Summer Investors

What do investors really care about? (in edit)

2010-11-10T22:42:00.000-08:00

Here is a message that was sent by a Kapitall user. I can answer the share buyback portion, but I would like to have a discussion about the rest of his message. Thanks!

DT:
"Thanks for replying.

My point of view is best described in the wiki article you sent:
"Another reason why executives, in particular, may prefer share buybacks is that executive compensation is often tied to executives' ability to meet earnings per share targets."

My point is - I, as a stock holder, am basicaly not interested in the EPS number itself. Nor the ROI ROE P/E and so on. Im interested in the market reacton, the price. The yield. The luck?

So, in bear times, when the whole market does down, I do not get anything from buybacks - just numbers, financial ratios. While I`m sure those are great times for the company to buy its stock, an induvidual not-hedged investor receiving the dividends in this situation is better positioned.

Of course the dividends may be cut and I ignore the buyback`s tax bonuses (because I can ignore them thank to Russian broken laws).

I also have one more question on this topic that is not covered anywhere I saw: can the company reissue those bought stocks? Does it counts in the long-term investment portion of balance? If true it`s just an other speculative player, which does in fact work against me - because in this case the company will benefit more from the lowest possible stock prices.
Am i missing something?"

Danny:
In response to the share buybacks, yes that is true. Buying back shares would decrease the float, which would cause the EPS to rise. The same earnings would be divided by fewer shares, and the executives get a bigger bonus. In bear times, I would use the fundamental information to make sure the company isn't going down the tubes. Usually, a share buyback program is a good indication that the company is doing well. A lot of investors look for them, then perform fundamental analysis on the company to make sure it is a good investment. Bear times is usually just market fluctuation, which should be used as a buying opportunity. Also, a buyback might help to resist a strong downturn of the stock price during bear times.

Leverage (in edit)

2010-10-21T15:40:00.000-07:00

1. What is financial or investment leverage?

Leverage is attained when you borrow money to fund the ownership of something. For example, your house and its mortgage. You want to buy a $100,000 house but only have $25,000, so you borrow the rest of the money from the bank in the form of a mortgage. You are then able to pay the bank back the borrowed amount in monthly payments over time.

2. How am I leveraged?

Normally, the average person would set aside a portion of their income that they want to invest each month. They would use that money to reinvest in the same security, or pick a new one each month. To be leveraged, you would instead choose to borrow a large amount of money (called a margin) to invest immediately, and gradually pay off the amount with your portion of monthly income and returns on your investment. If your investment is highly successful, you can pay off the margin easily. If your investment fails, though, you will still have to pay off the margin.

3. How are companies leveraged?

A company can similarly be leveraged by borrowing money to finance operations without increasing company equity. The company would borrow money and use it to expand, increase production, or buy fixed assets to reduce their operations costs.

WARNING

Being leveraged can be very risky. There is potential for higher gains, but there is equal potential for higher losses. Always do strong analysis before investing, and always manage your risk according to your financial stability and preferences.

Why Would A Company Buy Back Stock?

2010-10-18T15:59:00.001-07:00

Written by Daniel Guttridge

A buyback is when a company buys shares of their own stock on the open market, which reduces the number of shares issued, or the float.

1. SHARE PRICE INCREASE

The laws of supply and demand take effect here. Since the supply of shares is more limited, the price is likely to rise. With the expectations of a price increase, demand usually increases and fuels the price increase.

2. SIGN OF CONFIDENCE

Also, since the company is buying their own shares, it shows that they have confidence in their future. Investors see that the company has confidence and they expect the value of the shares to increase in the long term.

3. AN ALTERNATIVE TO DIVIDENDS

1. Tax issues: Buybacks allow the share owners to pay the taxes on the stock whenever they choose to sell. They only recognize profits when they sell. When you receive a dividend, you have to pay taxes on it by the tax year-end.

2. Dividends are hard for companies to reduce. When a company decreases it's dividend per share, it can be a sign that the company is going through financial trouble. Buybacks can be more opportunistic by having an extended time frame to buy the shares back, which allows the company to choose how much they will buy back at different times.

WARNING

Not every buyback is a good thing, though. Companies sometimes announce buybacks to hide other issues within the company. Some aggressive growth companies will issue large amounts of stock, which will dilute the individual share value. Buybacks can then counter the large issuance of stock and increase the share value.

Generally, a buyback has positive effects on the company's shares, but investors should do strong research (just like with any other investment) before investing in a buyback.

Edited by David Neubert

Tax Credits

2010-10-11T15:45:00.000-07:00

1. What is a tax credit?

It is a dollar for dollar discount on the total taxes an individual or entity may owe.

2. What do you get tax credits for?

Sometimes the government will give businesses tax credits for including non-petroleum gas usage, motor vehicle alternatives, welfare relief employment, and rising research expenses in their operations. The government may also give tax credits for disaster relief or property development for certain buildings. There are also some other non-standard reasons tax credits may be given.

Individuals may also receive tax credits for some similar activities as businesses, such as adoptions and using solar panels to power their homes. They are given these credits to directly reduce their tax amount, dollar for dollar. If you made $100,000 and your tax rate is 20%, you would owe $20,000 dollars. If you received a tax credit of $5,000 for using solar panels, you could reduce your total tax amount to $15,000.

The main difference between individuals and businesses, though, is that an individual can only use tax credits for the following year. Businesses, though, are able to use any tax credits at any time.

3. How does it affect the company's shares?

Tax credits are added to the balance sheet, usually in footnotes. When performing fundamental analysis, they will affect the book value of the shares.

For example, if you leave the tax credits out of your analysis and the market share price matches the book price, adding the tax credits will leave the market share price undervalued. If you are a value investor, this is exactly what you are looking for in your analysis.

Trials and Tribulations of a Beginning Investor

2010-08-25T15:44:00.000-07:00

Jason: I am first and foremost a beginning investor. So when I started up at Kapitall, I soaked up advice like a sponge. One of the first, and most important, rules in investing is to ‘buy what you know’. Now, I’m at a point in my life where I don’t have a lot of things that I am totally committed to. I have a PlayStation3, (Sony) that I am very committed to. I generally wear Nike things, and I have my checking and savings accounts in Chase Bank (JPMorgan Chase). There are things that I’d also love to have, such as the luxury of buying a Starbucks mocha every day, my own AB car (that gets me from point A to point B), and a nice cooling Amerigon seat for it. These are all things that I would look for first under the ‘buy what you know’ mantra. There’s one big issue with that saying, primarily for beginning investors like me: how do you not become emotionally attached?

Currently, while holding Amerigon in my practice portfolio, I have watched the stock grow from the price I bought it at ($8.60) to the price it closed at as of August 17 ($11.05). If I were to put my graduation money ($1,000) into Amerigon when I first bought it in my practice portfolio, I would have been sitting on a nice $285 gain today. So where to from here? I have a number of questions surrounding my ever-growing desire to buy this stock, including:

Will this stock continue to grow?
What is this stock's 6 month projections?
Can I get a profit even after I've watched the stock hit it's year high?
Is this stock just gonna TANK as soon as I put my real money in?

