Tag Archives: NASDAQ:AMZN

5 Useful Tips for Successful Stock Investing

Some people think stock investing is gambling. It can be, but it doesn’t have to be. Stock investing won’t be gambling if it’s a sure win. There is a range of concepts you can apply to increase your odds of winning.

Here are some useful tips that can make stock investing a lucrative endeavour for you.

saving, investing, and compounding
Image attributed to ccPixs.com

Don’t Lose Money

This is easier said than done. To avoid losing money when you invest in stocks, first familiarize yourself with the topics around what makes a good business, fundamental analysis, and valuing a company.

I find learning about technical analysis helps. But identifying great businesses and trying not to overpay for them comes first.

Many investors share their investing strategies or why they buy or sell a stock through blogs or forums.

For instance, my friend recently invited me to join a Facebook (NASDAQ:FB) group, which had a focus on dividend investing. Of course, if you have more time on your hands, pick up a bunch of books about specific investing topics from the library or Amazon (NASDAQ:AMZN).

A good book for new investors is The Single Best Investment by Lowell Miller with a focus on Creating Wealth with Dividend Growth.

You can follow the people or groups that share stock investing ideas or strategies that interest you and learn over time.

Soon, you’ll be itching to apply your knowledge. If you want a sure-fire way to not lose money, experiment with a virtual account. I bank with Bank of Nova Scotia (TSX:BNS)(NYSE:BNS).

It offers a virtual trading account in which I can buy or sell stocks on the Canadian and U.S. exchanges like in a real account, but it’s for practice only. It starts you off with $100,000-200,000 of virtual money.

Key Takeaway: Preserve your capital. You need money to invest to make you more money.

Blue sky with cloudy words saying change. Grass field in background.

Business Valuation Changes

In the previous section, I mentioned about valuing a company. If you’ve done some reading on stock investing already, you’ve probably heard that you don’t want to overpay for even the best of companies, including Johnson & Johnson (NYSE:JNJ), one of only two AAA-rated companies.

The most common valuation metric of a stock is the price-to-earnings ratio (P/E).

As of writing, Facebook trades at $162 per share and in 2018 it reported earnings per share of $7.57. So, its P/E based on trailing-12-month earnings is 21.4. However, its P/E was close to 60 when it first started trading. Facebook’s 2019 earnings are estimated to remain stable compared to 2018’s. That’s why the stock is trading at a lower P/E. Longer term, Facebook is currently estimated to increase its earnings per share by more than 15% per year.

There are other things that can affect a business’ valuation, such as the debt levels of a company. If company A and company B are the same except that A has more debt than B, A will have a lower price tag than B.

Key Takeaway: Business valuations change as the underlying businesses change. Typically, lower anticipated earnings growth (or worse, negative earnings growth or a net loss) will cause stocks’ valuations to drop like a rock.

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How to Build a Position in Your Favorite Stocks

This article with an additional example using Tencent (OTCMKTS:TCEHY) first appeared in the Seeking Alpha Marketplace service DGI Across North America.

Have you ever missed out on high-flying winners? Have you ever been stuck in a (seemingly) losing stock for a long time? I’ll use Amazon.com (NASDAQ:AMZN) and CVS Health (NYSE:CVS) as examples for illustration.

person with a question

How to Build a Position in Your Favorite High-Flying Winner

An investment in Amazon 10 years ago has become a 24-bagger. In other words, it delivered returns of roughly 37.5% per year. That said, we’ve been in a bull market since 2009.

In a correction, it’s possible that Amazon stock could fall 30-50%. In a normal market though, one of the best ways to build a position in a high-flying stock like Amazon is buying it periodically.

Some investors wait to buy stocks on dips. However, you’ll notice that in the last few years, dips in Amazon stock didn’t occur very often.

chart showing dips of Amazon stock between 2016 and 2018

Source: Google Finance with author annotation – Potential buy points when using the “buying on dips” strategy

If you waited for a dip in Amazon stock in June 2017, you wouldn’t have gotten one until April 2018. However, by then, the stock had already appreciated +40%.

At this point in the cycle, I’m leaning more towards buying high-flying stocks on a correction, whenever it may occur. Share in the comments below if you have a different opinion.

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Why This Growth Stock Went Up +10% on Monday

This first appeared in the Seeking Alpha Marketplace service DGI Across North America, from which you can get real-time buy and sell alerts (and explanations) when I make moves in my portfolio.

Summary

  • NetEase up 10.4% on Monday. My position is up nearly 17% in a little over 2 months.
  • News came out that it plans to buy ~$11 billion of inventory over the next 3 years from the U.S., Europe, and Japan to sell to the Chinese market.
  • NetEase is primarily a video game publisher in China that has been diversifying into e-commerce.
  • NetEase is reasonably valued after the pop based on the consensus low-end earnings growth estimation.
  • Interested investors can nibble here to start a position, but will be safer to buy on a meaningful dip — perhaps one will occur when the company reports Q3 results on Nov 15.

Occasionally, dividendfocused portfolios need some growth to spice things up. And NetEase Inc. (ADR) (NASDAQ:NTES) is a good candidate for consideration.

NetEase stock appreciated 10.4% on Monday. In the DGI Across North America service, I gave a real-time alert and the reasoning for buying NetEase, which is now up nearly 17% in a little over 2 months.

NetEase position November 2017

Source: Author

The following quotes are excerpts from my previous article that’s available in the service.

NetEase was founded in 1997 and has been listed on the NASDAQ since June 30, 2000. Even for an investment that was made at the end of 2007 would have delivered an annualized return of 32%!

This outperformed Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) which has delivered an annualized return of 10.8% in the period, Baidu (ADR)(NASDAQ:BIDU): 19.6%, and even Amazon (NASDAQ:AMZN): 27.2%.

NetEase is the second-largest video game publisher in China.

In 2016, NetEase generated 73.3% of its revenue from its online games.

NetEase PC games Q2 2017

Source: Company Q2 2017 presentation – Slide 6

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