My New Volatility Strategy

So for the next few months I am going to focus on a volatility index, specifically VIXY which is an ETF that is supposed to follow the VIX.  If you look at the yearly chart it is moving like the VIX but it is also going down.  

Since its creation several years ago, VIXY has plummeted to around 27 points when it originally opened around 400 points.  There is definitely upside potential to this ETF and since I bought it in the middle of the day I am already up a few 10ths of a point.  

My observation is most every time the market goes up the VIX goes down and most every time the market goes down the VIX is up.  I am buying at a very low point now so as the market goes down I will wait till I make my profit target then sell.

This is a contrarian play and is basically a hedge against the market.  I am strictly playing the stock this way to make short term money.  I want to see how well I can time my entries and exits for the most profit.  Wish me luck and join me if you would like.  Let me know your results in the comment section below.

Dividend Strategy Reinforced

One of my strategies that I have been adamant about over the years is buying high yield dividend stocks to help build cash in your portfolio.  I just looked at my two biggest earners and calculated the amount of dividends earned since I bought the stock and I can’t stress the point enough.  Even if the stock may be down in value the value of owning the stock will beat the fluctuation in price. 

Take CYS for example, it pays quarterly dividends but it has a high yield.  Even though my deficit is -$12.85 after owning it only 7 months I made $64 in dividends giving me a net profit of $51.15.

My biggest earner ARR has paid me $320.72 since owning it back in June of 2012 and I am up $127.34 in equity.

This just goes to show that even with the ups and downs of the market you still can make money off of a stock that pays consistent high yield dividends.

Check Out My Youtube Channel

I just started posting How-to's and stock investing tips on my new Youtube Channel.  Be sure to check it out and leave me a comment as well.  Here's my first post:

Investing in Stocks With a Moral Conscious

In one of the forums I participate in, I responded to a recent post about investing in correctional facility stocks.  My responses was this, "Not a fan, not trying to can gain the world but lose my soul, there are plenty of other opportunities out there."

Here is the rest of my take on it:

"There are a lot of things that are legal but some things just ain't right. A for-profit corrections system is one of them. The whole premise is wrong. You make money based on how many people you can get into prison. So the only way to stay profitable is to incarcerate more people. This is not a reform school where you can send folks to be rehabilitated, this is prison. There is no way to justify profiting from caging people like animals especially with the recent situation where one judge was convicted for jailing "kids for cash."

NBC "Kids For Cash" Article

 

How To Play This Market Nosedive

I have read a lot of strategies over the years and the common idea that sticks out is to buy when everyone else is selling and to sell when everyone else is buying.  This may seem obvious but not when the emotions of the market get to you.  It goes against the natural feeling that we all have of self preservation.  Whenever we see a crowd running away from something our own nature is to run with the crowd because there must be something dangerous in that direction.  The strange thing is we have not seen it for ourselves. 

Here in lies the issue.  You must investigate something before you run away from it.  Take the time to research a stock and find out whether the company is being managed well.  Then look at the financials as well as the technical analysis.  Lastly consider the market sector.  Is there still potential growth in this sector and is this company in a strategic position to take advantage of it? When you are confident in the direction of the company, do not worry about jittery fluctuations in the market based on insufficient data and world events.  Consider a drop in the stock price an opportunity to buy that stock on sale. 

Marijuana Stock Gets Halted

I recently listed PHOT as a stock I was checking out, trading on this stock has since been halted as of April 10th.  I fortunately sold my shares while I still had equity.  The Executive VP Robert Hunt sold 500,000 shares of his own stock which caused alarm among many traders.

It is tempting to jump into the marijuana sector because of its newness and the potential upside given the recent legalization efforts.  I would caution new investors however to only use play money with these stocks, if you can’t afford to lose then don’t invest it.  The companies in this sector are new and are not led by management that is familiar with SEC compliance.  There is going to be bumps and bruises during this new growth period but eventually some companies will emerge as forerunners and that’s the time to buy.

Is ARR Still A Good Buy?

There was a recent article about some analysts on The Street downgrading ARR to a sell.  A member of one of forums I'm in asked me about my thoughts on this development.  Here's the article:

Article on The Street

My response to this is that it's a sign of that market sector as a whole, all REITS took a beating last year. ARR was the one on top. This is the time to stock up (pun intended)...buy when everyone else is selling, sell when everyone else is buying. As the article said itself "the consensus estimate suggests that this trend should reverse in the coming year... This year, the market expects an improvement in earnings ($0.60 versus -$0.53)"

Obamacare Signup Numbers Are Impressive But So Is Another Number

The 30-day hospital readmission rate for Medicare patients has gone down dramatically.  Patients are not being readmitted as much as before. Before 2011 the rate was around 19% it is now around 17.5%. And based on the latest numbers from the nters for Medicare and Medicaid Services,the rate this year is going to come down even more.

This will bring down taxpayer costs more quickly than the number of sign ups to the ACA.  With a 19% readmission rate the costs to taxpayers has been around $26 million.  That number is now going down significantly.

This can most likely be attributed to the penalty that kicked in as a part of the ACA law in 2012.  Hospitals have to pay a penalty for Medicare patients who are readmitted for the same condition up to a threshold.  It seems that hospitals have resorted to other means to keep from paying this expensive penalty: telehealth, remote home monitoring, and drug store clinics.

The stock play on this is several companies who are either directly involved in the telehealth technology or those companies using it like drug stores.  According to IBISWorld the telehealth market is slated to grow at 30% for the next 5 years.  

Here are some potential players:

Rite Aid – RAD

Qualcomm- QCOM

Polycom – PLCM

CVS Caremark – CVS

Cisco - CSCO

Sources: Motley Fool, Office of Information Products and Data Analytics 

Michael Lewis New Book "Flash Boys"

There is a buzz lately about the new book by Michael Lewis called "Flash Boys."  It's about a trader who learns about high frequency trading and instead of capitalizing on the knowledge he learns he uses it to expose what is going on.  After listening to an interview with the author yesterday it seems that there is a potential of the SEC to actually make some moves to curtail some of this activity. 

Mr. Lewis had some interesting points to make during the interview.  He said that the main issue was trust in the market place and that trust is the oil that makes the whole market work.  If investors do not have trust in the market then the whole system will come down. 

High frequency trading is basically the act of brokers using super fast computers to get ahead of someone's trade to make money off of them.  An example would be a retail investor placing a trade to buy Microsoft on their computer and that order going into their online broker's system.  The online broker would notify high frequency traders of the trade for them to bid on the opportunity to front run the trade (making money in the process).  The high frequency trader would make money on the difference in the trade and the retail investor would not know anything happened. 

Albeit the amounts may be pennies on the dollar, when you are doing this across the whole market they add up to billions over the year.  The morality of this practice is definitely questionable but more to the point there is the legal question of insider trading.  Here is a link to Mr. Lewis's book: