Saturday, January 15, 2011
Thursday, January 13, 2011
Why Small Cap Stocks Should Outperform in 2011 [Video]
A number of smart money managers are betting that 2011with be the year that large cap stocks -- those with a market capitalization over $10 billion -- outperform the market. The reason? Small caps, which have a market capitalization below $2 billion, and mid cap stocks, with market caps between $2 billion and $10 billion, almost doubled the returns of S&P 500 in 2010, rising 27%. Large caps, on the other hand, were up only about 15% so they seem relatively cheap.
But Hilary Kramer, editor ofGameChangerStocks.com,says not to be so quick to give up on small caps. In fact, she says that they will do very well this year. In the short video above, Kramer explains that small caps, which were destroyed during the credit crisis, should do well. She says that many could benefit by being acquired by larger companies such as Qualcomm's (QCOM) recent announcement that it will acquire Atheros (ATHR). In the video, Kramer gives a number of small cap stock recommendations. Among her picks: the publisher of yellow and white pages in print and online, Supermedia (SPMD).
Source - DailyFinance
Wednesday, January 12, 2011
10 Greatest Trades Of All Time
Chairman Bernanke's period of "the Great Moderation,"ended in 2007 beginning new era of "heightened volatility".
This period destroyed the careers of some on Wall Street, while making the careers of others like hedge fund manager John Paulson, who made billions betting against the subprime mortgage crisis.
As a result, interest has renewed in "making huge, concentrated bets by analyzing fundamental economic/business conditions," or 'global macro' trades.
IBTimes compiled a list of the greatest trades of all time.
1. John Paulson's bet against subprime mortgages
Hedge manager who predicted and profited from subprime mortgage crisis.
This trade made his hedge fund $15 billion in 2007, propelled him to stardom and his hedge fund to the 3rd largest in the world.
Why does Paulson deserve credit for making the greatest trade ever?
a.) Paulson earned billions betting big on the largest economic event of the past 70 years
Global macro trading isn't even Paulson's background (his background is merger arbitrage) so it is puzzling yet impressive that he came up with such spot-on analysis.
He should receive credit for being bold enough to trust his analysis and ignore his oblivious Wall Street pals.
2. Jesse Livermore's call on the Crash of 1929
Legendary speculator early 20th century, Livermore correctly predicting both the 1907 and 1929 stock market crashes.
Like Paulson, Livermore earns credit for the high impact of the events he predicted and the amount of money he made.
Furthermore, he made his fortune without the benefit of massive investor money or fancy derivative instruments.
One more point towards Livermore is that he became successful with less mentors and educational resources than todays speculators.
In fact, Livermore is still considered a pioneer in the art of speculation. Traders still swear by Reminiscences of a Stock Operator, a book based on Livermore's trading philosophy and career.
3. John Templeton's venture into Japan
Born in 1912, Sir John Templeton, is a legendary investor who pioneered the mutual fund industry.
In the 60's, when Japan was beginning its 30 year long economic miracle, Templeton was one of the country's 1st outside investors. At one point, he put over 60% of his fund in Japanese assets.
Before his brilliant Japan call, Templeton also correctly assessed the economic impact of World War II, the 2nd most important economic event of the 20th century.
In 1939, he invested $100 each in 104 U.S. stocks trading below $1. In 4 years, this portfolio increased 4Xs.
Templeton also gets credit for being a pioneer.
Back in the 60s, people weren't hip to investing in Asia and Japan's export-driven model wasn't yet proven.
Why didn't IBTimes rank Soros higher?
"Not to belittle Soros' accomplishments, but the analysis behind it wasn't as difficult as some of the other trades on this list. " -IBTimes
Also, it was Soros' partner Stanley Druckenmiller who first came up with the trade idea. Soros' just agreed and bet big on it.
Still they give Soros credit for boldness. And he gets 'coolness points' for ringing in a new currency regime for a major country.
5. Paul Tudor Jones' shorting of Black Monday
Paul Tudor Jones correctly predicted and profited from 1987's Black Monday, the largest single-day U.S. stock market decline (by percentage) ever!
Jones tripled his money, making over $100 million while the Dow plummeted 22 %.