For answers and sound investment advice for these questions, I turn to another Summer Investor, Danny Guttridge.

Danny: Well, Amerigon definitely has the potential to continue growing. What I recently realized is that a stock isn't just affected by it's products or how well the company is doing. There are a multitude of outside factors, such as market influence and the laws of supply and demand. Is the market growing and will it continue, or are we headed for another recession? Is the market in a slump, providing discounts, or is it at the top of its range with stocks also trading at the top of their ranges?

I had always felt like I needed to take action immediately, and I lost a lot of money that way. I ended up with a very expensive lesson on patience and thoroughness. You need to learn how, when the stock's direction is ambiguous, to wait it out to see what it will do.

Jason: When dealing with the specific emotional attachments, it helps to think of the money you put into the real stock market as your 'play money'. It sounds weird. My personal goal is to save $20 per paycheck ($10 for future stock investments, $10 to see Ken Griffey Jr. in his Hall of Fame induction in 10 years). In 6 months, by next January, I will have enough investing experience to feel comfortable trading, and also have a simple $250 to invest. I won't feel as emotionally attached to that money, because I know that it was a direct result of NOT buying those mochas every day. I will then use that $250 as a learning platform for investing even further down the road.

Detaching yourself from the emotional side of investing also means knowing when to buy and sell, and not holding onto the stock because you are too partial to it. This means we heed the advice of Danny again, who says that it's better to be a fundamentalist and chartist at the same time, and use your research to make an unbiased, objective decision.

Danny: After you learn how to decipher a company's fundamentals, good job, but you're still not ready to invest or trade. Just knowing that a company has good earnings and growth isn't enough. You absolutely need to learn technical analysis (charts, indicators, etc.). The picture to the right is an example of the chart and indicators I use for my technical analysis. Some investors label themselves as fundamental investors or technical traders, but having one side doesn't cut it. That's like going to build a house with just a hammer, not the whole tool belt. Good luck, because that's what you end up relying on.

After you practice this with repeated profits on a virtual portfolio, like on Kapitall.com, then you can try your hand in the live markets. You can't let yourself get attached to your stocks, though. You have to set a loss tolerance and abide by it. No matter how much you love the company, you have to understand that they might not always love you back. That's why I've started researching and analyzing stocks of companies that I don't know much about. I have no loyalty to the company and I'm ok with selling as soon as my limit is hit.

Jason: Hopefully, this can help put some things into perspective. One of the biggest issues beginning investors have is knowing when to buy and sell. Many make the mistake of buying the losers because prices are low, and selling the winners to ensure profit. Again, it boils down to research and patience. And if we can a third: an objective view of your portfolio.

Let us know what you think!

Jason and Danny

GLITCH

2010-08-18T10:43:00.000-07:00

Ok, so a lot of you are wondering how in the world I more than doubled my contest portfolio. I'm just that good. Just kidding.

First, let me explain that as a Kapitall employee, I am not eligible to "win" the contest. I do not get first place, I do not receive a prize. I am simply here to increase the numbers of the contest and increase your chance of winning.

Now, how did I double my portfolio? A glitch, and luck. I found a glitch in the system and was playing all of the scenarios with it so I could send it in to our programmers. I bought as many shares as I could of a certain stock, because I know that it trades between a 2 cent range. I bought at the low end of the range and sold at the high end. The glitch, though, was that I was given an extra amount of cash, so I put that into the stock when it was low as well. It acted as a margin account, so when I sold, it took back the amount it gave me and let me keep the profit. It's not supposed to do that.

The other part of how my portfolio doubled was a lucky penny stock. I bought it at $0.0001 and sold at $0.0002, so I was able to double what I put into it. I DO NOT SUGGEST DOING THIS. IT IS SIMPLY A GAMBLE AND NOT A WISE INVESTMENT DECISION. There are many things that can happen to a stock that has that low of a value, including the bankruptcy of the company.

So that's how I duped you all! Sorry for the scare. You all are still competing fairly with everyone else (hopefully nobody is cheating, because WE. WILL. FIND. YOU). Good luck everyone!

-Danny Guttridge

Fair Contest. Opening an account at KAPITALL is absolutely free of charge and the decision to enter the Contest to win real prizes is subject solely to the User's decision. Delayed feeds from U.S. equity markets are available on the KAPITALL platform, provided by fully licensed data providers. The system has been constantly tested to provide our users with a fair, secure and transparent trading environment. Our fair gaming policy is very strict; we make it our business to assure that each member is not being abused or exploited, by any fraudulent activity attempted by other players. In case you have encountered any fraudulent activity attempt or have been a victim to one, please contact KAPITALL immediately. Fraudulent activity affects all contestants. This type of activity will not be tolerated at KAPITALL and be caught engaging in such activity will be banned from using KAPITALL infinitely. Rest assured, KAPITALL reserves the right to eliminate a winning portfolio and not reward the prize in case of any fraudulent measures, including any actions made by the player that are not in accordance with the Contest rules or KAPITALL policies.

How to start on Kapitall in 15 minutes or less

2010-08-09T15:04:00.000-07:00

Image from www.ruralmfg.com

I know a majority of Kapitall's newest users are pressed for time and maybe you're also newer to investing. Are you having fun yet? Here are three steps that will introduce you to the best Kapitall has to offer, in 15 minutes or less.

1) Sign up on http://www.kapitall.com/.
2) That took 2 minutes. Now take the Investor DNA quiz for insight into your investing preferences, and see who matches your DNA on Kapitall. Clock is at 5 minutes.
3) Join our portfolio contest. This entails opening a virtual portfolio with $10K play money (1 minute). On Wednesday this week, choose a few stocks (5 minutes) and win an iPod Touch 32G if your portfolio performs best among other players over the next 2 weeks. More details here. You have two weeks to make unlimited trades and change your original choices as you wish.

That took 13 minutes! Note that exploring Kapitall is addictive and I'm not responsible for the additional time you spend getting news and following the inevitable emotional rollercoaster. Now you can pat yourself on the back for beating expectations.

Good luck in the contest!

-Jenny Bradbury

Why Is Overconfidence Bad?

2010-08-04T14:07:00.001-07:00

Well, I'm a loser. I mean this in the sense that I lose things, and I'm talking about Neubert's money right now. Since the portfolio contest for the Summer Investors has started, I've lost David over $100 between two stocks. Now, what am I doing wrong?

Could I be buying at the wrong times? Buying the wrong stocks? One of them, Ariba (ARBA), was partly a timing issue. I trusted that their earnings report would be better than analyst expectations because they haven't miss them for a while (read my explanation here), but I was sadly mistaken. I should've had David sell as soon as I heard about them, but by then it was already too late. This is the first example of why overconfidence can hurt you. I had overconfidence in the company and their ability to beat analyst expectations. Lesson learned: trust no one.

I also had overconfidence in my analysis of the company. I thought they were doing really well financially, but there must have been something I missed in the reports that they filed. I also had too much confidence in my own analysis abilities. I have big dreams of becoming a trader for a firm, but I seem to keep forgetting that I don't really know much and I have a lot to learn. Lesson learned: I know nothing.

