The Bull Hunters Guide

Hello again, and welcome back. This time, we’re still discussing the different theories on how best to choose a stock that is poised to give big gains in the future. It sure sounds simple enough, but there are a lot of conflicting ideas out there, and we’re planning to examine each one in turn to see just how well they hold up.

The goal of fundamental analysis

Last time, we talked a bit about fundamental analysis, and how its main goal was to look at the numbers of a company in order to generate a mathematically supported future projection for the company’s cash flows. Since this is essentially the same kind of appraisal one would do when buying a company, it makes sense to apply it to the stock market, and indeed most of the strategies we’ll discuss here are simply an extension of evolution of the idea of fundamental analysis in some way or another.

Qualitative analysis

The first of these is qualitative analysis. What qualitative analysis has to say might seen very obvious, but it’s something that some of us don’t care to admit because it tends to throw a very large monkey wrench into our carefully controlled fundamental analysis calculations. The main idea behind qualitative analysis is that attention must be paid to the subjective, “quality”-based parts of a company, as well as the objective aspects of the situation (the numbers).

Appraising a company

To appraise a company in the qualitative sense, investors tend to need to do a lot of research and ask a lot of questions. Of course, in many cases, a lot of the research will already be done for them, but they still have to take the initiative to seek it out before they put their money down. Questions like the following tend to be very helpful in accessing the subjective quality of a company.

Where did the company come from? No company springs up overnight. Discover the company’s origins, and by extension, whether or not the company really seems to have a solid foundation under it.

Company policies

What ideas drive company policies? Companies that are in their respective industries to turn a fast buck and then cash out may have good numbers on paper but are clearly not wise ideas for long term investors. It pays, then, to know a thing or two about the philosophy behind a company’s leaders.

A close eye on “who’s in charge”

Who are the people in charge of this company? Oftentimes, a company will change hands, and this can happen without small scale investors even being aware of it if they aren’t paying attention. For this reason, it’s important to keep a close eye on the individuals in charge of the companies you’re invested in, in order to make sure that the individuals running them seem qualified for the job.

Of course, it’s also important to analyze the industry as a whole. No company exists in a vacuum, and the trends that affect the industry will affect the companies within that industry as well.

Real value of a company

As we can see, this whole concept of using “strategies” to pick stocks is going to be a lot more complicated than perhaps we foresaw. Of course, there are some sound tips coming up, and plenty of valuable information, but for now, meditate on this all important concept: the real value of a company has to be measured at least in part by real human inquiry, not just calculations and optimistic graphs.

See you next week for part 3 of Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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Recently in this blog, we’ve addressed the topic of general stock market tips that were intended to help new investors come to terms with some of the myths and rumours that dominate the market, as well as to avoid some typical mistakes that often spell the downfall of first time investors. Having addressed a sufficient amount of those, however, it’s time to move on to some more specific topics. In particular, we’re going to begin to discuss the different strategies that are normally employed for choosing winning stocks and comment on the pros and cons of each one.

Having it all figured out

Everyone out there seems to have it all figured out when it comes to the market. They all think they have the sure-fire formula for picking up on the next big thing and hitting it big all with one well placed investment. The truth is, of course, that no one can accurately predict the future all of the time. If they could, there wouldn’t be any fun in playing the market!

As one plays the market and grows accustomed to its ups and downs, one can’t help but to begin to see patterns. This is just the nature of the phenomenal (and shortcut-loving) human mind at work. Everyone develops their own strategies. Be that as it may, there are certain strategies that have risen to the forefront and tend to be seized upon as “sound strategies” by a majority of individuals.

Fundamental analysis

The first of these, and the most important is the concept of “fundamental analysis”. Simply put, this is, of course, the analysis of the fundamentals of a company. But what exactly does that mean? The main theory here is that stocks tend to have a “real value” which is separate from the nominal value that it is being traded at on the market.

This “real value” is determined by looking at a number of factors, including the projected future cash flows of the company in question (the same thing you would look at when buying a company outright, which in a very real sense, is what stock trading is all about), as well as how fast it will generate the profit it seems to be ready to generate, and what that passage of time means in terms of inflation.

Differing schools of thought

Phew. It’s a lot to think about, and maybe that’s why there’s so many competing schools of thought on how best to determine what the real value of a company is. Those differing schools of thought are what we’re going to be discussing over the next several posts in this blog.

Until then, happy trading!

See you next week for part 2 of Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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This is the last post for a while to cover the topic of basic investment strategies. In the coming installments, I’ll branch out into more diversified topics and try to get a little more in depth into each one. In the meantime, I hope you’ve enjoyed this series on basic stock market strategies and I sincerely hope that they’ve improved your ability to successfully invest in the market and see good returns.

Please refer your friends to this blog so they also can enjoy a free way of improving their investment knowledge. Now, back on topic: Basic Investment Strategies.

