Easy ways to make money for kids

William O’Neil, publisher of Investor’s Business Daily, as well as the author of a handful of highly readable, and very useful investing books, has updated his 1976 original treatise on short selling with the assistance of Gil Morales, Chief Market Strategist for his firm. The book briefly covers the mechanics and rationale for short selling. Selling short is the opposite of buying long. However, many investors are afraid to short because they either think it is un-American or dangerous. Neither premise is correct. If you know what you are doing, have a game plan, have stop-loss rules and monitor the markets daily, the opportunity to make money is there. And the May through October timeframe in 2006 may turn out to be terrific shorting opportunity.

The first part (27 pages) of this 194-page three-part paperback covers how and when to sell short. Using colorful charts with detailed explanations of the key price and technical market conditions, the authors illustrate the proper timing of the short sale.

Part II entitled “The Anatomy of the Short Sale,” details the mechanics of a short sale in seven pages. Two page-size charts illustrate the four phases of a short sale and the logic used to known when to pull the trigger.

Part III is composed of 155 pages of annotated chart examples of different stocks pointing out the stock’s trading characteristics and exact sell point. The chapter includes detailed write-ups of nine stocks and their charts, and hundreds of single page charts with annotations

Some of the key points made in the book include:

1. Very few investors know how and when to sell short correctly. 2. Use daily and weekly charts of a stock’s volume and price. 3. Use 20 and 50-day moving averages of price and the piercing of these averages by the price. 4. Best short sales are the biggest winners in the prior bull market 5. Determination and persistence are required characteristics of a successful short seller

Overall, this book provides a very basic introductory discussion of short selling which is not totally inclusive of all the information needed to make the sale. Comparing this book to his other books, O’Neil does not provide the same degree of detail or insight. He could have put more emphasis on providing more indepth discussions on the psychology and practice of short selling, as well as show how to use options instead of stocks. An investor considering short selling should become familiar with the market’s internal statistics, sentiment indicators, and technical analysis (e.g., MACD, stochastics, RSI, etc.) before even considering a short sale. Since 50-70% of a stock’s move is dependent on the market’s trend that should be the first item to be determined.

Penny stocks are a somewhat controversial segment of the stock market. These stocks, most of which sell for $10 per share, or in many cases, much less, are often not a part of any of the major stock exchanges. While it is technically possible to make a lot of money in a short amount of time with relatively unknown, inexpensive stocks, the market is a volatile one and it is also quite possible to lose a lot of money in the process. Can penny stocks make millionaires? Read on as we discuss this question.

One of the reasons why penny stocks are seen to be so risky is that most of the companies involved are small or relatively unknown. It is often very difficult to get any accurate information on the companies, and this makes it difficult and risky to invest in them by buying their stock. Also, these companies are sometimes subject to closing down in a moment’s notice or experience other serious issues in quick, surprising fashion.

Of course, there is a lot of potential for great reward that comes along with the palpable amount of risk involved. Penny stocks can grow by over one hundred percent in just a couple of days, which is mostly due to their low selling prices. This attracts many buyers who believe that they can find the right stocks and profit substantially.

The Securities and Exchange Commission does warn that these types of low-price stocks do carry a substantial danger of fraud. This type of fraud can come in several forms. Many times, message boards or online forums are flooded with praise for a certain company, which is supposed to inflate the price of the stock as forum members jump on the “opportunity”. Later, the bottom falls out when all of the supposed fans of the stock sell their shares. Spam e-mails are also used to alter the prices of these stocks.

In the end, it is up to you to decide whether you are comfortable investing in penny stocks. As mentioned earlier, there is an opportunity to make a lot of money very quickly by trading these types of stocks. Of course, as with most things, there is a lot of risk involved with chasing the potential rewards.

I have read about a dozen books on how to invest in stocks. And I’m here to tell you, this is undoubtedly the best. The man has been there done it. Whatever mistakes you’ve made in buying and selling stocks, he’s done it. And in this book, he is passing along his wisdom so that you can learn from his past mistakes and get on the road success. If you haven’t been beating the market averages and making a lot of money in the last few years, then it’s because you are not following William O’Neil’s CANSLIM method. CANSLIM is an acronym that defines his trading principles. These principles are the active ingredients that make a stock rise. Take it from me, give up on your hit and miss approach to investing. Begin today on his sound and proven methods of investing and you’ll soon be glad you did. Do you know anybody who have lost or is down more than 50% of their trading capital on a stock? I do. Many of my co-workers have ridden stocks down to over a 70% lost. Now they are stuck in a stock or stocks they can’t afford to sell. And worst of all, they are stuck when the market averages are soaring to heights. (That’s gotta hurt. I know. I’ve been there). O’Neil methods won’t let this happen to you.

