Thursday, July 29, 2010

The 7 Emotional Stages of a Beginning Investor

Part III: Buying Your First Stock

Jenny Bradbury asked me an important question yesterday after I wrote Part II of the 'Buying Your First Stock' series: would I have made the moral of the story the same if Amerigon Inc. (ARGN) had rallied Wednesday? The answer is... yes. I honestly think that if you put enough research and analysis into a company, and you feel good enough to jump in and own a part of that company, you should stand by it until new material comes out that tells you otherwise.

The whole process of selling ARGN at what I was guessing was the day's high point, and then trying to buy it all again for an 'inevitable' market rally (which never happened, DANNY), all ended up making me feel overwhelmed and anxious. Like I mentioned previously, my mood seemed to mirror how my stocks were performing on a daily basis. So as a Beginning Investor, I feel that it's my duty to help other new investors my age through the 7 emotional stages you'll feel after purchasing your first stock.

STAGE 1: Research

You've read about the importance of thorough analysis, and your stock is steadily climbing - just as your numbers predicted. Hmmmm, maybe you should get in on this company. The numbers are solid and the future looks bright. Let's put this stock on the watch list and keep researching.

Stock Price Expectations: Steady Incline
Emotional Expectations: Excitement, Nervous Twitching
Emotional Advice: Your analysis in your company should be the base line for your emotions. If you feel like you've succeeded in researching a potential company, you should really be excited to jump in.

STAGE 2: Buying Your Shares

You feel good enough to jump in and buy your first stock. The company seems to be growing as you expected, and now seems like the best time to jump in. If the upward growth continues, you have a serious chance of making some money! Ready, LEAP.

Stock Price Expectations: Minor gains/losses
Emotional Expectations: Constant questioning of what you've learned
Emotional Advice: Recheck data, hover around the buy button for 15 minutes, take a deep breath, and believe in the work you've put in.

STAGE 3: A Steady Decline

This is not what you expected out of your stock. Down 1.50% yesterday. Down 2.37% today. Down 5.83% overall. What is going on? You bought the stock with aspirations, hopes and dreams. You had visions of buying lavish things with the money you made - specifically that big screen TV with a Rock Band set up that compares to most New York City music studios. You're checking the stock ticker every 20 minutes, hoping you can stay afloat.

Stock Price Expectations: Down by 1% to 3% for 2-5 consecutive days
Emotional Expectations: You've started an annoying foot tapping that you are unaware of until someone tells you to stop. You've also asked your waitress once or twice if you've made the right lunch decision.
Emotional Advice: Stay calm. This is the stock market. After all, you didn't expect the stock to skyrocket as soon as you bought it, did you? You did? Well that may be a little unrealistic, don't you think?

STAGE 4: Back in the Green

OK, now you're balancing back out a bit. Due to some nice market rallies in the past few days, it looks like everything's going back up, including your stock. It sure is nice to say that you've made $12.36 on your stock investment. It's only a matter of time until the stock really jumps up... right?

Stock Price Expectations: Increase of 1%-3% for 2-5 consecutive days
Emotional Expectations: You've randomly given stock advice to children.
Emotional Advice: You'll have more of these days if you've made a smart investment with solid research. But hold off on the stock advice to children, ok? Let's just stay the course.

STAGE 5: Crisis

Forget Facebook, Twitter, or any of your plans this morning. Your stock is down 8%? 8%?!?!?! It's not even 10am on the West Coast!!! How could things turn so quickly? You've locked yourself in your room or office, you've stashed some food, drinks, and ammo away as if you're preparing for a Zombie Apocalypse, and you can feel tears in the corner of your eyes. Why does the market have to open at 6am on the West Coast? Would it not be more logical to make more of an effort to compromise on the market start time? Should you sell, and cut your losses? Regardless, the only outgoing calls you're making today is for someone to drop off a package of Red Bull and a gallon of ice cream at your door.

Stock Price Expectations: Plummeting
Emotional Expectations: Despair, Hopelessness, Frustration (to the point where you're throwing delicate things around to further emphasize the world crashing down around you)
Emotional Advice: If you can't laugh, you will weep. Find out why your stock is going down. Is it temporary, or is it more permanent? Has anything in your research changed to make this happen? If not, look at this day as an anomaly if nothing else. If there's a change to be made, you better have the statistical data to support pulling out.

STAGE 6: The Miracle

Your stock has made up for all its losses - AND THEN SOME! Feel free to unlock your door, reconnect with friends, pick up trash while you're walking around in your state of jubilation. That coffee stand barista deserves an extra tip today, right? I mean, you have some extra cash in the stock market! Just a few days ago, you were wallowing in your self-pity. Today, you just couldn't script this story any better!

Stock Price Expectations: Soaring
Emotional Expectations: Euphoria, On Top of the World (as in the Titanic scene)
Emotional Advice: Enjoy. Like a good shot in golf, this is why you keep coming back. Your research prompted you to buy a part of this company, and you've been rewarded. Hopefully, you will continue to be rewarded. But with patience and analytical diligence, you will have more good days than bad.

In baseball, the saying goes, 'No team is ever as bad as they are on their worst losing streak, and no team is ever as good as they are on their best winning streak.' If your research is done right, your stock will hold true to this baseball philosophy, but it will continue to trend upwards. Not all days will be as drastic as the last two stages, but those days will come. It's your patience and research that will be the most important in the weeks following your stock purchase. Have fun with it! Are you wondering where stage 7 is?

STAGE 7: Go back to STAGE 3, repeat.

