Alamy Forbes columnist Phil DeMuth recently posed the question: "What is your edge as an investor?" After admitting that having an edge is not "as easy as it sounds," DeMuth walks through some possible edges. These range from the highly unlikely/illegal (such as working at the FDA and investing in a drug stock before its approval) to the tougher to quantify -- like being "good at spotting trends" or being "a market-beating stockpicker." So if you're not Warren Buffett or willing to risk jail time for insider information, is there any hope for you to beat the market? Do individual investors have any advantages over the world of Wall Street Goliaths? Absolutely! The Forbes article points out several strategies that everyday investors can implement to at least equal the market's return (through investing in index funds) and maybe even do a bit better (by buying index-like investments that seek out market anomalies). But aside from strategies, there are some inherent qualities of being an individual investor that give you an edge. These are advantages that could make you more successful than even the best mutual fund managers -- not to mention famous investors like Warren Buffett. In fact, Buffett once quipped that if he had only $1 million in net worth (instead of his current $53.5 billion), he could guarantee 50% annual returns. So why is he so confident in making such a bold promise? He never specifically answers that question, but I've put together a list of five "edges" small investors have that I think even Buffett would agree with: 1. You've got no pesky shareholders. Much of a money manager's time is spent thinking (and worrying) about their customers (aka, shareholders). A large investor might call up and ask why his money's not growing as quickly as he'd like -- and then after that, another could send an email explaining their moral objections to the money manager's most recent purchase. It never ends. But when you're investing for yourself, you only have yourself to answer to. No one will harrass you about inevitable downturns or berate you for a weak quarter. 2. Your interests are perfectly aligned. Believe it or not, not all mutual fund managers own shares of their fund. In fact, a 2007 study from the Georgia Institute of Technology discovered that only about half of the managers of the 1,406 funds they studied did. So if they're not profiting directly off their investing decisions (and knowing that self-interest is a powerful tool), how are you to believe they're putting 110 percent of their focus in doing the same for you? You can't. But when you're working on growing own portfolio, you know your best interest and full focus is tied directly to your own money -- and there's no doubt you'll be giving 110 percent of your focus to how best to grow it. 3. You've got flexibility. Mutual funds typically have a stated purpose -- and their investing decisions must wind up within those boundaries. Large-cap funds must invest mostly in large caps, emerging market funds in foreign stocks, and so on. But when you're investing on your own behalf, you can own a broad assortment of large caps, small caps, real estate investment trusts, value stocks, growth stocks -- your universe to pick from is limitless. 4. You can control costs. The majority of mutual funds have to trade stocks daily to maintain cash flows. After all, new money is constantly flowing in. And some investors also need to withdraw their money for a variety of reasons. This means cash is regularly coming in and cash must regularly go out. Unless the manager keeps a hefty chunk of his portfolio in cash reserves to account for this, he'll likely need to make regular purchases and sales. Of course, all of this trading comes with costs. Every transaction has a commission associated with it. On top of that, all the regulatory paperwork behind each trade requires staff members to maintain these day-to-day operations. Yet when you're managing your own money, you only pay fees on transactions. You don't have a staff, and -- if you buy with the intent to hold for the long term -- you incur minimal transaction costs. Which brings me to the final edge... 5. You've got time. The biggest edge an individual investor has is that time is on their side. They can buy a stock today -- and hold for decades, without worrying about any external pressure to sell, as is common on Wall Street. Often, you've got a goal in mind: retirement, kids' college fund, new home. And, more often than not, these are many years out in the future. And although stocks are fickle in the short term -- jumping up here, dropping off a cliff there -- over the long term, the market's trajectory is consistently up. In fact, my Motley Fool colleague Morgan Housel recently calculated that an investor who bought and held over a 20-year period had positive returns ! He calculates that someone's ever returned over a 30-year period is a 250 percent gain, post-inflation. Those are returns I think all of us could get behind. So as you can see, being a small investor looking out for your own best interests is a critical edge you have over Wall Street.
