Investment Course (a freshman - year Course of Study ) Week # 7
This is week number seven and is your freshman year of learning to Invest Wisely. We have now completed our first trip through all 30 Dow Industrial Companies. You should have learned: a) how to navigate through the internet sources of financial information and data, b) learned what information and data is of value and what is unimportant, c) gained an insight on how this old professor thinks about the data and information and whether or not you agree, d) learning to Rank Companies is going to take quite some time but you will get or perhaps already have a good idea about this proceedure.
As you know by now, in this course, we will use the Dow Jones 30 Industrial Companies in the pursuit of learning / applying analytics and of course - the art and science of making money. This Course of study was created many years ago by Professor Steven Bauer, a retired university professor and still active asset manager and consultant / mentor for selected Clients. You can review, at the bottom, your possible / over all five years of study - from this freshman year through graduate school. As an old Prof., I am pleased to guide through your next four - five plus years of my sharing much experience of how to go about consistently profiting in the stock market.
Introduction - (what to learn this week?)
For the coming six weeks, we will learn to use Scans / Screeners to collect the important information and data in bulk and then learn how to identify the Top / Best of the Best and the Bottom / Worst of the Worst. The securities between are simple of no value and definitely not for your focus. There are only three positions to consider when investing wisely. They are, as you already know, Buy, Short and hold Cash.
I am publishing a brief flow of information in Seeking Alpha each Tuesday - Best of the Best and each Thursday - Worst of the Worst just to enforce the importance of my position regarding "Rotation." See my Instablog in SA.
In the below table there is an update of five 'valuated' Dow 30 Industrial companies with a current ranking and brief comments for each company.
I believe you need to understand that we are starting this Course of Study at a time when the marketplace has produced over six months of a bullish cycle. This is very rare and therefore, will tend to distort your entire picture of the marketplace. Bullish and bearish cycles typically do not last that long in time. Adjusting and balancing from this lofty time frame will take months. You can profit from my guidance through this period or do what most investors do and that is to assume all is and will remain well. These investors tend to sit on their can, have very short memories and poor abilities when it comes to the psychological "stuff" like fear and greed. Hence, they do not do well in the art and science of making money.
Prof's Weekly Note of Encouragement or I suppose for some investors - Discouragement. (Remember most all folks see a glass as half empty while others (the minority) see it as half full): Your freshman year is / will be - without a doubt the toughest. Emotionally, you will want to skip the repetitious grind of collecting and confirming information and data. This process is called "analytics." You will want to make investments when you have not properly finished your homework. (You probably are doing just that, right now - anyhow!) You will want to put my picture on your dartboard and use it rather frequently. Etc. I have taught this course many times in University. Few of my students were still gun-ho after a 16-week semester much less spending a full year of dealing with much stock 'rotation' and the 'cycles' of both bull and bear markets. I always asked students and now investors / prospective clients - how bad do you want to do the work to earn a fair return on your investment capital? My impression, over all of these years is - not hard enough! Remember, you can easily heir a professional to do all this grunt work / analytics for you! There are many "financial analysts / asset managers," but few do their homework well.
My Mission and Your Job (if you choose to accept it): My mission is to provide you a flow of work-study that will eventually give you a platform from which you can consistently make money in the stock market. Your job is to make it your purpose to confirm my opinions and rankings by using information and data via the Internet, perhaps a textbook or two and good old common sense. It is important that you understand that I already know what I am doing and have been a profitable advisor / manager for several decades. I say this because you may want to disagree with my 'opinions and rankings' and that is ok. Nobody is always right! However, some of us are better at their trade than others. Just so you know, for years I have routinely spent about an hour per company doing the needed analytics to find those candidates that I can invest and recommend with confidence. It is a boring process for many investors, but it is also accurate and profitable.
General Market - Current Perspective
Within my work / analytics it is important to take into account the current position of the general market and the economy as it relates to the companies that are being valuated. This is one of those - first things first situations. It is a fact that 60% of the influence of the direction of any security is that of the general market - bullish or bearish. A 20% influence is on the Sector and Industry Groups. That leaves only 20% for the Companies itself. So, you had better be in phase / sync. with the general market and sectors / industry groups. Then you had better have done your homework well and be very selective in the companies you take positions in.
