The Bull Hunters Guide

Welcome back to our continuing discussion of the seven worst mistakes that investors tend to make when dealing with the stock market. If you missed last weeks edition, be sure to take a look at stock market investing mistakes part 5.

These are mistakes that you might tend to make while thinking that you’re doing something wise, only to realize that you overlooked a crucial detail that ruins your whole plan. For that reason, it’s very much worth your while to learn what to look for in a stock, and how to avoid these all too common pitfalls.

Sector Trends

This time, we’re going to talk about sector trends. Typically speaking, a stock will perform in some sense of unison with the other companies in its industry, or sector. Of course, there are rare exceptions.

A company making microprocessors might well suddenly take off ahead of the competition when it seemed like the entire microprocessor industry was in a lull. However, when this does happen, it’s almost always the result of some exceptional force that the other companies just can’t replicate.

For example, the company might have just released an innovative new product, or the other companies might have been involved in lawsuits that drained their finances during this quarter. Whatever the case, there is always some external reason for it.

Look At The Industry As A Whole

In other words, when you’re looking to buy a stock, it’s quite reasonable to expect that the performance of that stock will be tied in some ways to the other companies in the same industry. It goes without saying that some will outperform others, but the point remains that an upward movement in a few of the companies tends to forecast an upward movement in the rest, and vice versa.

If you keep this in mind when investing, it can even become a powerful tool for prediction. If you see a sector moving up as a whole, try jumping on the bottom performer in the group. You should be able to buy at a value, and see some profit in a short amount of time.

See you next week for the final edition of Stock Market Investing mistakes.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Welcome back to our ongoing discussion of some of the most common mistakes that investors tend to make when Stock Market Investing. If you missed it, be sure to take a look at stock market investing mistakes Part 4.

These aren’t the usual obvious errors that you might have heard of, but they still hold disastrous consequences, so it pays to educate yourself about them and to diligently avoid them.

Predicting Spikes And Lulls

There’s hardly an industry out there that doesn’t fluctuate at least some with the seasons. Everyone knows that retailers, for instance, tend to see a major spike around the Christmas season, and then a lull immediately following that, in the spring.

The same can be said of many other businesses, and the better you’re able to predict when these kinds of lulls and spikes will happen, the better your investment decisions will end up being.

Also note that the decisions made by the federal reserve in regards to setting interest rates tends to directly coincide with the fluctuating seasonal movements of the country’s industries. So, that’s even more incentive to keep this in mind when you’re looking for a company to invest in.

Research 5 Year Data

The best thing you can do to educate yourself about an industry or company’s typical schedule of spikes and lulls is to look at a monthly five year record of the company’s performance. You should see some semblance of a pattern emerging from the shifting data, and from that it ought to be quite easy to extrapolate the knowledge of when it would be best to invest in this company (if at all).

This concept is incredibly important to making wise investment decisions, because the movements of the market and the federal reserve will nearly always outshine any other consideration that can be made about an investment.

In other words, even if everything else looks great, and a company is still being traded at a high volume with a lot of excitement, you can’t count on it unless the seasonal history indicates that you can.

See you next week for part 6 of Stock Market Investing mistakes.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Welcome back, don’t forget to check out last weeks edition of stock market investing mistakes part 3 if you happened to miss it.

Today, we’re going to continue on our discussion of the worst possible mistakes that you can make in the stock market. These aren’t the obvious errors that you might have heard about, but rather simple blunders that people tend to make over and over again. It pays to know as much as you can!

What Is Stock Dilution?

Let’s talk about dilution. Stock dilution is what happens when a company issues too many shares, and begins to undervalue the Investments held by their original shareholders.

For instance, imagine that you knew of a hot stock, and the company was selling shares left and right. You might want to jump on it, assuming that it was soon going to experience an upward climb. You might well be right.

However, there’s always the need to look out for stock dilution. If the company in question begins to issue too many shares, they’re going to cause dilution, and then the shares held by everyone will see their relative value plummet, even if the actual value of the company continues to climb.

