Uranium investment opportunities

In this article I shall be updating you with the recent development in the uranium market which is set up for a big boom in the coming year after a healthy correction recently.





Spot prices of uranium:
Look at the chart above((Picture courtesy : http://www.uxc.com/review/uxc_Prices.aspx).
It is expected that after a correction of almost 20% and an impending stock market recovery soon we might be in a time to invest in uranium. The spot prices are expected to hit $140 next year and this would be fuelled by the rising demand in autumn(power requirement peaks in winter). So that would give a return within next six months of 30% or more.

For unexperienced investors one might one to own Pinetree capital(TSE:PNP) which has had a severe correction recently and is nicely poised for sustained upturn(provided the market forces do not turn bearish).

Other possibilities are TSE:SXR(Uranium One) and Cameco corp.

All the best and happy returns.

Some article about bear market (impending ?)

There are some rumours about the beginning of a bear market soon.
Here are some articles about earlier bear market.
(Courtesy:this website)
The stock market crash of 1987 was the largest one day stock market crash in history. The Dow lost 22.6% of its value or $500 billion dollars on October 19 th 1987! In order to understand the crash, we must first study the cause.
1986 and 1987 were banner years for the stock market. These years were an extension of an extremely powerful bull market that started in the summer of 1982. This bull market had been fueled by hostile takeovers, leveraged buyouts and merger mania. Companies were scrambling to raise capital to buy each other out, in essence. The philosophy of the time was that companies would grow exponentially simply by constantly purchasing other companies. In leveraged buyouts, a company would raise massive amounts of capital by selling junk bonds to the public. Junk bonds are simply bonds that have a high risk of loss, so they pay a high interest rate. The money raised by selling junk bonds, would go towards the purchase of the desired company. IPOs were also becoming a commonplace driver of the markets. An IPO is when a company issues stock for the first time. “Microcomputers” were also a top growth industry. People started to view the personal computer as a revolutionary tool that will change our way of life, and create wonderful profit opportunities. The investing public was caught up in a contagious euphoria, similar to that of any other bubble and market crash in history. This euphoria made people, once again, believe that the market would always go up.
Despite the strong economic growth, SEC was unable to prevent shady IPOs and conglomerates from proliferating. In early 1987, the SEC conducted numerous investigations of illegal insider trading. This created a wary stance from many investors at this point. Also, due to the extremely strong economic growth, inflation was now becoming a concern. The Fed rapidly raised short term interest rates to temper inflation. This, unfortunately, had an effect of hurting stocks as well. Many institutional trading firms started utilizing portfolio insurance to protect against further stock dips. Portfolio insurance is a practice that uses futures contracts as an insurance policy. People that hold the futures contracts can make money as the market crashes, offsetting the losses in the stock holdings. After interest rates had risen, many of the large institutional firms started using portfolio insurance all at the same time. The futures market was taking in billions of dollars within minutes, causing the futures market and the stock market to crash from instability. Additionally, common stock holders all wanted to sell simultaneously. The market couldn’t handle so many orders at once and most people couldn’t sell because there weren’t ANY buyers left!
Within one day, 500 billion dollars was evaporated from the Dow Jones index. Markets in every country around the world collapsed in the same fashion. When individual investors heard that a massive stock market crash was in effect, they scrambled to call their brokers. This was unsuccessful because each broker had many clients. Many people lost millions instantly. Some unstable individuals, who had lost fortunes, went to their broker’s office and started shooting. Several brokers were killed, despite the fact that they had no control over the market action. The majority of investors who were selling, didn’t even know why they were selling, except that they “saw everyone else selling”. This irrational mentality caused the extreme market crash. Most futures and stock exchanges were shut down for the day.
Around this time, the Fed started to intervene. Short term interest rates were instantly lowered to prevent a depression and a banking crisis. Remarkably, the markets recovered quickly from the worst one day stock market crash. Unlike the stock market crash of 1929, the market quickly started on a bull run, once again. This was powered by companies buying back their stocks that were undervalued after the severe crash. Additionally, the Japanese Nikkei index was embarking on its own massive bull market. This tremendous momentum helped pull the US stock markets to new heights never seen before. Some benefits came as a result of the 1987 stock market crash. For example, the circuit breakers system was implemented, which electronically stops stocks from trading if they plummet too quickly. This will prevent any future one day vertical drops, like 1987.
Once again, the remarkable similarity between all of the market crashes is striking. It seems that after all of the historical market crashes, people would learn to foresee a coming financial disaster. This rarely happens, of course, which is why there is constant opportunity for the smart money to prosper from the irrationality of other people.

