Strategy Choices and Long Term Plans

January 10, 2020

Business

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Ask ten business people what strategy is, and most will give the same answer: Strategy is a long-term plan. My undergraduate students give a similar reply on the first day of my strategic management class. Besides, many folks use the word to inflate the importance of their activities. One business executive bragged, “I am excited because after one year we finished working on our five-year strategic plan.” Though difficult, we did it. His strategic plan was an end-a goal. He presented it to his board of directors and then moved to another major project. That’s not understanding strategy and strategic management.

Strategy is About Choices

I learned strategy as a teenager in college when I learned to play chess. Soon I discovered chess is a strategy game. Each person starts with a goal to capture the other person’s king. Each must understand the value and role of individual chess pieces, particularly how each moves. The pawn advances one space, the knight in an inverted L-shape, the bishop diagonally to as many consecutively open spaces as available, while the queen goes in every direction to any sequentially available space.

You cannot play chess haphazardly; stay focused on your goal. Before each move, ponder how the other player might respond, and consider a likely counter. When the opponent moves unexpectedly, revisit your overall approach.

What’s the strategy in chess? It’s your choices to achieve your goal to beat your competition. That’s strategy in a nutshell–choices to get to your goals. And strategy is not static, but dynamic. Once you decide your overall approach (strategy) to capture your opponent’s king, if she plays an unanticipated move, review your strategy and adjust as needed. Never choose a game-plan to checkmate the king and follow it blindly, change as needed. Learn the opponent’s patterns (past) and use it (present) to develop your overall approach (future). Likewise, never do a “strategic plan” and file it. Update it to show current available choices to meet the mission of the business.

Strategy and Negative Choices

I learned three valuable lessons about strategy during my 32-years business career. First, strategy allows you to commit resources optimally. Second, whenever you commit resources to one area, you deny other areas those resources. This is crucial to keep in mind. Although obvious, sometimes we do not spend enough time looking at this negative choice.

The third noteworthy lesson is some choices will not turn out as expected and will be impossible to reverse in the short to medium term. When this happens, if you made a mistake, admit it, look at available choices early, and understand this is part of the strategic journey. You will not get every decision right. Strategy is not static, but dynamic.

5 Best Investments for Beginners

January 10, 2020

Investing

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The adage goes something like ‘the best time to start investing is now.’ For some beginners, this can be painstaking, considering the volumes of information on the best investment with guaranteed returns. Other beginners will think this is an easy way to make a quick buck and plunge head first in the markets.

This post is for the amateur investor who is ready to make a strategic decision to safeguard their investment against exposure to unsustainable risk, but with enough latitude to pursue conservative opportunities that yield capital gains, and learn the ropes of the trade while at it.

Apart from the theoretical understanding of how the financial markets operate, it is imperative that a beginner gets a realistic feel of the different strategies investors employ in pursuit of opportunities in the markets.

The following is a detailed explanation of five best investment approaches suitable for beginners:

  1. ETFs

Exchange-traded funds (ETFs) offer a less rigorous opportunity for participating in the stock exchange. As a beginner, investing in ETF is ideal because an ETF pools together several assets including particular stocks, commodities and bonds, and the performance tracked against an index. ETFs allows you as the investor to trade several assets commonly as if they were a single stock. The diversification of the ETF enables beginners to access a broad portfolio of stocks and bonds providing the convenience and reduced risk. Consequently, the flexible nature of ETFs allows an investor to trade flexibly, with the choice of buying and selling at any time during regular trading hours.

  1. Mutual funds

Mutual funds are pooled investment vehicles ideal for beginners because of its two primary characteristics. First, a beginner is able to access the services of a professional trader in the name of fund manager despite the meek amount of capital, some as low as $25. Secondly, the investor is exposed to minimal risk because mutual funds, like ETFs, invest in a diverse asset class portfolio of stocks, commodities, and bonds across different markets and industries.

