Historically, just before Thanksgiving is time to buy your Small Cap Stocks. So what will give you a good look at what small cap stocks are out there on the market? Lets look at the Russell 2000. That is the best place to start. Next you may ask, what are Small Cap Stocks? You have never really spoken to us about them before. They are individual stocks and the term Small Cap Stocks refers to stocks with a relatively small market capitalization. The definition of small cap can vary among brokerages, but generally it is a company with a market capitalization of between $300 million and $2 billion. This being said, you might be surprised at some of the small cap companies that help make up the Russell 2000.
Why is now the time to buy your Small Cap Stocks to add to your portfolio. The answer is pretty easy if you follow the history of the stock market. December is the time when "historically" small cap stocks make their best move in the market for the year.
Now you ask me, but how do I know what Small Cap Stocks to buy. Well, as you know I have no crystal ball. But with research I can certainly find likely candidates that will be winners in the future. I am of course not able to research all 2000 of the Russell 2000, but I can certainly steer you towards a few likely winners in this sector. I do want to remind you that in the Small Cap sector you are going to be finding things like restaurants, furniture companies, small pharmaceuticals, small retail, etc. There is a list of the companies that make up the Russell 2000 of course on the Internet. Here is the sight I like to use when doing research on Small Cap Companies. http://www.marketvolume.com/indexes_exchanges/r2000_components.asp
Basically this website gives you the names and symbols so you can find or lookup a small cap company you might be interested in.
So now you ask me, Gus what are some of your top picks in this sector? Again, I do not have a crystal ball, but if I were buying today here are some things I would be looking at in order of priority. COKE, PZZA, GIII, RCII, TXRH, LZB, SONC, WST, USLM, CAKE, NWN, and PJC.
Yes the Coke we love and enjoy is on the Russell 2000. It pays a good dividend, has below average growth due to it's world wide saturation of the market and just came off a stock split this past year. If you are looking for dividends this is a good place to stick a little money.
Next lets talk about Papa John's. A great Kentucky company founded and headquartered right here in Louisville, KY. They are just coming off a spit within the last year and have continued growth and decent dividends. I would be on board here for future improvements. Papa John Schnatter, is no idiot and grew this company from a drive in window in a bar. This is a winner.
What about GIII? They are a clothing distributer and have many of their own lines. They started out in leather good and quickly expanded into other markets. They have had many great accusations of other companies and competition. I once owned this stock. It split, flew through the roof and I sold off at a wonderful profit. No dividends here, but LOTS of continued growth potential. Bill Cramer likes GIII and hosted them on his show a few months back. I can just say I did will them and I think you can too.
RCII is commonly known as Rent A Center. This company has been killing it. Lots of this having to do with our current economy and those not being able to for the outright purchase of furniture and electronics in there home or have found themselves with poor credit due to the loss of jobs and foreclosures of their homes etc.. This company is the at the top of the competition and I think you could find great help in your portfolio with them. I almost bought into this company several months back myself, but decided to save my money and go with another big boy company BABA when it came out as an IPO.
I have to talk about TXRH, commonly know as Texas Road House. Another stock I formally owned that has made me a lot of money. But I sold them and took my money and ran. That does not mean they are a bad choice to invest in. I have my methods for a reason, but there is still money to be made here.
Look at the rest of the choices I suggested. But if you are going to invest in the majority of these stocks the time is now. Good luck and I hope you find this information useful to your investment planning.
Gus S.
Disclaimer:
Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
Wednesday, November 26, 2014
Sunday, November 23, 2014
Falling Inflation?
I have been reading articles regarding falling inflation rates and how some experts are worried about this. China just decreased interest rates for the first time in two years our unemployment rate is falling, consumer confidence and spending is up. Inflation is falling? Well, not so fast while we look at the big picture.
This is one thing that always burns me about having an economic recession as we have recently experienced for the past six year. Upon improvement to the economy there is very little correction to market prices and cost of living adjustments to the consumer. Meaning, if inflation were truly falling as some experts for some reason fear why are groceries, consumer goods and services, energy cost, interest rate adjustments, utilities and industrial goods etc. adjusting with this so called period of falling inflation? Don't ever expect to see prices again which we had prior to the recession. It is easy for both big and small business to quickly raise prices but lowering them somehow taboo as the economy corrects itself as ours has been doing over the past couple of years.
