Discovering Turnaround Candidates
There are many types of investment methodology out there. All of them has their own merits. I for one, personally like to invest in turnaround stocks. What is turnaround stocks? They are normally companies that are experiencing problems (hopefully short-term), and a lot of people are not willing to wait for those companies to recover.
I personally like turnaround stocks for two main reasons; First, turnaround stocks have problems in the open. The problem has been disclosed and our task as investor is to figure out how much the company is worth should the problem persists or when the problem goes away. Granted, there might be more problems discovered along the way. But at the very least, some of the problems has come out and the share price generally has dropped because of that.
Secondly, expectation is low for turnaround investment. Share price is already depressed due to known problems. The company does not have to 'beat expectation' every time it reports earning. All it has to do is clear out the problems that causes its stock price to drop on the first place.
How should one find a potential turnaround candidates for their portfolio? The one thing that I found useful is to read the financial news. Companies that are in trouble can be easily spotted in the news. For example, this week brought news from Pier 1 Imports Inc. (PIR) and Doral Financial (DRL). Are these companies in trouble? Sure. Are they turnaround candidates? Possibly.
Another good source would be the list of stocks that are touching 52 week low. Most of these lists would be companies that are experiencing problems and hence has the potential of turning around. For example ATI Technologies Inc. (ATYT) trade closes to its 52 week low of $ 11.20.
What to avoid when sifting through lists of potential turnaround investment? I would avoid company that is getting hammered due to the delay in its financial reporting. No matter how low the share price is, investors do not and should not invest in companies that has some trust issues.
Once we identify our target, we can then do some analysis to determine the fair value of the stock. There are chances that some companies may never recover. So, we have to take that into accounts when doing fair value calculation. Calculating fair value is a whole brand new topic and I won't get into the details here. But obviously, a stock will have a higher fair value if it can recover from current problems than a stock that cannot overcome its current problems.
Hari Wibowo manages a small finance website aiming to help new investors getting started. Curious? You can find his other writings at http://www.noviceinvesting.com
Two Timeless Rules in FOREX Investing
RULE #1) ~ Cut your losers; let your winners ride.
Q1: When you consider that the foreign exchange market has become the world's largest financial market, with over $1.5 trillion USD traded daily, where does it go from here?
Writing A Trading Plan
All professional traders have a trading plan. Trading futures is a zero sum game and those with a plan (and the discipline to apply it) will succeed over those that have no plan. A plan details the particular market anomaly that you intend to exploit - your edge. Human emotion creates anomalies - essentially, the fear and the greed of those that have no trading plan.
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One way to acquire discipline in trading...
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Options Trading - Advantages and Disadvantages
What is Options Trading?
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The Miracle of Forex
My father, who owns a small parts store and garage for vintage British sports cars, called me up recently and droned on and on about how he is getting killed by the Euro. Confused as to how the Euro could possibly be affecting his small and seemingly insignificant business, I asked him how. "Because of the Euro!"
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There are lot's of Forex signals providers out there. New Forex traders might be thinking of looking for a reliable Forex signals provider. Is there any reliable Forex signals providers available?
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ISO 4217 in Forex Trading
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The Seven Most Traded Currencies in FOREX.
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Intrenet Marketing VS Forex Currency Trading
Have you noticed that when someone's trying to sell you something - such as a system for making money - they always make it look far easier than it is? Let's look at two Internet businesses, almost as diametrically opposed as it's possible to be ? Internet Marketing and Forex Currency Trading.
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