Top 5 Small Cap Companies To Buy Right Now: KongZhong Corporation(KONG)
KongZhong Corporation, together with its subsidiaries, provides wireless interactive entertainment, media, and community services to mobile phone users in the People's Republic of China. It also involves in the development, distribution, and marketing of consumer wireless value-added services, including wireless application protocol, multimedia messaging services, short messaging services, interactive voice response services, and color ring back tones. In addition, it offers interactive entertainment services, such as mobile games, pictures, karaoke, electronic books, mobile phone personalization features, entertainment news, chat, and message boards; and through Kong.net offer news, community services, games, and other interactive media and entertainment services; and sells advertising space in the form of text-link, banner, and button advertisements. Further, the company develops and publishes mobile games, including downloadable mobile games and online mobile games cons isting of action, role-playing, and leisure games. As of December 31, 2009, it had a library of approximately 300 internally developed mobile games. Additionally, it develops online games; and provides consulting and technology services, as well as media and net book services. The company was formerly known as Communication Over The Air Inc. and changed its name to KongZhong Corporation in March 2004. KongZhong Corporation was founded in 2002 and is headquartered in Beijing, the People?s Republic of China
Advisors' Opinion:- [By Wyatt Research Staff]
As a Chinese ADR, KONG is the leading provider of 2.5G wireless interactive entertainment, media and community services in terms of revenue to customers of company China Mobile. Institutions snatched up shares at an alarming rate with an increase of 26.7% in institutional ownership over the past three months.
A consensus of analysts expect earnings to increase by 16.9% in 2011 and 19.6% in 2012. Company earnings are estimated to increase by 62.1% this year.
Top 5 Small Cap Companies To Buy Right Now: OCZ Technology Group Inc(OCZ)
OCZ Technology Group, Inc. designs, develops, manufactures, and distributes computer components for computing devices and systems worldwide. It primarily offers solid state drives, flash memory storage, memory modules, thermal management solutions, AC/DC switching power supply units, and computer gaming solutions. The company?s products are used in industrial equipment and computer systems; computer and computer gaming solutions; mission critical servers and high end workstations; personal computer (PC) upgrades to extend the useable life of existing PCs; high performance computing and scientific computing; video and music editing; home theatre PCs and digital home convergence products; and digital photography and digital image manipulation computers. OCZ Technology Group, Inc. offers its products to retailers, on-line retailers, original equipment manufacturers, systems integrators, and distributors. The company was founded in 2002 and is headquartered in San Jose, Califo rnia.
Advisors' Opinion:- [By Wyatt Research]
The maker of solid state drives for computers reported revenue more than doubled and posted adjusted net income of 1 cent per share. It predicted a full-year revenue rise of at least 65 percent. The share price has jumped 210 percent in the past year.
10 Best Blue Chip Stocks To Own For 2014: ATA Inc.(ATAI)
ATA Inc., through its subsidiaries, provides computer-based testing services in the People?s Republic of China. It offers services for the creation and delivery of computer-based tests utilizing its test delivery platform, proprietary testing technologies, and testing services; and provides logistical support services relating to test administration. The company?s computer-based testing services are used for professional licensure and certification tests in various industries, including information technology (IT) services, banking, securities, teaching, and insurance. Its e-testing platform integrates various aspects of the test delivery process for computer-based tests ranging from test form compilation to test scoring, and results analysis. ATA also provides career-oriented educational services, such as single course programs, degree major course programs, and pre-occupational training programs focusing on preparing students to pass IT and other vocational certification tests; test preparation and training programs and services to test candidates preparing to take professional certification tests in securities, futures, banking, insurance and teaching industries; online test preparation and training platform for the securities and banking industries; and test preparation software for the teaching industry. In addition, the company offers HR select employee assessment solution, an online system that utilizes its proprietary software and an inventory of test titles to help employers improve the efficiency and accuracy of their employee recruitment process. As of March 31, 2010, it had contractual relationships with 1,988 ATA authorized test centers. The company serves Chinese governmental agencies, professional associations, IT vendors, and Chinese educational institutions, as well as individual test preparation services. ATA Inc. was founded in 1999 and is based in Beijing, the People?s Republic of China.
Advisors' Opinion:- [By Wyatt Research Staff]
The Chinese-based educator spiked higher recently after it exceeded analysts' expectations. Revenue and adjusted earnings soared 78% and 269%, respectively. Its long-term annual growth rate is 15%.
Analysts at Zacks Investment Research upgraded shares from "neutral" to "outperform".
Top 5 Small Cap Companies To Buy Right Now: Panera Bread Company(PNRA)
Panera Bread Company, together with its subsidiaries, owns, operates, and franchises retail bakery-cafes in the United States and Canada. Its bakery-cafes offer fresh baked goods, sandwiches, soups, salads, custom roasted coffees, and other complementary products, as well as provide catering services. The company also manufactures and supplies dough and other products to company-owned and franchise-operated bakery-cafes. As of March 29, 2011, it owned and franchised 1,467 bakery-cafes under the Panera Bread, Saint Louis Bread Co., and Paradise Bakery & Cafe names. The company was founded in 1981 and is based in St. Louis, Missouri.
Advisors' Opinion:- [By Dan Moskowitz]
Now that Panera has become a mainstream American brand with millions of loyal customers that enjoy one of the most casual and comfortable atmospheres available,��it�� a long-term OUTPERFORM. However, a tentative consumer, a somewhat poor valuation, and an artificially-inflated stock market are reasons�for caution.