Dilution also brings up the issue of convertible debt. If the company issuing too many shares does eventually begin to go into debt, they would be very likely to convert any Investments you held with them into common stocks with a set value. Clearly, this could interfere with your dreams of making a grand profit.

Look Out For Companies Repurchasing Stock

So, when you’re looking at Investments, always be sure to try to find companies who are actually trying to repurchase stock! It might seem counterintuitive, but the fewer shares there are on the market, the bigger your slice of the pie and the higher your earnings per share will end up being.

Besides, a company interested in buying back shares is a company committed to the impeccable management of its finances, and you can always take that as a sign of good management, and a good future.

See you next week for part 5 of Stock Market Investing mistakes.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Recently we’ve started a new series taking a look at some of the worst blunders you can commit when dealing with Stock Market Investing. Be sure to check out last weeks edition of stock market investing mistakes part 2.

These are issues that aren’t quite so obvious, and which a lot of otherwise intelligent investors seem to commit over and over again. Therefore, it pays to know about them so that you can be careful to avoid them in your own career.

The Importance Of Macroeconomics

This time around, we’re going to talk about the importance of macroeconomics. As most of you know by now, macroeconomics refers to the viewpoint which encompasses the entire scope of the country’s economy all at once, instead of focusing in on anything in great detail. In other words, it’s taking a very broad view of the market as a whole, with all of its many forces at play.

We mentioned earlier the importance of qualitative analysis of stocks that you planned on investing in, but that still isn’t quite enough. Indeed, a stock might look totally excellent from both a quantitative and a qualitative point of view.

Everything might be laid out and ready for you to come out making tons of profit on your investments. And still, you might lose money on what seemed like a sure thing.

What happened? You failed to take the macroeconomic viewpoint into perspective. If a company were about to release a ton of new products that seemed sure to be a hit, and if they had solid strategies to carry them into the next decade, normally you’d want to invest right away, right?

But what about if the market is such that there are about to be a lot of layoffs? Or trade issues that will begin to interfere with the manufacture of those products? In that case, the investment is as good as dead.

If you pay attention to the wide, macroeconomic view at all times, you’ll never be taken by surprise like this.

See you next week for part 4 of Stock Market Investing mistakes.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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Hello again. Last time in this blog, we began a new series on the seven worst stock market investing mistakes that you can make when investing.

Now that you’re sufficiently armed with a great deal of knowledge about the markets and Investing in general, you need to know how to safely employ that knowledge. Knowing about these common blunders should help you to avoid some costly mistakes.

Investing Too Early

The mistake we’re going to talk about today is Investing too early in a falling stock. It’s very often the case that when the price of a stock plummets, you’ll see some intrepid investors buying it up with the rationale that it has nowhere to go but up. Sometimes they’re right. But sometimes, they’re horribly wrong!

Stocks of this type are often called “falling knife” stocks because it’s similar to what happens when you drop a knife. Your reflexes sometimes cause you to reach out and grab the falling knife before your common sense can tell you otherwise, and as a result, you get injured.

The problem here is that when the news of a plummeted stock first breaks, not all the damage is yet done. Many times it will happen that when other investors hear the news, they’ll quickly grow upset and sell off their own stock, resulting in the stock plummeting even further. If you had already bought into it, you’d be quite upset.

Strike When The Time Is Right

Instead, exercise some patience when a stock plummets. If you invest too early, you’re only cutting into your potential to make money, so learn to judge exactly when the stock has truly hit “bottom”. This is done by learning to comprehend something called the “selling pressure” of a stock.

You have to observe not just the activity and price of the stock, but also the rate at which shares are being sold, and how quickly the price is dropping. Don’t jump in while the rate it still high; when it’s truly bottomed out, the rate of sell will taper off, and then is the time to strike with your Investing.

See you next week for part 3 of Stock Market Investing mistakes.

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2009

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