To be honest, I was a slow learner too. So,let me take you back a little bit. I first picked up this book in ’92, read it, got excited but then went back to doing it my way. I picked it up again in ’94, read it and made a note in the book that a company stock called DELL fit the profile of his CANSLIM methods, set the book down, forgot about it and went back to doing things my way. (Didn’t buy DELL in ’94) Finally, early last year of ’98, I again picked up the book and read it. This time I saw a little note that I had written in the book in ’94 about DELL and thought to myself ‘why was I so stubborn’ about ‘doing it my way’ that I missed out on so much valuable time and money. Since then, I’ve bought the stock and a few others that have catapuled my portfolio balance to over 200%. Now that feels real good.

Like me for the first time, you’ll probably understand most of what he says in the book but you may not relate to what he says entirely until you’ve been practing or ‘getting your feet wet’ in the stock market for a little while. Since buying and selling stocks is not a perfect science but rather an art, you will need to go back and reread the book many times over while you’re in the market before you’ll truly ‘get it’.

My only critism about his CANSLIM method is that he steers you towards buying stocks with a low number of floating shares which indicate small to mid cap stocks because he says these stocks have the greatest upside potential. I disagree because hitech stocks like Dell, Microsoft, AOL, and Cisco that have gone global can still grow very rapidly if not faster than some of the small guys.

Other than that, armed with this book and his Investors Business Daily, you’ll be able to achieve the returns that you’ve always wanted.

SuperModels
22 swinging stocks for quick-hit profits

advertisement
Swing traders are the markets’ tigers, devouring short-term gains and moving on before the stock goes cold. Here are some rules for the short-term game and some possible prey to get you started.

By Jon D. Markman

In early 2003, shares of Denver-based Titanium Metals (TIE, news, msgs) sold for the equivalent of $1.55 a share. Today, the stock fetches $77. During those three years, the stock has been terrific for buy-and-hold investors. But even if you didn’t buy the stock early in Titanium’s run, there were plenty of opportunities to make big profits with low-risk trades.

Normally in this space I write about the multiyear investment opportunities that arise from corporate, political and economic events, such as the race by Boeing (BA, news, msgs) and Airbus to build lighter, stronger, faster planes that has led to accelerating titanium demand.

Today, though, Id like to get down and dirty in the world of people whose investment horizons extend no more than a month or two. Not red-eyed day-traders, but so-called position or swing traders who look for chances to buy stocks like Titanium Metals for 20% to 40% gains, and then move on and find another. If buy-and-hold investors are anacondas, eating one big meal every few months, swing traders are tigers, hunting and killing once a week.

See the news
that affects your stocks.
Check out our
new News center.

How can you become a short-term tiger, while not abandoning your inner anaconda?

Its really not that hard. Youll need five things: A willingness to narrow your investing universe to companies undergoing fundamental change that have stocks that trend well; a subscription to a decent online stock-charting service; a little courage; and an unswerving ability to face up to occasional failure quickly without remorse.

Demand performance
To get started, let me make one thing clear. A lot of what you think you know about why stocks go up and down is right in the long term but wrong in the short term.

• Over long periods of time, companies that are undervalued in relation to their future growth prospects, and which grow earnings at a pace greater than the markets expectations, make great investments.
• Over short periods of time, what makes stocks go up is a group of passionate buyers that are more aggressive than sellers. End of story. Think of it this way: If there is a finite number of shares available, and current holders are reluctant to part with them, then buyers must offer increasingly greater amounts of money to encourage holders to change their minds. Stocks rise when they are most profoundly wanted.

To swing trade successfully, your mission is to find stocks that are in demand. But not just any rising stocks. The ones with the best chance of actually being successful over the next two to six weeks are ones that are rising on progressively higher volume.

Makes sense, right? The more buying transactions that are taking place, the more the story behind the demand is appreciated — and the more likely it is that you will find willing sellers when you are ready to offload your purchase at higher prices.

A piece of the action
Who are these buyers? Most often, they are large financial institutions. Mutual funds. Hedge funds. Pension funds. People with a lot of money. Duh, right? But theres more to it.

Virtually all of these institutions specialize. For instance, they tend to concentrate on growth stocks, or value stocks, or small stocks, or foreign stocks. The greatest number focus on some shade of growth, but as a glib rule of thumb, the bravest and smartest of the most successful fund managers in the world focus on value. These guys can do open-heart surgery on a balance sheet and find life where others see death. These are the guys who bought Apple Computer (AAPL, news, msgs) at $10 three years ago, or Titanium Metals at $5. Its hard work, and you dont hear about all the times it doesnt work out.

As a swing trader, you are not looking for value. You are looking for volatility, for action, for a trend. So much of the time, you will be looking for stocks that are sort of crossover hits: Shares are being handed off from the value guys to the early-bird growth fund managers, and then to plain-vanilla growth fund managers, and finally to momentum traders. These changes of constituency provide some of the best opportunities for traders, as the number of managers who consider the stock applicable to their investment style widens.

Page 1 of 2 Story continues on next page

NEW YORK (Fortune) — Even though Citigroup shares dropped below a dollar Thursday, volume appeared healthy as 577 million shares changed hands.

Other blue chips like Hewlett Packard (HPQ, Fortune 500) and Johnson & Johnson (JNJ, Fortune 500) traded between 20 million and 30 million shares, while the average trading volume per Dow component hit 250 million.