Now, my goal is to actually do more thorough analysis, make better investment decisions, and have better risk management/lower loss tolerance. I'll keep you all updated on my progress.

-Danny Guttridge

ENTER KAPITALL'S PORTFOLIO CHALLENGE TO WIN AN IPOD TOUCH 32G

2010-08-04T14:03:00.000-07:00

Want to put your investing skills to the test? Join KAPITALL's Portfolio Challenge and see who can build the most successful virtual portfolio over a two-week period based on total dollar return. The owner of the winning portfolio will get an iPod Touch 32G!
There's no better way to build your investing skills than to test your ideas in the market, especially when it's risk-free.

START NOW!!!

Duration:

The contest begins at 9:30 a.m. on Wednesday, August 11 and ends at 4 p.m. on Wednesday, August 25.
To enter, you must create and submit your KAPITALL Practice Portfolio before the August 11th start time (see How to Enter).

How to Enter:

Create a new Practice Portfolio on Kapitall with $10,000 (limit of one per user).

Label your portfolio with your own full name for identification purposes.

By Wednesday, August 11th, at 9:29 a.m. EDT add Sugarsuren Byambasuren as a KAPITALL contact and share your named Practice Portfolio with him.

9:30 a.m. EDT, Wednesday, August 11: Begin investing! You may continue to trade within your Practice Portfolio through Wednesday August 25th, at 4 p.m.

The eligible owner of the Practice Portfolio with the highest total dollar return as of 4 p.m. on August 25th, 2010 will win KAPITALL's Portfolio Challenge and receive their very own iPod Touch 32G!

Terms & Conditions:

Please read our Terms and Conditions before entering.

Join KAPITALL's Facebook Portfolio Challenge Group Page!

-Sugarsuren Byambasuren

Facebook Connect!

2010-08-04T11:10:00.000-07:00

Early this morning, Facebook was launched on KAPITALL!

Now you can:

Sign in with your Facebook account
Automatically get connected with your Facebook friends that are on KAPITALL
Send KAPITALL invitations to your Facebook friends
Share your Lists, Company Snapshot or Tools on your Facebook wall

Many of us at Summer Investor, have been waiting for this moment for a long time. This is a great way to compete and share your investing ideas with your Facebook and KAPITALL friends.

-Sugarsuren Byambasuren

The 7 Emotional Stages of a Beginning Investor

2010-07-29T10:55:00.000-07:00

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

Lessons from a Kapitall super-user

2010-07-28T16:23:00.000-07:00

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.

-Jenny

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?

2010-07-28T14:53:00.000-07:00

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

2010-07-28T14:00:00.001-07:00

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!

-Jason

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

2010-07-28T13:24:00.000-07:00

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.

Upcoming Kapitall Weekly Newsletter Articles

2010-07-27T11:33:00.000-07:00

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

2010-07-27T11:23:00.001-07:00

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

What is the Dow Jones?

2010-07-26T22:49:00.000-07:00

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

2010-07-26T16:26:00.000-07:00

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

2010-07-26T16:10:00.001-07:00

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 Kapitall.com 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.

DISCLAIMER:
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

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

2010-07-23T14:20:00.000-07:00

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

2010-07-23T13:24:00.000-07:00

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 www.kapitall.com) 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:

Annual Sales (Revenue): $75.0 M
Employees: 68
Total Debt: $0.0
Investor Relations Home: http://www.amerigon.com/investors.php

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: http://finance.yahoo.com/q/co?s=argn

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?

- Jason

Can Earnings Season Save Our Economy?

2010-07-22T15:04:00.000-07:00

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?

2010-07-22T10:52:00.000-07:00

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.

Disclaimer:
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

2010-07-22T08:54:00.000-07:00

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 http://twitter.com/kapitall/ or become a Kapitall fan on Facebook.

-Sugarsuren Byambasuren

The Investing Starting Line

2010-07-21T12:35:00.000-07:00

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 www.kapitall.com 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!

-Jason

Apple Stock Soars

2010-07-20T14:09:00.000-07:00

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

Apple's Expectations

2010-07-19T14:31:00.000-07:00

To reference my past post about earnings reports, I decided/Neubert suggested I check out Apple's past actual earnings versus the analysts' estimated earnings.

Apple tends to be tricky with the information they give analysts. They do this to deliberately lower earnings expectations so their actual earnings are higher than estimates and their stock prices increase. Analysts have started to figure out this game, but we should find out tomorrow whether they have Apple pinned down or not.

Disclaimer:
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.

Curb Your Impulse…iasm

2010-07-19T14:03:00.000-07:00

CNN Money recently published an article that detailed secrets of extreme savers. New to the idea of saving, like many of my peers, I thought I’d modify a little for the sake of relevancy, and share the articles golden nuggets with the hopes that some day those of us new to investing may have more than just fake money in practice portfolios to invest on Kapitall.

1. Avoid debt: not to be confused with “always pay cash.” Although paying cash for things like homes and cars may help you avoid debt, just because you’re doling out last night’s leftover cash in your wallet for your daily Starbucks fix doesn’t mean you can check this box.

2. Employ what I’ll call the tattoo rule. Your new motto: delayed gratification. AKA, lose the habit of being a junkie about the new everything. I thrive on “living in the moment” but it seems this shouldn’t include “paying in the moment” (also doesn’t mean put it on the card and pay later). One of CNN’s super savers said she saves by waiting three to six months to buy anything that costs over $100 to make sure she still wants it. I’d say this can translate to the under $100’s too- I hear brown bagging is back.

3. Budget for everything…including your savings, because then down the line, like super saver Tiffani Murry said; “You won’t have to want for anything!”

4. Live below your means. We’re all working (or should be) on reducing our eco-footprints, but how about trying your hand at fixing your personal econ-footprint too? A few tips? Start clipping coupons, don’t let retailers beat you at the rebate game, track your spending, book flights on credit card points, scavenge for deals, and turn your free time into cash by being nifty and thrifty!

5. If you can’t see it, you won’t miss it: Try automating your savings, and save yourself the hassle… as well as the money.

Then maybe try what Sugarsuren mentioned earlier in his post on the Yo-Yo market…sit on your cash, and you too can be an “extreme saver.”

-Rosie

What Are A Bond's Basis Points?

2010-07-19T09:55:00.000-07:00

This may seem complicated and there will be a lot of numbers thrown around here, but if you pay attention and read carefully, it's a pretty simple concept to grasp. Just don't let the numbers scare you!

First, let's start by describing what a bond is in relation to the market. A bond is essentially a loan given to an entity (corporation/company, government, etc.) by an investor. Say the U.S. Government issues ten-year bonds at $100 (par value or principle) and I decide to buy one. I am lending the government $100 in expectation of reimbursement with interest added over the span of a specified amount of time, the maturity date (usually long-term; 10, 20, 30 years from initial investment).

Now for the bond's yield, which can be four different things. The coupon, the current yield, the yield to maturity, and the tax equivalent (only applies to tax-free municipal bonds, so it won't be discussed).