- Jason


Wednesday, July 28, 2010

Lessons from a Kapitall super-user

I received some terrific analysis from a Kapitall user, Griff Eaton. Griff read my blog post about our Summer Investor portfolio challenge. This is the best part of using Kapitall; I managed to connect with someone who knows a heck of a lot more about investing than I do, and he's willing to share what he knows with me.

I initially passed on buying Trina Solar (TSL) and Griff caused me to reconsider by sharing some research he published late last year. Here are some excerpts of his analysis:

(Excerpts from post written August 2009, so all #s are before TSL's January split)
My Theory: Trina Solar is an underpriced stock that should be trading at much higher p/e levels than the current 15x.

My Prediction: Due to their exceptional earnings performance for the first 2 quarters of 2009, a competitive cost structure, and the increased growth (quarter over quarter), Trina Solar shares easily command a multiple that is closer to the industry average of 21.5x. With the benefits from the new energy tariff and financials superior to their direct competition, a p/e of 25x could be seen within the year (high end estimate). This puts a share price in a range between $35 - $44 (based off the current 2009 eps estimate of 1.76 ).

Griff was right on; the stock hit his high prediction and kept on going. He wrote about TSL again in December after 3 months of huge gains in this stock:

Trina Solar (TSL) has provided investors with insane returns in the last 3 months. While many might think that this stock has little upside left after jumping 106% since late August, I think that it is still an exceptional stock that will provide a high return on investment!

Primary Reasons:
• At best this stock is overlooked and misread by analyst…I think it is more likely to be poor analysis by market analyst that trends towards EPS estimates that are reflective of an unambitious and stagnant company; neither of which apply to Trina Solar.
• Growth and earnings! Trina is predicted to have revenue growth in 2010 of 32%...Their share price has doubled in 3 months; their avg. estimated earnings for 2009 has been risen 61%.
• Increase in gross margins in the 3rd quarter report of 3.5% to 28.5% and announced increase in ‘estimated products shipped’ for 2010.
• Current P/E and fp/e ratios are (in my analysis) inflated
due to misguided/inexact estimates. The result is a significant range between low/high EPS and an “average” estimate that is less than accurate.

I'm a long way from being able to write like Griff. But I really appreciated his willingness to talk stocks with me. Will I change my recommendation for David? I'm becoming convinced.


Disclaimer: At the time of this writing, I do not own TSL stock. My opinions are not necessarily shared by Kapitall, and they are not to be considered investment advice.


What Is High Speed Trading?

Imagine walking into a room with a wall of computer monitors, like in the picture to the right. Charts and tables and numbers strewn all over the screens, red and green flashing back and forth, and complex calculations performed in seconds. The thought runs through your mind, What is going on in here?

What you're seeing is the buying of selling of millions of shares on stocks, options, futures, and bonds per second. You're seeing the computed display of millions of dollars in cash flow through the markets. This crazy set of screens that more closely resembles The Matrix with Keanu Reaves than the Word and Xcel programs you're used to is referred to as algorithmic or automated trading, or more commonly, high speed or high frequency trading.

These incredibly powerful computers are often used for pension funds, mutual funds, other institutional funds, and some independent traders and companies. The funds and companies develop the algorithms themselves, which can lead to errors that can cause substantial losses. These errors could take months to even find, not to mention how long it would take to fix them and recover from the losses. If the code is without error and carefully planned, the success could be endless. Some of these funds and companies have even recorded no overall daily losses since their inception.

So is this a good or bad thing for you? Sometimes it is a good thing because it can lower our trading costs by increasing liquidity and volume. On the other hand, it can be bad for fund investors because the machines have been able to figure out what securities other funds are going to buy next, and buy large amounts of shares just so they can sell them to the funds at a higher price. It really comes down to what you are trading and investing in, stocks or funds.

Even Citigroup (C) decided to build their own trading supercomputer, Dagger. They talk about it like it's a giant monster (they actually use pictures of a dragon) that will eat up every profit opportunity on Wall Street, and it really can do that eventually. It has algorithms that can change its other algorithms to become more adaptive. IT LEARNS. It can learn from past trends to figure out what to trade, how much, and when. It makes me think, will proprietary traders become obsolete in the next 5-10 years?


Keep Your Hands and Feet Inside the Ride at All Times

Part II: You Made Your Stock Choice- Now What?
That’s what they tell us when we’re entering a roller coaster right? If you’re like me, buying your first stock is very much a roller coaster ride. You’re checking real-time quotes, you have 6 different internet tabs with 6 different charts, and your mood is basically defined by where your daily percentage return is. Does it all have to be so nerve-racking? My previous post outlined the most basic and important steps that you need to take in order to choose a stock that’s right for you. After researching Amerigon Inc., I decided to advise David Neubert to buy this stock in the Summer Investor portfolio. (DISCLAIMER: I have informally advised David Neubert on this company. After consideration, he has decided to purchase this stock, which he is keeping in his personal account. This is strictly advice for a beginning investor like me, and the opinions I have do not necessarily reflect those of Kapitall. But they could.)