Article on technical chart analysis

This blog is being created while reading books and good websites on chart analysis. This is also very important for small investors as timing a buying of a share is very important for getting good returns on a time span of 1-2 years. Sometimes bad timings can lead to a waiting time of 1 year or more before one can break even.

(Taken from the book by william j'o neil:)

stocks with big future prospects

All these stocks have made it to IBD top 100. But due to ongoing subprime lending crisis some of them are having corrections and thus provides new consolidated values. Here are some of them.

1. Green mountain coffee roaster(GMCR): The stock is getting a correction of around 6-7% and if this proceeds to another 10% to value of around 34USD then this is an extremely good value to buy. Since this stock had a base price of around 30USD this would be within a deviation of 15% from the base.
2. Amazon(AMZN) : Inspite of the subprime crisis this stock is one of the growth stocks of IBD 100. And more importantly it is within 10% of the base of 70 USD. This will prosper in the near future. More importantly in midst of the difficult market amazon has hit a new high. All the right parameter and ready to grow once this crisis stops.

Fundamental versus techincal investment.

During the recent rout in the stock market I am starting to question the pure buffet style of investment for small investors like me. Does it really pay to see all your gains washed away simply because the company fundamentals are strong and there will be an eventual recovery ?

I do not think so. For small investors I would surelly suggest reading the book "How to make money in stocks" by "william j. o'neil". This book emphasises on ways to preserve the gains in the bull market and several other useful hints. Mainly it introduces CAN SLIM strategy.

C Current quaterly earnings per share: Higher, the better.
A Annual earnings increase: Look for significant growth.
N New products , New management, New Highs : Buying at the right time

S Supply and demand: Shares outstanding plus big volume demand
L Leader or Laggard: Which is your stock ?
I Institutional Sponsorship: Follow the leaders
M Market direction: How to determine it ?

During this correction the stocks where I lost money were precisely the ones where the sector was beaten down due to huge gains in the earlier bull run. Most of the stocks still have good fundamentals but cannot be called good growth stocks. This is where the CAN SLIM strategy will help investors. Hopefully we can find a nice balance of both worlds.

Example :

Philips : Though it is undergoing drastic reorganization, streamlining and focussed acquisitions does not have the required growth momentum. No new products etc. So although the company is sitting on huge cash reserves (close to 20 bn) it is in a beaten sector.

Arcelor mittal: This is a very nice selection but still is suffering in the short term due to overall steel sector getting the beating. In fact it is a very investor freindly management and looks agressively for growth. Recently they have penetrated the chinese steel market(joinlty with bao steel and nippon steel. 15% stake). This stock also lists in the IBD top 100. Look for buying opportunity in a week or two.

Salzgitter: This is also a good company with sound policy and with exteremely low debt/equity: 0.04. But still I lost some cash due to wrong timing of buying this stock. It is also a nice fundamental stock and they are also tying up with Korean POSCO in search of growth.
So overall it is a nice long term investment, given the growth of the german economy in the offing.


Overall there advices are very useful (atleast to me):
(Courtesy: www.investors.com)

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.

2. Recent quarterly earnings and sales should be up 25% or more.

3. Avoid cheap stocks. Buy higher quality stocks selling $15 a share and higher.

4. Learn how to use charts to see sound bases and exact buy points.

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.

6. Follow selling rules on when to sell and take profit on the way up.

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.

8. Read IBD's Investor's Corner and Big Picture columns to learn how to recognize important tops and bottoms in market indexes.

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.

10. Pick companies with management ownership of stock.

11. Buy mostly in the top six broad industry sectors in IBD’s New High List.

12. Select stocks with increasing institutional sponsorship in recent quarters.

13. Current quarterly after-tax profit margins should be improving, near their peak and among the best in the stock's industry

14. Don’t buy because of dividends or P-E ratios.

15. Pick companies with a superior new product or service.

16. Invest mainly in entrepreneurial New America companies. Pay close attention to those with an IPO in the past 8 years.

17. Check into companies buying back 5% to 10% of their stock and those with new management.

18. Don’t try to bottom guess or buy on the way down. Never argue with the market. Forget your pride and ego.

19. Find out if the market currently favors big-cap or small-cap stocks.

20. Do a post-analysis of all your buys and sells. Post on charts where you bought and sold each stock. Evaluate and develop rules to correct your major past mistakes.