The Bull Hunters Guide

Welcome back. We’re glad you enjoy reading advice on how to invest wisely. Continuing from where we left off in part four of developing the success mentality for investing, we’re going to move towards covering another critical thinking skill that applies to ensuring that your investments are always sensible choices.

It’s Not All About Crunching Numbers

A lot of amateur investors are often told that they should bury their head in the market journals and utilize mathematical formulas for determining successful investment strategies. This is something basic that works, but it can only take you so far. In fact, crunching numbers is only useful when you couple it with what those numbers represent the real world.

Changing values can alert you to opportunities and risks, but they don’t necessarily tell you what those opportunities or risks are. When it comes to making those brilliant choices that the best investors are famous for, it often boils down to evaluating and paying close attention to business practices, employee behavior, and press correspondence.

Pay Attention To The Company Behind The Stock

This mindset is called qualitative evaluation, and it’s basically a matter of inferring changes and deducing market reactions to the things that occur with the key players and participants behind stock-based companies. Very much like being a detective, you have to be willing to forget the numbers and investigate the idiosyncrasies of a company and its behavior.

For example, in 2002, during a Ciena Corporation conference call, Gary Smith, their CEO, was talking. A very festive event, Smith maintained a jubilant attitude regarding the future of his company. However, some individuals recognized Smith’s unusual usage of the term”difficult” and his tone of voice when talking about the economic landscape for telecommunications.

While most basic investors would never have paid attention to this, the shrewd purveyors of fortune knew that this indicated troubled times ahead for the company. Sure enough, almost half of the stocks were sold off only months after the conference, despite optimism.

Always pay attention to what affects your stock directly. Numbers are representations, so you should turn to what they represent and pay attention to the happenings of businesses and the people that run them. This concludes today’s lesson. Don’t leave us however, as we still have more to cover for this series!

Sean Rasmussen
The Bullhunters Guide
Universal Wealth Creation © 2004 - 2010

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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, 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 in this blog, we’ve been discussing the importance of diversifying your knowledge of investment opportunities beyond just the stock market, such as last weeks article on Convertible Securities. In doing so, you should be able to make more intelligent decisions about where to put your money, no matter what kind of turn the market takes. In today’s times, this is obviously a very useful skill to have.

Discussing Corporate Bonds

Today we’re going to discuss corporate bonds. Odds are, like most people, you’ve dealt with a bank before in the past. Whether it was to get a mortgage to buy a house, or a loan to purchase a car, you borrowed money from them and then had to pay it back over the course of time by a predetermined date, along with a premium called interest. When you purchase a corporate bond, you’re doing the exact same thing with a corporation, only you’re acting as the lender.

Whatever cash value you purchase the bond for, this cash is then distributed to the corporation so that they can put it to use just as you would a loan. In return, they must repay you on a pre-determined date called the date of “maturity”. But of course, you would need a greater incentive than that to loan your money. Just like you pay interest, the corporate you buy a bond from will then pay you interest at periodic intervals until the bond is paid in full.

Good Continuous Income

Corporate bonds aren’t the greatest way to earn a lot of money in a flash, because even when they offer a decent yield, it tends to be spread out over time. However, this very feature does make them a really good source of continuous investment income. Retirees might take note of this and use corporate bonds to their unique advantage.

If you’re interested in buying corporate bonds, this can easily be done at just about any broker in the game, as well as at many banks. Unlike taking out a loan, you’ll want to buy when the interest rates are at their highest, though.

See you next week for part 6 of Investments.

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

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For the past few weeks, this blog has been focusing on different methods of investment that you can engage in besides just the usual stocks and bonds, for instance our last post covered investing in Common Stock. The idea is that by doing so, we’ll be expanding your concept of investing and making you a better, more well rounded investor in the process.

What Is Convertible Security?

This time, we’re going to talk about something known as the convertible security. Simply put, this is a bond that can be converted into a stock. When you purchase a bond in a company, you’re buying the right to later on, at your discretion, concert the value of that bond into a number of shares of stock. Clearly, there are times when doing this would be advantageous and times when it would be better to simply keep the bond itself. This is the purpose of the convertible security: it allows you to make that decision for yourself.

Of course, this option doesn’t come without a cost. Typically speaking, convertible securities offer a lower initial yield than other types of investments, because of their modular nature. At the same time, however, if you’re holding a bond and a company goes bankrupt, you’re among the first in line to be repaid, ahead of those who simply are holding stock.

Buying And Selling Is Easy

One other major risk of convertible securities is that most companies withhold the right to “call” these bonds, which means that they can theoretically at any time convert them all into stock at their discretion. While this is rare, it’s something that everyone investing in convertible securities very much needs to be aware of.

Buying and selling convertible securities is fortunately a very easy matter. Most all brokers deal with them just as they would stocks and bonds, so you should be able to dabble in this type of investment fairly easily. Once you get a taste for it, you can decide whether or not it’s really for you.

See you next week for part 5 of Investments.

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

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