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Read Christian Hill's previous newsletter articles below:

Has the Housing Market Hit Bottom?

Saturday, June 6th, 2009

Many people are trying to call this the bottom of the housing market. While the loudest voices may be those with self-serving interests (namely, realtor groups), there is some real optimism creeping in.

The most recent Housing Opportunity Index – released by the National Association of Homebuilders and Wells Fargo Bank – shows that almost 73 percent of homes sold in the first quarter of this year were “affordable.” In order to qualify as “affordable,” the total costs of a home (mortgage, taxes, etc.) must not exceed 28 percent of the median family income (currently $64,000).

A few factors contributed to this jump in affordability, and it is a bit of a good news/bad news situation.

Plummeting home prices are a major factor in affordability. Unfortunately, the recent drop in prices is primarily due to foreclosures, which means that someone had to lose their home for it to become affordable for someone else. And until foreclosures slow down, prices won’t stabilize.

Another factor is record low interest rates, which hovered near 5 percent for a 30-year fixed loan at the end of the first quarter. This is good for individuals who qualify for those loans, but many who need a lower rate to be able to stay in their homes don’t qualify.

I think the housing market will find its true bottom by the end of the year, when the Obama administration does something to tackle the last roadblock: the vast number of homeowners who are currently underwater.

While there are still obstacles in the housing market, it seems like now is a great time to buy. Sure, prices may come down a little more, but the drastic drops appear to be behind us (and trying to time any market perfectly never works). If you find a home you like, at a price you like, don’t second-guess yourself. Interest rates won’t stay this low forever, and neither will prices.

And if you are looking for the country’s most affordable large city, check out Indianapolis. It has topped the list for the last 15 quarters.

[Ed. Note: Detroit native Christian Hill is an active follower of the real estate markets, the auto industry, and practically every other investment vehicle under the sun. You can catch his insightful commentary and advice for free in Investor's Daily Edge. Click here to find out more.]

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The Wheels Aren’t Falling Off This Car

Wednesday, April 22nd, 2009

In an industry full of missteps and forced resignations, Hyundai is one company actually headed in the right direction.

First off, the economy is playing right into Hyundai’s hands. Long known as a maker of low-priced vehicles, Hyundai in an enviable position. The Sonata is priced roughly $2,000 less than a Toyota Camry, and the Santa Fe SUV is almost $10,000 less than a Toyota RAV4.

While still lagging far behind Toyota in sales, Hyundai does have one advantage: A full 55 percent of its sales come from countries in emerging markets, versus 31 percent for Toyota. And because those countries have withstood the worst of the global slowdown, this means the company can continue to see greater sales growth.

Also helping Hyundai is its product mix. Almost 65 percent of the automobiles it makes are small cars. In a world of rising gas prices, demand for these vehicles will increase, allowing the company to capture market share while other manufacturers re-tool their assembly lines.

Finally, the company introduced its AssurancePlus program, where it will make your payments for three months if you lose your job. And if you’re unemployed longer than that, Hyundai will buy back the vehicle. (This idea has proven to be so strong that GM and Ford recently announced similar programs to encourage people to buy.)

If you’re looking for an investment that could be on the upswing, Hyundai fits the bill.

[Ed. Note: Detroit native Christian Hill doesn't just follow the auto industry closely, he offers advice covering everything market-related in Investor's Daily Edge, ETR's sister publication. Sign up free here ]

Investing in automakers on the rise is just one investment you can profit from in 2009. This June, a group of financial experts will give you their top recommendations for making 2009 the best year ever for your portfolio. Find out more here.]

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Home Sweet Home

Thursday, April 2nd, 2009

My hometown of Detroit has been all over the news recently. Thankfully, it’s been for something other than the transgressions of our former mayor.

The rest of the country (and world, it seems) has realized that Detroit has incredibly cheap real estate, and plenty of it. Investors – some from as far as away as the U.K. – are buying up lots of houses (for as little as $10,000) to fix up and rent out.

While it might be tempting to buy an investment property for only $10,000, there are at least three reasons to be cautious:

• In comparison to other parts of the country, real estate taxes in depressed areas are high and could get worse. A shrinking population means a smaller tax base, so everyone left has to cough up more money.

• Take your rehab bill and double it. Not because of cost overruns but because your upgrades will walk out the door at night. Theft is a major problem.

• Don’t count on getting government-assisted renters. The easy days of the government sending you the rent check are long gone. According to a friend of mine who has a few rental properties in Detroit, the number of landlords looking for Section 8 renters far outstrips the supply.

With that being said, I believe investing in Detroit is worth considering… as long as you do your homework first. Where else can you buy a house for less than a new car and generate cash flow every month?

[Ed. Note: Whether you're interested in real estate, the stock market, or other investment opportunities, you can get Christian Hill's take in Investor's Daily Edge, Early to Rise's sister publication. Sign up for free right here.

Buying and renting out real estate is just one investment you can profit from in 2009. This June, 9 financial experts will show you exactly how you can make a fortune in today's market. Find out how you can get their top recommendations for making 2009 the best year ever for your portfolio right here.]  

