Avoid Stocks Hitting - 2
By Saghir Aslam
Rawalpindi, Pakistan

 

(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)

At 33 7/8, the stock was marked down 55% from its February 1997 high, a tempting “bargain” to bottom fishers. But Reebok shares slid lower in each of the next

eight weeks of trade.

Reebok’s stock bottomed in January 1998 and recovered some ground. In May of that year, Chairman and CEO Paul Fireman told shareholders that the firm’s short-term prospects remained dim but stressed that Reebok’s new DMX shoe-cushioning technology “will drive our renaissance.”

Investors are still waiting for the rebirth. Reebok has seen profits shrink in six of the past seven quarters. In the other quarter, Reebok lost money. Reebok now trades just below 12, 78% off its February 1997 high. Rigorous statistical study bears out the Reebok example.

There have been many other examples since 1997, I am sure you know them, so do I, specifically the real investors who try to do their homework properly , always look monitor, these type of situations , learn from it, if done properly, you can make big buck.

Consider the below three examples to prove the point. In the stock market the stocks hitting new highs will ultimately give better results. It has been proven over and over again.

One theoretical portfolio was rebalanced each year to stay in stocks with the best price performance in the preceding year. It yielded an average compound annual return of 14.3% and turned $10,000 into $4.1 million.

Another portfolio was indexed to the broad market. Its compound annual return of 13.2% turned $10,000 into $2.7 million.

The third rotated once a year into stocks with the worst prior-year performance. It produced a piddling annual return of 3.3%. That would have changed $10,000 into about $43,000.

In conclusion, once you do your homework properly, I guarantee you will win big time, condition is proper research from proper resources that have been proven to win again and again. For example try reading barons I call it bible of investment and many time I spend entire weekend studying, analyzing baron. Another good source is investor’s business daily.

(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, nor 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.)

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Editor: Akhtar M. Faruqui
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