NataliePace.com

Monday, June 16, 2008

Winners Focus On Scoring

Winners Focus On Scoring; Why Stop Losses Are a Losing Proposition. By Natalie Pace. Includes my Hot News on Cool Stocks List.

Market Commentary

Last month’s theme was take your profits early and often. This month’s theme is Focus on Scoring. Now, as you know, I’m a Santa Monica girl, which means that I’m biased on who I want to win another championship ring this year. But, even if you’re a Celtic fan, the lessons you can learn by watching Kobe Bryant score are applicable to anyone who wants to succeed in anything, and quadruple the importance for anyone who wants to make money in investing.




As my good friend, Chellie Campbell always says, there are three types of people in the world. Those who make things happen. Those who watch things happen. And those who say, “What happened?” (Be sure to join us on Wednesday, June 25th, in an online chat with Chellie. She’s VERY smart and can help you determine whether or not you can be a bestselling author, whether that book will really help your business and what you can do RIGHT NOW to earn more and enjoy a richer life. Get more information at the Calendar section of NataliePace.com.)

As you can see in this picture of Kobe. Those who make things happen – those who score – keep their eye and their focus on the basket. They dribble and dive and dodge the competition and soar above the crowd to succeed.

Now, what does that have to do with investing? In short, stop losses are the playground of the “what happened” team, not the winning team – especially in a challenging environment, like we’re seeing today. When the defense is preventing you from scoring easily, the best strategy is not to cut your losses and sit on the bench. That’s a losing strategy. The best strategy is to examine the game, figure out how to maneuver your way to the basket and score. This year, the stock market is volatile and are down on the year so far. So, you can’t take a business as usual approach. In fact, some of the top earners on this news list are on the Cooling Off list!

My friend, Martin Samler, the CEO of TipsTraders.com, stops out at 10% loss. So, even though my returns are strong this year – 26 companies have made money, while only 6 are down – he shows a loss of 40% for my record this year. Because I DON’T STOP OUT my losses at 10%, I have eight winners for every loser, which means that the featured companies are overwhelmingly in profits. In reality, investors who have been reading my Hot News on Cool Stocks list religiously and following the Hot and Cooling Off stock news reporting are making a ton of money. Having eight winners for every down company is a phenomenal average when the general marketplace is down on the year. However, if you’re stopping out your losses at 10%, you’re losing money unnecessarily because the markets are volatile and swinging hundreds of points in either direction on this or that headline, taking great companies up and down with the rising and waning tides of market fever! Oftentimes, if you were just waiting a few days, you’d be making massive profits instead of losses, based solely upon the crazy swings of the marketplace.


What’s just as important as all of the gains being made in the winning companies is that the six companies that are down in share price have tremendous potential to be the top earners on the list. Mentor Corporation will have trouble if the purse strings are so tight that women cannot elect for cosmetic surgery and surgical procedures. World Water and Solar is still backlogged and had a ten-fold increase in revenue this year over last. Revenue for the first quarter was $9.0 million, compared with $0.9 million reported in the first quarter of 2007. Wisdom Tree’s revenue more than doubled this quarter over the same quarter last year. U.S. Gold has rocketship potential, but is very high risk if the reserves that CEO Rob McEwen is locating are not easily mined. (This one could be a real money loser, so evaluate it carefully before you invest in U.S. Gold.) HOKU is a Suntech/Sanyo partner that is on track to produce silicon as early as 2009. Altair Nanotechnology is a leading lithium ion battery manufacturer in the exploding new space of electric cars. I personally own four out of six of these companies, and I’m not the least bit worried that they are down right now. (Even though I’m tremendously pleased with the way the other companies in my portfolio have performed in the meantime!)

Take a look at one of the most explosive Wall Street earners of this century – Taser International. Taser was another company that looked like nothing for the first few months after I first found it and featured it as my 2003 Company of the Year. Based upon cutting losses at 10%, Taser would have been stopped out within two months.



Source: moneycentral.msn.com

Now, look at the gains you would have missed, if you’d stopped out your investment, having lost 10%, instead of hanging on for the payday. AS you can see below, Taser International scored 9000% gains between January 2003 and January 2005. Hmmm. Which do you prefer? Having an investment that (temporarily) goes down 12% in the first few months and then turns $10,000 into $900,000, or stopping out your losses with $9000 left in the bank?



