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Grow with US Global Investors

May 21, 2007 by Chris 9 Comments

Stock of the Day
US Global Investors, Inc.
Monday’s Intra-day Price: GROW – $21.86

Sector: Financials
Industry: Asset Management & Custody Banks
52-week Price: $36.36-$8.78

This stock has held the 200-d moving average for several years and is currently trading on the line with an ideal risk-to-reward setup for longer term trend buyers. Institutional sponsorship looks to be slipping based on the lower volume figures on the chart and the actual reporting numbers listed below.

However, the company has had impressive earnings and revenue growth over the past several years while exceeding the average for its industry. The company does not have debt therefore it sports a debt-to-equity ratio of zero which is excellent for investors.

My largest concern with this stock is the state of the overall economy and the effects of the housing slow-down. A major violation of the 200-d m.a. on heavy volume will be a red flag to sell your position or avoid taking a new position. See the breakdown for the potential trade setup below.

GROW is the investment adviser to U.S. Global Investors Funds and U.S. Global
Accolade Funds, which manage 13 no-load mutual funds with various investment objectives.

Institutional Analysis:
Held by Institutions: 17.97%
Money Market: 44
Mutual Fund: 21
Other: 5

Shares Held: 5.1 mil
Shares Held Previous Period: 5.2 mil

Shares Bought: 3.28 mil
Shares Sold: 3.36 mil
Value of Shares Bought: $90.2 mil
Value of Shares Sold: 92.4 mil

Top Institutional holders, Shares Held:
Bridger Management LLC, 555,848
Renaissance Technologies Corp., 503,020
Southpoint Capital Advisors LP, 500,000
Morgan Stanley, 314,976
Bridgeway Capital Management, Inc., 303,386

Potential Trade Set-up:
Risk a maximum of 1% of portfolio
Set a stop loss near $18.00 or higher (7-10%)
Target of $29+ based on previous action, Fibonacci levels and current location of 50-d m.a.
Risk to reward has a potential of 4-to-1 based on exact entry and stop.

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Filed Under: Stocks

Think and Grow Rich – Napoleon Hill

May 18, 2007 by Chris 11 Comments

Napoleon Hill, the author of Think and Grow Rich, may be one of the greatest inspirational speakers of all-time (which is still in print in several versions, and has sold more than thirty million copies). Reading the book is one thing but listening to the man on audio CD is amazing. The enthusiasm, the passion and authority he commands can make any long trip skip by in a flash. I always leave the car energized and pumped-up to accomplish amazing things after listening to his tapes.

Many of these tapes I am referring to were recorded more than 50 years ago but they are as relevant as anything today and certainly more genuine than the so-called guru’s of modern personal-success literature.

I am not speaking about the audio CD of the book Think and Grow Rich but rather the actual recording of the lectures that Hill held around the country while rising to and after achieving prominence.

If I had to recommend one set of tapes, it would have to be Your Right to be Rich which includes inspiring lectures by Hill himself.

In these rare recordings on CD you will hear a complete and thorough exposition of Napoleon Hill’s philosophy as you listen to him interpret and amplify the 17 universal principles of success. These lectures are designed to motivate you and teach you the goals and strategies that will carry you to new heights of personal success. Before there was The Secret, Napoleon Hill was the father of success around the world.

The lectures in this audio, recorded in the 1950s, are fascinating glimpses into his steadfast, somewhat authoritarian, and eminently relevant teachings. Though his speaking style often has an overly aggressive quality, there’s something magical about hearing it. We are handed many gifts, Hill says, many opportunities for meaning, but we can tap into them only when we connect with the guiding force that put them there. We do this by dedicating ourselves to a single purpose in life, and paying daily attention to programming our subconscious minds. This is a seminal work on the basics of personal motivation.

For those of you that are not familiar with Hill’s work, I can tell you that he personally studied some of the most successful businessmen and leaders of his time, including but not limited to Andrew Carnegie, Thomas Edison, Alexander Graham Bell, George Eastman, Henry Ford, Elmer Gates, John D. Rockefeller, Charles M. Schwab, F.W. Woolworth, William Wrigley Jr., John Wanamaker, William Jennings Bryan, Theodore Roosevelt, William H. Taft, Woodrow Wilson, Charles Allen Ward and Jennings Randolph.

