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Amy Tailor
On this website, I will try to explain why I think that the future belongs to the stock market. But first let me briefly introduce myself. I earned a B.A. degree in economics from Yale University in 1972, and my Master�s Degree in Mathematics from University of California at Berkeley in 1976.
From 1979 to 1985, I was in charge of the stock forecasting newsletter. I also have several publications on theoretical economics topics in academic jour...
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Wall Street�s Best Analysts
July 02,2008
Over the most recent three years, these people made the most accurate forecasts, and many investors profited from their recommendations. Who they are and what they recommend today, as published by Forbes.com.
 Robert Spingarn, Credit Suisse�s aerospace-defense expert, was named #1 analyst. His forecasts and stock picks over the most recent three years were the most accurate. For instance, his recommendations to buy shares of defense corporations Aerispace, Precision Castparts and Armor Holding allowed investors triple their profits from May 2005 to December 2007.
Spingarn�s today recommendations include BE Aerospace as a top pick, as well as other two companies Northrop Grumman (NYSE: NOC) and Spirit AeroSystems Holdings (NYSE: SPR, chart below).
#2 in the list is former Credit Suisse�s tech analyst Robert Semple, who successfully forecasted Apple�s increase. Since his first recommendation �to buy� in 2005, the stock�s market value increased by 449%. Today Semple sticks to his forecasts: his picks include Apple (Nasdaq GS: AAPL), Hewlett Packard (NYSE: HPQ), and Western Digital (NYSE: WDC).
James McIlree, a telecommunication expert in Collins Stewart, is #3 on the list. His best recommendation, Harris (HRS), returned 117% in profits over three years, and his picks Globecomm Systems (NASDAQ: GCOM) and Comtech Telecommunications (NASDAQ: CMTL) increased by 115% and 80% respectively. His today�s picks are ViaSat (NASDAQ: VSAT), Harris and Comtech Telecommunications (chart below).
Rod Lache, an auto industry analyst from Deutsche Bank, shares third rank with James McIlree. Lache is pessimistic about his sector due to high gas prices and its overdependence on fuel-thirsty SUVs. That�s why he is more into tire companies at the moment. His favorite pick is Goodyear (NYSE: GT), which he believes is an example of organic business development with diversified customers� base and geographic diversity.
#5 is the veteran of Wall Street Richard X. Bove, deemed one of the best macroeconomic forecast analysts. Presently, he believes that U.S. economy is entering a recovery period, not a recession, and recommends investors to buy shares of Bank of America (NYSE: BAC).
Which clothes brands might be profitable for investors and what�s good about commercial estate sector, you might learn here. |
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If Buffet Invested In Small Companies
June 25,2008
 Many investors would like to invest like Warren Buffett, but very few command such budgets as he does. It�s also hard to follow his success by investing in the same companies, as most of the Buffett�s investments cost hundreds of dollars per share.
However, Buffett told his shareholders recently that opportunities lie in small companies. In early May he was asked on the Berkshire shareholders� meeting what would he buy if had only several millions at his disposal? And though the Oracle did not provide any names, we can find small companies that could be attractive for Buffett using his criteria, just like Forbes did. For instance, a company has to see its before-tax profits increasing over the recent 10 years. Average profitability of shareholders� equity should be at least 15 percent over the last three years. A company also has to have strong management, which could be determined by how retained earnings are distributed. Besides, a company must have enough assets to pay off its debts in two years in case it is needed.
Using these criteria, Forbes magazine has picked 6 the most perspective American small cap companies. The list was topped by Landstar Systems Inc. (NasdaqGS: LSTR), logistics and transportation company. The company�s debt is $124.2 million, and annual income is $109 million. Average profitability of shareholders� equity equaled 49.5 percent over the most recent three years and 36.5 percent over the last decade.
Producer of specialty ingredients for food, nutritional products and pharmaceuticals, Balchem (NasdaqGS: BCPC) has market capitalization of $432 million. The company�s annual income totals $17.5 million, which is enough to cover the debt of $15.2 in one year. Average profit on retained earnings is 17.7 percent over the recent 10 years.
