Sound Advice

  Inside Information? Yes, inside information about companies is available, but it’s not what you might think.  There may well have been a time when company officials provided hints or even specific comments to analysts or insiders looking to get a leg up on the general public, but those days are long gone.  These days, given the risks associated with doing so, companies have usually gone out of their way to release new information to the public as quickly as possible. Analysts typically seek information about current developments and what lies ahead.  The latter is forward-looking and is known as guidance. In most cases, when companies are releasing their quarterly results, they include guidance about the near future.  This guidance covers revenues and profits, usually in ranges, e.g., $200-220 million in revenues or $2.00-2.20 a share in earnings.  There may also be interim updates when management expects that the numbers will be higher or lower tha...

The Professional Approach To Stock Selection There are various approaches to stock selection, but the two that predominate are fundamental analysis and technical analysis.  Fundamental analysis is a numbers-based method that evaluates key factors such as income and financial health, including the past, present, and future.  Technical analysis emphasizes movements and formations of stock prices. Fundamental analysis is based on factors that over time have proved to have a meaningful impact on stock price movements.  The optimal picture of corporate profitability is steady growth, both in the past and, prospectively, in the coming years.  Steady growth is rewarded by higher valuations of underlying earning power than those accorded companies with erratic progress. When professionals screen (filter) the data of the broad universe of stocks, they look for companies that move ahead every year, regardless of the prevailing economic conditions.  Although high pas...

  Why Exchange-Traded Funds? It’s hard to believe, but the first mutual fund was created almost 100 years ago.  That was Massachusetts Investors Trust, which was born in 1924 and opened to investors in 1928.  Other funds then came along, though it took four decades for them to develop a substantial following. The reasoning behind the development of mutual funds was simple.  They offered diversification.  Why buy one or several individual stocks when you could buy funds managed by professionals who could make well-considered selections from the broad universe of all stocks. The logic seemed reasonable and investors climbed aboard in huge numbers.  But there was more than one hitch.  In those good old days, the cost of making mutual fund investments was rather hefty.  Indeed, the loads (a.k.a., sales charges) for purchases of fund shares tended to be in the upper single digits.  Loads of 8.5% of the amount invested were not uncommon....

Gas Prices Going to $10 a Gallon?  NOT!   Only 90 days ago, the level of hysteria surrounding the issue of inflation was overwhelming.   The Number One concern at that time was the price of gasoline, which had topped $5.00 a gallon and more than a few esteemed Wall Streeters said “You ain’t seen nothin’ yet”.   Surprise, surprise, the numbers then did an about-face and by late August, the national average price of gas had dropped below $3.90 a gallon.   Some of that pullback was probably attributable to releases from the Strategic Petroleum Reserve, which had been targeted at one million barrels per day since last Spring.   But the greater impact was from an across-the-board reduction in crude oil prices this year.   West Texas Intermediate, one of the best-known standard measures, peaked at $120.93 a barrel on June 13 th , only to drop 25% 10 weeks later.   Clearly, this is not just about tapping U.S. reserves to ease price pressures. ...