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Michael Michaud is the founder of ( and the Invest2Success Blog ( He has been investing and trading in the financial markets since 1989. He founded to empower individual institutional... More
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  • The Bad News For The Bears Continues

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    April 22, 2014 - The Bad News for the Bears Continues by Market Authority

    A few weeks ago, on April 4th, the BLS released a meaningless unemployment number.

    On the same morning, the market began a multi-day selloff. This selloff appeared like bandwagon selling and I questioned how long it would last…

    Today, after a selloff and low volume rally, the market has returned to the same level as it sat pre-unemployment report. If you were away on spring break with the kids, the good news is you didn't miss anything!

    Take a look at the 1-month chart of the SPY's…

    SP500 Chart

    And now here comes the bad news for the bears. The SPY is a mere 50c away from an all-time closing high.

    SP500 Chart

    Once this top is taken out, the investors who put on bear suits after the employment report should push the market to higher levels this week. You can see this by how the market traded sideways throughout March. The early-April sharp selloff caused investors to jump on the move and turn bearish. Now these bears need to cover shorts and add exposure as the market moves higher.

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    Apr 22 9:04 PM | Link | Comment!
  • Investing In Firearms Sales And Earnings Growth

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    Stocks in the firearm industry were extremely hot in 2013 as worries over new laws spurred many to buy up guns and ammo before fresh regulations could come into effect. However, any big changes to nationwide gun legislation haven't really taken place, cooling demand for many firearms across the country.

    Yet even with the lack of legislative impetus, many stocks in the firearm industry remain well-positioned for further gains, and are actually looking quite promising for 2014 as well. This is particularly true when investors take a closer look at one of the most famous names in the industry, Smith & Wesson (SWHC - Trend Report).

    SWHC in Focus

    The Springfield, Massachusetts-based arms maker is probably best known for its pistols and revolvers, but the firm is also involved in a variety of rifles and firearm-related products as well. The company is over 150 years old, and it has stood the test of time selling its defense products to individuals, police, military and federal workers.

    While the fear of increased gun legislation has certainly boosted volatility in SWHC over the past few years, the stock has moved significantly higher regardless of these worries, and even as these concerns have cooled in recent months, SWHC has remained a top performer. In fact, the stock has added over 80% in the past two years, while it is sporting a 27% gain in the past six months compared to a roughly 7.5% move higher for the S&P 500 in the same time frame.

    However, it is worth noting that SWHC was on a bit of a bearish trend in 2014, at least during the first two months of the year when the stock lost about 15% of its value in the time frame as worries built that the gun boom was beginning to fade. The company put these concerns in the rear view mirror though, as its earnings report on March 4th crushed estimates while the firm raised guidance as well.

    Recent Earnings

    For the most recent quarter, our Zacks Consensus Estimate for SWHC earnings was 29 cents per share, but Smith & Wesson posted EPS of 35 cents a share, crushing the estimate by over 20%. This also continued the solid streak of beats for the company, as it has now beat in each of the last four quarters including an average beat of 16.9%.

    Beyond this solid beat on the earnings front, SWHC also boosted its guidance up to $1.39-$1.42 a share for the full year. Thanks to this great earnings report and the move higher in guidance, it shouldn't be much a surprise to note that many analysts bought in to this continued upswing in shares of Smith & Wesson, leading to several earnings estimate revisions higher.

    Earnings Estimates

    In the past two months, six estimates for SWHC have moved higher, and not a single one has gone lower in the same time period. The current consensus has now moved up to $1.43/share-just ahead of management guidance-baking in a very solid EPS growth rate of just under 17% for the company.

    Clearly, even as the gun market cools off, SWHC remains well-positioned for further gains, and a solid level of growth as well. Due to this, the company has earned itself a Zacks Rank #1 (Strong Buy) meaning that we are looking for more outperformance from the company in the weeks ahead as well.

    Bottom Line

    SWHC has been a very solid stock over the past two years, but it ran into some turbulence to start 2014 as many were worried that the gun boom was fading. However, the firm surprised with a very solid report and increased guidance, dispelling those worries with ease.

