Ranking dramatically improves stock returns

Many investors could dramatically improve returns on their stock market investment if they ranked stocks listed on the market. Ranking helps to better identify those with the greatest potential to grow and those that do not, within a limited time frame.
Many investors grapple with selecting the most appropriate stocks to buy or sell but many if they ranked stocks in the market, could see a marked change to their results. It would also give them a great guide as to when to sell. Most they know when to buy, but have difficulty in determining when to sell. Ranking solves that.
Investors should pay attention to all stocks in the market, especially when the companies report results. Financial results may have coded message about future earnings. Some factors to look for in results that could provide big advantage for keen investors are results with one off income or expenses that make them look better or worse than if those cost or income were not included. In short, results should be stripped to show earnings from continuing operations.

Access has a long history of consistent growth in income & profits

Ultimately stock valuation will be based on continuing earnings. Strength in revenue growth is a very good place to start, the higher the increase the better the future may look especially if costs are rising much more slowly than revenues.
Investors should pay attention to those stocks that rise or fall and try and identify the reasons for the movements, especially if the movement is over a few days rather than the one day up and the other day down change. Get help from a broker or a friend who are likely to know, to get a better understanding of price movements.
Investors can use information in IC Insider.com’s stock market report charts that show the PE ratio of each stock. The TOP 10 charts rank stocks starting with the ones showing the highest likely return at the top followed by next in line and so on. Ranking stocks to show those with the best and worse performance over the next 12 months, is one of the best ways to make money in the market.

Junior Market TOP 10 stocks ranked in descending order of potential gains.

It is highly recommended, as it has worked very well historically in eliminating the noise that is inherent in stock selection when they are not ranked. Those with the best ranking tend to take longer to rise as they tend to be out of favour for a while but usually they do and go on to provide big gains.
Focus should be placed on stocks with the lowest PE ratios. Rising stock prices increase the PE and falling prices will tend to reduce the PE. The crude rule of thumb is that stocks with the lowest PE ratios are better buys for maximum appreciation with the reverse being true.
While investors should be looking for low PE stocks to invest in, some of the best stocks to invest in are those with rising income and profit, they could probably be very good stocks to invest in for a longer period and ensure a greater chance of long term gains.
The historical performance of Access Financial is an excellent example to observe as it has demonstrated consistent high annual growth in revenues and profits and stock price.

Scotia Premium Growth up 37% in 2017

Scotia Investments was the top performing unit trust in 2017.

The Jamaica stock market enjoyed strong growth between 2015 and 2017 with several stocks recording more than 100 percent gains in each of the years. The vast majority of Jamaicans have not participated in the gains offered by the market.
The vast majority of Jamaicans have not enjoyed the benefits of investing directly in the stock market because they do not fully understand it while some are just scared to lose their money. Many investors have taken the hassle or concerns out of investing directly in stocks by investing in equity based unit trust schemes that have delivered better gains than those in the fixed income market.
For while the combined market index of the Jamaica Stock Exchange racked up gains of 43 percent in 2017, the top performing equity based fund, Scotia’s Premium Growth Fund recorded gains of 37 percent for their investors in 2017 on top of a 25 percent gain in 2016. The Scotia Fund displaced Barita’s Capital Growth Fund, the 2016 front runner that ended at number 6 in 2017, delivering a 21.5 percent return, down slightly from 26.7 percent in 2016
Many investors have benefit from the strong performance of the local stock market in a number of ways. Pension funds that a large number of Jamaicans are members of, hold shares of many companies on the Jamaica Stock Exchange (JSE). There are also insurance company funds that rely on the shares as part of their investment portfolios. The National Insurance Scheme also invests in these companies and many more Jamaicans benefit from the market’s performance than they may be aware of. Others persons invest through unit trusts to enjoy the growth in the market and thus lower their risk. How does this work?