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Beware of Moving Targets

Tuesday, January 6th, 2009

The last 12 months has been a bad time in the markets. Very few stocks have avoided the market-wide sell-off. And for a lot of stocks, as a result of their share prices being depressed, one measure of value – dividend yield – could be misleading. 

The dividend yield is calculated by dividing the dividends paid per share over the course of a year by the stock’s price – and this number is of paramount importance to income investors. Oftentimes, there is a minimum yield that they are willing to accept when they invest in a stock.

And this is where the current markets could send you down the wrong path. Let’s take DuPont (DD), for example. For the past three years, DuPont has traded in a range from around $40/share to $50/share. During this period, it has paid a consistent dividend between $0.37 and $0.41. That would give investors a dividend yield between 2.9 percent and 3.7 percent. 

A nice return, but perhaps too low to hit the radar screens of many income investors. 

But now let’s look DuPont’s dividend yield today: 6.2 percent. 

Your first assumption might be that the company has really fattened up its dividend. But that would be incorrect. What has occurred is that the stock price has fallen so much that the yield has been “artificially” driven up. 

DuPont is now trading for around $26/share – about half of what it was even three months ago. This means the denominator in the equation for calculating dividend yield is much lower… and that’s why DuPont’s yield is so high. 

When the market moves back up and DuPont’s share price follows, its yield will plummet back down.

[Ed. Note: Finding fundamentally strong companies is a good way to prosper despite the market's condition. But you can also make money on companies that are ready to crumble. Learn how to spot the "red flag" signals that could predict (with as much as 92 percent certainty) when a company's stock is going to tank.]

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Don’t Let Short-Term Troubles Rule Out Long-Term Investments

Saturday, January 3rd, 2009

With the markets getting clobbered over the last year, traditional methods for measuring the value of a stock have been thrown out of whack. That doesn’t mean you can’t rely on those indicators, but it does mean you need to keep certain things in mind.

Let’s take dividends as an example. Many companies have slashed or completely eliminated dividends to keep more cash on hand to weather the downturn. Does this mean their current dividends should be used to measure their future income streams? Of course not.

It’s better to isolate this period from your analysis and look, instead, at a company’s historical dividend payments. Take a look at what the company has paid out over the last five years or so. If it has a steady and/or increasing dividend – with the only blemish being the most-recent quarters – then it is probably safe to assume that once the economy gets turned around, its dividend stream will return to normal. 

Don’t forget that we are in the midst of the worst market in decades. Strange things are happening, but it will eventually return to normal. Don’t miss out on long-term investment opportunities by focusing too much on current conditions.

[Ed. Note: Finding fundamentally strong companies is a good way to prosper despite the market's condition. But you can also make money on companies that are ready to crumble. Learn how to spot the "red flag" signals that could predict (with as much as 92 percent certainty) when a company's stock is going to tank.]

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Profits by Mail

Tuesday, December 30th, 2008

It’s so irritating to pay a late fee when you return a rental movie a day (or 30 days) late. Was anyone else really trying to rent Gigli during the two extra days I held on to it? Not likely. So why should I pay a fine when the movie was just going to sit on a shelf?

There is a solution that many folks have turned to.

Netflix!

This online movie rental service has no late fees. Ever. And their selection is much more extensive than what you find at your neighborhood Blockbuster or video store. The perks are better too. New releases are almost always available. You can schedule your next 10 movie deliveries – and you can modify your list if your tastes change. To return a movie, you just drop it in the mail. In about two days, the next one on your list is delivered. And now, you can even download and watch Netflix movies on your computer.

The best part is that a subscription to get one DVD at a time is under $10/month, cheaper than renting two movies a month from most video rental places.

With subscriptions being bought as holiday gifts for family and friends, Netflix (NFLX) should ride a revenue wave that will push its stock price up over the next few months. Currently trading around the $27/share level, I expect it to pop back up to the $32-$34/share level soon. Pick up some shares now.

[Ed. Note: The market may not look so hot right now. But you should be ready to take action when the moment strikes. Some incredible opportunities are headed your way. For an educational program that lays out the simple steps you need to take advantage of them, click here.]

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A Little Speculative Play Could Pay Off Big

Saturday, December 6th, 2008

The market has been getting absolutely clobbered for the last year or so. Some very big names are trading at extremely low prices. Will some of them end up going out of business? Perhaps.

But that shouldn’t deter you. Taking a few chances with some of your speculative portfolio money could lead you to windfall profits.

I’m not talking about buying penny stocks that rarely return anything more than a headache. I’m talking about household names that have just been beaten down for a multitude of reasons. The list I ran through a stock screener of companies with a market capitalization of over $1 billion and share prices less than $10/share returned 221 results.

I don’t want you to go crazy and buy up thousands of shares of companies like these. You should still be prudent and diversify. As an example, you could invest $100 in 10 of the following 16 companies. You would have $1,000 invested, and would need only a few to pay off to get a great return. 

