The Art of Contrarian Investing: Going Against the Crowd for Profit
I think with all the shorting going on, and the group that says “Ford can’t possibly go much lower…I’m buying some”, we all need to think about the contrarian point of view. For some of us that might be finally biting the bullet and saying “YES the economy is in trouble…I’m shorting!” Yet for others they think, “no chance the Dow continues to bomb like this, Obama will change the economy.” Whatever your position, you need to understand exactly what goes into the contrarian mindset and I’ve asked Jon Lee from WeeklyTA.com to come and enlighten us a bit!
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A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricings in securities markets. For example, widespread pessimism about a stock can drive a price so low that it overstates the company’s risks, and understates its prospects for returning to profitability. Identifying and purchasing such distressed stocks, and selling them after the company recovers, can lead to above-average gains. Conversely, widespread optimism can result in unjustifiably high valuations that will eventually lead to drops, when those high expectations don’t pan out. Avoiding investments in over-hyped investments reduces the risk of such drops. – Wikipedia
Professionals vs. Non-professionals
“Whenever you find yourself on the side of the majority, it’s time to pause and reflect.”
– Mark Twain
What is the “Crowd”? They are the group of non-performing institutions, individual investors, traders, speculators, and other players in any market that form a collective opinion that is expressed in the terms of a degree of optimism or pessimism. We will call them the non-professionals.
The professionals are the “smart money”. These are the very few that are aware of crowd behavior and are able to adjust their strategies (long and short) to profit from extreme sentiment. Note: professional does not mean institution by definition. Most institutions are part of the crowd.
The key point to make is that when non-professionals display an excessive amount of optimism or pessimism, the professionals enter into the market and drive prices in the opposite position. Any truly non-professional, one-sided opinion or expectation of a market will be unable to anticipate a movement created by the professionals in the opposite direction that is anticipated by the group of non-professionals. This is contrarian investing, going against the masses that believe in only one direction of a market and taking advantage of their unanimous opinion by crushing them on the other side.
Here’s a diagram I created to illustrate the above point:
How does this work? Some might argue that if everyone’s buying and extremely positive, then why would the market crash? The answer: as more and more investors buy, the market will become fully invested. The last ones buying are the ones that bought into the market when the professionals were selling and will be stuck because of this overhead limit. After everyone’s bought, there won’t be anyone left to sustain the buying. Therefore, a fearful panic ensues and the masses start to sell, most of the times much later than they should have done.
A recent example of massive cash inflow (totaling hundreds of billions of dollars) is shown below. Note that the peak of the NASDAQ was on March 10, 2000 at 5,132.52 at nearly the same time when the largest monthly in flow occurred. Clearly, everyone was invested at the full limit.
The Media’s Portrayal of “Professionals”: An Observation in Barron’s April 28th Issue
This is the “Back in the Pool” issue with the funny-looking bull cartoon testing out the pool’s temperature. Barron’s surveyed “professional” investors and here were some “crowd-like” results:
1) Describe your investment outlook through December 2008:
• Very Bullish: 7%
• Bullish: 43%
• Neutral: 38%
• Bearish: 12%
• Very Bearish: 0%!!!
2) Is the U.S. stock market overvalued, undervalued, or fairly valued at current levels?
• Overvalued: 10%
• Undervalued: 55%!!!
• Fairly valued: 35%
These questions were the biggest eye-poppers:
3) Are you beating the S&P this year professionally?
• Yes: 74%!!!
• No: 22%
4) Personally?
• Yes: 72%!!!
• No: 19%
Here’s the most recent chart of the S&P 500:
The media’s definition of “professional” is not always correct so please be aware of the difference. The market is down over 40% year-to-date, so obviously the results have now changed dramatically.
Contrarian Strategies
“The fastest way to succeed is to look as if you’re playing by somebody else’s rules, while quietly playing by your own.” – Michael Konda
• Buy when media headlines read the absolute worst and there is no sentiment divide among investors. Once sentiment becomes entirely pessimistic, buy. Also look out for a bottoming of new capital in flows into stocks. Historically, the good time to buy was when capital in flows were between 10 -15%.
• Sell when everyone is overly bullish and capital in flows into common stock & mutual funds reach a high. (In 1960 the market declined 18%, in 1962 -29%, in 1966 -27%, and in 1968 -37%, while stock ownership levels were between 32- 34%, the highest ever. In 1999-2000, stock ownership levels were at 31-33%, near an all time-high)
• Don’t fight the trend. If the primary trend is down, go short. If the primary trend is up, go long. Why fight the long-term direction of the market?