The coupon is the rate of interest you will accrue each period (usually semi-annually) from the amount you lend (the bond's par value/principle). For example, the $100 bond that I bought from the government has a coupon of 2.50%. This means that every six months, I will be paid $2.50 (2.50% x $100) until the bond reaches the maturity date.

The current yield is the amount of interest divided by the bond's current market price. The price of the principle will fluctuate in the market just like a stock price, which is how bond traders can make money just like stock traders. Say my $100 government bond dropped in price to $95 and my coupon rose to 2.75% (when a bond's price drops, interest rises). My current yield would be 2.89% ($2.75/$95). This means that I would be paid $2.89 for the current period if I were to sell back the bond at that time.

The yield to maturity is the total expected return that I make on the bond if held until the maturity date. It accounts for the coupon, the current market price of the bond, par value, and term to maturity. At this point, the coupon is 2.75%, the current price is $95, the par value stays at $100, and let's say the remaining time to maturity is 5 years. My YTM is $39.53. These calculations are almost always done using a financial calculator (or the finance function on a graphing calculator) because calculating the YTM manually is tedious and difficult.

Now, with all of that covered, it's time for basis points, which are even simpler in comparison. Basis points are a smaller unit than percents to measure the amount that the yield changes. Remember when the interest rate rose when the bond's price dropped? Well, that affected the current yield of the bond. If the coupon and par value hadn't changed, the current yield would have been 2.50%. With the change, though, it rose to 2.89%, which means the yield changed 39 basis points (2.89-2.50=.39 x 100=39).

That wasn't that difficult, was it? With this information and some practice, you are prepared to invest in the bond market. You can also read about the bond markets behind the mortgage collapse in 2008 in Michael Lewis' book, The Big Short. It's a great read and very interesting.

-Danny

Disclaimer:
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.

The Yo-Yo Market

2010-07-16T15:27:00.000-07:00

What is going on with our Market?

We saw great increase in the Market early this week and now look at the market!!! Today, NASDAQ was down by 70 points, Dow was down by 261 points and S&P 500 was down by 31 points. The market has been roller coaster ride for most of us. With a great beginning to earnings reports, we were hoping to get in the gear for the Bull Market.

But it seems that Bull market is going to be more of "Yo-Yo Market" where the Market is going up and down by almost 1000 points according to Andy Kessler from Wall Street Journal. It is an interesting Anology and shows how unstable our economy is with all the current issues such as BP Oil Spill Crisis, European Debt Crisis and also the fall in the housing market by almost 30 percent.

My mentor David Neubert and I discussed about the "Invest in Cash" theory in this "Yo-Yo Market". Investing in cash is basically sitting on your own money until the market reshapes itself from the Yo-Yo to the Bull Market. Basically keep your money in your pockets until the Stock Market is more stable. The Invest in Cash theory is a neutral stand in the Market where it is a winning strategy no matter if the market is up or down. Your money will stay where it is and most important, safely in your Pockets. It doesn't seem like a great strategy, but believe me, it is very clever.

However, if you are a short term investor like me, I am looking forward to a great opportunity to buy low and sell high strategy. I will be Looking for the bargain stocks. Right now, the market is unstable and it is hard to predict what will happen in the future. I am looking forward to the start of next week and I will be keeping my eyes open for any bargains.

-Sugarsuren Byambasuren

SEC Won the Battle Against Goldman Sachs

2010-07-15T15:47:00.000-07:00

Goldman Sach decided to settle for $550 million for charges against them brought by SEC for defrauding investors to buy securities for subprime mortgages. $550 million includes $300 million in fines from SEC and $250 million will go to the investors who have lost their investments. I personally believe there is something wrong with this settlement.

So what is the problem?

The problem I have with this settlement is the fact that the settlement amount of $550 million is less than 5% of Goldman's 2009 net income of $12.2 billion after paying dividends to shareholders. Goldman Sach makes $550 million in little more than two weeks. SEC is really going to settle for $550 million with Goldman Sach?! I think it's a madness. If you think about what Goldman Sach and its alleged partner Paulson have done to our economy, $550 million is nothing compared to what they have done. Goldman Sach's involvement with Paulson was one of the reasons why our economy fell. This just shows how big and powerful investment banks have become over the years.

Because of Goldman Sach and Paulson, the future of the housing market is a nightmare for many Americans. Having them pay for what they have done in the past wouldn't help change the future of the housing market. That is why I have strong disapproval of this settlement.

How will that $550 million will help improve the housing market which drove our economy to its knees? I personally, I feel that our government wasn't thinking about the future when they settled for the deal. Currently, our economony has been recovering at a very slow rate and the housing market is still suffering. SEC should have done more than just settling this case. This will not do anything to those who suffered during this recession.

How will they learn their lesson, if our government literally gives them free pass?

Let's just hope that our new Finance Reform Bill will help protect us the American people and it's economy in the future from another recession.

-Sugarsuren Byambasuren.

Effects of Unemployment

2010-07-14T13:20:00.000-07:00

Essentially, unemployment rates are an inversely correlative sign of the potential production power of a city/state/country/etc. The higher the unemployment, the worse the economy is performing. It doesn't just represent the lack of performance, either. It also implies an increase in federal or state costs due to benefit programs for the unemployed. So, why exactly does the stock market become so volatile when jobs reports are released?

Unemployment can be used to loosely forecast how certain sectors of the market will be valued. People who are unemployed won't be spending as much money, which the economy is contingent on, constant cash flow. With a lower cash flow, some businesses will have decreased profits, which is directly represented in the valuation of their stock prices.

Here's a very simple example. Say a high-end clothing company has projected sales of 10,000 units at $10/unit. There's $100,000 of revenue minus $20,000 in overhead costs equalling $80,000 in profits. The company has issued 1,000 shares of common stock, so each share is valued at $80. In the market, the stock fluctuates due to overall market fluctuation/speculation/buying and selling momentum/etc., but it still holds a value of $80.

What if unemployment rates increase and people start buying less of the higher-end clothing and more cheaper clothing from other companies? Sales drop drastically to 6,000 units and revenues are, in effect, dropped to $60,000 minus the $20,000 overhead, leaving $40,000 in profits. There's a 50% drop in profits from a 40% drop in sales. Well, with 1,000 shares, the stock that was formerly valued at $80 is now cut in half to $40/share.

The stock does not necessarily trade on the market at the $80 or $40 per share, though. There are countless other factors that also affect the market price, including outside economic and political factors, inflation, etc. The market price could be either above or below the stock's value, which is either a premium or a discount price, respectively.

Here is a stock, Hutchison Whampoa Ltd. (HUWHY), that I am holding in my Kapitall Practice Portfolio. The closing price of the stock was $31.40, while the book value is $48.56. This stock is trading at a discount, so I think it will eventually climb up to, or even past, the book value. My goal here was to try to buy at a lower price within the trading fluctuation (to get the best discount) and wait for the price to climb.