Lets take a quick look at grocery prices. As of October 2014 the national average price for ground beef 70/30 hamburger is $4.154 per pound. Hamburger prices in 2007 just prior to the beginning of our last recession was $2.372 per pound. That is a $1.79 per pound increase in a 7 year period of time and that is on just one common grocery item. This is a good example of what I am trying to explain to you. I don't expect to see hamburger prices at $2.37 per pound again, but there continues to be a rinse in cost to the consumer that continues to fast out pace the cost of living furthering the gap which makes our consumer dollar less powerful and cost you more money that you cannot save, invest, put away for your child's college fund etc.
The only consumer product we have seen fall in price for the past year is fuel cost. This largely due to over production of oil and a surplus of reserves. We have seen some relief at the gas pumps when filling our cars, but we continue to be taken advantage of in other areas. Airlines companies certainly have NOT lowered prices on airline tickets. In August 2014 I booked a trip to fly to Minneapolis, MN to see my family over Christmas. To book that same flight on the same airlines with the same rental car would cost me over $125.00 more. The airlines companies have done us no favors as fuel costs have dramatically drop for them they have ignored passing on any of this savings to the consumer.
As for the recent fall of lending interest rates in China which dropped them to 5.6% they are still well over our lending interest rate which are in the neighborhood of 3.5%. Housing continues to struggle and new building remains extremely low. Falling unemployment rates are largely related to people accepting temporary holiday employment and drastic under employment largely taking on of fast food jobs and retail employment or falling off the grid as they are no longer eligible to get unemployment, or live in a State that is not counted in the unemployment figures such as South Carolina due to not getting government unemployment compensation for their refusal to pay the amounts required by the state to receive it. So unemployment rates are highly inaccurate right now due to these reasons and others. Consumer confidence and spending is up but for the wrong reason. They "think" things are going to get better and that we are in a period of great recovery and growth while that is simply not true. Our national debt continues to rise vastly with every tick of the clock, our government continues to spend more than it takes in. We give away money, donations, food, and resources to other countries that we currently cannot afford to give, even borrowing money from China so we can give it to another country to help them. Inflation of consumer goods and services are still increasing faster than the cost of living. Bottom line...Inflation is NOT FALLING, it is growing in leaps and bounds both to the consumer (you and me) and for the country we love, the United States of America.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
This is one thing that always burns me about having an economic recession as we have recently experienced for the past six year. Upon improvement to the economy there is very little correction to market prices and cost of living adjustments to the consumer. Meaning, if inflation were truly falling as some experts for some reason fear why are groceries, consumer goods and services, energy cost, interest rate adjustments, utilities and industrial goods etc. adjusting with this so called period of falling inflation? Don't ever expect to see prices again which we had prior to the recession. It is easy for both big and small business to quickly raise prices but lowering them somehow taboo as the economy corrects itself as ours has been doing over the past couple of years.
Lets take a quick look at grocery prices. As of October 2014 the national average price for ground beef 70/30 hamburger is $4.154 per pound. Hamburger prices in 2007 just prior to the beginning of our last recession was $2.372 per pound. That is a $1.79 per pound increase in a 7 year period of time and that is on just one common grocery item. This is a good example of what I am trying to explain to you. I don't expect to see hamburger prices at $2.37 per pound again, but there continues to be a rinse in cost to the consumer that continues to fast out pace the cost of living furthering the gap which makes our consumer dollar less powerful and cost you more money that you cannot save, invest, put away for your child's college fund etc.
The only consumer product we have seen fall in price for the past year is fuel cost. This largely due to over production of oil and a surplus of reserves. We have seen some relief at the gas pumps when filling our cars, but we continue to be taken advantage of in other areas. Airlines companies certainly have NOT lowered prices on airline tickets. In August 2014 I booked a trip to fly to Minneapolis, MN to see my family over Christmas. To book that same flight on the same airlines with the same rental car would cost me over $125.00 more. The airlines companies have done us no favors as fuel costs have dramatically drop for them they have ignored passing on any of this savings to the consumer.