• Watch financial networks and read newspapers and magazines to get an idea of where sentiment levels are. Magazine covers are my favorite.
Conclusion
“Follow the path of the unsafe, independent thinker. Expose your ideas to the dangers of controversy. Speak your mind and fear less the label of ‘crackpot’ than the stigma of conformity. And on issues that seem important to you, stand up and be counted at any cost.” – Thomas Watson
It’s safe to say that following the real professionals is the way to go. In order to do that, you have to know how they play. There are three points that I stress: 1) there is tremendous pressure and influence to join the crowd and gain easy acceptance, 2) the crowd is wrong the majority of the time, 3) under duress, psychologically, our emotions and objectivity can become distorted and cause us to rationalize (a dominant coping mechanism) or deny (a dominant defensive mechanism) even the basic realities of truth.
Investors will be able to join the crowd when appropriate, but remain flexible to leave the crowd at times when the market warns us. I encourage each investor to respect the nature of human weakness and to become a free-spirited independent thinker.
Jon Lee
Investing Legends Buying Up Stocks
For today’s guest blog post I decided to contact Christopher Hill from Investorazzi.com. I emailed him and asked him his opinion on stocks, and what the experts are doing. Christopher has been running Investorazzi.com for quite a while now and to say I’m a fan is an understatement. Check out his blog post below and check out his site…it’s worth the visit!
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Investing Legends Buying Up Stocks
To say U.S. equities have been beaten up lately is an understatement. As I write this post Monday evening:
* The Dow Jones Industrial Average is off almost 38 percent for 2008 (See CHART here)
* The Standard & Poor’s 500 Index is down 42 percent for the year (See CHART here)
* The Nasdaq Composite Index is now at a five-year low (See CHART here)
Turn on the news and you’d think investors couldn’t get out of the stock market fast enough. Remember that old story about someone’s cousin losing their shirt from investing in commodities? I suppose some are saying that about equities these days.
Yet, in times like these I remember a certain saying. “Buy when there’s blood in the streets.” Or, as legendary investors Jeremy Grantham and Warren Buffett might say, on the Street. For those of you who aren’t familiar with Jeremy Grantham, he is the Chairman of Boston-based GMO, a privately-held global investment firm with $152 billion under management as of the end of 2007. The British money manager, whose clients have included U.S. Vice President Dick Cheney and former U.S. presidential candidate John Kerry, has made some terrific calls in the past quarter century:
* In 1982, said the U.S. stock market was ripe for a “major rally.” That year was the beginning of the longest bull run ever.
* In 1989, called the top of the Japanese bubble economy.
* In 1991, predicted the resurgence of U.S. large cap stocks.
* In 2000, correctly called the rallies in U.S. small cap and value stocks.
* In January 2000, warned of an impending crash in technology stocks, which took place two months later.
* In April 2007, nailing the current crisis, he wrote to shareholders, “From Indian antiquities to modern Chinese art, from land in Panama to Mayfair; from forestry, infrastructure and the junkiest bonds to mundane blue chips; it’s bubble time!”
As for Warren Buffett? Well, who hasn’t heard of the “Oracle of Omaha?” Buffett, the richest person in the world with more than $62 billion (according to the 2008 Forbes list), amassed his multibillion dollar fortune mainly through investing in stocks and buying companies through Berkshire Hathaway, where he serves as Chairman.
These days, Grantham and Buffett both sense blood on the Street— and are acting accordingly. Paul J. Lim of the New York Times wrote this past Sunday:
“Mr. Grantham said in an interview that even though his firm began buying stocks in early October, after prices fell to attractive levels, the market had a tendency to “overshoot” during sell-offs… Mr. Grantham noted that GMO began buying only after its portfolios had fallen below some key thresholds. For example, in GMO’s global balanced portfolio of stocks and bonds, the firm’s minimum allocation to equities is usually 45 percent. But after the market sell-off, that equity allocation dipped to around 38 percent. So once stock prices began to look attractive, GMO started rebalancing back into what it regards as the most undervalued types of equities: emerging markets stocks and high-quality domestic blue chip shares. After a few rounds of purchases, stocks now make up around 55 percent of GMO’s global balanced portfolio.
