Oil Stocks As A Long Term Investment

The demand for world oil is increasing while world reserves are decreasing. This is a known fact. The current price of oil can certainly confirm this statement. Consensus also agrees that we will never see $25.00 oil again. The logical conclusion to our above statement is oil stocks should be a good long term investment. However, the location of the oil companies’ reserves can affect their bottom line and valuation.

Some of the largest reserves in the world are found in Venezuela, Saudi Arabia, Russia and Canada. Political unrest in Venezuela, unstable and unpredictable government in Russia and Osama Bin Laden targeting Saudi Arabia leave Canada, namely the Alberta Oil Sands, as the largest, most reliable oil reserves in the world.

Companies like Exxon Mobil Corp., Royal Dutch/Shell Group and Canadian Natural Resources Ltd. are planning to spend billions during the next 10 years to develop Alberta's unusual oil deposits as demand for crude rises and output from existing reserves decline. Oil sands output in Alberta may double to 2 million barrels a day by 2013, according to a presentation by Enbridge Inc. earlier this month. Oil sands are deposits of bitumen - heavy oil that must be treated to convert it into crude oil for use in refineries to produce gasoline and diesel fuels. The U.S. Energy Department revised its global oil resource estimates to include the oil sands 174 billion barrels of proven reserves that can be recovered using current technology.

With demand for oil and other commodities from China and India increasing due to their growing economies, strong trading relationships are procuring with Canada - a country with numerous resources, political stability and neutral military views.

Companies with reserves in the Alberta oil sands look like a great investment for the next decade

There are many companies with reserves in the Oil Sands here are some with strong exposure.

Stock Chart Reading

As an investor you will want to check

out any equity before you buy it. Many investors

go to Morningstar which is one of the largest

providers of mutual fund information in the world.

It is assumed that their information is correct.

After all that is what you are paying for.

Recently the SEC (Securities and

Exchange Commission) called them on the carpet for

not correcting an error within a reasonable time

(whatever that is according to the SEC). Everyone

makes errors and this was no big deal.

It seems that when you went to their

site and drew up a chart or asked for statistics

on Rock Canyon Top Flight mutual fund it failed to

notify the potential buyer that the fund had

issued a very large dividend of approximately 25%

and the NAV (Net Asset Value) dropped from $15 to

$11 to reflect the $4.00 dividend.

When you ask for a chart of this fund

on MarketWatch, Yahoo, TheStreet or Bloomberg they

only post the NAV and do not make any adjustment

for the dividend or capital gains distributions.

Looking at the chart it appears the fund fell out

of bed. Because I look at so many charts I knew

immediately that this was a distribution and not

some calamity. It is best to call the fund to

verify this.

Most funds that make dividend and capital gains

distributions usually do so in December, some in

November and very few at other times during the

year.

Some nitpicker called the SEC and made

a complaint about Morningstar. Not that I am a big

fan of them (in fact I think their reports are

worthless) they get their price information from

other sources such as the above. If you are not

familiar with the requirement of mutual funds to

disburse their profit before year end you might be

fooled when you see the price suddenly drop.

This is important for potential

investors. I caution everyone to get a chart on

the Internet of at least a one year performance of

any mutual fund before buying. It is better to go

back to year 2000 to see if the fund manager was

able to keep from losing money during the last 4

years. Almost none of them could so they bamboozle

about how they did better than the S&P500 Index

which had a huge loss of 50% and remains down 25%

from those highs at this time. Don’t fall for that

one.

Once again I caution that any purchase

should have an exit plan. One of the basic rules

of investing is never to lose a lot if you are

wrong. Small losses will not ruin your portfolio,

but big losses can ruin your retirement. Set your

loss limit (5%, 10% or ?) and stick with it.

Charts can help you with

buying/selling decisions, but check out their

accuracy as charting is not an exact science.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!"

has helped thousands of people make money

and keep their profits with his simple 2-step method.

Read the first chapter at http://www.mutualfundmagic.com

and discover why he's the man that Wall Street does

not want you to know.

