The float of a stock is another important factor that can help you make a proper decision when it comes to picking a winning stock. The float is simply how many shares there are available for trade on the open market. Most finance sites will give you this information if you dig just a little. The float is a crucial thing to consider, because it is part of the equation that gets you to the earnings per share. (Net Income/Number Of Shares Or Float = Earnings Per Share)
Remember how important the EPS or Earnings Per Share is too, as it drives the most basic stock equation (EPS * Stock's Multiple = Price). Generally, I believe that the smaller the float the better. It breaks down to simple supply and demand. If a stock has a small float and gets a piece of great news they will go up a lot faster then one with a large float, simply because there isn't very many shares out there to buy. Watch out though because this can also work the opposite way. Check out what happen to VDSI which has only 37 million shares of float after it missed earnings estimates, just painful!
This is also were buybacks and stock splits come into play. A company that has passed it's growth phase needs to increase it's EPS somehow, so it simply starts reducing it's float by buying back it's own shares. The less shares on the market the easier it is to raise your Earnings Per Share and keep the shareholders happy! Take a look at Boeing (BA), they just announced a big buyback and the stock was rewarded.
Now when a stock split occurs you are normally just increasing or rarely decreasing the float. Lets say you have a 2 for 1 split. If the float was 50 million before the split it is now 100 million or if it was 10 million before now it is 20 million... just that simple!
Here are a few basic companies to look at that have a small float...
Cogent (COGT) 94 million shares, Vasco Data Securities (VDSI) with 37 million shares, Ormat (ORA) with 38 million shares, Zoltec (ZOLT) with only 29 million shares of float!
Compare that to some of the bigger companies out there, Microsoft (MSFT) with 9.3 billion, Motorola (MOT) with 2.2 billion and General Electric (GE) with a whopping 10.2 billion!
Basically, it is a lot easier to move a stock that has a small float, not only that, but a stock with a small float has a lot of room to grow, which is always a good thing when you are looking for great long term investments...
Picture Taken By Paul Clos
Tuesday, October 30, 2007
Thursday, October 25, 2007
Anyone who held Vasco Data Securities (vdsi) yesterday is down a whopping 33.95% today! Talk about pain, that was one of the worst days I have ever seen for any stock. So, you might think that this stock is done, over, and just going to keep going down, but I am here to tell you that this is not going to happen.
This was the biggest overreaction to an earnings report that I can remember in recent times. The drooling analysts were looking for 17 cents per share and Vasco came in at 15 cents. That was an amazing 79% over last years earnings. Their revenues came in at 30 million which was below anayists' expectations, but was still a 60% increase over last years revenues. Vasco Data Securities won 608 new customers in the third quarter, including 106 banks and 502 enterprise security customers.
With the 15 cents a share in earnings Vasco's P/E ratio is only 44 based on it's current price of $26.13, which is low for a company that can grow at 79%. Vasco's backlog of orders also grew to an all time high of 33.4 million for the fourth quarter. My point is that the long term story with Vasco is still in tack. They re-affirmed their guidance of full-year revenues to rise 55 percent to 65 percent. Vasco Data (vdsi) also sees gross profit as a percentage of revenue for 2007 to be in the range of a very healthy 60 percent to 68 percent!
I have been a bull of this stock for a long, long time now and I did watch it's valuation get a little a head of itself, but this almost 35% sell off in the stock is just unjustified. This stock may be in for a rough ride the next couple of days, but this is an opportunity that I would jump on soon before the smoke clears.
To learn more about Vasco Data Securities visit their website and to see what I thought going into earnings check out this post!
If you are still looking for more information about the company listen to what the CEO T. Kendall Hunt has to say in this presentation in Chicago...
Tuesday, October 23, 2007
Well I certainly can't say that I would put too much down on the table before earnings on Thursday, but this certainly is a good stock to consider for the long run. Evergreen Solar (eslr) is small company that is quickly expanding it's manufacturing facilities not only here in the states, but in Germany as well with it's joint venture with Everq. Germany is arguable the leader in the world when it comes to Solar technology, so ESLR has it's eggs in the right basket. They are still operating at a loss though, so this play is not for the faint of heart. They are also very small compared to the other players out there with only a 960 million dollar market cap, but with great risk comes great rewards. Here is a look at their 1 year chart courtesy of Google Finance.
