The infra structure of technology has not quite reached puberty. The very best is yet to come. In particular I am referencing Internet technology and mobile access to the world wide market place of information and support system that enables total remote access. Additionally, the use of technology in the field of medicine, health care and other related services.
Investing in Technology Stocks
The list of products and services in the pipeline of small, medium and large companies is astounding.
Within the field of technology is the corner stone of all the products is security software and services. The talk on Wall Street is that technology stocks are ripe for investing in todays market. This piece of information is noteworthy, but having watched the exuberance of gross gains in the last decade go blow , not all technology stocks are the same.
The specific areas that appear in my opinion to be situated well for future growth are in health care related stocks, multi-media and graphic software, security software, networking and communication devices and specialized areas of electronics. There are other categories, but these areas of technology are poised for future gains in my opinion.
Health Care Related Stocks:
Imagine the future of delivering health care services. The physician practicing in a remote town in Alaska who can consult with a specialist located at John Hopkins Medical Center. In real time the rural doctor can send and receive vital radiological and metabolic tests and results. Imagine medical scientists, physicians and university medical centers consulting on their data enable mobile phone devices. Some of these technologies exist today, but the future is going to be fantastic.
In the small cap arena several health care delivery stocks are generating interest. Mediware Information Systems is a $7 stock that will likely double in the foreseeable future. It trades under the stock symbol MEDW on the NASDAQ stock exchange. This relatively small company has a huge presence in the hospital services area. MEDW has three components in its software applications all that aid hospitals and physicians to track and modify drug orders, blood management and perioperative functions. These tools are used extensively in the United States and their application is being applied in other countries including African nations. More on Investing in Stocks.
The socially conscious investor will find a wide range of Eco-friendly stocks and mutual funds to choose from, both small and large. Due to the influence of world-wide concern over global pollution and carbon dioxide, the investor will find many large corporations are snapping up green companies to add to their list of products.
Investing in Green & Eco-Friendly Stocks
A recent acquisition by Royal Philips Electronics (headquartered in the Netherlands) of Color Kinetics, trading on the NASDAQ as CLRK is a great example. Color Kinetics was a ten-year-old company that produced environmentally friendly lighting through its enhancement of the LED (light-emitting-diode) technology to create a new type of illumination.
Color Kinetics utilized digitalized technology to create a new source of controllable illumination. The merger between the giant Philips and Color Kinetics will enhance its Philips Lighting Solutions market in the LED technology. Color Kinetic has existing installations world wide and a huge customer list, with relationships in China and the UK. Philips, in turn will, provide its 60-country-presence to the Eco-friendly technology of Color Kinetics. Investors should not rule large conglomerates in their search for Eco-friendly stock.
Small Cap Companies:
For investors that enjoy investing directly in small cap companies there are numerous opportunities for investors in AMEX. These stocks are very reasonable in price and may provide future gains as going green becomes an integral part of business and not just a slogan. I have watched some Eco-friendly companies grow over the past several years and the following is a highlight of some interesting stocks.
Environmental Power Corp. trades under the ticker EPG on the AMEX exchange. This stock currently sells in the $5 range. The company and its subsidiaries engage in the ownership, development and operation of renewable energy facilities in the United States. EPG owns 83 leasehold of land. It has plants that utilize animal and food industry waste to produce bio-mass and other forms of alternative fuel that utilize their renewable energy biogas. A good reason to give this company a good look is that it filed a notice with the SEC that it has a firm commitment from an underwriter to make and offering of over four million shares of his stock. If the offering goes forward the company could realize a gain in the price as well as an infusion of over 22 million dollars. More on Investing in Green Stocks.
There are companies that allow an investor to purchase stocks directly from the company. This is perfectly okay according to the Securities and Exchange Commission. These are called Direct Stock Plans. It is called a DSPP. The company may require that you already have stocks through employment with the company. It is not required in all companies.
Investing in Stocks Direct ly From the Company
The Direct Stock Plan operates differently than buying stock through a broker. There is no commission charged for these stock plans, but there can be a small fee. The other difference is that the company buys and sells the stock at a given time. The investor cannot sell or trade stocks at will. The investor may turn the stocks over to a broker to sell, but the broker cannot charge a commission. You may be charged a fee by the company. It depends on your agreement.
If you have a favorite company, like the Walt Disney Company, Coca Cola or other brand names in the United State you may be able to implement a Direct Stock Plan to purchase stocks on a regular basis. You can review the list of stocks in your local library or check out the company you are interested in by accessing the company web site.
Another method of investing direct in a company is by way of the Direct Dividend Reinvestment Plan. It is commonly called a DRIP. The good aspect of this type of plan is that instead of receiving the dividends you agree to reinvest the dividends in more stock in the company. It is a regular Direct Stock Plan with a reinvestment agreement. You may do the same reinvestment plan with your other stocks and mutual funds even if you have a broker.
The advantage is that if the company allows a private investor to purchase stocks directly this would allow you to set up a pay check withdrawal each pay period for the purposes of the stock plan. There are various advisory services that can assist you in locating companies that offer these direct stock purchase plan. I would suggest that you find companies you are interested in a make an inquiry with investor relations. More on Investing in Stocks Directly.
Investing in the stock market can be both very lucrative and risky. If you know what you’re doing, or you are very lucky, you can make a lot of money. The historical average return is about 13% which is higher than a lot of other available investments such as bonds. Then there are mutual funds. A mutual fund is basically a collection of stocks and/or bonds. If a mutual fund is made up of stocks, why not just buy stocks?