As for the recent fall of lending interest rates in China which dropped them to 5.6% they are still well over our lending interest rate which are in the neighborhood of 3.5%. Housing continues to struggle and new building remains extremely low. Falling unemployment rates are largely related to people accepting temporary holiday employment and drastic under employment largely taking on of fast food jobs and retail employment or falling off the grid as they are no longer eligible to get unemployment, or live in a State that is not counted in the unemployment figures such as South Carolina due to not getting government unemployment compensation for their refusal to pay the amounts required by the state to receive it. So unemployment rates are highly inaccurate right now due to these reasons and others. Consumer confidence and spending is up but for the wrong reason. They "think" things are going to get better and that we are in a period of great recovery and growth while that is simply not true. Our national debt continues to rise vastly with every tick of the clock, our government continues to spend more than it takes in. We give away money, donations, food, and resources to other countries that we currently cannot afford to give, even borrowing money from China so we can give it to another country to help them. Inflation of consumer goods and services are still increasing faster than the cost of living. Bottom line...Inflation is NOT FALLING, it is growing in leaps and bounds both to the consumer (you and me) and for the country we love, the United States of America.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
Monday, November 10, 2014
Stock Splits and How They Work
A family member is wanting to know how stock splits work. So this is the topic we will be talking about today as it can get confusing. Lots of people do not know if a stock spit is a good deal or not. I have spoken about this in previous blog postings, but we are going to review all this again for those that still have questions and our new readers.
First lets talk about why a stock splits. There are many different reason, but the big picture is money for the company. Perhaps they are wishing to generate more money for a purchase, buy out of another company, hostile take over, filling purchase orders, expansions of the company, etc.. Buy splitting the cost of the stock it makes the stock purchase more attractive to potential new buyers. These new buyers purchase the stock at a lower price that they can now afford thus generating money into the pocket of the company of the stock they just purchased.
But what about the old stockholders? Those people that owned the stock for a long time? Depending on the stock spit approved by the companies Board of Directors the old stockholders number of shares will increase by the split value that was approved. Lets look at a common example: Company ABC Inc. has an approved split at 2:1. This means the old stockholders are going to get 2 new shares of stock for everyone they own. Thus if you own 10 shares, you will own 30 after the split. But, those 30 shares are going to be valued at the same price as the 10 shares you previously owned as the price of the stock is going to fall. Then the hope is that the price of the stock is going to be more attractive to new buyers and that they will start buying the stock, putting more money in the pocket of the company and drive up the price of the stock value putting more money in the old shareholders pockets.
Also with a stock that is going to spit, there will be a cut off date established. Meaning if you by the stock before the cut off date the company will split your shares too along with the old shareholders. This is where it begins to get tricky and confusing to many people. How do you know if you should buy stock and take the split? And is it okay to buy after the split if I missed out? Lets talk about this and hopefully answer these questions. Both have the same answer as far as I am concerned. However, with a positive calculation you would have made more money had you gotten in on the split. So you ask, what is the calculation? Well, it is pretty easy and it works for me. I have only lost money one time using this calculation and it was not a lot of money that could not be easily recovered by moving on to bigger and better things. So here is my key to success with a stock split. First, NEVER follow or buy into a spit that is less than 2:1 as you are most often setting yourself up for disappointments. If you happen to own the stock in your portfolio already and it splits at less than 2:1 that is okay, but don't buy into a stock at less than 2:1 upon the split announcement. Any split to a stock already in your portfolio is a good thing so don't get me wrong here. Okay so ABC stock is going to split 2:1, but is it a good buy before the split? Here is how you make the odds most often fall in your favor. Like I said this works for me and other financial advisors like the formula as well. Lets say the stock is currently selling at $100 per share. Look at the 52 week low. If the split will take the price down when it cuts in half to $50 per and is below the 52 week low significantly, this is a good stock spit to buy into before the split. So ABC has a 52 week low of $80 per share, after the spit the price will be at $50 per share. I see lots of room for growth her to even get back up to the $80 per share Low for the previous year. This is a buy for ABC stock. Lets say the 52 week low is $58 per share. Now ABC stock does not look so attractive. The bigger the gap the better the buy potential. Does this formula work 155% of the time? Of course not. But like I said, it is a solid formal and it only has failed me one time and my loss was basically pennies in what the formula has made for me in the past. I sold that one stock at a small loss to invest the money into Apple which split 7:1 and is currently up 36% in my portfolio. I think I made the right choice. Follow the formula and the odds are highly in your favor.