Mr. Grantham says that although he doesn’t know how well he timed his purchases, ‘we do know that seven years out, these will be good purchases for us.’”
Even if stock prices continue to decline, Grantham told Douglas Appell of Pensions & Investments back on October 27, he still plans on buying more equities. Appell wrote:
“Going forward, Mr. Grantham said GMO will be ‘steady buyers as the market goes down.’ The firm risks being too early, but will be in position ‘to make a ton of dough’ when the inevitable recovery comes, he said.”
Like Grantham, Buffett has also been actively acquiring shares of companies. And like the British investor, he hasn’t made a secret of his intentions. In fact, back on October 17 he wrote in the New York Times:
“The financial world is a mess, both in the United States and abroad. Its problems, moreover, have been leaking into the general economy, and the leaks are now turning into a gusher. In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary.
So … I’ve been buying American stocks. This is my personal account I’m talking about, in which I previously owned nothing but United States government bonds. (This description leaves aside my Berkshire Hathaway holdings, which are all committed to philanthropy.) If prices keep looking attractive, my non-Berkshire net worth will soon be 100 percent in United States equities.”
And what was it that triggered Buffett’s latest spending spree? The man some call “The World’s Greatest Investor” explained:
“A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors.”
Blood on the Street, perhaps? Morgan Housel of the financial website Motley Fool wrote Monday:
“What’s the Oracle been up to lately? In the past quarter, Berkshire purchased about 24 million shares of ConocoPhillips (NYSE: COP), upping its existing stake to 84 million shares — currently worth just less than $4 billion. As of the filing date of Sept. 30, ConocoPhillips stood as Berkshire’s fourth-largest common stock holding, behind Wells Fargo (NYSE: WFC), Coca-Cola (NYSE: KO), and Procter & Gamble (NYSE: PG).
That’s a pretty serious vote of confidence. Conoco shares have crashed more than 40% in the past three months, as global economies screech to a halt. In the short term, that pullback is probably justified — energy was getting ahead of itself for a while. So did Buffett buy at the peak? Nah. For long-term investors who want to make the bold assumption that energy isn’t just a passing fad, there are some serious, serious bargains being made right now.
Berkshire’s other purchases in the quarter included a new 2.9 million-share investment in electrical goods manufacturer Eaton, as well as a 1.8 million-share increase in its existing stake in NRG Energy (NYSE: NRG).”
Should stock prices continue to fall, I have a feeling we’ll hear a lot more about these two investing legends— especially regarding their latest acquisitions.
Christopher Hill
Editor Investorazzi.com
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Is now the time for a bear market rally?
I’ve been in contact and reading the blog Psychologyofthecall.com for a few months now and from what I’ve read they seem to be on top of a number of issues. I asked them to answer one question for me…Is now the time for a bear market rally? Here’s their answer:
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The ongoing global financial crisis has made perma bears look like geniuses, yet the Psychology of the Call team (POTC) senses the imminent appearance of a bear market rally for four good reasons.
1) President elect Obama’s first speech and chief of staff pick, Mr. Rom Emanuel, were very bearish for the market; we are confident both of those negativities will change soon. POTC believes Mr. Obama’s goal in the coming days and weeks will be to do everything popular to be re-elected to a second term in just four short years. He understands that half of U.S. citizens are in some way affected by the mayhem of the recent sell off; Americans expect transparent leadership and policies now.
It’s that second pivotal term where Presidents are more inclined to show their true colors, especially in terms of openly hell bent left or right policy. We remain confident and are prepared for a lag effect Thanksgiving Obama rally to begin this week, as his centrist appointments and policies begin leaking through hedge fund insiders. We are not waiting for New Year to enter long positions, as that seems to be the easiest and most ‘herdish’ trade today: we remain forward thinking contrarians and are going long the S&P emini contracts into Thursday’s death spike.
We believe President elect Obama will appoint some Wall Street friendly names to his first administration, doing so to satisfy his political appetite to win that critical no holds barred second term in 2012.
Yet, if he chooses to select only hard line left wingers, the market will not rally. After witnessing the extremely well planned and hard fought victory, we would be shocked to see a concentrated (leftist) cabinet:. We are confident that will not occur.
2) The pressure from Warren Buffett on President elect Obama to call for a change in mark to market accounting from the SEC, or announce a huge infrastructure stimulus plan plays a factor in our short term bullish call as well.