The general market is currently over-valued, over-bought and is showing serious signs of deterioration, especially in the area of breadth. Interest rates are on the rise, and inflation is already an acute problem. These Dow 30 Industrials along with many other companies are quite vulnerable to a meaningful general market pullback. That means that you should strongly consider holding cash or perhaps taking bearish positions. I do not recommend taking short positions in any of these securities.
My focus for all companies, Dow 30 or others, is - Investing Wisely. My methodology of taking advantage of the bull / bear fundamental 'rotation,' technical 'cycles,' and 'inflection points' are especially critical in this marketplace and to your annual profitability. I believe doing your homework well each week is a vital discipline in today's marketplace.
Companies - Current Perspective
A Ranking, using each of my three (weighted disciplines) -- Comments for each Company -- and current Numeric Ranking of the position of each Company within the Dow 30 Industrials should give you plenty hard work each and every week, but soon you will be doing it like a professional.
For this week I want to stress Comparative Analytics by looking at Rankings as related to Price movement. There is a correlation folk and you had better believe it! You had also 'better' learn how to do it.
Grouping One: (see below for a list of the six groupings of five - Dow 30 Industrial Companies.)
| Symbol and Current Numeric Ranking within the Dow 30 Industrials | Category | Fundamental (weighting 40%) | Technical (weighting 35%) | Consensus (weighting 25%) |
| (BAC) Ranked: # 29 | Bellwether | Very Poor | Good | Poor |
| Comments: Currently, at $12.3 the company does not look healthy and is carrying a very low Ranking against its Dow peers. Numeric Ranking is very important and yet Investors do not acknowledge that it is essential to being profitable in the stock market. BAC is down in price over 10% and it's ranking has dropped from 26th to 29th. If you are not keeping records of this kind of stuff and want to be an A or B student, I suggest you begin and begin NOW! Otherwise I suggest you DROP the Course. Over the coming couple of years the earnings' growth pops up very nicely and then falls back to zero! ( No Change from 6 weeks ago) Fundamentally, BAC is a mess of a company, and I am quite bearish. It is definitely not even a hold. Technically, it looks like it is topping and a bearish inflection point has been completed. I believe the stock is coming much lower before it can begin a new up-trend. Consensus wise, in plain English - the "Street" does not like BAC. | ||||
| (CSCO) Ranked: # 30 | Bellwether | Poor | Very Poor | Poor |
| Comments: Currently, at $16.9 the company in trouble and carrying the lowest Ranking against its Dow peers. During all this upward market momentum CSCO has also dropped in price! This year earning' turned negative. However, it appears that next year as well as the following year projected earnings' will have recovered back to or above normal. (What is Normat?) (No change from 6 weeks ago) Fundamentally, CSCO is meanwhile in trouble, and we must now wait for a recovery. Technically, never hold a stock that takes a beating like Cisco Systems did in November. And to confirm this point - February was another follow-on - there may well be another before a bottom is reached. Holding is and likely will definitely be costly. Those who insist on being Buy and Hold investors have taken it on the chin for over a decade and in this "unforgiving" marketplace this has become an expensive methodology to follow. Mutual funds still have not learned this lesson, and "you" are paying for it! Consensus wise it is negative. | ||||
| (GE) Ranked: # 14 | Bellwether | Very Good | Very Good | Good |
| Comments: Currently, at $20 the company has come a long way on the upside over the past four months and HAS carried a top Ranking against its Dow peers. In just 6 weeks it has dropped in Ranking from 7th to 14th. The good news is that the price has not moved even with good, recent earnings. It is a SELL and I will see you in 6 weeks again on this company. (You should track this company and my line of reasoning as a homework assignment) (No change from 6 weeks ago) Fundamentally, GE is making a positive move that could be sustained. Technically, on a more near-term basis it is looking tired at the current top. Is there more life in it for the near term? My work says yes, but my conservative asset management says - wait for a pullback it may be coming lower. Consensus wise it is definitely not one of the strongest. | ||||
| (BA) Ranked: # 19 | Bellwether | Poor | Good | Poor |