I believe things can only get better for this company as governments around the world begin to offer even more incentives for green energy. Climate change is becoming more of a reality ever day and I believe we are soon going to be scrambling to provide the world with cleaner forms of energy.
One of the things that separates Evergreen Solar from the rest of the solar industry is the fact that they manufacture wafers, cells and panels all under one roof which will allow them to more efficiently control costs, and perfect the manufacturing process. They also produce panels that have the smallest carbon footprint of any panels on the market today, and with their revolutionary quad furnace I think Evergreen has a leg up on the competition.
Is Evergreen the best solar play out there right now? Maybe not, two others to consider are SunPower Corp (SPWR) and Suntech (STP) but I think that a year or two down the line Evergreen will be vastly outperforming both of these stocks... What are your thoughts?
NASDAQ ESLR is trading at $9.60 as I write this...
Saturday, October 20, 2007
While a lot of people are in the market just for growth stocks, there is a safer, less exciting way to build your fortune. Just look for stocks that pay a hefty dividend and that have consistently raised their dividend over the years.
A dividend is simply a payment that is issued to stockholders normally every three months. Most brokerages allow you to either take the dividend in cash or you can re-invest your dividends directly back into the stock. My favorite personally, is to re-invest those dividend payments. Think of it this way, you put $1000 into a stock that pays a 4% dividend. Three months or less later you get your first dividend of $40. As I stated above, you can take this in cash or simply re-invest it automatically.
This way you are technically buying stock every three months automatically without even raising your finger! As you can imagine this will really end up paying off in the long run. Plus, if a company is raising it's dividend it is always a sign that business is good so stocks like this tend to go up naturally as well! It is a win-win situation!
For me though, the idea is to eventually have so much stock that you can simply live off of the dividends as well. This way no matter if a stock goes up or down you still receive that dividend.
Yet another advantage of dividends is that in a market like we had on Friday, which was terrible in case you missed it, stocks that have high dividends tend to not be hit as bad as ones that do not. So while it is great to have growth stocks that shoot straight up there is nothing wrong with a good steady stock that pays a nice dividend. A couple that I would suggest looking at include Royal Bank of Canada (ry), Yum Brands (yum) or any other stock that has been increasing it's dividend consistently.
Find out more about why I like Yum brands here, or you can learn even more valuable information about the stock market here!
Thursday, October 18, 2007
Nothing new here, Google (goog) blows past analysts estimates posting $3.91 earnings per share (eps) vs the estimated $3.78 that analysts were predicting. They also beat on revenues with 3.01 billion which is 70 million above what the analyst were looking for. Mind you this beat was already after many analysts had raised their estimates prior to the release, so the bar was already very high, and Google still had no problem beating!
The only blemish on the quarter was continued hiring by the company that spooked investors a bit in after hours trading. If you listened to the conference call though, they explained that some of that was due to the acquisition of Postini and some due to an overhang of people that were hired in the second quarter that didn't start till the third quarter. The management said that they would keep a watchful eye on hiring in the future as well.
Overall, this looks like another great quarter from the company that never seems to stop growing it's impressive bottom line. They have introduce serveral new ad formats for adsense and have just begun to start making money off of Youtube with the new overlay ads. Also, with the release of the I-Phone, mobile Internet use has only begun to hit and Google just released adsense for mobile which will pad the bottom line a bit next quarter! Basically, with the seasonally strong forth quarter coming up it is hard to find another stock out there with this much potential.
You might be thinking I can afford to buy a $600 stock, but don't forget that you don't have to buy a full share of a company like this and others with such a high price tag. You can buy partial shares though places like sharebuilder and other brokerages. Don't think you missed the boat either, because as grows the Internet grows Google. This is a worldwide play on the growth of the Internet and the push from traditional adverting into Internet advertising which is much easier to track through services like Google Analytics. Plus, with the Summer Olympics coming up in China and the presidential election next year things are only going to get better for this company.