Berkshire Hathaway just reported a horrible quarter, and even if Buffett is okay with paying higher taxes, we know he does not want to see his almost perfect legacy wither, wilt, and die in his waning years.
Other recent Buffett investments in Goldman Sachs (GS) and General Electric (GE) have underperformed as well, and both of those companies will survive this wickedly panicked market.
3) The financial sector could begin to stabilize as it shrinks. The S&P is heavily weighted with oversold financials. Approximately 20% of the S&P value lies in financials, so be cautious. Regional banks could begin bouncing with 50%+ buy-out premiums. Rumors abound that Citigroup (C) is very close to bidding for a regional bank with government TARP money.
Story here
This would ignite a type of forest fire under financials, forcing many perma bears to cover their seemingly bullet proof short positions.
We will take advantage of what we view as monopoly money about to be used to boost stocks like Regions Financial (RF) and/or Suntrust Bank (STI).
4) Intel’s (INTC) (see MarketClub’s latest prediction here, ed note) report of lowering numbers after hours creates the perfect set-up for hedge funds to close or enter new positions before they step foot on Capital Hill, Thursday. Please remember these managers are either long, short, or in cash at this point, so we expect the INTC news to shake out the wounded, weak, and desperate long herd, and flush out the dynamic kings of cash, specifically Steven Cohen and Paul Jones: Story here
These managers are patiently waiting to take over your shares when your fear factor boils over Thursday, turning their greed gauge on auto pilot in search of inexpensive generals. Will you allow them that satisfaction?
Four examples of best-in-breed generals at these levels are: Apple (AAPL), America Movil (AMX), Chicago Mercantile Exchange (CME), and Google (GOOG).
POTC feels the S&P index could settle above 1,000 by Thanksgiving, and as the bear rally gains momentum from one or two other positive developments mentioned above, then 1,100 on the S&P could well be reached before we wish you a Happy New Year.
Interview with a “Silver Man”
Earlier this week I had the chance to talk to David Morgan from Silver-Investor.com and ask him some questions about the futures markets and silver.Here’s David’s bio and below you’ll see my mini interview!
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Brad: David Good morning! How are things?
David: Things are well, just got back from vacation and am looking forward to getting my nose back into the silver that’s for sure.
Brad: David let me get right to it here….Can you give us a brief overview of how the futures markets operate?
David: Until very recently the futures market has been operated the same way basically from the inception. It’s what’s called an open outcry market. Guys jam literally into a ring. It’s a round section with tiers going up from the floor, like a cone. The levels represent different months. This same layout is for different commodities; a wheat pit, a corn pit or ring as referred to in New York. Now most futures contracts trade electronically.
What takes place is an auction method, and the futures price is set by this method. This method actually sets the spot price. The spot price is called the cash market.
Now, once that price is set, that doesn’t necessarily mean that you can buy silver or gold at that price that’s set in that pit. You can buy it for that price plus a few other fees, such as a delivery charge and transportation, but basically you will pay the price set.
I want to be very clear; there are times that the silver market and other markets go into what is called backwardation, where you actually have to pay more for immediate delivery of the real product than you can purchase the same commodity for in a future delivery month. This is a sign of a tight supply situation and usually does not last for much more than a few days.
Conversely, in the past we have seen the opposite. If we go back to the 1980 high of January 21, 1980 – the peak in precious metals in real terms, not nominal terms the price of silver in the physical realm was less than the futures price. I was in Los Angeles at the time, and even though silver in the futures market was over $50.00 the ounce, in the futures exchange, on the spot market, closing that day, the actual price that you could sell your silver physically for all over Los Angeles, every dealer that I checked with – was $35.00 the ounce.
So the dealer community bid it back $15.00 from the actual futures price. I want people to be aware of the facts and this was at the high and a very fast moving market. I’m really trying to be objective here. Now, the way we’re going in the silver market and the gold market right now is that anyone that really understands these markets are willing to go to the futures markets and take physical delivery.
I do expect these premiums to close up, meaning, that what you have to pay your local coin dealer for silver being greater than the spot month is going to narrow so that if you have to pay, as an example, $14.00 for one ounce of silver at your coin dealer, and the futures price is 10, those two will come together at some point in the future.
I wrote an article about that recently; if you haven’t read my Web site, you might go there, Silver-Investor.com. It’s called Silver Arbitrage; where I explain these arbitrage opportunities, usually don’t last for a very long time.