Barita Unit Trust equity drop from #1 in 206 to 6th spot in 2017 with a gain of 21.5%

A unit trust is a pooled investment scheme that allows anyone without expert knowledge and time to invest in a diverse portfolios of most stocks, to invest in them and therefore benefit from the gains that the funds can deliver. The investments, which comprise local and foreign equities, bonds, corporate paper, government securities, real estate, among others, are professionally managed to optimize gains for the investor.
Investing in a unit trust is an attractive option as the portfolios are not only diverse but they also cater to those with or without an appetite for risk. A few of the benefits to be derived are tax free gains, depending on the portfolio, lower levels of market volatility given the mix of securities in each portfolio as well as other perquisites.
From year to year, the performance of investments in equity based unit trust funds may in part reflect the highs and lows of the economy, the percentage share of investments in the local stock market shares and fixed income funds. Most importantly, the management of the funds can make a big difference as can be seen from the varied performance of funds in Jamaica. Additionally, in recent years there have been new players entering the market and new products being offered, thereby creating greater diversity so as to capture new investors and a greater share of the market of the non-investing market.
At present, there are eight schemes managed locally, namely Barita Unit Trust, JMMB Fund Managers, JN Fund Managers, NCB Capital Markets, Proven Fund Managers, Sagicor Investments, Scotia investments Jamaica and  Victoria Wealth Management. All offer varied slate of funds denominated in Jamaican dollars and US dollars. Sagicor Investments has fifteen (15) portfolios, the most diverse of all, followed by Barita Unit Trust, JMMB and NCB, VM, Scotia and newcomer Proven.
Funds under management as at October 2017 stood at $229 billion with Sagicor still commanding the lion’s share with Scotia and NCB holding their double-digit portion while the others shared the remainder of the pie.
In the next article, IC Insider.com will look at the performance of the unit trust equities’ portfolio in 2017 compared to previous years to give investors a better view of the best performing funds.

Buying and selling shares

A decision to purchase or sell shares is usually communicated to the stockbroker by investors on a daily basis. This may be done by telephone, email or in person. Increasingly the broker are requiring their clients to commit their orders in writing.
The customer may request the stockbroker to purchase or sell a specified number of a particular stock at a particular price or at the market price which prevails at a particular day. On a trading day (Monday through Friday) the broker will fill the order of the customer and will then notify them in the form of a contract note of the details of the trade. The first orders fill are likely to market orders, but many investors tend to state specific prices for each trade.
This contract note is a very important document in the purchase or sale of a transaction. This document sets out the following:(a) The date of the transaction. (b) amounts of units bought or sold;(c) purchase or sale price;(d) name of the company that trading took place; e) the gross and net consideration. (f) Cess payable (g) the commission payable to the broker (up to 2% of consideration by the seller and up to 2% by the purchase on each transaction)(h) Trade fee that is payable to the Exchange, (i) settlement date (usually three {2} days after the date of the transaction).
Opening a brokerage account will require the investor to provide the broker with relevant information so that they have information on each of their clients. These include IDs, addresses with verification of it, references to name some of the items. for new investors brokers will usually require a deposit on the purchase.
The broker can provide an investor with recommendations for buying and selling. Investors should do their homework where necessary on the company they would want to invest in as this can help when talking to your broker. The following are the list of stock brokers that trade securities on the Jamaica Stock Exchange.

Barita Investments Limited, • GK Capital Management Limited,• JMMB Securities Limited,• JN Fund Managers Limited,• M/VL Stockbrokers Limited,• Mayberry Investments Limited,• NCB Capital Markets Limited,• Proven Wealth Limited,• Sagicor Investments Jamaica Limited,• Scotia Investments Jamaica Limited,• Stocks and Securities Limited and Victoria Mutual Wealth Management Limited.

Bitcoin what is it really?

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Cryptocurrencies have spawned many millionaires but most persons don’t know how they work and why the prices keep surging upwards in spectacular fashion.
Bitcoin, the most popular of the cryptocurrencies, gets huge attention globally, as the price has skyrocketed from nothing to the US$20,000 recently. The price pulled back in the last two weeks but still sits at a spectacular $16,700.
The crypto prefix in cryptocurrency comes from cryptography, the practice and study of techniques for secure communication in the presence of third parties. Blockchain is a decentralized ledger in which a continuously growing list of records called blocks are linked, secured, and distributed across networks of computers.
Bitcoin mining is a process where computers are used to verify a block of transactions along the bitcoin blockchain, which are then put through a process that applies a mathematical formula to them. That then turns the block into a random sequence of letters and numbers known as a “hash.” The hash is stored along with the block, at the end of the blockchain, at the point in time it is authenticated.
Participants on the blockchain has access to all records of all transactions, including the most newly made. Anyone can mine blocks (by identifying them by their hash and confirming them) and earn a reward of 25 bitcoins. Bitcoin has no intrinsic value, its utility as a currency is limited to those who choose to use it.
Bitcoins can be traded by signing up to a bitcoin wallet service at exchanges such as, Coinbase, Blockchain.info, and Xapo. Signing up is similar to any other website by entering name and email address and password to get started. After that, it’s time to connect your bank account, debit card, or credit card.