In the weeks before Black Monday, traders were nervous about the market. Some also saw the danger of portfolio insurance, partly responsible for the magnitude of the fall.
Thereby, many went short going into Black Monday or advised clients to get out, so Jones wasn't alone in predicting the crash.
Even so, Jones deserves credit because Black Monday was so momentous a market event and he made more money than anybody.
6. Andrew Hall's $100 oil prediction
Back in 2003, when oil was $30 a barrel and the economy was recovering from the dot-com crash, Andrew Hall bet oil would exceed $100 in 5 years.
When oil shot past $100 5 years later in 2008, Hall's employer Citigroup made a fortune and Hall raked in a $100 million bonus.
According to Time Magazine, Hall arranged the contracts so that if oil didn't hit $100 within 5 years, they would expire.
This took conviction and brilliant analysis.
It's hard enough to predict the direction of an asset, much less find a good entry point.
So while Hall's calls weren't on monumental events, he makes up for it by his creativity and brilliance and .
7. David Tepper's 2009 bet on financials
In early 2009, David Tepper bought severely depressed shares of big banks like Bank of America (NYSE: BAC) and Citigroup (NYSE: C).
IBTimes considers Chanos' short of Enron like a miniature version of Paulson's short of the subprime mortgage market.
This period destroyed the careers of some on Wall Street, while making the careers of others like hedge fund manager John Paulson, who made billions betting against the subprime mortgage crisis.
As a result, interest has renewed in "making huge, concentrated bets by analyzing fundamental economic/business conditions," or 'global macro' trades.
IBTimes compiled a list of the greatest trades of all time.
1. John Paulson's bet against subprime mortgages
Hedge manager who predicted and profited from subprime mortgage crisis.
This trade made his hedge fund $15 billion in 2007, propelled him to stardom and his hedge fund to the 3rd largest in the world.
Why does Paulson deserve credit for making the greatest trade ever?
a.) Paulson earned billions betting big on the largest economic event of the past 70 years
b.) Less than 10 players on Wall Street made big profits from this event.
Global macro trading isn't even Paulson's background (his background is merger arbitrage) so it is puzzling yet impressive that he came up with such spot-on analysis.
He should receive credit for being bold enough to trust his analysis and ignore his oblivious Wall Street pals.
2. Jesse Livermore's call on the Crash of 1929
Legendary speculator early 20th century, Livermore correctly predicting both the 1907 and 1929 stock market crashes.
Livermore made $3 million of his 1907 call (equiv. $70 million today) and was worth $100 million (equiv. $1.2 billion today) after his 1929 trade.
Like Paulson, Livermore earns credit for the high impact of the events he predicted and the amount of money he made.
Furthermore, he made his fortune without the benefit of massive investor money or fancy derivative instruments.
One more point towards Livermore is that he became successful with less mentors and educational resources than todays speculators.
In fact, Livermore is still considered a pioneer in the art of speculation. Traders still swear by Reminiscences of a Stock Operator, a book based on Livermore's trading philosophy and career.
3. John Templeton's venture into Japan
Born in 1912, Sir John Templeton, is a legendary investor who pioneered the mutual fund industry.
In the 60's, when Japan was beginning its 30 year long economic miracle, Templeton was one of the country's 1st outside investors. At one point, he put over 60% of his fund in Japanese assets.
Before his brilliant Japan call, Templeton also correctly assessed the economic impact of World War II, the 2nd most important economic event of the 20th century.
In 1939, he invested $100 each in 104 U.S. stocks trading below $1. In 4 years, this portfolio increased 4Xs.
Templeton also gets credit for being a pioneer.
Back in the 60s, people weren't hip to investing in Asia and Japan's export-driven model wasn't yet proven.
It took Templeton's ingenuity, courage, and foresight to lead the way.
4. George Soros' breaking of Bank Of England
In 1992 George Soros put the hedge fund industry on the map by breaking the Bank of England (BOE) by shorting 10 billion worth of pound sterling and forcing the U.K. to withdraw from the European Exchange Rate Mechanism (ERM).
George Soros made $1 billion (an unimaginable sum back then) in the process.