Understanding a Stock's PEG Ratio

A PEG ratio cannot be used alone but is a very powerful tool when integrated with the basics (price, volume and chart reading). You must enjoy crunching numbers and have a calculator handy to estimate your own PEG ratio. Access to quality statistical information from the web such as past earnings and future earning estimates is essential to calculate this fundamental indicator. A variety of websites produce a PEG ratio but I have not found one site that has a reliable PEG ratio that I can use for my own research, so I calculate it myself, ensuring accuracy with the final number.

I am going to use the definition from investopedia.com as it makes complete sense and doesn’t get too confusing (below the definition is further explanation and a current real time example, using Apple Computer).:

The PEG Ratio:

“The PEG ratio compares a stock's price/earnings ("P/E") ratio to its expected EPS growth rate. If the PEG ratio is equal to one, it means that the market is pricing the stock to fully reflect the stock's EPS growth. This is "normal" in theory because, in a rational and efficient market, the P/E is supposed to reflect a stock's future earnings growth.

If the PEG ratio is greater than one, it indicates that the stock is possibly overvalued or that the market expects future EPS growth to be greater than what is currently in the Street consensus number. Growth stocks typically have a PEG ratio greater than one because investors are willing to pay more for a stock that is expected to grow rapidly (otherwise known as "growth at any price"). It could also be that the earnings forecasts have been lowered while the stock price remains relatively stable for other reasons.

If the PEG ratio is less than one, it is a sign of a possibly undervalued stock or that the market does not expect the company to achieve the earnings growth that is reflected in the Street estimates. Value stocks usually have a PEG ratio less than one because the stock's earnings expectations have risen and the market has not yet recognized the growth potential. On the other hand, it could also indicate that earnings expectations have fallen faster than the Street could issue new forecasts.”

- provided by www.Investopedia.com

PEG Ratio Example:

Using Apple Computer Inc., I will demonstrate how to calculate the PEG ratio without relying on other websites.

First, you will need to gather the past earnings numbers; going back at least 2 years and going forward two years. (All data is from Thursday, June 23, 2005)

AAPL:

2003: 0.09

2004: 0.36

2005: 1.31 (E)

2006: 1.52 (E)

Now we need to calculate the growth from year to year.

Subtract the earnings of 2004 by 2003 and then divide by 2003.

Repeat the process to determine the growth rate for the following years:

2004: (0.36-0.09)/0.09 x 100 = 300% growth rate

2005: (1.31-0.36)/0.36 x 100 = 264% growth rate

2006: (1.52-1.31)/1.31 x 100 = 16% growth rate

Now, take the current price (we will use the close from Thursday, June 23, 2005: $38.89) and divide it by 2004 earnings and then by the 2004 growth rate:

2004: 38.89/ 0.36 / 300 = .36 PEG Ratio

2005: 38.89/ 1.31 / 264 = .11 PEG Ratio

2006: 38.89/ 1.52 / 16 = 1.59 PEG Ratio

Using the definition from above, Investopedia states that a stock is evenly valued at a PEG ratio of 1 in a rational and efficient market. Please note that the stock market is not very rational or efficient so we only use this number as a secondary indicator and tool, after our fundamental and technical analysis is complete. Apple’s PEG Ratio of 0.11 for 2005 was discounted into the price when these estimates first hit the street, giving us the big run-up late last year. Going forward, the stock’s earning potential looks to slow considerably and the PEG ratio clearly shows us the tremendous jump in numbers from 2005 to 2006. A PEG ratio of 1.59 for 2006 is not the best rating going forward but still under the red flag ratio of 2.00.

Learn to Calculate a Stock's Pivot Point

Stocks breakout from properly formed bases everyday but many investors don’t understand how to locate a pivot point or what patterns to study that may contain this very important buy signal. A pivot point can be described as the optimal buy point or the area at the end of a familiar base pattern where the stock breaks out into new high territory. William O’Neil, the founder of Investor’s Business Daily is considered the pioneer of the pivot point in modern times. As Jesse Livermore explains in his book (1941), the pivot point can also be described as the point of least resistance. When a stock breaks the point of least resistance, we are presented with an opportunity where a stock has the greatest chance of moving higher in a short period of time, especially when volume accompanies the breakout.

The pivot point can be calculated as the stock is forming the handle on a cup-with-handle base. The ideal buy price would be $0.10 higher than the highest spot during the handle, also know as the top of the right side of the base. The intraday high can qualify at the highest point and does not have to be the closing price of the stock. If the stock closes at the high for the day, then we will use this number as the high point.

