s entry, yet the market did not seem overly excited about the news since it only boosted the general market up slightly (Although the Indian stock market rallied on the news, however much that may affect you).

                Apple announced earnings Monday afternoon, and the market reacted to them exactly the way I said it would react, shares fell more than 3% on Tuesday, and if you took my advice and bought Apple stock after the earnings report, you saw a small profit at the end of the week. Now of course Apple’s earnings were nothing to impressive, although the company mostly met expectations it saw its profit margins decline. I would not worry too much about Apple’s margins, what I would worry about is Apple’s next product line.

                I know I am not the first to say that Apple needs a new product line to revitalize itself, but unfortunately it’s true. No matter how much I love Apple’s iPhones and iPad’s I cannot ignore the fact that Apple is rapidly losing market share to Samsung, and Google. The company needs a new edge; personally I believe that will come in the form of a smart T.V. I believe this for one reason, the smart T.V space needs improvement, I own a Samsung (so called) smart T.V and the smart option on it randomly shut off on me a few months ago. Since then I have, ironically, been using an Apple T.V to watch Netflix and Hulu Plus. If Apple can create a smart T.V at a reasonable price, I have no doubt that the company would gain control of the market quickly. But this is all speculation; the only thing I am sure of about Apple is that it makes solid, reliable, and popular products, and that the company stock is currently undervalued. With this said even if you failed to take advantage of the opportunity to buy Apple stock on Tuesday after its Earnings report you could still make money on Apple by buying now.

                Another company that reported earnings this week was Facebook, which blew past earnings expectations and saw its stock climb over 17% in pre-market trading on Wednesday, the stock then settled down after the social media giant announced that the amount of teens logging on daily has dropped. Facebook ended the week down 3.4%, but I have voiced my distaste of Facebook as a company many times before, what interests me about Facebook’s earnings and its market performance is that it might show a helpful insight into the potential market reaction of Twitters IPO.

                Twitter is supposed to go public this week, around $18-20 a share, this gives Twitter an evaluation of $11 billion. In my opinion Twitter represents the next wave of the internet bubble that has appeared to have swept the stock market. Facebook, Netflix, Amazon, LinkedIn, Groupon and now Twitter, all of these internet based companies have seen their stocks blown out of proportion to resemble the internet stocks of the late 1990’s.

                All of the above companies have earnings that do not support their market evaluations at all, and Twitter is no different. In the company’s first financial report it announced revenue of $254 million in the first six months of 2013, ended June 30. That's more than double the $122 million the company generated in the first half of 2012. The company also reported a net loss of $69 million in the first half of this year, which compares with a net loss of $48 million in the same period a year earlier.

                These numbers do not add up, but with this said it the IPO market has been red hot this year, and shares of social media companies such as Facebook have rallied. What I suggest for Twitter is to buy stock in the company and sell quickly, because the company’s fundamentals are terrible, and the high evaluation will eventually backfire. (This trade is highly risky, and if you cannot afford to take a large hit I would not suggest investing into Twitter when it goes IPO)

                As for investment opportunities, I found three companies that could both potentially bring in enormous profits, MGM Resorts, Melco Crown Entertainment, and Capital One Financial corp.

                                MGM Resorts International (MGM)

-          I am a great fan of investing in Casino’s I think the casino market will continue to recover, with this in mind I bought large amounts of MGM stock which I’ve held for the last 4 months. I bought the stock at $16.50 a share, and saw it rise to well above $20. I had planned on cashing out on Thursday after the company announced its 3^rd Quarter earnings, which I was convinced were going to be good. What a mistake! Shares fell more than 6% on Thursday after the company announced that although there losses narrowed their profit margins declined. This sell off of MGM stock, really stung since MGM stock forms nearly 1/6^th of my total portfolio. But where there is loss there is a potential opportunity, besides MGM’s profit margins shrinking somewhat, earnings were not too bad considering revenues increased. I bought additional MGM stock on Friday (at 18.99 a share) and saw shares rally somewhat. I have full confidence that MGM stock will regain ground and continue their march higher. My recommendation is to take advantage of the opportunity presented by the sell off and buy into MGM.   