By listening and understanding the keys to success, you can achieve a level of mental self-mastery that will enable you consistently to:

Overcome fears to reach your achievements
Maintain self-discipline and self-confidence
Develop strong personal initiative
Focus your thoughts into clear plans of action
Mental skills needed to meet the challenge of transforming your ideas into realized accomplishments.
Discover proven strategies for bouncing back from failure.
Manage your time effectively.
Inspire others to work with you.

These teachings and recordings have helped with all aspects of my life including trading, business, marriage, personal relationships and my own emotional and mental makeup.

For further reading on Hill, please visit his wonderful page over at Wikipedia:
Napoleon Hill Biography

“Whatever the mind of man can conceive and believe, it can achieve.” – Napoleon Hill

Filed Under: Books, Psychology, Subconscious

IBD’s 20 Rules for Success

May 17, 2007 by Chris 7 Comments

IBD, otherwise know as Investor’s Business Daily, has compiled a basic set of rules for success. They claim that your investment results should improve materially if you carefully follow these 20 rules (rules in bold lettering).

I have added my “two cents” after each rule based on my experiences as a trader. I can tell you that these rules helped establish my foundation towards successful investing.

New readers can try the paper for free for two or four weeks depending on a print or electronic version: Free Trial

I now use the eIBD electronic version so I can save them but I started with the print version (both are great for their own reasons).

1. Consider buying stocks with each of the last three years’ earnings up 25%+, return on equity of 17%+ and recent earnings and sales accelerating.
CP: This is an excellent rule to follow as it will filter most of the poorer performing stocks from your initial screens. Many of my fundamental screens contain these parameters although I do eliminate or loosen the ROE parameters at times.

2. Recent quarterly earnings and sales should be up 25% or more.
CP: Love this rule as earnings results do have a direct relationship to share price

3. Avoid cheap stocks. Buy higher quality stocks selling $15 a share and higher.
CP: I follow this rule about 95% of the time. It’s a must for novice investors as much of the market’s garbage is priced below $15 per share. However, I will occasionally trade a stock below $15 per share if the risk-to-reward ratio warrants the position.

4. Learn how to use charts to see sound bases and exact buy points.
CP: Learning technical analysis is a must to become a successful trader. Thousands of methods exist so discover the few that fit your trading style. Read through this blog to become familiar with my technical methods.

5. Cut every loss when it’s 8% below your cost. Make no exceptions so you can always avoid huge, damaging losses. Never average down in price.
CP: First – NEVER average down in price, NEVER! Second, always cut your losers based on your position sizing calculation which should have a direct relationship to your risk-to-reward setup. Don’t allow losses to grow larger than 8-10%.

6. Follow selling rules on when to sell and take profit on the way up.
CP: Always sell when a rule is violated. Examples could be a price falling back below a specific moving average, a specific retracement from new highs or a trailing stop.

7. Buy when market indexes are in an uptrend. Reduce investments and raise cash when general market indexes show five or more days of volume distribution.
CP: Follow the trend! Whether it is up or down, trade accordingly!

8. Read IBD’s Investor’s Corner and Big Picture columns to learn how to recognize important tops and bottoms in market indexes.
CP: I do recommend these sections of the newspaper but you can also formulate your own methods for signaling market tops and bottoms (I like to monitor the NH-NL ratio and my own index of 20-30 of the market’s leading stocks).

9. Buy stocks with a Composite Rating of 90 or more and a Relative Price Strength Rating of 85 or higher in the IBD SmartSelect® Corporate Ratings.
CP: This is a great rule for strong bull markets but the parameters must be loosened in flat or weak markets. I set my fundamental screeners to a minimum rating of 70 for both EPS and RS. I rarely use the smart select ratings from IBD.

10. Pick companies with management ownership of stock.
CP: I don’t care about this rule and don’t follow it in my research. It can help but I have never based a trading decision off of this rule.

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Filed Under: Education

Mindray Medical (MR) Profit Jumps

May 16, 2007 by Chris 7 Comments

Stock of the Day – Update
Mindray Medical International Ltd.
Tuesday’s Closing Price: MR – $26.77

The company reported better than expected earnings late Monday and blasted 7.34% higher yesterday on the strongest positive volume since its debut as an IPO last fall.

I owned shares in the company back in February of this year but sold when the stock struggled to make and then maintain new highs. Its Chinese counterpart, EDU, was performing better so I turned my attention in that direction.