Source: moneycentral.msn.com

If you do your homework initially, by constructing the Stock Report Card and picking a company that is leading the pack in an industry that is poised to do well, then you should have the confidence to wait until that story hits Wall Street and gives you your payday.

As for the prognosis for today, the stock marketplace is predicted to continue to be challenging. According to analyst Steven Wieting, in an article published by Smith Barney’s Portfolio Strategist, on June 12, 2008, “Profits in the Financial and Consumer Discretionary sectors are the only two that show substantial scars from recession, with margins in other sectors still close to historic highs, which suggests greater downside earnings risk overall. Underlying profitability is gradually eroding.” In the same newsletter, Michael Brandes / George Friedlander report, “Less amenable credit conditions tend to squeeze less qualified consumers (subprime) and corporations (junk rated), typically leading to higher delinquencies and defaults. Then, of course, there’s the housing downturn, which appears likely to persist into 2009.”

So “Recession Proof Your Nest Egg,” make sure that you review the “Trading Tips for Turbulent Times” article and continue to read this Hot News report twice every month. The first two articles are located in the February 2008 ezine (vol. 5, iss. 2), while the Hot News list is updated on the 1st and 15th of every month. Check out the FAQs article in the Investor Edu section on the home page at NataliePace.com for tips on how to read the newsletter for best advantage. If you follow the recipes for cooking up profits found in those resources, odds are great that you will be picking eight winners for every loser, making incremental gains in your nest egg, taking profits in shorter windows in your trading portfolio and taking a sound, profitable, rewarding approach to your investment strategy. Be sure to understand the tax ramifications of short-term capital gains in your trading portfolio, and ask your broker how you can trade in a tax-protected account, like an IRA to limit that exposure.

Track Record of our Reporting
While the markets have fallen in 2008, the Hot News and Cooling Off lists below have a winning track record – in bear and bull market years. 26 companies listed below have delivered positive gains, even while the general marketplace is down 6%. Only six of our listings went in the opposite direction of the reporting. Even during the flat year of 2007, our featured companies had outstanding performance between Oct. 2006 and June 2007! 4 out of 9 companies – almost half – doubled or more from the time they were featured to the time they were taken off of the list. 48% of the companies featured in my stock newsletter between 2002 and 2005 – 25 out of 52 companies -- DOUBLED as well, and the majority of the remaining 52% well outperformed the marketplace. (See the chart in the article, “25 of Our Companies Have Doubled,” from volume 4, issue 4, the April 2007 ezine, for a listing of companies.)

3 out of 5 Company of the Year selections more than doubled. My 2003, 2004 and 2007 Companies of the Year have posted up to 9000% gains (Taser), up to 690% gains (Opsware) and up to 215% gains (Suntech Power Holdings), respectively. MySpace, my 2006 Company of the Year, was a large part of News Corp’s success with shareholders that year. Only OSI Pharmaceuticals, my 2005 Company of the Year, has lost money. So three out of five are superperformers, one is performing well above the market and one is down. That’s the kind of record that puts you on top on Wall Street. (I launched my first publication on 11.15.02, and featured the first Company of the Year on 1.1.03.)

TipsTraders.com continues to list me as a Highly Recommended Stock Picker, with their independent ranking system, where I’ve repeatedly occupied the #1 position. Some of our best picks include: Bioteq Environmental (BQE) +144%, Blockbuster Video (BBI) +82.5%, Genentech (DNA) +415%, Google (GOOG) +545%, Las Vegas Sands (LVS) +139%, LifeCell (LIFC) +180%, Macerich (MAC) +150%, Opsware (OPSW) +690%, Rio Tinto (RTP) +145%, Sohu (SOHU) +150%, Suntech Power Holdings (STP) +107%, Taser (TASR) up to 9000% gains and World Water & Solar (WWAT) +181%.

Market Movers:

The Bureau of Economic Analysis released its preliminary report on the 1st quarter 2008 GDP growth on April 30th. The numbers came in at .9% -- anemic growth, down from the robust 4.9% GDP growth in the 3rd quarter of 2007. The next GDP growth report – final numbers for the 1st quarter 2008 GDP growth – will be released on June 26, 2008, the day after the Federal Open Market Committee meeting concludes.

