This past week eBay recently released its third quarter results which came up to be pretty favorable to investors as the stock managed to climb pretty significantly the next day. This week, Amazon (AMZN), a similar cousin to the online auction giant will be reporting its own earnings in attempt to edge back to the glory days of nearly five years ago. However, with the recent fall of Amazon shares over those past five years, as an investor, you may be hesitant to pursue such an action into acquiring more or any, for that manner, shares at all. While such sentiment is understandable, you will be missing out on a great chance to earn quite a bit of capital gains if you do not follow such reasoning.

Looking strictly at fundamentals, it is true that Amazon has not preformed at its peak over the course of the past few years. Revenue has increased in a favorable margin the last three years, but unfortunately other factors, such as net profit, have not augmented to many shareholders’ liking. While I believe such statistics don’t lie, there is a more profound implication imbedded into such numbers. Looking strictly at operational margins, Amazon has actually done pretty decently in terms of reporting yearly results which confirm a positive growth stimulated from the company’s actual business, which in my opinion, is probably the most important indicator when looking at fundamentals. The problem Amazon incurred looks directly at its financing and investing expenses, both of which have been terrible as of late. While of course this is undesirable, it is important to understand, with a large rally throughout much of the third quarter complimented with the fact that Amazon is still a young company, both of these factors should climb considerably in the near future. While it may not be reflected directly in this quarter, if Amazon continues its productive operating margin reports, then with economies of scale coupled with a recession looming, expect revenue and profit for Amazon to shoot back up to its glory days from its now oversold price.

Reading that last sentence you may wonder why shares of Amazon would go up when a recession is nearby. The rational can be explained by simple economic theories. As demand for luxury goods continue to increase, producers eventually will have to increase prices to correspond with such preference. As this happens, coupled with the fact of increasing interest rates from the Federal Reserve, consumers will be more reluctant to purchase these luxury goods causing a surplus of goods. When this happens not only are consumers looking for cheaper prices but many of these same buyers are laid off from their respective job because producers have to cut costs somewhere to make up for the large number of inventory already produced. Now you may ask yourself how this relates to Amazon. Well as mentioned with the process of consumers looking for cheaper prices, many of those buyers will turn to online companies such as Amazon or eBay to obtain particular products for a discount price than what they normally would have purchased during times of economic prosperity. As this happens, companies like Amazon amass more revenue, post incredible results, and please shareholders.

To provide some evidence for such a theory, when looking at the recession of 2001 to 2003 you will notice that shares of Amazon rose from about four points to 60 points: an incredible raise of almost 1400%. Now when economic activity was flourishing such as illustrated from 2004 to the present, shares of Amazon dropped nearly 50% from 60 points to near 30 points. Now as the Federal Reserve seems to be finished in terms of raising interest rates which signals that economic activity has tended to slow down, you should expect, according to this theory, shares of Amazon to skyrocket in the near future.

Thus, while normally I would postpone purchasing shares of Amazon for a few more months, with the recent reports of eBay illustrated in a positive light, I would encourage the purchase of shares of Amazon as both companies operate and obtain revenue in a similar fashion. While there is a possibility that the results of Amazon may not be that favorable as I am making this article out to be for this third quarter report, I am very confident that by this time next year shares of Amazon will be at very least at the 45 point range if not higher.

Dennis Biray presents advice on all kinds of topics ranging from finance and investing to fitness to sports. For more information email him at dbiray@gmail.com, or to view other articles written by him visit http://www.biraynetworks.co.nr

“If I set for myself a task, be it so trifling, I shall see it through. How else shall I have confidence in myself to do important things?”-George Clason

There is not a single right way to invest in the stock market. Each investor has his or her own needs, investment styles, levels of risk and income. However there are a few tips, offered by financial advisors, which can help investors with long term gains.

The buy and hold theory of investment is a technique that all investors should utilize, if the conditions are right. Today’s stock market is full of aggressive and active traders who are far too impatient to just buy and hold. However, the old technique still has a great deal of value and can be utilize by people who want to be passive investors.