So, I have made my decision. I like that Amerigon (ARGN) has a product that is truly innovative, I like that they have no debt, and I like that they outperform their competitors. I see/hope that this company will continue to grow in the long-term future, and I can’t see anything in the charts, graphs, or balance sheets that would tell me otherwise. Pretend with me that you’ve made your first choice, if you haven’t already.
Let’s first cover some basic questions on buying a stock.
One of the comments I received from the Investing Starting Line came from Sarah, who asked, “How do people our age determine an appropriate number of stocks to invest in? Is there a magic number? Good, solid question. Basic logic will tell you that if you have a diverse portfolio, (where you have a number of different stocks in different sectors of the business world) you have a portfolio that is ultimately less risky in terms of losing money. For example, if you bought all of your shares in just one company, you live with the gains or losses it accumulates on any particular day. However, if you have more than one company that you’ve invested shares in, it may all balance out or gain money at the end of the day. No matter what type of portfolio you have, the companies that you invest in should be well researched, so you feel comfortable about its immediate future in the stock market. So there’s no magic number- feel free to invest in the company or companies you feel strongly about. If, in time, you don’t feel comfortable owning a particular stock, you can make the necessary changes.
How many shares should you buy? The number of shares you decide to buy is directly related to how much you’re willing to spend. If you have $100 that you’d rather put into the market than making miscellaneous discretionary purchases, you can opt to buy as many shares as possible with that $100, and watch it grow from there. The limit on how many shares you can buy is almost always determined by how much you are willing to spend. I’ve put my available $1,000 into my company, and I don’t plan on making more purchases, although I do continue to research other companies just like I did with ARGN, and inserting some into a watch list. So what else is there to do concerning your first stock purchase?
Today, I watched ARGN sky rocket up to a 5.00% day’s return. I’ve read several materials on daily highs and lows, and I decided to try an experiment. I sold all my shares of ARGN close to its daily high, thinking that it would drop to a more average price, then I would buy my shares again just in time for an ‘inevitable’ late market rally. Low and behold, ARGN stayed at relatively the same price all the way through the closing bell. Afterwards, David Neubert gave me this advice: Don’t make a short term investment into a long one. A long term investment would potentially entail buying it cheap, selling it expensive, and then waiting to buy cheap again. This doesn’t necessarily mean that a short-term investment has a time limit on it, but at the same time, you should have a general idea of what you want out of your investment. I have already laid out the pros of buying ARGN, and I should stick with my research, even if that means taking little losses here or there. I’m ultimately betting that the gains ARGN makes will outweigh the losses it accumulates. Therefore, playing the ‘buy low-sell high’ game isn’t in my best interest.
If you’re asking yourself when the best time to sell is, the answer is simple. The time to sell is when you don’t feel comfortable with a company’s situation, or if you feel like your money could be invested in a company with more potential. Down the line, if I think another (well-researched) company could be a better place to invest my money, I can make that change. If, for example, you hear that your company has some pending criminal charges (not unlike Halliburton had today), feel free to make that change. It’s your money, and you can spend it where you most feel comfortable.
Ultimately, research is the only other activity you should concentrate on after your stock purchase. Research what’s happening with your company, and what’s happening with others on your watch list. In other words, keep your hands and feet inside the ride at all times. (Blogging 101: I've come full circle.)
Hopefully, this answers some questions about your stock purchases- if there’s more questions, feel free to insert a comment! My next post will be a guide to using the Kapitall site- learn to manage your money better, interact with the Kapitall community, and have all the research you need right at your fingertips. It’s pretty addicting.
Until next time!


My Opinions on Criminal Charges Against BP Plc, Transocean Ltd and Halliburton Co

Securities and Exchange Commission, Justice Department and several other Federal Agencies announced that they are launching criminal probe and market probe relating to the recent Oil Spill in the Gulf which includes BP Plc, Transocean Ltd and Halliburton Co.

Personally, I am not much of a fan of these parties but when it comes to the market, I am always interested because they have such a big market and offers great opportunities to investors. Recently, I told David Neubert to add Halliburton Co. to his Summer Investor TD Ameritrade account. But today, after the news got out, Halliburton dropped as much as 2%. With much uncertainty, We decided to drop $HAL from David Neubert's Summer Investor Portfolio.

In my opinion, even though they were responsible for the Oil Spill in the Gulf and the death of 11 oil rig workers, I have such a low faith for this investigation because for these giant corporations it will just be a slap in the wrist. If there was a same scenario in the Peoples Republic of China, I am sure that the Chinese government will probably order the executions of who ever that was responsible. Why can't our government punish these companies to teach them a lesson. Not that I am recommending their executions. But I feel that in a Capitalist country, many giant corporate are let go by paying small amounts of fine. For example, Goldman Sach was fined to $550 million for creating wreck on the housing market. For Goldman Sach, they make more than $500 million in two weeks. It is never fair.

I can't express how much I am disappointed with SEC and other federal agencies. One concern I have is, When will they be brought up to justice? This will take at least few years to hear any result on the case.

Anyways these are my personal opinions about the recent SEC and other Federal Agency's Criminal Probe against BP Plc, Transocean LTD and Halliburton CO.

-Sugarsuren Byambasuren

Disclaimer: I do NOT own any of the stocks mentioned in the article. All are my personal opinions and should not be taken as any investing idea.


Tuesday, July 27, 2010

Upcoming Kapitall Weekly Newsletter Articles

This week's upcoming weekly newsletter articles from KAPITALL

Humans vs. Wall Street Machines: Who's In Charge?

6 Mind-Blowing Algorithms Being Used To Beat The Street

How To Get A Computer To Run Your Portfolio

List: The 24 Hottest Stocks For High Frequency Trading

Check it out!!!

Coolest Guy in Kapitall

I don’t think I have formally introduced myself to my readers. And please, accept my apologies for being rude. My name is Sugar and I just graduated from High School and this fall I will be the big fish in my new home, College. I know that all of you loyal readers of Summer Investor Blog wants to meet me in person because I am famous, really cool and I got the goods but I will not disclose any personal information such as my home address, name of my high school or the name of the college I will be going to this fall to protect my famous and really cool identity.

