All posts by: Shaun Cullinane

Should you buy when corporate insiders are buying, and sell when insiders are selling?  Do insider transactions mean anything at all for the future direction of stock prices?  What about the market as a whole?  Join me today as I cover the topic of insider trading.

 

Sign up for FREE email updates to be notified of new podcast episodes, timely videos featuring market analysis and commentary, special offers, and more.

corporate boardroom

(CC image by ShellVacationsHospitality on Flickr)


Section 1: Insider Ownership

Founders or controlling shareholders

C-suite executives

Boards of directors

Executive compensation: performance-based incentives

Warrants vs. options

Restricted stock as a retention incentive

Employee stock purchase plans (ESPP)


Section 2: Common Types of Transactions

Exercise of stock options

Open market purchases

Open market sales

What’s legal and what isn’t


Section 3: How to Trade in Response to Insider Buying & Selling

A review of the research on insider trading

Figure out who the major insiders are, and how they typically transact

Routine vs. non-routine trades

Isolated vs. sequenced trades

Look for anomalies and follow suit (if everything else checks out with the company and its chart – always do technical analysis)

 

 


 

References

 

List of Insider Transactions (finviz.com)

SEC Info: Insider Trading Reports

Institutional Holdings: NASDAQ.com

Trends in Board of Director Compensation: Harvard Law


Intro music and mid-program music by audionautix.com


Find more episodes of the Torpedo Trading Podcast at this link

Continue Reading →

Today I am announcing some significant changes to the production schedule for the free content, including the podcast, videos, and blog.  I’m also making a change to the membership benefits.

But first, let me start by thanking you once again for your interest in the work I do here at Torpedo Trading.  I hope it continues to help you along your path towards achieving your most important financial goals and building long-term wealth.  Taking control of your own money truly is the best path to financial freedom, especially in the volatile economic environment we’ve been in for nearly two decades.

The reason for the changes I’m about to lay out is that I’m returning to full-time employment in the actuarial field.  As the regulars on my live stream know, Torpedo Trading has been a part-time pursuit for me.  I’ve continued to work as an actuary on a part-time, flexible schedule.  Recently, my family and I determined that the best thing for me to do going forward is to resume the full-time actuarial gig.  Therefore, I will have considerably less time to put towards this business than I previously had.  It’ll keep going, because it’s my passion to provide honest, high-quality educational content that engages all of you and inspires you to take control of your wealth, whether you’re brand new or experienced with trading and investing.  But, I will have to dial back the amount of content I produce – and I already have over the last two weeks.

Here are the changes:

  1. The podcast frequency will drop from weekly to approximately one every two weeks.  New episodes will continue to be released on Tuesdays.  The podcast is extremely important to me, so I’ll be doing everything I can to get new episodes out as often as humanly possible.  The next episode, #28, is already in pre-production and will be released next Tuesday, July 18th.
  2. I will be making significant investments in the quality and efficiency of the analytic tools I use to forecast the financial markets.  This is exciting because when this work is done, I’ll be able to give you even more accurate and timely analysis on the markets than before.  Of course, this takes time away from content production in the meantime.
  3. The live stream will drop from 3 times per week to “as I’m able”.  I’ll use the Torpedo Trading Discord server to announce live stream dates and times at least 24 hours in advance whenever possible.  I’m looking forward to sharing the new and improved analytic tools as they’re progressing along on the live stream.
  4. The YouTube channel will continue to be a “best-of” compilation from the live streams.  How many videos will I do?  It depends on the number of live streams there are (see above).  Probably a couple YouTube clips per month, at a minimum.
  5. I’ve taken down the premium community for members – but I do expect to revive it at a later date.  While I still believe being part of a community is really, really important for traders who want to be successful, I’ve done very little promotion of the members forum here.  It just doesn’t make sense to keep paying the hosting fee month-after-month to keep it live when it’s not being actively used.  I think the best approach for now is for those who are seriously interested in joining the community to contact me to get on a list.  This won’t be an email list where I harass you to join up; I don’t do that.  I will just store the info aside until we have enough people committed, then I will reach out to everyone who’s expressed interest to confirm and lastly the forum will go live once again.  The bronze membership is only $5/month so it will not be expensive to jump on board the relaunch.  Looking for a way to support this site in the meantime?  Check out the options on this page.
  6. I will be launching a new premium service that is affordable, quick and easy.  Basically, for a small fee I will do a basic technical and fundamental analysis of any stock, ETF, currency or commodity you want me to look at.  I get lots of requests for this, and am happy to address them for free on the live stream as I always have.  But with fewer live streams and less hours to go around, having this as a pay service will bring the demand more in-line with my supply of time!

