What's important in a stock???

When buying a stock -- what is important?

What exactly is P/E? I'm looking at a stock that has a negative P/E. Bad news?

Thanks for any information.

It depends on your investment style as to whether you care about P/E or not. Investors concerned with value watch the P/E closely. But a lot of technical analysis and fundamental folks couldn't care less about the P/E.

But I will say that P/E's can get very high.

As for a negative P/E, it doesn't sound like there's a lot of love for that company right now. But if they came out with a new widget tomorrow, that could all change.

"P/E is important"

Like I said above, I think this depends on your trading style. There is no right or wrong answer here. Doublehead, it looks like you have your own system of trading. That's great, but it doesn't fit in with everyone's trading style. You can miss out on some great growth opportunities worrying about P/E. An example, Juniper Networks has a P/E of 332. The stock price has gone up 300% in a year. If you were worried about P/E, you missed it.

p/e = price (per share) divided by earnings (per share)

a negative p/e means the company has negative earnings.

"PE is important in determining how much risk is involved in owning a stock. The higher PE the more risk."

I agree. Like I said, it depends on your investment style. Your system is more risk averse than some. It's preference.

"Ignoring PE one might not have realized the risk they were taking when they bought JNPR at $312 a share in March 2000."

Again, true. But on the otherhand, just because one was not watching the P/E doesn't mean they didn't bail on Juniper at the right moment.

I still don't think there is any single right answer the question. It depends on what you want to get out of your trades. If you don't like risk then by all means, don't buy anything above a P/E of 15 as some advocate. If risk doesn't bother you then focus on things like sales growth and return on equity. If all you care about is whether or not the stock is moving up and don't care a thing in the world about the fundamentals, then take a look at volume and trending. It just depends on what you're looking for.

I disagree Gordon.

One can invest in the market with a simple SP 500 index fund. With dividends reinvested, historical returns are around 12-13%. Its fairly low risk and mindless.

To take advantage of currency and commodities markets, you need to educate yourself a good deal. And you need to put forth some efforts while investing.

Mark

Gordon, from reading your investment style, you blew my away my thinking of a savvy investor being one who only plays in stocks and bonds and funds. Using mortgage, currencies, and commodities/futures as investment, very interesting.

I think you can get very steady gains in mutual funds, many consistently outpace the index fund of their category.

Hi Gordon,

If you changed the time criteria in your search to 10 years from 5 years; you will come up with very different results. Any 5 year study is going to include 3 of the worst years the market ever had. The 18 year bull market helped lots of PM's and funds achieve results greater than 12% over the last 10 years. Hard to make an assessment on the value of a PM and fund simply on entering some historical data. Some bad managers are helped by a bull market and some good managers get hurt in a bear.

I can't agree with you more about knowing who's managing your money. The person who has my father's IRA money since 1998 has done spectacularly. I pray for his health every night.

Hi Gordon,

I didn't remember the 50% drawdown factor when I posted, so yeah, finding any common stock fund manager that would fit that bill would be tough. The best managers in the world have years when they make an error in judgement or the market doesn't co-operate. Common stock investment isn't a great place to be with that criteria.

Best of luck to you with the commodity and currency trading.




If your looking to invest into some stocks and dont want to research all the info yourself... look into

www.taipanonline.com

You pay for their recommendations. I have had tremendous success with them. If you go to their homepage they show a list of all their people who recommend stocks for them. The numbers are not false. There are also a few others that have had great recommendations for me.

Gordon,

What resources can you recommend to someone looking to
get into mortgage investment. TIA