For more information on how I see the Google Story check out these past posts...
Google Should I Stay Or Should I Go?
Putting A Value On A Stock
Evolution Of Traditional Advertising
Tuesday, October 16, 2007
I have to admit Vasco Data Securities (vdsi) has gone a lot higher then I thought it ever could in this time frame, but there are some fundamental reasons and major momentum moving this stock upwards this quarter and towards the next earnings release on October 25th. Vasco is a security company that is growing at an astounding pace, and judging by the recent additions of a few key contracts this company is poise to continue this growth in the future. It even opened up a new location in Brazil on October 1st to ensure it's growth prospects in the region. Vasco does the majority of it's business outside the United States, and therefore has a huge untapped market that is just beginning to embrace online banking.
As more people realize the convenience of online banking here in The States, customer's will demand higher security just as they did in Europe and the other over 60 countries that Vasco does business in. The only question I have is the growth already priced into the soaring stock price? It is currently trading at a 80 P/E ratio or multiple which is normally considered to be "expensive". Still there is only a couple analysist that even cover this stock, and it is only a 1.6 billion dollar company market cap wise so it certainly has breathing room still.
No matter what happens this earnings report it appears that the long term story remains, they are a small company (184 employees) that has hit the sweet spot of online banking industry and is leading in almost every place but the united states, which they are beginning to penetrate with their recent agreements with The Royal Bank Of Canada and Az-lan Tech Data which both have a very extensive reach!
Just to be clear though this pick is not for the faint of heart is has been on a crazy run, I would personally wait till after earnings or buy some now and buy some after earnings if all continues to go well...
Sunday, October 14, 2007
You may think it is very hard to try and put a price tag on a stock and it is even harder to tell which direction that stock should be going, but there is a basic underline way to determine how to price any stock out there.
The first and most important thing to consider is a stock's PE or Price To Earnings Ratio. Now sure that may sound complicated, but it's really not. All you do is take this price of any stock, let's say for instance Royal Bank Of Canada (ry) which is trading at $57.56 a share and divide it by it's earnings per share which is $4.19. ($57.56/$4.19 = 13.61 PE) It is just that simple, Royal Bank Of Canada has a 13.61 PE or Price To Earnings Ratio!
So, all we do is apply this same logic to future earnings. Let's say Royal Bank Of Canada earns $6.25 next year and the market is willing to pay the same multiple 13.61 for the stock it would be at $85.06 per share. ($6.25 EPS * 13.61 PE = $85.06)
Basically, if a stock can continue to grow it's earnings and the market is willing to pay the same multiple or more for the stock it will go up naturally. Now, if earnings decrease the price will generally go down and so may the multiple that the market is willing to pay for the stock which is a double whammy.
Another thing to consider is that the higher the multiple the more "expensive" the stock is.... that is investors are paying more for future growth. Sometimes this can really pay off if the earnings are growing quick enough, but stocks with a high multiple that missed their earnings estimates can get hammered. Take Akamai (akam) for example, their recent earnings missed just made their stock drop like a rock due to the fact that their multiple was already so high that any kind of a miss would be ugly and it certainly was if you look at the 3 month chart.
Therefore, in general the stocks with the lower multiples can be much safer, but sometimes it can be worth it to pay up for growth. It all depends on what kind of an investor you are and how much risk you are willing to take on.
One last thing, the multiplies can be a good measure of comparing similar stocks, for instance Google and Yahoo. Google (goog) trades at $637.39 and has a PE of 54.18 while Yahoo (yhoo) trades at $28.48 with a PE of 55.55. So technical Yahoo is more expensive than Google! Yes that's right, even though Google is a $637 stock it is still cheaper than Yahoo at 28 smackers! Amazing really, especially since Google is growing faster than Yahoo which is what the multiple is really based on.
So next time you are trying to hunt for a stock, make sure to keep the multiple in mind and don't be afraid to compare it to it's peers. Let me know if you have any questions or comments and good luck to everyone this earnings season!