Questions or feedback on the changes?  Email me at the address I give on the podcast – or use the contact form to reach me.

Thanks again for your support!

Continue Reading →

How can you and I profit from corporate mergers and acquisitions?  What should you do when one of your stocks gets a buyout offer?  Today I’ll be discussing all kinds of corporate deals and what they mean for investors.  I’ll also present a couple ETFs that allow you to emulate the merger arbitrage strategy used by many hedge funds.

 

Sign up for FREE email updates to be notified of new podcast episodes, timely videos featuring market analysis and commentary, special offers, and more.

Pac-Man eating

(CC image by Pierre Boisonnet on Flickr)


Section 1: Transaction Types & Examples

Cash buyouts

Stock-for-stock transactions / mergers

Combinations (cash + stock)

Merger of equals

Spinoffs


Section 2: How to React to a Buyout Offer

Terms: – what are you getting for your shares, what are the tax consequences, and what’s the chance the deal gets done?

Valuation (two of the best books are by Aswath Damodaran: The Little Book of Valuation and Investment Valuation: University Edition)

Likelihood of a bidding war

Recent price history of the stock


Section 3: Profiting from Corporate Deal-Making

Merger arbitrage strategies: active & passive

ProShares Merger ETF (MRGR)

IQ Merger Arbitrage ETF (MNA)

Buying stocks in anticipation of a deal


 

References

Largest corporate spinoffs – Wikipedia

Largest corporate acquisitions – Wikipedia

Paper on merger-arbitrage strategy by Brenda Kahn, University of Southern Indiana (PDF)

The Hedge Fund Journal – Ride the M&A Wave With Merger Arbitrage (PDF)

Fairmark.com – tax consequences of cash received in mergers


Intro music and mid-program music by audionautix.com


Find more episodes of the Torpedo Trading Podcast at this link

Continue Reading →

More Real Estate & Stocks, But Be Very Selective


Today, I’m releasing new asset allocation targets for long-term oriented investors of all ages, as well as active traders.    Remember, these are aimed at a general audience and are not personalized recommendations for any single investor.  Consider your own personal goals and risk tolerance when making your final selections.  More important disclaimers can be found on this page.

The most important update I made to the long-term allocations (and indirectly, to the allocations for active investors) was to increase the allocation to real estate by a few percentage points.  Many investors will already have this much exposure to real estate through equity in their personal residence.  For those that don’t, REITs will get you there.  Listen to my introductory podcast on REITs to learn about this exciting asset class.  I also recently published a video on one of my favorite picks.  I’m careful to choose REITs that I think are most likely to maintain or grow their share price over the long term while paying a good dividend yield.  Stay away from most REITs in the health care, office building, and retail areas.

I also bumped up the allocation to stocks.  Don’t read too much into this, as it relates to my overall stance on the stock market.  Stocks are generally overvalued at this time.  However, I do think you can find enough strong companies to fill out a portfolio if you are selective.  Here’s one I recently talked about on the live stream.  And, we must acknowledge that there are few alternatives to stocks in this low-interest-rate world.

If you own a business, or are a equity partner in one, your share of the value of that business counts in the Equity category too.

OK – now for the asset allocations.

If you’re a long-term oriented investor, making adjustments to your portfolio only a couple times each year, these are the baseline targets:

Long-Term Allocations


If you are an active trader, consider these allocations instead.  They’re based upon the long-term targets, but adjusted for my latest intermediate-term market outlook (6-18 month horizon).  These change much more frequently, as chart patterns emerge and develop.

Intermediate-term allocations


Consider using options to limit downside risk on stock positions.  You might also consider preferred stock for the greater protection it provides, over common stock, but remain cautious because preferred stock will drop if we see a big downturn in the market.

Wealth-building is a marathon, not a sprint.  Staying defensive in a market like this one will keep your portfolio intact.  A cash reserve will position you to leap on bargain prices when we see them.

Emergency cash and structural cash (beyond a little structural cash for where we’re at in the long-term economic cycle) are NOT included in these allocations.

This episode explains the three different buckets of cash:

Once you’ve determined how much cash you want to keep outside the markets, here’s how to adjust the asset allocations:

(1) Let A = 1 – Cash % shown in the asset allocation you’re looking at

(2) Let B = 1- Cash % you want to keep

(3) Multiply all asset allocations (except cash) by (B/A)

Now the “Base” allocations will sum to 100% with your new cash %.