Recreational vehicles and buses producer Thor Industries (NYSE: THO) has no debts at all. The company�s profit on shareholders� equity has totaled 17.1 percent over the most recent decade. Beverage manufacturer Hansen Natural Corp (NasdaqGS: HANS) has no debt as well, and its average profit on the shareholders� equity totaled 39.6 percent over the most recent three years.
Oregon-based bank Cascade Corp (NYSE: CAE) has a profit on retained earnings of 15.5 percent and profitability of its shareholders� equity of 19.1 percent. Florida-based insurance agency Brown& Brown (NYSE: BRO) has seen an increase in its pre-tax income over the last decade, and its shareholders� equity average profitability is 23 percent.
Although these companies would not be interesting to Warren Buffett due to their small size, they can bring nice long-term profits to its investors. Besides, you can always find your own investment picks using the criteria above. |
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The Sports of Trading
June 18,2008
 Trading is often compared with gambling for its risks or with sports for its competitiveness. In his recent post, Jeff Miller discusses how sports and trading are related. I believe some of his thoughts should be shared here as they provide an alternative understanding of trading for those who look for more trading rules and principles.
Tolerating Losses is probably one of the hardest issues for both sportsmen and traders. Frustration and lack of success that arise from losses usually make players take unsound decisions. As put by a poker superstar Daniel Negreanu, �Bad decisions are born from a lack of focus combined with a lack of confidence. In order to be at your best, you have to separate the past from the present, and devote 100 percent of your attention to the here and now.� Isn�t that a perfect rule for traders? Do not focus on what you did wrong or what you need desperately � focus on what you can do and emotionally accept the possibility of loss as a part of the whole game.
Another interesting idea is Playing within Yourself. As I understand it, it means finding your own skills within yourself, without being better or worse than others. As put by Harold Reynolds, a great base-stealer and fielder, who was seeing other players as giants, �They all had a special skill that stood out amongst the group, but once I set that skill aside, it cleared my vision and I realized not only were we similar in physical stature, but we basically all had a similar style of play -- catch the ball, hit for good average and don't make mistakes. After assessing the competition, I concluded that if I could play within myself, which meant catching the ball, putting it in play and stealing bases, why couldn't I be an All-Star too?�
And then there is an important investor lesson offered by Jeff Miller. When people strive for an instant win, they risk facing big losses as well. But when investors use �basic strategy� of finding strong stocks with modest valuations, they perform better and with less risk. Setting your goals too high won�t get you all of the way up just because you want it. Grab what you�re given, strive for more, but remember you won�t be able to get all of the world�s money. |
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Investments in the Sun
June 11,2008
 As long as clean energy is a relevant issue at the moment, I decided to present a few companies engaged in solar energy production. While there are plenty solar power stations on the market, there are much fewer producers of materials for them. And without sun panels and other equipment, no station can operate efficiently. So let�s dig in.
First Solar, Inc. (NasdaqGS: FSLR) develops, produces and sells solar electric power modules using a proprietary thin film semiconductor technology. According to experts, this is not the most modern technology but it�s quite cheap and established. The company boasts $21.79-billion capitalization and strong fundamentals. No wonder its shares increased from $25 to over $300 per share in the year and a half of public trading. First Solar�s stock is good for long-term holding (the company is building its second plant in Germany) or in hope for a technological breakthrough.
SunPower Corporation (NasdaqGS: SPWR) is promoting efficient but expensive technology of silicon full-contact panels. The company�s most famous achievement is the U.S. most powerful solar system Nellis Solar Power Plant near Las Vegas with its panels following the sun. Although SunPower Corporation�s stock is quite volatile, analysts believe it to have great potential: when energy gets more expensive, even costly SunPower systems will be much demanded and bringing profits to investors.
The abovementioned companies are among the largest and well-known in the sector. But there are other publicly traded companies on the market. For instance, a Chinese corporation LDK Solar Co with $4.7 billion capitalization, or smaller players such as Suntech Power Holdings, Canadian Solar, Evergreen Solar, Akeena Solar. In general, all these companies have bright future: the cost of their energy is going down while kilowatts of traditional energy are getting more expensive. |
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Shareholders of Societe Generale Expressed Themselves
June 04,2008
 Shareholders of the French bank have been storing their emotions for several months as shareholders� meeting takes place once a year. The loss of billions blamed on a rogue trader, Jérôme Kerviel, was the main reason of a scandal on the meeting as angry shareholders of Societe Generale did not pick the words demanding the resignation of its CEO.