Profitable investments guide

Access Financial Services profit has grown regularly from 2005 to 2017.

“I recently began trading stocks on both the main and junior market, and I was hoping that you could guide me through the analysis of the market and stocks and IPOs, I am not sure which stocks might likely break out on either market and my portfolio is sitting in the red for a year now,” a reader asked recently.
That is a bit tough when several stocks have delivered very good returns in 2017 with the JSE main market up more than 50 percent for the year to date and with 9 Junior Market stocks rising more than 100 percent. It is worth noting that investment is not an endeavor that will always produce quick positive results. One of the stocks in the portfolio was clearly bought at far too high a price and value. Currently, although the price has fallen it can be considered overpriced. If you were following IC Insider.com you would have seen from last year that the stock was highly overvalued. Important it was the top performing Junior Market stock and there is good evidence suggesting that buying the top performing stock for a year is unlikely see that stock performing strongly in a subsequent year.

JMMB peaked in 2005 and only exceeded that price in 2017.

The number one rule in investing, get good reliable advice. Rule number 2, compare the price earnings ratios of stocks and focus on those that are the lowest and those companies that are doing well, that is, their profits are growing in a consistent manner and likely to continue that way into the future. A very good case in is that of Access Financial with a virtual increase in profit every year since listing.
Be very careful of popular stocks there may have run their course of gains and have little fuel let to go much higher.
Future earnings are important in investing, but it makes no sense to buy a stock at a high price with the hope that in a few years, profits will then grow and make a profitable investment for an investor, while one waits on the big pay day, other stocks are rising and the investor misses out on other good opportunities. Companies that are expanding can provide good investment opportunities.
Three stocks in the Jamaican market, made historical highs in 2005 and it was not been until 2017, that two recovered enough to exceed the previous highs, these two are JMMB Group and Scotia Group. Mayberry Investments is the third and is well below the peak after so many years. Even as two have exceeded the 2005 highs, the gains from then to now, is not very great while many others have gone on to record considerable gains. The lesson from these three is that, while investors wait to recover losses by holding on to poorly performing assets, they are missing profitable investment opportunities elsewhere.

Stock market moves in opposite direction to interest rates.

Why is it so important to get good advice? In August a brokerage house recommended that investors sell Caribbean Cement as in their opinion it was overvalued. At the same time IC Insider.com had the stock highly placed in the TOP 10 stocks to buy. The other is Berger Paints where some investors sold their stock for $10.88 only to see a big price gains since. Some persons have not factored in a number of developments in some of these companies and other developments in the wider economies, all of which can push revenues and profits. What are some of these, Cement has cut cost and likely to do so in 2018 when they refinance the current leasing arrangement. Most importantly, demand for cement is going to explode locally as demand for construction rise. The same will be happening at Berger as more buildings mean more demand for paints.
Consistent growth| Most investors should really be investing in companies where there is a consistency in annual growth in profits. They should shun ones with a checkered earnings history, unless they can be adept of picking tops and bottoms. That is a task persons who use technical analysis can do well.
Dangers of investing| When stock prices rise much faster than the growth in profits, it is time to take serious note of what is happening, this is a telltale sign of a correction ahead, unless the company is recovering from past period of undervaluation, interest rates are falling or the company is expanding and will be expected to enjoy a boost in profit as a result. Investors in such stocks should be fully conversant with what are the factors at play, to ensure their investment can be properly protected if, and when, the factors change.
Other factors| Look at developments in each company and what is happening to the local economy and the likely impact on companies. Most importantly, movement in interest rates have been shown to move markets in one direction or the other and this is a critical factor in investment assessment. One last point to bear in mind is the Investor’s Choice 80/20 rule.
The 80/20 rule| The rule is simple but profound, only 20 percent of the stocks that end up in the top 10 in one year reenter in the subsequent year and in some years just one or none make it, while 40 percent of the 10 worst performing stocks, make it to the top 10 best performers in the subsequent year. This is backed up by data going back for several years to the 1980s. This rule is only broken in a few years that are bearish. this rule is a very good guide for investors in knowing which stocks to buy or sell and when.