  1. Individual stock

After a detailed analysis of the past performance of an individual stock and the prevailing facts, individual stocks can offer a stable investment opportunity suitable for beginners. Caution should, however, be placed to ensure that the investment into the particular stock does not upset the risk tolerance level of your portfolio in case of a negative turn of events. Markets is not always predictable.

  1. Certificate of deposit

Depositing money in a bank over a specified term length with a fixed and guaranteed return of capital plus interest is a sound investment opportunity for a beginner. Certificate of deposits is insured and hence the capital plus interest are guaranteed to the investor at maturity. However, it is important to understand that access to this money is limited during the stipulated investment term length and may attract fees or loss of interest in case of withdrawal.

  1. High Yield Savings Account

This investment also entails saving for the sole purposes of earning capital gains from interest over a specified term length. However, unlike the certificate of deposit, the interest is not fixed and hence interest is according to the prevailing market rates. Funds in this account are however more liquid hence easily accessible.

Chris Bouchard is a strategic consultant who works with non-profit leaders and social entrepreneurs to apply concepts and techniques to identify complex strategic issues, find practical solutions, and devise strategies to create and win a unique strategic position. He also offers project development, proposal writing, and project evaluation services.


Investing – Some Metrics To Determine If A Business Is Worth Investing Into

January 10, 2020

Investing

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Figuring out what business venture to invest in can be a difficult process. When I was looking for a business to become a part of, I had a rough time trying to understand what to look for and what are some red flags. I have put together some metrics to help you determine whether or not a business is worth investing into.

What Are the Earnings?

Earnings are vital for a stock to be understood as a good investment. With the void of earnings, it is hard to evaluate what a business is worth. While current earnings have been overlooked during the boom of the internet stock, investors still were buying stocks in businesses that were thought to have earnings in the future. Earnings could be determined in this main three ways:

Earnings Growth:

Earnings Growth is described as a percentage. This percentages are gathered from month to month, or quarter to quarter. The premise of earnings growth is that the present reported earnings should be higher than the previous earnings that were reported. I caution you however, some may argue that this is “backward-looking” and that future earnings are more critical. While the pattern of growth is one of the essential tools for a business, the relationship of the growth rate matters.

Earnings Quality:

Quality of earnings factors favorably into evaluation of a company’s status. This process is left to a professional analyst, but the casual analyst could take a few steps to determine the condition of a company’s earnings.

For example, if a business is growing its earnings, but has revenues that are declining while costs are increasing, you can guarantee that this growth will not last the test of time.

What is the return on equity (ROE)?

Return on equity is the measurement of effectiveness of a brand’s management to turn a profit on the money that its investors have entrusted with.
ROE is the purest form of evaluation and could be broken down even further. ROE could be compared to the general market and then to peer groups in industries. Obviously, if there are no earnings, the ROE would be negative. I strongly recommend that you do some research into the company’s historical ROE to evaluate its consistency.
While these three characteristics could lead to a sound investment in a good company, do not settle for them alone. Do your best to gather as many metrics to ensure that you are making the best decision possible.


3 Solid Techniques for NQ Trade Entries

January 10, 2020

Trading

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The Nasdaq futures contract (NQ) generally trades like most of the other equity indexes though it has a few twists and turns that set it apart from the crowd. For anyone who has traded seriously, it is those “twists and turns” that can spell trouble for the uninitiated when trading the NQ. The purpose of this article is to alert traders to some of the idiosyncrasies that are part of trading the NQ and how to adjust your trading to take advantage of the attractive parts of the contract and avoid some of the less-than-pleasant outcomes this instrument can cause.

There are times when this contract is very easy to trade, especially when it is trending. Of course, you might say all contracts are easy to trade when trending but the NQ (because of volatility) presents some unique challenges and can be profitable if you trade the contract correctly. The challenge in trading the NQ is to understand and profit from the volatile nature of the contract. This can be a double edge sword and the downside of volatility is the tendency of price action to move against your position at a high rate of speed.