The exact methods used for finding pivot points vary depending on the base pattern that is forming on a daily and/or weekly chart.

When a flat base occurs, an investor should look for a move $0.10 higher than the top point on the left side of the base or the start of the formation.

A saucer-with-handle follows the same rules as the cup-with-handle and is described in detail above.

A double-bottom formation triggers a pivot point that will be $0.10 higher than the middle peak in the “W” shaped pattern.

Many investors will try to cheat the rules and place a position prematurely before the stock breaks out and passes the pivot point. I do not suggest buying until the stock triggers the pivot point on above average volume also known as qualifying volume. The area considered as the least amount of resistance is weighed so heavily because all overhead sellers are gone as we break into new high territory. The pivot point usually comes within 5% to 15% of the stock’s old high 52-week high.

Don’t chase a stock that is 5% or more above the proper pivot point. This does not mean that you can’t buy on normal corrections and pullbacks to support or moving averages, especially if the stock remains in an uptrend. This rule only applies to the pivot point area as the stock becomes extended. If you buy with the pivot point and sell when a stock falls 7-10% from the pivot point, I guarantee that your yearly performance will increase dramatically.

In The Stock Market Greater Risk Could Mean Greater Profit

One of the many ways to make a larger profit on the stock market is to take grater risks. There are several advanced strategies and techniques and - or strategies that you can use. Each has its own level of risk and as we say, "In the stock market, greater risk could mean greater profit".

Before we get into the different techniques, it needs to be clear that when using any trading strategy or technique, you should play with money that is liquid. In other words, money you can live without, should things go badly. Never play the market with money you need to survive. Trade responsibly and knowledgeably.

One strategy is investing in an IPO (Initial Public Offer). An IPO is way that a company is moved from being privately owned to being publicly held, or stockholder owned. Simply put, they offer common stock to a few hand picked investors. If the need for capital is greater, then they might offer stock on the open market.

One way to use IPOs is to jump in right at the beginning, buy stock at the initial IPO price and hope for a big price jump initially. Then you would sell those shares on the stock floor and pocket the profits. The risk here is that the company may not be accepted well by investors at first. If that happens, the stock price will fall and you will lose money.

Another IPO technique is to simply sit back and watch the IPO stock after it has opened. If the stock is fairly priced, and goes up in value you can buy and make a profit but not as much as the trader who jumps in as soon as the stock is issued. The basic rule is "buy low, sell high and get out". This method carries the same risk but in the stock market, greater profit means greater risk.

Short selling is an advanced technique that is not used to its full potential. This is due to the high-risk level involved. Short selling is a serious speculation technique and carries maximum risk. A trader will sell stocks he doesn't actually have at a higher price in the hope of a downturn. If the stock goes down, he buys at the lower price, pockets the profit and returns the shares to the owners. The risk here is very high for obvious reasons. If the shares price increases rather than decreases, the trader loses money. Plus there is still the matter of the broker's commission, which is still owed regardless.

Then there is margin trading where a trader borrows money to buy a stock. The money can be borrowed from a broker, normally up to 50% of the investment. Obviously, if the stock goes up, you make the profit on your 50% of the purchase price and pay the broker back. Without the benefit of margin trading, the trader shoulders the responsibility of the entire purchase plus the broker's commissions.

Of course, if the stock goes down, you have lost part of your original cash investment and you still need to pay the broker for the loan and his commissions. This is another technique that is heavily laden with speculation and carries maximum risk.

Online Stock Market Trading

Most of us have seen slices of future in flashes, largely feared or frowned upon. But there’s much to this occurrence. Internet has a paramagnetic attraction attracting all kinds of businesses to flourish upon. Internet is indeed a great window into the stocks world today and it is through this prism that rest of the people looks at stock market. What is about online stock market trading that attracts a multitude of people to invest? Indeed, it is a surprise to see the stocks software bags with “direct trading” feature selling in the market area of cyber space.

