Top Dog and First Mover

A "Top Dog" is A company that dominates its industry.

A "First Mover" is a company with a technology or product so revolutionary that disrupts an existing industry and create an entire new one.



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Sell PUT and CALL

Selling a put obligates investors to buy more stock should the stock price dip below the put's strike price.

If the stock market plunges lower—and two major macro-economic events will occur in the next few weeks—put sellers could be buying stock at sharply lower prices.

Selling call obligates investors to sell their stock should the stock price rise above the call's strike price.

If the stock market plunges, and the stock never rises above the call's strike price, the money received for selling the call is like an extra dividend payment.

In fact, the money received for selling puts or calls and buying stock can be thought of as conditional dividends. If the stock doesn't cross the strike price of the put or call, investors can keep the money.

Another strategy rising in popularity is the "risk reversal." By selling a put with a strike price that is below the stock's price, and buying a call with a strike price above the stock's price, many investors are finding they can get paid by the options market to speculate on stock prices.

If the stock surges higher, moving past the call's strike price, investors can sell the call bought for free at a profit. If the stock price declines below the put's strike price, investors are obligated to buy the stock.

The key in these options strategies is to use them only on stocks you want to own. If the stock pays a dividend, even better.

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Option Open Interest

An increase in open interest along with an increase in price is said to confirm an upward trend. Similarly, an increase in open interest along with a decrease in price confirms a downward trend. An increase or decrease in prices while open interest remains flat or declining may indicate a possible trend reversal. 

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Reasons for increase volume trading during End-of-Quarter

Much of the recent rally has been traced to end-of-quarter window dressing by fund managers, who typically sell losers and buy winners to make their portfolios look better.

The Federal Reserve ends its $600 billion bond-buying program, known as QE2, on Thursday and has not offered any hints of more monetary easing. Markets were volatile in May and June, partly on concerns about QE2's end.

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The Importance of Reinvesting Dividends | Fundsupermart.com

http://www.fundsupermart.com/main/research/viewHTML.tpl?articleNo=5303

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Warren Buffett holding as of 24th June 2011

KO Coca-Cola Company	$65.04	0.06 (0.09%)	24.75% of portfolio. 8.72% held. 200 million shares. Position unchanged.
WFC Wells Fargo & Co	$26.96	-0.08 (-0.30%)	20.27% of portfolio. 6.5% held. 342.62 million shares. Position unchanged.
AXP American Express ...	$48.50	-0.71 (-1.44%)	12.79% of portfolio. 12.61% held. 151.61 million shares. Position unchanged.
PG Procter & Gamble ...	$63.02	-0.44 (-0.69%)	8.82% of portfolio. 2.74% held. 76.77 million shares. Position unchanged.
KFT Kraft Foods Inc	$34.43	0.17 (0.50%)	6.16% of portfolio. 6.02% held. 105.21 million shares. Position unchanged.
JNJ Johnson & Johnson	$65.12	-0.55 (-0.84%)	4.71% of portfolio. 1.56% held. 42.62 million shares. Position unchanged.
COP ConocoPhillips	$72.69	-0.31 (-0.42%)	4.34% of portfolio. 2.04% held. 29.1 million shares. Position changed by -8,000 shares.
WSC Wesco Financial C...	$385.08	0.17 (0.04%)	4.14% of portfolio. 80.1% held 5.7 million shares. Position unchanged.
WMT Wal-Mart Stores Inc.	$52.58	-0.71 (-1.33%)	3.79% of portfolio. 1.12% held. 39.04 million shares. Position unchanged.
USB U.S. Bancorp	$24.03	-0.26 (-1.07%)	3.4% of portfolio. 3.59% held. 69.04 million shares. Position unchanged.
MCO Moody's Corporation	$37.22	-0.45 (-1.19%)	1.79% of portfolio. 12.39% held. 28.42 million shares. Position unchanged.
WPO Washington Post C...	$409.59	-2.38 (-0.58%)	1.4% of portfolio. 25.12% held. 1.73 million shares. Position unchanged.
MTB M&T Bank Corp	$86.26	-0.02 (-0.02%)	0.89% of portfolio. 4.46% held. 5.36 million shares. Position unchanged.
COST Costco Wholesale ...	$80.14	-0.26 (-0.33%)	0.6% of portfolio. 1% held. 4.33 million shares. Position unchanged.
USG USG Corporation	$14.28	-0.34 (-2.33%)	0.53% of portfolio. 16.6% held. 17.07 million shares. Position unchanged.
TMK Torchmark Corpora...	$62.21	-0.52 (-0.83%)	0.35% of portfolio. 3.64% held. 2.82 million shares. Position unchanged.
GE General Electric Co	$18.08	-0.30 (-1.63%)	0.29% of portfolio. 0.07% held. 7.78 million shares. Position unchanged.
SNY Sanofi	$37.28	-0.40 (-1.06%)	0.27% of portfolio. 0.16% held. 4.06 million shares. Position unchanged.
UPS United Parcel Ser...	$70.81	-0.51 (-0.72%)	0.2% of portfolio. 0.2% held. 1.43 million shares. Position unchanged.
GSK GlaxoSmithKline PLC	$41.34	0.23 (0.56%)	0.11% of portfolio. 0.06% held. 1.51 million shares. Position unchanged.
MA MasterCard Incorp...	$271.45	-1.68 (-0.62%)	0.1% of portfolio. 0.18% held. 216,000 shares. Position new.
BK Bank of New York ...	$25.19	-0.25 (-0.98%)	0.1% of portfolio. -1.4% held. 1.79 million shares. Position unchanged.
XOM Exxon Mobil Corpo...	$77.88	-0.56 (-0.71%)	0.07% of portfolio. 0.01% held. 421,800 shares. Position unchanged.
IR Ingersoll-Rand PLC	$43.79	-0.75 (-1.68%)	0.06% of portfolio. 0.19% held. 636,600 shares. Position unchanged.
GCI Gannett Co. Inc.	$13.58	-0.06 (-0.40%)	0.05% of portfolio. 0.73% held. 1.74 million shares. Position unchanged.
CDCO Comdisco Holding ...	$7.49	-1.51 (-16.78%)	0.03% of portfolio. 38.18% held. 1.54 million shares. Position unchanged.