Citi (C, Fortune 500) wasn’t the only blue-chip-turned-penny-stock that traded at outsized volumes – 283 million shares of Bank of America (BAC, Fortune 500) traded hands, closing near $3; and volume for AIG (AIG, Fortune 500), which closed at 35 cents, hit 62 million.

But before you think that active trading in stocks trading so low means there’s value there, think again. The flurry of activity is more likely the thrashings of a badly wounded company than the stirring of a firm rising from the dead.

“For the most part, what you’re seeing is active traders making a few bucks in these names,” says Michael Lewitt, president of Harch Capital Management. “It’s sort of like gambling or playing craps.”

Lewitt and other money managers describe this is an “option value situation,” meaning that traders don’t need to put a lot of capital at risk to make a return. If AIG goes to 50 cents from 35 cents and you can get your money off the table, you’ve made a 43% gain and risked very little capital.

Markets have always attracted investors who trade penny stocks to make quick money on their volatility. But now they’re sweeping into shares that traditional buy-and-hold investors dominated for decades, a change that shows just how much this market has shifted radically in a short period of time.

“The volume reflects that people are piling in to buy for the trade, knowing that those stocks are highly volatile,” says Lewitt. “But these companies have negative net works and their capital base, even at Bank of America, has been or will be wiped out. Few people believe they’re turnarounds. They’re treating them like companies that will need to be restructured.”

Active traders in AIG, Bank of America, and Citi are betting that further government intervention (or even just news thereof), is a factor that could give these stocks a short pop, says Barry Ritholtz, the director of equity research at Fusion IQ, an independent quantitative research firm.

“AIG has gone up 300% at times on a politically-driven bounce,” says Ritholtz. “All you need is for someone to come on TV and say that a government is about to intervene, and the stock will move.”

Ritholtz says institutional money is another contributor to active trading in these names. There is still massive institutional ownership for these names, and they can only sell so much at a time.

“If you’re a big owner, you can’t just dump millions of shares because you can’t find the buyer for that much,” he says. “So you could also be seeing a steady stream of selling.”

It’s a bad situation for institutional money, and only good for the few day traders who manage to get the timing right on these names. In short – it’s just the kind of situation the average investor wants to avoid.

Recs

189

• Email
• Share
• Print

True story: The other day, I (Brian) received an email with this as a subject line: “Buy these stocks and make money.”

Of course, the email ended up touting a $0.04 penny stock with an un-pronounceable name (it looked fake). Apparently, an “analyst” somewhere assigned a short-term “price target” of $1.10 to this stock.

We’re liberally applying quotation marks here to reiterate the obvious absurdity of The Stock That Will Return 2,650% in One Month.

Back to real life
Ridiculous claims in the stock market are nothing new, of course, and ridiculous claims from analysts are especially old hat. (Click here for a story about the analysts who pegged Countrywide Financial “outperform,” with a $45 price target, in the fall of 2007.)

We’ll even go so far as to advise you to fight — violently, if necessary — whatever urge you may have to click on the “analyst opinions” tab at Yahoo! Finance. While it may seem prudent to see what the “smart money” thinks of your stock, this page is one of the most dangerous places on the Internet — truly NSFW, as the tech savvy say. It’s not even worth the five seconds it takes for your browser to load the page.

That’s because (1) you get no context and (2) nearly every single stock — surprise, surprise for an industry that makes money by convincing you to buy stocks — is considered “undervalued.” Here are a few notable examples:

Company

Closing Price, Feb. 26, 2009

Analyst Target Price (Mean)

Analyst Target Price (Low)

Qualcomm (Nasdaq: QCOM)

$33.66

$43.27

$35.00

Sirius XM Radio (Nasdaq: SIRI)

$0.13

$0.35

$0.10

Microsoft (Nasdaq: MSFT)

$16.42

$23.64

$16.00

ExxonMobil (NYSE: XOM)

$70.95

$83.89

$75.00

Monsanto (NYSE: MON)

$76.60

$120.10

$90.00

MercadoLibre (Nasdaq: MELI)

$16.08

$25.26

$12.00

Data from Yahoo! Finance.

While we each own shares of a stock on this list — Microsoft (Brian) and MercadoLibre (Tim) — and also see the merits of an investment in Qualcomm, Exxon, and so forth, it’s preposterous to assume that every single one of our random sampling of stocks is, on average, undervalued by some 65%.

Please.

But let’s talk about you
You opened this article for the same reason Brian opened the email with the same headline: to see which stocks you should buy to make money.

After all, it is a good headline – direct, relevant, practical, and appears to offer applicable advice. And it plays to a core human emotion: the quick, easy buck.

Yet if it’s a quick, easy buck you’re after, there are no stocks you can buy to make money. At least, not reliably. And that, to bring us full circle, is the problem with sell-side analyst research. While these five- to 20-page reports can often provide useful insights, they’re not reproduced on Yahoo! Finance. Instead, individual investors who won’t pay up for premium research are left to divine meaning out of useless, optimistic, one-year price targets.