Buy and hold is a term which refers to an investment technique where an investor will purchase stock, bonds, and mutual funds. He holds on to these stock vehicles for an extended period of time and does not sell them as the market fluctuation up and down.

An investor who uses this type of technique will actively picked stocks based on solid research and past performance. However, once the stocks are bought he does not monitor their daily growth or decline. He unconcerned with the short term motion of the stock market and the economy in general. In general stocks will increase over long periods of time.

Just as the prices of products and services increase, so will stock values. There is a great debate in the investment world if the buy and hold technique is actually more profitable then active trading. Many financial experts agree the only difference may that each technique caters to a different investment style.

In addition, buy and hold has a great deal more tax rewards then active investing. This is because long term investments are taxed in a lower bracket then short term options.

An investor that utilizes buy and hold is called a passive investor or affectionately referred to as couch potato investors. This type of investor let’s his money grow with the general growth of the market and therefore is not dependent on the growth of any single stock.

Using buy and hold for long term gains are best when you have done all the research and picked solid companies. The companies which are great for buy and hold are those who have a long history of growth and expansion. These companies may include Wal-Mar, Coca-Cola, and IBM.

Visit the Global Investment Institute and signup for our free Online Investing For Beginners E-Course at http://www.Global-Investment-Institute.com

Webmasters or publishers, please feel free to use this article provided this reference is included and all links remain active.

As Chevron (CVX) will report earnings this week, you may be wondering if it will be beneficial to purchase shares of this company in attempt of earning higher capital gains. You may also be wondering why I am endorsing the purchase of this equity at a time when oil prices are at its lowest point for this year. While such is a valid claim, there is a more profound reason to the success that Chevron will post this week which will surprise many investors throughout Wall Street.

Since the stock market naturally is a rational expectations market, the information consumed by investors stays recent and continuously changes on a day to day basis. Many of these investors are always trying to look in foresight to how equities could potentially react to certain changes in the economy. While such is typically an insightful proposal, in the case of Chevron, many of these investors should have a clear sense of hindsight before making hasty predictions. When looking at Chevron, its previous operational results were reported a few months ago in late July. However, the actual 2nd quarter finished June 30th which surprisingly should have more implications than usually thought of.

Through that one month period between the quarter’s end and the results posted by Chevron, the oil market went through unprecedented territory reaching record highs of almost 80 dollars per barrel. While of course in the recent months oil has fallen dramatically by 25%, such an incredible value should remain in investors mind when thinking of purchasing the stock. The reason I say this can relate back to my premise of how the rational expectations market of the stock market may fool some individuals who impatiently focus completely on future news. Such sentiments sometimes have negative implications as for the 3rd quarter many Wall Street analysts have predicted an EPS estimate of 2.02 for this oil giant. While such a number may sound normal or foreign relative to what it should be, I believe such a number is greatly undervalued because of the foresight of impatient analysts. Using supportive material of only recent weeks in terms of how the oil market has performed, more than likely analysts worried over such a drop and failed to notice the record highs just three months ago and undervalue this estimate. The same can be said three months prior when analysts overvalued the EPS estimate of Chevron because of the recent events which coupled with a miss in terms of expectations for this company and immediate falling numbers. Thus if such a trend continues, it should be no surprise this Friday when Chevron posts the bottom line number way above most everyone’s expectations.

As you read that last paragraph, you may say to yourself about the effects currently happening now will bring to the next quarter results for Chevron. While such is a valid concern, think about the upcoming months. Many predictions have indicated that a milder than normal winter would be approaching. However, with snow reaching places about a month or two earlier than normal coupled with the fact the OPEC will continue to cut inventory, do not expect a significant further decrease in the price of oil anytime soon. As prices have reach their more than likely lowest point, the only way they can move now is up, and more than likely they will be up in a matter of weeks which should have a positive effect on oil companies such as Chevron. As I say this, you may be thinking that I am contradicting myself as I am looking into foresight instead of examining what has been put in front of me. However, the reasoning here is that prices have reached their lowest point of the year and won’t decrease any further. However, unlike the previous quarter’s situation where prices went from incredibly high to incredibly low, I believe this quarter there will be a much smaller margin of difference between high and low prices this upcoming quarter which should position analyst earnings to be a better representation of how Chevron will perform. If such analysis is still to risky to believe, just think of the fact that it is inevitable, with shrinking supplies, that oil prices will increase in the future complimented with the fact that Chevron is a respectable name which has grown at a steady but encouraging rate since its IPO days.

