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Multiply Your Returns: 5 Large-Cap Stocks Set to Top Earnings

Multiply Your Returns: 5 Large-Cap Stocks Set to Top Earnings

Earnings releases create quite a stir in the investment space. While companies strive to gain investors confidence through various initiatives, what ultimately counts is the company's earnings performance compared to market expectations. Even the market … Continue reading at

A Big Rally Descends on Small-Cap Stocks (IWM)

Small-cap stocks joined the market rally in a big way Wednesday, and it should be chalked up as a big win for the bulls. One of the complaints surrounding the October stock surge was the lack of breadth. The charge was led by large caps -- especially big … Continue reading at

Does the small-cap underperformance predict large-cap pain?

Small-cap stocks have fallen behind in the recent rally, with the Russell 2000 down more than 3 percent year to date even after the S&P 500 has turned positive again for the year. And the lag could mean it’s time to buy protection on large-cap stocks … Continue reading at

Large Cap

3 Large-Cap ‘Value’ Stocks That Warren Buffett Would Love

For many investors, the value investing concepts championed by Berkshire Hathaway’s Warren Buffett are the best way of making money over the long haul. Value investing looks at the intrinsic value, or fair value, of a stock based on future earnings … Continue reading at

How To Diversify With Very Cheap Global Large Caps

See also this previous article of mine. Most of these stocks are unknown small caps but there are also a few large caps with a low EV/EBIT multiple and a strong balance sheet. For those who don’t want to invest in unknown but even cheaper small cap stocks … Continue reading at

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Large Cap

Small stock weakness signals shift from risk

Tried-and-true stocks are in vogue. Small upstarts are out of favor. And that new trend could have legs. “Leadership off the lows has been all about large caps vs. small caps and we continue to anticipate this has longer-term implications,” Jason Trennert … Continue reading at

What Investors Should Know About Small-Cap Stocks

In your stock portfolio, size matters … “Small caps do tend to outperform large caps,” he says. “They are often avoided by investors, as many small caps are neglected and not followed by Wall Street analysts. Small caps just don’t have the same … Continue reading at

Skylands Capital Likes Apple In Q4, But Likes These Two Stocks More

Our research has shown that hedge funds' large-cap stock picks historically underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among … Continue reading at

Chart Of The Week: Russell 2000 (IWM) Breakout Or Fakeout?

The stock market rally in October has been a beast. It's been relentless. But something is missing. Several large cap stocks have pushed higher during the rally, many even gapping higher post-earnings. BUT the small caps have lagged. Noticeably. Continue reading at

* – Value Based Stock Investing

Disciples of stock guru Benjamin Green engage in value based stock investing. Value based stock investing works on the principle that the stock market always finds the true value of a stock, even though that process may take a little time. Popular stocks may be overpriced and lightly followed stocks may be underpriced. However, when the market in general does the necessary technical and fundamental analysis of a given stock it prices the stock appropriately. An easy tool to use for value based stock investing is the price to earnings ratio. Mr. Green and subsequent value investors consider two things in appraising a stock. One is the current price and the other is a fair estimate of future stock earnings. The working assumption in value based stock investing is that an overpriced stock can be quickly recognized by its high price to earnings ratio or, better, by a high price to earnings ratio using anticipated earnings. Likewise a stock with high anticipated earnings may be underpriced as the price to earnings ratio is based upon current reported earnings and not upon the prediction of future earnings. Value investors believe that all stocks will eventually return to their fair market price. As such they sell overpriced stocks and buy underpriced stocks in anticipation of profits.

In value based stock investing investors consider the book value of a company and its earnings, preferably an accurate assessment of anticipated earnings. The formula includes a “fudge factor” of 22.5 and calculates the square root of earnings per share multiplied by book value per share. An average Graham number is 1.5. The Graham number is read like the price to earnings ratio. High is overpriced and low is underpriced. Whereas value based stock investing considers a price to earnings ratio of more than fifteen to be high, a Graham number of one and a half carries the same implication. In picking new winners in the stock market, value investors focus on these numbers. When a market downturn occurs it is often a field day for value based stock investing as stocks with substantial long term value are available for low Graham numbers or price to earnings ratios. Value based stock investing seeks to find profit in individual stocks. In addition to stocks with attractive PE ratios or Graham numbers investors look at just what a company does, how well they do it, and how much profit they make, or could make, in the future.

A good example of an attractive stock for value based stock investing might be DDI Corp — DDIC — who design and make circuit boards. Its Graham number implies that it should be priced fifty percent higher. It is mid cap stock which means that fewer analysts follow it than follow large cap stocks causing its promising financials to be overlooked by the market in general. By comparison Quaker Chemical Corp — KWR — is a specialty chemical maker that lost nearly ten percent in the last year but whose Graham number implies a real value of nearly thirty percent more that its current price. This is where knowing what the company does and how it fits into the overall picture is essential for value stock investing. A company whose business will falter during an economic downturn may have a low price to earnings ratio or Graham number but, in fact, may be liable to a lower set of numbers if the current recession worsens. A large cap company may or may not be a good stock investment based on value based stock investing principles. Companies like ExxonMobil — XOM, Freeport-McMoRan Copper & Gold Inc. — FCX, Delta Airlines — DAL, or Hewlett Packard — HPQ may or may not be fairly priced depending upon the state of the economy but they are typically followed closely by many stock analysts so that their market price is typically closer to what value investing considers a fair market value.

Large Cap

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