Teachings from silly Unilever Investors

Investors need to be careful and not follow the fad of following the leader blindly. In 2013 IC Insider.com posted a report on the Unilever Caribbean based in Trinidad and traded on the country’s stock exchange.
Since the report the company stock has been on a downward slope after rising to new record in 2013, yesterday Jamaica Stock Exchange junior market listed Knutsford Express after a long period of overvaluation relative to the market, dropped $2.75 as demand for the stock evaporated. The same thing happened to Cargo Handlers that was pushed unrealistically to $30, only for it to be trading at $10 currently and is still above normal valuation. This latter stock came as a big buy on the way up, by a brokerage house.
Unilever’s profit peaked in the period to September 2014 and started a downhill ride since but investors kept on pushing the price higher until it peaked at TT$68.30 in December 2015, on Wednesday the stock traded with a loss of $1.25, to a multi year’s low of $38.

Unilever products

The IC Insider.com report in 2013 was: When stock prices rise much faster than the growth in profits, we need to take time to note of what is happening. Investors in such stocks should be fully conversant with the factors at play to ensure that their investment can be properly protected if, and when, the factors change.
Unilever Caribbean stock price is up 13 percent so far in 2013, on top of a 45 percent increase in 2012, 44 percent in 2011 and 35 percent in 2010 after a 16 percent fall in 2009. The company, a subsidiary of Unilever PLC, a United Kingdom company, is based in Trinidad and manufactures a range of homecare, personal care and food products for the Caribbean region, including Jamaica, has been having reasonable profit performances for a number of years. In fact they have been able to improve sales and margins in a market that has been in recession since 2009. The growth in the stock price is well in excess of the rise in profits for the past four and half years.
Some of the company’s brands include Mistolin, Radiante, Breeze, Vaseline, Lux, Lipton, Becel and Blue Band. The product range also includes dishwashing liquids as well as fabric conditioners.

Knutsford Express peaked at $16.89 and is now trading at $12.

For the three months to March 2013, revenues climbed to $137 million up from $128 million for the same period in 2012 while profits were up to $13 million after tax compared to $11.9 million in 2012. The December quarter is the biggest period for earnings with more than a third being generated in the period. For 2012 full year to December the company reported after tax profit of $59.5 million an increase of just 2.8 percent over that earned in 2011. Profit for 2011 was up 11 percent over 2010 and 2010 profit was up 26 percent over the previous year. Lower interest rates in Trinidad have helped to push the PE ratio to 21 times earnings at a current stock price of $53.25, up from 14 times in 2011 and 11.5 for 2010.
Unilever reported areas of success reflected in good growth in some of its products but also expressed concerns about rising input cost of some of the products it manufactures as well as competition from cheaper products. From all indications, management seems to have managed to steer the operations well resulting in improved margins, which moved from 61.8 percent in 2012 first quarter to 63.8 percent in 2013, a continuation of the marked improvement seen for 2012 when the margins for the full year came out at 63.7 percent versus the 59.2 percent enjoyed in 2011.
While cost increase seems to be under control in 2013 for the first quarter, that was not the case in 2012 when selling cost rose by $17 million or 17 percent and administrative cost rose 22 percent, well above the growth in revenues. For the quarter, selling cost rose by 4.8 percent and administrative cost rose 2.7 percent while revenues are up 4.75 percent.
The company boast equity capital of $176 million, has no interest bearing debt and a high current asset ratio with liabilities almost covered twice over.
The article concluded, that the stock seems poised to rise further as demand exceeds the supply of the stock on the Trinidad market.
At the close of the market on Wednesday November 8, 2017 the stock seems poised to suffer further decline and that shows up in the chart formation.

When the market speaks

Markets have a way of telling stories that confound many. In May 2014of that year, the local market declined to reach 76,344.27 points on June 23, after reaching 86,590 points in mid-March.
Some investors thought the market was going to crash with some pulling funds out and moving into foreign exchange investments. The technical reading pointed in a different direction, the market by then had hit bottom and was not only heading up but much, much higher. One big clue, the market was caught in a triangular formation, a tell-tale sign of a big break out. The signal was very clear from September.
An article published on this site in September 2014 said “Technically, the main market is seeing the short term moving average on the verge of crossing the medium term moving average, a bullish sign. Importantly, many listed companies have posted some attractive results for 2014 that is supportive of an upward push in their stock price.” The rest is history as the market slowly crept higher to 84,084.94 and the slow recovery morphed into a strong bull market starting early in 2015.
Recently, the market has been sending out strong signals, one is that the main market is heading for the 500,000 points market, that is 60 percent away from the current level. The other signal to have emanated from the market, was the clear message that was pointing the major error the directors of Berger Paints were making in recommending the sale of shares by minority shareholders.

