You Asked, I'm Answering

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Part of This $500,000 Could Be Yours (Only until Tomorrow at Midnight) When you're getting the chance to make $4,000 in a month... or $8,000 in two weeks... and even $1,000 day after day after day like Andrew Keene's followers are... what you're really getting is a shot at complete freedom. That's why he's putting $500,000 on the line to help give as many folks as possible the same advantage. But come Sunday at midnight, his offer will be off the table. So don't delay - go here now. February 29, 2020 You Asked, I'm Answering By Tim Melvin Dear Reader, As the coronavirus continues to pressure the markets and the South Carolina primary is in full swing today, it strikes me as a good time to answer some reader questions we have gotten in recent weeks. Here's what inquiring minds want to know... Maybe I am confused, so I have a question to which I would greatly appreciate your response. Is it better to buy and own actual gold instead of buying or investing in gold stocks, such as buying shares of gold mining companies or other precious metals securities? Is owning gold stocks just like owning any other stock (paper money)? Thank you for your response. - Maria Maria, I am not big on gold investing. If I was going to buy gold, I would buy the ASA Gold and Precious Metals Limited (NYSE:ASA) closed-end fund. The fund invests in gold miners and actual bullion and is trading as it a huge discount to net asset value (NAV) right now. And yes, owning stock in a gold mining company is similar to owning stock in any other business. (Maria's question is in reference to the January 21, 2020 article, By Ignoring This Type of Investment, You're Leaving a Ton of Money on the Table.) How do you know if a company is profitable? Tried to put a screen on my account and had too many choices to decide from. I will contact the brokerage for assistance, but what does Tim Melvin use for criteria? Thanks so much. - Joanie In the research for this, I simply used trailing 12-month net income. (Joanie's question is in reference to the January 7, 2020 article, Break Wall Street's Rules for Fun and Profit.) How do you calculate the lowest price according to P/B? EV/EBIT? Price/FCF? Regards, and happy and healthy 2020. - Miquel I used the actual price of the stock to determine the cheapest stock. It is not a valuation measure, but just the price of the stock for this strategy. (Miquel's question is in reference to the December 31, 2019 article, The Simplest Way to New Year Profits.) What is the exit strategy for this system? - Gray We exit when it no longer meets both criteria. (Gray's question is also in reference to the December 31, 2019 article, The Simplest Way to New Year Profits.) Is PRICE/BOOK the best measure of value? - Robert Haddock Price to tangible book value is the best for financial stocks, in my opinion. In non-financials, I think enterprise value to earnings before interest and taxes (EV/EBIT). Do not use earnings before interest, taxes, depreciation, and amortizations. (EV/EBITDA). Depreciation is a real expense, and this measure can exaggerate the true cash generation ability of the company. Tim, do you ever use stop losses for any of your recommendations? If not, please explain. Thank you. - Heng Lim Never. Stop losses may create a warm and fuzzy feeling, but studies have consistently shown that they hurt long-term performance. In his study Stop-loss strategies with serial correlation, regime switching, and transaction costs, Andrew Lo of MIT found that, "Stop-loss strategies are commonly used by investors to reduce their holdings in risky assets if prices or total wealth breach certain pre-specified thresholds. We derive closed form expressions for the impact of stop-loss strategies on asset returns that are serially correlated, regime switching, and subject to transaction costs. When applied to a large sample of individual U.S. stocks, we show that tight stop-loss strategies tend to underperform the buy-and-hold policy in a mean-variance framework due to excessive trading costs. Outperformance is possible for stocks with sufficiently high serial correlation in returns. Certain strategies succeed at reducing downside risk, but not substantially." I think that you will be sharing with us great companies to invest. That is great. However, the problem I have with investing newsletters is out of the dozens of companies that are recommended, I have a hard time picking the few I should actually invest in. I don't want to invest in all recommendations but just the few that I can follow and put my faith in to invest in for the next 5-10 years. I'd rather put $10K in one company than $1K in 10 companies. Maybe I'm too ahead of myself, but if you can give us a model or guideline in the future of how we can scan through your recommendations to execute on a few of them, I would really appreciate it. Thanks! - James I can't give personal financial advice, but to achieve your goal of finding a few stocks, I think you might want to pick a strategy or sector that you really like and limit your portfolio to just those picks. As you look back through Max Wealth articles, you will find I talk about different strategies that work in different sectors, including technology, biotechnology, banking, and REITs. Pick the one that fits you best, and limit your buying to just those stocks. Hey Tim, love your approach. My question is why do you target companies that have sizeable debt? What differentiates good debt from the bad? Thanks! - Drew Good debt is debt that is being paid back, and the company passes all my credit checks. Debt repayment is better than buybacks as a wealth-building use of corporate cash. What do you think of corporate debt levels? - Anonymous Corporate debt now stands at almost half of U.S. GDP. That's is an all-time high. More concerning to me than the absolute level of debt is the looser standards that have been used to underwrite more speculative loans in the past few years. I have seen this several times in the past 30 years, and it never ends well. I am also concerned that 50% of that debt is BBB, the lowest level of investment-grade bonds. In a recession, a lot of that paper will be downgraded and some institutions and funds that can only own investment-grade bonds will become forced sellers of trillions of dollars of bonds. Most high-yield funds that can own BB or lower are fully invested, and we will see widespread selling that rattles the bond and stock market alike if this happens. I hope these questions were helpful. If you have a question that you'd like addressed, comment on your next Max Wealth article, or shoot me an email. To the Max, Tim Here's what else I'm following... Don't Sell a Single Stock Until You See This Video The stock market is swinging wildly, and investors are panicking. Do you buy the dip? Or is it time to sell? According to Dr. Steve Sjuggerud, who gained national acclaim for predicting the dot-com crash of 2000 and the bottom of the Great Recession in 2009, there is one specific step you can take today to not only protect yourself from this volatility - but profit. Here's his exact strategy. You are receiving this e-mail at, its028@gmail.com, as a part of your free subscription to Tim Melvin's Max Wealth. Remove your email from this list: Unsubscribe Manage Your Email Preferences To cancel by mail or for any other subscription issues, write us at: Tim Melvin's Max Wealth | Attn: Member Services | 1125 N Charles Street | Baltimore, MD 21201 North America: 888.384.8339; International: 443.353.4519; Fax: 410.622.3050 Contact Customer Service Website: https://maxwealth.com/ © 2020 Tim Melvin's Max Wealth All Rights Reserved. Nothing in this email should be considered personalized financial advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. 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