Melco Crown Entertainment (MPEL)

-          Another Casino company where I see a potential opportunity to cash in is Melco Crown. Unlike MGM, which has the majority of its business in Las Vegas, Melco Crown is an Asian based Casino company with its core business located on the Coati strip, in Macau. Melco Crown has seen its stock stagnate along with much of the market, and shares were down 2.27% this week. But Melco Crown announces earnings on Tuesday, and I have confidence that if the company’s earnings are good the stock will go up. Needless to say this strategy is extremely risky, last time I gambled on a good earnings report MGM stock sank more than 6%. My confidence in Melco Crown’s earnings comes from Las Vegas Sands earnings report, which showed that the company’s business in Macau improved. With Melco Crown’s earnings relying heavily on the progress of the Macau market I put the two and two together and decided that Melco Crown is a good investment. Now Melco Crown stock might just be boosted by a good earning s report but do not get me wrong this is a very short investment, I’m planning on selling off my stock as soon as Tuesday or by the latest Wednesday. I don’t think Melco Crown would make a good long term investment for one reason; the company’s stock is overvalued.  Melco Crown trades at 51 times earnings; this is way past the industry average of 30 and above the S&P 500 average of 15. My recommendation for Melco Crown is to buy on Monday, to take advantage of the stock rising on Tuesday and then get out.

Capital One Financial Corp (COF)

-          The stock of this credit card company is an odd choice for someone looking to get out of the doldrums the stock market has settled in. For one thing Capital One shares are up just 13% this year, lagging far behind the market which is up about 20% this year. Capital One’s earnings are also nothing to boast about, revenues were at $5.65 billion in the 3^rd Quarter of 2013, slightly less than the $5.7 billion made last year, this quarter’s profit of $1.1 billion is also slightly lower than last year. But Capital One has one thing going for it, the stock is dramatically undervalued!  Valued at only 10 times earnings Capital One seems to have plenty of room to grow, plus another upside to Capital One is that the company is stable, so there is little risk of taking any huge loss. So my recommendation is to take advantage of Capital One’s underappreciated stock and take home profits in the future.  

Airlines-

-          I had originally intended to increase my investment into the airline industry, seeing that along with casino’s it is my largest and most profitable. But this week the government will announce whether or not it will permit American Airlines and U.S Airways to merge into the largest Airline in the world. American Airlines stock has been very hot recently, and with good reason, the stock is undervalued trading at just 6 times earnings, plus the company will be getting out of bankruptcy with the merger. My opinion on the merger is that it is great for the airline industry as a whole but terrible for the consumer. If American and U.S Airways merge the price of airfare in this country will be decided by three major companies Delta, American, and United. I do not want to buy any additional stock in airlines right now because if the government decides that the American-U.S merger is too monopolistic, airlines stock will tank, this will provide endless opportunity to buy. It is ironic that with me holding so much airline stock I am actually hoping the merger does not go through, since it will provide an opportunity to buy into American Airlines (which will see its stock tank the most) American Airlines truth be told doesn’t need the merger to come out of bankruptcy, earnings have been improving recently and if the merger is shot down the company will remerge from bankruptcy organized like a low fare airline. This in my opinion will make American more able to compete with larger more capitalized airlines like United. So my recommendation for airlines is to buy if you are convinced the merger will go through or hold off on buying if you think it will not, and take advantage of the lower prices.

 

 

 

 

I would ask that if you may please leave comments about how you liked the article and any suggestions you have about how to make it better. Also if you enjoyed this article I would ask if you please spread the word since currently I am advertising only through word of mouth.

 

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.

  

 

 

  

                  

                      

  

                 

Another Profitable Earning's Week

                This week was not as exiting or profitable as the last two, markets were generally up and earnings announcements continue. Yet this week some saw some massive gainers, amongst which were Microsoft, Amazon, and Boeing.

                This week although pretty flat for me personally, highlighted the heightened uncertainty in the Stock Market, next Wednesday the Federal Reserve will announce whether or not they will start to dial back on the $85 billion monthly stimulus program. The popular consensus is that they will not, the Federal Reserve wants to see some undeniable evidence that the U.S economy is growing steadily enough not to require federal assistance, and they don’t have it.

                Personally I believe the Federal stimulus program had to go in September, the last time the Fed had met to discuss its future, now after the Government Shutdown and the debt ceiling limit postponed until early next year I feel like the Federal Reserve should not start tapering until mid-next year.

                But eventually the stimulus program has to end, so there is no point in debating its future, what’s truly important is the results of the Earnings that were announced this week and the earnings that will be announced next week.

                Some big names announced their 3^rd Quarter results this week were the Defense Contractors Lockheed-Martin, and Boeing. Earnings for these contractors were supposed to disappoint due to the Government Shutdown and reduced military spending yet they did not, both Boeing and Lockheed Martin beat earnings expectations and saw their shares rise this week, yet I would not recommend buying into defense contractors for one reason, they are two reliant on government contracts.

