I present this topic in hopes that the TK'ers might again share with the community of investors and traders the steps they take in selecting a stock to trade or invest in.
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My name is Patricia and I'm really not an investor. I am by category a Day Trader that risks considerable monies for short term profits of a nickle to sometimes a dollar per share... in hopes that it will accumulate into a mass of money so I can have my own HFT company. Most day traders will loose all of their investments over time; so this is not for the faint of heart. Profits are taxed at 35%, so much of my monies gained go into fee's and taxes. I also spend over 300 dollars a month on data feeds, lease of software, and market advise.
I have an arsenal of knowledge that has enabled me to automate my trades and has given me satisfactory success in this crazy up and down market place. I use Ninja Trader, IQFeed data feed, and I use another Broker for this type of trading.
I have invested in a 4 screen computer system with considerable horse power to accommodate just trading SPY. I also have 3 other computers actively trading other stock and monitoring news feeds and overall conditions in the market place.
I have studied one stock (SPY) and have become well versed in it's movement and have developed a sixth sense to the way it behaves. I selected SPY because it's 3 digits to the left of the decimal, it moves at least a dollar a day, and it is heavily traded. It is driven by market conditions, rumors, and it provided the most challenge to figure out how to trade it.
I am also a firm believer in professional advice from proven companies that can deliver Swing Trades or stock selections that allow for a quick profit and limited down side risk. I use "Better Stock Entries" and the claim to fame here is that they might miss the early beginning of a trend, and they might miss the top... but they will give you wonderful returns.
So in recap, you see I'm not an investor with knowledge on how to pick stocks for long term gain and thought those who do... might share the steps that they go through in selecting a company, and how to research or pick the stocks they think will bring them long term returns.
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I trade mostly options, a month or two out, on highly liquid ETFs, large caps or VIX-related products. Vertical spreads and condor leg-ins have worked fairly well for me during the see-saw market of the last few months, when I've mostly traded the news, but considered technical indicators as well. In less volatile markets, I trade calendar spreads. Occasionally, I buy deep in-the-money puts or sell out-of-the-money puts.
If a well-established company is scheduled to trade ex-div in the coming weeks, I'll consider a buy-write with a near-the-money call. If the stock gets called away prior to ex-div, I'm content to take the profit; if the call expires, I'm content to take the dividend. After expiration, I'll either sell the stock at a profit, or sell another call.
Overall, I try to remain flexible, letting the market's mood dictate my strategy.
What's the criteriea for picking your stock...
Displaying entries 1 - 20 of 34 forum posts in total
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For myself I find it much harder to predict the short term outcomes over longer ones. What moves the market, or an individual stock, day to day is subject to many more relevant forces than in the long run. To use a sports analogy, it seems to me harder to pick Duke as the winner of a particular basketball game, than to predict that it will make the field of 65 in March, and it is an even safer bet that it will make the playoffs, in 7 out the next ten years.
The point being that payoff for being right on a particular game may be higher, but there is much less chance of losing money on the long range proposition. If you then spread your risk over several long term positions the odds are some will not turn out, but enough will that it will be worth your while.
How to specifically focus on such long term propositions. Well to me, I consider what are the fundamental traits of human beings that have endured over time, and hopefully don’t exhibit a likelihood of being obsolesced in the foreseeable future.
I trade about 95% options*. I use the current relative volatility to
decide the type of trade to use and statistics (plus some speculation) to
determine the strikes.
As you (Otter) trade SPY, I trade RUT (Russell 2000). Though SPY has more liquidity, RUT is a multi-exchange traded broad based index. At lease for now, that means my trades are taxed as 60% long term and 40% short term regardless of the duration. There are other indexes that qualify, such as SPX, VIX, NDX, ... And being multi-exchange, I avoid these extra fees. Most of my trades last a few days to a few months.
Also, like you Otter, I have computer skillz. I'm in the "thinking about it" phase of writing a program to trade. I'm sure SPY will be my instrument for that. Unless I find something with more volume. By the way, God bless TK for the API!
