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What You Should Know About the Price-to-Sales Ratio

Several weeks ago, we blogged about fundamental ratios and showed a head-to-head comparison of several of the best performing indicators. We received comments from some readers asking how the price-to-sales (P/S) ratio fared in that type of testing. In hindsight, we should have anticipated this question. The P/S ratio is popular, and for good reason. A number of studies have shown the ratio, which is also known as the PSR, works well.There are times when we can forget that investment analysis is a fairly new field of study. Many indicators have been developed within our own lifetimes. The P/S ...
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Clouds Can Help Traders Spot Trends

Technical analysis is an established discipline dating back to at least the 1800s. Some techniques are even older with candlestick patterns being used to trade rice markets in eighteenth century Japan according to legend. However, candlesticks were lost for centuries to Western traders and only became popular after they were reintroduced to the world in the 1980s. They were brought to the attention of traders in Western markets by Steve Nison in his book, Japanese Candlestick Charting Techniques, and Nison noted that based on his research, he believed the chart style was developed after 1850. While the exact history is ...
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Four Trump Trades to Benefit From the New President’s First Hundred Days

The election is finally over and we know who the next president will be. We also know that the first hundred days of a president’s term are among the most important. Political scientists agree that the first hundred days of a new president’s term are likely when their power and influence are at its greatest. This is when they have the chance to work with Congress to get things done, before rivalries develop. The deadline of 100 days helps to create a sense of urgency and urgency led to the origination of the term.Franklin D. Roosevelt was the first to ...
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Four Biotechs to Buy Now

Elections can be hard on stocks. In the heat of the campaign, politicians often make promises and seek to assure voters they share many of the same problems that make life difficult for voters. At times, when trying to reassure voters, politicians seem to demonize industries. Financial stocks were a popular demon after the financial crisis. This year, drug makers became demons and targets of a few politicians in their speeches and tweets.To be fair, the CEOs of drug companies made easy targets this year.In February, Martin Shkreli, a 30-something hedge-fund manager turned pharmaceutical-company CEO, was indicted on securities fraud ...
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Is the P/E Ratio the Best Way to Find Value?

Many investors look at the price-to-earnings (P/E) ratio when deciding whether or not to buy a stock. They often believe that a low P/E ratio identifies value while a high P/E ratio indicates a stock should be avoided. Applying a test to identify value makes sense since buying undervalued stocks increase the probability an investment will be successful. But many investors fail to consider whether or not the P/E ratio is the best test for value. They might be relying on the P/E ratio just because it is popular and widely available.Researchers have actually looked at the question of which ...
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Ben Graham’s Rules for Cheap Stocks: Four Cheap Stocks Warren Buffett’s Teacher Might Buy

  Ben Graham is considered to be the founder of the value investing philosophy. He began investing in the 1920s, just in time to suffer large losses in the 1929 stock market crash. Graham decided to learn from the crash and began studying how to buy safe stocks. Within a few years, he coauthored the first book on the subject of value investing with a former student, David Dodd. That 1934 book, Security Analysis, is still found on the bookshelf of many investment professionals. Although Graham’s work is important on its own right, it was the work of another student, ...
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High Income Utility Stocks to Ease Election Jitters

Under normal circumstances, elections are often followed by selloffs in the stock market. Two examples many investors may remember are the selloffs that occurred in 2000 and 2008. Stocks were already in bear markets as those elections were held, but the selloffs that occurred after the votes were counted still seemed to catch many investors by surprise.  The circumstances associated with the 2000 election may have been unique. That year, a close election required several weeks of recounts and a decision by the US Supreme Court to finalize the results.  The uncertainty associated with the recounts and court cases may ...
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The Whole Truth About Moving Averages:

We’ve all seen the analyst on CNBC explain with a sense of authority that the S&P 500 index has just crossed above or below an important moving average (MA). We are led to believe this foretells a trend reversal but we never really see data supporting that idea after the statement is made.This leads to the logical question, “are analysts talking about MAs simply to have something to say or are MAs useful?” The answer, as so many answers are in the financial world, is that “it depends.” Sometimes MAs work spectacularly well. This was the case in 2008 when ...
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