I was watching 'Fast Money', the trading show which airs at 2:00 pst on CNBC and thought I would comment on the 'advice' one gets from the so called experts on that program. First, you have an individual who has a book called, "Buy High, Sell Higher." A recent quote by Warren Buffett about the market was, ' The lower it goes, the more I buy.' The approaches could not offer a larger contrast in methodologies. Myself, I think the guy from Omaha is who you listen to as he has done pretty well and intuitively, the cheaper the price of an asset, the more one gets for their money. Obviously, much depends on what the asset consists of in terms of what you are getting when you buy it. In today's environment, market participants are avoiding companies with heavy debt loads.
Many times, one avoids a lot of trouble that way. However, just because a company has a large debt load does not mean it may not be a good investment. One must compares debt levels to net cash, other marketable securities and assets, and the cash generated by the business to get a more precise understanding of whether a company is able to service the debt easily. In addition, knowing the interest rates, maturity terms, and debt covenants related to the debt issuance tells a buyer what restrictions are on the company with respect to servicing the debt.
Next, I thought I would mention my opinion of the constant stream of chartologists which come on the program. If you think investment bankers or successful portfolio managers like David Einhorn analyze charts to make investments, you are mistaken. In my opinion, the minute they pull out stock charts, run for the hills. You are better off going to company web sites, looking at earnings releases and reading 10-Q's, 8-K's, and Annual Reports. The charting stuff is a byproduct of financial results and the markets reaction to those results. Kindergartners look at pictures, people making investment decisions regarding thousands, tens of thousands, hundreds of thousands, or millions of dollars have to read a ton of material.
Interesting article on smart Money and the stock Market-http://www.bloomberg.com/news/2012-01-19/smart-money-owning-more-equities-says-finland-iq-study-of-who-buys-stock.html
Kodak finally files for Bankrutpcy- When they put digital cameras into phones, that was the kiss of death-http://seattletimes.nwsource.com/html/businesstechnology/2017274850_apuskodakbankruptcy.html
Apple is making a huge push into the education sector with ibooks and the Ipad- smart move as it is a massive market ripe for more efficiency-techcrunch.com/2012/01/19/apple-announce...
As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charterholder.
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