- [By Roberto Pedone]
One casual dining player that insiders are active in here is Panera Bread (PNRA), which is a national bakery-cafe concept with 1,652 company-owned and franchise-operated bakery-cafe locations in 44 states, the District of Columbia and Ontario, Canada. Insiders are buying this stock into modest strength, since shares are up 5.2% so far in 2013.
Panera Bread has a market cap of $4.8 billion and an enterprise value of $4.5 billion. This stock trades at a reasonable valuation, with a trailing price-to-earnings of 26.28 and a forward price-to-earnings of 21.32. Its estimated growth rate for this year is 15.8%, and for next year it's pegged at 15.1%. This is a cash-rich company, since the total cash position on its balance sheet is $341.06 million and its total debt is zero.
The CFO just bought 1,500 shares, or about $252,000 worth of stock, at $168.58 per share.
From a technical perspective, PNRA is currently trending below both its 50-day and 200-day moving averages, which is bearish. This stock recently gapped down big from $187.50 to its low of $165.55 a share with heavy downside volume. That move has now pushed shares of PNRA into oversold territory, since its current relative strength index reading is 25.59. Oversold can always get more oversold, but it's also an area where a stock can experience a powerful rebound higher from.
If you're bullish on PNRA, then look for long-biased trades as long as this stock is trending above some key near-term support at $165.55, and then once it breaks out above some near-term overhead resistance levels at its 200-day of $171.33 a share to more resistance at $172.50 a share with high volume. Look for a sustained move or close above those levels with volume that hits near or above its three-month average volume of 439,019 shares. If that breakout triggers soon, then PNRA will set up to re-fill some of its previous gap down zone that started at $187.50 a share. Some possible upside targets if PNRA gets into that gap with volume are $175 to $180 a share.
- [By Fabian]
Most of you have probably eaten at one of these franchise bakery-cafes. If not I highly recommend it, as for the company itself they are exceptional. Profit soared 50% in the first quarter, operating margins rose several percentage points, and Panera is sitting on $300+ million of cash. Right now it’s at a 30% discount to its peer averages and the stock is very cheap when valued against future earnings. Strong buy expect it to rise to $105.
Top 5 Small Cap Companies To Buy Right Now: FuelCell Energy Inc.(FCEL)
FuelCell Energy, Inc., together with its subsidiaries, engages in the development, manufacturing, and sale of high temperature fuel cells for clean electric power generation primarily in South Korea, the United States, Germany, Canada, and Japan. The company offers proprietary carbonate Direct FuelCell Power Plants that electrochemically produce electricity from hydrocarbon fuels, such as natural gas and biogas. Its fuel cells operate on a range of hydrocarbon fuels, including natural gas, renewable biogas, propane, methanol, coal gas, and coal mine methane. The company also develops carbonate fuel cells, planar solid oxide fuel cell technology, and other fuel cell technologies. It provides its products to universities; manufacturers; mission critical institutions, such as correction facilities and government installations; hotels; and natural gas letdown stations, as well as to customers who use renewable biogas for fuel, including municipal water treatment facilities, br eweries, and food processors. The company was founded in 1969 and is headquartered in Danbury, Connecticut.
Advisors' Opinion:- [By SmallCap Investor]
The developer of stationary fuel cells used by commercial and government customers might be headed for a rebound from a pullback that began this spring - which has left the stock down 39 percent year-to-date.
- [By Roberto Pedone]
Fuelcell Energy (FCEL) designs, manufactures, sells, installs and services ultra-clean, highly efficient stationary fuel cell power plants for distributed baseload power generation. This stock is trading up 7.2% to $1.01 in recent trading.
Today’s Range: $0.94-$1.01
52-Week Range: $0.83-$1.95
Volume: 1.27 million
Three-Month Average Volume: 1.04 million
From a technical perspective, FCEL is ripping higher here right above its 50-day moving average of 92 cents per share with above-average volume. This move is quickly pushing shares of FCEL within range of triggering a near-term breakout trade. That trade will hit if FCEL manages to take out its 200-day moving average at $1.05 and then once it takes out more overhead resistance at $1.06 with high volume.
Traders should now look for long-biased trades in FCEL as long as it’s trending above its 50-day at 92 cents per share, and then once it sustains a move or close above those breakout levels with volume that hits near or above 1.04 million shares. If that breakout hits soon, then FCEL will set up to re-test or possibly take out its next major overhead resistance level at $1.18. Any high-volume move above $1.18 will then put $1.39 into range for shares of FCEL.
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