Again, don’t bother.

Buy these stocks and make money
If you’re willing to change your mindset, however, then there are stocks you can buy to make money. These are stocks in companies that â€

1. Have a sustainable competitive advantage such as economies of scale, high switching costs, or network effects.
2. Treat all of their constituents — customers, employees, and shareholders — as partners in the business.
3. Are financially strong enough to take advantage of down economies like this one to expand market share, buy up valuable assets on the cheap, and enhance their competitive position.

And we’ll add a new trait to that list amid this paralyzing downturn: Exposure to multiple foreign markets, which provide diversification and the potential for faster growth.

One stock to make money
Of course, we’d be remiss, after promising so much in the headline, not to give you at least one stock idea straight from our Motley Fool Global Gains investing service, so here it is: America Movil (NYSE: AMX).

This company is the dominant cellular provider in Mexico and one that’s actually seen subscriber numbers increase with new number portability (indicating a significant competitive advantage). It’s also shown a willingness to repurchase shares and pay a dividend to shareholders. And it continues to grab market share in Mexico, Brazil, and elsewhere given that it has a much stronger balance sheet than its competitors and has already established 3G networks in most of its markets.

The catch is that while America Movil looks like a promising long-term opportunity, we have no idea if it will make you a quick, easy buck. But if anyone tells you they can do that, they’re lying.

In sum
When it comes to investing successfully, look for the four traits above in any stock idea and commit to putting money in the market for the long haul. And take seriously the opportunities abroad. As co-advisor of our Motley Fool Global Gains service (Tim) and a contributing author to the international investing chapter of our most recent book (Brian), we believe that the growth potential of many foreign stocks — even some of the stalwarts — could lead to multibagger returns at today’s prices.

To see more of our ideas, including our best bets for new money, click here to join Global Gains free for 30 days.

Brian Richards owns shares of Microsoft; Tim Hanson owns shares of MercadoLibre and America Movil, but you already knew most of that. MercadoLibre and America Movil are Motley Fool Global Gains recommendations. Microsoft is an Inside Value pick. No one of the corner has swagga like our disclosure policy.

SuperModels
$10 and $20 stocks that can make you 20%

advertisement
You dont need a lot of money to turn a profit that would make Warren Buffett proud. Here are 19 stocks I think could return 20% in a year.

By Jon D. Markman

If youve got 10 bucks, a brokerage account, a little imagination and a lot of patience, you can beat the market next year. In fact, you could probably do it every year — and one day, perhaps Business Week will be calling you the next Warren Buffett, instead of giving the title to Kmart Chairman Eddie Lampert.

The benchmark for great investors, on display every time a business publication gets excited about the investment returns of Buffett or someone like him, is 20% per year. Thats just about the compounded annual return of his holding company, Berkshire Hathaway (BRK.A, news, msgs), since the late 1950s. And it is more than double the return of the S&P 500 Index ($INX) over that span, including dividends.

When hedge-fund guys get to chatting about great returns over a long period, they talk about 25% to 30% annualized. And they all recognize it is the toughest benchmark in the profession.

All you need is a $10 stock that grows to $12
But if you think about it, there is a relatively easy way to get a 20% return year after year. Not extremely easy, of course. But easier than you might think. And that is to find a single $10 stock that will grow to be a $12 stock in a year. Or a little more than $12, if you plan to sell it after 12 months and need to pay taxes on the gain.

See the news
that affects your stocks.
Check out our
new News center.

It would be a big risk to bet all of your money on a $10 stock, to be sure. But what if you were to acquire a small basket of $10 stocks and hold them for a year? If you focus only on ones with high MSN Money StockScouter scores, mix them up by sector, include some growth and some value and take at least one rich-yielding real estate investment trust, it shouldnt be impossible to find a few that would go to $14 or $16. Then, a couple that would go to $12 or $13. And, finally, several that would end up flat or fall far enough to trip a 10% stop-loss order. Add those up, average them out and voila! Youve got a 20% return.

Yes, a $10 stock can be risky
Of course, $10 stocks are often small caps on their way up and thus fairly risky. Or they are mid-caps on their way down — and thus also pretty risky. So you could move this exercise up a notch and find 10 $20 stocks that will rise, on average, to $24 instead. Lets try both now to see if we can earn 20% over the next year with a concept as simple as this.

For my list of stocks at around $10, I queried our database for stocks priced at between $9.50 and $10.50, market capitalizations greater than $50 million and average daily volume greater than 25,000 shares a day — plus MSN StockScouter scores greater than 8. Since there were 20 stocks meeting those criteria, I next sorted them by StockScouter factor scores, aiming to take the ones with the most As and Bs and the fewest Cs, Ds and Fs. Ive listed my $10 to $12 portfolio below.