4. George Soros' breaking of Bank Of England
In 1992 George Soros put the hedge fund industry on the map by breaking the Bank of England (BOE) by shorting 10 billion worth of pound sterling and forcing the U.K. to withdraw from the European Exchange Rate Mechanism (ERM).
George Soros made $1 billion (an unimaginable sum back then) in the process.
Why didn't IBTimes rank Soros higher?
"Not to belittle Soros' accomplishments, but the analysis behind it wasn't as difficult as some of the other trades on this list. " -IBTimes
Also, it was Soros' partner Stanley Druckenmiller who first came up with the trade idea. Soros' just agreed and bet big on it.
Still they give Soros credit for boldness. And he gets 'coolness points' for ringing in a new currency regime for a major country.
5. Paul Tudor Jones' shorting of Black Monday
Paul Tudor Jones correctly predicted and profited from 1987's Black Monday, the largest single-day U.S. stock market decline (by percentage) ever!
Jones tripled his money, making over $100 million while the Dow plummeted 22 %.
In the weeks before Black Monday, traders were nervous about the market. Some also saw the danger of portfolio insurance, partly responsible for the magnitude of the fall.
Thereby, many went short going into Black Monday or advised clients to get out, so Jones wasn't alone in predicting the crash.
Even so, Jones deserves credit because Black Monday was so momentous a market event and he made more money than anybody.
6. Andrew Hall's $100 oil prediction
Back in 2003, when oil was $30 a barrel and the economy was recovering from the dot-com crash, Andrew Hall bet oil would exceed $100 in 5 years.
When oil shot past $100 5 years later in 2008, Hall's employer Citigroup made a fortune and Hall raked in a $100 million bonus.
According to Time Magazine, Hall arranged the contracts so that if oil didn't hit $100 within 5 years, they would expire.
This took conviction and brilliant analysis.
It's hard enough to predict the direction of an asset, much less find a good entry point.
Hall pinpointed a timeframe and price level of the move.
Known for doing these brilliant but risky trades, Hall thought spot oil was cheap in 2009, but couldn't buy oil futures (too expensive) so he actually bought 1 million barrels of real oil and physically stored it.
Known for doing these brilliant but risky trades, Hall thought spot oil was cheap in 2009, but couldn't buy oil futures (too expensive) so he actually bought 1 million barrels of real oil and physically stored it.
So while Hall's calls weren't on monumental events, he makes up for it by his creativity and brilliance and .
7. David Tepper's 2009 bet on financials
In early 2009, David Tepper bought severely depressed shares of big banks like Bank of America (NYSE: BAC) and Citigroup (NYSE: C).
Everyone knew Bank of America and Citigroup shares were cheap, but they were too scared to buy because, among other things, they were afraid the banks would be nationalized.
By the end of the year, Bank of America quadrupled in value and Citigroup tripled in value from their bottoms earlier in the year.
That earned Tepper's hedge fund $7 billion. He personally made $4 billion.
8. Jim Chanos' prescient shorts
IBTimes heralds Jim Chanos as "the best short-seller in the world".
He predicted, and profited from the fall of Enron.
That earned Tepper's hedge fund $7 billion. He personally made $4 billion.
8. Jim Chanos' prescient shorts
IBTimes heralds Jim Chanos as "the best short-seller in the world".
He predicted, and profited from the fall of Enron.
He also successfully shorted Baldwin-United, Tyco International (NYSE: TYC), Worldcom and KB Home (NYSE: KBH)
Chanos found red flags in Enron as early as 2000. As he dug deeper, he discovered more discrepancies, alerted the media, added to his short position, and got rich when the Enron scandal hit the fan in October 2001 and the company went bankrupt.
Chanos found red flags in Enron as early as 2000. As he dug deeper, he discovered more discrepancies, alerted the media, added to his short position, and got rich when the Enron scandal hit the fan in October 2001 and the company went bankrupt.
IBTimes considers Chanos' short of Enron like a miniature version of Paulson's short of the subprime mortgage market.
Chanos is now looking at China because he believes its economy is a giant bubble.
9. Jim Rogers' early call on commodities
Jim Rogers spotted the secular bull market for commodities in the 90s. In 1996, he created the Rogers International Commodity Index and worked on ways to make it investable.
Since 1998, it has returned 290% through the end of 2010.
