Category Archives: Stock market

by | November 21, 2013 · 2:08 pm

To taper or not to taper

The FED`s FOMC minutes, said yesterday that they could see the Fed tapering its $85 billion-a-month bond-buying program at one of the next few meetings the coming months. In addition, the committee members also saw the U.S. economy growing at a moderate pace.

This is not something new to us. They have earlier said that they want to see the unemployment rate below 6,5% and a better growth with a stabile inflation before they start to taper. Therefore, the U.S employment report in early December will be on traders and investors watch list now.

Once they came out with the news yesterday, the dollar index shot to its daily high, which is a bearish signal for the precious metals traders. Gold and silver prices dropped sharply. Where are the gold headed now?

From 1976 into the peak in 1980, gold rallied from $101,50 to $873 an ounce. A big bullish trend for the gold that time. Fear and greed are reflecting this chart, while people trade on emotions.

The gold indes peaked out and the market backed off and settled into a sideway trend from about 1982 to 1996. Then it started a sideways trend from around $281 to $514. A loooooong sideways trend for a loooong periode of time.

It went sideways in the 90`s and people considered the market to be «dead». But then the market changed in 2001 – 2002. It started a new trend that peaked out in September 2011, trading at $1900.

The chart is now very similar to the chart back in the early 80`s. If this is the future for gold, we are likely to see a sideways trend now.

But many people expect a big drop now because the market seems to be overbought. If that happend, we will se a change for the gold price. Probably a big jump. News today: PPI & Unemployment Claims at 8:30am, Philly Fed Manufacturing Index at 10:00am.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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by | November 20, 2013 · 1:35 pm

Price-to-earnings growth (PEG)

PEG ratio is used to determine the value of the stock while you look at the company’s earnings growth. This gives you a better picture and overview than P/E ratio. Take a look at LinkedIn. Price-to-earnings is just below 1000 now.

A high P/E like that may look like a good buy, but factoring in the company`s growth rate to get the stock`s PEG may tell you another story. A company with a lower PEG ratio may be undervalued given its earnings performance.

The PEG ratio tells you whether the stock is over or underpriced and that varies by industry and what kind of business it is. The accuracy of the numbers in the PEG depends on all the inputs used. If you use historical growth rates, you may provide an inaccurate PEG ratio because the future growth can deviate from historical growth rates. Some use the terms “forward PEG” and some use the terms “trailing PEG” to distinguish between the calculation methods using future growth and historical growth.

The most popular way to compare two different stocks are to look at the P/E. You simply calculate it by taking the current price of the stock and divide it by the EPS. It tells you whether the stock is high or low relative to its earnings.

A stock with a high P/E is often considered as overpriced and that is probably right. It signals that the traders have pushed the stock price too high and above any reasonable near term growth that is probable.

However, a high P/E can also signal a strong vote of confidence that the company still has strong growth prospects in the future. This tells us that the stock price can go even higher.

Investors are usually more concerned about the future than the present. That`s why it is better to look at future earnings growth or the PEG ratio. You calculate the PEG by taking the P/E and dividing it by the projected growth in earnings.

PEG = P/E ratio / (projected growth in earnings)

For example:

P/E in Company A is 100, and projected earnings growth next year is 20%. PEG in this case is 5 (100 / 20 = 5). Like all other ratios, the number five in this case is just a number you can compare in relationship to others. The lower the number, the less you pay for each unit of future earnings growth. A company with a high P/E and a high projected earnings growth may be a good value.

A company that is not growing any more with a P/E of 10, and a low or no projected earnings growth, gives you a PEG like the P/E. This can tell you that the investment in here is very expensive.

Take a look at the chart below. I have compared Sony with Starbucks. People are not buying vinyl records or cd`s anymore. What do they buy? They simply buy coffee! Sony traded at $120 in year 2000, and now the stock is just below $20. By the way, do you know what company that is selling most cd`s in this world right now? Belive it or not; it is Starbucks!

SNE and SBUX

News today:

Core CPI & Retail Sales at 8:30am,

Existing Home Sales & Business Inventories at 10:00am,

Crude Oil Inventories at 10:30am,

Fed Meeting Minutes at 2:00pm.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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by | November 19, 2013 · 12:23 pm

Earnings per share (EPS) 2

EPS is considered to be the single most important variable in determining a companies share price.

Definition:

The portion of a company’s profit allocated to each outstanding share of common stock. Earnings per share serves as an indicator of a company’s profitability.

The most important thing in finance is “time”. When are the transactions going to be paid? That`s because the world it changing, so are the currency and the value of the money.

So, it is very important to compare apples to apples. Otherwise, it will be difficult to make an investment decision. It`s meaningless to compare the price of two different stocks.

It doesn`t make sense to compare the earnings of two different companies either. Why? Because, like I said in my article: “Earnings per share 1”, all the companies have different number of outstanding shares. This is important to know.