Under $10/share (as of 11/21/08):                

Time-Warner (TWX)                          

UBS                                                    

Dell Computers (DELL)                                  

Yahoo (YHOO)                                              

Alcoa (AA)                                                     

Starbucks (SBUX)                                          

Macy’s (M)                                         

Applied Materials (AMAT) 

Under $5/share (as of 11/21/08):

Citigroup (C)

Motorola (MOT)

Sprint (S)

AIG

Ford (F)

Sun MicroSystems (JAVA)

General Motors (GM)

[Ed. Note: The market may not look so hot right now. But you should be ready to take action when the moment strikes. Some incredible opportunities are headed your way. For an educational program that lays out the simple steps you need to take advantage of them, click here.]

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Sticking With It

Tuesday, November 18th, 2008

A few months ago, I wrote that, despite all the doom and gloom, I thought the domestic automakers would survive. Unfortunately, things have gotten even worse. Just recently, a Deutsche Bank AG analyst said that GM shares will likely be worthless in a year.

Even so, I’m sticking with what I originally said. I still think the government will step in and provide the automakers with the loans they need to survive. As a GM spokesperson has said, bankruptcy “creates more problems than it solves.”

GM is doing all it can to cut costs. It is laying off workers and closing plants. It is scrapping plans for some vehicles. It is going as lean as it can in the face of the worst auto market in 17 years. The company is not just sitting around, waiting for divine intervention.

How’s this for a reason for the government to step in: This year, the economy has shed approximately 1.2 million jobs. Should GM go under, it will cost 2.5 million jobs in the first year alone. I can’t help but think the government will do everything it can to avoid that disaster.

If things unfold as I expect and GM gets the loan it needs – and if you are the adventurous type – a LEAP option for the January 2010 calls could be a very lucrative play.

[Ed. Note: You may be surprised to hear it, but there are plenty of ways to make money in a down economy. You just need to be poised to take action as soon as the opportunities arise. Discover the simple steps you need to take to make money in any market condition right here.]

 

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After Selling, Your Work Is Only Half Done

Thursday, November 13th, 2008

With the recent turmoil in the markets, chances are you liquidated some of your holdings. Whether it was because they hit your pre-determined stop-loss point or you simply threw in the towel because you’d had enough, you still have some work to do.

Did you re-examine your portfolio mix after you sold those stocks? Most likely you didn’t, so do it now.

Selling at a loss is often an emotional and stressful experience. As a result, you aren’t necessarily focusing on what remains in your portfolio, and you could quickly become overweight in one stock or sector.

After any selling, take the time to make sure you have the mix you want. It may mean selling some additional holdings to bring everything back in line, but it is best to take care of that now, rather than get caught down the road.

[Ed. Note: Protecting your wealth is about more than getting in and out of the market at the right time. It means keeping your portfolio balanced.

Keep your money safe during these shaky times by making smart investment choices. Companies with strong fundamentals are best equipped to withstand major market changes. But don't be afraid of fluctuations in the market. These movements can offer you the perfect opportunity to profit .]

 

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Time to (Re)Build Your Portfolio

Monday, November 10th, 2008

The last 10 months in the market have been terrible. The Dow is down more than 30 percent, the S&P is down around 35 percent. One day we may look back on this year as the single greatest financial crisis ever, depending on how the next few months unfold. 

The individual investor has taken it square on the chin. Over $2 trillion has evaporated from retirement accounts in the last 15 months. Given the massive amount of lemons around, how can you make lemonade? 

You can start by either building or rebuilding your portfolio.

If you are just starting out in the market, value picks are plentiful. Now is the perfect time to pick up shares of industry leaders at deeply discounted prices. Sure, there may be some downside left, but no one can perfectly time any market.

And if you are one of the many who have seen their investments beaten up, now may be the time to buy into some industry leading companies that were too pricey for you in the past. Remember when Google was at $700 share? You can now buy it at half that.

If the price is right and you feel strongly about a company, you might as well buy it now. The market will rebound, valuations will return, and you will be wishing for the opportunity to go back and buy at today’s prices. 

[Ed. Note: Keep your money safe during these shaky times by making smart investment choices. Companies with strong fundamentals are best equipped to withstand major market changes. But don't be afraid of fluctuations in the market. These movements can offer you the perfect opportunity to profit.]

 

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Homebuilders Make a Nice Contrarian Play

Wednesday, November 5th, 2008

The housing market is mired in a slump that shows no signs of letting up. Home values continue their slide. Foreclosures are at a record-setting pace. So why am I bullish on homebuilders?

Survivability, for one thing. Those that have lasted have shown that they can make it through the worst housing market in decades. Sure, their balance sheets are a mess and they may still have some unsold inventory – but, for the most part, they have likely weathered the worst of the storm.

When the market started to turn in late 2005/early 2006, builders were left with unfinished developments and an extreme oversupply of land and homes. Most of the homes that were under construction at the time were completed and sold, sometimes at a loss. The land that had been bought at the top of the market was sold, and huge losses were written off. But all that is pretty much over.