Markmans $10 to $12 portfolio Company Size Style Industry StockScouter ranking Nov. 26 close Cornerstone Realty Income Trust (TCR, news, msgs) Small Growth REIT – Residential 10 $10.00 Famous Dave’s of America (DAVE, news, msgs) Small Value Restaurants 9 $10.21 Siebel Systems (SEBL, news, msgs) Mid Growth Applications software 9 $10.05 Pioneer Drilling (PDC, news, msgs) Small Growth Oil & gas drilling 9 $9.90 Interwoven (IWOV, news, msgs) Small Growth Business Software 9 $9.85 PolyOne (POL, news, msgs) Small Value Synthetics 9 $9.36 Government Properties Trust (GPP, news, msgs) Small Growth REIT – Residential 8 $10.62 Liberty Media (L, news, msgs) Large Growth Cable TV 8 $10.61 CMS Energy (CMS, news, msgs) Mid Value Electric utility 8 $10.32 Cardinal Financial (CFNL, news, msgs) Small Value Southeast banks 8 $9.99
This is a pretty diverse list that appears to minimize risk. It tends toward small caps, but there are a few mid-caps and large caps as well. And the sectors are all over the map, ranging from high-yielding real estate investment trusts to cable TV to banks, software, a utility and oil drilling. Most have the wind at their backs, though a couple are coming off one-year lows.

Here are the ones that appear the most interesting:

• Cornerstone Realty Income Trust (TCR, news, msgs), which pays an 8% dividend, owns and manages high-end and mid-range apartment complexes in Virginia, the Carolinas, Georgia and Texas. Returns have been solid, if unspectacular. Financial results were only fair in the last quarter, but the company says leasing momentum has strengthened. Considering the yield, though, this $10 stock only needs to advance $1.20 over the next year to provide a 20% return. It traded in the mid- to high-$11 range in most of 2001 and 2002 and appears headed back to that area.
• Famous Daves of America (DAVE, news, msgs), a Minneapolis-based franchised barbecue restaurant chain, has advanced fivefold since its all-time low in 2003 as it has successfully refocused on profitability and marketing. The stock needs to get to $12.25 over the next year — a level shareholders havent seen since 1997. Corporate executives and insiders have been buying shares on the open market all year, and, last month, the company announced a 1 million share repurchase program.
• Siebel Systems (SEBL, news, msgs), which sells software that helps large companies manage their marketing teams, only needs to get to $12.06 — a level it held as recently as April. Revenues have steadily declined in recent quarters, making the stock as cheap as it has been in years — though it is still not inexpensive. To envision $12, investors would need to be optimistic about economic growth and corporate IT spending over the next 12 months. That makes this something of a long shot.
• PolyOne (POL, news, msgs), which makes plastics and resins, needs to get to $11.25, which seems doable even though it hasnt seen that level since 2002. Sales and earnings trends have been passable, the valuation is constructive and buyers have been coming into all plastics and chemical companies in recent months.

At $20, we generate a more dynamic list
The highly rated stocks that have the potential to advance 20% by moving from around $20 to around $24 are in some ways a little more compelling. As you can see below, you have your choice of a Taiwanese wireless giant, a major U.S. oil-and-gas exploration company, a major maker of painkillers, a major oil shipper and a Dallas-based commercial bank.

Markmans $20 to $24 portfolio Company Size Style Industry StockScouter ranking Nov. 26 close Chung Hwa Telecom (CHT, news, msgs) Large Growth Wireless communications 10 $20.59 Patterson-UTI Energy (PTEN, news, msgs) Mid Growth Oil & gas drilling 10 $20.21 OMI (OMM, news, msgs) Mid Growth Shipping 10 $20.25 Hornbeck Offshore (HOS, news, msgs) Small Growth Shipping 10 $20.10 Endo Pharmaceuticals (ENDP, news, msgs) Mid Growth Drug manufacturing 9 $20.46 Eclipsys (ECLP, news, msgs) Small Growth Healthcare information technology 9 $19.73 Noven Pharmaceuticals (NOVN, news, msgs) Small Growth Drug delivery 9 $19.44 Cleco (CNL, news, msgs) Small Value Electric utilities 8 $19.73 Texas Capital Bancshares (TCBI, news, msgs) Small Growth Southwest banks 8 $20.44
The most interesting in this group:

• Chung Hwa Telecom (CHT, news, msgs), which I have held for a one-month gain of 12.4% in Strategy Lab, is one of the largest telecommunications companies in Taiwan. It has a legacy fixed-line business, but it is increasingly focusing its attention on wireless customers. The government of Taiwan owns most of Chung Hwa and would like to spin out more to the public, though it has encountered resistance from union members. With a 6.5% dividend yield, it only needs to get to around $22.80 over the next 12 months to dial in a 20% return.
• Texas Capital Bancshares (TCBI, news, msgs) is a fast-growing commercial bank that should actually do better as interest rates rise. In the third quarter of this year, the company reported that earnings per share rose 43%, loans grew 32% and deposits grew 13%. It earns a good return on capital and trades at a 19 price/earnings multiple on estimated fiscal 2005 earnings per share of $1.03, which would be another 37% year-over-year jump. Thats pretty cheap. The stock needs to get to $24.55 to record a 20% gain for shareholders.