Reinvesting your interest

For this article, I’ll cover a tip that more people need to take advantage of in order to keep the cycle of their investment going. Namely: reinvesting the interest.

First of all, never draw from your portfolio for spending money unless it’s absolutely necessary. You should have a separate savings account for matters such as that, and it’s from here that you draw when you need to travel, or make repairs to your home, or things of that nature. Your portfolio is a long term investment, and drawing from it early is a blow that will strike you much later down the road, with a force magnified many times over.

Moreover, because it’s a long term investment, avoid the trap of seeing the interest generated by your investments as “free money”. Sink it right back into your investments by buying more shares, so that the cycle can continue and that your payouts will grow larger and larger.

Check the balance of your portfolio

Try and keep a schedule going where you regularly check the cash balance of your portfolio, and when it hits a certain amount, spend some time looking around and buy new shares, either in new holdings or more in ones that you already have a stake in.

By treating your investments in this way, you are ensuring that your profits are maximized because the interest will continue to compound over the years (and usually at a rate much, much higher than typical means of savings such as bonds and savings accounts). Your portfolio will thank you for it.

Thanks for hanging around for the 12 week series of Basic Investment Strategies. I sincerely hope you have enjoyed it. Please leave a comment in this blog if you appreciate the effort and I will reward you with plenty more stock market investment strategies.

Join me next week as we start our trek into some more in-depth investment topics: Stock Picking Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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In my excitement the latest release of my Internet Marketing ebook, I managed to totally forget my Bullhunter blog. My apologies! Maybe I can cheer you up with this video on my motivational blog >> It is guaranteed to make you laugh. Now, onto the topic: Basic Investment Strategies.

Underlying stock market needs

In any type of activity, there are always those people who seem to need to “keep up with the Joneses”. If the neighbors buy a new car, they have to buy a new one, and preferably one that’s more expensive, with fancier features. If the neighbors get new golf clubs, guess what? They’ve got to have them as well. No one is really sure what drives this sort of behavior, but it’s obvious that there’s some sort of underlying need for these people to prove themselves to those individuals with whom they are interacting. When these people become involved with the stock market, it’s just a disaster waiting to happen.

The serious investor

How many times have you heard the phrase serious investor used to describe someone who has sunk nearly all of their assets into the stock market? Don’t fall into this trap! The seriousness of an investor is measured by the amount of thought and care they put into managing their portfolio, not the actual dollar amount that they’re playing with. Some people never seem to get this message though. In an attempt to be taken seriously, they just keep on sinking in more and more money, regardless of the potential consequences.

What do you hope to gain by investing?

What ends up happening to these people, inevitably, is that a loss hits them, and they lose way more than they are comfortable with losing. In their desire to look serious or to be taken seriously by others, they failed to ask themselves the question of what they hoped to gain by investing. Some people are okay with a loss of 20% on their investments. Some can even handle 50%. Others might run screaming at a mere 10% loss. All of this is fine so long as you’re honest with yourself about how deeply you want to swim in this pool. Don’t go out further than you’re comfortable with, and you’ll never get into trouble that you can’t get out of.

See you next week for part 12 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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Ever hear of those “fantasy sports” leagues? People meet up on websites or even in person to build their own fantasy sports team comprised of all their favorite team members from all the various teams throughout the actual league. Then, every time a game is played in real life, the performance of the players who are involved in each person’s fantasy team are evaluated and an overall value is given to each fantasy team. At the end of the season, the fantasy team that contains the most valuable players is announced as the winning team.

The Fantasy Stock Market

Some people, it seems, like to play fantasy stock market. They do an awful lot of speculating in “what ifs” and it tends to take time away from their actual investing. This is especially true of those individuals who can never seem to let go of a stock once they sell it. We’ve all probably met someone like this. They had a poorly performing stock so they decided to sell all their shares in it. But now, they check the status of that stock more obsessively than when they actually owned it! Even though it can’t possibly affect them now which direction the stock takes, they have to know how it’s doing anyway, they have to know if they made the right choice. What if they didn’t? What if they would have been better off holding on for a little while longer?

Learn To Let Go

Letting go is one of the most important lessons to learn in the stock market. The fact is that you’re going to pick some duds over the course of your career as an investor, and when you do, you need to just forget about them and move on. If you’re constantly looking backwards and dwelling on your mistakes and whether or not they were really as bad of mistakes as you thought they were will prevent you from doing what every real investor needs to do: look ahead to the future.

Stocks Poor? Ditch It!

If you have a poorly performing stock that’s causing you grief, sell it and let that be the end of it. If you happen to come across a report of how it’s performing, fine, but don’t bother to seek it out. You’re just wasting your time. You might as well try to keep tabs on every single stock in the exchange! Instead, focus on those stocks in which you still have an actual investment, and those on which you’re thinking about investing in the near future. They are the areas that are really worth your attention and concern.

See you next week for part 11 of Basic Investment Strategies.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2008

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