Factors affecting Economy recovery

The economy, he says, is like a four-cylinder engine, and a recovery usually requires all four to be firing. They are consumer spending, employment, housing and the reversal of the inventory cycle.

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Valuing best stocks, buying them cheap

The Fed's goal, if it starts buying bonds again, would be to drive interest rates down further from their already low levels and spark borrowing and spending. Lower rates could also eventually drive investors into riskier assets like stocks or into currencies in countries with more attractive interest rates.

Five Investing Tips From Warren Buffett

 
What does 's message to stockholders mean for you and your money?

Every year Mr. Buffett, the world's third-richest man and arguably the most successful stock-market investor in history, writes a letter to stockholders in his investment company . The latest came out this weekend. There are usually some nuggets for all those who haven't invested in Berkshire, and this year's letter was no exception. Here are five:

1. Watch out for stock-market valuations.

Mr. Buffett's company is now sitting on a cash hoard of $38 billion. "That's among the highest levels it's ever been," says Stifel Nicolas analyst . While Mr. Buffett says he is looking for a big acquisition, and has his "elephant gun loaded," the high cash pile also suggests he's having a challenge finding really good deals. If Mr. Buffett is cautious, investors might want to take note: It's another sign that many valuations on the stock market may be looking a little stretched.

2. Coke is it.

Mr. Buffett rarely makes predictions, but in the case of —a long-term holding—he issues a remarkable one: Dividends will probably "double ... within ten years," he writes. That would take them from last year's $1.76 to $3.52 per share. If Coca-Cola stock didn't move over that period, it would raise the dividend yield from 2.5% today to above 5%. Berkshire owns 8.6% of Coca-Cola stock.

3. Some of his favorite stocks are still cheap.

While the stock market overall has boomed, and it's a battle to find cheap stocks, one thing does stand out: Many of Warren Buffett's favorite stocks remain at, or around, the prices he paid for them. As Mr. Buffett only likes to buy stocks for a lot less than he thinks they are really worth, this suggests you can get a bargain or two—although, as always, there are no guarantees.

They include French drug maker . Berkshire Hathaway has accumulated about $1.8 billion worth of the stock. Sanofi's share price has come under pressure lately as a result of its acquisition of biotech giant Genzyme. At $35, its American Depositary Receipts are now about 12% below the average price Mr. Buffett paid.

Or look at . Mr. Buffett owns 97 million shares, a hefty 5.6% of the company, for which he paid an average of $33 each. Today the stock is just $32. It has been held back, in part, by the costs of the takeover of Britain's Cadbury. But the stock yields a decent 3.7%. It is a reasonable 14 times forecast earnings, and just over 1.1 times annual revenues.

Mr. Buffett also owns 45 million shares in health-care behemoth , a stake valued at about $2.7 billion. He paid about $61 for the stock: It's now $60, 12 times forecast earnings, yielding 3.6%. A cheap stock.

And what about ? It's tumbled in recent weeks to $52. That's just 12 times forecast earnings. And the dividend yield, 2.3%, may not be huge, but it's the highest it's ever been. Today's price is just a few dollars a share more than Warren Buffett paid: Berkshire Hathaway accumulated a $2 billion stake at an average of about $48.50.

4. Berkshire stock isn't expensive, by Mr. Buffett's own calculations.

No one knows exactly what a share in Berkshire Hathaway is really worth. Mr. Buffett himself told investors over the weekend that if you ask him and his veteran co-manager to calculate the intrinsic value of the stock, "you will get two different answers. Precision just isn't possible."

