07 | March | 2011 | wealthymatters

9 Ways To Make Money On The Stock Market

March 7, 2011 6 Comments

Here are 9 ways listed by Whitney Tilson to pick diamonds in the stock market:

1. Out-of-favour blue chips. Even the world’s greatest companies encounter problems or otherwise fall out of favor. Correctly differentiating between those suffering temporary rather than permanent issues is the key to success here. As long as the positive fundamentals of the company’s business remain intact, and new management is willing and capable of bringing the company on track buying out of favour blue chips can be very profitable.

2. Distressed industries. Buying a good company in a distressed industry is often a great way to make money.

3. Turnarounds. Turning around a broken business is difficult and often takes much longer than expected — but when it occurs, a stock can rise many-fold.

4. Overlooked small caps. Among the thousands of publicly traded stocks that analysts don’t cover are fine businesses that are cheap because either no one is paying attention to them or their stocks are thinly traded. Read more of this post

Filed under Paper Assets, Theory, Tool Kit Tagged with activist, blue chips, cheap stocks, distressed industries, growth, growth investor, growth stocks, momentum investor, Money, postaday2011, RandomBlog2011, small caps, stock investing, stock market, stock share, turnarounds, valuation, value investing, Whitney Tilson

5 Ways To Lose Money On Stocks

March 7, 2011 Leave a comment

Here are 5 situations that Whitney Tilson lists where investors can lose money:

1. The game has changed.Bargain Hunters and Bottom Fishers Beware!There’s a fine line between opportunity and trouble when a once-strong business goes into decline.

2. High and rising debt. Value investors are naturally drawn to companies in trouble — that’s what makes stocks cheap if the difficulties prove to be temporary. But too much debt can ruin even the best-planned turnaround.

3. Consumer fads. When investors extrapolate far into the future what are highly likely to be impossible-to-maintain growth levels, trouble follows.

4. Serial acquirers or mega-acquisitions. Given the research showing that a significant majority of acquisitions are value destroyers for the buyers, it’s remarkable how frequently investors get excited about roll-up stories or big acquisitions.

5. Aggressive accounting. The gray areas in accounting leave managements considerable leeway in how aggressively or conservatively to represent company operations. When a company’s accounting treatment creates more questions than answers, something is usually wrong.