Friday, February 19, 2010

Market Timing via Monthly and Holiday Patterns

The stock market displays a medley of patterns that can be used as the basis for a timing strategy. A prime example is the frequent surge of the market around the turn of the month as well as the run-up to a holiday.

On one hand, the timing strategy does have its shortcomings. A case in point is the need to dart in and out of the market more than a dozen times a year. Another drawback is the need to deal with the tax impact of short-term rather than long-run capital gains.

In spite of the limitations, though, trading with the calendar can turn in higher profits at less risk than the mundane policy of buying stocks and holding them forever. As a result, a timing strategy based on monthly cycles and market holidays represents a free lunch on Wall Street.

More on Market Timing via Monthly and Holiday Patterns.

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Tuesday, February 2, 2010

Valuation of a High Growth Business

Comparing a High Growth Business to Similar Firms on the Stock Market is the Simple Approach to Valuation

The valuation of a high growth business is a key concern for the owners of the enterprise as well as outsiders such as prospective investors. As an example, a corporate buyer that plans to acquire the business has to figure out how much the entire company is worth. The same is true of a savvy investor in the stock market who wants to buy a block of shares in a listed firm.

A simple way to gauge the value of a business is to compare it to similar firms in the marketplace. The matchup against listed firms is of course directly relevant in the case of a public offering of shares. However, the same analysis can serve as a point of reference in other settings. An example of the latter occurs if the owners decide to sell the company, whether in whole or in part, by way of a private transaction.

More on Valuation of a High Growth Business.

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