You can use the same procedure with Property, Owned Real Estate, or anything else instead of Cash to account for assets you may have in those classes.

Get the Early Scoop When Allocations Change

Going forward, members of our community platform will receive updated asset allocations at least one week ahead of when I release them to the public blog.  Members will also get detailed sector-by-sector breakdowns within several of these asset classes (e.g. retail stocks vs. utilities, consumer staples, etc.).  Membership starts at only $5/month for the Bronze level.


Continue Reading →

Market orders, limit orders, stop-on-quote orders … what does it all mean?  In this episode, I start with the basics of order flow and execution: what happens behind the scenes when you buy or sell stocks and ETFs.  Then I go through the various order types, from simple to complex, to help you understand your choices.  You’ll get examples of situations where you might use one order type over another.

 

Sign up for FREE email updates to be notified of new podcast episodes, timely videos featuring market analysis and commentary, special offers, and more.

network cables

(CC image by Norlando Pobre on Flickr)


Section 1: How Securities are Traded

Bid and ask prices

Market depth

Exchanges and other trading platforms

Order routing

National Best Bid and Offer (NBBO)

Price improvement

Brokers often get paid for order flow – is that fair or are we getting ripped off?


Section 2: Basic Orders and Conditions

Market orders

Limit orders

Conditions: All-or-nothing (AON), Fill or Kill, good ’till canceled (GTC), good ’till date (GTD), day orders, market on close (MOC), limit on close (LOC)

Stop orders

Stop-on-quote

Trailing stops


Section 3: Complex Orders

One Cancels Other (OCO)

One Cancels All (OCA)

Conditional orders

Pegged orders


 

References

Scottrade: Anatomy of an Order (PDF)

TD Ameritrade: Order Execution FAQ

SEC Investor Publication – Trade Execution


Intro music and mid-program music by audionautix.com

Find more episodes of the Torpedo Trading Podcast at this link

Continue Reading →

Are you ready for the next financial crisis?  No one knows for sure when the crash will happen, but here are some sensible steps everyone should take to keep from being caught off-guard when it does.  I also tell you what signs to look for that will foreshadow the next crisis, so you can be calm and confident while others panic.

 

Sign up for FREE email updates to be notified of new podcast episodes, timely videos featuring market analysis and commentary, special offers, and more.

 

Bunker

(CC image by Psaiko on Pixabay.com)


Section 1: What Will the Next Crisis Be Like?

A brief review of the last few major financial crises

Signs and signals to watch for, this time around


Section 2: How to be Safe During Normal Times

Cash

Diversification

Alternative assets

Hard assets

Know your goals and risk tolerance, and keep your assets in alignment with them

Multiple income streams

Preparedness outside of the financial world


Section 3: Getting Defensive When Risk is Elevated

Move to a conservative asset allocation, as I have already done with my own assets

A little-known tactic to avoid getting trapped within your retirement account

Protecting a portfolio using options without selling the stock

What to sell

What not to buy


Section 4: What to do When the Crisis Arrives

From smoke to fire: The stages of a crisis, and the actions you should be taking in each

Embrace risk as others are becoming the most fearful of it

Follow trustworthy news sources; stay away from mainstream media as much as you can


References

Episode 15: How to Get a Return on Cash

Washington Post (April 2, 2007): Huge mortgage lender files for bankruptcy

The Survival Podcast – rational preparedness without the prepper mania

ZeroHedge – Why the Fed is Trapped: A 1% Increase In Rates Would Result In Up To $2.4 Trillion Of Losses

Battery1234 – Steven Harris’s website on how to make your own home battery bank for emergency power


Intro music and mid-program music by audionautix.com

Find more episodes of the Torpedo Trading Podcast at this link

Continue Reading →

An Income Opportunity for the Long-Term


open road ahead

(CC image by peterichman
on Flickr)


Check out the video below, which is from my live stream for traders and active investors, to learn why I like Ford Motor Company (F).


 

As I explain in the video, Ford is the most forward-looking of the major automakers.  (Tesla is not a serious automaker yet – don’t believe all the hype.)  Ford has been willing to take a chance on future mobility technologies because their largest voting shareholder, the Ford family, understands that if a company doesn’t innovate, it dies.  The tech titans of the world, like Google and Apple, would love to sink their teeth into the auto industry.  And they are already trying to do it.

