Highly recommended film to catch. A film that truly gives different meaning to different people. We are given a deep sense of self-awareness for such contemplation of the 'higher truth' . The key is in the discovery, not in the believing.
Thursday, June 21, 2007
Monday, June 11, 2007
S = Supply and Demand; Small Capitalization Plus Big Volume Demand
The law of supply and demand determines the price of almost every-
thing in your daily life. When you go to the grocery store and buy fresh
lettuce, tomatoes, eggs, or beef, supply and demand affects the price.
The law of supply and demand even impacted the price of food and
consumer goods in former Communist, dictator-controlled countries
where these state-owned items were always in short supply and frequently
available only to the privileged class of higher officials in the bureaucracy
or in the black market to comrades who could pay exorbitant prices.
The stock market does not escape this basic price principle. The law
of supply and demand is more important than all the analyst opinions
on Wall Street.
Big Is Not Always Better
The price of a common stock with 300 million shares outstanding is
hard to budge up because of the large supply of stock available. A
tremendous volume of buying (demand) is needed to create a rousing
price increase.
On the other hand, if a company has only 2 or 3 million shares of
common stock outstanding, a reasonable amount of buying can push
the stock up rapidly because of the small available supply.
If you are choosing between two stocks to buy, one with 10 million
shares outstanding and the other with 60 million, the smaller one will
usually be the rip-roaring performer if other factors are equal.
The total number of shares of common stock outstanding in a com-
pany's capital structure represents the potential amount of stock avail-
able for purchase.
The stock's "floating supply" is also frequently considered by market
professionals. It measures the number of common shares left for possi-
ble purchase after subtracting the quantity of stock that is closely held
by company management. Stocks that have a large percentage of owner-
ship by top management are generally your best prospects.
There is another fundamental reason, besides supply and demand,
that companies with large capitalizations (number of shares outstand-
ing) as a rule produce dreadful price appreciation results in the stock
market. The companies themselves are simply too big and sluggish.
Pick Entrepreneurial
Managements Rather Than
Caretakers
Giant size may create seeming power and influence, but size in corpora-
tions can also produce lack of imagination from older, more conserva-
tive "caretaker managements" less willing to innovate, take risks, and
keep up with the times.
In most cases, top management of large companies does not own a
meaningful portion of the company's common stock. This is a serious
defect large companies should attempt to correct.
Also, too many layers of management separate the senior executive
from what's really going on out in the field at the customer level. And
in the real world, the ultimate boss in a company is the customer.
Times are changing at a quickening pace. A corporation with a fast-
selling, hot new product today will find sales slipping within three years
if it doesn't continue to have important new products coming to market.
Most of today's inventions and exciting new products and services are
created by hungry, innovative, small- and medium-sized young compa-
nies with entrepreneurial-type management. As a result, these organiza-
tions grow much faster and create most of the new jobs for all
Americans. This is where the great future growth of America lies. Many
of these companies will be in the services or technology industries.
If a mammoth-sized company occasionally creates an important new
product, it still may not materially help the company's stock because
the new product will probably only account for a small percentage of
the gigantic company's sales and earnings. The product is simply a little
drop in a bucket that's just too big.
Institutional Investors Have a
Big Cap Handicap
Many large institutional investors create a serious disadvantage for
themselves because they incorrectly believe that due to their size they
can only buy large capitalization companies. This automatically elimi-
nates from consideration most of the true growth companies. It also
practically guarantees inadequate performance because these investors
may restrict their selections mainly to slowly decaying, inefficient, fully
matured companies. As an individual investor, you don't have this limi-
tation.
If I were a large institutional investor, I would rather own 200 of the
most outstanding, small- to medium-sized growth companies than 50 to
100 old, overgrown, large-capitalization stocks that appear on every-
one's "favorite fifty" list.
If you desire clear-cut factual evidence, the 40 year study of the great-
est stock market winners indicated more than 95% of the companies
had fewer than 25 million shares in their capitalization when they had
their greatest period of earnings improvement and stock market perfor-
mance. The average capitalization of top-performing listed stocks from
1970 through 1982 was 11.8 million shares. The median stock exhibited
4.6 million shares outstanding before advancing rapidly in price.
Foolish Stock Splits Can Hurt
Corporate management at times makes the mistake of excessively split-
ting its company's stock. This is sometimes done based upon question-
able advice from the company's Wall Street investment bankers.
