Are small banks good investments

Are small banks stocks good investments? Smart money is saying many small banks are good value picks right now.

Every Friday afternoon for the past year, it’s been the small-bank death watch: Which U.S. bank would federal regulators seize next?

In 2009, it was 140 banks stretching from Florida to Washington state. The number is 85 and counting so far this year, including two failures announced late Friday. Yet with federal banking reform moving ahead this week, shares of the smallest community banks are a good bet on any recovery in the credit cycle, say money-managers and industry analysts, who are becoming more bullish about a turnaround for banks with assets of $1 billion or less. See how financial stocks fared on Friday.

Smart investors are starting to realize that we are in value territory for the right banks, the strong will continue to get stronger and the weak will get weaker. Lawmakers reach a deal for new rules governing the banking industry. Analysts say the deal isn’t as stringent as many had feared, bringing relief to investors. Small banks caught a break from Congress in the financial regulatory bill that passed on Friday. With regard to capital requirements, the banks will be allowed to count some trust-preferred securities, a form of hybrid debt capital, towards their capital standards, easing them of the onerous burden of raising new common equity.

The smaller operators also will have to contribute less money than big banks to the FDIC deposit insurance fund, which will save them $4.5 billion collectively over the next three years.

Like their larger peers, tiny community banks have been struggling under the weight of the massive credit crunch. Since the end of 2007, when the U.S. recession took hold, the SNL Small Bank Index is down 36% as of June 24, compared to a 14% decline for the S&P Small Cap 600 Index and a 23% drop for the Russell Microcap Index.

Yet lately small bank stocks have been gaining traction. So far this year, the SNL Bank Index is up 14%, outpacing the 2% gain for the S&P Small Cap Index and a 3% gain for the Russell Microcap Index.

Investors and analysts who specialize in microcap banks say the ones that will emerge from the economic downturn in stronger shape are the banks that didn’t make too many loans on speculative construction of commercial buildings, strip malls, or housing developments.

Value stock picks  are stocks whose share price are at bargain levels with solid fundamentals. Small banks are great investments for the value traders.

How to Swing Trade

Wikipedia defines swing trading as a stock, index, or commodities trading practice whereby the instrument is bought or sold at or near the end of an up or down price swing caused by daily or weekly price volatility. A swing trade position is typically open longer than a day, but shorter than trend following trades or buy and hold investment strategies. Swing traders engage in prospecting changes in an instrument’s price caused by oscillations between its price being bid up by optimism and alternatively being sold down by pessimism over a period of a few days, weeks, or months. Profits can be sought by engaging in either Long or Short trading.

The Stocknod momentum stock picks employs this style of buy and sell trading that attempts to capture gains in a stock within one to four days. Momentum swing traders use technical analysis to look for stocks with short-term price momentum. These traders aren’t interested in the fundamental or intrinsic value of stocks, but rather in their price trends and patterns.

Stocknod explains Swing trading as a trading style that finds situations in which a stock has the extraordinary potential to move in such a short time frame, the trader must act quickly. Therefore, swing trading is mainly used by at-home and day traders. Large institutions trade in sizes too big to move in and out of stocks quickly. The individual trader is able to exploit such short-term stock movements without having to compete with the major traders. Swing trading can be volatile but can also be very lucractive if done correctly. More on Stocknod’s momentum stock picks and how to swing trade.

Defense is best offense

Many Main Street investors have yet to regain their stomach for the risky, uncertain and highly volatile world of stocks. Many buy-and-hold investors have unwittingly switched to a “buy-and-fold” strategy.

Individual investors who once embraced risk-taking have adopted a more defensive investing posture, preferring capital preservation over appreciation. Many are trimming the percentage of stocks they own and boosting holdings of safer investments, such as CD’s and money market funds.

Market turbulence caused by signs that China is clamping down on credit to slow its economy, bank bashing by the White House, concerns over debt problems in some European countries and the recent pullback has investors on edge. A two-day rally this week left stocks down 1.1% in 2010.

Following the money trail highlights the shift toward defense. Since the start of 2008, when the worst financial crisis since the Great Depression began shredding paper wealth into confetti, stock funds have suffered outflows totaling $232 billion, Investment Company Institute statistics show. In contrast, fixed-income bond mutual funds have enjoyed inflows of $431 billion.