In a normal “bracketed” market you can let the trade run against you some, depending on the size of your trading account, but sooner or later (it may be days, weeks, even months) the price action will break out and the trade you let run will become your worst nightmare. The best general approach is to trade this contract conservatively and with the trend.

Countertrend trading is the formula for blown trading accounts on the NQ. You should repeat this mantra 25 times before going to bed each night. “I will not trade against the trend, I will not trade against the trend… “

Here are the techniques that have been successful for me in trading the Nasdaq:

· Reversion to the Mean: Like most contracts, the Nasdaq is a great contract to trade using a technique called “Reversion to the Mean.” This strategy, in general, discourages traders from taking those awful breakout and breakdown trades that are, so often, the cause of many losses. I generally wait until the price action is between 2 and 3 standard deviations against a backtested SMA and find this trade phenomenally successful. I have added a few game-changing rules to quantify the trade more precisely and upped the win rate another 15%. I urge you to investigate this less-than-popular style of trading and see how truly successful it can be.

· Pay specialized attention to support and resistance (SAR): As I mentioned at the onset, the NQ is a very active contract and making any preliminary assumptions about whether or not the price is going to move through SAR is a mistake. A better idea would be to use an order flow program so that you can see the actual order flow at SAR. Are traders hitting the buy side, the sell side, or are the orders placed that represent traders are on both the bid and ask.

· Volume Analysis: By now, most traders realize that increased volume at SAR generally results in a market pullback off SAR. The corollary is true also, low volume approaches to SAR may indicate that price is going to continue through support/resistance. I strongly recommend using a “Better Volume” indicator to indicate, in real time, the nature of each bar. Obviously, high volume at SAR often indicates that a change of direction could be in the cards and low volume signals a possible continuation of a move. The question has always been, “How high should the volume be to indicate a reverse in direction?” Obviously, high volume at SAR often indicates that a change of direction could be in the cards and low volume signals a possible continuation of a move. The question has always been, “How high should the volume be to indicate a reverse in direction?”

Is there a method for finding the “perfect” NQ entry point? No, not so much. But, you can get good enough to read between the lines and consistently score winners. Best of luck in your trading.

3 Types of Financial Analysis and When They Matter

January 10, 2020

Trading

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Financial analysis is conducted using information posted on a business’ financial statements to evaluate the current financial position and the past performance.

Financial Key performance indicators such as liquidity, profitability, and solvency among others highlighted by this process are used to ascertain the financial strengths and weaknesses of the business entity.

This analysis can be performed internally within the organization to facilitate decision making by management. External parties and stakeholders such as auditors, regulators, financial analysts, investors, and competitors can also conduct their analysis using the available facts to ascertain the entity’s financial position. These stakeholders equally utilize the information for decision-making suitable for their respective interests.

Three types of financial analyses can be performed with businesses financial statements are horizontal analysis, vertical analysis, and ratio analysis.

  1. Horizontal analysis

Horizontal analysis of financial information entails the assessment and comparison of the relative changes in specific items in a financial statement over stipulated accounting periods. The items in question could be sales, revenue, etc., and the accounting periods can be months, quarters, years, etc.

This type of financial analysis is best applied when seeking to determine the dynamic behaviour of an item so as to observe the trend of the item over the specified accounting periods. This is important in determining the factors behind the trend, whether positive or negative. For example, the net profit of a business can be tracked over a five-year period.

However, there are two ways of conducting a horizontal analysis, namely; percentage analysis and absolute analysis.

In the absolute analysis, the comparisons are carried out using the figures posted in the financial statements whereas in percentage analysis, the comparisons entail presenting the relative change in the figures into percentages.