My goal is financial independence. Just enough to retire some day from my "day job" as a freelance audio technician (sound guy). My job is very cool and/or interesting, but it always starts by unloading a truck and ends with loading a truck. Some day, I might lose the physical ability to do that. After 25 years of being a gipsy, I'm ready to be home.
* I can't stress enough the importance of a good understanding of options before trading them. People get rich feeding on uneducated options trader wannabees. Tradeking is a great place to start. Click on the Education tab.
As you (Otter) trade SPY, I trade RUT (Russell 2000). Though SPY has more liquidity, RUT is a multi-exchange traded broad based index. At lease for now, that means my trades are taxed as 60% long term and 40% short term regardless of the duration. There are other indexes that qualify, such as SPX, VIX, NDX, ... And being multi-exchange, I avoid these extra fees. Most of my trades last a few days to a few months.
Also, like you Otter, I have computer skillz. I'm in the "thinking about it" phase of writing a program to trade. I'm sure SPY will be my instrument for that. Unless I find something with more volume. By the way, God bless TK for the API!
My goal is financial independence. Just enough to retire some day from my "day job" as a freelance audio technician (sound guy). My job is very cool and/or interesting, but it always starts by unloading a truck and ends with loading a truck. Some day, I might lose the physical ability to do that. After 25 years of being a gipsy, I'm ready to be home.
* I can't stress enough the importance of a good understanding of options before trading them. People get rich feeding on uneducated options trader wannabees. Tradeking is a great place to start. Click on the Education tab.
I am a jack of all trades, master of none. I divide my money on long term holdings (stocks and mutual funds) and short/positional trading which includes everything and lasts from a few hours to a few months. I trade mostly options bcz of leverage and time component, directional and non-directional. For directional trading I use momentum, insider buying and value (like shameless picking holdings of some well-known value investors) often expressing the direction with credit spreads
Non-directional includes things like ICs and calendars for income generation on indexes and ETFs
Non-directional includes things like ICs and calendars for income generation on indexes and ETFs
I trade mostly options, a month or two out, on highly liquid ETFs, large caps or VIX-related products. Vertical spreads and condor leg-ins have worked fairly well for me during the see-saw market of the last few months, when I've mostly traded the news, but considered technical indicators as well. In less volatile markets, I trade calendar spreads. Occasionally, I buy deep in-the-money puts or sell out-of-the-money puts.
If a well-established company is scheduled to trade ex-div in the coming weeks, I'll consider a buy-write with a near-the-money call. If the stock gets called away prior to ex-div, I'm content to take the profit; if the call expires, I'm content to take the dividend. After expiration, I'll either sell the stock at a profit, or sell another call.
Overall, I try to remain flexible, letting the market's mood dictate my strategy.
I invest: I use standard value criteria. Am especially partial to stocks with high roe and low p/e. Been doing it for more than 15 years. Works for me - sometimes.
I have used a variety of strategies over the past 3 years here on TK and have finally, I hope, settlled on one that fits my style and objectives.
I invest only in stocks with higher than average dividends. I will sometimes sell some OTM calls against the stock and collect extra cash. I use dollar cost averaging and reinvest in my basket of 9 stocks. I keep approx. 90% invested in stocks/funds and approx.10% in cash.
As far as which stocks, they will have a dividend of 10% or higher, have positive earnings, and a good track record of maintaining the dividend or increasing the dividend.
I invest only in stocks with higher than average dividends. I will sometimes sell some OTM calls against the stock and collect extra cash. I use dollar cost averaging and reinvest in my basket of 9 stocks. I keep approx. 90% invested in stocks/funds and approx.10% in cash.
As far as which stocks, they will have a dividend of 10% or higher, have positive earnings, and a good track record of maintaining the dividend or increasing the dividend.
TJ, I was right there with you until you set the dividend bar at 10%. To reach for that I would think you are dealing largely with ETF’s and Ltd. Partnerships, and the danger is you lose principle over time. Obviously, 10% dividend returns are undercut if value of the stock declines. If I’m wrong about my assumption, enlighten me; however, to me high than average dividends is in the 4-7% range.
As it is obvious I am not TJ and I am very interested in his reply, Dividend monsters do exists outside the area of MLPs. Are they without risk - of course NO and everybody makes decisions about his/her own risk. Everybody knows about these dividends and they are priced-in.