The remaining carnage is primarily in the condo market, since most of those condos are in high-rise towers that took longer to build and are just now being completed and sold.

The major builders, those with regional and/or national exposure that have survived, should be a relatively safe bet now. They have been battered long enough, and no real surprises remain in terms of massive write-offs and losses. Their stocks are near historical lows, and little downside is left. I like the Homebuilders ETF (the XHB) for these reasons, and perhaps as a contrarian play as well. In terms of individual builders, Toll Brothers (TOL) and Pulte Homes (PHM) are my favorites.

[Ed. Note: Going against the market with contrarian investments isn't the only way to prosper in the next few years. Learn how to recognize "red flag alerts" and you could put yourself in the pathway of a raging tidal wave of cash. Learn how to prepare yourself for what could be the investment opportunity of your life.]

 

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Don’t Let the Future of Solar Pass You By

Saturday, October 25th, 2008

Sustainable energy and “going green” have been and continue to be popular topics of discussion. The markets took note, and stock prices of many companies in this industry ballooned over the past 12 months. The air slowly leaked out of that balloon, though, and prices fell back to earth. 

Too much too soon? Perhaps. But as sources of sustainable energy develop and gain greater acceptance, the industry is sure to rise again. 

One of the companies poised to lead the field is a manufacturer of thin-film flexible solar laminate products for the commercial rooftop and building-integrated (integrating solar panels into architecture) markets. As companies look for ways to reduce their energy costs, this has become one of the fastest-growing segments of the solar market.

ECD (Energy Conversion Devices) Ovonics is just the type of company you want to own. In addition to its solar cell business, it is working on a new type of digital memory chip for cellphones, digital cameras, and computers. This means the company is diversified, and isn’t solely reliant on one technology.

Invest in ECD Ovonics (ENER) to take advantage of the exciting things this company is doing. As “green” energy grows in popularity, it has tremendous upside potential.

[Ed. Note: Going green with your investments isn't the only way to prosper in the next few years. Learn how to recognize "red flag alerts" and you could put yourself in the pathway of a raging tidal wave of cash. Learn how to prepare yourself for what could be the investment opportunity of your life.]

 

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Cashing Out a 401(k) Might Not Help As Much As You Think

Tuesday, October 21st, 2008

With the downturn in the economy and rising costs, many Americans are feeling the pinch in their pocketbooks. As a way of getting extra money to pay bills, some are thinking about pulling their money out of their 401(k)s. While this may help short-term, there are serious drawbacks you need to consider.

• First and foremost is the investment penalty of selling at the bottom of the market. You are selling your shares at the worst time possible, getting the lowest return on your dollar.

• If you are under the age of 59 1/2, you are subject to an early distribution penalty of 10 percent. Seeing that money vanish right off the top is a hard pill to swallow.

• The amount of money you receive as a final disbursement is still subject to income tax (since you are now receiving money that was set aside pre-tax from your paychecks). This often amounts to around 20 percent of the taxable amount, and slices out another chunk.

So, if you are contemplating closing out your 401(k) to help you through the current downturn, just be aware that it is not as simple as asking for and receiving your entire contribution. Consult with your accountant or retirement specialist to go over any questions you may have and other approaches to meet your short-term money needs.

[Ed. Note: The economy may be in an uproar these days, but there are still ways for you to make money. The real secret to banking riches in today's market is to look in unconventional places. You can access one of these "hidden treasure troves" just by keeping an eye out for "Red Flag" alerts. Find out how to spot those Red Flags, and how they can help you prosper, right here.]

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The Price Could Be Right to Buy Into This Travel Site

Saturday, October 18th, 2008

Priceline built its business on the premise that people want to pay a lower price for travel services than what is advertised. The company started by targeting air travelers with good deals on flights. It has since expanded to include hotels, rental cars, and vacation packages.

With William Shatner in a campy role as spokesperson, the company’s commercials are at least memorable and keep it visible. Since peaking in May of this year at around $140 a share, its stock has slid back a bit, to the current $60 range. However, with the major holiday travel season looming on the horizon, I think the fortunes of Priceline could turn soon.

Traveling during the holiday season, unlike the rest of the year, is almost unavoidable, even with airfares climbing. And with shrinking wallets, consumers will employ every resource available to get the cheapest possible fares and accommodations. This leads me to believe that Priceline could see a nice bounce in earnings when it announces first-quarter 2009 results.

Of course, to take advantage of this, you want to buy Priceline well before the earnings announcement. And with the recent pullback in the stock price, you can now get in cheaper than you could have a few months ago. But before you buy, wait until the stock ends its current slide and starts to gain upward momentum again.

[Ed. Note: Keep your money safe during these shaky times by making smart investment choices. Companies with strong fundamentals are best equipped to withstand major market changes. But don’t be afraid of fluctuations in the market. These movements can offer you the perfect opportunity to profit.