The stock market is sending a very strong message that a stock split is inevitable for NCB Financial by early 2018.

The market sent the message but some investors did not listen resulting in the surrender of 6.6 million units at a vastly reduced value to its true valuation. It is not surprising that the stock now trades at $15
At an investors’ briefing this year, the NCB Financial Group’s executives said they saw no benefit to the company of a stock split. IC Insider.com had written a piece indicating that a split is baked into the price already and could not be avoided. On Friday and Monday, the market sent and even clearer message to the directors that it cannot be delayed with the stock price jumping record $108 with only small amounts being offered for sale.

Stocks on verge of a breakout – 2014

Stock markets can be like tsunamis, the change in the current is not seen as it moves out of site until it’s time for all to see what’s been happening. That is one reason investors are often advised to invest in stocks with good prospects long term.
There is no certainty when markets will move in one direction or another. Since profit drives stock prices, one only has to wait on the pay day from growing companies, which will surely come. What does this have to do with the local stock market? Many investors wrote off any chance that the local market would have any recovery after the spring decline of 2014 that saw the All Jamaica Composite Index falling to 76,344.27, coming against the strong demand for foreign exchange, not aware of the market’s history.
A critical point, investors in local stocks should note, is that the best times to start buying stocks is during the summer months. The Jamaican stock market bottoms and starts to move upwards in more summers than at any other time in its history, this goes back to the start of the creation of the market index, back in the early 1970s. For 2014, prices on the Jamaica stock market declined a bit from its earlier 2014 high, with several stocks hitting 52 weeks’ lows into the early summer months, with the main market hitting a low on June 23 and the junior market on August 4.
2014 developments| The average person may look to changes in the market indices to guide them in what is happening in the market. And yet others will wait until the news headline say stocks are rising. The problem with this approach is that indices movements cloud what may be important shifts in values and prices and when the main news highlights what is happening in the market much of the gains are gone, making it riskier to invest. From the end of August to September 19th in 2014, the all Jamaica index rose by 1 percent while for August it remained flat. The Junior Market index rose 3 percent towards the end of September, but was flat for August. But something else was happening that bode well for continuation of an upward move of the market, more importantly, upward move for some stock prices. In September up the 19th the all Jamaica index rose on 53 percent of trading days, while for the junior market it was 60 percent and with the month not ended the ratio could improve. In August the ratios are 42 percent and 48 percent respectively. The advance decline ratio tells a far better story than the indices movements. The main market had only 7 days when the advance decline ratio was negative and so far for September, that number is just 4 with 7 trading days to go before the month ends.
Interest Rates| Rising interest rates drive money out of stocks into other investments, the reverse is also true falling rates drive money into stocks to position for better returns in the stock market. Interest rates on government Treasury bills have been declining since May 2014 and flows in the forex market are buoyant with the local dollar remaining stable. Technically, the main market is seeing the short term moving average on the verge of crossing the medium term moving average, a bullish sign. Importantly, many listed companies have posted some attractive results for 2014 that is supportive of an upward push in their stock price. These are positives that will help the market.
Few investors picked up the above signals, it was not until April 2015, when newspaper reports of an investment forum was reported that the wider public became aware of the bull market that had its genesis from 2014 and was up 21 percent to the end of March from the June 2014 low.
The above was posted on September 23, 2014 and is reproduced with slight modifications.

Do you really know your adviser?

Berger Paints is worth more than $20 per share.