9. Jim Rogers' early call on commodities
Jim Rogers spotted the secular bull market for commodities in the 90s. In 1996, he created the Rogers International Commodity Index and worked on ways to make it investable.
Since 1998, it has returned 290% through the end of 2010.
This compares to the 10% return of the S&P 500 Index during same interval.
10. Louis Bacon's geopolitical play
In 1990 Louis Bacon made a fortune predicting Saddam Hussein invading Kuwait.
10. Louis Bacon's geopolitical play
In 1990 Louis Bacon made a fortune predicting Saddam Hussein invading Kuwait.
Bacon went long on oil, shorted stocks, and his new hedge fund returned 86% that year.
The following year, Bacon also bet the U.S. would quickly defeat Iraq and the oil market would recover.
Bacon gets points for venturing outside the field of finance and correctly anticipated a geopolitical event.
His feat was also impressive because he anticipated events better than the U.S. President, director of the CIA, and top government officials who had better information and access than he did.
Source - International Business Times
Bacon gets points for venturing outside the field of finance and correctly anticipated a geopolitical event.
His feat was also impressive because he anticipated events better than the U.S. President, director of the CIA, and top government officials who had better information and access than he did.
Source - International Business Times
Monday, January 10, 2011
In New Gold Rush, Equipment Suppliers Can Strike It Rich
In uncertain economies, gold goes up.
In many places, like California, basic doesn't even require a permit.
Evens sees a direct link between his store's business and the price of gold.
But not all prospecting suppliers are so optimistic.
Discovery's Gold Rush: Alaska stars have taken prospecting to the extreme, moving their lives and families to the gold fields.
These machines, sorters, earth-moving tools and generators cost between $150,000 and $500,000.
Over the past 3 years, the dips and dives of the stock market have sent gold to record highs!
Many of the recently unemployed started thinking about trying their luck in the gold fields, from weekend panners to the "go-for-broke" stars of Discovery Channel's Gold Rush: Alaska.
But just like gold rushes of bygone eras, the biggest beneficiaries of the new gold rush will probably be the suppliers, the ones "feeding the dream".
But just like gold rushes of bygone eras, the biggest beneficiaries of the new gold rush will probably be the suppliers, the ones "feeding the dream".
At it's most basic level prospecting is all that expensive.
Walter Evens, store manager of California-based Gold Fever Prospecting, says beginning prospectors "just need a gold pan ($4.95)," and maybe "a sluice box ($49) to consolidate material for panning."
In many places, like California, basic doesn't even require a permit.
Evens sees a direct link between his store's business and the price of gold.
"Every time the price of gold goes up $100, 10 or 15 new people walk into my store. Since Gold Rush: Alaska started, our phones have been constantly ringing and we have new customers coming in and out."
Evens thinks his customers have a good chance of making money and has even thought about prospecting himself, "I've thought about going up to Alaska myself. A friend of mine is prospecting up there and I asked him if I could make enough money in a summer to last me all year. He told me that I could make somewhere around $50,000."
But not all prospecting suppliers are so optimistic.
The director of operations for Gold Prospectors Association of America, Brad Jones, says: "Casinos love it when people gamble, but don't want to see people do that as a full-time occupation."
Discovery's Gold Rush: Alaska stars have taken prospecting to the extreme, moving their lives and families to the gold fields.
They also run more complex operations, which costs more money.
Miner, Todd Hoffman, has a deal with a claim holder, who owns mineral rights to the land they're mining. Claim holders take between 10% to 20% of gold found on their property, for allowing prospectors to mine their land.
Pans and shovels may be cheap, but they also in-efficient.
Pans and shovels may be cheap, but they also in-efficient.
Ultimately, Prospecting is sorting through large quantities of ruble in search of a small amounts of gold. Full-time miners use machinery to speed up the process.
Hoffman's working an area known for small gold nuggets, so he uses a machines to sort rocks and mud into progressively smaller pieces, straining out everything larger than ½ inch around.
These machines, sorters, earth-moving tools and generators cost between $150,000 and $500,000.
Due to the recession, many former miners were forced to sell their tools for a fraction of what their worth making it a good time to buy equipment.