-Danny

Disclaimer:

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

A Call for Financial Literacy

2010-07-14T10:50:00.000-07:00

As many of you may know, particularly after Danny’s posting, the Wall Street reform bill is just days, if not minutes away from passing into law as we enter the final countdown in the quest to secure the 60 votes. Although most of its provisions are really aimed at the financiers most call responsible for our tanked economy, I thought I would explore what the bill means for the rest of us, namely me.

As a recent graduate from college, I struggle daily with the concept of getting my “finances in line.” What it means to live beyond paycheck to paycheck is something I can’t even comprehend yet (or see myself somehow getting grasp of in the near future), thus, like many others in my position, I understand the devilish temptations of the shiny plastic in my wallet and dream about the lavish houses I’ll someday park my future car in. Fortunately, for me, my parents had the sense to drill some basic financial sense into me, and the bill boasts reform and protection for consumers which I agree Danny, sounds nice - but I do have questions as to whether the bill alone will do the trick.

Take for example the astronomical numbers tied up in current big bank’s liabilities. These numbers top billions and sometimes trillions, and such figures cause me to wonder if the issue is actually that our banks are (dare I say it) too big? What economic benefits ensue from throwing our support at several beastly banks? Yes, the bill will curb profits but I’m finding little to support that it will actually reduce their power.

I know it’s aimed at helping protect American citizens from future financial crisis, but until we fix the fact that we live in a consumer culture in which easy credit and unaffordable debt are quickly becoming the norm, I’d say we’re far from reforming anything. With this in mind, my vote would actually be for increased financial literacy among younger generations. Maybe, just maybe if we had spent the time teaching kids how to save, the idea behind investing, financial responsibility and work ethics, we’d live in a very different world.

-Rosie

Financial Reform Bill Effects

2010-07-13T16:04:00.000-07:00

Reform sounds great, doesn't it? Well, it is for consumers like us. It can protect the markets from drastically dropping if a bank were to fail, which keeps us safe from an economic disaster. It can also protect us from being taken advantage of by keeping strong regulations on banks and other financial institutions.

Executives could have their leashes pulled in with their compensation packages being voted on by shareholders. This allows more of the profits to be put back into the company, which could help produce even more profits and better returns for the shareholders.

Consumers will also be protected from defaulting on mortgage loans. Banks will have to do extensive background checks to determine if someone can afford to take out certain loans. This will protect the borrower and the banks/loan backers.

Although much more extensive than consumer protection, the bill will ultimately help keep our system from collapsing again like it did in 2008 with the mortgage crisis. In my opinion, anything that helps our system from collapsing and pushing our economy into a depression is a good thing, no matter how many restrictions it puts on big banks.

-Danny

Disclaimer:
My opinions are not necessarily shared by Kapitall, and they are not in any way to be considered investment advice.

How could LeBron James Be One Person Stimulus Package?

2010-07-12T16:09:00.001-07:00

I recently read an article on LeBron James and how he could be one person Stimulus Package for Miami. I found it very alarming how one person could have the power to change a whole city’s economy. Though it might sound little too crazy, I have to admit that the one man stimulus package rather possible and very likely to happen only if LeBron James wins his first NBA National Championship with Miami Heat. With the dynasty he could create, LeBron James will certainly raise attendance for the team, infiltrate the value of TV rights to broadcast games, sell merchandise and bring more money to the city.

The sad reality of our today’s society is that one man stimulus package would be possible but it would still be like our government’s stimulus package to the banks rather than its people. Who will benefit from the one man stimulus package? The answers are corporate heads from the National Basketball Association and the owners of Miami Heat will end up pocketing most of the stimulus package. The people would be left with nothing but a pride of winning National Championship.
However, the reality of one man stimulus package is rather too hypothetical and studies have proven to show that one man stimulus package is rather a dream than reality. At least two studies have shown that there’s little to no net positive economic impact from sports teams on metropolitan areas. It is interesting analogy that “what revenue a city gains is what revenue a suburb loses”.

Is Clean Energy the Next Technology?

2010-07-12T14:57:00.000-07:00

As we all know, the technology sector has exploded for the past 20-30 years. Billions have been made within the industry and also trading stocks and options in the industry. Is technology the only sector with growth like it has, though? Maybe not, with Obama's urge to boost clean energy tax credit. Since the BP oil spill in April, everyone has been searching for a way to reduce the potential for another spill by looking for other avenues of energy, and this is Obama's way of participating. Even across the world, the Japanese are putting in their two cents. Itochu Corp. have started showing interest by claiming a 20% stake in the US lithium production. We have also seen plans for solar panels to be launched into space to provide uninhibited ray absorption from the sun for more efficient solar power production.
With the trend continuing on like this, clean energy may have a dramatic increase in trading volume, which could lead to massive growth in the industry. Now would be a great time to find a lithium mining company, like Sociedad Quimica y Minera de Chile SA (SQM), or a power company, like PG&E Corp. (PCG) and put them on your watch list. Check their fundamentals/financials and keep an eye on them until they start to show strong growth. You might get some great returns on this new trend.

-Danny Guttridge

Disclaimer:
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.

Double Dip or Bull Market?

2010-07-12T08:40:00.000-07:00

I'll begin with introducing myself. I'm Danny and I'm interning at Kapitall.

With this past quarter having a large dip and an increase in volatility (the amount the markets move), investors were generally unsure of where or when they should invest their money. Should they stick with a growth stock like Apple (AAPL)? Should they find a stock with a strong dividend yield like Nestle (NSRGY)? We didn't know which way the markets were moving, so we couldn't have been sure. With the earnings reports coming out this week, though, we might get a strong hint on the markets' direction. With positive earnings reports, we could see a bull (strong upward) market. Positive earnings reports show that companies had good revenue for the past quarter, although the markets and stock prices were still reacting to the past reports and current events. Negative earnings reports, though, would show that revenues were down this past quarter, and it could send the markets into a double dip or even a depression (worst case scenario).

It can also be a little more complicated than just positive or negative earnings, though. Many analysts and economists have expectations for how high or low the earnings should be. If they have a certain number in mind and the reports are lower, but still positive, the markets could still suffer. The reports would be given a "good, but not good enough" spin. On the other hand, if the reports are better than expected, the markets could potentially explode and have a strong bullish trend for this quarter.

So what do we do now? We wait for the reports and keep your eyes on the news. If the reports are negative, either wait for another positive trend, or find securities that are inversely correlative to the markets (inverse ETFs, certain commodities like gold, etc.). Most of all, though, keep your eyes on the news.

Disclaimer:
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.

David Neubert's Article on Tesla Motor Inc.

2010-07-09T12:20:00.000-07:00

This is an article written by David Neubert from Kapitall
Check it out, It is a must read for anyone who is planning to invest in Tesla Motor Inc.

Wpnmaster Asks: Hello David Neubert. Do you think I should buy Tesla Motors Inc.?

BUY THE CAR?

I do not own a Tesla (TSLA) car. But man, I would love to drive one. I'm going to wait a couple years and see how the battery works. I never buy a car the first year it comes out. The first new model year always seem to have design flaws that are fixed after a couple years. I'll wait until the car has a track record. Let somebody else suffer working out the kinks.