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A Phone Call That You Need to Make

Tuesday, September 30th, 2008

The average American has at least one credit card and carries a balance of more than $1,700. Faced with mounting minimum payments on their cards and shrinking monthly budgets, what is a consumer to do? Answer: Call your credit card company and negotiate a lower interest rate.

Credit card delinquencies are mounting with the downturn in the economy. (Interestingly, the two states with the highest foreclosure rates, Nevada and Florida, also lead the nation in credit card delinquencies.) Through July, the annualized rate of credit card charge-offs rose 33 percent compared to last year, according to Moody’s Investor Services. At the same time, the Payment Rate Index, which reflects borrowers’ ability and willingness to repay credit card debt, dropped.

Faced with increasing delinquencies, credit card companies are more willing than ever to lower your interest rate to make sure you’ll be able to keep current. The last thing they want is for you to fall behind on your payments and have another past-due account on their books.

[Ed. Note: Protecting your wealth is about more than investing. It means keeping your debt under control, too.

Have a sticky financial question? Want to know what's behind an investing term you keep hearing? Send your questions to AskETR@ETRfeedback.com and one of our financial experts may answer you in Early to Rise.]

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Mutual Funds Don’t Necessarily Mean Low Risk

Saturday, September 20th, 2008

Mutual funds traditionally get high marks for being a “low-risk” investment. But if you think about them that way, you could be putting your money at risk.

A Forbes article on mutual funds broke down the winners and losers during a recent market downturn. One fund – the Putnam Investments Growth and Income Fund – has underperformed its peers for the last nine years. Plus, over the last year, it has dropped 23 percent.

The cause? Most likely its large holdings in Bear Stearns, Countrywide Financial, Bank of America, and Citigroup while the financial sector collapsed. To make up for that, the fund then loaded up on ExxonMobil just before the recent decline in the energy sector.

The lesson any mutual fund investor can learn from this is to closely examine the largest holdings in a fund prior to investing in it. If the fund is too heavily weighted in a certain sector, you are left exposed should that sector run into problems. And once you buy into a fund, you should be constantly monitoring its allocation. The holdings can change at the fund manager’s discretion, and the balance can become drastically different over time.

The composition of most funds can be found online, so doing your initial homework and then checking up on the ones you buy is relatively easy. In the long run, you will be happy you took an active role in managing your risk exposure.

[Ed. Note: While you're researching the best mutual funds for your dollar, check out one of the greatest investment opportunities of the 21st century: the massive bull market in oil and gas. Now that doesn't mean you should buy most oil and gas companies. In fact, you should AVOID them. Find out how doing so can make]

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A World-Famous “Hero” for Your Portfolio

Saturday, September 6th, 2008

Video games were once the domain of children and “computer geeks.” But the industry has undergone a major transformation in the last 10 years and is now an integral part of the entertainment genre. Some video game players actually earn well over six figures by competing in tournaments.

One company is capitalizing on this trend, and should be a part of your portfolio. Activision Blizzard (ATVI) is a third-party developer of video games. This means it develops games for all game platforms, including Sony Playstation 3, Microsoft Xbox, and Nintendo Wii and Nintendo DS.

The company has the current best-selling video game franchise, Guitar Hero, as well as other popular franchises, including Call of Duty, James Bond, and the online goliath known as World of Warcraft. comes from a recent merger with Vivendi Games, completed in July. This merger will allow Activision to challenge Electronics Arts as the #1 third-party developer of video games.

With the current economic downturn, you might expect demand for video games to diminish. But I don’t think it will. Dollar for dollar, video games offer more than many other entertainment options, including movies. Games can be played over and over again, and the experience is different every time. Also, the demand for consoles – the machines the games are played on – shows no sign of slowing. In fact, demand for the Nintendo Wii is still outstripping supply.

All of this leads me to believe that there is still plenty of growth ahead for Activision. And with the holiday season right around the corner, sales should be even stronger.

Add Activision to your portfolio and get excited about video games. Maybe even pick up a copy of Guitar Hero and see what the fuss is about.

[Ed. Note: Despite the gloom and doom surrounding the economy, you can still find ways to make money in the markets. Discover a "long-lost" trading method that the wealthy use to get even richer - a system that's so simple, it's almost embarrassing.]

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My Case for the Automakers

Monday, August 25th, 2008

“You make money when you buy, not when you sell.” So says the old adage. It’s especially important to keep this in mind in today’s market. Buying opportunities abound, and now is the time to take advantage of that and make your money.

I must admit, I have a soft spot in my heart for Detroit. That was where I was born and raised. And the entire southeastern part of the state of Michigan is dependent on the automakers staying in business. So whenever talk of the Big Three (or Two, if you prefer, since Chrysler is now privately owned) going bankrupt surfaces, I take note. But no matter what you hear, I believe the chances of them going bankrupt is very remote.

