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Aug31
Post Earnings Announcement Drift
Jack Hough of The Wall Street Journal wrote on Post Earnings Announcement Drift (PEAD) in his column "Smart Money Stock Screen - Earnings Momentum" on 31 August 2006, p, D7.  I've written about this before and we tried an unsuccessful experiment with the predicted earnings surprises from Starmine.

Jack notes that research over the last 45 years on PEAD show that, "...when companies report better-than-expected earnings, their share prices tend to keep rising faster than the broad market for six months to a year after the news is out."

Mr. Hough also gives a reason why our experiment may have failed.  One of our readers, Jason, also picked up on the theme in another post.  I quote Mr. Hough.  "That's not to say that individual investors should buy stocks based solely on one sunny earnings announcement.  Rather, those searching for stock bargains might want to start by screening for companies that have topped quarterly estimates over the past year and whose remaining earnings projections are on the rise.  (Emphasis mine)

In other words, when you are using earnings surprises as a screen, you want to pick stocks with good earnings momentum as well.  As Jason said, you want to pick good companies at the end of the day.
Aug30
To Be Or Not To Be Defensive
On August 8, 2006 the FOMC did not raise the target Fed Funds rate.  Their statement noted that the rate of growth of the economy was slowing.  This slowing might moderate the inflationary pressures building in the economy.  Some stock... Continue Reading
Aug29
401(k) And Non-Spouse Heirs
There is good news in the tax law that congress just passed.  You can leave your 401(k) to someone who is not your spouse (children for example) without triggering an immediate taxable event. Under the old law, if I left my... Continue Reading
Aug28
House Insurance
For most of us our house is one of our largest investments.  With the recent run up in housing prices our holdings of real estate as a percentage of our total assets has increased dramatically.I just returned from southern California... Continue Reading
Aug25
Pricing Oil In Terms of Precious Metals
My friend R. David Ranson of H.C. Wainwright & Co. Economics Inc. published a paper for subscribers titled, "Allocating Between Oil And Gold: A Simple Trading Rule" on August 18, 2006.  It is copy righted so I can't reproduce any... Continue Reading
Aug24
Active Management Versus Closet Indexers
It matters.  It turns out that whether your fund is actively managed or is a closet indexer matters when it comes to performance and delivering alpha.  Two very bright people from the Yale School of Management International Center for finance,... Continue Reading
Aug23
Roth 401(k)
I've written a couple of articles on the new tax law congress recently passed.  Tom Herman & Rachel Emma Silverman point out a change I haven't mentioned in an article in The Wall Street Journal on August 16, 2006 titled Bill Is Likely... Continue Reading
Aug22
Teaching Children To Save
We all want our children to grow up to be financially secure.  I wanted mine to budget, save and prepare for the future and to stay out of debt except for home, car and education.  Some of my children have done... Continue Reading
Aug21
ETF Holdings - What Did I REALLY buy?
There has been a rapid proliferation of ETFs.  They come in all sorts of flavors to track specific niches.  While it is clear what the large ETF index funds contain it is not always so with some of the new... Continue Reading
Aug18
Te Arikinui Dame Te Atairangikaahu
I hope my Maori friends will accept my condolences on the death of Te Arikinui Dame Te Atairangikaahu who was the Queen of the Maori.  She died August 15, 2006. While this has nothing to do with investing, I feel... Continue Reading
Aug17
State Estate Taxes
Nothing is as certain as death and taxes.  If you die in any of 24 states and Washington, D.C. and your estate is big enough your heirs will experience both.  That is because these localities all charge state estate taxes... Continue Reading
Aug16
Asset Allocation And Retirement - The Case of Craig S
Larry, I want to retire in 10 years, should I sell my equity exposure now?  What if there is another 9/11, will we go through another 5 years with no net return?  I received a phone call from my friend... Continue Reading
Aug15
IRAs QTIPs & You
A widower I know in his 80s just married an acquaintance of mine in her late 40s.  How will he arrange to provide some support for her from his estate?  If he has an IRA and a QTIP trust the... Continue Reading
Aug14
Stocks & Foreign Exchange Direct From Charles Schwab Corporation And Fidelity Investments
Charles Schwab Corp. (CSC) and Fidelity Investments have recently made it easier to funds in local currencies on local exchanges according to an article in The Wall Street Journal dated August 12, 2006 on p. B1.  Now you can buy stocks... Continue Reading
Aug11
IRA Tax Change
A recent change in the tax law allows tax free contributions from your IRA to a charity of up to $100,000 per year.  In a regular IRA you contribute pre-tax dollars to the account and they grow tax deferred until... Continue Reading
Aug10
Best And Worst Investments
Alright readers, it's your turn now!  What was the best investment you ever made (we're talking financial returns only here) and what was the worst investment you ever made? My best investment was the stock of The Chase Manhattan Bank,... Continue Reading
Aug 9
Fed Funds and You - August 2008
The Fed didn't raise the Fed Funds target rate yesterday.  For the first time since it began tightening in June of 2004 the Fed did not raise the target rate by 25 basis points.  During that 2 year period the... Continue Reading
Aug 8
Another Scam To Avoid
My partner here at work brought me a new email scam this morning.  I LOVE seeing the inventive ways people think up to separate us from our money.  This scam involves a textile trading company from Asia.  It uses broken... Continue Reading
Aug 7
Exchange Traded Notes - Barclays Bank PLC Credit Risk Anyone?
Barclays Bank has introduced a new series called iPath.  The iPath family will be notes (think debt) issued by Barclays Bank that track an index.  The notes will be exchange traded like the iShare family of stock index Exchange Traded Funds.  While... Continue Reading
Aug 4
Certificates Of Deposit for 529 Accounts??
As states compete with each other to bring in 529 money for college education they have begun to add features.  The latest addition is to allow savers to buy CDs (Certificates of Deposit) in their 529 account.  The FDIC decided... Continue Reading
Aug 3
Lifecycle Funds - T. Rowe Price Group, Inc.
To paraphrase the old Greyhound slogan, "Buy our Lifecycle Fund and leave the driving to us" seems to be the motto of the lifecycle or target fund industry.  Lifecycle funds allow you to pick a fund with your retirement date... Continue Reading
Aug 2
Convertible Bonds - Part II
Bob asked when it makes sense to invest in convertibles.  That is his kind way of saying that I didn't go into enough detail yesterday.  The short answer is that a good time to invest in convertibles is when interest... Continue Reading
Aug 1
Convertible Securities
Do you like the security of bonds with the upside of stocks?  That is the story companies selling convertible securities want you to buy into.  How does it work? A convertible security is usually a bond that can be converted... Continue Reading

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