The love affair with bonds could end badly, says Brian Belski, chief investment strategist at Oppenheimer. In the 2000s, bonds outperformed stocks by a record 7.7 percentage points, on average, annually. The only other times bonds outpaced stocks for a full decade were the 1930s and 1970s. In both cases, stocks rebounded in the following decades, topping bonds by an average 10 percentage points a year.

Due to the shock and awe of the past 10 years, most people went to the safest assets they could find, and many are beginning to think now is a good time to move out of bonds into stocks.

The current lower demand for stocks, analysts say, could steal some of the cash ammunition the stock market needs to move higher.

How to Read Stock Charts

Unfortunately for the average investor, stock market charts are not particularly intuitive. It takes a fair amount of knowledge to decode and understand them thoroughly, but the basics can be grasped fairly easily. For example, every stock has a ticker symbol consisting of letters taken from the company’s name. While this may seem unnecessarily complex and unreadable, it is actually a byproduct of the times when stock trades were made using the limited space on ticker tape. The ticker symbols can easily be looked up through online tools, and because they are based upon the name of the corporation, they are usually fairly easy to remember once known.

Other numerical figures are important to understand for accurate stock market interpretation. The last trade figure represents the price of a specific stock in the last reported trade. The change figure tells how much the price of the stock has changed since the closing figure of the previous day. This gives a sense of the price trend or stability of a particular stock. The close and open figures tell the investor how much that stock was worth when the day opened and when it closed.

While stock market charts include many other symbols and figures, these are the basics, which an investor must know to get started. These basic terms can be used to expand knowledge of the chart’s terminology and significance. An understanding of the measurements of price and stock trends included in stock market charts is essential for stock market success. So, be sure to expand your knowledge whenever possible.

A new stock charting website that I would reccommend for fundamentals is www.ycharts.com. New website in beta but by far the cleanest and easiest stock charts I have found today. For technical analysis there is no need to learn how to read stock market charts because the Stocknod algorithm already has all of the best stock technicals baked into the proprietary formula.  If you are looking for stock signals, then let Stocknod read your stocks charts automatically with no learning curve on how to read stock charts.

StockNod Rally in Austin

Stocknod’s very own David Yang was in town from Toronto this past weekend. David was visiting Austin to help Stocknod founder Jason McGuire confirm the latest version of the Stocknod Alerts. His visit also gave us a chance to meet his lovely wife Lillian and enjoy some of the fun to be had in Austin. Unbeknownst to anyone, the Republic of Texas (ROT) rally was also being held the same weekend, so David and Lillian were surprised to see 100,000 plus motorcycles and riders downtown Congress when they arrived.

The trip was a success on many levels as it provided corroboration opportunity for the Stocknod trio as well as provided for some much needed  R&R.  We started the weekend with dinner downtown at McCormick and Schmick’s where we all ate way too much, and then ventured out to watch the ROT Rally parade that was being held downtown on Congress. Unfortunately we didn’t stay out late enough to watch Robbie Knievel make his big jump in front of the Texas state capitol.

Saturday we had an early meeting to discuss some pre-launch issues with the 2.0 Stocknod Alerts. David quickly defused the issues and stabilized  the new ranking algorithm. As many users know the old version of the Stocknod Alerts worked great for roughly 80% of stocks but there were always that pesky group that just didn’t seem to adhere to the Stocknod algorithm. David and Jason both agreed that the issue with the stock’s trading personality could be resolved by tweaking the current ranking algorithm. New modeling supported David’s theories of  incorporating returns by industry into the equation, adding a profit calculation, and adjusting weight of the Stocknod key indicators. The break through was immediately recognized from David’s historic models. The new updates have proven successful for stabilizing the trade signals for those stocks with atypical trading personalities. Both Jason and David have been working to resolve this issue over the last several months but the rally in Austin really helped to bring everything together. Like Jason likes to say “I think we finally cracked this nut”. Our member’s will no doubt see significant performance improvements in both the alerts and the Hotsheet stock picks.

From left to right Jason McGuire, David Yang, and Ryan Collins.

