So here is what happened when I violated one of my rules. In December, I looked for low priced stocks that really tanked due to tax selling. I thought I found an interesting company called Constar International Inc. (CNST), a manufacturer of plastic containers. The stock traded as high as $20 a share back in April and had dropped below $2 a share in December. I thought that was a pretty good drop which I assumed was due to tax selling, possibly making it a great buy. So I looked further into the stock. The company had $1.42 in cash per share, and was trading way below the reported book value of $2.48 per share. But there was one little hitch; the company had debt, a lot of debt for its size. Its debt to equity ratio was stratospheric.

But I thought, I am just buying it for the very short term, the tax selling rebound, so the debt shouldn’t mean anything (first mistake). I bought a bunch around $2 a share on December 28. The first week of January, the stock traded between 1.80 and 2.00, and I kept waiting for it to pop (second mistake, if the trade doesn’t work in a reasonable number of days, get out). So on January 11, I checked my portfolio and noticed that it was down big time, even though the market was up at the time. I searched down my list of stocks and discovered that Constar had plunged by almost a buck from a previous close of 1.75 to 79 cents. That’s a drop of 55% in one day! I scrambled to find the cause of the drop and eventually discovered that the company had filed for bankruptcy.

So in exactly two weeks, I lost around 60% on that one stock, all because I violated my one primary rule, choose stocks with low or no debt. Yes, I’ll probably miss out on plenty of rising stocks with lots of debt, but I will have less downside risk, and less of a chance of getting downside shocks from bankruptcies.

The takeaway is, if you have a stock trading system that works, be disciplined and don’t waiver from your own rules. In my case, I had plenty of other stocks to choose from. As a matter of fact, WallStreetNewsNetwork.com has several lists of debt free stocks, including Debt Free Stocks Selling At Or Near Cash, High Cash No Debt High Yield Stocks, No Debt High Yield Stocks, No Debt Low Price To Cash Flow Stocks, and Stocks Selling Near Cash Per Share and Debt Free.

Disclosure: Author owns AAPL.

By Stockerblog.com

But there are also regular corporations, such as Alaska Communications (ALSK) which provides landline and wireless services to Sarah Palin’s state. The stock sells for around $10 per share, has a forward price to earnings ratio of 37, and pays a yield of 7.8%. The company reports earnings on March 4.

Another example is Hercules Technology (HTGC) which is a private equity, venture capital, and venture debt firm. It sells for less than $11 per share, has a forward PE of 9.8, and pays a yield of 7.4%.

Provident Energy (PVX) processes, transports, stores, and markets natural gas liquids in the United States and Canada. It sells for slightly more than $8 per share, has a forward PE of 17, and yields 8.8%.

For a list of over 15 stocks that pay a yield over 6% and sell for less than $10 per share, go to wsnn.com. Just remember, very high yields may not be sustainable.

Disclosure: Author didn’t own any of the above at the time the article was written.

By Stockerblog.com

Rare earths are used for such applications as superconductors, magnets, electronic polishers, car batteries, luminescent materials, lasers, optical-fiber communication systems, welding, night vision goggles, rangefinders, and radar. The rare earth metals are:
Scandium
Yttrium
Lanthanum
Cerium
Praseodymium
Neodymium
Promethium
Samarium
Europium
Gadolinium
Terbium
Dysprosium
Holmium
Erbium
Thulium
Ytterbium
Lutetium
Other metals and elements are often (incorrectly) referred to as rare earth metals such as lithium and manganese. However, many of the companies involved in the mining of the rare earth metals are also involved in mining some of the other scarce elements.

Rare Element Resources is a Vancouver based company that explores for and develops mines in Canada and the United States, including the Bear Lodge property located in northeast Wyoming. This debt free company has 32 cents per share in cash, however the company reported a 6 cents per share loss for the quarter ended September 30.

Molycorp, Inc. (MCP) is another company involved in the rare earth industry, based in Greenwood Village, Colorado.The company has $5 million in debt, and over $351 million in cash, with $4.27 in cash per share. Latest earnings were a loss of 97 cents per share.