  1. Vertical analysis

Also known as the common-size analysis, this vertical analysis involves comparison of figures of separate items to a standard figure on the balance sheet over a specified accounting period. For example, taking the total revenue of an accounting period to be 100%, other items such as employee benefits and debt repayment for a particular period can be calculated as percentages against the total revenue of the specific accounting period.

This form of analysis is most useful in the determination of the efficiency of business items by comparing how they stack up against common items such as income.

  1. Ratio analysis

This method of financial analysis correlates the different items of a balance sheet to the income statement to determine the financial performance of the firm. Assets are measured against liabilities and presented in a simpler way that is comprehensible without quoting huge figures.

Ratio analysis matters most when analysts and stakeholders seek to determine the viability and sustainability of an entity’s long-term and short-term financial strategies.

Chris Bouchard is a strategic consultant who works with non-profit leaders and social entrepreneurs to apply concepts and techniques to identify complex strategic issues, find practical solutions, and devise strategies to create and win a unique strategic position. He also offers project development, proposal writing, and project evaluation services.


Best Investment Opportunities Guide for 2020 and Beyond – Pharmaceuticals and More

January 10, 2020

Stock

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Are you interested in investing but don’t know exactly which markets and industries to consider? You’re not alone – there are many beginners and casual investors who need a lot of advice as well. It never hurts to diversify your portfolio, but you probably already know this. Never put all of your money into one investment. That being said, what are some of the best investment opportunities right now? What are some of the ones you should definitely look into?

Here are a few industries and markets that have the potential to pay off huge over the next several years.

Japan

Japanese equity markets have been long shunned. However, they are currently among the cheapest in the world. There is evidence that “Abenomics” (policies put forward by Shinzo Abe) appear to be making some slow, yet real improvements in the country’s underlying economy. Also, it is no secret that Japan is a leader in technology, and has been for a couple of decades now. For international investors, medium-sized companies might offer compelling opportunities for stability for the long-term, as the larger companies have to deal with market share loss, and the “fast-growth” companies are more vulnerable to crashes.

Drones and Robotics

While so many people are investing in the companies that sell the drones, you might be better off investing in the manufacturers who make the parts. This is because drone technology is still somewhat in its early stages. Like all electronic products, drones will only evolve and become more advanced over time. To diversify your portfolio a bit more, consider investing in the stores and companies that use drones now, and are financially stable enough to continue using them in the future (Amazon).

ULTA

ULTA Beauty has experienced a lot of growth over the past 5 years, despite the setbacks of the retail industry. The network of stores keeps expanding considerably. There are strong indicators that this beauty / spa product store provides the best investment opportunities in the retail industry. Not only is ULTA an online retail giant, it also has a network of 1,100+ stores, and that number is expected to grow closer to 2,000 over the next decade. In the first half of 2019, the ULTA Beauty stock gained 42% (NASDAQ) and 17% increase in S&P 500.

Aerie Pharma (AERI)

Why not add pharmaceuticals to your portfolio? This particular company has put a significant amount of focus on the development of treatments for eye diseases such as glaucoma. AERI has already successfully developed two drugs for glaucoma with the first MoA (Mechanism of Action) in nearly two decades. With solid first product launch, limited competition in the glaucoma treatment sector, and strong management execution, everything points to this company being one worth investing in.

These are just a few ideas of where to get started. Always do research on the best investment opportunities before making any decisions. Capital Exploits is the best place for educating yourself further. All of the resources and tools are straightforward and easy – even for complete beginners.


5 Smart Investment Tips to Help You Make Better Decisions With Your Money

January 10, 2020

Stock

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There is so much information on the internet these days about investing for beginners and experts alike that it can be hard to sort through it all.

No matter what kinds of markets and industries you are interested in, or your level of expertise, here are a few smart investment tips that anyone can follow:

1. Only invest in things that you understand. Don’t just put your money wherever your broker (if you have one) tells you to, without first learning WHY you should put your money there. For instance, we all know that technology is the future, but that doesn’t mean everything involving technology will make a good investment.