Brad: Okay. I guess what I’m driving at is reading the Internet that some say big interests are depressing the price through Comex. I don’t understand how they succeed in that and why they don’t just lose money and go out of business and why the price doesn’t just reach its natural equilibrium due to supply and demand rather than this manipulation?
Option Trading – Calendar Spreads & Time Decay
From David Riveria from Delta Neutral Trading comes a lesson on Option Trading…Calender Spreads and Time Decay. Learn more about David and his site Delta Neutral Trading.
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When traders speak of putting on calendar spreads, they normally refer to buying the further month options and selling the closer month option. While I can not argue with this, it is not best for all options.
I am going to be general in this article because prices change and I don’t want to cause confusion.
For out of the money options, you might want to consider doing the opposite. Buy the close month and sell the further month. This is because the theta is advantageous to you if you are buying the front month. The further the months are from each other, the more you have an advantage. Also, figure out the price per day of the option. Which option costs more and which is cheaper per day. You can find options that are equal distance away in strike from the futures but one option is 3 times cheaper per day than the other.
For the at the money options, the regular calendar spreads are the way to go. For strike prices that are far out of the money, the reverse calendar spread is better. One reason is the theta advantage. Another is the price per day.
So keep your eyes open for out of the money options and check their price per day and theta and compare them to different months. If you are looking at different months, make sure that the month you are thinking of selling, is the same amount of strike prices away or more from the underlying, as the one you sell. Meaning, if you buy an option that is 5 strikes away from the underlying, the one you sell, should be at least 5 strike prices away from the underlying. This is so if there is a big move, both options will be in the money at roughly the same time.
David Rivera has traded commodities and options for one of the largest cash trading firms in the world. He has written a course on futures options techniques.
You can find out more about this concept at: Delta Neutral Trading
Greed - The Ugly Duckling of Investing
Let’s stay focused everyone! The election is over and the economy is still at the front of our minds and our wallets. Today I’ve asked Branden Moskwa B.ASBE founding Parter, Tradeopolis.com to come and give us some help and a look into Greed!
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Ah, yes, that evil five letter word can get one into a some hot water when it comes to investing in the stock market now can’t it? I’m sure we’ve all been there, at one time or another, where the evil has overcome and we think; hold on for a just a little bit longer and I can make even more money than I could if I sold right now. Greed can be defined as an excessive desire to acquire or possess more than what one needs or deserves, especially with respect to material wealth. Yes, that sounds just about right, certainly relates to stock market investing now doesn’t it?
Keeping Greed out of Your Investing
We all have our own investment strategies, I’m not here to tell you what works best and what sucks wind, but one thing I do know, if your investing strategy involves greed you will probably ‘lose’ more often than you ‘win’. It’s certainly not always an easy thing, to keep greed out of your investments, especially when you’re in a stock that’s on a nice uphill ride. Any prudent investment approach should contain some form of an exit strategy, simply put how you plan on getting out of (selling) the stock you hold. This would be one way to avoid greed, have a set price at which you intend on selling the stock, walk away with the money in your pocket and move on to the next investment. Not always as easy as it sounds though is it? Prior to buying into a stock you should have some sort of idea at what price you would like to sell it, hopefully you don’t have to hold it for 10 years in order for it to reach that price. Sometimes you buy into it and if you timed it just right, you start to see the price go up sooner rather than later. When you start counting the dollars you are making seems to be when the exit strategy flies out the window and greed comes creeping in. I mean, gee, who knew when you bought it that the stock was going to rise so high, so fast, why sell now when you could make so much more money? It would be downright silly to get out now when you could clearly make much more cash if you held on to it. Somewhere deep within your being, there should be something rejecting this argument, and reminding you of your exit strategy and how you’ve gone past the price you told yourself you were going to be out of that stock and onto the next one.
Take your profits when you can
Discipline is a big factor when investing in the stock market. By employing some self-discipline you can keep your head about your initial investment strategy and keep greed from banging down the door. If the stock you invested in has made a nice move, and you have made the money you hoped to make off of it, then get out of it while the getting is good. If it seems as though the price is going to continue to increase, then why not take out your original investment plus a small profit (if possible) and leave the rest. At least you wouldn’t be losing any money by taking your profits when they are presented to you. You could have the best of both worlds if you chose to employ this strategy, you made your money (or at least didn’t lose any) and if the stock goes to the moon you’ll be laughing all the way to the bank, or at least to your next investment. The other option, let greed take the wheel, you could make way more money if you don’t take any profits and let the whole thing ride up the hill. Sure, you could stand to make a lot more off of your investments and I’m sure many people do, but the problem with this approach, where is the top? And when it reaches the top is it going to stay there for a while or come crashing down at record speed? What if it reaches this peak while you’re on vacation, or sick and can’t get to your computer to make the all important trade? It’s amazing how fast all those profits can disappear and you are no further ahead then when you first invested in the stock.
