Is it time to juggle your portfolio? Perhaps. The year end is less than two months away. I have elaborated on the importance of fall season as the best time to rearrange your portfolio. Mainly, stock that rises during the year will continue to rise heading into year end. On the other hand, stock that underperformed, will continue to be sold heading into year end.

Now, the year end is almost here. While there are no guarantee that you can buy at the best possible price, it is as close as you can get. Stock does not turn exactly on the last day of the year. Even when it does, investors will anticipate its movement and make any arbitration move useless. But, the November- December period is close enough for small investors to get the best possible price.

Having said that, I don’t advocate buying any stocks that fall sharply during the year and selling any stocks that have risen a lot. Fundamental still drives stock price movement in the long run. Therefore, what you need to do first is to determine the fair value of a common stock that you want to invest. I have touched on this subject briefly in the past too.

If you are looking to invest, you can start researching stocks that have fallen throughout the year. Until year end, these stocks will continue to be depressed. Here are several list to help you look. Fannie Mae (FNM), Lexmark (LXK), Pier 1 Imports Inc. (PIR), Sharper Image Corp (SHRP), Seagate Technology (STX), JoAnn Stores (JAS), Take Two Interactive (TTWO) and Flagstar Bancorp (FBC).

If you own one of these stocks, you might want to continue holding them until the year ends. This way, you will pay taxes for fiscal year 2006 instead of 2005. Here are several list: Apple Computer (AAPL), TXU Corp. (TXU), NVIDIA Corp. (NVDA), Tesoro Petroleum (TSO) and Valero Energy (VLO).

You can get your free investing idea by visiting our commentary section at http://www.noviceinvesting.com

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It is easier said than done. You want to invest your money, not to gamble it away. A lot of people unknowingly has become gamblers instead of investors. The distinction between the two is not what they do, but rather how they do it. How can you differentiate the two? Here are the basic distinction between the two.

Gamblers. I am not referring to individuals who went to the casino and gamble. I was referring to stock gamblers, individuals who blindly throw their money away in investing. They love buying stocks. The ups and downs of the stock price thrills them. Whether they make a profit or loss, they have no idea what causes it.

Investors. These are not individuals who merely buy stocks. They know what they bought, researched it beforehand and are aware of the risks involved. They may lose money on an investment but they knew why they lose and they learnt from their loss to improve future performance. They do not over diversify and yet they manage to spread their risk apart.

So, how do we all learn to be investors, specifically stock investors? First, we need to educate ourselves and know how to calculate the fair value of a common stock. If a stock is currently undervalued, we need to assess whether we can accept the potential return given by the stock. If the stock is 20% undervalued, would you want to accept that kind of return? If so, then you might buy the stock as an investment.

Aside from the potential return, investors also need to assess the potential risk associated with the purchase. What would make the stock to drop from your purchase price? The most likely occurrence is that a particular stock fails to generate a profit expected by your calculation. If your calculation shows a fair value of $ 50, while the actual profit generated warrants a fair value of $ 30, then you might experience a loss. This of course depends on what price you buy the stock for. Anyway, if you know the risk and reward of a stock purchase, then you can decide whether this stock is right for you.

Another tools needed to be stock investor is portfolio management. You do not want to over diversify but you also do not want to expose yourself to incredible risks associated with the adverse movement of your holdings. In general, you can do this by buying stocks of different industry or buying companies which engage in different kind of industries. Of course, the stocks you bought should fulfill your criteria as an undervalued investment.

Finally, you should keep abreast of new development. Investing is about identifying the best alternatives for your money. Right now, stock might be the best investment for the skills that we have. In the future, perhaps bond investing will be the best alternative to grow your investment. In whatever things that you do, please get familiar with a particular investing vehicle before committing your hard-earned money into it. This is what separates investors from gamblers.

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In Continuation of an article ‘Signs of Dividend Cut’, let me follow up with a the other side of the coin. Companies can also initiate a dividend increase. In fact, plenty of successful companies, always deliver dividend increases year after year. There are plenty of reasons for dividend increase; management ego, financial strength, inefficient money management. Whatever it is, dividend increase is normally a good sign for publicly traded companies.

It is true that dividends are taxed twice; once at corporate level and another one at individual tax filing. However, companies that pay its dividend can’t lie about its profit figure. Money received by shareholders is money that is obtained from the corporation. Without increasing profit, corporation is less likely to raise dividends.

Here are several indications that management will raise future dividend:

Increasing Cash Flow From Operations. When cash inflow is positive and increasing, it will pile up in the balance sheet. One way to reinvest the cash flow is by distributing it as dividends to shareholders.

Positive Net Cash. If a company is increasingly profitable and has positive net cash on its balance sheet, the chance is those cash will be distributed to shareholders in the form of higher dividends.

Low Capital Expenditure. When the capital expenditure requirement for a firm is low, the company has more cash to use. Furthermore, if the business operation generate more and more profits, there is no reason why management should withhold the cash.

No Acquisition Target in sight. A company may decide to accumulate cash in advance of future acquisitions. However, if a company operates in an industry where no acquisition target in sight, it will eventually raise its dividend to distribute the extra cash to shareholders.

Overvalued Stock Price. Smart management know how to best use its resources. When the company’s stock price is overvalued, it is not wise to buy back its own shares. With profits piling up and cash left unused, the only sensible way is to raise dividends.

While most of the above criteria are important, the most critical requirement for a dividend raise is increasing profit. Without profit, the company has no resource to do anything. Therefore, if you want to invest a company who will raise its dividend, consider buying a stock of a company that is highly profitable and is expected to increase profit for a long time.

Get your free investing idea by regularly visiting our commentary section at http://www.noviceinvesting.com

Tags: Annual Report, finance, investing, Portfolio, stockAnnual Report, finance, investing, Portfolio, stock

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