Original Blog Articles for MR:
China’s Mindray Medical Intl. (MR)
Mr. Mindray on the Move

The stock never lost much ground but it wasn’t gaining any either, until yesterday. I wouldn’t get too excited unless the stock can blast into new high territory as noted on the weekly chart.

What interests me most are the most recent institutional numbers. Compare the numbers I found back in February to the numbers being published today. Somebody is accumulating the stock and this was my reason to buy in the first place. With the numbers stronger today, I wonder if the stock can make the move I expected earlier in the year.

Institutional Analysis:
Money Market: 60 (from 21)
Mutual Fund: 57 (from 75)
Other: 2 (from 4)

Shares Held: 29.7 mil (from 7.0 mil last period)
Shares Bought Last Period: 25.7 mil (from 6.4 million)
Shares Sold Last Period: 3.0 mil (from 0.2 million)

Value of Shares Bought: $598.8 mil (from $156.4 million)
Value of Shares Sold: $70.7 mil (from $4.9 million)

Top Institutional Holders; shares held:
Goldman Sachs Group Inc.; 9,106,788
Emerging Markets Management LLC; 2,542,100
FMR Corporation (Fidelity Management & Research Corp); 2,536,700
Fidelity International Ltd (Bermuda); 2,255,050
Marvin & Palmer Associates, Inc.; 1,440,100

By Katherine Hunt
SAN FRANCISCO (MarketWatch)
Mindray Medical International Ltd. (MR) late Monday reported first-quarter net earnings of 122.4 million yuan ($15.8 million), or 1.09 yuan (14 cents) a share, up from 68.4 million yuan ($8.9 million) or 0.80 yuan (10 cents) a share, during the year-ago period. Pro forma earnings were 139.6 million yuan ($18.1 million), or 1.25 yuan (16 cents) a share. Net revenue for the three months ended March 31 rose to 422.4 million yuan from 318.3 million yuan, the Chinese medical device company said. Additionally, Mindray said it now expects 2007 net revenue to range from 2.12 billion yuan to 2.17 billion yuan, up from the previous range of 2.12 billion yuan to 2.15 billion yuan. Pro forma earnings for the year are now expected to be between 585 million yuan and 600 million yuan. The previous estimate was for earnings to range from 570 million yuan to 585 million yuan

My Rating: Accumulate Shares

Filed Under: Stocks

How to Short a Stock

May 14, 2007 by Chris 14 Comments

To short means that you borrow stock from your broker to sell to a third party. The idea is to buy back the stock at a lower price, returning the shares to your broker while leaving the remaining cash in your account as a profit. A short seller does not own the stock before they sell it as they borrow it from another investor who already owns it. At a later date, the short seller buys back the stock they shorted and returns the stock to close out the loan. If the stock has fallen in price since they sold short, they can buy the stock back for less than they received for selling it. The difference is your profit. Please note that short selling is a transaction made on margin.

To initiate a short sale, you must place the order with your broker or online brokerage by determining the size and price at which the trade will occur. Your broker or brokerage company will check to see if shares are available in the specific stock selected or if they can borrow the shares. Once they are available or can be borrowed, they will be sold in the open market on the first plus tick or continuation of an up-tick also known as zero-plus tick (the stock must move up for the transaction to complete). To close the short position, the broker will purchase the shares using the original proceeds and return the shares to the third party.

As a short seller, you believe that the price of a particular stock will fall in value over time. For example: by establishing a short position for 100 shares in XYZ at $50, the broker will place $5,000 into your margin account. If the stock falls over the next few weeks and you decide to cover the short at $40, you will initiate a buy for 100 shares in XYZ using the money placed in your account when you sold short. The cost to buy back the shares in this example will be $4,000 or $1,000 less than the original short sale amount. This difference in price will result in $1000 cash that will now become your profit.

On the flip side, if the stock was to jump to $60, you would most likely cover your short or have your stop loss triggered, buying back the shares at this price. The cost would be $6000 or $1000 more than the original short sale, resulting in a 20% loss. The broker would take the additional $1000 from your cash account to cover the loss in the short sale. This is how you can lose money when shorting stocks. The higher the stocks rises, the more money you can lose, theoretically resulting with an infinite loss (excluding stop losses and broker margin calls).

If the stock rises in price or if the value of the stocks you are using as collateral goes down in price, you may be forced to add cash to your margin account or cover the short sale prematurely. Keep in mind that you must pay any dividends issued while you are short a particular stock.

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Filed Under: Education, Shorting