In rny opinion, it is usually better for a company to split its shares 2-'
for-1 or 3-for-2, rather than 3-for-l or 5-for-l. (When a stock splits 2-for-
1, you get two shares for each one previously held, but the new shares
sell for half the price.)
Overabundant stock splits create a substantially larger supply and may
put a company in the more lethargic performance, or "big cap," status
sooner.
It is particularly foolish for a company whose stock has gone up in
price for a year or two to have an extravagant stock split near the end of
a bull market or in the early stage of a bear market. Yet this is exactly
what most corporations do.
They think the stock will attract more buyers if it sells for a cheaper
price per share. This may occur, but may have the opposite result the
company wants, particularly if it's the second split in the last couple of
years. Knowledgeable professionals and a few shrewd traders will proba-
bly use the oversized split as an opportunity to sell into the obvious
"good news" and excitement, and take their profits.
Many times a stock's price will top around the second or third time it
splits. However, in the year preceding great price advances of the lead-
ing stocks, in performance, only 18% had splits.
Large holders who are thinking of selling might feel it easier to sell
some of their 100,000 shares before the split takes effect than to have to
sell 300,000 shares after a 3-for-l split. And smart short sellers (a rather
infinitesimal group) pick on stocks that are beginning to falter after
enormous price runups¡Xthree-, five-, and ten-fold increases¡Xand
which are heavily owned by funds. The funds could, after an unreason-
able stock split, find the number of their shares tripled, thereby dramat-
ically increasing the potential number of shares for sale.
Look for Companies Buying
Their Own Stock in the
Open Market
One fairly positive sign, particularly in small- to medium-sized compa-
nies, is for the concern to be acquiring its own stock in the open market-
place over a consistent period of time. This reduces the number of shares
of common stock in the capital structure and implies the corporation
expects improved sales and earnings in the future.
Total company earnings will, as a result, usually be divided among a
smaller number of shares, which will automatically increase the earn-
ings per share. And as we've discussed, the percentage increase in earn-
ings per share is one of the principal driving forces behind outstanding
stocks.
Tandy Corp., Teledyne, and Metromedia are three organizations that
successfully repurchased their own stock during the era from the mid-
1970s to the early 1980s. All three companies produced notable results
in their earnings-per-share growth and in the price advance of their
stock.
Tandy (split-adjusted) stock increased from $2 4 to $60 between 1973
and 1983. Teledyne stock zoomed from $8 to $190 in the thirteen years
prior to June 1984, and Metromedia's stock price soared to $560 from
$30 in the six years beginning in 1977. Teledyne shrunk its capitaliza-
tion from 88 million shares in 1971 to 15 million shares and increased
its earnings from $0.61 a share to nearly $20 per share with eight differ-
ent huvbacks.
Low Corporate Debt to Equity
Is Usually Better
Alter you have picked a stock with a small or reasonable number of
shares in its capitalization, it pays to check the percentage of the
firm's total capitalization represented by long-term debt or bonds.
Usually the lower the debt ratio, the safer and better the company.
Earnings per share of companies with high debt-to-equity ratios can
be clobbered in difficult periods of high interest rates. These highly
leveraged companies generally are deemed to be of poorer quality and
higher risk.
A corporation that has been reducing its debt as a percent of equity
over the last two or three years is well worth considering. If nothing
else, the company's interest expense will be materially reduced and
should result in increased earnings per share.
The presence of convertible bonds in a concern's capital structure
could dilute corporate earnings if and when the bonds are converted
into shares of common stock.
It should be understood that smaller capitalization stocks are less liq-
uid, are substantially more volatile, and will tend to go up and down
faster; therefore, they involve additional risk as well as greater opportu-
nity. There are, however, definite ways of minimizing your risks, which
will be discussed in Chapter 9.
Lower-priced stocks with thin (small) capitalization and no institu-
tional sponsorship or ownership should be avoided, since they have
poor liquidity and a lower-grade following.
A stock's daily trading volume is our best measure of its supply and
demand. Trading volume should dry up on corrections and increase
significantly on rallies. As a stock's price breaks out of a sound and
proper base structure, its volume should increase at least 50% above
normal. In many cases, it can increase 100% or more.
In summary, remember: stocks with a small or reasonable number of
shares outstanding will, other things being equal, usually outperform
older, large capitalization companies.