First of all, not all mutual funds are made up entirely of stocks. Some funds include bonds, real estate, currency, commodities, and other investments. That alone is one great reason to invest in mutual funds instead of stocks; you get instant diversification. If you want to invest $1,000, there are only so many different companies’ stock you can buy. With mutual funds, your money is pooled with other people’s money so that you are able to get a small bit of hundreds of investments that will greatly reduce the risk of your investments.
That brings us to our next point, affordability. The average person probably can’t afford the $20,000 up front investment needed to have a well diversified portfolio. With a mutual fund, you don’t have to worry about diversification because it’s already done by the fund manager for you. Also, investing in stocks can have a lot of costly fees. If you opt for no-load mutual funds, you don’t have to pay any fees. You don’t have to worry about trading fees that can be very steep when buying and selling stocks.
Finally, mutual funds are easy investments. If you want to invest in stocks you have to research stocks by reading financial statements, reviewing history, and understanding what you are doing. This takes a lot of time and effort that you can only get past if you pay a financial advisor or stock broker a pretty penny to do this for you. With mutual funds, you can invest in a no-load fund that has no fees and get professional stock picks. Now understand that nobody can successful predict the stock market 100% every time, but a financial professional can at least make possibly better picks than you.
If you’ve finally realized that you need to be investing your money, and you don’t know how to invest or what to invest in, start with mutual funds. Watch your money grow, and if you ever feel confident enough you can buy your own stock picks. Until then, don’t waste precious time, start investing right away!
This week I want to focus on Sales Growth and Profit Margins.
Everybody understands sales, but margins might bring up a few question marks.
So let’s start at the beginning: First and foremost, sales are THE most important thing to a company. Everything else stems from that. Without sales, there really wouldn’t be anything else to analyze. Sales Growth numbers show you how the company is growing.
However, just because sales are increasing, doesn’t always mean that profits are increasing too. Sales at the expense of profits does not work. So paying attention to Profit Margins is the next thing we’re going to look at.
Margin is simply a ratio, and the calculation is Net Income divided by Sales.
So, if a company’s margin is 15%, for instance, that means the company’s net income is 15 cents for every $1 of sales it makes.
But if a company’s expenses are growing faster than their sales, this will reduce their margins.
In general, a company with increasing margins is becoming more profitable and is better managed; i.e., their costs are under control.
(Take Dell (DELL) for example. Last week, Dell announced their second-quarter earnings. They put up an impressive increase in sales; up 11%. But they posted a negative EPS Surprise of -8.3%. So their sales increased pretty significantly, but it came at the expense of profits as their margins fell yet again. The stock on Friday dropped nearly 14% on the news. Further proof that sales at the expense of profits doesn’t work.)
Parameters for this week’s screen:
* 12 Month Trailing Sales Growth (Current / 1 Quarter Ago) >= their relevant Industry average. (Looking for the top companies in their industries.)
* Current Net Margin >= 5 Yr. Avg. Net Margin. (Steady to increasing Net Profits is what we’re after.)
* Current Net Margin >= Net Margin from 1 Quarter Ago. (If a company’s profit margin fell last quarter, there’s a chance it might fall yet again. So we’re excluding those companies whose margins fell in the previous quarter.)
* Zacks Rank = 1. (The Zacks Rank is one of the best, if not the best rating system out there. One of the main components to the Zacks Rank is Earnings Estimate Revisions. The whole idea being, companies that receive upward estimate revisions have a tendency of receiving even more upward estimate revisions. And this helps paint a solid picture moving forward.)
Here are 5 stocks that pass this screen this week:
FSYS Fuel Systems Solutions, Inc.
GGB Gerdau S.A.y
GIII G-III Apparel Group, Ltd.
LPHI Life Partners Holdings, Inc.
LVB Steinway Musical Instruments, Inc.
Diversification means adding a variety of investments. It means not putting all your eggs in one basket. When investing, diversification is very important. When you invest, you are always taking some kind of risk. When you buy stock in a company, you are taking a chance that the stock price will decrease or increase. You are hoping for it to increase, but it might go down. When you buy a bond, you are taking the chance that the company may or may not pay you back.
Risk is important in investing because it means you can make money. More risk usually means the potential to make more money, but not always. The risk you take when you don’t diversify your investments is unnecessary risk. Never put all your money in one investment. The more money you have invested, they more you should be aware of this. If you have $1,000 and you invest in all in the stock of one company that goes bankrupt, you’ll probably lose all of it. You’ll lose $1,000. If you had $1,000,000 and invested it all, you would have lost a lot more.
This isn’t to say that you should only diversify if you have a million or more dollars, you need to diversify no matter how much money you, you just don’t need to diversify as much if you have less money invested.
How you diversify your money in investments will also depend on how old you are. If you are nearing retirement, you should invest more money in bonds that are more secure and carry less risk. Because you are about to retire, you want to be sure you won’t lose any money that you will need when you aren’t making a salary. If you are very young, you should invest most or all of your money in stocks and you can concentrate more in riskier investments. If you are somewhere in the middle, you need to make a nice balance.
If you are unsure how to diversify your money, you can invest in mutual funds. A mutual fund is diversified as is because it includes many investments to begin with. If you want to further diversify, you could choose to invest in a bond mutual fund and a stock mutual fund or in different industry mutual funds.
However you decide to spread out your investments, just make sure you diversify. Invest in different companies, in different industries, in different cap sizes, and in any other way you feel will benefit you. Don’t put all your eggs in one basket and you can further ensure you won’t lose your investment.
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