When a security or a class of assets sees its market-driven price move in the opposite direction of the broad market or its competition. The move could be in either direction, but generally occurs as a result of good performance in the face of negative broad market performance. The meaning is often extrapolated out from just asset prices to business and market fluctuations. If a company is recording increased sales while its competitors lose business, that company would be "bucking the trend". Taobiz explains Buck The Trend It may be a bullish signal when a stock is able to resist a prevailing downtrend in its own industry or against the broad market. This suggests that investors are attracted to the stock despite negativity surrounding its competitors and peers.
A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these bubbles are easily identifiable. Former Federal Reserve Chairman Alan Greenspan famously coined the term "irrational exuberance" referring to asset bubbles. Under the bubble theory, large overvaluations of assets can persist for many years, but eventually burst, causing precipitous declines before returning to more reasonable prices. Taobiz explains Bubble Theory One of the most famous historical examples of an asset bubble is the so-called "tulipmania" in the Netherlands during the 1630s. Contemporary examples include the dotcom bubble in the late 1990s, and the real estate bubble in the U.S. in the late 2000s. The bubble theory is controversial among those who believe in the theory of efficient markets. Efficient market theorists believe that market participants are rational, and therefore would not buy into asset bubbles if they were readily identifiable. Rather, these theorists argue, clear overvaluations would be driven down to their true value by savvy market participants who would sell the asset, anticipating a decline to the true value.
A company whose valuation greatly exceeds that suggested by its fundamentals. The first well-documented bubble company was the South Sea Company, which caused the South Sea Bubble in 1720. A bubble company arises when speculators continuously buy up the stock in expectation of increased future earnings. However, bubble company shares often become worthless once the speculative bubble bursts. Taobiz explains Bubble Company One common characteristic of a bubble company is scandal. For example, during the dotcom bubble many internet-based firms traded at high multiples under the expectation of generating high levels of future growth. When earnings did not meet analysts’ expectations, many firms began to cook the books in order to manipulate their bottom lines. once the internet bubble burst, the individual bubble companies either went bankrupt or experienced massive drops in their share prices.
A type of recommendation to buy an asset once the price is able to surpass an influential level of resistance. A move above resistance is used as a buy signal because an increase in upward momentum often follows the breakout. Buying a break is a strategy often used by traders who incorporate the use of chart patterns, trendlines and other technical indicators into their trading. Taobiz explains Buy Break For example, suppose a stock appears to have met resistance at the $50 price level for the last year. Many traders will watch the price movement around $50 very closely because a break above the resistance would suggest that a likely surge higher will follow. Technical traders use a break above resistance to signal a good opportunity to buy because a resulting surge of upward momentum commonly follows.
A buzz word coined by Jim Cramer based on the idea that "buy and hold" is a losing strategy. Cramer's buy-and-homework strategy is to spend at least one hour a week researching each stock in your portfolio. The research the buy-and-homework strategy calls for can include listening to conference calls, knowing what analysts are looking for, reading the news stories and reading financial statements. Cramer often points out that everything is available easily and for free on the web. Taobiz explains Buy And Homework There are two main arguments that investors use against this strategy: people don't have the time, and if you hold on long enough, the stock will come back. Cramer's argument for the first excuse is that if an investor does not have the time to spend researching each stock in their portfolio for at least one hour per week, they can hand off their portfolio to a professional manager (e.g., through a mutual fund). The latter is even easier for Cramer to refute – just to look at a stock like Enron.
A passive investment strategy in which an investor buys stocks and holds them for a long period of time, regardless of fluctuations in the market. An investor who employs a buy-and-hold strategy actively selects stocks, but once in a position, is not concerned with short-term price movements and technical indicators. Taobiz explains Buy And Hold Conventional investing wisdom tells us that with a long time horizon, equities render a higher return than other asset classes such as bonds. There is, however, a debate over whether a buy-and-hold strategy is actually superior to an active investing strategy; both sides have valid arguments. A buy-and-hold strategy has tax benefits, however, because long-term investments tend to be taxed at a lower rate than short-term investments.
A corporate buyout in which the acquirer sells off a piece of the company in order to pay down some of the debt used to finance the initial buyout. The acquirer buys the company by taking on debt and then repays it with the target’s assets once it has control. This is a strategic method used in cases where the target company has undervalued assets that the acquirer seeks to exploit. Taobiz explains Bust-Up Takeover This style of buyout, as with any leveraged buyout, involves heavy analysis on behalf of the acquirer to adequately value the target company’s assets and to make sure that the return on those assets pays for the added cost of debt. If the target company has significantly undervalued assets and the acquirer has little cash (and so needs debt to fund the purchase), this strategy could be implemented to successfully unlock value.
An exchange-traded fund (ETF) that invests in business software companies, with the objective of replicating the performance of an underlying software index. A business software and services ETF includes companies engaged in a diverse range of business activities that are driven by software - from productivity and enterprise information management, to security and customer relationship management. These ETFs are better known as software ETFs. Taobiz explains Business Software & Services Industry ETF A software ETF will outperform when business demand for technology is robust, which is the case when the economy is in growth mode. Software ETFs generally include U.S. giants such as Microsoft and Oracle, as well as smaller companies like Salesforce.com, Adobe Systems and Intuit. Depending on the index on which the ETF is based, the fund may hold U.S. software companies only, or may include overseas companies like SAP and Check Point Software as well.
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