BUY THE STOCK?

Though I often speculate, I am a conservative stock picker. My stock picking strategy is very similar to my car buying strategy. If a stock is new, I don't really understand that much about the consistency of financials, business, track record or the underlying management. I tend to stay away from new stocks until more information is out about the company. It's hard to put a valuation on new stocks. I'll wait until the company builds a track record too. I might miss some big hits but overall my strategic focus remains intact.

Neubie Axiom 2:

It is the difference between price and value that matters, not just the underlying business of the stock. If I can't figure out the value of the stock how can I know if I should buy it?

Disclosure:

I do not own Tesla (TSLA). But man, I would love to drive one. I'm going to wait a couple years and see how the battery works. I never buy a car the first year it comes out. The first new model year always seem to have design flaw that are fixed after a couple years.

Disclaimer:

My opinions are not necessarily shared by Kapitall, and they are not in any way to be considered investment advice. Do not rely on watching my trade notifications; they are not always timely, which may compromise their accuracy. In general, I try to enter trades as I perform them, but it can sometimes take up to a few days for me to do so. I do not always write a note as to why I buy or sell, so do not rely on receiving a message from me to indicate if I've traded in my portfolio. Holdings represented in the portfolio attached often represent only part of my entire holding in that stock.

Electronic Tattoos???

2010-07-08T12:43:00.000-07:00

When I was on kapitall's News Viewer, I came across this article called “Electronic Tattoos: The Next Big Thing in Bio Tech?” Well-known electronic device manufacturer, Philips, have reported that they are working to create Electronic Tattoo. They have managed to develop a silicon and silk device that could be implanted on a person’s skin to work like tattoo.

This device could change the world of medicine where they could turn the device into personal health meter such as blood sugar sensor and hooking chips to particular nerves to control a prosthetic hand etc. The possibilities it could bring into the world of medicine are endless. Also, it has reported to contain LED lights to person’s skin into light source or even a small personal screen.

With new technologies and gadgets coming out every year, the future for Nano Tech in the Market is looking really strong. From kapitall.com’s analyst review, Philips stocks have grown 75% over the last year and currently offer a dividend yield of 3.11%. They are expecting Phillips’ earnings per share to grow by more than 20% over the next 5 years.

If you are interested in investing into Nano Technology, check out Kapitall.com and the article I have read.
Phillips is really strong stock option for the future. Invest in long term and Phillips is guaranteed to grow stronger and stronger. Unlike any other companies in the technology sector, Phillips offers exceptional dividend yield.

Power of Compound Interest

2010-07-07T13:32:00.000-07:00

How do you minimize your risk and still make money?

The answer is Compound Interest.

Compound interest is interest calculated on the principal amount invested, which is then added to the principal amount then it is compounded again and again. Compound Interest can be compounded daily, weekly, monthly, and yearly. The more you compound, the more money you can make. For young investors like me, compound interest is one of the best options you can have and so. As for me, I can have my investment compounded for 40, 50, and 60 years. With compound interest, someone could even take care of their retirements.

What is the difference between Compound Interest and Simple Interest?

Simple Interest is basically the same concept, except, simple interest is interest taken only from your original investment. The difference between Compound and Simple is from where they take your interest. Simple is only from your original investment and compound is from your original and added interest amount being compounded again.

Basically, if you invest enough money and have it grow until you retire, your original amount of investment is growing at almost an exponential rate. The risk involved with Compound Interest is very minimal. Unlike investing in the Stock Market, one can safely still make money without many worries.

Compound interest is only beneficial for someone who is looking to invest long term because the yearly interest rate is lower than simple interest. Investing in Simple Interest for about two or three years will make more money for someone who will need the money later on. Someone who is very young and looking for ways to save up for retirement, compound interest will generate more money.

Compound interest is very beneficial for someone planning to buy house. Compound Interest could generate at least the down payment that might be needed to get a loan for a house.

Just got a hot tip that can't wait?...Now you can invest as soon as inspiration strikes!

2010-07-07T08:15:00.000-07:00

I’d like to start by introducing myself, Rosie, as another of Kapitall’s summer interns, based in New York. Unlike Sugarsuren, however, my role pertains more to the marketing and community side that Kapitall is reaching out to as they get on their feet in the investment community. With that said, I thought I’d introduce myself to the blog with a short personal quip about the new and improved Kapitall experience on the iPad.

As near as I can tell, the largest advantage the iPad offers in terms of the Kapitall site is immediacy...both in terms of ease of use and quickness relative to market activity. The iPad and iPhone have insured that when we're on the go we always know what time the movie starts, that it's a left not a right onto Washington Ave., and where the best dumplings in Chinatown are to be had. For me, my recent move to New York has initiated an addiction to my iPhone that I never thought I’d give into before. These conveniences have become an integral part of our social and professional goings on. We've become accustomed to ease and immediacy in nearly every realm of our lives, so why can't the same be true of the way we invest? Now it can. Kapitallists, and gadgeteers, pull out your iPads, and let your fingers tap, flick, scrunch and drag all they like! Kapitall has recently configured its site to be entirely compatible with the iPad, giving us even more instant access to investments, as well as the same incredibly easy site navigation.

Picture this, you’re traveling around Italy with a few friends doing a wine tour and want to invest in a vineyard that just went public but don’t want to have to call your broker all the way in NY – what a way to put a damper on the immediate excitement of the situation. Instead, just whip out your trusty iPad, drag in the stock and with the swipe of a finger proceed to “boast” it on facebook for all your friends to give you their trusty advice, and who knows, maybe it’ll be a better investment than you thought! I, for one look forward to using Kapitall on the iPad, that is, once I get my hands on my own. In the meantime however, explore the possibilities…I’d love to hear what you think!

Value Stocks VS. Growth Stocks

2010-07-06T15:01:00.000-07:00

What are Value Stocks and Growth Stocks anyways?

Value Stocks are considered to be undervalued based upon such ratios as price to book or price to earnings. These stocks generally have lower price-to-book and price-earnings ratios, higher dividend yields and lower forecasted growth rates than growth stocks.

Growth Stocks are stocks from companies characterized by rapid growth in revenues and whose market value is expected to grow quickly. Many of these stocks struggle with profitability due to the high costs of financing growth. For the same reason, most growth companies do not pay out dividends to investors.

Value Stock VS. Growth Stock

Value Stocks are perfect option during weak economy because they are definitely very cheap and they tend to have better dividend yield than growth stocks. Having a high dividend yield for value stocks are good because value stocks are for long term investments. Example of value stock would be Express Scripts Inc in the medical sector. One can make serious amount of money from Value Stocks because mostly they are undervalued from its book value.

Growth Stocks are the opposite from Value Stocks. Owning growth stock during recession or weak economy is much more risky because it depends on consumers to grow. It needs people to buy their products to grow bigger and bigger. But they barely have any dividend yield because they want to use the money for dividend yield to reinvest into the company for more research and new products. Especially most of the companies in the Technology sectors are growth stocks such as Apple, Intel and HP etc. I would say that Microsoft is not a growth stock anymore. They used to be growth stock but they have not grown bigger recently and the price of each share is very stable. Now it is more of value stock.