Among the rest, Hornbeck Offshore (HOS, news, msgs) looks a bit overextended at the moment. It may backtrack before heading toward our 20% goal. Among the smaller names, Eclipsys (ECLP, news, msgs), which sells administrative and financial software to hospitals, looks like it could find favor as it is breaking out on good volume amid signs that it could finally turn profitable next year after several years of losses.

Ill check in with these in six months to see how far theyve gotten. If you have any other $10 or $20 stocks — and not ones priced $11 or $8 or $17 or $23 — that you think could gain 20% next year, write me at jon.markman@gmail.com and let me know why.

Fine Print
My Thanksgiving column, 14 turkeys that could fly in 2005, yielded a feast of responses to my request for opinions on which beaten-down MMM stock would do best next year. MMM, you may recall, stands for chipmaker Maxim Integrated Products (MXIM, news, msgs), drug maker Merck (MRK, news, msgs) and insurance broker Marsh & McLennan (MMC, news, msgs). . . . Mail was incredibly detailed and imaginative. Thanks for all of them. . . . Several readers chided chipmaker Maxim as a lousy choice because its management refuses to expense options. Many said Marsh & McLennan would not have a future because it lost the one asset that a broker has — trust. And several said they thought Merck would be tied up in lawsuits forever, making that a poor choice. But value stocks always have a lot of hair on them. Thats why their prices are so depressed. So many readers came up with reasons to buy each. . . . Maxim was deemed the best choice because its diversified range of products for the digital and analog world made it an ideal company to own in a modestly expanding economy that relies on semiconductors. Many readers said they liked Merck because they believed its phalanx of lawyers would help it avoid serious prosecution. Plus, they said, the legal claims arent as severe as they appear on the surface. And finally there were a chorus of readers who said the woes at Marsh were a big to-do about nothing. Ultimately, they said, its retroactively criminalized commission system would reappear in a more legal fashion down the road after the companys liability insurers paid a fine to settle with New York Attorney General Eliot Spitzer. . . . I see merits on all three, but I would put money on Maxim and Merck and treat Marsh more skeptically. Maxims options expensing is a nefarious — but not illegal — practice that investors have willfully ignored. The stock is expensive but will find favor with investors again if not in 2005, then in 2006 or 2007. Merck will probably escape the worst-case scenario and has a shot at coming back strong over the next few years. Although Marsh has outperformed both in the past couple of weeks, it is still hard to understand how it can win back its customers confidence and replace its lost earnings. It has no hard assets and no economic moat to prevent customers from moseying over to rivals. But new management might sweet-talk its way back into companies good graces, which will make Marsh by far the most fascinating company to watch over the next year.

Jon D. Markman is publisher of StockTactics Advisor, an independent weekly investment newsletter, as well as senior strategist and portfolio manager at Pinnacle Investment Advisors. While he cannot provide personalized investment advice or recommendations, he welcomes column critiques and comments at jon.markman@gmail.com; put COMMENT in the subject line. At the time of publication he held positions in the following stocks mentioned: Chung Hwa Telecom and OMI.

Company Focus
4 stocks that make sense of every sale

advertisement
Business intelligence, software’s hot new thing, mines data to help companies detect fraud, spot trends and manage inventory. Here are the four big players.

By Michael Brush

Hey, thieves, listen up. You’d better think twice about using stolen credit cards. Chances are increasing that the next time you try it, youll be watched in ways you never even thought about.

While youre waiting for your purchase to clear, the retailer youre ripping off may be quietly using new software to check the card against a statistical profile of its owners spending habits. In seconds, the retailer should know if the current purchase fits regular patterns — or looks fishy.

For thieves, software that flags unusual purchases is a new problem. For investors, however, it’s a new opportunity. Some of the software industry’s most dynamic growth is coming from the so-called business intelligence (BI) sector, says T. Rowe Price analyst Ken Allen. Business-intelligence companies offer software that provides deep, easy-to-interpret data on business trends to managers.

This week, we took a look at the trend and at the top publicly traded players in the field: MicroStrategy (MSTR, news, msgs), Hyperion Solutions (HYSL, news, msgs), Cognos (COGN, news, msgs) and the French company Business Objects (BOBJ, news, msgs).

Start investing with $100.
Explore our
new ETF center.

From catching crooks to in-store placements
Business-intelligence software companies do much more than help their customers catch con artists at the checkout counter. Here are some other examples of how BI software is used:

• Pharmaceutical companies and retailers such as Best Buy (BBY, news, msgs) and Hot Topic (HOTT, news, msgs) use it to provide daily updates of sales trends so they can tweak marketing efforts, right down to product placement inside stores.
  
• The Miami Dolphins football team uses Hyperion software to track and manage ticket sales.
  
• Insurers use BI software to find certain word combinations that suggest doctors offices are submitting fraudulent claims.
  
• Large retailers use it to watch checkout clerks, monitoring for certain keystroke patterns — such as lots of returns in the final minutes of a shift — that indicate fraud.

A 50% drop in credit card fraud
Does business-intelligence software really make a difference? Consider this:

In the first six months that Amazon (AMZN, news, msgs) used this kind of software, sold by the privately held SAS, the online retailer reduced credit card theft by 50%. That kind of success is hard to argue with, and it helps explain why many BI software companies grew at a healthy clip in 2003.

