Hello,\nI am researching stocks.  I have come up with my own strategy as I am looking at stocks.\nI noticed that some stocks have a huge difference between forward P/E and trailing P/E.\n\nWould this mean that the stock is under valued?\n\nDoes anyone know if there have been books or specific name of this investment strategy I can look up?\n\nThanks
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The discrepency between forward and trailing P/E is not an indicator of whether a stock is undervalued or not.  Trailing P/E is Price/last 12 months earnings while forward P/E is Price/next 12 months earnings.  Each of these time periods are independent of one another and cannot be compared.  A better method may be to look at forward P/E for your stock versus the industry average forward P/E over time.  It is important to look at a time series of data to determine what is normal for the industry and how your target firm relates to the industry average.  \n\nBe careful when using relative valuations like this for long term investment decisions.  Some firms are priced relatively higher or lower than an industry based on their earnings for a reason.  Typically, the market values the quantity of earnings (captured in the P/E) and the quality of the earnings (not captured in the P/E).  The quality of the earnings relates to the riskiness of the earnings.  Actually, to be technically correct, the market values cash flows, which may or may not relate to earnings.  Earnings can be manipulated by management to make a firm appear stronger or more stabile than it truly is.  Over the last few years, there have been many examples of firms going under and upper management being tried for earnings manipulation.  \n\nI am an advocate of the Discounted Cash Flow approach, but if you are interested in relative valuation and strategies that are based on multiples, Aswath Damodaran (professor at NYU) has some really good texts talking about taking an economic approach to price multiples.  Another good text is "Security Analysis on Wall Street" by Hooke.\n\nSome other multiples that you may be interested in are the PEG ratio (P/E divided by growth), market-to-book (became very popular in the 80's), and Price/Sales (good for valuing start-ups, tech firms, and many service firms).  Keep in mind that while a ratio may hold well in terms of valuation for one industry, it may not hold well for other industries.  Additionally, within an industry, differences in firms' capital structure, revenue recognition, depreciation methodologies, capitalization policies, and off-balance sheet financing may force you to restate ratios in order to make them comparable and relevant.
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SGID.....ROTFLMAO!!!!\n\nStay away from penny stocks!  They're penny stocks for a reason!  At the very least, buy stock in a company that actually MAKES MONEY!
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Part of fundamental analysis is not just reading the numbers, but knowing what to do with them.  \n\nI would recommend\nJim Cramer's Real Money by Jim Cramer \n\nCramer recommends a fundamental approach, similar to value investing.  This book gives a good  explanation of market cycles, and how to determine if a stock is 'cheap'.\n\n\nor\n\n\nHow to Make Money in Stocks by William J O'Neil\n\nO'Neil  uses an approach that combines fundamentals with technical analysis.  Its a more actively traded style that takes advantage of momentum.\nI found his  explanation of growth companies and  how to evaluate the fundamentals helpful.
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they will factor the fall into the spread.  They don't allow arbitage opportunities like this.  I thought I can buy a put on a prediviend payout stock that has a large dividend but that doesn't work either.  If you do short-sell a stock, you have to deduct the dividend and pay it to the owner of the stock that allowed you to borrow his stock for short-selling.
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Blimey...there is certainly more to you that meets the eye isn't there Mr Raidehz??!! Am completely ignorant on all things business/stock etc...so have to compliment you as I'm sure its all pukka..what you says sounds completely confident and from someone who really knows his stuff...\nSo - a question for you: If I had @ £10,000 to invest, what is the best thing for me to invest it in right now to virtually guarantee good payback within a relatively short timespan......?
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What you are hoping to capture by buying a calendar spread is the decay of the first expiring option relative to the decay of the second. Read "Options as a Strategic Investment".\n\nA short term option loses its time value faster than a longer term option. So, if the decay on the longer is a penny a day...and the decay on the shorter option is 1/8 a day...you are capturing 11 1/2cents per day and protecting yourself in case of a big market move. Is it a given that you'll make money??? Absolutely not. Every time you think that, think to yourself "there are a million other people out there that have thot about this for at least 25 years...chances are I am not thinking anything original" !