2. Don’t just assume that investing in multiple mutual funds will automatically “diversify” your portfolio. Always look beneath the surface of each fund to see what all is there. It’s not uncommon for a lot of mutual funds to actually own a lot of the same stocks.

3. If you want to put your money in a bank to earn interest, whether it’s through CDs, money market accounts, or savings account, go with an online bank that has a lot of positive views. Online banks are better able to provide higher yields than traditional banks.

More Smart Investment Tips

4. One of the most important “smart investment tips” is to NEVER allow your emotions to get in the way. The stock industry has no place for emotions. No matter how wonderful you feel about a particular opportunity, it might not really be the best. Always take a bit of time to do research first. It’s the same when it comes to selling stock. Don’t think that just because you’re having a good day that it’ll be a good time to sell. Always be calm – never allow yourself to feel panic. Try to be as objective as possible when looking over the larger picture.

5. Everybody has a “risk tolerance level” and it’s important that you learn yours as soon as possible, if you haven’t already done so. Even if all of the indicators are pointing towards you getting a huge, don’t invest any more money than you can afford to lose. What if the unexpected happens and you wind up losing money anyway? Will you be able to handle the loss?

You can get many, many more smart investment tips from some of the best experts at Motley Fool. It’s the best place to learn about all aspects of investing. Regardless of your level of knowledge and experience, Motley Fool offers everything you need for conducting research.


New Stock Ideas: A Guide to Some of the Best Industries for Beginners to Invest In

January 10, 2020

Stock

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Are you new to investing? 2019, overall, has been pretty good to shareholders. The best stocks to buy are strong companies with a solid foundation, expected to prosper no matter what the future holds. Even though the trade wars are stirring up a lot of concern, there are still some relatively safe stocks, some of which are under the radar. To give you a starting point, here are some new stock ideas to think about.

Cloud / file hosting technology

Dropbox (DBX) in particular has a 112% upside. The company seems to be stabilizing thanks to new product offerings and pricing in order to better serve the needs of its 500 million+ registered users. The virtual storage needs of many people are growing so much that free accounts aren’t sufficient enough anymore, which means that the number of paid subscriptions is growing.

Wind energy

Wind energy projects are becoming more pervasive in a number of countries. This clean, sustainable source of energy is considered a good long-term prospect. There is potential that the operating costs are declining, and the pricing seems to be stabilizing.

Australian Housing

If you’re looking for new stock ideas in real estate, consider the metropolitan areas of Melbourne and Sydney. They are short of rental supply and the population is growing due to immigration. There has been a lot of money put into Australian from foreign countries like China. If you are interested in the Australian real estate market, keep rental properties at the top of your priority list.

Waste management

This isn’t the most glamorous industry to invest in, but with an increase in environmental services, pollution control, and recycling centers, it is reasonable to see the value in investing in this side of the industrial sector. It is a necessary part of everyone’s lives. A couple of organizations to look into include US Ecology (ECOL) and Waste Management (WM).

Aerospace sub-sector

There has been a boost in US military spending this past year, so it might be worthwhile to put money into companies that are part of the supply chain, such as designers and developers. The aerospace industry typically performs well in late economic cycles. As the cycle matures, there is an increase in plane orders, and a good way to play it safe is by investing in the suppliers.

Where to Get More New Stock Ideas

These are just a few recommendations. The best way to learn about new stock ideas and investment opportunities is to become part of Capitalist Exploits. There are currently 30,000+ investors getting unfiltered analysis of the financial events shaping the world. This is definitely THE investment newsletter to subscribe to.


4 Ways To Invest In The NASDAQ 100 Stock Index

January 10, 2020

Investing

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If you look back over the past 25 years of stock market history you will find that it’s hard to beat the performance of the NASDAQ 100 stock index. The NASDAQ 100 is the 100 largest non-financial stocks that trade on the NASDAQ stock exchange. In general, it out performs the S&P 500 when the market is advancing and under performs the S&P 500 during periods of decline. Therefore, when the economy is improving many investors look for exposure to this index.

