Your Questions About How To Pick Stocks

Ken asks…

Stock picks for the united states economy?

I’m still a teen, and i’m only learning, but i’m kinda tired of my profile going down. So anyone have any stock picks for this economy in the USA?

John answers:

Sure. Buy inverse ETFs that go up in value when the stock indexes go down.
I bought and recommended TZA back on 4/26 at a price of $5.31 – it closed today at $8.97.
TZA is a triple leveraged inverse ETF tracking the Russell 2000 index – my retirement funds are fully invested in this ETF.

Michael asks…

should i sell xing stock?

I bought xing stock three weeks ago it has going down 20& should I sell

John answers:

There’s always the probability that the stock will go down instead of up. Indeed the efficient market hypothesis says that due to the large number of competent investors out there, all possible considerations have been priced in leaving only a random walk hence the probability that the stock will go up or down are 50/50. Of course, the market only tends to approach being efficient and not al investors are competent, but this does mean that a good investor must take into consideration the probability that the price will go down and have a strategy for that.

So what is your strategy? Is this a forever stock that you intend to always have a position in? If so then what risk free asset did you pair it with in order to portfolio balance to take advantage of bargains when it drops and reap the profits when it rises? Portfolio balance is when you have a designated percentage of the investment kept risk free and liquid (cash or cash equivalents), when the stock price drops, this percentage increases so you buy more stock to rebalance back to the target percentage, when the stock price rises, you sell to rebalance back to the target percentage thereby buying low, selling high. Is this a forever stock that you wish to accumulate a position in? If so, then you dollar cost average buying a set dollar amount at regular intervals usually coinciding with your paychecks, that way you buy more when the prices are low and buy less when the prices are high.

If this stock is speculation than what was your predetermined acceptable losses? Where you going to use a protective trailing stop market sell order to exit the position? Did you buy a put option to guarantee a sell price? Did you buy a call option instead of buying the stock immediately the stock in order to defer the decision to buy till the option expiration so that you’re only risking the cost of the option and retaining the capital for interim risk free opportunities? What was your determination about how much to invest? What was your money management? What was a reasonable amount to risk on the opportunity such that the wins accumulate and the losses don’t wipe you out? Did you adopt a Kelly criteria, half Kelly, quarter Kelly approach? Are you using a fix proportion for your money management? Are you maximizing your diversification for money management? Did you look at the cross correlation or co-variance between stocks if you’re relying on diversification for money management? Are you using concurrent Kelly for diversification?

Why was “xing” a good buy? Was it facing some challenges that caused the market to price it below it’s intrinsic value? What is it’s intrinsic value? Did you do a dividend valuation model calculation or a discounted cash flow valuation such as an internal rate of return calculation? Have those challenges been resolved? Will they be resolved? What’s the time frame that you would expect such challenges to be resolved in?

If you just pick stocks without deciding how to mitigate the potential for loss then you might as well be betting on horses. Indeed, professional gamblers put more thought into wagers than you have into your investment.

Laura asks…

Where can I buy stocks in oil?

I want to get stocks in the oil industry, but I don’t how to. Anybody know how? Also, is it a smart thing to try and buy stocks in the oil industry right now?

John answers:

If you want advice for picking stocks, here’s a link for Investopedia’s stock-picking guide. Http://www.investopedia.com/university/stockpicking/ It points out certain things to look for when investing in stocks.

As for the other part of your question, there are discount brokers on the Internet (for example Fidelity and Charles Schwab) that will make trades for you for about $10-20 per trade. Here’s a list of comparisons by Forbes magazine with their opinions of the best online brokers. Http://www.forbes.com/bow/b2c/category.jhtml?id=5

That being said, it isn’t a good idea to invest all your money in one stock. There’s a principle called diversification which basically says it’s better to invest your money in lots of different stocks in lots of different sectors. It will minimize your losses because you’re basically not putting all your eggs in the same basket. Here’s the Wikipedia article on diversification. Http://en.wikipedia.org/wiki/Diversification_(finance)

Paul asks…

stock market project?

What are some good companies to ‘invest’ in
for a stock market project?

I need about 10..
and i need to know the parent company or stock symbol.
(:

John answers:

Google “stock picks” and see what the “experts” say. Like that guy on TV Jim Cramer says to buy:
Research in Motion (RIMM) — “Overdone to the downside. I am not buying into the negativity. I’d rather own tech than sell tech. Research in Motion is a buy.”

Apple (AAPL) — “Apple is a buy.”
Corning (GLW) — “Corning is a buy.”

Molson Coors (TAP) — “I like Molson Coors. The raw costs have come down. I want to buy this one”

Brown Forman (UPS) — “I like Brown Forman as well.”

CVS Caremark (CVS) — “CVS, along with the rest of retail, is a part of the early-cycle rally taking place right now. He recommended buying CVS.”

Thomas asks…

ECONOMICS::: i have to pick 5 stocks???…?

i have to pick 5 stocks for an assignment. I dont know what stocks are good or w/e. can someone help me with picking the 5 stocks that will make the most money please?

John answers:

XTO – Exto Energy
POT – Potash Corp
AUY – Yamana Gold Inc
COP – ConocoPhillips
ABX – Barrick Gold Corp

these are not recommendations to buy but can be used for academic study

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