This summer I have received one of the greatest and rarest opportunities I will ever get which is a paid summer internship at an awesome company called Kapitall. This internship is not like any other internship where young handsome gentleman like myself could be harassed by cougars, making thousands of copies, or simple as being the “Coffee Boy”. How could anyone learn anything from that kind of experience??? This opportunity I have right now is the best Internship I will ever get because I am not just a Intern in this gigantic office but I am one of the person that will lead this company to success. There are so much pressure on my back but I am the best I can be only when I am under pressure. I’ve learned that from High School Football. Those of you who didn’t play football, I don’t know what to say to you but you get the point.

Also, I have realized that for the past month, my writing and my words became too formal and it just wasn’t me. From now on , I will let my words of wisdom flow like the Buddha. If you are wondering why I used the Buddha analogy, well lets just say I look like with my shaved bald head and well formed sexy looking belly. However, I wish to beat the mighty Buddha by my words of wisdom and not by the size of my belly. My favorite Times Magazine writer is Joel Stein and I love reading his articles because it’s not just funny but it’s actually useful.

This is a short introduction of myself, Sugarsuren, The Man.

I am looking forward to hear more comments from you!!!

-Sugarsuren Byambasuren


Monday, July 26, 2010

What is the Dow Jones?

The Dow Jones is always talked about in the news, on the tv, internet, and in the paper. We've heard about its strength, and we've heard about its crashes. Well, mostly its crashes. What is this huge subject in financial news, though? Is it a stock? Is it a fund? What do you do with it? I always wondered this, growing up with parents who watched the news religiously. I always heard the term, but it never meant anything to me.

So, how does it apply to us? The Dow Jones is a stock market index, meaning that it averages the stock values of 30 large, publicly owned companies based in the United States. It essentially gives us an idea of how our country's overall market is trading within a normal trading session by benchmarking itself. It is composed of companies such as 3M, Boeing, IBM, JPMorgan Chase, Walmart, and 25 others.

What do we do with it, then? Well, other than a benchmark that speculative traders and investors use to compare their holdings to, it also can influence how investors and traders act, magnifying volatility. You can also trade ETFs such as the ProShares Short Dow 30 (DOG), which responds twice as much and in the opposite direction as the Dow. Derivatives, such as options and futures are available to trade also.

So what is the value of the Dow Jones? It generally fluctuates around the 10,000 area, below meaning that the markets are bad and above meaning that they are in good shape. You can watch The History of Dow Jones to get a more in-depth description and history of its development.

-Danny Guttridge


How David Neubert started a fire: the Summer Investor Challenge

Would you give an intern control of $1000? This internship is getting serious.

David Neubert, my boss at Kapitall, is putting real cash on the line for Kapitall's Summer Investor team. He's seeded a Kapitall portfolio with $1000 allocated to each of the Summer Investors. We make buying recommendations and the highest performing intern gets an undivided hour with David over lunch (his treat) and valueable bragging rights. There's some fine print too, to make sure we keep it all fair and legal.

In a sense, I'm new to investing. I once followed certain mutual funds quite closely but as I mentioned in my first Kapitall post, have lately left investing to my better half. It's time to take more responsibility. For this challenge I confined my initial research to within Kapitall to demonstrate how comprehensive the site is. According to the Kapitall Investor DNA quiz, I have a Passive Investor profile.

Here are the buy recommendations I made to David:

1) Kimberly-Clark (KMB), maker of the funny new denim Huggies diapers (YouTube video approaching 1M views). We buy Kimberly-Clark consumer staple products regularly and often, no matter what the economy is doing. Kimberly-Clark has a price of profit (POP) of 13, a high ClimateCounts green rating, and a market cap of $26.1B. I'm impressed that they're measuring their impact on global warming and their profits are less expensive than similar corporations.

2) Luxottica (LUX), maker of most of the world's sunglasses, upscale and otherwise. Are designer sunglasses worth their markup if comparable models are sold cheaply at LensCrafters? Consumers think so; Luxottica reported 2Q profits higher than the year ago quarter, crediting both their non-premium and luxury brands. I simply love that my $10 shades are protecting my eyes just as well as models 20 times that price. Luxottica does not have a ClimateCounts green rating or POP in Kapitall, so I'm letting my rookie status shine by betting on them. After all, it's summer and my family is using, losing, and buying sunglasses. I assume many other consumers are doing the same. Is this naive? Keep reading to find out.

3) Pfizer (PFE), pharmeceutical giant. Turns out that Pfizer is going to pay a dividend on August 4, delivering a quick reward if David takes my buy recommendation. Pfizer has a high ClimateCounts green rating, a POP of 7, and a market cap of $119.5B. This company is influential and has taken steps to manage its environmental impact. Its low POP means profits are relatively inexpensive. This looks like one to hold.

I considered the following brands and am witholding my recommendation for now:

1) Taleo (TLEO) provides talent recruitment services. I noticed that many of Seattle's most recognizable companies manage their job boards on Taleo software. Given the persistently high unemployment rate in the US, I realized that Taleo must be getting fairly high exposure for the few postings available. The company's POP is an outlier at 51 among other software companies. I have more to understand about Taleo before investing in it.

