Market Watch Investment - Essay Example

no. Market Watch Investment Report Part A large of our team’s investment process pursued an investing strategy to aid in making viable trading decisions. Available sources indicate that “pure investors” are people with intentions of trading stocks sometimes and buying principally to hold. This activity is in line with the trading metrics we were following, which indicate that we traded for not more than 19 times over the 2 months course. ‘Pure investors’” position differs with “pure traders” position since the later refers to the individuals who regularly sell and buy, potentially a number of times during the trading day. There are a set of rule governing how trades and investors choose the varying available security options in the stock market. Our strategy is exemplified in this paper because of the decision to apply the gainer part. For the momentum strategy, my choice was Voltari Corp. Applying the first trading principle, “avoid dealing in stocks reporting above or within the 52 week high”, the decision to invest in APC indicates that this trading principle was correctly followed. Purchasing stocks of Voltari Corp. in its 52-week high stood at $3.60. The second trading principle-choose stocks recording a minimum of 1,000,000 shares in the daily trade volumes, in addition to avoiding stocks recording daily volumes of trade below 100,000 shares-the decision to buy Voltari Corp. stocks comply with the second trading principle. Voltari Corp. stocks recorded 3 million shares in its average 3-month trading volume. The third trading principle illustrates the need to avoid mid-and-cap stocks (stocks recording values less than $5 billion). This principle does not conform well to Voltari Corp.; its stock falls in small-cap stock category with $16.91 million in market capitalization value. Finally, the fourth trading principle indicates that an individual should choose stocks signified by analysts opinions rated closer to or above one (1). This is an indication of better performance in the future compared to opinions that are above or within the range of Five (5). The fourth rules also states that stocks recording negative trends or without significant changes in weekly consensus figures also need to be avoided. Summary of data from MarketWatch Summary of data from Yahoo! Finance The “snapshot” tool available in Market Watch do not show the average recommendation from the analysts for Voltari Corp. generally, most stocks in the financial market have an average recommendation of ‘buy’. Consequently, the trend is projected to move towards the lower facet of the statistical ranking, with twenty-three (23) out of the thirty-three (33) recommendations surveyed showing that people should buy the available stocks in the market. The choice of investing in Voltari Corp. conforms to the four trading principles. Analysis of Voltari Corp. may also be conducted using trading principles for investors. The first rules states that P/E ratio (the projected figure) should be less than the previous 12-month’s P/E ratio, and the previous 12-month’s P/E ratio of a stock should be less than a firm’s competitors or the stock market as a whole. MarketWatch indicates that Voltari Corp. recorded a previous 12-month’s P/E ratio of -1.11, and a forward 1-year P/E projection of -1.11; thus Voltari Corp. confirmed to the first requirement. MatchWatch also provided the data relating to Voltari Corp. competitors in terms of P/E ratios. For example, CannaVest Corp. recorded a P/E ratio of 290.95; of , LightInTheBox Holding Co. Ltd. ADS (LBT) as N/A; and the entire insurance industry, N/A. With regard to the industry’s P/E ratio and competitors in, Voltari Corp. ranks well. The company’s P/E ratio shows a better performance in terms of its earnings. Another platform-Google Finance-also provided additional information on P/E ratios of companies such as Morgan Stanley as 10.00, Wells Fargo & Company as 9.40 and JPM as 8.90. In this case, Voltari Corp. indicates a poor compliance to the first principle of investment. Second principle in investment notes that a company’s previous net income trend ought to show profit accumulation with a rising trend during the last trading period. In addition, loses should exhibit a declining pattern. Data from MarketWatch show that Voltari Corp. has reported a negative pattern in its gross profit accumulation of $14.43 million in 2012 financial year to $1.01 in 2013. This is the 3-month closing trade on 2012-12-31 and 2012-09-30 respectively, from the reports taken from Google Finance reports. Therefore, Voltari Corp. complied with the second investment principle. The trends of operating income, revenue and operating margin for Voltari Corp. (Google Finance) The third investment principle deals with the activities of a firm’s institutions and insiders. Voltari Corp. shows a unique characteristic in this category. The available data from Market Watch shows that insider transactions during the last 6 months amount to 3.2% of the company’s net shares (11,861 shares). Regarding the company’s stocks, this trend was seen as a fall in insider transactions. Institutions bought 5,793,090 shares (representing an increase of 1.23% in net shares). Combining these differing statistics with analysts’ projection of the future performance of the company indicate that the company performs poorly compared to its competitors and the industry with regard to P/E ratios. The stock value indicates that buying Voltari Corp. is a good investment. Generally, investing in Voltari Corp. Holdings partially fulfills the conditions of traders and investors. However, the tendency to buy and hold stocks over a considerable period proves that the investment conforms well to investing strategy. Investor principles may also be applied in analyzing CannaVest Corp stock. The company’s P/E ratio of 290.95 ranks better compared its competitors’-VTLC and LITB N/A, and the