Mr. Market is an Idiot. On June 21st, I posted an article “Thinking About Garmin” in which I proposed that Garmin is uniquely positioned as the leader in a technology that is “crossing the chasm” from early adopter to mainstream. I was expecting a stellar earning report this week, which is exactly what Garmin delivered. Only to see the stock go down.
So I took another look at my analysis.
Gold & silver, or precious metals (PM) as they are referred to in the investing community, are a kind of commodity. Physical commodity investing is not usually done as a long term investment. This is because a commodity has no value besides its intrinsic value. It will never increase in quantity nor quality as an investment or product, unlike stock ownership in a company where the corporate earnings can potentially increase with time.
So why am I investing in such stupid and “boring” investments? Because, on an inflation-adjusted basis, gold needs to exceed $2090 in 2006 dollar to overcome its 1980 peak.
There are about as many variations on the moving average as there are investors using them. While it’s generally understood that no one configuration is going to be the holy grail of predicting stock prices, each investor has their own baselines or favorites that they come back to.
Below, I’ll talk a little bit about how I’ve been using MAs lately. Then I’ll look at some of the MA setups which seem popular online today and make some observations based on them.
Sherman, set the wayback machine to the winter of 1999! This was a time when everyone thought they were a financial genius. You couldn’t loose, or so we thought. I was a conservative investor even in those days but a co-worker was talking about a great investment tip he heard from a friend who had heard it from their doctor. That in it self should have been a sign.
If you’re anything like me then you think that once you click on the appropriate button, or get off the phone with your stock broker, your order speeds off to be filled at whatever price the stock is currently trading at. How wrong I was.
Chapter 8 on “Spotting Bottoms in Stocks” is one of the best sections of Jim Cramer’s Real Money. The chapter is filled with the type of insights you would expect to get from someone with 25 years of experience in the market.
The chapter does discuss spotting bottoms in individual stocks, but Jim spends most of his time on indicators he uses to spot market bottoms. These indicators (collected into three categories) have been shared by all four of the last big market bottoms (1987, 1990, 1998, and the “double bottom” in 2002-2003).
It’s hot here in San Jose. With a record streak of record temperatures (many over 100 degrees), newspapers are reporting that every local store selling air conditioners has been cleaned out. Similar stories are being heard around the country.
Naturally, that led me to think again about companies selling air conditioners. I already wrote about Lennox which, while down from when I originally looked at it, still looks like a good medium term play. Their plan on building up an extra large inventory this season looks like it will pay off big time, though it may not be until their next quarter report that we’ll really know the results.
But Lennox mostly sells larger units. Today I went looking for companies that sell the portable and window units that have been selling like crazy, and I found Fedders Corporation (FJC).
Amidst the turmoil and uncertainty that attends the markets these days, I often find it relaxing to sequester myself for a while and do some analysis. Part of my job as an analyst is to discover things that others may have missed. These may be opportunities to identify “Special Situations.” Some very successful opportunities of mine in the recent past have been companies such as Nucor, Landstar System, C.R. Bard, Laboratory Corp., PACCAR, Asta Funding and Student Loan Corp (STU). I have had some excellent runs with these companies because I was able to isolate their uniqueness early – before Wall Street discovered them.
I got an email from a reader at my other site asking about Geely Automotive Holdings Ltd. The author had already purchased over 19000 shares which might seem like a lot until you realize this is very much a penny stock. Still, the outlay for a young college student is significant and it probably brings up a topic for a good future article “Where the small investor should put his money?” We are not talking about that today because we need to answer the questions on Geely first.
In his book You Can Be a Stock Market Genius (review at ThinkingAboutMoney.com), Joel Greenblatt discusses the investment opportunities that come from investing in special situations – such as corporate breakups and mergers.
Over the next few weeks, Cendant is breaking itself up into four companies. You may not have heard of Cendant, but you’ve certainly heard about the companies it owns.