Thus, with the obvious spectacular fundamentals coupled with such EPS analysis, look for shares of Chevron to produce some positive and surprising feedback from Wall Street this week. As in most cases, predicting the future and examining the present is what will bring success. In the case of Chevron, having a clear representation of hindsight should reap more benefits than both the present and future combined.

Dennis Biray presents advice on all kinds of topics ranging from finance and investing to fitness to sports. For more information email him at dbiray@gmail.com, or to view other articles written by him visit http://www.biraynetworks.co.nr

One of the most common pieces of investment advice is to find a good investment and to simply hold on to it. Known sometimes as buy and hold investing, it doesn’t seem to be working as well as it once did. A common response of buy and hold advocates is to point to the success of some of the famous value investors. The most famous of the contemporary value investor is Warren Buffett.

Given that, it’s fair to as how Warren Buffett investments been performing recently. Everyone knows that he’s had investment returns of over 20% per year since he started investing, even better depending on which period of time you review. Most of us would be quite happy getting those returns.

Now Warren Buffett does have a few advantages over the average investor. He doesn’t just invest in stocks, he invests in companies. His practice is to buy a large stake in a company, and he then gets to name the CEO of the company, and gets to choose one or more board members. Most of us average investors don’t need to worry about choosing who runs as board members or who would make a good CEO.

Now with all those advantages, it’s fair to ask how well he’s done in the past several years. A lot of Buffett’s reputation is based on history stretching back to the early days of Berkshire Hathaway in the 1960’s. How has the "Oracle of Omaha" and his buy and hold approach done in the past several years?

The holding company for the collection of companies that he owns is Bershire Hathaway. So we can easily judge his performance by looking at the stock price. The Class A shares have recently become infamous for being one of the most expensive stocks on earth (trading recently at over $100,000 a share).

To accommodate more "average investors" several years back they introduced the Class B shares, trading recently over $3000 a share. So, you if you want to invest like Warren Buffett, taking advantage of his inside connections, you can simply buy the BRK Class B shares.

Let’s take a look at their performance. After the Class B shares started trading, they initially went up just like you would expect from a work class investor averaging over 40% a year in 1997 and 1998.

But, after that the performance has not been as good:

1999 down 22.1%
2000 up 28.6%
2001 up 7.3%
2002 down 4.0%
2003 up 16.2%
2004 up 4.3%
2005 up 0.0%

For the 7 years from 1999 to 2005, HRK.B has increased 41%, which is a compounded annual growth of about 5%, slightly better than a money market fund. Recall that as meager as that looks, it did outperform the S&P 500 over that same time period, so he did beat the index fund holders.

If that’s not the world class performance you were looking for, or if it just reminds you of your own results, what alternatives do you have?

The top ranked advisory services in Hulbert Financial Digest over the last several years have many newsletters that use a relative strength or sector rotation approach to investing, specifically using mutual funds. Choosing the top mutual funds and rotating sectors on a regular basis has been a successful approach for many years. However, as mutual funds add Early Redemption Fees (ERF’s) to limit fund switching that approach has become much more difficult, as it eliminates many top rated funds from use in a sector rotation strategy.

There are a couple of ways to get around these fund limitations:

1) The Fidelity Select Mutual Fund family still allows trading after a holding period of 31 days, and has over 40 funds which offers the diversity to effectively implement a sector rotation strategy. Many newsletters have a long history successfully trading the Fidelity Select Funds. Also, most of the other Fidelity mutual funds still have no redemption fee if they are held for at least 90 days.