Wall Street has frowned upon Ford’s approach, so they’ve pushed the stock price down so far that the dividend yield has reached 5.3%.  Why?  Wall Street tends to have a “value-extraction” mindset instead of trying to build long-term value.  For instance, activist investors and private equity firms constantly push for more debt, buybacks, and acquisitions to drive short-term value.  They are less concerned with the company’s cash flows over a period of many years, and more concerned with rewarding companies like GM that churn out gas-guzzling trucks and SUVs with no regard for tomorrow.  But if you want to build wealth over your lifetime, like I do, you should love a company like Ford that has the courage to take control of its future instead of waiting until it is too late.   They have begun to transform Ford into a company that will not just build cars as we know them today, but will provide various forms of transportation that meet society’s needs in 2020 and beyond.  In February, they invested $1 billion into Argo AI, a startup focused on developing technology for self-driving vehicles.   Learn more about Ford’s initiatives around future mobility.

As with any investment, make sure to review the company’s annual report and other SEC filings to get a good understanding of the company before investing.  Pay particular attention to the disclosures of potential risks in those filings.  You can find investor info for Ford here.  Just because this company is right for me right now doesn’t mean it is necessarily right for you.

I own shares of Ford Motor Company as of the publishing of this post.  View other important disclaimers on this page.


Be Selective

Most stocks are priced at lofty valuations right now, so we’ve got to be selective.  While the bull market may last a bit longer, stocks whose values have grown out of line with their true cash flow potential will suffer a hard landing as deflationary pressures resume.  So, don’t just blindly buy the market index.

I’m still on the hunt for long-term portfolio holdings that can give me a reliable yield and are fairly valued or undervalued – so stay tuned for future Dividend Stock of the Month posts.

In case you missed it, here’s the last dividend stock I highlighted.  It’s had a nice run since I released the video!


The Torpedo Trading Live Stream

Watch more live streams like this at https://www.twitch.tv/torpedotrading and interact with me in real-time.  Follow the channel, and you can receive notifications when I go live.

If you miss a stream, highlight clips like this one can be found at my YouTube channel.


Continue Reading →

Trading and investing are all about information: Accessing it, processing it, and turning it into an action that makes you money.  In this week’s episode, I go through my favorite learning tools, data sources, news providers, and more to help you locate the most beneficial info and toss out the rest.

 

Sign up for FREE email updates to be notified of new podcast episodes, timely videos featuring market analysis and commentary, special offers, and more.

lantern

(CC image by Andreas Kohn on Flickr)


Section 1: Market News, Commentary, and Data

Newspapers: Wall Street Journal, Barron’s (subscription required to view articles)

Online: Reuters for high-quality reporting on breaking news

Television: Bloomberg TV

http://www.dailyspeculations.com/ – Vic Niederhoffer’s blog

Economic articles & blog posts: Financial Sense, Monetary Metals, Keith Weiner Economics, Armstrong Economics, Let’s Talk Bitcoin

Podcasts: Financial Sense Newshour

Live prices in various futures markets around the world at Marketwatch.com

Live currency cross rates

Calendar of economic data releases and other important events

Daily historical prices for stocks, ETFs, and indices: Google Finance and Yahoo Finance

Live prices and stock charts: TD Ameritrade, Scottrade, Fidelity, Google Finance and Yahoo Finance

Economic data series from the St. Louis Fed

Historical oil price data from the Energy Information Administration

Various data series that can be imported into R, SAS, Python, and other advanced statistical tools

Cryptocurrency price charts


Section 2: Learning Advanced Topics

For serious students, I still think books need to be a part of your study plan.  Here are my ten essential books for traders and investors.

Spreadsheet skills: Microsoft Excel courses on Lynda.com from LinkedIn

YouTube – here’s one of my favorite presenters of high-quality technical analysis

Live streamers on Twitch.tv – a very new but promising niche

Personalized instruction and coaching, customized to your goals


Section 3: Sources to Avoid

“Hot stocks” from email newsletters, pump-and-dump scammers, or social media groups

Poor-quality, overpriced garbage like Online Trading Academy – you’re paying $4,995 for what exactly??  Their obnoxious radio & junk-mail ad campaigns?

Instructors who promise massive returns overnight, turning $1k into $1M in three simple steps, etc.  Don’t get scammed.

Anything you use to get blind recommendations – always do your own diligence before making investments.