Though Hoffman, a aviation machinist by trade, saved money making his own tools and The Discovery Channel chipped in with a little money towards gas and food, Hoffman had to raise money to pay for his equipment.
"I scraped together money by selling equipment, and I traded some equipment for other equipment," he recounts. "I also borrowed money from family and sold an airplane. I'm not sure how I made it, but we decided that we just had to go for it."
Hoffman has also gone into the gold rush supply business himself.
"I scraped together money by selling equipment, and I traded some equipment for other equipment," he recounts. "I also borrowed money from family and sold an airplane. I'm not sure how I made it, but we decided that we just had to go for it."
Hoffman has also gone into the gold rush supply business himself.
Having built his own equipment, he also designs and builds equipment for other prospectors.
"I've become sort of a poor man's go-to guy for gold mining machinery. I'm refurbishing shakers that are 20 or 30 years old and working with engineers to design and build equipment that is cheap and effective." says Hoffman. His customers find him by word of mouth.
For Hoffman, the equipment building hustle is more than just an income source. It's also a chance to share his experience. "After using my equipment, I looked at the things that I did right and the things that I did wrong," he says. "My machines are not going to be high-flying, brand-new stuff. I'm making quality equipment that a guy can buy and use to attack his dream. I think that gold prospecting is one avenue that we can use to develop wealth in our country again."
Source - Daily Finance
For Hoffman, the equipment building hustle is more than just an income source. It's also a chance to share his experience. "After using my equipment, I looked at the things that I did right and the things that I did wrong," he says. "My machines are not going to be high-flying, brand-new stuff. I'm making quality equipment that a guy can buy and use to attack his dream. I think that gold prospecting is one avenue that we can use to develop wealth in our country again."
Source - Daily Finance
Sunday, January 9, 2011
5 Stocks Insiders Are Buying in 2011
Studies show insider trading is most profitable when several insiders buy around the same time.
Insider Monkey, your source for free insider trading data, compiled a list of companies with at least 3 insiders buying with the latest purchase made in late November:
1. Winmark Corp (WINA): Insiders have been buying since December 22nd. WINA closed at $33.16 last Friday.
2. Trailer Bridge Inc (TRBR): Insiders have been both buying and selling around $3. Douglas E. Schimmel purchased 30,000 shares at $2.91 on Thursday. TRBR closed at $2.94 on Friday.
3. Cogent Communications Group Inc (CCOI): There have been recent insider purchases at Cogent Communications around $14 per share. Last Friday CCOI closed at $13.74- less than what the insiders paid for it.
4. Diamond Foods Inc (DMND): Diamond Foods had significant insider purchases 3 months ago when it was trading around $41. Recently Diamond Foods’ Chairman and CEO Michael J Mendes bought additional shares below $52. On Friday, DMND closed at $52.30.
5. EQT Corp (EQT): There are recent insider purchases in EQT Corp. The largest transaction was two months ago at $38.38, recent transactions occurred below $45. On Friday, the stock closed at $45.62.
Source - Insider Monkey
University of Illinois professor Josef Lakonishok and Inmoo Lee show insider purchases generate over 7 % per year in excess returns above index funds when there are several insiders purchasing.
Last week Insider Monkey covered Hercules Technology Growth Capital Inc (HTGC) which closed at $10.36 the Friday before they reported the insider purchase.
During the past week HTGC increased 4.3% beating the S&P 500 index, which increased 1.1%.
This is the 5th week in a row the Insider Monkey list of insider purchases beat the S&P 500 index.
17 of the 22 stocks that made the list beat the S&P 500 index.
Insider Monkey, your source for free insider trading data, compiled a list of companies with at least 3 insiders buying with the latest purchase made in late November:
1. Winmark Corp (WINA): Insiders have been buying since December 22nd. WINA closed at $33.16 last Friday.
2. Trailer Bridge Inc (TRBR): Insiders have been both buying and selling around $3. Douglas E. Schimmel purchased 30,000 shares at $2.91 on Thursday. TRBR closed at $2.94 on Friday.
3. Cogent Communications Group Inc (CCOI): There have been recent insider purchases at Cogent Communications around $14 per share. Last Friday CCOI closed at $13.74- less than what the insiders paid for it.