However, he says, "book," or net asset value is his preferred "understated proxy for intrinsic value." Mr. Buffett writes, "To be sure, some of our businesses are worth far more than their carrying value on our books.... But since that premium seldom swings wildly from year to year, book value can serve as a reasonable device for tracking how we are doing."

So it's intriguing that Berkshire Hathaway stock today trades at $128,000, or just 1.3 times that book value. Stifel's Mr. Shields says the historic average is about 1.6 times. If the "premium" between book value and the intrinsic value doesn't swing that much from year to year, one might conclude that Berkshire is looking a little cheap.

Naturally, as a big company, it has a lot less growth ahead of it. And as Mr. Buffett is 80, his years of producing spectacular investment returns are nearer the end than the beginning. Nonetheless, in a market where so many investments seem to be trading at lofty valuations, it is notable that Berkshire is below its average.

For those who wish to invest, and who don't have $128,000 in spare cash, the economy-class "B" shares trade for $85.

5. Get ready for a dividend hike at Wells Fargo.

Mr. Buffett's favorite bank, San Francisco-based , has had its dividend levels held back by the Federal Reserve, along with other banks, during the financial crisis. "At some point, probably soon, the Fed's restrictions will cease," he writes. "Wells Fargo can then reinstate the rational dividend policy that its owners deserve. At that time, we would expect our annual dividends from just this one security to increase by several hundreds of millions of dollars annually."

Berkshire Hathaway owns about $11 billion worth of Wells Fargo stock. It added a small amount in the fourth quarter. At $32, Wells Fargo is just 11 times forecast earnings, and less than one and a half times book value—compared to nearly three times book value five years ago. The dividend yield under the current regime is a paltry 0.6%. Five years ago it was around 3%.

 



French drugmaker = Sanofi-Aventis
Company who take over Calbury = Kraft Foods
Health Care Behemoth = Johnson & Johnson
2.3% dividend yield = Wal-mart Stores
Favorite banks = Well Fargo & Company

[ Write to Brett Arends at brett.arends@wsj.com ]
[ Brett Arends, On Thursday 3 March 2011, 4:12 SGT  ] 

“Be Fearful When Others Are Greedy And Greedy When Others Are Fearful” - Warren Buffett

One of my favorite investment philosophies comes from a statement made by the great Warren Buffett that states “Be fearful when others are greedy and greedy when others are fearful”. Without thinking, this may sound like some old man trying to be a great philosopher saying something that has no real meaning to it. But actually it is the exact opposite.

Although sounding very elementary, I quickly realized that this statement is deeper than what many human beings can comprehend without a second or third look. In my opinion, what Mr. Buffett is saying closely correlates to a statement made by Sun Tzu in The Art of War, that states "when the enemy attacks; retreat and when the enemy retreat; attack".

Generally when the stock market is having a great year (or week for that matter), many amateur investors become greedy and are lured by the possibilities of great gains, then of course come to the conclusion that it is now the perfect time to invest. When the rest of the world starts investing at this high point in the market, the seasoned investors generally retreat, as it can be said that the amateurs are now attacking. Although they attack with no real substance and can be defeated at any time, it is always better (easier) to destroy the enemy once they are in your territory, and thus out of their element.

Most amateur investors don’t understand market and economic cycles, let alone P/E ratios or Earnings per share data, but still you have millions of amateur investors in the stock market each year, whom nonetheless retreat once they realized that they are out of their element. They realize that they are out of their element once they begin to see massive loses, and can’t figure out why.

Now don’t get me wrong. We all lose sometimes, but when you lose and can’t figure out why you’re losing, that is a sign that you are out of your element, thus a place where you don’t need to be.

Once the amateur investors start retreating (selling off their investments below market value), the seasoned investors follow Sun Tzu’s advice and attack. When they attack, since the enemy is outside of their element and in the seasoned investors territory, the blow is fatal and often financially advance the seasoned investors, while setting the amateur investor back to a place where he or she did not want to be.

When the stock price starts to decline, the amateur investors start selling their investments at very low prices, which gives all the seasoned investors a chance to buy back their investments that they originally sold to the amateur investors when the market was at a peak, now at very low prices.

The way it works is this: the rich sell for $8, which means the poor buys for $8. Then when the stock price decreases to $6, the amateur sells it back to the rich, who of course now pays $6 for it back. Then when the stock price goes back to $8, the rich sell it to the poor again, which means the poor pays $8 again. Then when the price decreases back to $6, the amateur gets nervous again and sells it back to rich for $6.

Believe it or not, this happens all the time and is one of the many reasons why the rich get richer and the poor get poorer. This is one of the main reasons for the need for education in the fields of business and investing.

[ This article is extracted from www.gurufocus.com ]

Stock Market Movement in the Year of Rabbit

[This is an article published in the Singapore WoBao newspaper]