Another Recession? This Soon?

2010-07-02T13:34:00.000-07:00

I was reading few articles today about the possibility of another recession and I thought I should post my opinion about it.

What is the possibility of another recession?

Many economists believe that with the current trend, the possibility of another recession is high as almost 60%. First time unemployment claims rose last week for the second time in three weeks nationally. Many economists are afraid that it is because of increased layoffs. This means that the possibility of another recession could be on its way.

It is alarming to think about the consequences of another recession. The possibility of recession could cause many more layoffs and could really hit our already slow growing industries. The Stock Market has been recovering very slow and now if there is another possibility of recession, this could mean death to many stockholders. With many more lay off, the housing crisis might be affected deeply. The more and more people will lose their homes to foreclosure and less and less people would be able to pay off their debt. Many people face another possibility if losing to the banks; the banks will also lose to the market. The question is, if there was a double dip recession, would the government bail out the banks?

After Obama’s bank bailouts, he faced much criticism about the multi billion-dollar bailouts to the banks. Will he bail them out if there was another recession? Or will he let the banks burn to ashes? Banks have failed the people and they have done enough damage to the hard working class families. Obama should really think about the possibility of another recession and change his politics to adjust to the changes might happen soon.

Next time, I would talk about protecting your investments from the Double Dip Recession.

America Needs Growth in the Industry

2010-07-01T12:36:00.000-07:00

When we elected President Obama, he promised to create jobs and increase growth in the industry. But now, it’s been two years since we elected him as our president and we have yet to see any improvement in the economy. As for the Stock Market, it is slowly recovering. The unemployment rate in America is almost 9.8% and it wouldn’t be surprising if it reaches 10%.

How would this affect the Market?

As jobless claims grow and benefits shrink, Americans have less money to spend and the economy can't grow fast enough to create new jobs. This means that the Market could actually see huge impact as we Americans, tightly pull our money back to our pockets. This year we saw huge improvements in the market however, as the year comes closer to an end, stocks are falling again.

Many economists are worried that our economy has stalled to see any growth. As the year coming bit closer to end, new unemployment benefit claims jumped by 13,000 to a seasonally adjusted 472,000. This year claims have been stuck more than 450,000. Lat year, new claims have dropped from 651,000. Economists want to see the number fall below 425,000. However, as many lose benefits and jobs, economists are worried that our economy might halt back into the worst of recession. Some industries are revising their forecasts for growth in the industry.

With the current G20 meeting, we as a world could solve the economic problem together. I am looking forward to what Obama and the other Global leaders have to say about improving the economy.

Lesson #2 From the IPO Market

2010-07-01T10:57:00.000-07:00

Today, I have learned the most important lesson in investing, which is "Don't get too excited about anything". When I talked about IPO Market in my last article, I mostly talked about the benefits of IPO but I have realized that I have gotten little too excited because I have made extra $10 per share I have owned in Tesla Motor Inc.

But today, Tesla has dropped almost 10% from yesterday's market value. I am down more than $10,000. This morning when I checked the stocks, my portfolio was just all beaten up. I learned the most important lesson, which is IPO Market, is the riskiest of all the markets on Wall Street so don’t invest in companies you don't know. I should never have bought almost 4000 shares of Tesla. All the money, I thought I could have made is gone. My portfolio will take a long break and I am going to sell Tesla for good.

Another lesson learned from the Market. I came to the market without any knowledge. Now I am learning little by little. I paid the price of being a rookie.

The Risks & Advantages of IPO Market

2010-06-30T14:11:00.000-07:00

What is IPO Market?

IPO stands for Initial Public Offerings. In the stock market, IPO is basically a company who just went public and new to the Stock Market. There are much profound risks involved in investing in a new company. There are many reasons why IPO is high-risk investment. But lately, I found IPO market to be the jewelry found in the mud that could worth millions.

When I think about investing, I think about short term investing with Profit. I have found that making profit in the IPO market is like taking a candy from a baby. Recently, the automotive Company Tesla Motor Inc. went public and it started with $17 per share on its first day. When the market closed for Tesla Motor Inc. it’s per share price soared from $17 to $27 in a single day. There is whole profit of $10 from each share I have bought.

I have been very lucky that Tesla Motor Inc. is well-known and very favorable company in the automotive industry because of their innovative technology of electric sports cars.

Nevertheless, investing in the IPO market is probably one of the highest risks you will take in the stock market. They are new to the market and no one's knows much about them and they could fail at any moment.

With my new experience in the IPO market, I personally believe that it should be short-term quick profit investment. As the market knows more about those companies in the IPO, the price of each share levels out in time.

Message from David Neubert the Master!!!

2010-06-30T10:38:00.000-07:00

I added Microsoft (MSFT) to my personal portfolio today.

With the market getting cheap again there are quite a few "boring" stocks trading at good prices. Microsoft (MSFT)--yes, Microsoft--is one of those stocks. The company has made the transition from a super growth company of the late 90's to a stogy old industrial conglomerate. (I think you can call software "industrial" nowadays).

Two things are happening to Microsoft: one, profits are slowly growing with the economy; and two, the stock has fallen again as all eyes (and money) turn to fashionable companies like Apple (AAPL).

Microsoft Price of Profit is down to 11 times profits. [see attached for definition of POP] and it has a decent dividend yield of 2.1% which is about 20 times the 0.1% I'm earning in my savings account.

If you've been watching my value portfolio you can see the following Microsoft trades under the transactions menu. If you have any problems finding transactions let me know and send a message to "Feedback."

MSFT TRADES
August of 2009 bought 681 shares at $24.39
December 2009 sold 681 shares at $29.61
May 2010 bought 373 shares at $26.77
June 29th bought 450 $23.82

NEUBIE AXIOM #1:
You'll make more money off gems found in the mud than those in the jewelry store.

PERSONAL DISCLOSURE:
I own MSFT in my personal account in an amount greater than shown in my value portfolio. I own AAPL. I have both Apple Computers and PC's. I own a Playstation 3 (Sony), a Wii (Nintendo) and a DS (Nintendo). I am planning to buy an Xbox (Microsoft) soon - for research purposes of course.

Disclaimer:
My opinions are not necessarily shared by Kapitall, and they are not in any way to be considered investment advice. Do not rely on watching my trade notifications; they are not always timely, which may compromise their accuracy. In general, I try to enter trades as I perform them, but it can sometimes take up to a few days for me to do so. I do not always write a note as to why I buy or sell, so do not rely on receiving a message from me to indicate if I've traded in my portfolio. Holdings represented in the portfolio attached often represent only part of my entire holding in that stock.

------------
Link to Apple vs Microsoft POP.

Great Articles to Read!!!

2010-06-29T17:56:00.000-07:00

These are great 4 articles you must read!!!

1)"The Most Trusted Companies For Privacy"

2)"RFID Microchips: The Future Of The Internet, Or A Privacy Nightmare?"

3)"You Don't Know These Companies, But They Probably Know You"

4)"Targeted Ads: When Will Consumers Start Freaking Out?"