2) Exchange Traded Funds (ETFs) have a large diversity of offerings, and can be traded at any time, since they are bought and sold just like stocks (although you do have to pay the same commission as a stock trade). While exchange traded funds don’t have as long a history as the Fidelity mutual funds, so there is not as much trading history on systems using ETF’s, many successful investment newsletters are starting to offer portfolios using ETF’s instead of sector mutual funds, with similar performance advantages.

John Ruppel writes for Fundztrader.com. Fundztrader offers model portfolios featuring Fidelity Mutual Funds, Fidelity Select Mutual Funds, and Exchange Traded Funds. More information and a free newsletter are available at http://www.fundztrader.com.

Approximately one week away from Verizon’s (VZ) third quarter results, many investors are speculating whether to purchase shares of this lucrative telecommunications giant. In search for answers by examining earnings from other powerful monsters, there is a mix bag in terms of what to expect for both Verizon and the telecommunication industry in general. However, just specifically in the case of Verizon, I believe the real question should not be placed into whether Verizon accumulates high margins when two years are compared with one another or if this company beats its EPS estimate by a few cents, but how will Verizon perform in the next few years.

More than likely, with the giant status of Verizon, regardless of any significant changes from analyst expectations, Verizon shares should remain fairly steady when earnings for this company are reported in about one week time frame. You may say that anything is possible in this rational expectations market, but if you look at the technical side of this company over the past three years, you, as an investor would realize the sideways motion Verizon embodies. Fluctuating in the 30 to 40 point range for almost three years, Verizon looks very similar to other large cap giants such as Microsoft, reporting very little disturbances if at all in terms of share prices regardless of how earnings play out. While some investors may argue that such a stock represents a steady but guaranteed way of accumulating capital gains in the future, such a sentiment does not hold perfectly true with Verizon. Since its opening days about 25 years ago, Verizon has only grown 300% during that time period where much of that gain can be attributed to the overbought period of the late 1990s for the technology sector. While 300% may sound pretty lucrative to many investors, there are many other both well-established but relatively new companies on the market such as Google or Goldman Sachs which not only has the potential to reach 300% in 25 years but more than likely triple or quadruple that amount in possibly less than ten years. Thus, while you are pretty assured that Verizon will not decrease in terms of share price, even during a time of recession, to astounding levels, for the long term when looking at technical analysis I do not see much trend assurance for heavy optimism.

Nevertheless, I have only looked at one indicator in determining my rational for the purchase of Verizon shares. As an efficient investor, other indicators like fundamentals should be utilized as well. In the case for numbers when looking at Verizon, an almost parallel structure exists to how margins are represented juxtaposed to technical trends. It is true that Verizon has posted modestly higher gains year after year in most of the major categories, but the same can be said about how Verizon has moved in terms of share price during the same duration. While economic changes and consumer preferences, not to mention innovated telecommunication products, can challenge such momentum, for the time being, especially since Verizon is near a 52 week high, there should be no strong desire to purchase more or any shares as any falter in the economy or earnings will send Verizon back down a few points. Therefore, as prestigious as Verizon is in terms of branding and name recognition, just like my views on Microsoft, I do not see much encouragement or heavy optimism by purchasing shares from this company in both the short term as well as the long term.

Dennis Biray presents advice on all kinds of topics ranging from finance and investing to fitness to sports. For more information email him at dbiray@gmail.com, or to view other articles written by him visit http://www.biraynetworks.co.nr.

The 4th quarter of the year has historically been a blessing for the stock market. This is the part of the year where you usually get to watch a lot of momentum stocks and much longer and solid rallies outhere.

There are many factors that indicate that this 4th quarter could be especially good for the stock market. The economy is still growing & corporate profits remain robust. The economy and earnings have held up even after a two-year rate hiking campaign from the FED. Then there’s the steady decline in oil & gas prices that have taken off the preasure on inflation worries and put more money into the hands of consumers.