2) Trina Solar (TSL), a Chinese solar energy pioneer, landed in my practice portfolio when I first created a Kapitall user ID. It's performed beautifully, but there's some information missing from its Kapitall profile. I need to do additional research outside Kapitall to understand it well enough to buy it with (David's) real money.

-Jenny Bradbury

Disclaimer: At the time of this writing, I do not own any of the securities mentioned above. I have informally advised David Neubert on these companies and after consideration, he has purchased the stocks for his personal account. My opinions are not necessarily shared by Kapitall, and they are not in any way to be considered investment advice.

Note: This post was originally written for my personal blog, Strong Personality.


My Key to Victory

When David Neubert told us the opportunity he had for us, I knew exactly what stocks I wanted to look at. I’ve been using my Practice Portfolio on KAPITALL for almost more than a month now and I knew myway around these stocks. I knew what will make me money through short term or long term investments. I had such a high confidence that my stocks would out perform other Summer Investor’s stocks easily. This was a time to prove what I’ve learned about the Market while I’ve been working here atKAPITALL Seattle headquarter branch.

For David Neubert’s Summer Investor TD Ameritrade account, I chose to select Ford and Halliburton. As a recent high school graduate, I had no prior knowledge about picking and selecting a stock. All I used was to make educated guess whether or not if it was a good investment. Here is my story.

When David Neubert opened TD Ameritrade account through Kapitall for all the summer investor team members each with $1,000 to invest, the pressure was on for all the team members. This wasn’t the “If I fail, I can start over again” situation. The money is real, the market is in real time and the pressure is on. I wasted no time and went straight into my Kapitall account and used all the tools that were given to me to do a research on my own. I went ahead and looked at all the companies that I could think of at the moment such as Apple, Intel, Google, Amazon, BP and P&G etc. I haven’t felt so much pressure like this since my times in Roosevelt High School Football. Amazing how much difference it makes whether or not the money is real.

The first company, I did research on was Oracle Corp. Oracle Corporation is one of the world's leading suppliers of software for information management. The company develops, manufactures, markets and distributes computer software that helps corporations manage and grow their businesses. The company's software products can be categorized into two broad areas: Systems software and Internet business applications software. When you look at companies like Oracle with $123 Billion Market Capitalization, all you see is growth stock. And they offer, pretty respectable dividend yield of 0.82% for Computer and Technology companies who mostly have 0% because they want to re-use the money to invest in the company for more research and development. It seems like a good pick right? As for my personal opinion, NO. Why? Because Oracle Corp was too slow to see any rapid growth and I didn’t wanted to wait that long. So I decided to keep looking.

My next company was Apple. Apple always had a great reputation and always growing bigger and better. If I invested in Apple, I would have been very happy and relaxed because it’s stable. However, investing is not just about buying stocks that looks good on charts but it is also about the timing of your investment. As a value seeker, I always seek to time it right so I would buy it at a lower price and sell it high to earn profit from the difference. At the time, Apple was at a all time high and I knew it will start to go down soon. So I also passed on Apple.

The next company I looked at was Ford. About a year ago, many analysts weren’t sure about the future of the company. However, Ford beat the odds and had a strong earnings reports that will keep its stock very stable. So I had full trust in Ford that I will not lose any money from it. Ford’s been growing very slowly and almost non-stop. If you compare Ford with other American Car Manufacturers, Ford has outperformed them in many ways. Well, that’s just my personal opinion. As a car enthusiast, Ford isn’t on my top list but for an American Manufacturer, the force is strong with Ford. Because of its stability, growth and innovations, I had my full trust in Ford that it will not let me down.

My next pick was very controversial because of high risk due to volatility which is Halliburton. Halliburton Company provides a variety of services, equipment, maintenance, and engineering and construction to energy, industrial and governmental customers. The company is made up of the following three business segments: Energy Services Group, Engineering and Construction Group, and Dresser Equipment Group. HAL is probably one of the least environmentally friendly company. But you know what, to make money in the market, you have to make that sacrifice. One of the reasons why I chose HAL is that HAL they’ve reported an excellent Q2 profit that could drive the price up.

I have informed David Neubert about these companies as a consideration. After my proposal, he agreed to buy these stocks to keep it in this personal account. The opinions expressed in this article does NOT reflect those of Kapitall or David Neubert. This was based on a informal analysis I did myself and should not be taken as any investing idea or what so ever.

-Sugarsuren Byambasuren


Friday, July 23, 2010

How I Lost Money Once and I'm Now Learning To Get It Back

The Summer Investors were allocated $1000 each by David Neubert for an informal portfolio advising competition amongst ourselves, so I will explain my stock picks. I have actually been watching a few stocks for a couple of months now, so I already had an idea of which ones I wanted picked out.

First, how do I choose my stocks? Well, ever since I started trading and investing I've been told to "buy what you know". I know technology pretty well, so I first started out trading Apple (AAPL) since I'm a huge fan of them. I was trading options, which I will explain in a later blog post, and I hadn't a clue what I was doing other than the mechanics of buying and selling. I didn't know how to value a stock, read a chart (much less know what kind of chart to use), research a company's financials, nothing. I just knew Apple is awesome and they were constantly growing on a macro scale, so I'll throw some money at them. Bad mistake. The markets ended up slumping and I lost almost all of my money. I was incredibly frustrated with myself, so I decided to actually learn how to become a "day trader" (I chuckle at that expression now). In retrospect, I look at my loss as an expensive education.