Another way to play this market is through the processors of rare earth metals, such as Neo Material Technologies, Inc. (NEM.TO) (NEMFF.PK), which trades on both the Pink Sheets and the Toronto Stock Exchange. This Toronto, Ontario based company processes rare earths, magnetic powders, and other metals. The company distributes cerium, lanthanum, europium, neodymium, dysprosium, yttrium, and other materials. The stock has a price to earnings ratio of 17.9 with a forward PE of 14. It also has an extremely favorable price earnings growth ratio of 0.31. Earnings for the latest quarter were up 53.4% on a 68.7% revenue increase.

A more conservative approach to rare earth investing is through the Market Vectors Rare Earths/Strategic Metals Exchange Traded Fund (REMX). This ETF has gone from 19.51 at the end of October to 25.63 now, a 31% increase in a couple months.

To see a free list of over 25 rare earth metals stocks, which can be downloaded, sorted, and updated, go to WallStreetNewsNetwork.com.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com

Guest Article

Overview of bond trading

In the financial and investment market, bonds refer to a type of debt security whereby the issuer of the bond owes the purchaser a debt. Depending on the specific terms of the bond, the issuer is obligated to paying the purchaser interest and/or repays the total principle to the purchaser at a later date. This date is referred to as the maturity day. It is a formal financial contract the borrowed money is repaid with interest included and paid at fixed intervals throughout the life of that contract.

There are numerous types of bonds such as bearer bonds, fixed-rate, and many others. However one of the most common and popular are the municipal bonds which are typically issued by different government agencies such as a city or local governments, state governments, or US territories. The interest that the purchaser of the bond receives is normally exempt from federal and state income taxes.

Overview of stock trading

Even though stock trading is a common terminology, it is actually a misnomer because you really dont trade shares of stock. You purchase them for the purposes of selling them at a profit. In the language of the financial and investment markets, you purchase and sell shares of stock either on the floor of one of the different stock exchanges or online. Additionally, the individual who purchases and sells shares of stocks is referred to as a stock trader.

Advantages and disadvantages bond trading

As with any type of financial and investment instrument, there are certain advantages and disadvantages to trading bonds. Although they tend to be much less aggressive than shares of stocks typically are, they usually provide the investor with a steady income stream. Over the long-term, this means that their performance might be poorer than what you would experience with stocks. Additionally, and like other investments, there are certain risks involved with bond investing.

The two primary advantages are those involving income and ratings. The income advantage is the fact that they are a safer investment than stocks while the rating advantage is a system that enables the investor to gauge a bonds reliability. The key disadvantages involve risk and security. The former is associated with the fact that you cant always trust those systems that rate bonds. The security disadvantage refers to the fact that the bond is only as good as what the borrowers ability to repay the loan is.

Advantages and disadvantages of stock trading

As with trading in the bond market there are certain advantages and disadvantages where stock trading is concerned that you need to be aware of:

The key advantages are:

o better returns on ones investment
o familiarity with the larger companies
o wide range of investment choices

The key disadvantages include:

o cost of shares
o leverage is typically lower than other forms of investments such as the FOREX market
o uptick rules regarding short selling meaning that you have to wait for the price of the stock to increase before you can short sell it

If you’ve been following my blog, you might recall a few months ago I called out to Derek Foster, wondering what Canadas Youngest Retiree has been up to.

Back in September, Derek was a busy guy.  I found out he completed an interview with MoneyTalk host Patricia Lovett-Reid, he was preparing for a speaking engagement in Toronto at Canadian MoneySaver’s Investment Conference, he was putting the finishing touches on his new book and as always, he was helping raise his five kids.  I don’t know about you but that seems more like a year’s worth of work, let alone one month.