So Why trade momentum stocks this Winter ? Because certain stocks with momentum bring the posibility of gaining as much as 100% on the same trading day. Some may only rise 10% on a few minutes, which means that you could make a cool $200 on a $2000 investment on the same day.

The problem is that if you don’t know what stocks to look for and how to approach them while limiting your risk, you won’t even get close to making some profits.

You don’t necessarily have to trade momentum stocks all the time. But you can learn how to take advantage of them when you encounter the best opportunities while at the same time limiting your risk.

Many experts agree that the 4th quarter will bring the traditional "christams rally" for stocks. Do You know how to take advantage of this factor?

If you want to learn how to trade and pick stocks with momentum in a simple and effective way every week, order our momentum stock trading course at www.ProfitableStockMarket.com right now and discover what youve been missing.

On Wednesday, SPX opened sharply higher on the better than expected CPI report, although the core rate was in-line. SPX reached about 1,373 before pulling-back sharply. The strong open may have been a "blow-off top," and a bearish head & shoulders (on 15-minute chart) may have been created with the right shoulder at roughly 1,370 and the neckline at 1,357. Several weeks ago, SPX created a bullish inverse head & shoulders (on 15-minute chart) with the neckline at 1,338.

Over the past three days, SPX has traded entirely above the monthly upper Bollinger Band, currently 1,361. The 10-day MA, currently 1,362, has generally held for a month and the 20-day MA, currently 1,351, has generally held for three months. Both MAs have risen sharply. Consequently, SPX is being compressed between 1,370 and the rising 10-day MA. Given some short-term technical indicators are severely overbought, it’s likely the compression will result in a move to the downside.

There are three possible scenerios. If the rally continues, there’s a multi-year resistance level about 1,400. However, SPX will need to trade well above the monthly upper Bollinger Band, at levels not reached in 10-years, since the middle of the bubble boom. If there’s a consolidation, SPX will fall below the 10-day MA, perhaps bounce initially off the 20-day MA, with further significant support levels at 1,338 and 1,326. Initial resistance is 1,370. SPX will then either rally, e.g. about 1,400, or fall, e.g. below 1,300. If there’s a correction, support levels will turn into resistance levels through steep falls and volatile downtrends. First major support is 1,290.

Economic data and oil prices will largely determine SPX direction. Last week, the PPI core rate was reported much higher than expected, although the CPI core rate was in-line. Consequently, SPX may discount, over the next few weeks, higher PPI and CPI core rates in next month’s report. Oil closed at 56.82 Friday. If oil falls and stabilizes around 50, that may be market bullish, or if oil rises and stabilizes around 60, that may be market bearish. I suspect, a consolidation will take place through the first week of November and then a correction will take place, since intermediate-term technical indicators are overbought. Nonetheless, I wouldn’t rule out a rise to about 1,400 in early-November and a fall below 1,300 in late-November.

Free chart available at PeakTrader.com Forum Index Market Forecast category.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years.

The most important factor in stock market success is controlling risk. Risk, of course, includes not only the possibility that you will lose money, but also the possibility that you will miss out on a chance to make money.

The Sensible Stock Investor uses a variety of methods for managing risk. One of these is timing. Timing means selecting the optimum point in time to make a transaction—to buy or to sell.

Much stock investment literature derides timing as a risk-control measure. Most advisers focus solely on asset allocation and diversification. For example, whenever you see statistics about how much of your money you ‘’should'’ have in large-cap stocks, small-cap stocks, bonds, cash, etc., the recommendations are based on long-term performance statistics for those asset types. In other words, the advice is always based on the presumption that you will Buy and Hold each asset. That underlying premise is almost always unstated. The use of timing as an additional way to control risk is ignored or criticized as impossible.

However, to the Sensible Stock Investor, timing—that is, not Buying and Holding everything—is a valid risk-control technique. It turns out statistically that not being invested in stocks when they are going down contributes much more to positive returns than being fully invested all of the time.