Examples include NLY and PDLI. Strictly speaking PDLI is more in the 9% area as of today but I am in with a lower basis and while options are not very liquid been able to sneak in short puts, calls or even both sometimes and generate some cash
Disclosure - long both
Examples include NLY and PDLI. Strictly speaking PDLI is more in the 9% area as of today but I am in with a lower basis and while options are not very liquid been able to sneak in short puts, calls or even both sometimes and generate some cash
Disclosure - long both
NLY is a REIT, which I have occasionally watched, and
PDLI appears to be a royalty trust based on drug patents (I am wholly ignorant
of this stock). Although they can
spill off some nice dividends, they are not generally much in the way of a business
which will grow over time. In
other words you wouldn’t buy into them thinking that they will grow their
dividend over time, or yield much in stock appreciation. I have found that stocks like these
often have a cyclical pattern and one can profit from that. One name that I have used is NRT which
is a natural gas royalty trust.
But the point here is these are fine for picking up some extra dividend
returns at the margin, but I would be wary about using them as the core of my
portfolio. Often when the underlying industry falls out of favor the stock
loses more than the dividend can make up.
I will concede that big pharma, which I am heavily invested in, has been
out of favor for some time, but when it returns to favor capital gain returns of
several hundred percent are not uncommon, and the dividends are greater than
the norm, and the options are far more liquid.
sp - thank you for the discussion! Sorry - I never intended to say "Buy", just that I have decided (right or wrong) to hold these shares long term and nothing more or less. One other point that I consider is the correlation of my holdings. While it varies, current NLY/SPx correlation (10 days) is around negative 0.1. This is interesting in a Risk On/Off environment where the average stock correlation is > 0.85. And you get paid 15% for that. Something worthy of consideration, at least to me
First, I’d like to thank Pat for starting this thread, it is discussions as this on general portfolio management that I find the most interesting. Now, as to the TJ/OF point:- after starting out myself (in the early 80’s) with a very heavy emphasis on bonds, I moved to a portfolio which emphasized high dividends, which come to think of it, is a logical progression from bonds. I used Master Limited Partnerships, High Yield closed end funds, Royalty trusts, along if Dogs of the Dow. My warnings are based on real life lessons, which you are obviously free to take or ignore. I still today use some of these vehicles, but as I said, I won’t chose to make them the core of my portfolio, but a side enhancement. The danger that I see is someone saying, gee this is an easy way to pick up 10% each year, and uncritically focus on the size of the dividend. To be perfectly honest, if I could be assured of a 10% return year after year, I might put my portfolio on ‘cruise control’ and finally finish “War and Peace”. But life is not so kind.
Many moons ago in my college years there was a tradition to replace the university president with a student for one day at this place I attended. The temp president usually delivered a speech to mark the event. It was not a "Lady Godiva" moment (which was re-created nearby) but it was usually well attended. One year the student-president was from an older generation. Part of his speech was that he divides people into four groups. First - these that have read "Brothers Karamazov", second - not yet but will read it, third that will never read the book and the fourth and he pointed to himself who personally know the brothers
Great discussion.
Personally I would qualify myself as a trend trader that looks for value. A rising tide can lift all boats so the overall trend of a market is very important to me. I have developed long term market "sentiment" signals that I believe indicate lower risk entry points. I share these signals in my weekly blog at www.oracole.com. Most of my investments are in mutual funds through a 401K, and I created these signals to try and help me manage risk in those accounts. I also created these technical signals because I found that there are not many technical signals suitable for long term investors.
In my TK account, I use the sentiment signal to gauge long term where the market is headed, and then look for stock with good products and management. I also study the income statements, balance sheets, and cash flow to make sure that it all makes sense. If I don't understand a business, market, product, or investor sentiment; I don't invest. However, I also track the variability of a stock and look for significant moves down for entry and significant moves up to signal exit. Often if a stock moves radically up it is overbought or oversold and one should take advantage of these conditions (assuming the overall market trend is in your favor).
Best wishes to you and all fellow investors.