Let`s say Company Company A and B both earn $1000, but Company A have 10 shares outstanding and Company B have 100 shares outstanding. See? What company do you want own?

It`s better to compare two different companies by looking at the earnings per share (EPS). A simple tool to use. You calculate earnings per share by taking the net earnings and divide it by outstanding shares.

EPS = Net Earnings / Outstanding shares

In our example, Company A had earnings of $1000 and 10 shares outstanding. EPS for Company A is 100. (1000/10=100).

Company B also had earnings of $1000 but 100 shares outstanding. EPS for Company B is 10. (1000/100=10).

Wow! Buy shares in Company A you say. Maybe, but it is not enough to make that decision only on the basis of its EPS. It`s helpful to compare two companies, assuming they are in the same business, but it doesn`t tell you whether it`s a great stock or not. It doesn`t tell you what the market think of the stock either. We need to look at some ratios.

Keep in mind that there are three types of EPS:

Trailing EPS – last year’s numbers (the only actual EPS)

Current EPS – this year’s numbers (still projections)

Forward EPS – future numbers (obviously projections)

I have tried to make this as easy as possible, but if you want, we can make it more difficult. We need to remember diluted shares, dividende, warrants and so on. I am not gonna write about that today, so hang on, we will discuss that later. I just don`t want to complicate it now.

News today: FED Chairman Ben Bernanke speaks today at 7:00pm.

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Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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by | November 18, 2013 · 2:02 pm

Streaming is the future!

 

Internet changed the world, but we have only seen the beginning. You all know what happend to the print media. Internet relegated the print media to insignificance! Not only have the subscriptions gone, but the ad revenue has dropped dramatically too.

We are now seeing the same with the television. More than 5 million have already “cut the cord”. People ditched ordinary television in favor of online content from the likes of Hulu, Aereo, Netflix, YouTube, Amazon Prime, iTunes video and Goolgle Play. This trend will continue and is accelerating too.

Netflix is growing month after month and the ordinary cable TV subscriptions declines every day. A dramatic change. For every one American who ditched cable TV, we saw two signed up for Netflix. Now, you know what to buy and what to short?

Some investors are talking about a bubble in the technology industry. Is that right? Well, Nasdaq is nearing 4.000, and that is a level we have not seen since September 2000. Just months after the tech market collapsed. All this only a few months after the U.S Government shut down for 16 days early in October this year. This bull market is very odd!

Investors are bearish on gold and this precious metal is now trading at $1284,00. Once again below the support level at $1300. It is heading for the first annual loss since 2000. People do not belive in it anymore.

Gold slumped 23% this year and this is the biggest annual loss since 1981. Gold drops because the inflation everyone is waiting for fails to accelerate and the S&P 500 reaches all-time highs. I think people are bearish before Yellen`statement. She is ready to back stimulus until she sees a great growth in the economy.

News today: TIC Long-Term Purchases at 9:00am, NAHB Housing Market Index at 10:00am (all times: eastern time). Fed chairman Ben Bernanke will speak tomorrow!

Apple-TV-logo-on-iPad

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

 

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by | November 15, 2013 · 1:14 pm

Earnings per share (EPS) 1

Don`t look at only the price of the stock. That is not enough. A stock that is priced at $30 can be cheaper than a stock priced at $10. Some people tend to think that a stock price reflects the value relative to other stocks, but that is terribly wrong!

The price of the shares is completely meaningless to investors that is doing fundamental analysis. The market cap is found by multiplying the per-share price times the total number of outstanding shares. This number gives you the total value of the company or stated another way, what it would cost to buy the whole company on the open market.

The per-share price is changing all the time, and that is why we aren`t so concerned about it. All the companies have a different number of outstanding shares, and that doesn`t tell us what the value of the company is. What we are looking for are the market capitalization (market cap).

You can find the market cap by multiplying the per-share price times the total number of outstanding shares which means what investors need to pay for the whole company on the open market.

Let`s say the stock price is $5. Outstanding shares: 10 million. The market cap is $5 x 10 000 000 = 50 000 000. But, what if Company B have a stock price of $2 and outstanding shares is 100 000 000? Market cap is $200 000 000. So, what company do you want`t own? Stock price $5 or $2?

Do not only look at the per-share prices because it doesn`t tell much. Look for a stock compared to another stock that is similar in the same business. Market cap gives you a better picture of the companys value, and the market put the stocks into three categories:

Small Cap under $1 billion

Mid Cap $1 – $10 billion

Large Cap $10 billion+

The most important thing is to understand the comparing companies of similar size in the same business when you are doing your evaluation. Market Cap is better than evaluating per-share price of a stock. How do you find earnings per-share? I will write more about that next week.

News today: Empire State Manufacturing Index & Import Prices at 8:30am, Capacity Utilization Rate & Industrial Production at 9:15am.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Shiny bull. The author has made every effort to ensure accuracy of information provided; however, neither Shiny bull nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Shiny bull and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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