The main point to all this? Greed has a home and a mother, just like the ugly duckling, just perhaps not in stock market investing. Obviously, investment strategies vary from person to person, and if you find one that works, and greed is a big factor, well, kudos to you, personally, I’ve never gained off my greediness, it’s always hurt me more than helped me. Anyways, now back to my point. No one can predict with 100% certainty (no one I’ve ever heard of anyways) what is going to happen with a particular stock or the stock market in general. If you are able to keep your head about your investments and keep greed out, you could stand to make some tidy profits so that you can keep investing, employing your investment strategy and hopefully making some decent money at the whole thing.
Branden Moskwa B.ASBE founding Parter, Tradeopolis.com
Getting naked short selling
The practice of short selling has been blamed for the collapse of several major companies’ shares during the financial crisis. What is short selling? You will learn all you need to know about naked short selling in this video from Senior Editor Paddy Hirsch.
We thought that this was one of the most informative videos on how naked short selling works.
Enjoy,
Adam Hewison
Forex 1-2-3 Method
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This particular technique has been around for a long time and I first saw it used in the futures market. Since then I have seen traders using it on just about every market and when applied well, can give amazingly accurate entry levels.
Lets first start with the basic concept. During the course of any trend, either up or down, the market will form little peaks and valleys. see the chart below:
The problem is, how do you know when to enter the market and where do you get out. This is where the 1-2-3 method comes in. First let’s look at a typical 1-2-3 set up:
Nice and simple, but it still doesn’t tell us if we should take the trade. For this we add an indictor. You could use just about any indicator with this method, but my preferred indicator is MACD with the standard settings of 12,26,9. With the indicator added, it now looks like this:
Now here is where it gets interesting. The rules for the trade are as follows:
Uptrend
- This works best as a reversal pattern, so identify a previous downtrend.
- Wait for the MACD to signal a buy and for the 1-2-3 set up tobe in place.
- As the market pulls back to point 3, the MACD should remain inbuy mode or just slightly dip into sell.
- Place a buy entry order 1 pip above point 2
- Place a stop loss order 1 pip below point 3
- Measure the distance between point 2 and 3 and project thatforward for your exit.
- Point 3, should not be lower than point 1
The reverse is true for short trades. As the market progresses you can trail your stop to 1 pip below the most recent low (Valley in an uptrend). You can also use a break in a trend line as an exit.
Some examples:
There are a lot of variations on the 1-2-3 setup but the basic concept is always the same. Try experimenting with it on your favorite time frame.
Good Trading
Best Regards
Mark McRae Forex Avenger
Bio - Mark McRae is a fulltime professional trader, author and coach. He has coached some of the top names in Forex trading. David Curran, Forex’s latest rising star attributes his success in the Forex market to the teachings of Mark McRae. To read more about David, go HERE
Top Yielding Debt Free Stocks
When the market corrects like it does many people see value in stocks. But what about compaines that have low stock prices compared to their history…but a ton of debt? It’s often hard to find those companies with good potential without a lot of debt. Today I’ve asked Stockerblog.com to come and give us some insight into potential markets. Please consult with your broker, Trade Triangles, or your preferred technical indicator before making any trades. These are not trade recommendations…just great hints!
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Top Yielding Debt Free Stocks
With the extreme market volatility that has been taking place lately, investors are looking toward high yield stocks, so they have income coming in while waiting for their stocks to appreciate. In addition, investors prefer companies with no debt for additional safety. Combine those two features together, and look for the stocks with low PE ratios and low PEG ratios and you get the following list.
United Online, Inc. (UNTD) is an Internet and media services companies which owns the NetZero and Juno brands. The stock has a PE of 10 , a PEG ratio of 0.86 , and pays a yield of 9.84%.
Williams Pipeline Partners L.P. (WMZ) is a natural gas transportation and storage company. The stock has a PE of 2 , a PEG ratio of 0.24 , and pays a yield of 9.29%.