4. Diamond Foods Inc (DMND): Diamond Foods had significant insider purchases 3 months ago when it was trading around $41. Recently Diamond Foods’ Chairman and CEO Michael J Mendes bought additional shares below $52. On Friday, DMND closed at $52.30.
5. EQT Corp (EQT): There are recent insider purchases in EQT Corp. The largest transaction was two months ago at $38.38, recent transactions occurred below $45. On Friday, the stock closed at $45.62.
Source - Insider Monkey
What Are Top China Small Cap Picks For 2011?
China Growth Stocks (CGS) board on Investor Hub has put together its annual Emerging China Small Cap (ECSC) Index Top 10 List, based on contributions from its 1,000 followers.
Traders were asked to list their personal top 10 China Growth Stock picks for next 12 months.
The top 10 list for 2011 ranked in order of votes:
1. China MediaExpress Holdings (CCME)
2. Universal Travel Group (UTA)
3. China North East Petroleum (NEP)
4. Longwei Petroleum (LPH)
5. China Ceramics (CCCL)
6. ZST Digital Networks (ZSTN)
7. Yongye International (YONG)
8. China Redstone Group (CGPI.OB)
9. Biostar Pharmaceutic (BSPM)
10. Asia Entertainment and Resources (AERL)
CGS traders aren't alone buying up CCME and UTA because of their undervaluation with hopes of big gains ahead.
The top 10 list for 2011 ranked in order of votes:
1. China MediaExpress Holdings (CCME)
2. Universal Travel Group (UTA)
3. China North East Petroleum (NEP)
4. Longwei Petroleum (LPH)
5. China Ceramics (CCCL)
6. ZST Digital Networks (ZSTN)
7. Yongye International (YONG)
8. China Redstone Group (CGPI.OB)
9. Biostar Pharmaceutic (BSPM)
10. Asia Entertainment and Resources (AERL)
CGS traders aren't alone buying up CCME and UTA because of their undervaluation with hopes of big gains ahead.
CCME and UTA CFOs have been bullish in recent insider open market buys.
On Dec. 8, UTA’s CFO Jing Xie bought 39,850 shares of UTA at $6.20 valued at $247,070. One day later, CCME’s CFO Jacky Lam bought 1,000,000 shares of CCME at $15.00 valued at $1,500,000.
Source - Seeking Alpha
How iPhone Production Distorts Trade Deficit With China
With $300 billion plus market cap, Apple appears to be a positive example for corporate America.
But according to Business Insider, Apple is a major contributor to the American trade deficit with China.
Back in 2004, WSJ's Andy Kessler noted the iPod attributed to a $1.5 billion trade deficit with China,despite adding $16 billion in market cap to the company.
In 2011, WSJ is revisiting the same issue, even further.
Though an iPhone costs around $180 wholesale, the value coming from China, in assembly, is about $6.50 per unit.
Yet the entire cost of the iPhone gets counted in the trade deficit with China. As a result, the iPhone alone added $2 billion to the US' trade deficit with China.
Nobody would think the trade wasn't worth it, and nobody would suggest that on-net wasn't good for American economy.
It's not for us to say there aren't issues with currency manipulation from China or that American manufacturing can't be more competitive.
But if you suspect the US trade deficit with China represents some huge problem, then you need to delve deeper into the statistics.
Source - Business Insider
But according to Business Insider, Apple is a major contributor to the American trade deficit with China.
Back in 2004, WSJ's Andy Kessler noted the iPod attributed to a $1.5 billion trade deficit with China,despite adding $16 billion in market cap to the company.
In 2011, WSJ is revisiting the same issue, even further.
Though an iPhone costs around $180 wholesale, the value coming from China, in assembly, is about $6.50 per unit.
Yet the entire cost of the iPhone gets counted in the trade deficit with China. As a result, the iPhone alone added $2 billion to the US' trade deficit with China.
Nobody would think the trade wasn't worth it, and nobody would suggest that on-net wasn't good for American economy.
It's not for us to say there aren't issues with currency manipulation from China or that American manufacturing can't be more competitive.
But if you suspect the US trade deficit with China represents some huge problem, then you need to delve deeper into the statistics.
Source - Business Insider
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