Your Questions About How To Pick Stocks To Short

Donald asks…

4×4 folks, help me settle this argument?

A friend of mine has a stock 2003 Land Rover Discovery and he is trying to tell me that it is “way more capable offroad” than my 2006 Double Cab Tacoma. He claims that the Discovery is better at steep climbs and has a wheelbase that is 28″ shorter than the Tacoma.

The way I see it, the Tacoma has these advantages over the Disco:
– 1.5″ higher minimum ground clearance
– 4″ higher ground clearance under the chassis at the wheelbase midpoint
– same exact breakover angle
– 4 degrees better approach angle
– 5 degrees better departure angle
– Rear diff lock (I believe the Disco has auto LSD)
– Lower center of gravity
– 6″ lower height overall
– 20 hp more than the Disco

Please tell me how a shorter wheelbase, higher CG, weaker motor, and no diff lock would make a Disco a better climber…!?! Long wheelbase, lower CG, more power, and locker (Tacoma) improve climbing ability, no?

The only advantage I see the Disco having is that the short wheelbase can pick better lines around obstacles that the Tacoma would have to go over. And a shorter overall length that is slightly more maneuverable in tight trails. That’s it.

Am I wrong here?
p.s., I asked this in the Jeep category because I figure more people would know about wheeling here. And yes, I do know that JEEPS are the best offroad! ;-D
Alex, you are right — he just dumped $4K into having various power-train repairs made, at only 90K miles.

John answers:

He is simply posturing as he knows he bought an inferior piece of Crud. Those L/R’s are about as reliable as the weather forecaster and he has probably already put out a fortune just to keep the thing operating.

Capable -NOT-

Affordable -NOT-

Pretty, maybe to a girlie man who does not know how to off-road….

Helen asks…

Important Stock Picking Criteria?

I have been browsing through caps.fool.com, its a site where thousands of investors discuss and rate stocks. I’m a trust and Investment management major so i understand the basics of the “by the books” ways of judging a company’s performance. My biggest issue is not being able to look for up-coming investments. There seems to be alot of talk about valuation. If possible id like for someone to give me an idea of what YOU look at when investing in both short term and long term investments. I haven’t reached the courses yet in my curriculum which teach the advanced skills on investment analysis which seems to be what i need. i would apprieciate any help you could give toward giving me some rules, guidelines, #’s that you look for. Investments like PCU (Southern Copper) i look at & do the “Basic Math” and their performance just doesn’t match at all with how the stock is acting. The company is just “ok” but the stock is soaring. Any idea how people find stocks like this?
I look at stock performance charts and go “Wow that is exploding”… but then you wait and see that it most of the time comes back down. What im looking is the BEST way to look at companies and narrow down my choices, so that i can get in AHEAD of the explosions, not just riding coat-tails or following others. Thank you so much for any help you can provide me.

John answers:

Interesting. Very interesting. What valuations metrics did you use to judge a company as just “ok”.

But this would be a great research: “Does Fundamental Analysis of a stock really help an investor find a good stock?” That would be a good research paper.

There’s also a great debate between those who use fundamental analysis (such as you) and those who use technical analysis.

I saw you need to have both to help you get good results.

Let’s look at FCX, competitor of PCU.
1. Competitors of FCX are PCU and RTP.
2. They are all in the basic materials/copper area. This area is clearly in bull market mode. Emerging countries such as China need these raw materials to grow!
3. Let’s look at valuation:
Company || Forward PE || EV/EBITDA || 5 yr Growth || Yield || MyPEG
a. FCX, 10.61, 12.02, 37.5, 1.4, .24
b. RTP, 11.22, 9.377, 12.7, 1.6, .77
(more info on MyPEG here:
http://techfarm.blogspot.com/2007/06/improved-version-of-peg-ratio.html
)

I look at MyPEG of FCX and RTP and both are less than 1. That’s great! MyPEG 2 is very expensive. So that’s a good sign.

If we don’t trust the growth rates, we can still try to find a low PE, ideally under 20 or 15. The PEs above are under 12, very good.

Also, we look at the technicals:
http://stockcharts.com/charts/gallery.html?fcx

Over a three year period, the stock has been trading above both 200 day moving average.

So, it would seem appropriate to buy a good company with good fundamentals, good thesis, good growth, low valuation, that is trading above the 200 day (and ideally 50 day) moving averages.

Through my readings and research, I found that minerals are in bull market mode. I also watched Mad Money show on CNBC hosted by former hedge fund manager Jim Cramer and they mentioned metals were in bull market mode.

Also, using automated screens to find stocks would have found such stocks. (I’m a holder of FCX).

Personally, start researching stocks using the screener at yahoo screener: (finance.yahoo.com. Look for Stock Screener on left hand side)
1. Forward PE 20
3. Stock trading over 200 day moving average
4. Stock trading within 0-5% above the 50 day moving average (better buy area)
5. Ideally, stock is within 5% of 52 week high.

I’ve tried several experimental portfolios over the last few months and performance has been good so far, beating the VTI, the Vanguard US Total Stock Market ETF.

If you ever use this method professionally, (whether or not you get famous), make sure you credit me and let me know. 🙂

Laura asks…

What are some companies and corporations that would be promising investments on a virtual stock exchange?

I have joined a game on vse.marketwatch.com for my economics class, and we were told to learn about how it works ourselves. I think I have figured out well enough how to buy and sell and whatnot, but I don’t know what to invest in. It is a semester-long course, so I’m looking for short– and…semi-long-term investments. Any ideas? From what I’ve picked up, Exxon isn’t one.

John answers:

General Electric is good. As is Google and Walmart.

George asks…

I am wondering how long supermarkets store vegetables before putting them on sale?

There are 2 reasons why I ask. (1) I have noticed that many items have very short sell/use-by dates, often only 2-3 days maximum.

(2) My parents have an allotment. The onions they picked last year are still fine and perfectly edible. However, some of the supermarket onions that I purchased last week (before I was able to get some more stock from my parents!) are already going soft and rotten!

John answers:

My nutritionist told me they can be stored up to a year before they make it to the shelves.Put me right off.I live in the countryside and get my fruit and veg fresh now.Even markets are better than supermarkets.x

Susan asks…

What will happen if a hurricane passed made landfall over the gulf?

this is so exciting. what a time to be alive.
We are expected record breaking hurricanes and tropical storms.

Is it true, all the oil will be picked up and fall as acid rain, and millions of gallons of oil will wash ashore across 1000 miles of beaches?? oil on cars, houses, sand covered in oil., this is so exciting.

How can I make a profit from this? Can I short sell busineses listed on the stock market that are located on the gulf beaches
Should I short sell fishing stocks?

I wanna get rich.

John answers:

Hopefully obama would be caught up in it and blown to the land of Oz.

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