Here’s why: If Ford or General Motors, for example, ever filed bankruptcy, it would likely shift consumers immediately away from their products and to those of its competitors, further hurting revenue. Because that sudden loss of customers would make it nearly impossible for the company to recover from bankruptcy, a more likely scenario would be a recapitalization of debt, and favorable concessions from suppliers and unions to ease the financial burden. It could also mean that new debt sources could be found at more favorable terms.

The government, having bailed out Chrysler in 1979, is well aware of the consequences of a major automobile manufacturer going out of business. It wouldn’t just be GM or Ford going out of business. It would also mean the end for the hundreds of auto parts suppliers in the region, including Delphi, Visteon, and Johnson Controls. The trickle-down effect would be devastating.

So how does this tie into the old “you make money when you buy, not when you sell” adage? Ford and GM are currently trading near their 15-year lows. The outlook for them is bleak. Everyone is dumping shares. But, for the above reasons, I don’t think these companies are going to go away – and it is time to look at them as long-term recovery investments.

Buying near 15-year lows gives you two advantages: You are buying at a very low price, so the upside is huge. At the same time, that low price makes your downside relatively small in the unlikely event that they do go bankrupt.

[Ed. Note: You may be surprised to hear it, but there are plenty of ways to make money in a down economy. Take, for example, market analyst Christian Hill's advice about investing in Detroit automakers. And there are more ways to keep your money safe while allowing it to grow. You can also make big bucks in the coming years with companies searching for new sources of oil and gas. Discover two best-in-class drilling rig companies that will be on the receiving end of this tidal wave of cash here.]

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Know When to Say When

Saturday, August 2nd, 2008

We have all been there…

Sitting at a bar, head in your hands, you’re wondering how it happened. How could your favorite stock have fallen so far, so fast? It looked so promising months ago. But here you are, sick to your stomach over it.

You’re tempted to hang on to the stock and wait for it to rebound. You bought it at $30/share, and it is now $20/share. You want your money back. And it shouldn’t take too long to make back that $10/share, right? A few good days in the market, and you’ll be back to even…

Not so fast. When it comes to “recouping” losses, you have to look at the equation in a different way.

It’s human nature to look at the percentage of the loss and figure that is what the stock needs to increase by in order for you to break even. In this example, if you’d bought the stock at $30/share and it is now worth $20/share, you are sitting on a 30 percent loss. But in order to break even, and see your $20/share stock go back up to your purchase price of $30/share, it would have to appreciate by 50 percent.

Ask yourself if that kind of climb is possible. If you don’t think it is, it might be best to minimize your loss at 30 percent. There is nothing worse than watching a loss keep on growing while you hope and pray for a recovery.

It is critical in any trading situation to remove emotion from the decision. So set a stop-loss point on all trades to manage your downside.

[Ed. Note: Yes, it's hard to keep your emotions under control when you're dealing with money. So one of the best things you can do for your bank account is to follow a proven system for investing. ETR's experts can easily teach you the secrets behind their top trades. Learn more here.]

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Don’t Act Too Quickly or You Could Get Burned

Thursday, July 24th, 2008

Back in April, my colleague Rick Pendergraft wrote about the troubles he saw facing Starbucks (SBUX). A few days later, the company’s stock fell almost 11 percent on reports that it would likely miss its second-quarter earnings numbers.

Starbucks investors who followed Rick’s recommendation to get out could have made a nice little profit.

Those who didn’t get out of Starbucks immediately saw another chance to profit. On July 1, the company announced that it would be closing 600 stores and cutting the number of new stores opening in 2009 by half. This bad news for Starbucks looked like great news for investors shorting SBUX. It meant that the stock price would plummet, and anyone holding puts (options that go up in value as the price of a stock goes down) would be sitting on huge gains. Right?

Not so fast. Sometimes when bad news is announced, it is actually good news for the company. This was the case with Starbucks. Investors saw the store closings as a sign that the company would cut loose underperforming locations in an attempt to improve overall profitability and margins. The bad news for Starbucks actually turned into good news for the stock, which traded up as high as 4.6 percent in after-hours markets.

The lesson you can learn from this is that when a company reports bad news, it doesn’t always negatively impact the stock. And when it reports good news, it doesn’t always positively impact the stock. This is an important lesson to learn, as you could get burned quickly if you jump into a trade assuming you can quickly profit on good or bad news. It always pays to sit back and let the market digest the news before you act.

[Ed. Note: Sometimes the easiest investing advice - like investment analyst Christian Hill's suggestion above - is the best and most effective at helping you build your wealth. Discover a "long-lost" trading method that the wealthy use to get even richer - a system that's so simple, it's almost embarrassing.]

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An ETF With a Bright Future

Tuesday, July 15th, 2008

The world of exchange traded funds (ETFs) is ever-evolving. Nowadays, you can invest in a fund that covers just about any niche market. One that has caught my interest lately is the Claymore/MAC Global Solar Energy Index ETF, with the ticker symbol TAN. (Apparently, even Wall Street has a bit of a sense of humor.)