Personally I would qualify myself as a trend trader that looks for value. A rising tide can lift all boats so the overall trend of a market is very important to me. I have developed long term market "sentiment" signals that I believe indicate lower risk entry points. I share these signals in my weekly blog at www.oracole.com. Most of my investments are in mutual funds through a 401K, and I created these signals to try and help me manage risk in those accounts. I also created these technical signals because I found that there are not many technical signals suitable for long term investors.
In my TK account, I use the sentiment signal to gauge long term where the market is headed, and then look for stock with good products and management. I also study the income statements, balance sheets, and cash flow to make sure that it all makes sense. If I don't understand a business, market, product, or investor sentiment; I don't invest. However, I also track the variability of a stock and look for significant moves down for entry and significant moves up to signal exit. Often if a stock moves radically up it is overbought or oversold and one should take advantage of these conditions (assuming the overall market trend is in your favor).
Best wishes to you and all fellow investors.
I have tried several styles: started out researching solid co's with dividends, products, long term. I decided that i was too impatient to sit there and watch my stock rally into an earnings announcement and tank. So i started trading around earnings announcements but didnt really put much emphasis into overall market sentiment and sometimes it would work, other times not. Then i decided to up my trading frequency and started making directional bets on the market (trying to guess essentially)...much to my detriment, I will say!
so i settled on a mix of all of these in a way. Now i use my research of solid companies to devise a sort of "shopping list" as it were. I have roughly 20 stocks i track through spreadsheets and charts. Usually i have a couple of stocks in each sector, these were picked by using fundamentals or product offerings. I like to pick the best of each sector (in my opinion at least) and follow the top 2.
Then i divide my cash allocation through a few groups within my portfolio: 40% dividend blue chips, 20% higher risk/higher yeild (NLY, KMP), 25% growth/spec, 10% Gold, and 5% cash. rarely do i only hold 5% cash though. Often (like now i am over 66% in cash, looking for opportunities)
Once i have picked my list i go through the charts and select key support levels as buy levels. Using many technical indicators i determine if we are in a "buy" event or a "sell" event. depending on the event type i choose my scale width and holding time frame.
I basically rent stocks. Sometimes for years, months, weeks, days...whatever seems most prudent. I will buy a stock on my list, depending on portfolio allocation at the time. then if the stock gets a pop I will take profit, if it drops to the next level i pick up more.
I basically trade around my positions looking for opportunities within my range of holdings. especially around earnings and Ex-div's.
so i settled on a mix of all of these in a way. Now i use my research of solid companies to devise a sort of "shopping list" as it were. I have roughly 20 stocks i track through spreadsheets and charts. Usually i have a couple of stocks in each sector, these were picked by using fundamentals or product offerings. I like to pick the best of each sector (in my opinion at least) and follow the top 2.
Then i divide my cash allocation through a few groups within my portfolio: 40% dividend blue chips, 20% higher risk/higher yeild (NLY, KMP), 25% growth/spec, 10% Gold, and 5% cash. rarely do i only hold 5% cash though. Often (like now i am over 66% in cash, looking for opportunities)
Once i have picked my list i go through the charts and select key support levels as buy levels. Using many technical indicators i determine if we are in a "buy" event or a "sell" event. depending on the event type i choose my scale width and holding time frame.
I basically rent stocks. Sometimes for years, months, weeks, days...whatever seems most prudent. I will buy a stock on my list, depending on portfolio allocation at the time. then if the stock gets a pop I will take profit, if it drops to the next level i pick up more.
I basically trade around my positions looking for opportunities within my range of holdings. especially around earnings and Ex-div's.
It would appear some are waiting for a reply... sorry haven't been on the forum for a couple of days.
Yes, I am banking on dividends and Jim Cramer would jump up and down regarding the lack of diversification in my portfolio. My portfolio is a mix of REITs, Oil & Gas trusts, Intl Growth & Income trusts, Closed end funds, and some companies that invest in residential mortage back securities (RMBS). No ETFs in the mix... sorry SP you missed on that one.
I devised my own system using a spreadsheet to indicate to me when any holding in my portfolio is out of balance as related to the others and I make my buying and selling decisions based on the indicators I have developed. This is new territory for me and where I was more of a short term trend trader before, I now consider myself more of an investor. I only buy/sell stock a few times a week based on my indicators. Previously I may have bought or sold shares up to 10 times a week. The savings in commission are nice... sorry Tradeking.
