Best Stocks to Trade For Tomorrow with logic 19-Jan | Episode 453

Open your Trading account in mintues with Zerodha

Now I don’t necessarily agree that comparing a company to analyst estimates is the best way to measure a company, and I can certainly think of other ways that would be much better. However, this “system” of analysts estimates and measuring companies on a quarterly basis is the one we have.

Hundreds of companies are set to report numbers this week. Now, let’s think about what has been going on recently. Analysts have been revising earnings and revenue estimates downward. The negative revisions are due to of the weak economy.

The best traders realize when they’re struggling. Trades start going wrong left and right. You start breaking your trading rules. Those “sure thing” trades start losing money.

As a rule of thumb, markets return on average 10% per year. Most people don’t know this important fact. The 10% return isn’t always from prices going up. A portion of this long term average return is from dividends. Dividends play a very important role in most long term investment strategies.

A few months ago, I noticed solar stocks were jumping higher on earnings announcements. I knew that if one or two companies had really strong earnings the others probably did as well. Sure enough the first few announced big quarters and record backlogs. Everyone in the industry was doing really well and those who were watching closely made great money trading the options.

An important part of earnings season is what happens in the markets as the reports come in. Understanding how the markets react to earnings news is just as important as the earnings themselves.

Let me ask you a serious question. If you had a splinter in your thumb, would you listen to a doctor who suggested amputating your arm? Would you just follow the advice blindly? What if another doctor suggested a lung transplant because of a small cough? Seems a little drastic don’t you think?

Foreclosures are at a record high. Bank owned real estate is skyrocketing. Estimates on sub-prime mortgage defaults are upwards of 20%. And mortgage backed securities are now valued at $0.22 on the dollar.

The mutual fund industry pours a lot of time and money into making sure you hear the message, “Your investments are safe with us.” Stealing your principal is illegal. Stealing a huge share of your increase is not. You have to know how the mutual fund industry is making you poorer.

The purpose of the mutual fund industry today is not what one would think. They are often at odds with their investors, which is you and me. The difference between hype and fact is huge — and revealing. Are you buying hype, or are you buying a future with choices?