In my last column, Six Free Web Sites Investors Should Bookmark, I invited readers to suggest their favorite investment Web sites. I wound up getting more than 60 suggestions, and while I can't feature every one, here are the six I think were the most useful and unique.
1. EarningsWhispers.com
Many times a company will beat the official earnings estimates, but the stock price will fall for failing to beat the "whisper" number. EarningsWhisper.com collects both the published earnings estimate and an estimate of the whisper number by polling analysts and large investors. There's also some well-written commentary about upcoming earnings reports and recent releases.
Here's the EarningsWhispers report, for example, on Cisco
(CSCO)
:
Source: EarningsWhispers.com
2. ValuePro
Back in the ancient times of investing, investors actually looked at a company's ability to generate cash to determine its value. The discounted cash flow (DCF) approach assumes that a company can grow at above-average rates for a limited amount of time, and then grow at average market rates thereafter. At the height of the Internet mania, many companies had zero value according to this approach, so investors and analysts switched to other metrics (e.g., price/eyeballs) to justify sky-high valuations.
ValuePro is a powerful and simple tool to perform DCF analysis. The sponsors of the site have done an excellent job of explaining the methodology, and their model includes the baseline value for such elements as the forward growth estimate for the company, an estimate of the company's weighted average cost of capital, and its beta.
Plus, you can override any of the parameters. For example, using the default parameters, General Electric
(GE)
is valued at $63 a share vs. a recent trade of $37. However, if you cut the forward growth rate from 12% to 6%, you get a valuation estimate of $43 a share (Amazon.com
(AMZN)
is still valued at $0 according to DCF).
3. SecuritiesSleuth
The collapse of Enron has focused investors' attention on accounting irregularities. SecuritiesSleuth publishes frequent articles on companies whose prospects look a lot less rosy than certain emailed tipsheets would indicate. The site also has educational resources on how to recognize a "pump and dump" situation, how to evaluate the quality of stock analyst research and even how to initiate legal action to recover money if you've been the victim of a stock fraud.
4. UnlockDates
The IPO market is pretty quiet now, but back when it was hot in 1999-2000, the most dangerous time for a new stock was when insider lockups expired (insiders are restricted from selling stock for at least 90 days, and more typically for six months, after an IPO). At that point, large volumes of new stock could come on the market, possibly setting off a decline in the stock price that only accelerates as other investors rush to lock in profits. So prudent investors who invest in IPOs need to keep track of when these lockups expire and cut their exposure at least a week in advance.
UnlockDates, a service of Thomson Financial, provides a handy calendar of lockup expirations, as well as some additional tools. Of particular use is the Unlock Ratio, calculated by dividing shares coming off lockup by average daily trading volume prior to lockup expiration. For example, if 1 million shares of a given company are coming off lockup, and daily volume is 100,000 shares, the Unlock Ratio is 10. The higher this number, the greater the risk.
The calendar is fairly empty right now, but it will fill up again when the IPO market recovers, probably later this year.
5. Insider Trading
Investors often assume that when corporate insiders such as executives buy or sell their company's stock, profits can be made by riding on their coattails. In fact, some corporate insiders are lousy traders, and others are simply selling to diversify their portfolios, not because they have any special insight on the company.
Insider Trading, which is also a service of Thomson Financial, ranks insiders in terms of All-Stars, Second Team and Minor Leaguers by seeing how their transactions performed over the following six months. Currently, All-Star buyers show six-month gains averaging 36%, Second Team buyers show six-month gains averaging 9% and Minor Leaguers show losses. If you saw mostly Second Team and Minor League buys of a particular company, then you wouldn't conclude that this buying forecast future good news. However, if several All-Stars were buying, that would be a bullish indicator for the stock.
6. Stock TA
There are numerous sites dedicated to technical analysis of stocks. I've included Stock TA because it is particularly well-organized and because it has an analysis of the tracking stocks for the Nasdaq 100 (QQQ), Dow Jones Industrials (DIA) and S&P 500 (SPY) right on the home page. I wrote a column nearly two years ago about the short-term indicators that I use to fine-tune investments of new cash, and here they are in one convenient source.
More Tools Can Sharpen Your Insight
Here's an example of why you should have many tools in your toolbox: The ValuePro Web site, which has a long-term (five year-plus) horizon, estimates that GE is almost 40% undervalued. The Stock TA Web site, though, which has a shorter (one- to three-month) focus, is "very bearish" on GE with a near-term target of $32.
Who's right?
As I always say, "fundamentals rule the long term, technicals rule the short term." So if you thought that adding GE to your portfolio was a good idea based on fundamental valuation, you might put in a buy limit of $33 rather than a market order at $36.
Thank you to everyone who wrote in with suggestions.
David Edwards is a portfolio manager and president of Heron Capital Management, a New York management firm. At the time of publication, his firm held positions in GE, Amazon and Cisco, although holdings can change at any
time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Edwards appreciates your feedback and invites you to send it to David Edwards.