Timing can be used in both buy and sell decisions. It helps determine when to purchase a stock (thus reducing the risk that you will miss out on a chance to make money on the stock), and it also helps determine when to sell it (thus reducing the risk that you will lose money on the stock). Even Warren Buffett—who is reflexively associated with Buy-and-Hold—practices timing. There are many times when he holds a great deal of his assets in cash—waiting for the right time to buy.

Therefore, timing is a tool in the toolkit of the Sensible Stock Investor to practice risk management. It does not fully control buy, hold, and sell decisions, but it does influence them. The idea is to have more of your money in the market when there is a greater chance for gain, and to have less invested when there is a greater chance for loss. The whole idea is to stack the odds in your favor as much as you can. Timing helps you do that.

Timing is based on ‘’indicators.'’ Indicators are simply pieces of information that may be predictive of future performance. Thus, they are signals whether to buy, hold, or sell. We’d like to be more fully invested when the market is going up, and less fully invested—or entirely in cash—when the market is going down. Indicators can help us toward that goal.

Because individual investors cannot spend all day studying the market, the best indicators for the individual must be (1) readily available, (2) free, and (3) easily understood. It turns out that we can find such indicators without too much trouble.

For example, we can employ indicators such as broad market trends, broad market valuation, individual stock trends and valuations, economic trends, and interest rates. It turns out that a straightforward set of such indicators can be obtained for free, put together in a logical fashion, and kept up to date with relatively little expenditure of time and no expenditure of money. The result is called a ‘’Timing Outlook.'’

The Sensible Stock Investor then uses the Timing Outlook to influence—but not totally determine—his or her decisions about when and whether to buy, hold, or sell particular stocks. The Timing Outlook is used in conjunction with the other tools of Sensible Stock Investing. The whole toolkit—selecting excellent companies, valuing their stocks, maintaining a well-rounded portfolio, using sell-stops, and so on—creates a sound latticework of complementary techniques. These techniques lead to superior results, principally because they help you to manage investment risk.

A word about psychology: The Sensible Stock Investor creates all his or her tools as objectively as possible—when he or she is thinking most clearly, not in the heat of a fast-moving market. Psychologically, it can be hard to follow any system which is giving a seemingly non-intuitive signal. But that’s why you have a system in the first place: So you can follow it when objective thinking is most difficult. The Timing Outlook helps take emotions out of the equation. That’s a good thing, because in finance and investing, emotions often point in the wrong direction. Level-headedness usually wins out.

If you would like to learn about a comprehensive stock investment approach that that uses the same strategies reflected in this article, including how to construct the Timing Outlook mentioned in the article, please consider purchasing ‘’Sensible Stock Investing: How to Pick, Value, and Manage Stocks.'’ For more information about the book and the Sensible Stock Investing system, including purchasing information, please visit www.SensibleStocks.com . Feel free to reproduce this article or any portion of it. If you do so, please include the author’s name and the wesite address www.SensibleStocks.com .

Every investor should start with a good solid set of buying and selling rules and stick to them. This will take the emotional involvement out of the process of stock trading. When the emotions of trading are out of the equation, a person can use rational and logical thought instead of the emotional thought. An example of the emotional thought is when a stock is trading poorly and you say to yourself “This stock will come back so I will hold on to it for a while longer”. This type of thinking leads to huge losses at times. But if you have a set of selling rules in place, you simply set a percentage amount you are willing to lose and sell the stock if it hits the number.

Most professional traders will sell a new position if the trade turns bad and falls between two and eight percent. This type of rule will preserve your capital so that your remaining capital can be invested again to make up the loss on a later trade. Sell rules prevent the further deterioration of your capital. The loss of capital can be devastating for a person. A large loss requires a much larger gain later on to replace the lost capital. For instance, if you held a stock for a 50% loss you would need a 100% gain to counter the loss. So if a $50 stock falls to $25 before you sell, the only way to make the loss back is to buy a stock that must double in price.

