Free Investing

Adib Motiwala submits: In this article, I will present you an example of a company I avoided with my checklist. Any good investor will tell you to have a checklist of things to look for in companies before you invest. Checklists are a good idea and can help prevent some basic mistakes and oversight on our part. Checklists also help to enforce a discipline in your investing process. Good investing is not only about finding good investments, it also is about passing over the bad investments.Complete Story »

Research Recap submits:
Further anecdotal evidence of the challenge in battling unemployment emerged in the last week with five of the top ten companies on Alacra’s Pulse’s list of companies under pressure announcing layoffs. They include Hewlett-Packard (HPQ) shedding 9,000 jobs worldwide as as part of the restructuring of its enterprise services division; Citigroup (C) detailing layoffs and branch closures at its CitiFinancial unit to make it more appealing to potential buyers; Xstrata (XSRAF.PK) cutting back as a result of Australia’s mining profit tax; troubled Royal Bank of Scotland Group (RBS) making further cuts; and Whirlpool (WHR) closing a plant. American International Group (AIG) and the UK’s Prudential plc (PUK) both got black eyes for the failure of the deal for AIG’s Asia unit.Ford Motor (F) said it would take a hit from phasing out its Mercury brand, though this could be seen as a positive in the long term. Tenet Healthcare (THC) was downgraded by R.W. Baird, and its plan to buy Australia’s Healthscope ran into trouble. Bank of Florida announced it was insolvent and then was delisted by Nasdaq.Complete Story »

Zachary Scheidt submits:
In the market today, there is a general aversion to invest in medical companies that could be affected by the healthcare reform recently passed by Congress. Concerns are certainly valid considering the uncertainty of exactly how companies will be impacted by the measures. But there are also plenty of opportunities where the market has mis-priced this risk and where healthcare companies actually offer tremendous potential returns. Tenet Healthcare Corp (THC) is one of those growing companies in an uncertain market. The firm operates 53 general hospitals and two more specialized hospitals primarily in the Southeast, Texas, and California. According to the company’s website, the firm focuses on owning and operating acute care hospitals along with ancillary businesses which complement its medical care.Complete Story »

Ockham Research submits: Last night, Congressional Democrats were able to secure 219 votes in support of sweeping reform for the healthcare industry, three more than the minimum necessary to pass the bill on. For more than a year, politicians have debated and waxed philosophic about the bill and the current state of the health insurance industry, but after last night’s vote, it appears something similar to the current bill will reach the President’s desk before long. It was my impression that the market would react negatively to the proposed legislation, as it would hand the government far greater influence over a massive sector of the economy; some estimates place it at 16% of the US economy and growing. However, the market rallied on the news led by hospital administrators like Tenet Healthcare (THC) and Health Management Associates (HMA) on the assumption that 32 million additional insured will bring in greater ongoing revenue in the future. Other healthcare stocks have rallied higher on Monday as well, including health insurers like Aetna (AET) and Cigna (CI) that have been regarded as a primary target of the legislation. Again, the thinking is that the proposed bill should add to their customer base by extending coverage to many Americans currently living without it.Complete Story »

Andrew Wilkinson submits: Tenet Healthcare Corp. (THC) – Shares of the provider of health care services surged 9.39% today to $6.29 following the passage of health-care reform legislation through the U.S. House of Representatives. Intriguing bullish options trading transpired on Tenet Healthcare during the current session as investors secured positions that yield profits if the firm’s shares continue to appreciate through expiration in January 2011. One optimistic player enacted a three-leg options combination play by selling short put options to partially finance the purchase of a debit call spread. The investor picked up 10,000 calls at the January 2011 $7.5 strike for a premium of $0.65 apiece, and sold 10,000 calls at the higher January 2011 $10 strike for $0.10 each. Next, the trader shed 10,000 puts at the January 2011 $5.0 strike for $0.55 premium apiece. The investor’s combination play was essentially enacted at zero cost because of the financing provided by the sale of higher-strike calls and out-of-the-money put options. Maximum potential profits of $2.50 per contract are available to the Tenet-bull if shares of the underlying stock jump 59% from the current price to $10.00 by expiration next year. The short position in put options implies the trader is willing to have Tenet’s shares put to him at $5.00 each should the put contracts land in-the-money ahead of expiration day in January. Options implied volatility on the stock slumped 20.9% this afternoon to 46.67% following the passage of the health care bill in the House. Ford Motor Co. (F) – Bullish options activity on the automobile manufacturer picked up as the trading day progressed amid a 4.5% rally in the price of the underlying stock to $13.90. One optimistic individual initiated a bullish risk reversal transaction in the June contract to position for continued upward momentum in the price of Ford’s shares through expiration. The investor sold 5,000 puts at the June $10 strike for a premium of $0.23 per contract in order to partially offset the cost of buying the same number of call options at the higher June $16 strike for $0.44 apiece. The net cost of the reversal play amounts to $0.21 per contract. Thus, the investor responsible for the trade stands ready to accrue profits if Ford’s shares surge 16.60% over the current price to surpass the breakeven point at $16.21 by expiration day in June. Complete Story »

Phil Davis submits: Wheee, what a ride! The week can be neatly summed up by my 1:35 comment to Members in Friday’s chat, summed the week up quite nicely as I said: "So funny, a whole week of gains I thought were ridiculous wiped out in 4 hours." Of course it’s easy to laugh when you play the market correctly - as I had said in the morning post, we had cashed out into Thursday’s run up and planned on going bearish through the weekend but it turned out we got our sell-off early, jumping the $100K Portfolio, for example, up 12% in one day - enough to send us back to cash rather than risk a weekend reversal.Complete Story »

Phil Davis submits: It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way–in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only." - Charles Dickens, 1859 Dickens' famous novel (which was originally written as a weekly series in 31 installments) depicts life in the time of the French revolution but was also a parable, meant to warn the British aristocracy that they should not ignore the parallels to the social inequities that existed at the time in England. Dickens warned the nobles that the seeds of revolution were planted through unjust acts and surely there would be a time of reaping yet to come.Complete Story »

Phil Davis submits: First of all, what are you doing here?Why it’s Christmas Eve, Mr. Scrooge - Most global markets are having a half day so, if you are waiting for a Santa Claus rally on a half-day’s trading, you are very likely to be disappointed.Complete Story »

Hickey and Walters (Bespoke) submit:
Below we provide a table with the 10 best performing stocks in 2009 in each of the ten S&P 500 sectors. For investors looking for specific names that money managers will likely want on their books by year-end statement time, this is a good place to start.click to enlargeComplete Story »

Hickey and Walters (Bespoke) submit:
As noted earlier, Friday marks the two-year anniversary of the S&P 500's closing peak. As of Thursday's close (10/8), only 57 of the 500 stocks currently in the index are up since then. Needless to say, it has been a lousy two years. Below we highlight the 25 best performing stocks in the index over the last two years. As shown, sectors which are the most heavily represented include Technology (7), Energy (6), Consumer Discretionary (5), and Health Care (5). Check back Friday morning for a list of the top performing Mid and Small Cap stocks since 10/9/07.click to enlargeComplete Story »