| Comments: Currently, at $75.4 ( I said 6 weeks ago) there is little to complain about, at least for the now. The Aerospace Industry Group is still doing well but many component companies have already been hit hard. Remember, these are "Bellwether" companies that are not supposed to be volatile. When doing my analytics and a company Ranks near the bottom of my list, I usually spend very little time looking deeper? Like CSCO, this year earning' turned negative, but it appears that next year and the following year, earnings' will have recovered to the point of you wanting to watch it carefully. Ranking wise it improved! Fundamentally, currently BA is just another component of the Dow 30. However, look out and be watchful, things could turn positive in the coming months. Technically, it looks tired and is likely in for a pullback. But of the time being it is a hold. Consensus wise it is not doing well. | ||||
| (XOM) Ranked: # 4 | Bellwether | Good | Very Good | Very Good |
| Comments: Currently, at $864 the company looks healthy but is one of my least favorites for future price appreciation. At this time, it is Ranked very high however, I am not at all positive about the coming months years, please note the following numbers. Earnings Grow appears to be declining steadily for the next few years. Current 2011: 36%; 2012: 6%; 2013: 0% and 2014: 2%. You should understand that there are almost always better energy companies than XOM to own and many also pay a dividend. The Energy Sector is and has been a very compelling story but is often subject to high volatility. Exxon Mobil is not historically a great mover, but 20% plus price appreciation since December is (or has been) a nice gift. Remember, "they" give-ith and "they" take-ith and away. Don't be greedy. (No change from 6 weeks ago) Fundamentally, the near-term looks quite positive, however, the above numbers signal you do not want to remain too optimistic about the coming years. Technically, this is an excellent example of a chart picture that can turn negative without much notice. This current mini-pullback is eating up profits rather quickly. There is very positive Consensus picture. Your job is to remember is it currently rather strong. | ||||
Note One: My focus for each Company is to provide you food for thought and perhaps a stimulus to do your own research (homework) using the tools that you grow to like best. It's the WHEN that is so very critical in this market, and I have given you the WHAT in many of my articles and in the above table. I am also trying to give you the WHY in this Course of Study.
Selectivity is also an essential for investing wisely, but rather easy if you will use the "Three Pillars" of my Methodology. I continuously monitor the fundamental, technical and consensus status of these and many more companies, sectors and industry groups. As a mini example, please see my Public List in StockCharts of about 100 companies listed alphabetically by my two categories of securities - Bellwether and High Profile. Use this URL: Click here and scroll through them all when you have time.
Note Two: When these three disciplines are Excellent to Very Good they become a strong Candidate for Buying and when they are "Poor to Very Poor" they become a strong Candidate for Short Sale. There is always a large number of companies in both the bullish and bearish categories, but it is most important to wait for a clear bullish or bearish general market Inflection Point before taking positions. (please click on # 3. of my "Three Pillars" of my Methodology, below).
You might want to think of these comments in terms of a slot machine. When my 'Three Disciplines' have 3 bars of Excellent / Very Good - it's often a bullish Jack Pot! Strangely enough to some investors, when I have 3 lemons of Poor to Very Poor - it's often a bearish Jack Pot!
For a very important perspective, please study and become intimately familiar with my "Bell Curve" rationale on selecting companies to focus on for both bullish and bearish general market environments. (please click on # 1. of my "Three Pillars" of my Methodology, below).
Note Three: Technically it is important that you study and understand that all securities are always somewhere on the "SHB Cycle." (please click on #3. of my "Three Pillars" of my Methodology, below).
Note Four: Within this missive as well as those in the future, I stop short of providing specific recommendations. If you are interested in a more specific and personal dialog please let me know. Just so you know, I will work with you for a time if you are a serious investor and currently are seeking or believe you may have in the future - interest in my professions asset management / consulting / mentoring services. I cannot possible write enough volumes on the details of my methodology with sufficient clarity for you to emulate my work. I will lead you and make on going suggestions, it is up to you to develop your own methodology from what I share. Remember, this is your freshman year and if you think you have learned it all in a few weeks or months, I can assure you that you will be disappointed at some time in the future. After receiving a PhD in this "stuff," I screwed up for just under 10 years before I figured out what this "stuff" is all about. I discarded the books and much education and wrote my Methodology. I believe if you follow my suggested homework assignments and spend time confirming the information I provide on each company, week by week, you will learn enough to make money consistently in the stock market - maybe in a year or two.
