Tag Archive | Retail

Position Sizing: Key to Maximizing Returns

In a time when market volatility and equity preservation is of utmost importance, determining the correct number of shares to buy, or “position sizing”, is key to maximizing returns and minimizing risk.

The common investor generally doesn’t spend much time thinking about how many shares to buy or how significant of a position to take.  Instead, most investors use a common methodology of trading the same number of shares each time, which usually translates to a specific dollar amount.  Other, more sophisticated investors, opt to allocate a certain percentage of their portfolio value to a specific position. Following this train of thought, a new position in a portfolio of $100,000 would transcribe either a $10,000, or 10%, investment or a usual position of 50 shares.

Although these methods may work for some, using the volatility of a specific portfolio is likely to be the most effective decision tool.  Measuring a portfolio’s overall volatility enables an investor to decide on what percentage of that portfolio he is willing to risk losing on the new position.  This methodology is better explained through the following example. Read More…

If you can’t beat them join them, Best Buy. BBY

by  Chris Georgopoulos, SmartStops contributor

Reading financial articles can be, let’s say boring at times. This article we are going to try to spice it up, let’s play a game of role playing.  Famed speculator, Jesse Livermore once was quoted…

“If I were walking down a railroad track and saw an express train coming at me at 60 miles an hours.  I would be a damned fool not to get off the track and let the train go by. After it had passed, I could always get back on the track, if I desired.” –Reminiscences of a Stock Operator, Edwin Lefevre.  

For this game let’s rename the train, Best Buy stock (BBY: NYSE), the ““I” in walking down the track” we can call the shareholders of Best Buy and the speed of the train, the issues.  The game is scored by the costs of each decision. Whoever has the best return wins!

It is the end of summer 2005, Best Buy is approaching $80/share and the future couldn’t be brighter. The tech bubble burst is ancient history, the housing market is hot, interest rates are low and every house in America is an ATM for consumer spending.  You are on the railroad track…there isn’t a train in sight! 

It is now the beginning of fall 2008; Best Buy has fallen to the mid $40s in defiance of the market making new highs and there are rumors of problems in Mortgage backed securities.  (Note:  Sidestepping risk is now made possible with the release of SmartStops.net  which if had been available would have had you out in the $70 range in 2005).  Your friend has made a fortune flipping speculative properties in south Florida and Las Vegas, but you see he is worried. He still has five houses on the market with almost no personal income… (You know how this story ends)  You can hear a train coming and it sounds like it’s really moving!

Only a few months later, Best Buy is trading under $18/share!   The rumors are true; the housing market has crushed the stock market. It seems nobody thought housing prices would ever go down and the economy is on the verge of total failure. You can now see the train, its moving fast and finally you start to consider if you should actually get off the tracks.

(SmartStops.net   issued two Long-Term exit signals in 2008 the first January 4, 2008 at $46.80 and on September 16, 2008 at $40.68. That’s a  $22 per share savings by sidestepping risk.)

It is two years later; Best Buy is trading back in the mid $40s. Read More…

4 ETFs To Play Surge In E-Commerce

Over the recent holiday period, the e-commerce sector witnessed exceptional growth as many consumers opted to shop on-line, as opposed via the traditional brick and mortar storefronts, paving the path to opportunity in the near future for the sector. 

According to a recent article in Barron’s, U.S. e-commerce spending accelerated 13% during the holiday season, pushing total e-commerce growth in 2010 to 10% year-over-year.  Furthermore, the article also contends that US e-commerce is expected to witness another 10% year-over-year growth in 2011, pushing spending to over $150 billion for the year.  Read More…

Three ETFs Influenced By Accelerated Economic Growth

Although it is hard to say that the US economy is in a sustainable recovery, there are plenty of signs showing that economic growth is accelerating, paving the path to opportunity for the Retail HOLDRs (RTH), the PowerShares Dynamic Retail (PMR) and the First Trust Dow Jones Internet Index (FDN).

The most promising and upbeat news recently came from a decline in new applications for jobless claims in the week ending November 20, 2010.  The 407,000 applications were far lower than expected and is aiding in easing concerns about job security and income growth.  This can further be supported by an increase in personal spending, which jumped to 0.4% in October, marking the fourth consecutive month of increased consumer spending.  Read More…

Three ETFs Influenced By Black Friday

With Thanksgiving right around the corner, the nation’s single busiest shopping day is about to unleash, and whether or not the retail sector will get a boost this holiday season is ambiguous, however, the Retail HOLDRs (RTH), the iShares Dow Jones US Consumer Services (IYC) and the SPDR S&P Select Retail (XRT) are likely to be influenced regardless of the outcome.

A poll conducted by the National Retail Federation shows that up to 138 million shoppers may visit the nation’s shopping malls over the Black Friday weekend, an increase of nearly 3 percent from last year.  Many are expected to flock to the blockbuster bargains that are being offered by retailer like Wal-Mart (WMT), Target (TGT) and Best Buy (BB).  Wal-Mart is expected to offer DVDs for as little as $1.96, Blue-Ray Disc Movies for $10 and some kitchen appliances for under $3, while Target is following a similar path and is also expected to offer a 40 inch LCD HDTV for under $300 and Best Buy is advertising netbook computers starting at under $150.    Read More…

Three ETFs To Play Amazon And Remain Diversified

As technology companies continue to generate cash and hoard it, some, like Amazon (AMZN) are looking at acquiring others to broaden their current offerings paving the road to prosperity for the Internet HOLDRs (HHH) the Retail HOLDRs (RTH) and the PowerShares NASDAQ Internet (PNQI).

According to insiders, Amazon, which was sitting on cash and short-term securities of $5.9 billion at the end of September, is currently nearing an agreement to buy Quidsi Inc., owner of Diapers.com and Soap.com.    Furthermore, the Seattle based online retailer recently bought Woot.com, a site that offers a daily discounted item and has agreed to purchase BuyVIP, a fashion site, which will expand its presence in Europe.  Read More…

Four ETFs Driven By Consumer Spending

The US economy grew at a faster than expected rate in the third quarter of this year, buoyed much by an increase in consumer spending, however, is still not growing at a rate to generate new jobs.  Despite this, a ray of light may shine on sectors driven by consumer spending enabling the Consumer Discretionary Select Sector SPDR (XLY), the Vanguard Consumer Discretionary (VCR), the PowerShares Dynamic Consumer Discretionary (PEZ) and the Retail HOLDRs (RTH) to reap the benefits.

According to the Commerce Department, consumer spending, this accounts for nearly 70 percent of US GDP, increased by 2.4 percent annually during the third quarter of this year.  Furthermore, retail sales rose in each of the three months in the third quarter with a further detail indicating that this rise is broad based.  Read More…

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