Wednesday, October 10, 2007
One of the biggest bulls of Google's stock (goog) Jim Cramer just did one of his famous rants on the recent run up in the stock price tonight on his show Madd Money. Now I have to admit that Jim gets it wrong some if not a lot of the time and I take his advice with a grain of salt, but he does make some very good points about Google's stock valuation.
First off, people can't seem to get their heads around a $600 dollar stock. The first thing you need to realize is that there are a lot of other stocks out there that have high price tags. For instance The Washington Post (wpo) at $800, or even Berkshire Hathaway (brk) which is valued at over $120,000 a share!
The only real reason that most stocks don't have such high prices is that they have all gone through stock splits. A stock split is when you take a stock that is $100 for example and you split it in 2. This leaves you with 2 stocks at $50 dollars. Google's management has said from the very beginning that they do not plan on split the stock anytime in the future so the price tag will just continue to go up if the earnings keep pace.
While I do realize that Google's stock price has been on a decent run, it is all up to next weeks earnings to see just how long this can last. If they beat the numbers the stock will continue it's mad pace to 700, if they miss or meat there will be a pull back which would be a good opportunity to place your bets. The only problem is if they beat you could miss out on the fun.
It is up to you though if you believe in the long term story of Google I would put in a little before earnings and a little after this way you can't get burned too bad by a surprise either way. I have been convinced of this story since the IPO and the Google long term story just seems to gets better every day...
Just today it was reported that Boeing (ba) would have to delay delivery of it's Dreamliner series for at least 6 months. Incidentally, the stock fell by 3% almost immediately. This looks to me like a good entry point. The stock has pulled back from it's 52 week high of $107.83 and is currently traded at around $98.
The long term story with Boeing has not changed at all. Boeing doesn't just get orders from companies it gets orders from entire countries! It trades at a reasonable 21 PE and has a dividend of $.35 per share or dividend yield of 1.42% which should provide support for the stock.
As the developing countries progress they are going to need more airplanes and as the world becomes more aware of the problems that climate change is causing people are going to demand more fuel efficient planes. Boeing is already ahead of the game with it's Dreamliners which is much more efficient than the older planes that are on the market right now. Not only this, but Boeing is of course one of the largest defense contractors out there.
While this might not be the most exciting stock pick out there, it is certainly one of the safer picks that I would recommend. For more information you can always google Boeing and do some research yourself.
Monday, October 8, 2007
This stock had a stellar performance today after releasing 3rd quarter earnings. Yum Brands beat analysis estimates by a full $.05 and the stock took off in after-hours trading to hit a new 52 week high.
In case you are not familiar with Yum Brands, they own a series of restaurants including Taco Bell, Pizza Hut, A & W, Kentucky Fried Chicken (KFC), and Long John Silvers and is a company that is quickly spreading itself across the globe. One little statistic I just love is the fact that they are opening up a new KFC at least every single day this year in China! Now that is what I call growth...
I realize that this company is already pretty huge though and therefore their stock could be hard to move, but the company just announced an addition to their buyback plan which should be a good support for this stock. Plus just shows the confidence the management has in the future of Yum Brands.
Overall, I would have to say that this is a pretty safe bet even at it's 52-week high. If that wasn't enough they also pay a dividend which is yet another reason to own this stock.
What does everyone else think about this massive restaurant chain? They seem to trade at a reasonable multiple and are looking better and better with all this global growth, so how far do you think this stock can run?
For more information you can always visit their website here.
This blog will be dedicated to finding stocks that are actually worth investing in and have the potential to make you large amounts of money. We will try our best to find the best value stocks and growth stocks in the entire stock market!
Some of our favorite picks right now include Google (goog), Vasco Data Securities (vdsi), Royal Bank of Canada (ry), Yum Brands (yum), Boeing (ba), and Ormat Technologies (ora)! All of these stocks will be featured in detail in the coming posts, so stay tuned to this sites for more info on these great companies...
Remember though it is very important that you do your own research or contact your stock broker before making any investments. It is also important that you consider were you are in your life. Generally, the younger you are the more you can take risks in your stock picks. If you are nearing retirement you should be much more conservative with the stocks that you choose.
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