If the Government debt standoff showed anything it showed that the Government does not collect enough money to run the Country, and eventually spending is going to have to be cut and military contracts cost the Government Billions of dollars every year. Putting the two and two together it is obvious that in the future the military contracts Defense companies like, Lockheed Martin, Northrop Grumman, General Dynamics, and Boeing rely on will either be allowed to expire or are going to be cancelled. Now this won’t happen for at least a few years, since most Military contracts are not due to expire until 2015, but still with the politics in Washington affecting Government spending I would not want to put my money into companies that rely heavily on Government funds.

Defense Contractors were not the only companies that announced earnings this week, Internet retail giant; Amazon announced its 3^rd Quarter 2013 results also. Now Amazon is huge, with a market value of some $166 billion! Amazon has grown so large that it’s starting to carve into Wal-Mart, the undisputed king of retail, share of the market. Amazon beat average earnings estimates which predicted revenues to be at $16.76 billion, revenue topped $17.09 billion, and after this news shares surged 9.39% to close at $363.39. Amazon has just one problem…..its unprofitable! Amazon lost $.09 a share (this matched estimates) or a loss of 41 million.

This loss irritates me, since Amazon has the potential to become extremely lucrative. But my feelings aside shares of Amazon are up over 52% this year, considerably better than other traditional retailers. Normally I would discourage investing into an unprofitable company but Amazon is a special case, its revenues are growing, and it’s not like the company is hemorrhaging money, what I think Amazon needs is a financial advisor to manage their funds more affectively.

My recommendation when looking at Amazon is to look at the numbers and ask yourself what they mean to you, to me Amazon’s numbers show some unreasonable spending that has to be cut back in order to make the company profitable. I do not have the confidence to say buy it or not buy it but this is my analysis of the company.

Another giant that reported earnings this week was Microsoft, I admit I am biased against this company, I cannot stand Microsoft products, and I feel that the software company is a dinosaur that is watching its dominated PC market slowly die. But Microsoft announced earnings that were actually impressive, since the company is trying to reinvent itself as a device and services company, since it’s buying of Nokia’s phone business.

Microsoft reported earnings of $18.53 billion in revenue and 5.24 billion in profit ($0.62 per share). Also sales of new Microsoft tablets, and its office system supplemented for declining sales of windows. This shows that Microsoft is on its way to revitalizing its self. Shares of Microsoft were up 5.96% on Friday, closing at $35.73 a share.

My recommendation for Microsoft is to buy and hold, if you are looking for a quick profit this stock should be avoided since Microsoft is a steady blue chip company that will not see a resurrection for at least a few years. If you are the type of person who wants to put their money somewhere where you could watch it grow at a faster rate than a standard bank account, then Microsoft might the perfect match for you. Microsoft pays a high dividend of 3.13%, with this in mind it may be another retirement stock to put your 401K in.

There were other companies that announced earnings this week such as Ford, and Caterpillar, and generally Wall Street found overall earnings good enough to send the DOW up over 100 points this week, next week though several other large companies are announcing earnings, such as Apple, Facebook, General Motors, and Exxon Mobil.

My advice for these companies is to avoid buying into Apple stock until after the company announcing earnings on Monday, since Wall Street is forecasting another bleak Quarter for the technology giant. With this said Apple would make a great investment since the company is currently undervalued, and may be issuing a large buyback soon. I would buy into Apple after the company announces earnings since stock will probably fall and you could take advantage of the low prices.

As for Facebook, I stated my opinion on the social media giant in my first entry. I believe the company is highly overvalued, and that with shares surging over the last 3 months this Quarter announcement might send shares falling back to level where I think they should be trading at, in the mid 20’s. Yet Facebook may surprise people and shares might continue to go up but in the long term Facebook, and social media in general is a terrible investment, since it relies too much on advertising and produces little real profit.

General Motors on the other hand might be a good investment, since Ford announced good earnings GM might just be the next automaker to surprise Wall Street, as for Exxon Mobil, I would not buy into the Oil giant, because of falling oil prices that may have a negative effect on the world 2^nd largest corporation.

 

 

I would ask that if you may please leave comments about how you liked the article and any suggestions you have about how to make it better. Also if you enjoyed this article I would ask if you please spread the word since currently I am advertising only through word of mouth.

 

I will be posting an article every Friday 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. (I apologize for the late posting this week, I have been very busy)

An overvalued Market? Not according to These Earnings

                 An end to a 16 day government shutdown at last! Now that there is no pointless politics to disrupt the market investors can focus on what’s truly important, earnings.