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DONT buy penny stock for fucks sake\n\ninvest in mainstream shares with good invetsment analysis\n\nyou should ask yourself ....why are such companies valued so low?? its cos \n\n1  they are poor performers\n2 the invetsment community dont see any upturn ...if they did then they would pile in and the share price would increase ....supply and demand!\n\nif you have money to invest and you put it in penny shares then u might as well put allof it on a horse race!
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Several years ago there was a commodity traded, maine potatoes.  Every year for something over two-dozen years, the price would go up in the middle of January through early February.  Information was not as free back then, I could track causes better today on the Internet.  So I had some money and practiced trading in corn, making a little bit while getting the ropes.  The target was this, the smallest increase was 8 cents a pound, 50,000 pound contracts.  I caught it on a down tick and felt like a surfer catching a wave.  Unfortunately, it was a tsunami.  There were several millionaires who had also spotted the trend and they thought they could buck it.  So the price went limit up, trading stopping after the first couple of minutes, doing this for a few days, then limit down, again stopping trading after a few minutes into the next trading day.  I got a margin call, but it was for more money than I had, so the brokerage confiscated my position.  When the dust settled, the price had indeed gone up as I antcipated, but I was trapped out, unable to profit from it.  For that matter I was paying off that debt to the brokerage firm for years, instead of paying off my mortgage, which is what would have happened if those guys hadn't been greedy.  Meanwhile, it bankrupted something upwards of 100 rich traders who had tried to turn the market, and sent something like 60 to prison.\n\nThis doesn't happen all the time.  Just be careful, you can lose more than you put in, although trading the option MAY limit that.  For instance, even in stock options, if you sell a naked option and things go against you and someone calls that option and you haven't had a covering option to cancel, you are on the hook for supplying the shares.  Be careful of trading too close to the expiration.  I remember positioning for one thing expected to go up, and by the time the events began driving it up, my option was close to expiring, I got almost nothing out of it.\n\nA good plan is a wonderful thing.  But with commodities and commodity options, there is still uncertainty, and definitely danger.
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Indonesia Fund (IF) has had major intraday gyrations recently but liquidity is bad, at least on odd lots.  I had to wait several minutes for a market order to fill a few days ago.  I have had better luck buying and selling with limit orders.\n\nBallard Power (BLDP) volatility has spiked to an extreme this month.  FCEL, AMSC, and EMKR can generally be counted on to move somewhere every day--I just wish I could figure out which way.  These aren't penny stocks.  The spreads are decent.  I don't trade them enough to comment on liquidity but market orders have always filled right away.
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I don't think there is a stable strategy.  I don't know of any long term investment group that has ever survived just shorting stocks.\n\nI also doubt there is a stable strategy where you short some stocks and go long on others.  Many "experts" in hedge funds try this.  They sometimes have short term success, but I don't know of any that have had long term success.
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check this webisite for more understanding\nhttp://www.investopedia.com/articles/trading/04/031704.asp
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The company and a consensus of analysts have forecasted the earnings of the company out 12 months and divide it by the current price. Many people tend to use the Forward PE because it is a better indicator of where the company may go rather than where the company has been. \n\nFor example, a drug company may start selling a potential blockbuster drug next year. On this news the stock explodes, but since the company will not realized any profit until next year the current PE seems more expenses. Therefore we use the forward PE.
