Media Manipulation
06/15/2005
Was it a good or bad day on the market today? You look at the news. Maybe a website or financial TV to get an idea. When I did my weekly show for Bloomberg TV for three years, we would go on air and talk about the market. After a long day, a 7pm show was the final hurdle and we were usually quite happy to be going into the studio. In an hour we would be free. But say the market is down 100 points that day.
'Okay people, let's not look so happy. A lot of people will have lost money there today' the presenter would say.
Hang on a minute. This small trivial example illustrates a broader issue. First, if we're glum, isn't that going to affect how some viewers decide what to do with their investments. Second, since when did presenters become stockpickers? Third, short-term falls will have benefited those who are short stocks, spreadbetting, trading CFDs, so not everyone is glum. Fourth, it is only a day - are we not exacerbating a short-termist view of the market which is exactly what we're criticized of.
I mention this illustration because it depicts a broader problem: the messenger is the message.
Consequently I, like many hedge fund managers, in looking for trading ideas and stock picks will do a news word search. There are certain key words in financial news stories I will hunt for. Those words allow me to determine that I have a good starting point for investigating further whether the stock is likely to rise or fall.
I used the stocks associated with news stories containing those words to pick stocks on the programme on Bloomberg where each week I would have to give a six month 'buy' and 'sell'. When a Bloomberg intern went through my picks - they outperformed all other stock pickers on the channel.
Of course the names of stocks associated with stories containing those words were only the beginning. If 10 stocks were thrown up I would narrow down to the best candidate based on share price trend, fundamentals, earnings and so forth.
What were the words? For bullish stocks they were:
- "share soars"
- "earnings rise"
- "exceed expectations"
- "beat expectations"
- "director buys"
- "upgrade"
For stocks expected to continue to fall: "share plummets"; "earnings drop"; "met expectations"; "in line with market expectations"; "director sells"; "downgrade".
Value-Growth
On my value growth criteria which are based on stocks meeting revenue and profit growth and good value based on criteria such as price earnings growth, the following names come up. Remember they are for a 6 month outlook: Rolls Royce, British Polythene Industries, BAE Systems, MTL.
Remember I am targeting about 20-20% with the value growth criteria. Last year it produced 33% return. On my momentum value indicator I have Aero Inventory, Meggitt, easyJet, Allied Irish Banks, Axis Shield.
Crazy Small Stock
These are high risk volatile stocks which could move sharply higher or move sharply lower in my view, but will almost certainly not stand still. Names on the radar include: QXL, Christie Group, Renold.
Also, if you would like a free multi-media CDROM on 'Investing Better', which covers spreadbetting, CFD trading and momentum indicators like the MACD, posted to you then drop me an email with your postal address to alpesh@tradermind.com.
Spreadbetters
Spreadbetters and futures traders often look at hard and soft commodities. Here's my quick take on the action for the week ahead:
- Oil: Mixed
- Copper: Lower
- Gold: mixed
- £/$: Lower
- Dow: Mixed
- FTSE 100: Mixed
- Soyabean Oil: mixed to higher
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