    Given how bullish analysts have been on the company following this report-and SWHC's track record at earnings-there is plenty of reason to believe that more gains are ahead for this company. So before you think that you missed out on the gun stock boom, take a closer look at SWHC, the stock remains well-positioned for growth and it could still have plenty of room left to run if recent earnings estimate revisions are any guide.

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    Apr 21 7:25 PM | Link | Comment!
  • Secrets To Successful Insider Trading

    Secrets to Successful Insider Trading by Zacks Investment Research

    What REALLY happens when an insider buys stock?

    I'm talking about insider "trading". This is the legal kind, when insiders buy and sell company shares.

    There are a lot of different reasons that may influence why an insider is buying and if you should be following their lead.

    But how do you figure out what is a good insider "buy" and if you should be jumping in?

    The key is in the secret signals.

    The Insiders Will Send Signals

    Investors who want to get in on insider trading can simply buy what the insiders are buying.

    There are plenty of lists for "insider buys" put out every week. But those lists don't really tell you the full story. It's simply a bunch of names and numbers of shares.

    What's the REAL story behind the buy?

    I've managed the Insider Trader service at Zacks for four months and have reviewed dozens of insider buys in that period. The insiders often give out secret signals, but you have to know what to look for.

    Here are three of the secret signals that I use to find the diamonds in the rough of the insider trades. Find these secret signals and insider buying will no longer seem like a mystery.

    3 Secret Signals to Successful Insider Trading

    1) "The Lawyer Indicator"

    The General Counsel (or "Senior Counsel" at some companies) is the company's top lawyer and is considered part of management. Being a lawyer myself, I can tell you that lawyers are, in general, risk averse. (Sorry lawyers!)

    Therefore, when it comes to buying company stock, they usually err on the side of caution. They rarely buy shares on the open market unless they're seeing something that is really great at their company.

    If you see the General Counsel buying, that is a strong secret signal. I call it "the lawyer indicator." Buy when the lawyers are buying.

    2) Buy When There Are Cluster Trades

    The insider buys that get the most publicity are the famous CEOs who buy, for example, $1 million worth of shares (or more) in one massive buy.

    While these big buys are great, and can mean something exciting is going on at the company, I look for the complete opposite. I look for the "cluster" trades, where a group of insiders are all buying at the same time.

    That means, for example, there may be three Directors, the General Counsel and the President of China Operations all buying smaller amounts of shares, but all deciding to do so around the same time. This type of cluster buying is rarer than the one big buy by the CEO and sends a powerful signal.

    What do they ALL know?

    3) Buy If Insiders Are Jumping in For the First Time

    There are some insiders who buy company shares on the open market several times a year. Some of the senior insiders, like the CEO and CFO, are usually paid at a higher level than the other senior management and buying company shares isn't much of a hardship.

    But for other senior management lower down the chain, like the General Counsel or the head of Human Resources, among others, there may be a different calculation when deciding to buy that $10,000 worth of stock.

    It's not unusual to see insiders who have NOT bought shares in many years, if ever.

    The insider who has NEVER bought shares before, but is now, sends a strong signal.

    I'm not talking about someone who is new at the company. This would be an insider who has worked at the company for several years and only now has decided to buy shares.

    What does that insider know that is different from the prior years? Why is he buying right now? And how can you take full advantage of this buying activity?

    Where to Find the Strongest Insider Buys

    Anyone can go on the SEC website and get the insider trading information, but it's too time consuming to search by individual companies.

    Some investment firms collect the insider buying data and can provide it to you as a big weekly list. Have you ever seen one of those lists? The sheer number of companies can be overwhelming.

    To solve this problem, our Zacks research team developed a strategy that monitors selected insider buying activity at companies that already show strong earnings and exciting valuations. Only a handful of stocks meet the demanding criteria of our Zacks' Insider Trader. And right now, we have narrowed it down to 7 insider picks that make the grade.

    Insider Cow

    Profit From Insider Trading
    Insider behavior matters because research based on real-time signals has shown that a properly modeled picture of insider actions can provide the most accurate reflection of the prospects for the company, industry, economic sector, or even the stock market in general, going forward. This makes perfect sense from an intuitive perspective. Corporate insiders possess all the necessary skills and characteristics that one could use to describe the "successful" investor.

    Apr 20 7:01 PM | Link | Comment!
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