entire industry’s ratio at N/A, according to MarketWatch. The forward P/E ratio is valued at N/A. The second principle notes a considerable increase in CannaVest Corp net income from $11,765,210 in 2012 to an insignificant loss in 2013 of $2,045,541 and profits of $12,206,439 at the end of 2014 financial year. Yahoo! Finance also notes an increase in the company’s net shares by 0.7% after purchasing 423,885 shares. Institutional traders also indicate an improved liking for the company, considering that people bought approximately 4 billion shares from the company within the last six months. This reflected to an increase of 65.91% in the institutional holdings. In conclusion, CannaVest Corp exceeds the requirements of last (third) principle. The first trading principle can apply in the analysis of CannaVest Corp. The company was better placed with a 52-week high of $201.00 upon buying. Its average 3-months trading volume in shares was 4 million, according to the information from Market Watch. It means that the company complied with the second trading principle. Still, CannaVest Corp is a huge corporation that enjoys the privilege of having a distinct-ticker icon on the NYSE (New York Stock Exchange). This is an indication of the stock’s liquidity and stability the trading process. Google Finance reported that the company’s market capitalization was large with over $931.02 million. More equally, the company conformed to the third trading principle. Using the fourth trading principle in the analysis of CannaVest Corp stock performance, the analysts’ mean recommendation reports do not indicate whether the company’s stocks fall under ‘buy’ or ‘sell’ category. Opinions of the analysts have also lacked the description of the stock’s indicated significant changes between the weeks of December 31, 2013 and March 1, 2014. Thus, the fourth trading principle was perfectly satisfied. Summary of CannaVest Corp stock performance in the stock market The portfolio’s gainer (momentum) strategy First, Voltari Corp indicates a sturdy for future development. For example, Yahoo! Finance indicates that the company’s estimates for 1-year stock price is $1.79; a representation of a 12-15% price increase over the recent events, giving enough capital appreciation and growth realization. Capital appreciation may also be realized because of the significant 52-week range of $3.2 to $7.50. Yahoo! Finance indicated the change of 52-week high as -4.3%; a sign of the stock’s price decrease in the previous financial year. The decrease in price can possibly reverse according to the analysts’ recommendations. The company’s medium-capitalization status of over $16.76 million- a figure that is within the industry average as well as its competitors such as CannaVest Corp (with $938.00 million) and LITB have minimized risks in stock (with $282.48 million). This status is also an indication of the shares liquidity in the financial markets. The considerable sales volumes of 4 million shares also boost Voltari’s shares liquidity after the stock market closed on December 12, 2013. The 3-month average in share volumes stands at 53,876,542. Future earnings of the company can also be determined by its P/E ratio which stands at 62.63; a figure that is below the ttm ratio of 8.41. The chart below is a summary of VTLC’s stock performance at the close of trade on April 17, 2014 According to Yahoo! Finance, Volatri Corp has one of the best dividend yields of N/A by April 17, 2014. The company compares well with other digital advertising firms according to the value of its book value, which is valued at 0.65 compared to the entire industries average of 1.05; these figures are relative and a possible indication that the company’s stocks are undervalued. Therefore, it means that there is a high chance of the company expanding its growth for the old and potential investors. Thus, I decided to include it in my portfolio. PEG (price/earnings) ratio is examined in line with the choice of the stock. From Yahoo! Finance sources, the expected PEG of the company stands at 0.76, a figure that is below the entire industry’s average of 0.82. This is a sign of undervaluing the company with respect to future projection in stock performance. Expected PEG value of the company in a 5-year prospect stands at 0.34. This value is also lower than the figures shown in the industry average. The company’s earnings per share in the trailing-twelve-months valuation is $3.87. This figure compares well with industry total of $2.99. The company’s competitors record values that are significantly different from the reports of Voltari. In relation to the company’s beta, Yahoo! Finance shows that the figure is 2.29. It means that the stocks do not fall under the risky category and tries to tore the line of the overall market returns. However, however, lower chances of risks tend to lessen the scale of projected growth in profits and gains. In essence, VLTC has illustrated its downsides in the stock market in addition to a considerable less attractive statistics. For example, the ‘N/A’ value of the dividends and the negative price versus sales ratio of -1.11 may discourage the investors from buying the company’s stocks. The negative EPS (price per share) of -3.24 is an indication that the company may be affected by the unseen market factors, leading to losses in investment. However, the decision to choosing this stock over the others indicate that there are high chances that stock performance will increase by looking at the previous performances and the value of net shares and the volume of sales in the 3-month and 5-year projections. Other sources also indicate that the sales-to-price ratios are considerably lower are highly regarded by investors as potential investments. The loser (contrarian) section of the portfolio In the contrarian section of this portfolio, the choice still lied on CannaVest Corporation. Currently, this stock is undervalued