After our successful meeting we then headed out to Iguana Grill on Lake Travis where David and Lillian got to try fajitas for the first time. The weather was very hot but the view of Lake Travis and a couple of frozen margarita’s made bearing the heat much easier.

Thanks to David & Lillian for making the trip and we look forward to our next visit!

Analyzing the Stock Market Trends

The upward bullish nature of today’s stock market offers a small ray of hope and the stock market analysis offers improved bull market index characterized with technical bullish trends including accumulation, distribution, moving averages and so many other points of rally. However, the current consumer confidence and ISM manufacturing index are still off their bottoms. As per the stock market analysis, the ECRI weekly leading index shows a bulling trend and points out a moderation or ending of recession later in 2009. 

By deploying your funds cleverly, you can make some profit on the long side now. The most recent studies on stock market analysis offers some hope for the alleviation of the bad economic crisis that the world is experiencing now. The opinion whether the economic condition would improve or not is still to be watched. With the introduction of massive stimulus package, some countries (for example China) are in the verge of robust recovery. Amongst European countries that are under the tight hold of recession, Britain is the one that is experiencing pathetic condition in terms of economic recovery. The fiscal stimulus for United States is still on the way of stabilization. Even though, a small bit of improvement is found in the housing market of US, it is still a matter of doubt and argument on how a country that is experiencing great percentage of unemployment and cut-off payments can rise from the condition in the near-term. These uncertainties are affected severely in the US stock market also.

DIA or the exchange traded fund for the Dow indicates a technically rising bullish nature with a short term of rising up. Along with the rising of MACD, there is a rising found in terms of moving averages. In spite of the rising unemployment rate in the US, the US economy appears to be slightly improving. The forced pay cuts and layoffs are terribly affecting the state that can heavily weigh on the national economy. Bank of America demands a requirement of 34 billion dollar and the stock is jumping 20 % of what was seen recently. Even though stock are soaring high, no visible moving of bonds are found with the leverage. The government is now struggling to make efforts in pumping the money supply that could help in pushing the present economy forward with plenty of fiscal stimulus. According to the demands of the present stock market condition, you can make much money in the bond rather than with the stocks.

A complete study and understanding obtained through effective research of stock market analysis can help you in generating high returns from the stocks. Browse through the Internet to analyze the current stock market analysis to keep control on your investments and to make higher profits. With the help of proven technical tool (Stocknod Alerts and Stocknod Hotsheet), precision charts and thorough research, you can obtain trade tracking, live alerts, and the most recent news and updates regarding stock market for successful investment and consequent profit gain. You should also go through relevant article, blogs and e-magazines offered by expert stocks market analysts through online resources for your easy access.

Different Types of Investments

The present economy with a financial slowdown, pay cut and unstable market condition demands the need to stick to an intelligent investment strategy to survive. There are several opportunities that may knock your door in the form of different types of investments and loan plans with low interests and very attractive values in stock market indexes. However, it is required to follow wise decision before falling for such investment plans. Before choosing your plans for investment, you ought to carefully study or make researches on the present financial condition based on risk profile and enduring benefits. Every investment plans are associated with certain risk levels that should be carefully understood before making investments. It is advised to seek the help of consultants and experts such as distributors and agents of the investment plan chosen before handling your savings to them.

Out of a good number of investment options available today, investment through health insurance  and understanding annuities ought to be included in your must to have list without fail. With the increasing costs of medical treatments and drugs, an intelligent investment through an accredited health insurance company can help you in acquiring several hospital cash benefits (commonly known as mediclaim). Medical claim facility offers cashless treatments in hospitals where payments are executed directly by the insurance company to the hospital. Health insurance offers excellent security coverage when the entire family depends on one or two earning members or when dependances are more. It also covers income tax benefits. Moreover, medical insurance becomes an inevitable necessity in a family that has dependant with a disability. As per disability benefit programs in the US, both short and long term disability insurance are provided as a life assurance scheme to all the eligible employees.
 