For more BEA release dates, go to the BEA.gov website and be sure to visit the NataliePace.com calendar section often.

http://bea.gov/newsreleases/2008rd.htm

The Federal Open Market Committee and Monetary Policy
The Federal Open Market Committee has dropped the Fed Fund Rate each of the last six sessions. The Fed funds rate currently stands at two percent. Expect the Federal Reserve Open Market Committee to continue to ease investor worries, while monitoring inflation. The prevailing sentiment is still weak growth, a continued housing slump, more subprime foreclosures, a weak dollar, anemic consumer spending, turmoil in banks and financial services, rising gas and food prices and rising unemployment. (Yikes!)

Even with continued strain in the financial markets, the housing markets and the consumer wallet, don’t think that another Fed Fund interest rate reduction is likely to happen this time around. In the minutes of the Federal Open Market Meeting held in April 2008, it was noted that, “Most members viewed the decision to reduce interest rates at this meeting as a close call.” Two of the ten voting directors at that meeting voted against lowering the Fed Funds rate.


EDUCATIONAL OPPORTUNITES AND INFORMATION:


1. FOMC Information: Interested in reading the minutes of the April 29-30, 2008 FOMC meeting for yourself? You can. The official Federal Reserve document is available online. Click on FOMC, or go to FederalReserve.gov to read! According to the press release, “Economic activity remains weak. Household and business spending has been subdued and labor markets have softened further. Financial markets remain under considerable stress, and tight credit conditions and the deepening housing contraction are likely to weigh on economic growth over the next few quarters.”

The tentative FOMC meeting schedule for the 2008 calendar is: June 24-25, 2008 (Tuesday-Wednesday), August 5, 2008 (Tuesday), September 16, 2008 (Tuesday), October 28-29, 2008 (Tuesday-Wednesday), December 16, 2008 (Tuesday).

Don’t expect Bernanke and Co. to come riding to the rescue of the stock market with another interest rate cut in their June meeting at the end of this month. In a speech on June 9, 2008 at the Federal Reserve Bank of Boston’s 53rd Annual Economic Conference, Federal Reserve Board Chairman Ben S. Bernanke said, “One of the most effective means by which the Federal Reserve can help to restore moderate growth over time and to reduce the associated downside risks is by supporting the return of financial markets to more-normal functioning… Inflation has remained high, largely reflecting sharp increases in the prices of globally traded commodities.” More-normal functioning is economist speak for at a higher rate than our current 2% Fed Fund rate.

2. Calendar Section: Conferences, Online Chats and more: Check out the Calendar section of NataliePace.com regularly. There are many wonderful opportunities to chat one-on-one with millionaire money managers, life coaches, economists, respected money gurus, real estate veterans and CEOs! Be sure to check out the dates of the mid-month Hot News on Cool Stocks Update and the publication date of our next ezine. Get more information on how to best use our articles in the FAQs article, located under the Investor Edu link on the home page of NataliePace.com. Don’t miss the Premium Subscriber Teleconference on June 5th. Information on how to call-in will be listed on the Sharing Wisdom Premium Subscriber bulletin board (or email Heather for the information).

3. Survey Results:

Rate your broker and help to send a message of what you really want to the brokerages! Vote and view on the home page at NataliePace.com. Note that there is a chance for men and women to vote separately. Simply click on the survey that is currently on the home page, and you will be taken to a page with all three of the current surveys. Cast your vote there!

Hot Stocks List
Investors who "never pay retail," note that highlighted stocks are trading at their 52-week lows or near the price featured in NataliePace.com’s article. This may be a good buying opportunity. The companies that are listed below which are not highlighted may not be in a good buying range, but they appear to be poised to continue performing well (if you have already purchased them). There are never any guarantees in life, and all stocks are risk-based investments. Consult your certified financial planner before making any changes to your investment strategy.

Hot News List (highlighted). Be sure that you are buying low.
Altair Nanotechnology (ALTI)
Hoku Scientific (HOKU)
LDK Solar (LDK)
Trina Solar (TSL)
U.S. Gold (UXG)
Wisdom Tree (WSDT)
World Water & Solar (WWAT)

DELETIONS (Remember to take your profits early and often):
Johnson & Johnson (deleted on 5.5.08)

HOT NEWS on COOL STOCKS LIST

If you would like to access my list, just go to NataliePace.com. The most recent Hot News on Cool Stocks article is always located under the Hot News link, under Online Magazines on the home page at NataliePace.com. You will have to sign up for 30 days free to access. All you need to access the article is your email address. We don't spam!

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