(Excerpt from 'How To Make Money in Stocks')
thing in your daily life. When you go to the grocery store and buy fresh
lettuce, tomatoes, eggs, or beef, supply and demand affects the price.
The law of supply and demand even impacted the price of food and
consumer goods in former Communist, dictator-controlled countries
where these state-owned items were always in short supply and frequently
available only to the privileged class of higher officials in the bureaucracy
or in the black market to comrades who could pay exorbitant prices.
The stock market does not escape this basic price principle. The law
of supply and demand is more important than all the analyst opinions
on Wall Street.
Big Is Not Always Better
The price of a common stock with 300 million shares outstanding is
hard to budge up because of the large supply of stock available. A
tremendous volume of buying (demand) is needed to create a rousing
price increase.
On the other hand, if a company has only 2 or 3 million shares of
common stock outstanding, a reasonable amount of buying can push
the stock up rapidly because of the small available supply.
If you are choosing between two stocks to buy, one with 10 million
shares outstanding and the other with 60 million, the smaller one will
usually be the rip-roaring performer if other factors are equal.
The total number of shares of common stock outstanding in a com-
pany's capital structure represents the potential amount of stock avail-
able for purchase.
The stock's "floating supply" is also frequently considered by market
professionals. It measures the number of common shares left for possi-
ble purchase after subtracting the quantity of stock that is closely held
by company management. Stocks that have a large percentage of owner-
ship by top management are generally your best prospects.
There is another fundamental reason, besides supply and demand,
that companies with large capitalizations (number of shares outstand-
ing) as a rule produce dreadful price appreciation results in the stock
market. The companies themselves are simply too big and sluggish.
Pick Entrepreneurial
Managements Rather Than
Caretakers
Giant size may create seeming power and influence, but size in corpora-
tions can also produce lack of imagination from older, more conserva-
tive "caretaker managements" less willing to innovate, take risks, and
keep up with the times.
In most cases, top management of large companies does not own a
meaningful portion of the company's common stock. This is a serious
defect large companies should attempt to correct.
Also, too many layers of management separate the senior executive
from what's really going on out in the field at the customer level. And
in the real world, the ultimate boss in a company is the customer.
Times are changing at a quickening pace. A corporation with a fast-
selling, hot new product today will find sales slipping within three years
if it doesn't continue to have important new products coming to market.
Most of today's inventions and exciting new products and services are
created by hungry, innovative, small- and medium-sized young compa-
nies with entrepreneurial-type management. As a result, these organiza-
tions grow much faster and create most of the new jobs for all
Americans. This is where the great future growth of America lies. Many
of these companies will be in the services or technology industries.
If a mammoth-sized company occasionally creates an important new
product, it still may not materially help the company's stock because
the new product will probably only account for a small percentage of
the gigantic company's sales and earnings. The product is simply a little
drop in a bucket that's just too big.
Institutional Investors Have a
Big Cap Handicap
Many large institutional investors create a serious disadvantage for
themselves because they incorrectly believe that due to their size they
can only buy large capitalization companies. This automatically elimi-
nates from consideration most of the true growth companies. It also
practically guarantees inadequate performance because these investors
may restrict their selections mainly to slowly decaying, inefficient, fully
matured companies. As an individual investor, you don't have this limi-
tation.
If I were a large institutional investor, I would rather own 200 of the
most outstanding, small- to medium-sized growth companies than 50 to
100 old, overgrown, large-capitalization stocks that appear on every-
one's "favorite fifty" list.
If you desire clear-cut factual evidence, the 40 year study of the great-
est stock market winners indicated more than 95% of the companies
had fewer than 25 million shares in their capitalization when they had
their greatest period of earnings improvement and stock market perfor-
mance. The average capitalization of top-performing listed stocks from
1970 through 1982 was 11.8 million shares. The median stock exhibited
4.6 million shares outstanding before advancing rapidly in price.
Foolish Stock Splits Can Hurt
Corporate management at times makes the mistake of excessively split-
ting its company's stock. This is sometimes done based upon question-
able advice from the company's Wall Street investment bankers.
In rny opinion, it is usually better for a company to split its shares 2-'
for-1 or 3-for-2, rather than 3-for-l or 5-for-l. (When a stock splits 2-for-
1, you get two shares for each one previously held, but the new shares
sell for half the price.)
Overabundant stock splits create a substantially larger supply and may
put a company in the more lethargic performance, or "big cap," status
sooner.