For those of you who don’t know who Derek Foster is, here’s a quick bio (photo courtesy of his website):

• Derek was born in Ottawa in 1970.
• Derek was able to become a millionaire and leave the proverbial rat race at the age of 34 by using various investing strategies, many he believes any investor can emulate.
• Derek, ”Canada’s youngest retiree” is a well-known Canadian author and has shared his personal investment experiences and strategies in his National Bestselling Books:
• Stop Working:  Here’s How You Can!
• The Lazy Investor: Start with $50 and no Investment Knowledge
• Money for Nothing: And You Stocks for FREE
• Stop Working Too:  You Still Can!
• *The Idoit Millionaire (*Latest book, Fall 2010)
• When not writing books or giving speaking engagements, Derek spends time with his wife and five children in Ottawa (in my old neighbourhood no less).

For a couple of years now, maybe like some of you, I’ve been both entrigued and somewhat skeptical of Derek’s investment journey.  I’ve read a few of his books (Stop Working:  Here’s How You Can! and The Lazy Investor) and to be honest I’ve been more inspired than skeptical of his success.  Sure, he may have had some great timing on his side and some risker investments paid off, but sometimes you make your own luck as well.  I know others don’t feel the same and have written so.  That’s fine because everyone is entitled to their own opinion. 

Overall, I’m happy for Derek because he had a dream, saw it fulfilled and then some.  Investment timing, luck, skill or otherwise, he’s a fortunate guy. 

I’m glad I got the chance to chat with Derek for almost a couple of hours a few weeks back.  Here’s what he had to say in Part 1 of My Own Advisor interview.  I hope you enjoy the read.

*     *     *     *     *     *     *     *     *

My Own Advisor:  Thanks again for the interview Derek. It’s a busy time of year for everyone and I’m glad you got back in touch with me. It’s great to finally chat with you – enough email already!

Well, onto my questions.  Ready?

Derek:  Fire away Mark.

My Own Advisor:  Youve just released the latest book in your Stop Working series entitled The Idiot Millionaire: You Can Become Wealthy! What inspired you to write this book?


Derek:  To be honest, it was largely because of the 2008-2009 economic downturn. Because my personal situation had changed since I originally left the rat race at 34, (I was earning an income from other sources such as book sales, etc), I wanted to switch my portfolio to higher growing dividend-payers as this would save me tax and generate better returns over the long-term. BUT I wasnt as smart as I thought I was; hoping to sell my stocks at one price and trying to get back in at a lower price. In some cases, it worked. I bought businesses like JNJ, Shoppers Drug Mart and Phillip Morris at reasonable prices. For other businesses, it didnt work. For example, I waited too long for Canadian bank stocks. I missed the bottom and their subsequent run ups in price. Admittedly I missed that boat. I would buy some if prices to crept lower. I guess the title of my book really applies to me, kind of tongue-in-cheek.


My Own Advisor:  What makes this book unique in your Stop Working series?

Derek:  More so than any of my previous books, this one discusses a companys competitive advantage. I describe what I mean by this and how investors would do well to invest in those companies that have it and it also offers a list of those companies.


There are many companies out there that are worth owning, companies that pay dividends but they do not have any economic moat around them. This is important because ideally you want to buy companies that not only pay dividends, but that increase their dividends over time and also have great growth opportunities because of their advantaged products and services. My new book includes a pretty good list of these companies in Canada and the U.S. In the U.S. for example, Coca-Cola quickly comes to mind. In Canada, Enbridge.

My Own Advisor:  Switching gears a bit, tell me about your investment strategy. Still a dividend investor?


Derek:  Absolutely, but my approach or maybe should I say my focus has changed. Before I was more focused on higher yields for income generation, maybe slower-growing stuff but now my needs have changed. I mean the books generate income which was an unexpected surprise (because being an author or a writer is not usually the path to riches). Really though, Im fortunate to have some other income streams with no debt and so things are different for me at 40 than 34 when I wrote Stop Working (Heres How You Can Too!). Geez, that was six years ago. Im now more focused on companies that have their moats and good long-term growth prospects. I try to explain that in plain language in the new book.


Also, the reality is many folks dont retire from the workforce at 34, or even 40 or 50. They are working their way towards retirement bit by bit and hopefully this book will provide them with a more complete list of companies to help them out.