in accordance with the market figures. The daily change in stock price lies between -5.51% and -1.78%; according to the reports from Market Watch by April 17, 2014. Previously, the stock was valued at $28.60 on April 16, 2014, but it fell by $0.51 to $28.09 in April 17, 2014. The diagram below shows a summary of the company’s stock performance as of April 17, 2014: Compared with other competitors in the market and the industry as a whole, Cannavest has a low book/price value; an indication of underpricing or valuation of the available stocks. Additionally, the company records a 52-week high of $201.00 and a 52-week low of $10.01. The portfolio indicates that the company shares were when the stocks were at the 52-week low. According to the four trading principles, this was not a good investment because I overestimated the growth in share value and price of the company. From the investor principles learnt before in class, CannaVest Corp was chosen by applying the regulation that states, ‘a stock should be chosen depending on the increase in income or decrease in losses in line with the trends borrowed from previous trading history.’ Yahoo! Finance indicates that the company has been recording a fall in the overall net income. The company’s earnings results calculated at the end of the 1st quarter of March 21, 2013 recorded a decline of $192,625 (17.8%) from the reports of the previous quarter that ended in December 21, 2012. The first quarter of 2013 financial year reported $1,082,375 compared to $1,275,000 in the previous financial year (2012). CannaVest was also a good choice for the contrarian category since it emerged as less risky compared to the competitors in the market. The company has reported a market capitalization of $939.02 million; a sign of medium-capitalization stock. Medium-cap stocks are considered less risky compared to micro small capitalization stocks. The fourth trading regulation was not considered in this portfolio since Market Watch provides no data relating to the view and recommendations of analysts concerning CannaVest stocks. It means that the investment does not conform to all the four trading regulation there is insufficient information concerning the fourth rule. Looking at the stock performances of the listed companies in conjunction with the necessary trading principles it was important to identify a different strategy to be employed in the trading process. My personal strategy revolved around buying low-priced and penny stocks. The decision was reached after reviewing a number of factors related to the challenges and opportunities in the stock market. It is evident that the decision to trade as per the portfolio consisted of stocks indicating minimum chances of losses (a major factor in developing a successful set). However, this approach was marked with the failure to realize notable gains in the trading process. According the technical reviews conducted in this report, the contrarian approach cost considerable amounts for the development of the trading portfolio. Therefore, the strategy used in the investment process inclined towards employing a strategy that could aid in reporting growths in the ultimate revenues. The employed approach was also marked with high risk levels because it involved identifying market factors that determined the failure or success of a stock in the market. High cost and medium penny stock strategy followed the provision that the emergence of new items in the market could propel the purchased stocks to significant growths. For the medium stock option, Ignyta Inc. provided the best choice. As of April 17, 2014, the company’s stock price in the financial markets was $6.69 (MarketWatch). RXDX has reported a 52-week low of $5.36 and a high of $10.64. This reflects to a difference of $5.38 (83.8%). Since the stock price were valued at its all-time low, it was necessary to invest in the company’s stocks. It indicated the potential to grow with time, and fortunately, the stock price rose to $10.64. Additionally, RXDX reports a strong market capitalization of $128.41 million. This is a good number for companies categorized under medium sized firms. For the high-cost stocks, the option emerged as GMLD (Galmed Pharmaceuticals Ltd.). GMLD reported stock prices of $8.58 as of April 17, 2014. The changes in daily stock price were -0.31% and -3.49%. The company also reported its day low as $8.58 and day high as $9.30. The difference between the 52-week high and 52-week low was ($18.73-$8.58, which results to $10.15 or 118.30%). GMLD’s market capitalization was valued at ‘N/A’. The summary of the company’s stock performance is indicated in the chat below: Part 2 Section 1 (Data was obtained from MarketWatch) Gainer Loser Market Own Strategy Ticker VTLC CannaVest RXDX GMLD # Shares Purchased 950 810 1023 723 Price Purchased $ 3.60 28.60 6.69 8.89 Current Price $ 3.81 28.09 6.56 8.58 Commission Fees $ 0.71 7.23 2.11 2.41 Profit Per Share $ 0.21 -0.51 -0.13 -0.31 Gain on Investment 2.24518626 -0.93628363 1.3862394 4.3826245 Based on all the approaches discussed above, my strategy on purchasing shares from a highly priced stock (GMLD) worked best in realizing the results. Works Cited Lintner, J. (2001). The valuation of risk assets and the selection of risky investments in stock portfolios and capital budgets. The review of economics and statistics, 13-37. Lorie, J. H., Dodd, P., & Kimpton, M. H. (1998). The stock market. Irwin. Odean, T. (1998). Are Investors Reluctant to Realize Their Losses?l. Journaof Finance, 1775-1798. Yahoo! Finance. Voltari Corporation (VLTC). Retrieved April 21, 2014, from http://finance.yahoo.com/q;_ylt=AwrBJSDhKFRTcCIAQ56TmYlQ?s=VLTC Google Finance. Voltari Corp. Retrieved April 21, 2014. from https://www.google.com/finance?q=NASDAQ:VLTC&fstype=ii&ei=hbeKUci3OcmDqQGgLg MarketWatch. CRSR342-SPRING-2014. Retrieved April 21, 2014, from http://www.marketwatch.com/game/csr342-spring-2014 Read More