It is particularly foolish for a company whose stock has gone up in
price for a year or two to have an extravagant stock split near the end of
a bull market or in the early stage of a bear market. Yet this is exactly
what most corporations do.
They think the stock will attract more buyers if it sells for a cheaper
price per share. This may occur, but may have the opposite result the
company wants, particularly if it's the second split in the last couple of
years. Knowledgeable professionals and a few shrewd traders will proba-
bly use the oversized split as an opportunity to sell into the obvious
"good news" and excitement, and take their profits.
Many times a stock's price will top around the second or third time it
splits. However, in the year preceding great price advances of the lead-
ing stocks, in performance, only 18% had splits.
Large holders who are thinking of selling might feel it easier to sell
some of their 100,000 shares before the split takes effect than to have to
sell 300,000 shares after a 3-for-l split. And smart short sellers (a rather
infinitesimal group) pick on stocks that are beginning to falter after
enormous price runups¡Xthree-, five-, and ten-fold increases¡Xand
which are heavily owned by funds. The funds could, after an unreason-
able stock split, find the number of their shares tripled, thereby dramat-
ically increasing the potential number of shares for sale.
Look for Companies Buying
Their Own Stock in the
Open Market
One fairly positive sign, particularly in small- to medium-sized compa-
nies, is for the concern to be acquiring its own stock in the open market-
place over a consistent period of time. This reduces the number of shares
of common stock in the capital structure and implies the corporation
expects improved sales and earnings in the future.
Total company earnings will, as a result, usually be divided among a
smaller number of shares, which will automatically increase the earn-
ings per share. And as we've discussed, the percentage increase in earn-
ings per share is one of the principal driving forces behind outstanding
stocks.
Tandy Corp., Teledyne, and Metromedia are three organizations that
successfully repurchased their own stock during the era from the mid-
1970s to the early 1980s. All three companies produced notable results
in their earnings-per-share growth and in the price advance of their
stock.
Tandy (split-adjusted) stock increased from $2 4 to $60 between 1973
and 1983. Teledyne stock zoomed from $8 to $190 in the thirteen years
prior to June 1984, and Metromedia's stock price soared to $560 from
$30 in the six years beginning in 1977. Teledyne shrunk its capitaliza-
tion from 88 million shares in 1971 to 15 million shares and increased
its earnings from $0.61 a share to nearly $20 per share with eight differ-
ent huvbacks.
Low Corporate Debt to Equity
Is Usually Better
Alter you have picked a stock with a small or reasonable number of
shares in its capitalization, it pays to check the percentage of the
firm's total capitalization represented by long-term debt or bonds.
Usually the lower the debt ratio, the safer and better the company.
Earnings per share of companies with high debt-to-equity ratios can
be clobbered in difficult periods of high interest rates. These highly
leveraged companies generally are deemed to be of poorer quality and
higher risk.
A corporation that has been reducing its debt as a percent of equity
over the last two or three years is well worth considering. If nothing
else, the company's interest expense will be materially reduced and
should result in increased earnings per share.
The presence of convertible bonds in a concern's capital structure
could dilute corporate earnings if and when the bonds are converted
into shares of common stock.
It should be understood that smaller capitalization stocks are less liq-
uid, are substantially more volatile, and will tend to go up and down
faster; therefore, they involve additional risk as well as greater opportu-
nity. There are, however, definite ways of minimizing your risks, which
will be discussed in Chapter 9.
Lower-priced stocks with thin (small) capitalization and no institu-
tional sponsorship or ownership should be avoided, since they have
poor liquidity and a lower-grade following.
A stock's daily trading volume is our best measure of its supply and
demand. Trading volume should dry up on corrections and increase
significantly on rallies. As a stock's price breaks out of a sound and
proper base structure, its volume should increase at least 50% above
normal. In many cases, it can increase 100% or more.
In summary, remember: stocks with a small or reasonable number of
shares outstanding will, other things being equal, usually outperform
older, large capitalization companies.
(Excerpt from 'How To Make Money in Stocks')
Monday, June 04, 2007
Sino Techfibre
As requested. Sino Techfibre has establish a base support at the 61.8% retracement from the high of 1.64 to the low of 1.10. From todays price actions, resistance levels to break through are at 1.40/1.44/1.52 while support levels are at 1.37/1.30 . Volume count of 10mil and above on an upwards move would be bullish and high chance of breaking through resistance levels.
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