To do this, I had to ask myself, "How do people do this and make money every day? What do they do specifically to make a living off of their trading?" I had no idea where to find out, so Google and Wikipedia were my first sources. I searched and searched and searched until I finally realized that the brokerage I was using actually had a little bit of educational information. I read continuously on how to chart a stock, what determines the value of an option, how they react to market volatility, etc. I finally began to grasp the basic concepts of investing and trading. Now, I'm interning at Kapitall and learning tons more.

So, what do I look for in a company/stock to decide whether I should trade or invest in them? First, I check the chart to see how they have been trading. If it looks like the price of the stock has been strongly and steadily climbing over the past year, I take note and move on to my next criteria: financials. I check their income and cash flow statements to make sure they are making a steady growth in revenue, cash, and assets over the past few quarters. The best way to determine the cash value of the company is the Cash Equivalent for the ending period (Year End, Quarter End) on the cash flow statement. The Net Cash From Op Activities shows how much actual cash they've made from their operations. If that shows steady growth, along with an increase in revenue from the income statement, I move on to read more from the chart.

The company looks good financially, so how is it trading in relation to its recent past? Chartists have terms called "resistance" and "support" that refer to the stock's recent peaks and lows. They are basically imaginary lines that the stock bounces in between until it eventually breaks free from them. The resistance is the line representing peaks and support is the line representing lows. When resistance is broken, it often becomes the support and when the support is broken, it usually becomes the resistance. Then the respective missing line is reformed after time. Above is an example of a stock trading between the resistance and support and at last breaking the resistance. I loosely expect this stock to now form a new resistance and use the old as support.

How would I time buying this stock? Well, I would have bought today since it stayed above the new support until the markets closed. I expect it to continue to climb as long as the markets don't fall. What if it dropped below resistance, though? I would have waited until it finished dropping over the next few days next week and bought it when it showed that it was going to climb again. You can tell when the stock will begin to change directions by watching the buying and selling volume. The price will start to climb when more people start buying the stock, and the price will drop as more people sell the stock. It will react to the basic economic principle of supply and demand. You can try to guess when it will change directions by watching the volume of either buying or selling starts to lower. If there is large buying volume and then it starts to lower, selling volume will begin to increase, and vice versa. My rule of thumb is to try buy the stock as the selling volume slows dramatically and the buying volume increases dramatically.

So, what stock did I informally advise Neubert to buy? One company I've been watching for a while (and the graph above is of) is called Ariba Inc. (ARBA). They are an intranet- and internet-based data storage business. They showed strong revenue and cash value, so I bought it today during the market closing rally and made 0.23% in about 30 minutes. I'm hoping it continues to climb all next week until the company releases its quarterly earnings report. If it beats analyst's expectations, the price will likely jump up even further.

-Danny Guttridge

DISCLAIMER: I have informally advised David Neubert on this company. After consideration, he has decided to purchase this stock, which he is keeping in his personal account. This is strictly advice for a beginning investor like me, and the opinions I have do not necessarily reflect those of Kapitall.


How A College Basketball Pool Turned Into Life-Long Stock Market Advice

Part 1: Researching Potential Stocks
When I was 8 years old, my dad introduced me to my very first NCAA College Basketball tournament. He offered to pay for my entry fee in his office pool if I was willing to fill out a bracket. So one morning, I sat down and went to work. I went by records and cool mascots as a basis for picking my winner. Low and behold, Arkansas won the title in 1991, and the Razorbacks (the winner of my own ‘coolest mascot’ contest) became the reason I won $300 from my dad’s co-workers. Needless to say, I was pleased.

My mom (thinking that introducing me to a sports gamble was not the best life-lesson), quickly approached me with an alternative life-lesson: to take my winnings, and invest it in companies I like in what she called the “Stock Market”. I chose companies like Ben & Jerry’s (because I loved ice cream), and Sanctuary Woods (because I liked computer games). The research was minimal, the stocks at that particular time plummeted, and my funds quickly disappeared. Looking back, the only good thing that came out of my first stock experience was the coupons I used for free ice cream tastings.
However, 16 years later, I finally realize the real lesson I learned. While putting money into the stock market is a risk, substantial evidence shows that increased company research can eventually lead to stock market success. Shocking.
Let’s focus today on researching potential stocks, specifically so that this tragedy doesn’t happen to anyone else. As the all-knowing David Neubert says, you always have to start with, “What do you need the money for and when do you need it?” Learning about your own investing goals will determine where to put your money. Generally, if you’d like to invest your money in a low-risk, easy to take out manner, the best route is through a mutual fund (more on those in later posts). However, if you have money saved up that isn’t going anywhere for a while, why just let it sit in a savings account?
With some considerable research (preferably on and the confidence to spend, you have a better chance to beat the market and earn some money. Let’s figure out what questions you need to ask yourself before buying a stock.
Let’s use Amerigon Inc. as a potential company. (DISCLAIMER: I have informally advised David Neubert on this company. After consideration, he has decided to purchase this stock, which he is keeping in his personal account. This is strictly advice for a beginning investor like me, and the opinions I have do not necessarily reflect those of Kapitall. But they could.)
Let’s first begin to collect data on this company. You should be collecting data on every company that you have interest in- but what specifically?
  • Annual Sales (Are they bringing in healthy revenue?)
  • Employees (Helps you figure out the size and growth rate of the company)
  • Total Debt (A key statistic. I plan on bringing out a post just on debt. But for now, ask yourself whether their debt is good or bad. Is it good because they’re using it to reinvest in what they’re doing? Or is it bad because they’re behind on their payments? See all this in their annual reports.)
  • Investor Relations Home (Learn more about the direction of the company, news reports, and other relevant information.)
Amerigon Inc. looks like this when researching the stated information:
Now to ask the more important question: What makes them different from everyone else? Why, ultimately, should you invest in the company that you’re researching? Here are 5 important questions you need to ask and research before buying the stock. I’ll share the research for Amerigon Inc. as well.

