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Investor Toolkit: How to manage risk when investing in the stock market

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on the fundamentals of successfully investing in the stock market. Each Investor Toolkit update gives you a fundamental tip and shows you …read more »

BP oil spill could turn oil sands stocks into blue chip stocks

In response to the BP oil spill in the Gulf of Mexico, regulators will probably require offshore drillers to install more equipment aimed at preventing future spills. These extra costs would hurt the profits of companies that are active in the Gulf.

That should spur more development of less-risky onshore oil …read more »

3 risks of investing in drug stocks

Investors often comment that we sometimes differ with the mainstream view on which stocks make good investments. That’s especially true with drug stocks.

The general view on these stocks seems to be that they are can’t-miss investments because the baby boomers are reaching an age when they will need drugs …read more »

New Free Report - Gold Investing: 7 Profitable Strategies for Investing in Canadian Gold Stocks

Discover how you can make higher profits in gold investing — and minimize your risks

Click here to immediately download our new free report, Gold Investing: 7 Profitable Strategies for Investing in Canadian Gold Stocks.

When the economy is weak, gold’s popularity rises. As an informed Canadian investor, you’ve likely noticed that …read more »

3 ways to spot the best stocks for long-term gains

We’ve long relied on these three tips to find the best stocks to recommend in our investment services and newsletters, including our flagship advisory, The Successful Investor. We think they can help you pick winners, too.

1. Some of the best stocks have hidden assets: By hidden assets, we mean assets …read more »

Investor Toolkit: Beware of name-dropping promoters when you buy penny stocks

Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a new or experienced investor, these weekly updates are designed to give you specific advice on the fundamentals of successful investing. Each Investor Toolkit update gives you a fundamental tip and shows you how you can put …read more »

This well-established stock could produce strong gains for the conservative investor

We continue to think investors will profit most — and with the least risk — by buying shares of well-established companies with strong business prospects and strong positions in healthy industries.

(In the current issue of Canadian Wealth Advisor, our newsletter for the conservative investor, we update our buy/sell/hold advice …read more »

Patience is the key to profits in junior tech stocks

January 22, 2010
Posted by: Pat McKeough Filed in: Tech Stocks
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Technology has made extraordinary advances in the past decade, yet lots of investors lost money when they invested in it.

Often, that was because they invested too early. In their eagerness to get in on the “ground floor,” they bought tech stocks based mainly on potential improvements in the technology. But they failed to consider the political, financial and practical obstacles that new technology always faces.

Pioneering tech stocks rarely live up to their potential

Many investors are surprised to learn that pioneers in new or improved technology often make poor returns or worse. For instance, a number of software pioneers offered highly successful word processing and spreadsheet programs, but lost out to Microsoft’s Office suite of software, which offers both of these functions and more.

(We analyze many well-established U.S. tech stocks in our Wall Street Stock Forecaster newsletter. Click here to learn how you can get one month free when you subscribe today.)

Sony pioneered in videotape recording with its Betamax system, which was widely viewed as technologically superior to the VHS videotape system. But VHS triumphed and Betamax disappeared, mainly because VHS offered more storage on a single cassette.

Going back a couple of decades, the originator of hand-held electronic calculators, Rapid Data Systems, wound up going broke when sales of these devices first began taking off.

My #1 U.S. pick could easily make you 50% or more profits in 6 months or less. You'll learn all about this exciting company in my Wall Street Stock Forecaster newsletter. Plus, every month I'll reveal other high-quality, low-risk U.S. stocks with the potential to bring you big gains. Click here to learn how you can profit from Wall Street Stock Forecaster.

Wait until tech stocks reach profitability before you buy in

Early-technology investing is an area where the interests of investors and brokers diverge widely. If you invest too early in new technology and the company runs out of money, it will have to raise more money to stay in business. The new investors are likely to extract much better terms from the company than the early investors.

In fact, new financing can rescue the company, but dilute the interests of early investors down to zero, or close to it. That’s why successful investors prefer to hold off on investing in tech stocks that are a long way from becoming profitable, regardless of their technology’s potential.

Brokers, in contrast, have an incentive to begin covering and recommending technology stocks much earlier in the process, regardless of the obstacles. After all, if the company goes through its initial stake and needs to raise more financing, it is likely to do so through the brokers who were first to recommend its stock.

One good rule is to wait until the company that owns the new technology is cash-flow positive — that is, bringing in more money than it is paying out. Better yet, wait till these tech stocks are profitable. That may mean you miss out on some huge profits that go to the earliest investors. But you’ll also miss out on the many junior tech stocks that never turn a profit — the ones that “crash and burn,” as the saying goes.

For our latest buy/sell/hold advice on dozens of well-established companies in the fast-changing U.S. market (including many technology stocks), you should subscribe to Wall Street Stock Forecaster. Click here to learn how you can get a one month free trial.

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