The directors of Berger Paints should have their resignation letters ready for signing after in early October, as their continuing service will be in conflict with the recommendation they gave minority shareholders who seem set to rebuff it.
Investors need to be adequately informed as there are wolves out there to help snatch valuables from them. Salada Foods is a very profitable entity after the broker to a takeover offer and audit firm recommended shareholders to sell their shares for an undervalued amount back in the 1980s. According to the auditor, the plant was obsolete and coffee powder was no longer accepted by consumers. The broker suggested that minority shareholders will have to eat their shares for their stupidity in not accepting the offer. Three decades on and the company remains profitable and debt free and those shareholders who held their shares have done extremely well by doing so. I wrote at the time of the offer that it was unfair. I gathered that the chairman Mr. Charles Ransom at the time, on a flight back to Jamaica, dammed John Jackson for killing the offer, when he saw the story that was highly critical of the offer. That was a few days before the vote that rejected the offer.
In 2010 the first Junior Market listing IPO was condemned outright by a featured article in the Friday Business Observer, followed by a series of comments by doomsayers. The arguments against the offer were so uninformed that I wrote an article defending it fully.
One of the critics wrote, “I looked over their prospectus the very day it was released and came to the very same conclusion that this price is pie in the sky!! I have a degree in Finance and I invest in companies on the JSE, including Mayberry and I think this is a sad day in IPO valuation. They had the opportunity to set the standard for the Jr. JSE and they are muggin it up. The conclusion I draw from their pricing is that they take the Jamaican investor for idiots, like so many companies in Jamaica. And they are playing on peoples’ greed. I would love to invest in this company and if it hits the market I will wait for the price to realign to it’s proper valuation before buying.”
And yet another investors comments, “Mr. Jackson everyone has a right to his or her opinion, you Sir should have done your homework. I am not a stock broker, but I was interested in the offer and did my research, after reading the Prospectus I decided not to take up the offer.”
“Look at likely future earnings, the future of Access Financial looks BAD. WHAT IS THEIR BUSINESS??? SUB-PRIME LOANS. In the USA a company such as this would be called a predatory Lender. The business model looked okay 3 to 4 years ago, but now it just looks dismal. Most of the clients the forward looking statement alludes to are people who live paycheck to paycheck. With all the talk of layoffs and cutback in the Jamaican economy, how does the principal of Access expect their business to grow?”
“One point made in the prospectus is that Government does not regulate this particular company, and therefore they can keep their interest rate on their products higher. Look at the percentage of bad loans recorded for 2008, and then compare that to the 9.09% projected non-performing loans in the prospectus. Come now Mr. Jackson, does this sound right to you?”
In response to my article saying the market is huge the reader had this to say,“How is the market huge when this company’s business model caters to small and micro business sector? Take an informal survey on how many micro business have pulled down their shutter since the year started. If I did not have access to information I might have called you for guidance as a stockbroker, what a disappointment that would have been.”
My current response, they made a big mistake in reading the prospectus first, as they would have done far better had they done the right thing. One investors who was advised to buy, did just that and enjoyed wonderful returns.
Earlier this year, a brokerage house was recommending Cargo Handlers as a buy in the $20 range when the PE ratio was in the 50 region. Another last year recommended investors sell Barita Investments, saying the stock was not worth much more than just over $2. Where are these two stocks at presently? One is much lower than the recommendation and one much higher? And for naysayers in Access Financial who cause a number of persons to stay out of Access, they may have learnt from the experience, hopefully as the stock now trades at the equivalent of $460 per share and never fell below the issued price once. In addition investors have reaped a large amount in dividends and the growth goes on. The Berger Paints recommendation to sell is just another of those poor valuations done by persons who don’t really know how to value listed companies. The market will speak in a few weeks on this.

Is trading IPO issues a good idea?

The question of the week comes from one of IC Insider.com’s readers. “ I’m trying to understand more about investing and would like to know about buying stocks at the IPO price, selling when they go up and then buying when the prices settles lower? Does it make sense to do so?
The answer to the question is yes and no. it can be done but understanding where the stock may top out initially, is going to be the key. You have to determine the price to sell at and then identify when to get back in, as well as where the price may go after reentry. Those targets are not always easy to assess. A good example is Main Event, it went to $5 early after listing and then pulled back a bit and went over $8 and pulled back to $4.85 last Week. Express Catering went over $5 initially and pulled back to $3.80, traded recently at $5.60 and pulling back again. Trading fees can cost up to 5% to get in and out that needs to be factored into the equation of potential trades as well.
Knowing the PE and how the stock compares to others in the market, will help a great deal to determine the likely top for a stock. The use of PE ratio and comparing them with other stocks gives a good indication which stock has a better valuation, but it may not tell when that difference will be eliminated. Currently, just below 20 times current earnings, seems to be a good exit point as the target for IPOs and say 20% or so below could be a good reentry point.
Picking tops and bottoms in markets is not always easy, unless historical records are used in the assessments. This technique is better known as technical analysis where markets or products, in this case stocks, establish set price patterns over time, often trading within what’s called a channel. Channels allow investors to better pick tops and bottoms, while the items is trading within the channel.