My Own Advisor:  A short time ago, when the market was falling (in 2008-2009) you sold all your dividend payers. I read a few articles about that. You took some heat. Can you walk us through that decision?

Derek:  I was an idiot but at that time, I sold my shares in early February 2009, I thought I could get back in later and at cheaper prices. Turns out I did and I didnt as I told you before. I managed to buy a lot of stocks much more cheaply but a large part of this was luck. I benefitted from put-option premiums and the incredible strength of the Canadian dollar. After I sold my stocks, I remember humming and hawing for a couple of weeks – should I say anything to the media? The books encouraged folks to do the opposite; buy and hold dividend-payers for income. I didnt want to be hypocritical but I can see why some people were a little put off, you know what I mean? In the end, my approach did save me money and I came out ahead but not on everything; I missed the boat on those Canadian bank stocks and some other companies I would like to own.


The book (The Idiot Millionaire) actually includes some of this stuff and Ive got some details in there about my prices when I got back in.


My Own Advisor:  Made any recent purchases?


Derek – Yeah, I bought Strayer Inc (a for-profit university) at a pretty reasonable price. It just made sense with our Canadian dollar being so high and the recent stock price weakness due to pending potential changes to loans for students. Im very comfortable with this holding but I realize there are potential risks. The stock price had dropped from over $250 earlier this year to under $140 where I bought it. This is even cheaper than at the March 2009 low of $159 and the Canadian dollar is much stronger now, so the stock price is actually 30% below the March 2009 bear market low (in Canadian dollar terms).


My Own Advisor:  Something more fun now. Whats on your Christmas list for 2010?


Derek:  Well with five kids in house, Christmas is really for them, not me. Ive never been one to covet stuff, Im not materialistic. I finally got a GPS this summer for our trip out West and Ive got a laptop computer. During our trip, once the kids were in bed and all the chatter had stopped for the day, I pulled out my laptop and wrote a couple of pages (for the new book). Honestly, Im a cheap guy. If a burglar came to my house, he would quickly leave in disgust as my material possessions are not really worth stealing (except perhaps for my Sienna minivan). When I look at stuff, I always ask myself, is this really going to add any value to my life? If the answer is no, I dont buy it. I guess nothing Mark. I dont even own a cell phone. I guess I dont consider myself important enough to need one.


I had to laugh at this last response. I mean, with five kids, how can Christmas NOT be all about them?
 
It was great to chat with Derek.  He’s a bright and funny guy.  Foster’s fast track to early retirement through  savings and diligent investing in Canadian and U.S. dividend paying stocks may not appeal to everyone but I think it’s inspirational.  In the end, we’re all trying to achieve financial freedom and regardless if you’re a fan or a critic, learning something from Derek Foster can and should be done.  That doesn’t mean you need to follow his path or emulate what he did.  Knowledge is always different than the application, but learning what works and what doesn’t for you is important.  I’m trying to build my investment knowledge and application all the time because in my opinion, continuous improvement is critical to success. 
 
In Part 2 of my interview, you’ll hear more from Derek about his portfolio allocation and his stock market predictions for 2011.  Stay tuned for that blogpost after Christmas. 
 
I hope you enjoyed Part 1 and as always, I look forward to any comments!
 
Cheers,
Financial Cents

One way to define cloud computing is having your programs and data stored remotely on a server far away, instead of on individual computers. As long as you have an Internet connection, you can have a fairly dumb computer ans still utilize cloud computing. The clouds are simply the servers of companies that provide this service, and those servers can be located anywhere in the world. If you have Yahoo (YHOO) mail, Google (GOOG) gmail, or hotmail, then you are using cloud computing in a small way. You don’t have the email servers in your office or home, you use the Yahoo or Google servers. Many colleges and universities are turning over their student email services to Google, which saves them money on servers and saves on staffing for support.