                J.P Morgan Chase, Citigroup, Wells Fargo, Goldman Sachs, Morgan Stanley, IBM, Google, General Electric and Las Vegas Sands, all of these companies announced earnings this week, some of them stellar, some of them disappointing. Yet one thing was made clear this week, despite the market looking overheated and in need of a correction, earnings seem to back up the current evaluation given to most companies. This points to one end, markets will continue to rise for the foreseeable future (that’s if the politicians don’t send the economy off a cliff).   

                Personally my portfolio saw its largest weekly gain this week since I have begun trading; my total profit this week was up almost 50%. This spectacular gain might have something to do with an end to the Government shutdown and a rising of the debt ceiling, allowing the country to borrow money again, at least until early next year. Yet nearly half my gains were realized on Friday, when Google, General Electric, Morgan Stanley and Las Vegas Sands all announced earnings that beat estimates.

-          Google- (GOOG)-

Google without a doubt was the single biggest gainer in my portfolio this week, surging 13.8% on Friday to top $1,011. The stock was trading at just $888 the previous day, now this was before Google announced earnings of 11.92 billion (excluding sales from partner sites) and a profit of $10.74 a share. This blew past average estimates that were predicting revenue of $11.64 billion and a profit of $10.36 a share. Total profit this quarter increased 36% from last year to $2.97 billion. Showing these kinds of start up like earnings is remarkable for a company with a market valuation of over $336 billion. But how long could this continue?

I bought stock in Google when it was trading at $863 a share, I bought not so much on fundamentals but because I saw a pattern in the Stock price that saw it fluctuate between $865 and $915 a share. I bought the stock on August 20^th, and throughout late August shares fell slightly, alongside everything else, and I bought more, convinced that the stock price would bounce back to top 900. How right I was, within 2 months stock not only topped $900 a share it topped $1,000. I sold the stock at $1,001.40 a share in midday on Friday, I believe I might have sold a little too early, but I doubt the stock will keep this kind level for very long, within a few days or weeks, the hype on the stock is going to go down and there will be a natural sell off. But with this said I doubt the stock price would fall below $950. My advice for Google would be to hold off on buying until the inevitable sell off occurs, this way it could save you unnecessary losses in your portfolio and virtually guarantee a nice profit within a short period of time.

-          General Electric (GE)

General Electric is one of several Dow components that posted 3^rd Quarter earnings this week, and although the earnings were not as impressive as those of Google the market found them substantially adequate to move the stock up 3.53% on Friday. General Electric posted earnings of $3.7 billion, or $0.36 per share, down 3% from the third quarter of 2012. Yet earnings per share beat average estimates of $0.35 and global business improved heavily.

I bought General Electric a while ago, at $23.18 a share, and at the bell on Friday it was trading at $25.55, the gains are nothing to explosive yet I believe General Electric is the perfect “retirement” stock. The company shares are gaining in value at a rate that is par and par with the broad U.S market, GE stock is up 15.98% this year, while the DOW is up some 13.45%. Also General Electric is heavily invested into Solar Energy, recently partnering up with one of the largest Solar Energy companies, First Solar Inc. It is obvious that alternative and solar energy are the future, and that eventually alternative energy is going to be the next big economic bubble, when this happens you can count the General Electric will be part of it. Another plus for this stock is that it pays a very respectable dividend, 2.97%. So my analysis for this company is that it would make a great stock to put your retirement funds in, since the company has stable predictable earnings, the stock price is rising along with the U.S economy, the company is invested in new technology allowing investors access to the Solar Energy industry without the risk of investing into volatile solar energy companies and the company pays a good dividend.

 

 

 

-          Morgan Stanley (MS)

Most major banks announced earnings this week and frankly they were not to impressive, J.P Morgan Chase posted a loss of over 300 million dollars, although this  was due to heavy legal fines rather than business fundamentals, Wells Fargo posted earnings per share of $.99 that beat estimates but showed decreased revenue and also showed that the banks mortgage lending decreased significantly, Citi bank posted similar results in there mortgage lending business and Goldman Sachs although also beating earnings per share estimates and boosting its dividend saw its revenue decline 20% year over year. Now all these disappointing earnings reports from banks made me nervous for Morgan Stanley’s earnings announcement, yet I was not disappointed. Morgan Stanley posted a 50% increase in revenue or $7.93 billion compared with last years $5.28 billion, Morgan Stanley also reported a profit of $888 million or $.44 a share compared to last year’s loss of $1 billion and a loss of $.55 a share. Morgan Stanley also blew away earnings estimates that expected Morgan Stanley to produce a profit of only $.40 a share.

