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Know Yourself And Checklist For Chasing…By Charles Payne

Earlier this week, on my show, I was asked about selling a stock after one decides to take a tax loss (hint: you cannot buy it back for at least thirty days). This led up to a very important question: When does one sell? It is actually the biggest question every investor faces. After all, when it is all said and done, there are stocks that make a lot of money for many, while others actually lose a lot of money for many. But, why? Simple: because some people sell too early, or they sell too late…

Investing Guide

Trader

Intermediate

Long-Term

Duration

1 to 30 days

30 day to 6 months

Six months +

Risk

5%

10%

20%

Reward

10%

20%

50%

Vigilance (daily)

Four Times

Two times

Once

Financial commitment

20%

60%

20%

Click to enlarge

Ideally, an investor should have an equity portfolio in various investment themes. In part, to take advantage of volatility, but also to resist the urge to close long-term ideas too soon, and take too long to close short- term ideas. However, it is easier said than done. Yet over the course of any given 52-week period, the rationale typically plays out to where the advantages are clearer. The decision-making process for buying and selling stocks is the same across all levels of traders. People who buy as day traders, should sell as day traders; People who buy as intermediate traders, should sell as intermediate traders; and etc.

Obviously, the idea is to find stocks that are undervalued for intermediate and long-term investors. Traders should actually forget about fair value and look at the Greater Fool Theory which reminds a buyer that though they may be paying a lot for a stock, there is someone in line behind them ready to pay more.

Main Tools

Trader

  • Charts
  • Volume
  • Momentum

Intermediate

  • Fundamentals (earnings, market share, margins)
  • Charts

Long- term

  • Fundamentals (products, pipeline, potential)
  • Fundamentals (earning, market share, margins)

No matter what a person considers himself or herself, there is a psychological aspect to investing that triggers actions not originally intended. You MUST take losses from time to time, and you MUST keep 'greed' in check, and be realistic. Stick to who you are as an investor, or inconsistency will result in larger individual loses, wiping out more individual winners.

Equal Value?

Snapchat

Level 3

Value

$10 billion

$10.4 billion

Employees

35

11,000

Revenue

$0

$6.3 billion

Click to enlarge

Hot Private Companies = Hot IPOs?

Last night, I discussed all the noise with private companies that have soaring valuations. It is so amazing that Jessica Alba's business, Honest Company, is now valued at $1 billion. The thing is, she probably deserves it, but I cannot say that for the rest.

At the start of the year, there were 30 private Venture Capital (NYSE:VC)-backed companies valued at a billion dollars or more. Since then, three have gone public with decidedly mixed results that give naysayers ammo. On the other hand, they also encourage those that think these blockbuster private companies will soon be blockbuster publicly traded companies.

Welcome to the Real World

Name

January Value

Current Value

JD

JD.Com

$7.3 billion

$39.0 billion

MBLY

Mobileye

$1.5 billion

$1.34 billion

XNET

Xunlei

$1.0 billion

$78 million

Click to enlarge

We learned this week that the most successful investors in Silicon Valley put their money into Snapchat at a $10 billion valuation. Some think it is nuts, others think Kleiner Perkins just has cash to burn. However, I am not sure, so my advice to you is - be careful. Here are some rules to consider as all of these companies begin to sell stock to the public:

 

  • Make sure the business isn't a one-trick pony and peaking
  • Make sure there has not been too many rounds of financing- see ZYNA and GRPN
  • Make sure not to chase an IPO price that has been adjusted more than once

Today's Session

The major indices indicated lower earlier this morning as economists awaited the second US Q2-2014 gross domestic product (GDP) estimate to be released by the Bureau of Economic Analysis (BEA). There has been some poor economic data from abroad, such as Germany releasing weak employment data and HSBC issuing cautious comments over the key growth sectors in China being hindered by overcapacity and declining demand, weighing on the market. Also, it does not help that Ukraine President Porshenko has announced that a Russian military invasion is underway despite the fact that the two countries were just meeting for talks earlier this week.

We did have some positive news from the companies that reported after the close yesterday and before the open today (chart below). However, these stocks' earnings are not positive enough to move the market on their own.

Ticker

EPS (Actual)

EPS (EST)

EPS 1-Yr Ago

Rev (Actual $M)

Rev (Est $M)

Rev Y/Y %

GES

0.26

0.29

0.52

$ 609.00

$ 617.91

-4.7%

WSM

0.53

0.53

0.49

$ 1,039.00

$ 1,045.74

5.8%

WDAY

-0.11

-0.14

-0.13

$ 186.80

$ 177.45

73.6%

ANF

0.19

0.11

0.16

$ 891.00

$ 907.09

-5.8%

DG

0.83

0.83

0.77

$ 4,724.00

$ 4,765.75

7.5%

SIG

1.00

0.97

0.84

$ 1,225.90

$ 1,050.44

39.3%

TD

1.15

1.09

1.65

$ 7,509.00

$ 7,496.50

6.0%

Click to enlarge

Gross Domestic Product (GDP)

Economists were able to take a breather after BEA released the preliminary reading for Q2-2014 GDP. The US economy expanded more than originally expected, as GDP increased at an annual rate of 4.2%, it was estimated that the GDP estimate would come in at 4.0%. This is a great rebound, especially considering how the GDP decreased 2.1% during Q1-2014. The expansion of the economy was led by strong inventory growth. During the quarter, the US saw an increase in imports and positive contributions from personal consumptions, private inventory investment, exports, state and local government spending, and residential fixed investment. The GDP Deflator, a tool used to measure the relationship between nominal GDP and real GDP, came in at 2.1% after coming in at an estimate of 2.0% in July.

Though the market still indicates lower, the GDP news has caused a reversal in the major indices. The Dow Jones Industrial Average just might open in the green. The S&P 500 and the NASDAQ should also be able to climb higher during the trading day.