These same benefits apply to the private sector, especially when you extend it to data storage and computer software. You don’t need a technician to come out and install new software to each employees’ station. You don’t need a bunch of network administrators monitoring the company’s servers. You don’t need to periodically upgrade computers. You don’t need to own a bunch of servers. You cut down on the costs and issues relating to the disposal of old computers and servers. You don’t need to deal with data security, as that is the job of the cloud computing company. The benefits of clouds are extensive, and there are over 25 stocks in the cloud industry to choose from, according to the Cloud Computer Stock list at WallStreetNewsNetwork.com, including companies involved in server farms and outsourced storage systems.

Cloud computing as a growing industry now appears almost every day in the financial press. And the interest from investors has been significant. Take for example Salesforce.com (CRM), which is up over 600% since it started trading in 2004.

Salesforce.com is a provider of customer-relationship management services that has promoted ‘the end of software’. Salesforce has customers of all sizes, including Corporate Express division of Staples (SPLS), Daiwa Securities (DSECY.PK), Expedia (EXPE), Dow Jones Newswires subsidiary of News Corp. (NWS-A), SunTrust Banks (STI), and Kaiser Permanente. Salesforce trades at a lofty 89 times forward earnings, debt in the amount of $495 million, with over $769 million in cash. The company just reported a quarterly sales increase of 29.8% year over year, with a 1.8% increase in earnings.

VMware (VMW) is another major cloud and virtualization player. Its product VMware vSphere is a cloud computing data center platform. It sports a forward PE ratio of 49.6. The company has $450 million in debt with $2.9 billion in cash. The company reported that latest earnings increased an incredible 121.4% in earnings on a 45.8% increase in revenues.

Citrix Systems, Inc. (CTXS) provides on demand applications and online services, including GoToMeeting, GoToWebinar, GoToTraining, GoToAssist, and GoToMyPC. This debt free company has $902 million in cash and carries a forward PE of 30. The latest quarterly earnings were up 64.3% on a revenue increase of 17.8%.

To access a free Excel spreadsheet database of numerous companies involved in cloud computing in some way, that can be downloaded, sorted, and updated, go to wsnn.com. You can also get info on the green aspects of cloud computing from my book The Green Light on Green Stocks: A Quick Guide to Green Investing and Making Money in Alternative Energy Stocks, in which I described cloud computing as a green industry and a way of providing money saving services to many corporations.

Disclosure: Author owns YHOO.

By Stockerblog.com

Mattel Inc. (MAT) is the largest toy company in the United States, known for its Barbie Dolls, Hot Wheels, Matchbox toys, View-Masters, and numerous other toy products. The stock yields 3.3% and trades at 13 times forward earnings. Quarterly earnings were up 23% on a 2.3% rise in quarterly revenues. Total dividend payouts of $297 million are easily covered by operating cash flow of $846 million.

Cherokee Inc. (CHKE) markets apparel and footwear under the brand names of Cherokee, Sideout, Carole Little, Saint Tropez-West, Chorus Line, and All That Jazz. the company gives out a substantial dividend yield of 7.9%, which is paid out on a quarterly basis. The stock has a price to earnings ratio of 15. The company just reported a 16% drop in earnings per share, but on the positive side, its balance sheet remains debt free.

Philips Electronics NV (PHG) makes everything from MP3 players to digital picture frames to flat panel TVs to electric toothbrushes. The stock pay a dividend of 2.6% and trades at 14 times forward earnings. Earnings for the latest quarter were up an incredible 201% on a 9.6% rise in revenues. The stock has 6.32 in cash per share.

To see a free downloadable Excel list of high yield retailer stocks, which can be sorted and updated, go to WallStreetNewsNetwork.com.

Disclosure: Author owns AMZN and MAT.

By Stockerblog.com

Many investors look for debt free stocks selling at or near cash per share. These are stocks which have virtually no debt and are trading close to the amount of cash the company has on a per share basis. Without any debt and a lot of cash, it would be hard for a company to go out of business, unless it is a biotech company with a high burn rate. In addition, the cash might make the company a possible takeover candidate.