How Technologies Changed Us and the Economy

2010-06-29T17:04:00.000-07:00

It is really amazing to think about how much our lives have changed because of companies like Apple, Google and Microsoft. They change the world by creating machines and computers to make our daily lives easier and yet difficult for the older generations to adapt into the new informational age. As for me, technologies made my generation the first generation to grow up with personal computers, iPod, and the internet. As for us, young adults, it's very hard for us to realize how much technologies have changed the world.

For the past decade, consumer & industrial technologies have grown exponentially and created the informational age of the 21st century. Brain power and IT skills replaced the muscle power of hard working Americans from the factories to the streets.

Jobs in America have become scarce as we use software to do the simplest tasks; making us much more dependent on technologies. Some say that the innovation and technological advances free workers to perform other tasks and create new industries, new jobs and more goods and services for consumers to enjoy but recently, this dream have failed with the recent downfall of our economy. Many more Americans became jobless and poor. Yet we still find the money to buy new iPhone, PC, Mac or iPod.

Because of our recent downfall of our economy and rapid increase in unemployment rate, it made me think about how our economy would be different, if the assembly line workers never got replaced by machines or the accountant who never got replaced by Quick Book Pro. Personally, I believe unemployment rate would be much lower than today's 9.3%.

However, the world possesses a large inventory of inventions to help plant the seeds of tomorrow's industries. The challenges for the United States lie in training workers for the jobs that will be created as these industries grow and in encouraging entrepreneurs to take the risks and endure the hardships and challenges associated with creating new and better products for the marketplace.

What Is Dividend Yield?

2010-06-28T09:07:00.000-07:00

There are two ways you can make money from investing in Stock Market: Capital Gains and Dividend Yield. Capital gains occur when a stock price appreciates in value meaning that you can sell each share at the appreciated price to make profit. One might ask, "how can I make money when stocks are down?" The answer is Dividend Yield.

So what is dividend yield?

Dividend Yield is how much "x" company will pay you every year for being loyal investor to the company. For example, "Procter & Gamble" has dividend yield of 3.2%, which means that they will pay 3.2% to you, the investor, for each dollar you have invested to Procter & Gamble. Many companies like Apple, Ford and Google have 0% dividend yield!!! Why? For companies like Apple & Google have 0% dividend yield because they think that they can put that money into better use such as research for new & better technology than paying the investor dividend yield. In case of Ford, they want to keep their profit for safety net in case the car industry runs flat like in the recent downfall of our economy. Another reason is dividend yield is taxed at a very high rate. Company pays tax to the government for their profit at about 15% for dividend yield then us the investors pay another tax for receiving dividend yield. So dividend yield is being taxed almost twice which means that it is almost not worth to receive dividend yield.

From my analysis and David Neubert's expertise, there are three reasons why Company doesn't want to pay dividend yield:
- Tax
- Safety
- Re-investment.

If you are a long-term investor, dividend yield is the best possible scenario because dividend yield is never affected by the economy.

As for those who are looking for short-term profit, Capital Gains is the solution.

-Sugarsuren Byambasuren

Disclaimer:
I DO NOT own any position in the listed securities. My opinions are not necessarily shared by Kapitall, and they are not in any way to be considered investment advice.

Lesson #1 From the Master

2010-06-28T08:52:00.000-07:00

Today, declares the end of my first week as a Summer Investor. Investing in the stock market has been hell for me this week. It’s been only a week and my portfolio is already down $4,000.

This first week, I have been fortunate enough to have David Neubert as my mentor. He took a look at my portfolio and asked me why I had 2 shares of Comcast and 300 shares of Ford Motor Company? And my answer was I don’t know. I simply bought 300 shares of Ford because from KAPITALL.COM, it showed me that Ford had more than 90% return per year.

It was then when David gave me my first ever Investing Advice. The lesson number 1 is don't ever buy stocks by limiting yourself to the amount of shares but limit yourself to how much money you want to spend. With this lesson, it lowers the risk of spending more than what you want to spend and also buying excessive amounts of shares, which someone like me wouldn't need much of. I learned that the perspective I had was not the one Investment Tycoon should have. Don't ever look at how many shares you want but look at how much you want to spend. With new experiences, come new lessons.

-Sugarsuren Byambasuren

Disclaimer:
I DO NOT own any position in the listed securities. My opinions are not necessarily shared by Kapitall, and they are not in any way to be considered investment advice.

Why KAPITALL?

2010-06-24T12:15:00.000-07:00

Recently, I got the opportunity to try out new revolutionary website called, 'kapitall.com'. At first, I did not know what to expect from this site. All I knew was that this was just a free online investing platform.

When I first saw the word, FREE. My first impression was that this site is a Joke. WHY? Well, we all know that in a Capitalist society, nothing is free. When something is FREE there is always a catch where you have to remain in membership for two years, fill out thousands of surveys or as simply as putting our credit card information for something that is supposed to be FREE. Do you see the Irony in our society? Well, I do.

But KAPITALL.COM was nothing like what I expected from FREE online-based investing platform. The first main menu looked polished and well designed. I could definitely tell KAPITALL designers have put lot of time making this website. Even though Kapitall is in BETA phase, kapitall.com felt like this was the IT product.

So I decided to sign up since, it was free to use and join because of my cheap personality and curiosity to get my hands on anything that is new and cool looking. Kapitall was definitely perfect match for my personality.

After I signed up to use Kapitall, I thought to myself, "Why I'm I doing trying this website even though I have no interest in being Stock Market Tycoon?" Well, simply it was just because it was free and I had lot of time on my hands since school is out for the summer but don't forget my cheapness.

Prior to my experience at kapitall, there were only two words that I knew that had something to do with investing which are Wall & Street. Put them together, you end up with Wall Street. How can a person like me who is very cheap, immigrant and have no prior knowledge about investing can use this website for my advantage?

I have the perfect answer, Kapitall is very easy, simple to use and most important, you learn to be better investor. I felt like I was holding my first Wii controller for the first time ever and trying to play golf. That is how simple and easy it felt to me.

After I signed up to use Kapitall, I created my first practice portfolio with fake $10,000 in it. I never held that much amount of money in my life at once, from all my excitement, I felt as if my increasingly overwhelming cheapness was gone for good. I hustled to buy as much stocks of my favorite brand as I could. I went on to buy 100 shares of NIKE, 50 shares of Apple, 300 shares of my favorite car manufacturer Ford then it went on and on with all the company, brand and manufacturer I could think of at the moment.

After few moments of investing, I have spent all my $10,000 and I was holding as much shares I could possibly buy with my fake money. After few moments of sheer excitement, I calmed myself down and I could not believe what I have just done. I couldn't believe my eyes that I was the owner of my favorite brands. I felt like I could do anything in the world because I bought the companies that I dreamed of working there to get employee complimentary goods like free shoes from NIKE.

It was then I realized the potential for KAPITALL. I highly recommend all my viewers to use this website as a learning tool and possibly as your own private Broker.

Enjoy my friends!!!!

-Sugarsuren Byambasuren