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You are making the mistake that most amateurs make.  Okay, you lost Rs 35 per share or Rs 3500 for a single block.  Here is where you must begin to learn.  First, of all, losing money is part of the game.  The mistake you made is going into the trade without a plan.  Second, now that that trade is bad and you have no plan, you haven't the first clue on what to do.  Am I right?\n\nA professional never gets into his trade without a plan.  When you bought Patni, did you set a stop loss order?  I would guess "No".  A professional would have decided what the maximum loss they're willing to take is and then place a stop loss order.  For example, if you had planned out your trade, you might have said, "Okay, I'm going to buy Patni at 435, but the maximum loss I'm willing to take it Rs 2000", so you would have set a stop loss order at Rs 415 (Rs 20 times 100 shares = Rs 2000 loss, thus Rs 20 from Rs 435 would give you a stop loss price of Rs 415).\n\nWhen Patni reached Rs 415, the stop loss order would have taken effect and you'd be out.  Yes, you would have lost money, but that's the game.  You will win and you will lose.  The difference is that an amateur gets in without a plan on what to do if losses occur and what their maximum loss will be.  A pro knows all of that even before he picks up the phone to call his broker.\n\nRight now, you're scratching your head and want to know where to sell.  Why are you asking anyone one?  Do they have some magical crystal ball that will tell them when prices will bottom?  Just like you, they have no clue where to sell either.  They are making guesses just like you are.  The difference between, you, the others you're asking and a pro is that the pro realize he has no idea how low prices will drop, all he know is how much of a loss he's willing to take.\n\nSo, the question you need to answer is, "How much of a loss are you willing to take?".  You've lost Rs 3500, can you or are you willing to lose more?  If not, then you need to get out.\n\nA pro would have set a stop loss order and taken the loss.  He can always re-enter the trade when price action moves up again.  I mean, prices could go up from Rs 400, but just as likely than can continue to go down below Rs 400.  So, how much are you willing to lose?\n\nI answered a similar question by another poster and they voted my answer #1 and said that they would do that in the future and then proceeded to ask me "So, when should I get out".  He missed the whole point.  For example, let's say I tell you to get out at Rs 350.  You'd be an idiot to take that advice.  Why?  Because only YOU know how much money you're willing to lose.  If losing Rs 3500 is more than you can take, you should have been out a long time ago.\n\nYou must learn and stop thinking like the other 99% of the population.  You must have a plan, you must have limits that you are willing to take losses, etc.  I've traded for nearly 20 years and I see this all the time with new comers.  They get into a trade without laying out a plan of what they are going to do if the trade goes against them.  I never enter a trade without a stop loss order and I never second guess myself.  Discipline is the key ingredient of successful traders.  You don't have that.  You need to develop it.\n\nSo, to answer you question, you must answer this questions:  Are you willing to risk losing more than Rs 3500?  And if the Rs 3500 you've lost so far is more than you wanted to lose, then why haven't you gotten out already?
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I would stay away from penny stocks. This stock is at a 52 week low for a reason. Also, penny stocks can be manipulated easily with pump and dump schemes.\n\nYou're better off putting your money in other transportation stocks like JB HUNT or Fed Ex. Both are excellent companies.
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I'd like to know what the heck "long" and "short" is too...I hear it alot.\n\n\nAs far as a good trading site:    SHAREBUILDER.COM  I use it.   There are NO minimums (you don't have to  start with some huge amount of money...like some of the other sites).\n\nLots of info on there.   Look around.\n\n\nGood luck.
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Do your own research and don't rely on other people's "tips"   I started doing my own stock screening and research this past year and I've earned higher returns this year than in years past.  Based on personal experience, most stock tips are useless.
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Berkshire Hathaway is owned and run by Warren Buffet, a very smart and very rich value investor. He apparently keeps the stock price high on his company because he doesn't like a lot of buying and selling going on. This keeps the stock very stable. It took a bit of a down-turn when he announced he was giving 80% of his fortune to charity, but has recently surged. The .B stock has gone up almost $1000s in one year, and if you look at the history of this stock, it consistently rises. The problem is that you need to have money to make money: since this stock is so expensive, most people can only afford to by a few shares at a time, but the price of the share doesn't mean anything. It's the % that it goes up that matters! I'm an amateur at this, so don't take my word for it. Do your research at yahoo or google finance. Then check an investment site like Morningstar. My personal favourite is motleyfool.com. Happy investing!