The fund selects companies based on "the relative importance of solar power within the company’s business model." In other words, the fund covers only companies that derive more than one-third of their revenue from solar-related business. This includes companies directly involved in the production of solar power equipment and products for end users, as well as companies that fabricate parts for solar companies, provide services for solar-equipment producers, or supply raw materials, among other criteria.

While many solar companies have been beaten down this year, the industry still shows great promise. Solar currently generates less than 1 percent of America’s power needs, which means there is plenty of room for growth.

The solar industry still faces hurdles, such as the current worldwide shortage of polysilicon, a key component of photovoltaic cells. Fortunately for us, one of the companies in TAN is MEMC Electronic Materials (MEMC), a major supplier of silicon wafers. So even if actual production slows, you still own a company that benefits from the shortage of silicon.

The ETF is diversified amongst countries, with Chinese companies making up 30 percent of the index, Germany 29 percent, and the U.S. around 26 percent. Market capitalization is mostly small cap (at just over 42 percent) and mid cap (at 30 percent). This means the fund isn’t reliant on one company or country for success, and should be able to weather any growing pains facing the solar industry.

This is a long-term buy and hold position, as it will likely take many years for solar to gain widespread acceptance as the future of energy. When that time comes, TAN will be the ETF you want to own.

[Ed. Note: Despite the gloom and doom about the economy, you can still find ways to make money in the markets. Discover a "long-lost" trading method that the wealthy use to get even richer - a system that's so simple, it's almost embarrassing.]

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A Leveraged ETF for All Market Conditions

Tuesday, July 1st, 2008

Most investors would agree that in tough economic times one safe haven is consumer staples. Companies like Johnson & Johnson, Coke, and Philip Morris do well in all markets, and tend to weather storms better than companies that sell discretionary goods.

In order to own as many consumer staple companies as possible, a lot of investors utilize the XLP, an ETF (exchange traded fund) covering that sector. What they may not know is that there is also an ETF that offers leveraged returns on the same sector.

The ProFunds Consumer Goods UltraSector (CNPIX) is structured such that it will correspond to 150 percent of the daily movement in the Dow Jones U.S Consumer Goods Index. For example, if the Consumer Goods Index goes up by 2 percent on a given day, the CNPIX will go up 3 percent.

This allows investors to own a basket full of consumer staple companies without being exposed to the risk of owning the individual companies. All while getting returns that outpace the underlying companies.

The CNPIX is well diversified, so you aren’t subject to large price movements if one or two of the companies in the fund go up or down. The largest company holding in the ETF is Procter & Gamble, and the two largest industry holdings are beverages and household goods.

If you are looking for a way to add a nearly recession-proof ETF to your portfolio and get leveraged returns, take a serious look at the CNPIX.

[Ed. Note: Despite the gloom and doom about the economy, you can still find ways to make money in the markets. Discover a "long-lost" trading method that the wealthy use to get even richer - a system that's so simple, it's almost embarrassing.]

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Add Some Leverage to Your Portfolio the Easy Way

Wednesday, June 25th, 2008

You can find ETFs that cover just about any market ("spiders" cover the S&P) or sector (the XLF covers the financials). But did you know there are some that can offer leveraged returns?

Leveraged ETFs do just what they are intended to do: They offer the opportunity to generate greater returns than traditional ETFs. That means they can magnify your gains. Of course, they can also magnify your losses. But with proper risk-management techniques, these leveraged offerings can really boost your portfolio returns.

Let’s say you think the real estate market has found the bottom and things will turn around. In that case, you could invest in the ProFunds Real Estate Ultra Sector (REPIX). This fund is intended to replicate exposure to the Dow Jones U.S. Real Estate Index and seeks results equal to 150 percent of that index. So if the Real Estate Index is up 4 percent on any given day, the Ultra Sector fund will be up six percent.

The Real Estate Index is well diversified in its holdings, with no company making up more than 8 percent of the overall weight and the top 10 holdings making up less than 40 percent of the total. This means the Index (and therefore the Ultra Sector fund) won’t swing wildly as a result of the movement of one or two holdings.

This type of investment is perfect for those looking to generate outsized portfolio returns, or perhaps hedge against risk. Look into leveraged funds to see if one suits your needs.

[Ed. Note: You don't need complicated systems to make money on your investments. In fact, there's a genuine, legal, and easy way to potentially make a serious amount of money for very little work.]

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A Safe Way to Get a Technology Play

Monday, June 16th, 2008

One ETF (exchange traded fund) – which is laden with some of the biggest names in technology – is set to offer outstanding returns once the economy recovers. I’m talking about the technology SPDR (XLK), and it allows you to own a "who’s who" of the technology industry, including Microsoft, Google, Intel, Hewlett-Packard, and Apple. 

The blue-chip companies amongst XLK’s holdings are at the forefront of developing new industry-leading technology. And for most of them, it is a matter of when, not if, they will develop the next cutting-edge, "must have" software application or product and see their stock take off and produce huge returns. With XLK, you don’t have to guess which one of those companies will be next, because you can own a share of all of them.