In more recent times, middle class gentry have become a major part of the stock’s world. The notion of the bureaucrats, ultra-riches and creams of society, occupying the market, no more exists. Stock market investing, day trading no more involves traveling long distances to the stock market, flooded with people moving here and there, noting down the prices, yelling on phones and so. It just involves your access to cyber space and magic software’s providing you the rates of stocks. Sitting in an air-conditioned room, playing with stocks, handling your business along with trading seems to be a game for future that has turned into reality.

Internet access helps you to be self-sufficient. Online stock trading is so widespread that one need not to hunt for virtual brokers. Online brokers are available to assist you to make more money out of the hard earned invested. Well, behind every success there are several reasons. When evaluating the success reasons of online stock market trading, it revealed the popularizing aspects.

Easy way: Today nearly, 15% of stock trading is done through Internet. It is expected to rise to 30 to 40 % within a span of 2-3 years. Online trading seems to be a better way to trade because people don’t need too much paper work. Even banks are also providing the facility of 3-in-1 accounts including Savings account, Checking account and online trading account, needed to trade in stocks. However, it becomes the easiest and simplest way to trade without much of the paperwork involvement.

Self-trading: Traditionally, trading in stocks meant going to stock market with a broker and it was the broker who actually traded on behalf of you. The feature of self-trading added to the popularity of online trading. Now, it is the actual trader who is involved in day trading of stocks.

User-friendly: Online trading is quiet a simple way to trade in stocks. It just needs uploaded stock software on your PC and then you can be a part of stock market. It is quiet easy and user-friendly software to lean upon.

Cost: The cost of opening an account is an important factor for any investor. This cost is known as brokerage charge for opening and maintaining the account under a firm. In return, of this brokerage, the firm allows you to invest in stocks along with the tips regarding the future prospect of bulls and bears of the stock market. However, the cost diminishes with the increasing and frequent trading of the investor.

Security: This is another factor that attracts trader to trade online. Some investors do not believe in its security but with the passage of time, it is accepted that online investment is safe and secured. The companies providing the facility of online trading makes sure to provide secured trading. Passwords and locks are strict measures that are kept in mind.

“Every coin has two sides”-this is a saying that goes with online stock market trading. Despite of the fact that it has become a paramagnetic attraction, its darker aspects cannot be ignored. Being a technology, it misses that pinch of personal touch. The expert’s advice play important role while waving with bulls and bears, which is not available on the same scale as the traditional method. The slow connectivity and other technical faults may turn out be disastrous.

What Is A Bull Stock Market And Bear Stock Market

Unless you are involved in the stock market, or understand the jargon you may not understand what the term bull market or a bear market means. Stock prices are reflected in what is known as the financial market trends. These trends can best be demonstrated in a price chart and the purpose is to pick the best investment and trading opportunities. You may ask what drives these trends. Buyers and sellers are the driving factor, they are also known as the bulls and the bears.

When we say that it is a bull or bear stock market we are talking about the driving force behind the market. The bulls are the buyers so that would make the sellers the bears. Incidentally when we use the term bull or bear we could also be talking about specific securities and sectors.

A bull market is a market that is associated with investor confidence. As a result of this increase in confidence investors are more likely buy in anticipation of making a capital gain. The most memorable and longest running bull market was seen in the 1990s. This was the time when the U.S. and other global markets saw their fastest growth spurt ever.

Just to recap, in a bull stock market the investors are buying. They are looking for more ways to increase their capital gains. So then if it is a bear market, the opposite would be true. Investors will be more pessimistic about buying and are more inclined to sell their stocks to cut their losses. A bear stock market does not come about from a small decline, but a considerable drop in prices over a prolonged period of time. From 1930 to 1932 was probably the most infamous bear market in history. This bear market was the beginning of the Great Depression. There was a much less severe bear market from 1967 - 1983, which included the energy crises of the 1970s and the unemployment surge in the 1980s.

As we already stated a bear stock market does not come about as a result of a small dip in stock prices, it indicates sizable fall in prices over a prolonged period of time. It is most commonly accepted that in order for the stock market it to be considered a bear market there has to be a price fall of at least 20% in a key stock market index from a recent peak that happens over at least two months.

To summarize a bull stock market has investor looking to buy to increase their capital gains. They will be seeking out the best investment opportunities. A bear stock market has these same investors looking to sell their stocks so they can minimize their losses. Historically the U.S. has been a bull market. That is one of the factors why we have been considered the land of opportunity.