A Couple of Ways to Augment Your Stock Portfolio Performance
By Saghir Aslam
Irvine , CA
(The following information is provided solely to educate the Muslim community about investing and financial planning. It is hoped that the ummah will benefit from this effort through greater financial empowerment, enabling the community to live in security and dignity and fulfill their religious and moral obligations towards charitable activities)
Buy what the best mutual funds buy.
Buy what insiders buy.
It takes big money to move markets, and institutional investors have the cash. But how do you find out where the smart money is going?
Look in newspapers such as Investors Business Daily (IBD) and Wall Street Journal or talk to top mutual fund companies.
In IBD, the companies are sorted according to their combined Relative Price Strength and Earnings Per Share Ratings. That puts stocks with the best earnings growth and price performance-key factors that influence future performance-at the top of the list.
Make sure the stock you have your eye on is owned by at least one top-rated fund. If the stock has passed muster with leading portfolio managers and analysts, it’s a good confirmation its business is in order. Plus, mutual funds pack plenty of buying power, which will drive the stock higher. Some hints are to: check the volume, check the volatility, study fundamentals of the company, and examine the technical move as well.
The top companies have Relative Price Strength and Earnings Per Share Ratings of 95 or higher-signs of stellar companies. They go on to rise an average of 114% throughout the week.
The “New Sells of Top-Rater Mutual Funds” table, which runs the third Friday of every month in IBD, can give you the early signals that the quality funds are unloading a stock. The chart can help you zero in on potential winners. Use it as a watch list of companies you like. You’ll be ready when a quality stock starts its next leg up.
The top companies have Relative Price Strength and Earnings Per Share Ratings of 95 or higher-signs of stellar companies. They go on to rise an average of 114% throughout the week. For example, the top 10 stocks listed on the sells table in IBD on October 22 sat out the end-of-the-year market run-up. By December 31, they had gained a measly 3% on average. By the end of January, they had lost 12% on average.
Like its buy-oriented sibling, the sells table looks at funds rated A-or higher. However, it does not factor in Relative Price Strength or Earnings Per Share Ratings.
Then it tallies the number of funds buying or selling a particular stock in the latest reporting period. Finally, IBD ranks the firms according to the highest number of top-rated funds selling a stock.
If a stock you own pops up on the list, it may be time to re-evaluate your position. And if a name you’re considering buying appears, give it a closer look.
Some of the selling might be normal profit taking, but large moves out of a stock can signal problems.
(Saghir A. Aslam only explains strategies and formulas that he has been using. He is merely providing information, and NO ADVICE is given. Mr. Aslam does not endorse or recommend any broker, brokerage firm, or any investment at all, or does he suggest that anyone will earn a profit when or if they purchase stocks, bonds or any other investments. All stocks or investment vehicles mentioned are for illustrative purposes only. Mr. Aslam is not an attorney, accountant, real estate broker, stockbroker, investment advisor, or certified financial planner. Mr. Aslam does not have anything for sale.)