What are your favorite sources for news, commentary, data, and education?  Please share!  Leave a comment below.


Resources

Intro music and mid-program music by audionautix.com


Find more episodes of the Torpedo Trading Podcast at this link

Continue Reading →

Today, I’ll present another simple strategy that new and experienced traders can use right away.  The idea here is to find stocks that have extended too far in one direction and are lined up for a short-term bounce or pullback.  I show you how to filter down a long list of potentially good setups into the ones that are most likely to succeed.

 

Sign up for FREE email updates to be notified of new podcast episodes, timely videos featuring market analysis and commentary, special offers, and more.

Waveform

(CC image by Creativity103 on Flickr)


Section 1: How to Setup Your Chart

  • Choose timeframe
  • Bar chart with OHLC (open-high-low-close)
  • How to read a bar chart
  • Green OHLC bar

Section 2: Support & Resistance Lines

  • How to spot a trend
  • Uptrend

    Uptrend: Moving averages in alignment

  • Drawing support & resistance lines
  • Slope
  • A trading range
  • Narrowing vs. expanding formations
  • Why it works
  • How to select the best setups

Section 3: Momentum Oscillators

  • What is momentum?
  • Overbought and oversold levels
  • My favorite momentum oscillators

Section 4: The Mean-Reversion Strategy

  • How to do it
  • Why it works
  • Momentum crossovers
  • How to select the best setups

Section 5: Trade Management Basics

  • Protective stops
  • Taking profits

Examples

Example 1 - Macy's (M)

Uptrend within a channel: 1 buy signal, 3 sell signals


Example 2: CMG

Price reaches major resistance level, and conditions extremely oversold: good short-term buying opportunity – but a tighter stop-loss would have been needed to preserve profits.


Example 3: T

Strong buy in AT&T signaled as price reaches long-term resistance AND prior support lines, along with highly oversold conditions


Intro music by audionautix.com

Find more episodes of the Torpedo Trading Podcast at this link

Continue Reading →

A Long-Term Income Play in Korea, Available to US Investors!

 

Disclosure: I own shares of KT Corporation as of the date of this posting.

I’ve already got a Dividend Stock of the Month for May 2017, so I’m calling this my “Investment of the Week!”  But let me be clear, I intend for this to be a long-term investment.

In this video, I explain what this company does and why I selected it from a long list of dividend-paying stocks in the telecom sector.  The stock has gone up by about 5% in the two weeks since I released the video – so far, so good!

 


Shortly after I made this video, Moon Jae-In won the Korean presidential election.  As I anticipated, he is already talking tough on the chaebol conglomerates, one of which is KT Corp.  Should we be worried?  Just the opposite – we should be excited about this!

Korea’s chaebol are generally well-managed, conservatively-run companies that are built for survival over the long run.  What they lack are high dividend yields, big stock buybacks, or fully transparent management.  Therefore, many institutional investors have not given as much weight to Korean stocks in their portfolios as they should.

After the recent scandals involving Samsung’s Lee Jae-yong, impeached president Park Geun-hye, and others, the new President Moon finally has the momentum he needs to push for reform of these massive conglomerates.  The main goal of the reforms will to be to increase transparency, which will help these companies gain trust and attract more capital from abroad.  Sure, they’ll probably create some extra compliance costs for KT and other chaebol, but I expect that negative to be far outweighed by the benefits of more capital rolling in.  I think we’ll see the dividend payouts increase as part of this process too.  After all, KT is sitting on over $8 billion of cash.  In Korean won, that’s something like 88 zillion.  (Just kidding)  Note: Most Korean companies pay dividends annually, not quarterly, and they are variable from year-to-year.

Here’s another point I forgot to make during the video: Like many Korean companies, KT Corp is a good value relative to its earnings-per-share.  Here are the trailing and forward P/E ratios for KT Corp relative to its biggest peers in the US telecom sector, even after the recent rally (data from Yahoo Finance):

  • KT Corp: 12.6 trailing, 11.8 forward
  • AT&T (T): 18.7; 12.9
  • T-Mobile (TMUS): 34.7; 27.8
  • Verizon (VZ): 15.2; 11.8

As I always say, due your own due diligence before investing and don’t rely solely on my conclusions.  Other necessary disclaimers can be found on this page.

I’m still on the lookout for good quality dividend-paying stocks that can withstand market turmoil, so stay tuned to the live stream and YouTube channel to discover them.

 

 

Continue Reading →