I hope this information about Stock Splits will help out those that need a little more understanding. Do understand this is a basic understanding of how things work.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
First lets talk about why a stock splits. There are many different reason, but the big picture is money for the company. Perhaps they are wishing to generate more money for a purchase, buy out of another company, hostile take over, filling purchase orders, expansions of the company, etc.. Buy splitting the cost of the stock it makes the stock purchase more attractive to potential new buyers. These new buyers purchase the stock at a lower price that they can now afford thus generating money into the pocket of the company of the stock they just purchased.
But what about the old stockholders? Those people that owned the stock for a long time? Depending on the stock spit approved by the companies Board of Directors the old stockholders number of shares will increase by the split value that was approved. Lets look at a common example: Company ABC Inc. has an approved split at 2:1. This means the old stockholders are going to get 2 new shares of stock for everyone they own. Thus if you own 10 shares, you will own 30 after the split. But, those 30 shares are going to be valued at the same price as the 10 shares you previously owned as the price of the stock is going to fall. Then the hope is that the price of the stock is going to be more attractive to new buyers and that they will start buying the stock, putting more money in the pocket of the company and drive up the price of the stock value putting more money in the old shareholders pockets.
Also with a stock that is going to spit, there will be a cut off date established. Meaning if you by the stock before the cut off date the company will split your shares too along with the old shareholders. This is where it begins to get tricky and confusing to many people. How do you know if you should buy stock and take the split? And is it okay to buy after the split if I missed out? Lets talk about this and hopefully answer these questions. Both have the same answer as far as I am concerned. However, with a positive calculation you would have made more money had you gotten in on the split. So you ask, what is the calculation? Well, it is pretty easy and it works for me. I have only lost money one time using this calculation and it was not a lot of money that could not be easily recovered by moving on to bigger and better things. So here is my key to success with a stock split. First, NEVER follow or buy into a spit that is less than 2:1 as you are most often setting yourself up for disappointments. If you happen to own the stock in your portfolio already and it splits at less than 2:1 that is okay, but don't buy into a stock at less than 2:1 upon the split announcement. Any split to a stock already in your portfolio is a good thing so don't get me wrong here. Okay so ABC stock is going to split 2:1, but is it a good buy before the split? Here is how you make the odds most often fall in your favor. Like I said this works for me and other financial advisors like the formula as well. Lets say the stock is currently selling at $100 per share. Look at the 52 week low. If the split will take the price down when it cuts in half to $50 per and is below the 52 week low significantly, this is a good stock spit to buy into before the split. So ABC has a 52 week low of $80 per share, after the spit the price will be at $50 per share. I see lots of room for growth her to even get back up to the $80 per share Low for the previous year. This is a buy for ABC stock. Lets say the 52 week low is $58 per share. Now ABC stock does not look so attractive. The bigger the gap the better the buy potential. Does this formula work 155% of the time? Of course not. But like I said, it is a solid formal and it only has failed me one time and my loss was basically pennies in what the formula has made for me in the past. I sold that one stock at a small loss to invest the money into Apple which split 7:1 and is currently up 36% in my portfolio. I think I made the right choice. Follow the formula and the odds are highly in your favor.
I hope this information about Stock Splits will help out those that need a little more understanding. Do understand this is a basic understanding of how things work.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
Saturday, November 1, 2014
Buy, Sell or Hold (Follow Up)
Back on October 14, 2014 when the market slipped on the banana peel, I told my readers to "HOLD". Is the market done slipping on the banana peel yet? I do not think so and I am still going to HOLD! Let's talk about why we should continue to hold.