Note Five: You can find all Dow 30 Industrial Companies and a number of other supporting Bellwether and High Profile charts amongst the 100 or so in:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID4095527
Commodities - Current Perspective
Four for focus: These four commodities are offered in order to compare their on going analytics with that of the Dow 30 Industrials.
This presentation each week will be a simple update of the Technical picture. Fundamental and Consensus Analysis is much too complex to present in this format. However, understant in order to invest wisely in an appropriate ETF or Company the work / analytics is much the same as for any common stock.
| Symbol and Name | Category | Fundamental (weighting 40%) | Technical (weighting 35%) | Consensus (weighting 25%) |
| Gold ($GOLD) | Bellwether | Very Good | Excellent | Very Good |
| Comments: Currently, at $1,505., up again for the week. Gold is and has moved up strongly and has been a leader since late 2008 - that's a long time. Current Technicals: It looks like it is topping but may just keep doing its thing for awhile longer. If you were worried during the January 2011 pullback you can expect yet another pullback, and quite likely - more severe! Until Gold experiences a meaningful pullback, and then clearly fails to successfully test the previous highs, it is likely a hold. However, looking at the near-term and not wanting to "experience a meaningful pullback" - I suggest that prudence says that if Gold starts looking like it did in November and December that it could become a strong sell. Students and investors alike should develop an exit strategy. Few investors ever even consider this (an exit strategy) as part of their investment philosophy! | ||||
| Silver ($Silver) | Bellwether | Very Good | Excellent | Very Good |
| Comments: Currently, at $46.6., Silver is 'ranked' WAY out in front of Gold, but what goes up fast comes down even faster. That will happen but not likely in the near-term. ( Gold & Silver track each other very well historically) Silver is and has moved up strongly and has also been a leader since late 2008. Current Technicals: I suggest you re-read the above Comments on Gold. | ||||
| Crude Oil ($WTIC) | Bellwether | Very Good | Very Good | Very Good |
| Comments: Currently, at $112.3., Crude Oil has been tracking Gold/Silver and the above is also applicable to this commodity. However, it could be starting to look like the topping action of December / January. I said it could and that simple means caution. Energy in general is not holding up nearly as well as Crude Oil. That should be a warning of some sort? | ||||
| U. S. Dollar ($USD) | Bellwether | Very Good | Very Good | Good |
| Comments: Currently, at $74.0., at this time there is nothing to lead one to believe that the Dollar will be turning up - however!. Current Technicals: I now believe that any turn-up could well be coincident with a turn-down in the General Market. In other words - a possible rally in the U. S. Dollar and a pullback in the General Stock Market? Stay alert, this could be a very interesting study / scenario for both students and investors. | ||||
You can also find all these Commodities and a number of other supporting Bellwether and High Profile charts amongst the 100 or so in:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID4095527
The Prof's Six Groupings of the Dow 30 Industrials
Grouping One: BAC, CSCO, GE, BA, XOM
Next Week: Grouping Two: HPQ, AXP, KFT, TRV, CVX
Grouping Three: CAT, HD, KO, DIS, DD
Grouping Four: T, IBM, JNJ, AA, JPM
Grouping Five: VZ, MRK, PG, MCD, MSFT
Grouping Six: PFE, , MMM, UTX, WMT, INTC
You can find my specific articles for these securities by going to search and my name in SeekingAlpha.com.
There is more supporting information about my work / analytics in the following URLs:
My Personal / Private Blog -- Investing Wisely: (Introductory Information about my Investment
Methodology) http://twitter.com/InvestRotation
Three articles supporting my "Three Pillars" of my Investment Methodology that you may want to read:
(the title for each is at the end of the below URLs)
# 1. http://seekingalpha.com/instablog/121308-steven-bauer/119898-my-rotation-model-a-short-explanation
# 2. http://seekingalpha.com/instablog/121308-steven-bauer/120955-my-shb-cycle-a-short-explanation
# 3. http://seekingalpha.com/instablog/121308-steven-bauer/104062-inflection-points-a-short-explanation
Source information and data:
Yahoo Finance
MSN Money
MorningStar
BarCharts
StockCharts
Nasdaq.com
The Bottom Line
Your 'bottom line' will depend on just how proactive you are about doing your homework on the above Companies and perhaps asking questions of the Prof. (that's me!)