I bought shares in Morgan Stanley several months back at 25.17 a share, on Friday, after a 2.63% gain the stock closed at 29.69. And after these earnings I believe Morgan Stanley is going to have an amazing run, I continue to hold my stock in Morgan Stanley and see myself holding it for the foreseeable future.

-          Las Vegas Sands- (LVS)

I have been anticipating the earnings report of major casino companies for some time, and this week Las Vegas Sands, the largest Casino operator in the world, announced its 3^rd quarter earnings. And surely just like for Morgan Stanley, and Google, the Sands corps earnings, did not disappoint. Revenue increased 31.7% to $3.57 billion from 2012, earnings per share increased some 78.3% to $.82 a share, as a cherry on top of the cake, Las Vegas Sands corp also boosted the dividend to $.50 per quarter, an increase of 42.9%.

Now I have owned stock in Las Vegas Sands for just over a month now and within that time the stock price has risen over 10% to $72.52 a share. My logic for buying into casino’s was this, after the 2008 recession shares in Casino companies fell to all-time lows and since then have recovered remarkably alongside the U.S economy (LVS stock up 1,042% over last 5 years).I believe since the U.S economy is still on the mend and that inevitably revenues for casino companies will continue to rise as many people start having enough free cash to take a trip to Vegas it’s the best time to invest into Casino’s. So far my logic seems to be working, the two most profitable stocks in my portfolio are MGM resorts international and Las Vegas Sands (MGM announces earnings on October 31^st) So my advice for investing into Casino’s is to invest into companies with exposure to both a recovering Las Vegas, and the highly lucrative, fast growing Macau market. The only two Casino companies I see that have the necessary exposure to both markets to take full advantage at the recovering economic landscape is MGM and Las Vegas Sands. I would buy and hold the stock in these companies for the time being.

-          Spirit Airlines (SAVE)  

I know Spirit Airlines did not announce earnings this week yet I felt like I must include this company in this week’s blog entry. This month shares of Spirit are up almost 25%, including a 15% surge last Friday. Now airline stock have been very hot this year, with the industry recovering from a wave of bankruptcies in the 1990’s, and with the current consolidation of the Airline industry into 5 major companies (soon to be 4 after American and U.S airways merge) it appears the airline industry has become profitable again.

I bought into Spirit Airlines in mid-August when the whole Airline industry saw it shares fall after the justice department blocked the American-U.S Airway merger. I reasoned that even if the American-U.S Airways merger was blocked Spirit would not be affected, so I bought. And in the last month the stock has recovered and is rapidly becoming the fastest growing stock in my portfolio.

 My recommendation when buying into Airlines is to avoid investing into United Airlines, although currently the largest Airline in the U.S, United would be the type of airline that would rapidly lose ground to smaller, nimbler and cheaper competitors like Spirit Airlines and JetBlue.  

I like Delta airlines (I do own shares in it) because unlike most other airlines, Delta has a decent if not great profit margin and unlike United Delta is trying to set itself up like a low budget carrier similar to Southwest. Also through purchasing a 49% stake in Virgin Atlantic, Delta has broken into the highly profitable New York to London route which has until now had been controlled mainly by American and British Airways.  

American Airlines stock has made an outstanding recovery since it fell nearly 50% in August, and I had actually owned stock in it earlier this year when I bought at $2.00 a share and sold at b$3.50 (now I realize I sold way to early since the stock went to high of above $6) I actually like American Airlines since this quarter it did show an outstanding profit and I think the company could come out of bankruptcy on its own and thrive even if it does not merge with U.S Airways.

As for U.S Airways, I did make a nice, 30% profit on the stock earlier this year I would not want to invest in it seeing that like United the airline will fall victim to small low budget carriers. This is the same reason I would not want to invest into an American Airlines that has merged with U.S Airways.

So to conclude this week’s blog entry I would like to say that earnings were more or less good across the board and that I foresee the U.S market continuing to grow, at least until early next year when the debt ceiling hits its limit again. Until then I see a potentially profitable investment in Casino’s, low budget Airlines (such as Spirit) and Morgan Stanley.   

 

I would ask that if you may please leave comments about how you liked the article and any suggestions you have about how to make it better. Also if you enjoyed this article I would ask if you please spread the word since currently I am advertising only through word of mouth.

I will be posting an article every Friday 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. (I apologize for the late posting this week, I have been very busy)