�The employee was jailed but it is the bosses who should have gone,� said one man to loud applause, charging that management had turned the bank into a �casino.�
�Mister chairman, I wonder who you take us for,� retorted another shareholder who claimed to have been a customer of Societe Generale for 36 years. �You speculated and that is all there is to it. It is you who are in the dock and Kerviel is just a puppet,� he said.
Bouton was trying to convince the shareholders that the 4.9 billion euro (7.75 billion dollar) loss taken on Kerviel's positions resulted from �an isolated operational risk� and said the group remained one of the best-performing banks in Europe.
One shareholder, however, praised the chairman for his courage in coming to the meeting while another thanked him for preserving the bank's independence in the immediate aftermath of the scandal.
The value of shares had plummeted from 135 euros (213 dollars) in June 2007 to less than 67 euros on Monday. This drop is two times bigger as compared to the whole European bank sector decrease. |
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Brazilian Opportunities for Investors
June 02,2008
 Brazil is gradually getting a status of a country with stable economy and huge potential. Recently, attention of many investors to this country was drawn by the fact of discovery of new possible oil resources. With all of the above, the upcoming IPO of a Brazilian oil company OGX Petroleo e Gas Participacoes, which intends to raise $3.37 billion, looks natural even despite recent cancellation of a number of Brazilian IPOs.
The company�s owner Eike Batista has chosen the right time for public offering of its giant�s shares. According to Bloomberg, interest in Brazilian offshore oil soared after the announcement of the Tupi field, the largest Western Hemisphere oil find in three decades, and the possibility of 33 billion barrels in the Carioca field.
Stock of the company, which was created less than year ago, will be sold to public in Brazil and beyond its borders. 4.95 million shares are priced at 883-1,313 reais ($530-789), which will raise the company�s value up to $12-13 billion. The offer might as well be extended by 15 percent or 741,807 shares worth 839 billion reais. The chances of shares to be sold and their price to increase is supported by the company�s management statement that OGX has oil reserves of 4.8 million barrels, according to Texas auditing firms DeGolyer and MacNaughton. OGX also intends to start drilling by the end of 2008.
Recently, Brazil has been labeled both �the new China� because of it rapid growth and �the new Saudi Arabia� due to its rich oil reserves. Despite the January slide of Brazilian stocks (the Bovespa index plunged by 15 percent) and decrease in number of IPOs (only three were conducted YTD, compared to 59 in 2007), Brazil remains the #1 country for long-term investments and perspectives.
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Today�s Money in Old-Time Movies
May 30,2008
 These interesting calculations were recently published in CNN Money about what would the prices be now in old movies if adjusted to inflation level and actual today prices. Those simple comparisons show how inflation has unfolded in the United States over some 20-50 years.
 In Vacation, 1983, the Griswolds drive 2,000 miles from Chicago to L.A. in their Wagonqueen Family Truckster. At that time, the price of gas was somewhere around $1.20
per gallon, and the cost of the whole trip possibly was around $120 (although it was not indicated in the movie, they should have needed some 100 gallons of gasoline). When adjusted to inflation, the number would be $2.39-2.59 nowadays, although real price is much higher now. Today, with over $3.8 per gallon, the same amount of money would get the family only one third of their way to the Walley World, leaving them somewhere in Missouri or Oklahoma.
In the original 1960 version of Ocean's Eleven, starring frank Sinatra as Danny Ocean, Dean Martin and Sammy Davis Jr., the amount of take from knocking off five casinos in Las Vegas was never indicated. In the 2001 remake with George Clooney, it was $150
million. Deflated to 1960 dollars, the take results in $25 million. Divided among 10 Rat Packers of the 1960�s movie (one thief died during the heist), it makes $2.5
million, quite good lump sum per person back in the 1960s.
 Another �money movie�, Wall Street of 1987, depicted Bud Fox buying a "splendid four-room thirteenth floor aerie overlooking Central Park" for $950,000. Adjusted to inflation, this amount would now be almost twice as high, $1.8 million. But the real prices have gone much higher nowadays, and today Bud would have needed $8.6 million for a luxury apartment in a prestigious Manhattan neighborhood. Gordon Gecko�s mantra �Greed is good� would be even more relevant today with the current real estate situation.