WallStreetNewsNetwork.com just updated its list of Low Price to Cash per Share Ratio Stocks with No Debt, which shows the recent price, cash per share, forward PE, and price per cash ratio. Almost all the stocks have price to cash ratios less than 4.

On example is Electronic Arts Inc. (ERTS), the video game manufacturer, has $4.99 in cash per share, with the stock selling at less than 15.80, giving it a 3.16 price to cash ratio. The company, with no debt, has a forward PE of 18.8.

FormFactor Inc. (FORM) is another stock with lots of cash. This debt-free manufacturer of semiconductor wafer probe card products, which sells for less than 9.50 per share, has a significant $7.35 per share in cash. Recent earnings were negative, however, revenues for the latest quarter were up 8.2%.

If you want a free downloadable Excel list of ten stocks that have a Low Price to Cash Ratio with No Debt, go to wsnn.com.

Disclosure: Author did not own any of the above stocks at the time the article was written.

By Stockerblog.com

There are over 35 companies that have dropped more than 70% during the last 52 weeks, according to WallStreetNewsNetwork.com, which could include many tax selling bargain opportunities. Just remember, you want to be in and out of these stocks quickly, as the drop in stock price could be due to more than just tax selling.

Flagstar Bancorp Inc. (FBC), a Troy, Michigan based banking company, had had a huge drop. The stock traded above $5 a share back in May and even higher earlier in the year on a pre-split basis; it now trades at less than $1.50 per share. Although the company’s latest earnings were negative, quarterly revenues were up 218%. The stock trades at way below its book value of $5.30, and trades at 47 times forward earnings. Earlier this year, FBR Capital upgraded its rating of the stock from Market Perform to Outperform.

Broadwind Energy, Inc. (BWEN) is another company that has taken a big dump, dropping from over $9.80 per share last December to less than $2 now. This wind tower manufacturing company has a forward price to earnings ratio of 197, with current earnings being negative. The book value is $1.64.

The bio-pharmaceutical company Affymax, Inc. (AFFY) traded for about $25 per share during the last year, but now trades at slightly above $6 a share. Recent quarterly earnings were negative but the company is debt free and has $4.14 in cash per share. Last month, WBB Securities initiated coverage on the stock giving it a Buy rating. At the same time, WBB Securities upgraded the stock from a Hold to a Buy.

To see a free list of the rest of the stocks that have dropped more than 70% during the last year and trade for at least a dollar a share, go to WallStreetNewsNetwork.com. The Excel list can be downloaded, sorted, and updated.

Disclosure: Author didn’t own any of the above at the time the article was written.

By Stockerblog.com

Many stocks sell below book value for numerous reasons. The industry or sector could fall out of favor, tax selling, and a bearish stock market are just a few examples. WallStreetNewsNetwork.com has turned up a list of over 25 stocks selling at or below book value, most of which have yields above 3.5%. One example is Telecom Italia S.p.A. (TI), the large Italian telecom company which provides fixed-line and mobile telecommunications, Internet, and media services throughout the country. The Italian government may be suffering but Italians are still making phone calls. The stock is trading at two thirds of book value and pays a yield of 3.5%. Earnings for the latest quarter were up over 207% on flat revenues. The stock trades at 15 times forward earnings.

Great Plains Energy Incorporated (GXP) is another discounted stock. This electric utility, which serves Missouri and Kansas, is selling at 87% of book value and sports a yield of 4.3%. Earnings for the latest quarter were up 67% on a 24% revenue increase. It sports a forward price to earnings ratio of 12.

The shares of Brandywine Realty Trust (BDN) are trading at 77% of book and yield 5.5%. This REIT owns office and industrial properties. The stock trades at 8.5 times forward earnings.

To see the complete list of the major high yield stocks trading below book value, which can be downloaded, sorted, and updated, go to WallStreetNewsNetwork.com. Fourteen of the stocks have yields above 5% and four provide yields over 7%.

Disclosure: Author did not own any of the above at the time the article was written.

By Stockerblog.com