Last year, we had our best year in four years, says Jim Davis, who heads marketing at SAS, a BI software company in Cary, N.C. In 2003, sales grew in the low teens over the year before, up from 4% growth in 2002. This is the best weve felt in the last three or four years. The trend is strong enough that only a geopolitical event can throw it off track.

Big growth in this sector is anything but rare. In its most recent quarter, for instance, publicly traded MicroStrategy saw revenue increase by 23% over the year before. It added 201 new customers, the highest new customer count in over three years. Its stock jumped 247.6% in 2003 and is up another 22% so far this year.

Helping make sense of the mess
At its core, BI software helps companies transform the massive amount of data churned out by their computer systems each day into insights that can improve their businesses.

A typical large company has more than a dozen database management and operating systems and hundreds of separate software systems to carry out transactions with customers and suppliers. The numbers from all these systems are usually stored in different formats. BI software helps managers extract knowledge from that mess.

We sit one level removed from the transaction systems, and we gather data out of all of them to help managers make more sense out of the data, says Godfrey Sullivan, Hyperions chief operating officer.

BI software allows you to peer into your own corporate data and bring trends or anomalies to the surface, says Sanju Bansal, the chief operating officer at MicroStrategy. And it allows you to report on them widely so people who can have an impact on those trends actually have the tools in their hand to make better decisions. As people peer into the data, they are surprised what they can pull out of it.

In a sense, the spread of BI software today is a natural outgrowth of the Y2K-inspired massive upgrade of computers, which left businesses with tons of data but little help analyzing it. Companies want to get the most value out of those systems instead of leaving everything locked away in a database somewhere, says T. Rowe Prices Ken Allen. BI software gives them the tools to let them track the metrics that matter to their business. As a result, Allen thinks BI will continue to be one of the fastest-growing areas in the software sector.

Business intelligence software makers Company 2/10 close chg YTD chg 2003 Business Objects (BOBJ, news, msgs) $33.42 -4.09% 131.20% Cognos (COGN, news, msgs) $30.81 0.65% 30.53% Hyperion Solutions (HYSL, news, msgs) $34.99 15.79% 17.41% MicroStrategy (MSTR, news, msgs) $63.53 22.47% 247.55%
What makes BI so hot
Lets take a closer look at why business intelligence software has been so hot, and why it probably will be for the next five or 10 years.

• The data explosion. Thanks to the digital age and the greater use of software to manage a companys operations — so-called enterprise software — the explosion in the amount of data piling up inside companies will only continue. The amount of data will probably double every year, experts say.
• The democratization of the workplace. Many companies are pushing decision making out to the edges, relying on ever-larger shares of their workforces to size up situations and make spot decisions to keep customers happy. They need quick analyses of data to support their decisions.
• BI software is cheap, and its easy to know when it pays off. The typical price of a BI app (that is, the software plus its installation) is just under $100,000. So if you’re working at a large company, you dont need to knock on the finance chiefs door to get approval to buy it. And companies can quantify pretty quickly whether a BI app is adding to profit margins. Once it does, the BI vendor has an easier sell into other divisions. We penetrate, saturate and radiate, says Cognos Chief Financial Officer Tom Manley. (By contrast, enterprise software deals normally fall in the $500,000-to-$2 million range.)
• Penetration levels are low. Manley estimates that BI apps have spread through only about 10% to 15% of the companies that could be using them. We are in the early stages of the BI growth evolution, agrees MicroStrategys Bansal. Finally, after a decade of gestation, BI has taken root and people say, Wow, this technology gives us a better handle on our business, and we can use it to save money or make money. Sanju thinks sales in the sector could grow by 10% a year for the next five to 10 years.
• A new round of BI products is coming out. Well spare you the details, which you can explore at the company Web sites, but each of the BI companies has a fairly robust product cycle ahead of it. That can be a good recipe for improved sales. Cognos and Hyperion, for example, are rolling out products that offer alternatives to the cumbersome process of planning by piecing together lots of spreadsheets from underlings.

  And all the BI vendors offer products that play into a growing business consulting theme known as corporate performance management. While basic BI offers tools to understand where a company has been, performance management helps managers use those insights to plan ahead and track progress.

  Every company develops a strategy, says Manley. Then you build a plan to identify what metrics can ensure you are moving there. Then you put a whole bunch of business intelligence in there to measure it every day and push accountability beyond finance and out to people who are responsible. That is a key element of where we think the market is moving toward, corporate performance management.

• Regulatory reform. New corporate reporting requirements under the Sarbanes-Oxley law were supposed to fuel demand for BI apps, but everyone is still waiting for this to play out. It still might.

  The downside: low barriers to entry
  As good as all this sounds, there are risks. First, new — and powerful — players are entering the scene, including Microsoft (MSFT, news, msgs), Siebel Systems (SEBL, news, msgs) and SAP (SAP, news, msgs). (Microsoft is the publisher of MSN Money.)