Mutual fund companies are another reasonable yet smart option for ordinary men to make investment of their money to survive today’s economy. Since investments in mutual funds are shaded across a wide array of sectors and industries with parallel investment objective, this diversification reduces the risk wherein, profit and lose is shared by all the investors alike to their investments. According to the objective and types, you can choose the particular mutual fund scheme as your investment plan. Mutual funds are classified into two, depending on their maturity period as Open-ended and Close-ended Scheme. Mutual fund investments are highly preferred today due to enhanced features such as affordability, liquidity, transparency, diversification and flexibility. Similar to mutual funds, other preferable investments of today are pension funds and public provident funds. Bank term deposits such as fixed deposits in well certified banks are also good option.

Fixed deposits or FDs are the oldest types of investment plans opted by domestic investors. Today, there are plenty of different types if FD investment schemes available that offers the opportunity to withdraw money before the maturity of your investment, replacing the traditional schemes where the investors had to wait till the fixed tenure. Today, non-financial institutions are also emerging with such investment schemes that have to be carefully considered before falling for it.

What Are Mutual Funds

So, you want a Ferrari? So do I. How about a boat, a vacation house, or a paved path to financial freedom?  Well, there are several ways to achieve these goals, and investing in mutual funds is a great place to start.

What are mutual funds? A mutual fund is basically a pool of money that is professionally managed and invested in assets.  Professional management is an important feature to mutual funds. Most people don’t have the expertise or time to make strategic investment decisions. The fund managers are highly educated and trained to make these decisions with the goal of the best possible returns. Mutual funds will vary depending on its investing objectives. Some fund companies and managers may invest in blue chips, some in small companies, and others in international stock. There are three main types of mutual funds; stock funds, bond funds, and money market funds. Here, we will be discussing stock funds.

Mutual funds can be a great investing vehicle, however, they should not be the first investment that you make. I follow an investment hierarchy. This hierarchy places investment categories in the order that you should invest in and proceeds as follows; Step 1. Savings accounts/Money markets. Step 2. Bonds/Personal property. Step 3. Mutual funds. Step 4. Individual stocks. Step 5. Commercial real estate. Step 6. Commodities. Step 7. Rare collectibles – precious metals, paintings, and memorabilia such as a Barry Bonds autograph, er…uh, an Alex Rodriguez autograph, um, fine, a Roger Maris autograph. So, before investing in mutual funds, you should have money in a savings account/money market and bonds.

Stock mutual funds invest in a number of companies. For example, a tech-heavy blue chip fund might have holdings in Apple, Microsoft, IBM, Google, HP, Motorola, AMD, and Sony, to name a few. So, the overall performance of the fund will be based on the individual performances of the companies. Contrary to individual stocks, mutual funds will not flourish or sink based on the holdings of one company, but the performances of all of the companies combined.

To illustrate this concept, think of a stock mutual fund as a cruise ship and an individual stock as a ski boat. Both are two different vehicles but have the common goal of leaving the dock to have an enjoyable time in the rough seas. In order for the cruise ship to turn, either in the correct or incorrect direction, it takes time and a large number of individuals. As for the ski boat, it can head in either direction rapidly with just one person. So, mutual funds are less risky but are not immune to peaks and valleys. They can make you great wealth but it usually takes some time, which makes them a good tool for retirement planning.

There are many types of stock mutual funds. Large fund companies such as Fidelity, Vanguard, JP Morgan, American Century, Dreyfus, John Hancock, Janus, and Neuberger Berman, to name a few, offer all types funds for every investment objective. Most of these companies offer funds directed at a specific time to meet your goal, such as retirement.  Fidelity’s Freedom Funds are a great example. These funds use a mix of stocks, bonds, and short-term funds. The managers for these funds will invest your money more aggressively when you’re younger and will change your investments accordingly to become more conservative as you near your goal of retirement.

So, what are mutual funds? Well, everything we’ve just discussed and a lot more. We’ve only begun to explore the world of mutual funds. Other areas I will discuss with you in future articles will be Lump Sum vs. Automatic Investment, Fees, Focused Funds, and The Prospectus. So, once you’re a successful mutual fund investor, you can jump to the more risky and superfluous investments and maybe get that Roger Clemens jersey, um…or that Mark McGwire bat, well…fine, a Hank Aaron bat.