The most popular way to invest in the NASDAQ 100 is through the ETF which trades under the ticker symbol QQQ. This ETF is designed to track the performance of the NASDAQ 100 stock index less fees and expenses. It is one of the most popular ETFs trading about 50,000,000 shares per day.

In recent years another innovation in the ETF world has been the use of leverage. There is a 200% or 2x leveraged version that tracks the index and it trades under the ticker symbol QLD. The goal of this fund is to move up or down 2% (on a daily basis) for each 1% move in the NASDAQ 100 index (less fees and expenses).

For even more leverage ProShares also offers the 300% (3x) leveraged NASDAQ 100 ETF which trades under the ticker symbol TQQQ. These leveraged versions are popular with active traders but only trade a fraction of the volume of the QQQ.

The most leveraged way to gain exposure to the NASDAQ 100 is through the NASDAQ 100 stock index futures. The most popular version is the electronic E-Mini contract (ticker symbol NQ). This contract is valued at $20 times the index so if the NASDAQ 100 is at 2700 the total value of the contract is $54,000. Since the margin requirement to hold this contract is only $3500 at the current time, this give you 15 to 1 leverage which makes the leveraged ETFs look meek in comparison.

These leveraged products are designed for active traders and experienced professionals who monitor their positions closely. Long term investors are much better off in the QQQ which over time has out performed almost all other stock indexes. In fact, due to the fact that the NASDAQ 100 has a higher beta than the S&P 500 there is absolutely no reason why the average investor would want to add additional risk to their position.


Day Trading Stock Index Futures S&P 500, NASDAQ 100 & Dow Futures Shocking Secrets

January 10, 2020

Trading

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Many day traders trade stock indexes and make a successful living. Now days, almost every stock exchange in the world has got a stock index associated with it like the famous Dow Index, NASDAQ, FTSE, CAC, DAX, Hang Sen and so on. Currently more than 70 stock index contracts are traded on at least 20 exchanges in the world. You don’t need to trade every major futures contract in the world to be successful. You just need to find one or two these futures contracts with which you are comfortable.

So stock index futures are contracts based on indexes that are composed of stocks. For example, S&P 500 futures are based on the famous S&P 500 Index; a group of 500 commonly traded US stocks. When you are trading these futures, you are betting on the general direction of the market not on some individual stocks. This way you are blocking out a good deal of noise that is associated with the daily gyrations in the stock prices. Stock index futures are used for both hedging as well as speculation. These futures are used by hedge fund managers in hedging their stock portfolios.

The most popularly traded stock index futures contract is the S&P 500 futures. It trades on the Chicago Mercantile Exchange (CME). S&P 500 Index is made up of 400 industrial companies, 40 financial companies, 40 utilities and 20 transportation companies offering a fairly diversified view of the US economy. One tick on S&P 500 contract is worth $25. So there is an inbuilt element of leverage in these futures contract.

If the S&P 500 moves one point, you either make $250 or lose $250 depending on which side of the market you were. These contracts also get traded on the GLOBEX Electronic Platform after the regular trading hours. Margin requirements can vary. If the S&P 500 Index is at 1000 points, the contract is worth $250*1000=$250,000. A huge amount for most of the day traders.

NASDAQ-100 Futures Index contract is the second most popular stock index futures contract. It is based on the famous NASDAQ 100 Index that includes many technology and biotech firms. The margin requirements for this contract maybe too high for most day traders. Similarly, Dow Futures are written on DJIA. Due to these facts, a mini version of these contracts was introduced.

E-mini S&P 500 (ES) and e-mini NASDAQ 100 (NQ) are among the most popular stock index futures contracts as they enable you to trade the market trend with only one fifth of the margin requirement.