Stock Market Club

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Stock Market Club

• February 6, 2008
• Meeting 12

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Term Of the Week

• Book Value

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Book Value

• A company's common stock equity as it appears on
  a balance sheet, equal to total assets minus
  liabilities, preferred stock, and intangible
  assets such as goodwill. This is how much the
  company would have left over in assets if it went
  out of business immediately. Since companies are
  usually expected to grow and generate more
  profits in the future, market capitalization is
  higher than book value for most companies. Since
  book value is a more accurate measure of
  valuation for companies which aren't growing
  quickly, book value is of more interest to value
  investors than growth investors.

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Agenda

• Discuss Market Commentary
• Global Markets
• Spotting Tops
• Investopedia Portfolios

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Market Commentary

• DJIA 12,200.10 -65.03 -0.53
• NASDAQ 2,278.75 -30.82 -1.33
• SP 500 1,326.45 -10.19 -0.76
• Worker Productivity Slows Sharply

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Dow Jones Industrials 5-Day
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NASDAQ 5-Day
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SP 500 5-Day
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Worker Productivity Slows Sharply

• Key factor in rising living standards
• 1.8 percent in the October-December quarter
• Down from a 6 percent performance in the
  July-September period

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Worker Productivity

• Productivity determines whether living standards
  can rise because it allows businesses to pay
  their workers more because of their increased
  output without having to raise the cost of their
  products, which increases inflation.

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Labor Costs Rise

• Labor costs rose by 2.1 percent in the final
  three months of the year, after having fallen by
  1.9 percent in the third quarter and 1.1 percent
  in the second quarter.

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Global Growth

• The (IMF) International Monetary Fund tracks
  global and country specific economic growth
• Reports come out in April and September

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Global Growth cont.

• Growth of 1.8 in advanced economies
• Emerging Markets and developing economies 6.9
• United States growth 1.5
• Euro area (15) 1.6
• Japan 1.5

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Emerging Markets Growth

• Africa 7
• China 10
• Middle East 5.9
• Central and Eastern Europe 4.6
• Developing Asia 8.6

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Foreign Market ETFs and Mutual Funds

• iShares MSCI Malaysia
• iShares MSCI Australia
• iShares MSCI France
• iShares MSCI Singapore
• iShares MSCI Germany
• Morgan Stanley Eastern Europe
• Third Canadian General Invst Tr
• Asia Tigers Fund

• iShares MSCI Austria
• iShares MSCI Belgium
• iShares MSCI Canada
• iShares MSCI Hong Kong
• iShares MSCI Italy
• iShares MSCI Switzerland
• iShares MSCI Sweden
• iShares MSCI Spain
• iShares MSCI Mexico

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Foreign Market ETFs and Mutual Funds

• HOLDRS Europe 2001
• iShares MSCI EAFE
• iShares SP/Topix 150
• iShares SP Latin American 40
• iShares MSCI Pacific ex-Japan
• Singapore Fund
• Thai Fund
• Asia Pacific Fund
• New Germany Fund
• The European Equity Fund
• Korea Fund

• iShares MSCI Netherlands
• iShares MSCI UK
• iShares MSCI South Korea
• HOLDRS TeleBras
• iShares MSCI Brazil
• iShares SP Europe 350
• iShares MSCI Japan
• iShares MSCI Taiwan
• iShares MSCI EMU

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Foreign Market ETFs and Mutual Funds

• The European Equity Fund
• Korea Fund
• Taiwan Fund
• Chile Fund
• Central Europe Russia Fund
• Malaysia Fund
• Mexico Fund
• Turkish Investment Fund
• Thai Capital Fund

• Japan Smaller Cap Fund Inc.
• Swiss Helvetia Fund
• The New Ireland Fund
• Aberdeen Australia Equity Fund
• Greater China Fund
• First Israel Fund
• Japan Equity Fund
• Latin America Equity Fund
• JF China Region Fund

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Foreign Market ETFs and Mutual Funds

• Latin American Discovery Fund
• Mexico Equity Income Fund
• Korea Equity Fund
• Herzfeld Caribbean Basin Fund
• Taiwan Greater China Fund
• India Fund

• China Fund
• Canadian General Investments Ltd
• Morgan Stanley India Inv Fund
• Morgan Stanley Asia Pacific Fund
• Templeton Dragon Fund
• Spain Fund
• Templeton RussiaEast European Fund

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Video

• http//www.cnbc.com/id/15840232?video640883730pl
  ay1

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Spotting Tops

• It is imperative to spot tops to avoid some
  serious pain.
• Being flexible is crucial in this business one
  minute you may like a stock and then hate it the
  next because the fundamentals change that fast.
• A traders ability to adapt to changing market
  conditions is the key to successful trading.
• Timothy Sykes An American Hedge Fund

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Spotting Tops

• Jim Cramers reasons stocks have tops
• Competition
• Vagueness
• Overexpansion
• Government Blindside
• Top In Retail
• Fad Stock Tops
• Accounting Mayhem

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Spotting Tops Competition

• Monitor the whole sector
• You may own a company with decent margins on
  sales, forecasting great visibility and has
  vanquished its competitors.
• Then a new company comes in and does the same
  service or makes the same product or sells the
  same goods as your company, but with lower
  margins.
• This can destroy your company
• When Riding a great long Always assume there is
  competition lurking.

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Spotting Tops Vagueness

• Management is vague about the specifics, tells
  you it isnt worried about the numbers, or that
  it doesnt want to be constrained by the
  projections or by the forecasts because it is
  thinking or talking about bigger things, sell the
  stock.
• There are no bigger things than numbers.
• This is not a game of trying to make people feel
  better or making them broadminded. This is a
  business of hitting numbers.
• Read about the company you own. You need to
  search for interviews and if there is vagueness
  in the managements words then Sell, Sell, Sell.

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Spotting Tops Overexpansion

• If a company cant create growth organically, it
  either has to buy growth or use steroids.
• Over expanding or expanding too quickly is the
  equivalent of steroids on Wall Street.
• This is hard to spot because Wall Street loves
  acquisitions and rapid expansion.
• The trigger to sell When you here management
  talk about integration problems
• For retail, look at same-store stales or comp
  store sales

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Spotting Tops Government Blindside

• Pay attention to the front page of the New York
  Times, Wall Street Journal, USA Today, and
  Washington Post.
• There may be critical news from Washington that
  can affect a business, a sector, or the entire
  market negatively.

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Spotting Tops Top In Retail

• Easy to spot.
• Measure same-store sales for growing companies.
• For more mature companies, if they have a store
  in every state.

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Spotting Tops Fad Stock Tops

• Playing a fad can be fantastic.
• You can make fortunes on iPods, Crocs, or
  anything that America devours, but as soon as
  supply catches up with demand, you need to sell
  it.
• Monitor the stores that sell these fads, and
  listen to the conference calls.

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Spotting Tops Accounting Mayhem

• Accounting Shenanigans or irregularities equals
  sell.
• When you know a company cant make its estimates
  you must sell it.

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Spotting Tops Conclusion

• Dont get burned! You need to get out of a stock
  before it gets too hot.
• Bears make money, Bulls make money, Pigs get
  slaughtered.
• Dont be a pig, and dont be afraid to take
  profits and exit positions even if you may exit a
  little early.
• Its better to exit early than exit after the top
  has passed.

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Investopedia Portfolio