Pioneer Southwest Energy Partners L.P. (PSE) owns oil and gas properties. The stock has a PE of 5 , a PEG ratio of 0.68 , and pays a yield of 8.56%.
Starlims Technologies Limited (LIMS) creates and markets laboratory information management systems software solutions. The stock has a PE of 9 , a PEG ratio of 0.60 , and pays a yield of 7.17%.
NutriSystem Inc. (NTRI) is a provider of weight management and fitness products and services. The stock has a PE of 6 , a PEG ratio of 0.34 , and pays a yield of 5.86%.
Maxim Integrated Products Inc. (MXIM) makes and sells linear and mixed-signal integrated circuits. The stock has a PE of 14 , a PEG ratio of 0.92 , and pays a yield of 5.71%.
Electro Rent Corporation (ELRC) rents, leases, and sells electronic equipment. The stock has a PE of 15 , a PEG ratio of 0.99 , and pays a yield of 5.22%.
Patterson-UTI Energy, Inc. (PTEN) is a provider of onshore contract drilling services. The stock has a PE of 6 , a PEG ratio of 0.57 , and pays a yield of 5.10%.
Christopher & Banks Corporation (CBK) designs and markets women’s apparel. The stock has a PE of 12 , a PEG ratio of 0.88 , and pays a yield of 4.67%.
Safety Insurance Group, Inc. (SAFT) is a provider of automobile insurance in Massachusetts. The stock has a PE of 7 , a PEG ratio of 0.49 , and pays a yield of 4.36%.
If you like high yield stocks, you should check out the the High Yield Utility stocks and the Monthly Dividend Stocks at WallStreetNewsNetwork.com. You should also take a look at Top Yielding Defense and Aerospace Stocks.
Author owns UNTD.
A Life Changing Opportunity
I don’t think anyone would consider themselves a wild investor…except The Wild Investor! With the market swings, government bailouts, and political stumping we need some good news. I asked The Wild Investor to come and give us some good news and how we can benefit from all the news. Enjoy!
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When you think about the events that have taken place over the last year it almost feels like we are reading a book that is still being written. By the time we find a way to pull ourselves out (and we will) of this downward spiral of a market, the shelves will be littered with How I Survived the Credit Crisis Era books and paraphernalia.
You see the media has a way of exacerbating situations. While many of these outlets try to be as neutral as possible, often times they create more problems themselves than they report. We are constantly flooded with the notion that we are currently experiencing one of the worst economies since the Great Depression, soon nobody will have jobs, and all businesses will go bankrupt; however, all this couldn’t be further way from the truth. I would go as far as to say we are possibly experiencing one of the best opportunities anybody could ask for.
If you look back through history, then you will notice that many of the successful people in the world somehow found a way to be extremely profitable when nobody else could. If you delve down even further, you will notice these methods to get insanely rich were actually pretty easy and duplicatable. But if it was so easy, then how come more people didn’t profit? The answer is simple. Nobody wanted to take the risk.
Regardless of what experience you have had with the stock market, everybody can agree that there is always some sort of calculated risk. The misconception is that risk increases as the market goes down. The truth is that the risk is greater, while the market is rising.
How I have come to this conclusion is pretty simple. Lets say we are experiencing a bull run and stocks are on the rise. What happens if we decided to buy shares only to see the market suddenly turn for the worse? The higher a stock goes up; the more it can fall. Many people got trapped in this type of market just last year. We experienced huge gains, and when people finally got the courage to invest some money the market headed south.
Now lets say we are in a bear market and prices are obviously headed downwards. (like the market we are currently in). What happens if we buy some shares? There are two things that can take place. The first being the stock heads a little lower before eventually moving back up or we got lucky and correctly picked a bottom.
So you see there is less risk during a bear market. We know what the problems are, and there are really no surprises. As long as we do our due diligence and invest in solid opportunities, stocks or whatever you investment is more likely to move up, then had you bought on the rise.
The strong minded, who are able to set aside any third party news and take on that risk, will eventually be rewarded. Although the economy could still head lower, we are in a messed up time: expectations are low, but opportunities are higher.
While everybody is fleeing, the successful ones are heading towards the problem. We may be experiencing on of the worst economies, but we are also experiencing a life changing opportunity. Don’t take it for granted.
The Wild Investor - http://thewildinvestor.com
Speak Stocks - http://speakstocks.com