Stock Market Basics

This post is for the stock market beginners or those needing a refresher course in stock market fundamentals. Let’s first start with defining what exactly is a stock. A stock is basically a small share or interest that represents a partial ownership of a company. Stocks are issued by companies in order to raise capital and are bought by investors in order to acquire a portion of the company in the form of investment. Even a small share or interest in the company will give the investor the right to have a say or vote in how the company is run. Although investors do gain a portion of the company’s profits, investors do not carry liability in case of lawsuits or defaults. Stocks allow for cash infusion and stock issuance is typically needed for start-up capital, acquisition or company expansion and or growth. Each stock is limited to a particular number of shares available for issuance. A company’s growth potential and perceived health of the company influences the market adjustment of the initial value or “par value” of the stocks.

Obviously investors purchase stocks with the idea that the company will grow and ultimately raise the value of the purchased shares. Acquiring stocks from a new company or start-up is somewhat more risky than buying shares from an established company, but the potential gain is much greater.

 

Only companies which are listed with the public exchanges like the US Exchanges, NYSE (New York Stock Exchange) or NASDAQ (National Association of Securities Dealers Automated Quotation System), are capable of stock trading. The shares from the companies listed on public exchanges can be bought and sold on the open market.

An individual investor typically hires a broker to make transactions for him. Or now with the internet an investor can bypass the broker and use an online broker company such as Scottrade.com, Etrade.com or Zecco.com.  The orders can contain specific instructions to trade at a price that the market will bear or at a price that the investor will prefer. The broker then tries to execute the investor’s orders by searching for either a buyer or a seller. In return the brokers or exchange houses will typically receive a commission on each trade. Some online brokers such as Zecco.com will allow for 10 free trades per month and then a flat fee of $14.95 per trade thereafter that month.

Stocks have a lot of advantages over savings investments because they represent ownerships in a particular company. This gives the investor a certain right to participate in making decisions for the company. Some important company matters require voting and one stock is equivalent to a single vote. Partial company ownership also allows the stockholders to benefit from the company’s profits which are distributed in the form of dividends. These may be issued one or twice a year at the discretion of the company directors.

A prospering company causes the value of the stocks and the profits to increase while a suffering company causes the value of the stocks and the profits to decrease. Stocks, when compared with savings investments, both carry a higher risk of losing money and a higher potential of earning money. A good knowledge of the different stock markets and the various investment strategies can help investors to minimize their losses. Knowing when to enter and exit a market is critical to maximize returns.

“Stock market” is a term used to describe the physical location where the buying and selling of stocks take place as well as the overall activity of the market within a particular country. The correct term to be used in pertaining to the physical location for trading stocks is “stock exchange.” Every country may have a couple of different stock exchanges that are usually traded on only one exchange although a lot of large corporations may be listed in several different locations. For example India, Canada, Japan, China and several other countries all have their own stock trading exchanges.

The ubiquity of these international exchanges makes it possible to buy or sell stocks throughout the world. The only restriction to stock exchanges is time. Different exchanges may have differing opening hours based on their local times. The major global stock exchanges are the Tokyo Stock Exchange of Japan, the Bombay Stock Exchange of India, the London Stock Exchange of United Kingdom, Frankfurt Exchange of Germany, the SWX Swiss Exchange of Switzerland, the Shanghai Stock Exchange of China, and the NYSE, the NASDAQ, and the AMEX of USA.

The economic health of a country is closely followed by stock markets. The term “Bull market” is referred to as an up economy when a country experiences high economic production, low unemployment level, and low inflation rates. “Bear markets”, on the other hand, follow the down trends in the economy. Such indicators of economic downturn are high levels of unemployment and high inflation. Supply and demand which are affected by consumer and investor psychology also influence the prices of stocks.

Aside from the stock exchange, other popular markets that offer many investment opportunities include currency trading via the Foreign Exchange Market (FOREX). The FOREX is the biggest investment market in the world, in terms of trades and overall values.

Other trading options include futures and options. The futures market is a market of contracts where goods are bought and sold at specified prices and times.
The options market is very similar to the futures market because it also features a contract that gives the right, and not the obligation, to trade a stock at a certain price before a designated date.

Stocks can be bought and sold by anybody who has money. Knowing the basics will help people understand how stock trading works despite the process’s own specialized vocabulary. People who have knowledge about stock trading are the ones who are most likely to be successful in the investment industry.