This Week's Home Work Assignment: Please spend some time in Google and find at least a half a dozen Stock Screeners or Scanners. This is going to take a great deal of time because they are all different in different ways. I use several and have learned to Navigate through all that is offered. If you invest the time you too will become well rewarded by what you can find out in just a matter of minutes. On the other hand you can throw in the towell and heir a professional that can convince you that he or she is "really good" at this stuff. The above will be your - on going homework assignment for the next 6 weeks and will require many hours if not months - these sites offer much information - some good and some worthless - but can be very rewarding if you are willing to learn)
Next continue to read up on each of these companies and make some notes from your favorite sources of information. You may even want to make file folders for each company. Referring back to your notes can be a valuable learning experience. Remember, this is boring "stuff" to many investors, but it will provide you accuracy and profitability in your investment strategy.
More Notes about this Course of Study
Visit the 'Longer Version' URL for this information:
You may want to review my 38-week course - Investment Basics with SafeHaven.com. (see the sidebar on the SafeHaven.com home page or Authors and my name.)
Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the experiences of life, I hope you make it fun.
Learning how to consistently profit in the Stock Market, in good times and as well as in not so good times requires education, experience, time and unfortunately mistakes which are called losses. I believe if you will work ast it, you can be profitable while you are learning?
Let me know if and when I can help and tell a friend about this Course of Study.
Thanks for your interest in my work / analytics and possible my professional asset management / consulting / mentoring services.
Smile, have fun - Investing Wisely,
Steven Bauer, Ph.D.
More Notes about this Course of Study
The mechanics of investing wisely is really not all that hard to grasp. If you have the time, a willingness to train yourself, and have the temperament to be both disciplined and patient, you are more than half way there.
Thanks for attending class this week - and - don't put off doing some extra homework (using University Text Books, Mr. Graham's book and Google - for information and answers to your questions) and perhaps sharing with the Prof. (that's me!) your questions and concerns.
Investing Wisely - - ( Course of Study )
By: Professor Steven Bauer
Text for this Course:
I recommend you go to a major University bookstore and buy several textbooks that focus on Investing. I never recommend any books other than "The Intelligent Investor" by: Benjamin Graham. Google has the answers to most all of your questions, after exploring Google if you still have thoughts or questions my Email is open 24/7.
Each week you will receive a new / another groupings of five Dow 30 Companies to study through SafeHaven.com. Therefore every six weeks you and I will have reviewed all 30 Industrials and start over again with the first grouping. Understand that the on going dynamics of the stock market will present subtitle changes, enough for new work and learning to be accomplished. Hopefully you will begin to understand that it is this process that will enable you to consistently make money in the stock market by investing wisely. I will be guiding you with my comments and URL teaching references. I suggest that you create a file and print charts and other information. This archive will become very valuable if you will review your work quarterly, semi-annually and annually. I'm here to help.
Freshman Year:
Course 143 - Learning and profiting from the Dow 30 Industrials Index
Sophomore Year:
Course 245 - Learning and profiting from the S& P 500 Large Cap Index
Junor Year:
Course 347 - Learning and profiting from the S& P 400 Mid Cap and S& P600 Small Cap Indexes
Senor Year:
Course 449 - Learning and profiting from the Entire Universe with a focuson the Russell Indexes
Graduate School:
Course 550 - Doing it all Professionally - Using it all to make money investing and perhaps as a financial advisor / asset manager
A Couple More Notes
This Completes the List of Learning, Applying and Making Money - 5 years of Courses.
You may want to review my 38-week course - Investment Basics with SafeHaven.com. (see the sidebar on the SafeHaven.com home page or Authors and my name.)
Wishing you a wonderful learning experience and the continued desire to grow your knowledge. Education is an essential part of living wisely and the experiences of life, I hope you make it fun.
Learning how to consistently profit in the Stock Market, in good times and as well as in not so good times requires education, experience, time and unfortunately mistakes which are called losses. I believe you can be profitable while you are learning?
Let me know if and when I can help and tell a friend about this Course of Study.
I hope to hear from you and your friends...