  Next, Nathan Schneiderman, a software analyst at Wedbush Morgan, points out that a shift in investor psychology in the software space could lead to money flows toward the enterprise software stocks such as Oracle (ORCL, news, msgs), PeopleSoft (PSFT, news, msgs) and SAP.

  Spending on enterprise products has fallen anywhere from 30% to 50% in the past two years. If enterprise software companies start to close more deals now that the economy is strengthening, investors may move money from BI software stocks to the enterprise space — even if BI software companies continue to do well.

  Finally, just about all the major BI companies recently bought other software companies to build out their capabilities. Now, they have to successfully integrate them, and that isnt always easy. Besides, much of the impressive earnings growth at BI companies like Hyperion, and, to a lesser degree, Cognos and Business Objects, stems from these acquisitions. Only MicroStrategy has been posting really strong sales gains without the help of acquisitions. This makes MicroStrategy look like one of the strongest stock plays in the sector.

  On the other hand, the takeover fever in the software space has yet to cool down, even if PeopleSoft rejected Oracles takeover offer earlier this week. And that takeover fever makes Hyperion — with its relatively low valuation — look like a tempting target for the likes of SAP or Siebel Systems, both companies that want to build their presence in the BI software space.
  

ffxi gil
Maple Story Mesos
wow gold
wow gold
wow gold

age of conan gold
age of conan
age of conan power leveling
age conan gold
age of conan gold
age of conan power leveling
age conan gold
age of conan gold
age of conan power leveling
age conan gold
age of conan gold
age of conan power leveling
age conan gold
age of conan gold
age of conan power leveling
age conan gold
age of conan gold
age of conan power leveling
age conan gold
age of conan gold
age of conan power leveling
age conan gold
age of conan gold
age of conan power leveling
age conan gold
age of conan gold
aoc gold
age conan gold
age of conan power leveling
aoc power leveling
age conan gold

Runescape Money
Runescape Gold
Runescape Items
Runescape Money
Runescape Gold
Runescape Power leveling
Runescape Money
Runescape Gold
Runescape gold
runescape money
Runescape Money
Runescape
Runescape Money
Runescape Power leveling
Runescape Items
runescape money
money runescape
Runescape Gold
age of conan gold
age conan gold
aoc gold
age of conan power leveling
aoc power leveling
aoc leveling

archlord gold
anarchy online credits
cabal alz
city of heroes influence
coh influence
city of heroes
city of villains infamy
cov infamy
city of villains
dofus kamas
kamas dofus
dofus
daoc gold
daoc plat
eve isk
eve online isk
eve online
everquest 2 gold
eq2 plat
Ever Quest 2
final fantasy xi gil
Final Fantasy XI
buy ffxi gil
gaia online gold
gaia gold
guild wars gold
gw gold
guild wars
hellgate london palladium
Hellgate London
dofus kamas
dofus gold
dofus
dofus kamas
dofus

wow gold
world of warcraft gold
buy wow gold
cheap wow gold
wow power leveling
eq plat
EverQuest gold
Maple Story Mesos
MapleStory mesos
MapleStory Meso
Final Fantasy XI gil
ffxi gil
buy ffxi gil
dofus kamas
kamas dofus
lotro gold
lotr gold
lord of the ring gold
Lineage adena
Lineage 1 adena
Silkroad gold
buy silkroad gold
flyff penya
buy flyff gold
flyff money
eve online isk
eve isk
2moons dil
2moons gold
eq2 plat
EverQuest 2 gold

maplestory Mesos
MapleStory meso
maple story
Maple Story Mesos
maplestory Mesos
MapleStory meso
Maple Story
Lineage adena
Lineage 1 adena
Lineage 1
lotro gold
lotr gold
The Lord Of The Ring
lord of the ring gold
ge money
granado espada vis
granado espada gold
Granado Espada
///////////////////////////////////////////////
wow gold
wow leveling
hero online gold
last chaos gold
ragnarok zeny
ro zeny
rappelz rupee
rappelz gold
Silkroad gold
buy silkroad gold
SWG Credits
star wars galaxies credits
tales of pirates gold
age of conan

age of conan gold
aoc gold
aoc power leveling
aion gold
buy aion gold
anarchy online credits
anarchy online credit
archlord gold
buy archlord gold
City of Heroes Infamy
coh influence
City of Villains infamy
cov infamy
Gaia Online Gold
gaia gold
Gods and Heroes
gods and heroes gold
ge money
granado espada vis
granado espada gold
hellgate london palladium
Hero online gold
buy hero gold
Last Chaos Gold
buy Last Chaos Gold
gw gold
Guild Wars Gold
Lineage 2 adena
buy lineage 2 adena
Tales of Pirates Gold
Tales Of Pirates Online
rappelz rupee
rappelz gold
Hellgate London
hellgate london palladium
Second Life Linden
second life money
Vanguard money
Buy Vanguard Gold
Tabula Rasa Credit
tabula rasa credits
diablo 2 cd key
diablo 2 cd key
diablo 2 cd key