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TOP 20 DIVIDEND STOCKS
Stocks are but one of many possible ways to invest your hard-earned money. Why choose stocks instead of other options, such as bonds, rare coins, or antique sports cars? Quite simply, the reason that savvy investors invest in stocks is that they provide the highest potential returns.
You’ve now learned what a stock is and a little bit about the principles behind the stock market, but how do you actually go about buying stocks? Thankfully, you don’t have to go down into the trading pit yelling and screaming your order.
With the growing importance of digital technology and the internet, many investors are opting to buy and sell stocks for themselves rather than pay advisors large commissions for research and advice. However, before you can start buying and selling stocks, you must know the different types of orders and when they are appropriate.
“Buy low, sell high” is a favorite quip uttered by actors playing Wall Street tycoons in movies. It would be great if we could know that when we buy a stock it is low in price and that we will be certain to make a killing later when we sell it. Unfortunately, such knowledge is impossible to come by.
There are two main ways to purchase stock:
1. Using a Brokerage
The most common method to buy stocks is to use a brokerage. Brokerages come in two different flavors. Full-service brokerages offer you (supposedly) expert advice and can manage your account; they also charge a lot. Discount brokerages offer little in the way of personal attention but are much cheaper.
At one time, only the wealthy could afford a broker since only the expensive, full-service brokers were available. With the internet came the explosion of online discount brokers. Thanks to them nearly anybody can now afford to invest in the market.
2. DRIPs & DIPs
Dividend reinvestment plans (DRIPs) and direct investment plans (DIPs) are plans by which individual companies, for a minimal cost, allow shareholders to purchase stock directly from the company. Drips are a great way to invest small amounts of money at regular intervals.
The “buy and hold” approach to investing in stocks rests upon the assumption that in the long term (over the course of, say, 10 or more years) stock prices will go up, but the average investor doesn’t know what will happen tomorrow.
Historical data from the past 50 years supports this claim. The logic behind the idea is that in a capitalist society the economy will keep expanding, so profits will keep growing and both stock prices and stock dividends will increase as a result. There may be short term fluctuations, due to business cycles or rising inflation, but in the long term these will be smoothed out and the market as a whole will rise.
Market timing is essentially the opposite of buying and holding. Market timers believe that it is possible to predict when the market, or certain stocks, will rise and fall. It therefore makes sense to buy when the markets are low and to sell when they are high in order to maximize profits.
Market timers can use any number of different methods for timing the market – technical analysis, fundamental analysis, or even intuition .
Most experts agree that market timing is incredibly difficult if not downright impossible. They also warn against it because:
It’s hard to say when the market or a particular stock is “high” or “low”; often a seemingly high stock will go higher, and a seemingly low stock will go lower.
Commissions eat away at your profits when you trade frequently, especially on small transactions.
The bid/ask spread also eats away at your profits, especially for thinly traded stocks.
In the long run, the market goes up. Unless you’re a superb timer, you’ll do better staying fully invested at all times.
For example, in the last 40 years, the market returned about 11.3% annually. If you were fully invested the whole time, but got out completely for the 40 best months, your annual return would’ve dropped to 2.7%. If you miss the big moves it hurts, and no one really knows when they’re coming.
Growth investors focus on one aspect of a company: its potential for earnings growth. They believe that companies with high earnings growth will see their stock price continue to increase, since investors will want to own profitable companies that can pay large dividends in the future.
The number that they pay the most attention to is earnings per share, especially how it changes from year to year, although they sometimes look at revenue growth as well . Some investors also compare the price/earnings ratio with the annual earnings growth, to get a feel for how much the market is willing to pay for a given rate of earnings growth. Growth stocks tend to be from young companies, so they are often riskier than the average security.
They have the potential for large gains, but they also have the potential for large losses. In the 1990s technology stocks were the most commonly purchased stocks by growth investors, although growth stocks can exist in just about any industry.
Value investors look for stocks that are selling at an attractive price; in other words, they are bargain hunters. This does not mean that value investors buy stocks because they are “cheap” (such as penny stocks); value investing utilizes several measures of a company’s value to identify stocks that can be purchased for less money than they’re worth, regardless of whether they’re worth $10 or $100.
Although it’s possible that a growth stock could represent a good value, growth investing and value investing are usually considered opposing strategies. This is because value investors tend to focus on traditional valuation metrics such as the P/E ratio, looking for low ratios which are typically not found in growth stocks .
Value stocks often are ones which have fallen out of favor with the investment community for one reason or another, perhaps because they are in a slumping industry or because they reported poor earnings.
If you’re torn between the growth approach to investing in stocks and the value approach, then you might want to consider trying the GARP approach. GARP stands for “growth at a reasonable price” so, as you might expect, GARP investors look for companies with growth potential whose stock price is undervalued.
That can be a difficult task since growth and value stocks tend to have opposing characteristics, but it’s not impossible. Most GARP investors look at the price-to-earnings-growth ratio (PEG) ratio in order to find bargain stocks with growth potential that are selling at a reasonable price.
Here are some of the stocks we would advice you to buy inorder to see the returns you have been waiting for:
1)Boston Scientific
It’s shaping up to be a great day for shareholders in Boston Scientific (BSX) . The firm reported its first-quarter earnings numbers at the open this morning, driving a 10% upside move in shares. Boston Scientific earned 28 cents per share for the quarter, outpacing the 24-cent estimates that investors were hoping for.
Likewise, the firm announced expectations potentially above the high end of its previously announced range. Today’s breakout in Boston Scientific is sending shares to multi-year highs.
2)Alcoa
Aluminum giant Alcoa (AA) is enjoying a 3% move higher on big volume this afternoon, pushed higher in part by an analyst upgrade. Rosenblatt Securities rated Alcoa as a new buy, putting a $15 price target on the $15 billion metals stock.
The upgrade may be the catalyst for the move, but the stage had already been set by a breakout above Alcoa’s downtrend earlier in April. That change in Alcoa’s primary trend bodes well for investors as we head into May.
3)SeaDrill
Volatile offshore drilling stock SeaDrill (SDRL) is up 8% on big volume this afternoon, after the firm announced that its offering 490 million shares in its SapuraKencana Petroleum investment as part of its restructuring.
The deal is expected to increase SeaDrill’s cash holdings by approximately $200 million, boosting the firm’s ability to cope with prolonged continued conditions for contract drillers.
From a technical standpoint, SeaDrill’s new uptrend is holding this spring, despite the challenges that investors have acknowledged. As long as that uptrend holds, SeaDrill remains a “buy-the-dips stock” for investors willing to stomach the volatility of this energy name.