Historically after an election the stock market will dip. It will take a much deeper dip if there are contested results, run off elections, who controls the House and Senate or if there is a 50/50 split in the Senate between sitting Republicans and Democrats. And you think Washington is screwed up now? If the Republicans win the Senate which is predicted we will have a Republican House and Senate and a much hated Democratic President. It will be constant war between them for the next 2 years and not a dam thing will get done or be accomplished. This election can play a big role as to how the stock market will be affected. We have 3 Senate races that are too close to call and very unpredictable (Kentucky, Louisiana, and Georgia). It was just announced this morning that in Kansas it is getting to be a very tight race too with the Republican in danger of losing his seat. If this happens this will be the first time since before WWII that a Republican lost a Senate in Kansas seat to another party. For these election reasons I stand by my recommendation to "HOLD"!
We have also never resolved the issue that the majority of stocks on the market have inflated values that make the market vulnerable for a correction. I thought that we might be headed that way back in mid October, but 3rd Quarter profits pushed the DOW back up well over 17,000. Stocks prices went soring and in three weeks my individual stock holdings are up over 5% higher than when they fell in mid October. I am sure your individual stock holdings did similarly well on this bounce back. But being that the stock market is even more inflated than it was back in mid October when I first wrote about this subject I am again saying to "HOLD".
One thing that I could see and that I could agree with is taking a little money off the table and saving it for the stock markets rainy day. You know that day will come. Here is an example of what I mean and why. I bought shares of Apple (AAPL) about a month before it's 7 to 1 split. It was up 25% since my purchase date. The market took that significant drop in mid October and took me down to like 18%. Now it bounced back bigger than before and I am up over 35%. Being up 35% on any individual stock usually translates into a nice healthy profit. In a situation like this I can see a little sell off and you taking a little money off the table. Sell 1/3 or 1/2. Put the money on HOLD for that rainy day. Use it to revisit in AAPL if it takes a big tumble or reinvest that money into a new stock when the time is right or stick the money in your pocket for a nice vacation...but be prepared to pay taxes on it come the end of the year if you have reportable capital gains. Otherwise do not make any big moves right now, especially until after this upcoming election.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
Historically after an election the stock market will dip. It will take a much deeper dip if there are contested results, run off elections, who controls the House and Senate or if there is a 50/50 split in the Senate between sitting Republicans and Democrats. And you think Washington is screwed up now? If the Republicans win the Senate which is predicted we will have a Republican House and Senate and a much hated Democratic President. It will be constant war between them for the next 2 years and not a dam thing will get done or be accomplished. This election can play a big role as to how the stock market will be affected. We have 3 Senate races that are too close to call and very unpredictable (Kentucky, Louisiana, and Georgia). It was just announced this morning that in Kansas it is getting to be a very tight race too with the Republican in danger of losing his seat. If this happens this will be the first time since before WWII that a Republican lost a Senate in Kansas seat to another party. For these election reasons I stand by my recommendation to "HOLD"!
We have also never resolved the issue that the majority of stocks on the market have inflated values that make the market vulnerable for a correction. I thought that we might be headed that way back in mid October, but 3rd Quarter profits pushed the DOW back up well over 17,000. Stocks prices went soring and in three weeks my individual stock holdings are up over 5% higher than when they fell in mid October. I am sure your individual stock holdings did similarly well on this bounce back. But being that the stock market is even more inflated than it was back in mid October when I first wrote about this subject I am again saying to "HOLD".
One thing that I could see and that I could agree with is taking a little money off the table and saving it for the stock markets rainy day. You know that day will come. Here is an example of what I mean and why. I bought shares of Apple (AAPL) about a month before it's 7 to 1 split. It was up 25% since my purchase date. The market took that significant drop in mid October and took me down to like 18%. Now it bounced back bigger than before and I am up over 35%. Being up 35% on any individual stock usually translates into a nice healthy profit. In a situation like this I can see a little sell off and you taking a little money off the table. Sell 1/3 or 1/2. Put the money on HOLD for that rainy day. Use it to revisit in AAPL if it takes a big tumble or reinvest that money into a new stock when the time is right or stick the money in your pocket for a nice vacation...but be prepared to pay taxes on it come the end of the year if you have reportable capital gains. Otherwise do not make any big moves right now, especially until after this upcoming election.
Gus S.
Disclaimer: Make sure to review any information found on this blog site with your personal financial advisor before making any decisions. I am providing general information and not financial advise. I am not a licensed stockbroker or financial advisor.
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