1. What are their best products?
Knowing the product is a huge insight into the company. Amerigon’s current principal product is proprietary Climate Control Seat brand cooled/heated seat, which is sold to automotive and truck manufacturers and their tier one suppliers. They have sold over 5 million CCS seats to date, and are now offered in over 40 vehicle lines worldwide.
2. How does their technology work?
Why is this product special? And can it be copied? And is it unique? Basically, the CCS able to heat or cool a small area (like a specific seat) with little effort. Other cooling methods work much better for larger areas, but in a specific market like car seats, this product is far and away the best method for personal climate control. This is what makes this product, and company, so appealing. This is a product that can be copied. ARGN currently holds a patent on this product and several others that are still in testing or that are in less of a demand.
3. Who runs the company and what did they do before?
Daniel Coker, CEO paid $291,200, appointed in 2003, served as Vice President of Sales and Marketing since joining Amerigon in March 1996.
4. Who are their biggest clients? (Do they do most of their business with only one or two clients or is it diversified among many clients?)
Eight of the world's largest automotive manufacturers – Ford, General Motors, Toyota, Nissan, Jaguar/Land Rover, Hyundai, Honda and Kia– offer vehicles with Amerigon's CCS or Heat Vent System. Over half of Amerigon's revenue stream comes from international customers outside of North America.
5. Who are their biggest competitors?
- Leggett & Platt, Inc
- Magna International, Inc.
Direct competitor comparison:

We’ve looked at Amerigon, and quickly realized the following things:
  • They have a unique product
  • They’re not in debt
  • They’re outperforming their competition on every level
  • Their CEO has been with the company for 14 years
  • They’ve figured out a way to not have my sweaty back stick to my seat

Research is golden. Now you know the questions you need to ask yourself, and the basic research you need to put in before deciding on a stock.
It took me 16 years to figure that out, and you just figured it out in one blog post. Lucky for me, I still have the 1991 office pool trophy.
Look for Part II next week: you’ve chosen your stock- now what?


Thursday, July 22, 2010

Can Earnings Season Save Our Economy?

Early this month, with many analysts talking about the possibility of double dip recession, I was very skeptical about how earnings season could affect the economy. Since, I expected the revenues to have fallen because of our economic recession; it could have really worsen the situation we are in. But now the reports are coming in with excellent results from major giant corporate, the economy is gaining more confidence and recovering is still uncertainly continuing.

The Dow Jones industrial average rose 201 points after second quarter earnings from Caterpillar Inc, UPS Inc and other companies beat analysts’ forecasts according to YAHOO FINANCE. Also a better than expected report on housing and improvement in the growth of Europe’s market added to today’s strong gains. Also, Microsoft’s Windows 7 sales boosted Microsoft’s 4Q net income showing that businesses are now more upgrading their business software than upgrading/replacing their computers. For Microsoft, net income rose 48% to 4.52 billion or 51 cents per share. Reports are showing that only 397 stocks fell on the New York Stock Exchange, while 2,675 rose.

Yahoo Finance, also reported that European markets rose after a report showed unexpected growth in the 16 nation group that uses euro. Many global investors have been concerned with Europe’s debt crisis and this could help release some tension.

Today, after market closed, Amazon reported their earnings did not beat analysts’ forecast causing their stocks to fall as much as 15%.

With more reports coming in, the market might get the jump start it needed towards recovery.

-Sugarsuren Byambasuren


Is Book Value Relevant?

When valuing a stock, like determining the price of the stock when launching an IPO, your end result is called the book value. It's basically what the accountant says the stock is worth based on the company's value. The company's value is determined by subtracting their liabilities (current standing debt and equity) from their assets (current cash, inventory, equipment, etc.). That end information is taken and divided by the number of shares that are issued to determine the book value of the stock.

This is where book value actually becomes relevant: what the company does. If the book value of the stock is largely based on the company's assets, what the assets are in relation to what the company does is important. If Apple's book value is increasing because inventory is growing, it means that they aren't selling units. If they aren't selling units, their profits are nonexistent and the stock will plummet. Clearly, this is hypothetical because Apple is awesome.

In comparison, the financials above are from a company called Hutchison Whampoa Ltd (HUWHY). They are a multisector conglomerate based out of Hong Kong and their main holdings include telecommunications, property development and infrastructure, and port operations. Since a large part of Hutchison Whampoa Ltd. is property development, an increase in inventory can be a good thing. Inventory growth means they own more property that they can develop and eventually sell for profit.

Now, how does this affect how you invest? Well, if a company's stock is directly related to the company's assets and is trading on the market above the book value, the stock is inflated and there is a chance it could drop. If the stock isn't affected as strongly by their assets, then the chance is much lower. On the other hand, if it is trading below the book value and is directly related to the assets, there is a chance it could grow. Hutchison Whampoa Ltd's stock is currently trading around $31, which is 65% of the $48.56 book value, so there is a chance for an increase of up to 50% from the current price.

I do not own any of the listed securities. My opinions are not necessarily shared by Kapitall, and they are not in any way to be considered investment advice.