XLK’s holdings are very well diversified. So if one or two of the companies fall, the overall effect on the ETF is muted. 

XLK is currently trading at the $25/share level, and I expect it will climb toward the $30/ share level in the next 12 months. That would be a nice gain of 20 percent. And if things really get going, I don’t think $35/ share is out of the question. The support level seems to be around $22/share, so the downside is only around 12 percent. 

Adding XLK to your portfolio could provide great returns while giving you diversity in the technology sector.

[Ed. Note: Making money IS possible - even in an economic downturn. Learn how you can get expert advice on how to make safe investments with high profit potential right here.]

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Fill Up Your Portfolio With This Profitable Company

Saturday, June 7th, 2008

When it comes to a measuring a company’s health, little can compare with overall profits. The more profitable a company is, the better. And no company in the world is more profitable than ExxonMobil (XOM). For anyone who drives a car and pays $4/gallon for gas, this should come as no surprise.

In 2008, the petroleum industry is where you want to be. And while few of us can avoid buying gas, we can at least make back a little of what we’re spending by investing in ExxonMobil. The stock was around $70/share at the beginning of 2007, and recently closed at around $94/ share, a 34 percent increase.

Keep in mind that you need to go into any investment – even a seemingly great one like oil – with your eyes open. As Rick Pendergraft mentioned recently, the economy can’t sustain the gas price crunch on consumers for long. And as Andrew Gordon pointed out in an article about the future of gas prices, new technologies are on the horizon that will "upend the demand side of oil" and "make inroads on increasing the supply side." Those technologies are still a few years away. In the meantime, if you’re cautious, there is no reason you can’t profit from Exxon’s stock movements.

For the short term, oil is a good investment. Americans still drive everywhere, often with no one else in the car. And while a trend toward smaller cars has begun, gas-guzzling SUVs still dominate our highways. So, like it or not, ExxonMobil and its counterparts will continue to cash in on high gas prices for the near future.

Add ExxonMobil to your portfolio to help offset rising prices at the pump. But keep your eyes peeled for the inevitable reversal – and be prepared to jump ship as soon as gas prices start to slip. Protect yourself by setting a 25 percent stop-loss point. That way, you’ll get out with 75 percent of your profits intact.

[Ed. Note: Making good investment choices doesn't have to be hard - especially when you have an expert guiding your decisions. In fact, some of the most effective investing rules are so easy, a fifth grader could understand them.]

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Keep On Rolling

Monday, May 19th, 2008

One thing to keep in mind when buying a company’s stock is the lifespan of its product. In other words, keep an eye on how often consumers have to buy replacements. If people have to buy your product only once, you are on a constant search for new customers. Unless, that is, you’re satisfied with sporadic sales. 

And that is the beauty of Goodyear Tire and Rubber (GT) – a company that has been based in Akron, OH since 1898, when Frank Seiberling started producing bicycle and carriage tires, horseshoe pads, and poker chips. 

Goodyear’s product wears out and needs to be replaced – as often as every year in some cases, and every few years in almost all cases. If you drive a car, at some point you will need new tires. And in a country that loves to drive (even with gas hitting $4 a gallon), that is a lot of tires that need replacing. 

Looking at Goodyear’s chart, it appears the stock has found a support level at around $26, which makes a nice entry point. My recommendation: Buy Goodyear Tire and Rubber up to $30/share.

[Ed. Note: Christian Hill is the resident Research Analyst for Investor's Daily Edge (IDE). Get more clear recommendations and practical strategies for protecting your portfolio and multiplying your money from Christian and the rest of the IDE team. Sign up here.]

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A Bright Future

Saturday, May 17th, 2008

If you’re looking for a long-term investment, look no further than Philips. There is a lot to like about Philips. (Or Koninklijke Philips Electronics N.V., if you prefer the full name for use at cocktail parties.) For one thing, it is an international company, so it isn’t dependent on one country’s economy to prosper. Plus, it is in two markets that I see as being high growth over the next decade or so: diagnostic imaging and light-emitting diodes.

With obesity and cancer rates increasing, Philips should sell plenty of its cardiology and oncology diagnostic machines in the foreseeable future. The company also produces imaging systems, ultrasound technology, and monitoring solutions.

Light-emitting diodes – LEDs for short – are the future of lighting. They operate with much lower power requirements for a much longer period of time. Ann Arbor, MI has already installed 100 LED streetlights in its downtown. The city estimates that an initial retro-fit of 1,000 LED streetlights will save them $100,000 annually. As more and more cities take advantage of the savings that come with a conversion to this technology, Philips stands to make a substantial amount of money. And as LED prices fall (they are still rather prohibitive for residential lighting), there will be other opportunities for Philips to profit. 

Philips would be a good addition to your portfolio, even if the real payday may be a few years off.

[Ed. Note: Christian Hill is the resident Research Analyst for Investor's Daily Edge (IDE). Get more clear recommendations and practical strategies for protecting your portfolio and multiplying your money from Christian and the rest of the IDE team. Sign up here.]

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