Capital preservation is one the major considerations of a professional investor. If your capital is not reduced you can continue to profit from new trades. Which leads us to some buy rules. Some buy rules to include in your investing strategy;

Return of capital. How long will it take to have your initial investment returned to you so that it can be reinvested? Sophisticated professional investors want fast money. Money that moves and grows but is returned to the coffers quickly.

Return on investment. How much will your invested capital return as a profit? This is important when determining which investment to choose when deciding where to place your money. If one investment offers an annual return of 10% and a second investment returns 20% annually, it is an easy decision. A smart investor will invest in the second choice.

Future growth of a company. Is the business you are investing with growing, stagnant or shrinking? What is the outlook for trends in the industry? Are they positive? Is the company innovative?

Initial value of investment. Is the stock at the right price? Is it expensive when compared to other stocks in the same industry with similar returns? Your opportunity to make profits in stocks is often decided by the initial cost of a stock. This doesn’t mean the price of the stock. It is determined by the multiple of a stock when compared with other stocks. A $60 stock with a multiple of 15 is cheaper than a $20 stock with a multiple of 30.

Save yourself a bunch of grief and take a small loss when necessary, keep your capital moving into investments with the best returns on investment and watch for growing companies to buy and finally, buy stocks which offer the best value.

Matt Fox is a successful professional investor in stocks, options and commodities markets. He also invests in residential, industrial and commercial real estate markets. Read more investing tips from the author at http://www.bizmaker.blogspot.com.

The Ibex 35 is outperforming other stock exchanges in Europe. To date the ibex 35 has gained 23 % over 2006. In comparison, the Dutch stock exchange (AEX) has gained only 11% this year.

One of the factors that has contributed to the rise of the Spanish stock exchange index (the IBEX 35) is the (expected) takeover premium that is prized in the different stocks.

Endesa for example — the electricity company — has more than doubled its value has been the first company that has been revalued because of two takeover bids; the first from Gas Natural — the Spanish Gas supplier and later on an increased bid has been launched by the German Electricity supplier — E-On. Endesa’s stock has risen from 22 euro in January to 34 euro currently.

The rise of Endesa has revalued the whole energy sector and energy is highly represented in the IBEX 35; there are about eight utility companies listed on the Ibex 35.

Recently, the Spanish construction company Sacyr Vallehermoso SA jumped into the country’s red-hot energy sector, buying 9.23% of integrated oil company Repsol YPF SA (http://news.morningstar.com/news/ DJ/M10/D16/200610161417DOWJONESDJONLINE000652.html?Cat=Energy) This is not to be seen as a hostile acquisition, but more likely to prevent that foreign companies will bid on the Spanish Energy supplier…

“Banks enter the game,” quotes the newspaper in the recent weekend edition. The two bank on which the market speculates are BBVA (the second largest bank in Spain) and Santander the largest bank in Spain and number 10 in the world (according to market value (which is about 84 billion Euros).

An expert from Morgan Stanley (Iñigo Marco Gardoqui) thinks that “it is impossible that a hostile bid on BBVA will be launched.” And another analyst (Alberto Morillo) states that BBVA will most probably grow further by buying others. This is possible as long as the stock value continues to increase. The value of BBVA has increased inline with the rise of the index.

The Construction sector is also showing a high performance this year…

But the question for the individual investor remains, “what to do?”

The fundamental oriented investor should analyze the individual companies, in relation with growth in (expected) earnings. The technical oriented investor can help himself with the high amount of charts that are available on the market. For example from this website: http://labolsa.com/tecnico/ENG/ - focused on a technical analysis of the company ENAGAS.

But without all that knowledge, there is a more simple way to (decide to) invest. The fact that Madrid (IBEX 35) is outperforming other exchanges must have a reason. But you do not need to know this reason. Take for instance the Film stars “market.” There are film stars that are gaining attention and admiration by the public, where others are on their way back. It is easy to recognize these stars; George Clooney for example, recently invited by Martini, is still loved by the public.

And so is Spain at the moment. What more do you need to know?

© 2006 Hans Bool

Hans Bool is the founder of Astor White a traditional management consulting company that offers online management tools. Have a look at some of our free management tools