Kapitall Announced Partnership With TD Ameritrade

New York, NY, July 22, 2010 – KAPITALL, the leading investing website for the Facebook generation, announced the launch of live stock trading via one of America’s top online brokers. In a first-of-its-kind partnership, clients of this leading brokerage firm will now be able to trade their stock portfolios directly from KAPITALL’s website. And current users of KAPITALL’s innovative investing tools will now have the choice to execute live trades.

Starting today, a KAPITALL user can import an existing portfolio or open a new brokerage account with KAPITALL’s partner. The user gains access to KAPITALL’s full suite of innovative investing tools to track their portfolio’s performance, analyze their holdings, and trade stocks and ETFs directly from KAPITALL. Every trade on KAPITALL will be automatically synched with their brokerage account.

“At KAPITALL, we are leading the future of online investing for the next generation of investors. With the launch of this strategic partnership, KAPITALL’s users can now advance beyond our Practice Portfolios to begin live trading,” said CEO Gaspard de Dreuzy. “Clients of our partner are also invited to engage and collaborate in KAPITALL’s vibrant investing community.”

This unique partnership mirrors a larger trend of internet users networking across websites. Rather than remain isolated within a single investing site, the clients of KAPITALL’s partner can fully participate in KAPITALL’s community with the added benefit of full trading functionality. For KAPITALL’s users, the access to live stock trading enhances the distinctive KAPITALL user experience.

About Kapitall

KAPITALL's mission is to make investing feel like something entirely different that speaks directly to the Facebook generation. The site’s user experience introduces a new way for young investors to learn, achieve and play the market by offering a range of innovative benefits:

• Explore the market with KAPITALL’s drag & drop interface
• Build practice portfolios to grow investing skills—risk-free
• Find new investing ideas, concepts and trends with pre-selected watch lists
• Search, filter, compare and research companies with powerful, intuitive tools
• Trade stocks, mutual funds and ETFs directly from KAPITALL
• Share ideas and portfolios with friends and like-minded investors

KAPITALL was founded in March 2008 by a team of leading designers, developers and technologists from Apple, Bloomberg, Morgan Stanley, ShareBuilder, Pearson, and Electronic Arts. The firm is based in SoHo, New York City and Seattle, WA.

Follow us on Twitter or become a Kapitall fan on Facebook.

-Sugarsuren Byambasuren


Wednesday, July 21, 2010

The Investing Starting Line

As a new intern, and a new poster on the Summer Investor blog, let’s put a disclaimer up first: I am more likely to write a fantasy baseball post or an essay on pitching mechanics than I am to write on investing related subjects. My lack of experience in investing prevents me from taking the necessary steps to put my hard earned money into the market. Most importantly, when I have just as many bills being paid as I do income coming in, it’s hard to set aside money to invest in the market. However, when I grab a new job at Kapitall, with mentors like David Neubert and Stephen Roche, and I become more involved with the Kapitall site, it’s hard not to become interested and play around with a practice portfolio or two.

Therefore, I hereby announce a new division of the Summer Investor Blog, ‘Jason’s Beginners Guide to Investing’. I have questions just like you- it’s been a two years since I graduated college, and a full three years since I’ve studied a company’s balance sheet and determined whether they have good or bad debt. What financial terms are most important to know? What are the first things I look at when I’m looking to buy a specific stock? What is the smartest way to invest my graduation money while I’m saving to buy a car? These are the questions I aim to answer as a Summer Investor. I hope to learn the basics that will help me become a smarter investor, and subsequently pass that along to new users.

In writing these semi-weekly posts, I hope to receive comments, questions, and feedback from you. So many young and potential investors without a finance degree are afraid of asking basic questions for fear of being laughed at. Ask away! It’s hard to become a better investor without knowing the basics, and I aim to take that journey this summer. While you’re waiting patiently for the next post, I would highly suggest some basic steps to get started.

  • Read the Summer Investor Blog posts on investment and finance related tips. We have some very intelligent people contributing, all of whom have answers to your questions. Follow us on Twitter too @summerinvestor!
  • Visit and register for free! Build yourself a practice portfolio, and test how fun it is to interact with the Kapitall community. Practicing with pretend money makes you more confident when you really want to jump in and get started.
  • Ask questions! What topics do you want written about? Feel free to ask, and we’ll do our best to bring you relevant information.
I’m looking forward to your questions and feedback- until next time!


Tuesday, July 20, 2010

Apple Stock Soars

It seems that Apple is the hot topic of the last 2 months. When Apple iPhone 4 launched in last June, they sold more than 1.7 million units. This month, Apple is in a battle with PR also causing huge headlines. No matter how good or how bad the headline is, any media is good media especially for Apple.

Today, Apple shares gained 2.6% bringing price per share to total $251.89. I was surprised to find out how well Apple is doing since Yesterday's record low of $245.58. Apple gained most of its momentum after its September quarter earnings beat the analyst estimates. The numbers are spectacular and its afterhours trading price went up as high as $259.12. Yesterday, it seemed that Apple was suffering from strong PR criticism and had its all time low since last May.

Today's earnings report and yesterday's low price helped investors to grab the chance and earn some money. Surprising enough, recent Apple iPhone reception problem didn't seemed to affect their momentum. Apple sold 8.4 million units of iPhone during the quarter, beating analyst prediction of 8.2 million units. Apple sold 3.27 million iPads for the period matching analyst prediction. Mac sales totaled 3.47 million units comparedwith expectations of 3.2 million units. Analysts believe that Mac sales are the most impressive showing that customers who are exposed to iPhone and iPad still want a Mac.

Apple's fourth quarter revenue is expected to be $18 billion.

-Sugarsuren Byambasuren