So, I guess for the most part I am banking on a comeback in the real estate industry which I feel most will agree is one sector that has been beaten to death.
To gain a little better insight into my thinking you might want to check one of my earlier posts: http://community.tradeking.com/forum/categories/general/topics/7684-agnc-i-can-make-a-case-for-buying-it/forum_posts
Yes, I am banking on dividends and Jim Cramer would jump up and down regarding the lack of diversification in my portfolio. My portfolio is a mix of REITs, Oil & Gas trusts, Intl Growth & Income trusts, Closed end funds, and some companies that invest in residential mortage back securities (RMBS). No ETFs in the mix... sorry SP you missed on that one.
I devised my own system using a spreadsheet to indicate to me when any holding in my portfolio is out of balance as related to the others and I make my buying and selling decisions based on the indicators I have developed. This is new territory for me and where I was more of a short term trend trader before, I now consider myself more of an investor. I only buy/sell stock a few times a week based on my indicators. Previously I may have bought or sold shares up to 10 times a week. The savings in commission are nice... sorry Tradeking.
So, I guess for the most part I am banking on a comeback in the real estate industry which I feel most will agree is one sector that has been beaten to death.
To gain a little better insight into my thinking you might want to check one of my earlier posts: http://community.tradeking.com/forum/categories/general/topics/7684-agnc-i-can-make-a-case-for-buying-it/forum_posts
Tampa Jake _ I agree that the real estate sector has in been beaten to death, but also more importantly it is too big to fail. Therefore, it is receiving support from the Fed. However, it may still be decades before the real estate market recovers and prices begin to inflate again.
sp - dividends vs capital appreciation is a fair point. At the same time one can argue the capital appreciation is zero the last 10 years. So all gains came from dividendsspshapiro said: NLY is a REIT, which I have occasionally watched, and PDLI appears to be a royalty trust based on drug patents (I am wholly ignorant of this stock). Although they can spill off some nice dividends, they are not generally much in the way of a business which will grow over time. In other words you wouldn’t buy into them thinking that they will grow their dividend over time, or yield much in stock appreciation. I have found that stocks like these often have a cyclical pattern and one can profit from that. One name that I have used is NRT which is a natural gas royalty trust. But the point here is these are fine for picking up some extra dividend returns at the margin, but I would be wary about using them as the core of my portfolio. Often when the underlying industry falls out of favor the stock loses more than the dividend can make up. I will concede that big pharma, which I am heavily invested in, has been out of favor for some time, but when it returns to favor capital gain returns of several hundred percent are not uncommon, and the dividends are greater than the norm, and the options are far more liquid.
As I have said, if I could get a 10-12% dividend return with no loss of capital, I would ‘back up the truck’. Unfortunately many, (not all) of these vehicles, incur capital losses along the way. I first heard of NLY from James Grant on Rukeyser’s show (yeah, that long ago), and I would have done well following his advice, but at the time I didn’t realize how good he was at separating the wheat from the chaff.
I am little concerned about your choices or TJ’s. Both of you seem to be aware that you can’t just accept the stock touts you get any more than snake oil. As far as I can tell, you both do your own due diligence. We have all seen those touting 10% per month on this forum as elsewhere. All I see myself as doing is advising those few to put down that crack pipe before taking out their checkbook.
I usually wait until the overall market is down to buy. I then look at industries that I think will perform better than most in this economy such as precious metal miners, utilities, electricity, and agriculture(I'm pretty pessimistic on the future of the U.S. economy). Then I buy stocks with low P/B and P/E ratios within those industries.
If I am looking at large cap stocks I will pay a little more attention to the technicals under the assumption that large cap markets are more efficient. Sometimes I look at the list of biggest losers hoping to find some oversold stocks.
If I am looking at large cap stocks I will pay a little more attention to the technicals under the assumption that large cap markets are more efficient. Sometimes I look at the list of biggest losers hoping to find some oversold stocks.
Displaying entries 1 - 20 of 34 forum posts in total
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