Here there are more movie examples, which prove that inflation and price increase are just a matter of time. |
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How to Become the Richest Person in the World?
May 28,2008
 I think you should address this question to Warren Buffett, who is at the top of the Forbes� list. According to the recent news, Warren Buffett�s wealth is worth $62 billion, while his Berkshire Hathaway is one of the most successful enterprises in the world. So what�s the secret?
Many investors, managers, traders and other stock market professionals can gain much more profits than he does. They pick growth stocks, find prospective shares, use margin, futures, options and other tools of profit increase. As a result, many of them beat Buffett. So why then is he the richest person in the world?
It�s quite simple. Buffett�s strategy is based on long term investing in stocks which you may want to hold for 10 years or longer. He strongly analyzes the company, its managers and CEO, its goods, competitors, loans, industry, etc. Besides, he is extremely conservative and cautious in purchasing foreign companies. He lives in the US and prefers buying the companies he knows and goods pf which he uses.
Well, so it�s quite easy to become the richest person in the world. You should just� be Warren Buffett. In case you can narrow your claims to $2-3 billion, you are likely to reach the goal if following his strategy. |
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Place for Investors� Meetings
May 23,2008
 In the near future, several most powerful online services for investment news and analytics will unite in one resource. Worthnet.Fox. is a new vertical ad network launched by Fox Networks, operated by Fox International Channels (FIC), which network will offer opportunities for advertisers outside of the US. The new network will target international consumers of financial news and investment advice online.
So far the main media partners of the network include services belonging to The Wall Street Journal Digital Network, namely The Wall Street Journal Online (www.wsj.com), Barron's Online (www.barrons.com) and MarketWatch (www.marketwatch.com), as well as other websites (about 30). With time, more participants will be introduced to the network.
The Worthnet.Fox is planned to attract the growing community of those who follow the market closely, including interested persons from emerging economies. It is intended that the audience of the new network will include exclusive niche audience making important business decisions, as well as investors. Interestingly, Worthnet.Fox is planned as a place where public foreign companies will gain access to a broad community of shareholders. In other words, investors will as well be able to access information on foreign issuers, which is not easily accessible at the moment.
News Corp (NYSE: NWS), which owns Fox International Channels (FIC), is likely to increase in price on the news (see chart above). Thus investors who own the company�s shares are able to benefit not only from the company�s new global project, but also from its rise on the stock market. |
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Oil against Wall Street
May 21,2008
 Oil price has hit a new record, and we are no longer surprised by it. However, another spike to $127 per barrel (up $13 over one month) can affect negatively the Wall Street, which just started showing positive results last week.
The Dow increased by 1.89%, S&P; 500 by 2.67% and NASDAQ gained 3.41% over the most recent 5 trading days. However, investors do not rush to trade actively. The reason for that is another spike in oil price as well as anticipation of negative reports in the upcoming week.
The key report will be that on house sales, according to MoneyCNN. On Friday, the National Association of Realtors is likely to report a drop in house sales in April, as forecasted by analysts. Another important report will be published by the Labor Department on producer prices, which are expected to have grown by 0.5%.
These reports will show Wall Street who exactly is paying more for the rising cost of energy, food and other commodities, which all depend on oil price to some extent, - producers or consumers. Higher energy costs for producers mean that they need to cut costs in order to receive same profits. If the price increase is faced mostly by consumers, it�s bad as well, as they account for 2/3 of GDP. In any case, the Wall Street will be distressed at the news.
Moreover, investors might as well lose appetite to investments if this week�s expected earnings reports have no good news. Among those who are to publish reports this week are retailers such as Home Depot Inc (HD), Hewlett-Packard Co. (HPQ), Staples Inc (SPLS), Target Corp. (TGT), Barnes and Noble Inc. (BKS) and Gap Inc. (GPS).
All these data from companies and consumers will allow seeing the whole picture of where the U.S. economy is headed for the second half of the year. Although it�s quite clear at the moment that with such oil prices we won�t be able to see positive results neither for consumers nor for stock markets. |
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