Investment U Pop Quiz: What’s Your IU IQ?

By Dr. Steve Sjuggerud, President, Investment U
Tuesday, August 12, 2003: Issue #264

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Pop Quiz Question #1: Insider Action – How To Use It For Profit (from E-Letter #258)

Approximately how long after a major insider sell-off will a company’s stock reflect the sell-off by dropping significantly?

A. One week.
B. One month.
C. One year.
D. Never.

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Pop Quiz Question #2: Never Miss The Mega-Trend Again (from E-Letter #252)

When a stock goes below its 40-week moving average, it’s time to:

A. Sell it.
B. Load up on it.
C. Sell options on the stock.
D. Consider the stock in the “danger zone” – and buy it in conservative amounts.

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Pop Quiz Question #3: Mega Gains from Micro Stocks (from E-Letter #257)

What qualifies a stock as a “micro-cap” stock?

A. Its market capitalization is valued at less than $10 million.
B. Its market capitalization is at $100 million or below.
C. It’s wearing a very small hat.
D. Its market capitalization is less than $500 million.

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Pop Quiz Question #4: Getting Out With A Profit (from E-Letter #250)

What is our trailing stop percentage (i.e. the percentage of decline in a stock from its high to the point at which we sell it to prevent a catastrophic loss)?

A. 25%
B. 10%
C. 40%
D. 50%

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Pop Quiz Question #5: The Best Place to Put Your Real Estate Dollars Today (from E-Letter #256)

Well What is the best place to put your real estate dollars today?

A. A second house.
B. A retail building such as a small store or motel.
C. Into a different investment, because real estate’s in a bubble.
D. Real estate stocks and homebuilder stocks.

OK, then let’s see how you did. On to the answers!

Answer #1: C – One year. Generally speaking, a stock’s price will fall markedly about one year after a major wave of insider selling. However, with insider-sales reporting available more quickly than it has been in previous years, that time frame can be even less. From E-Letter #258.

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Answer #2: A – Sell it. When a stock goes below its 40-week moving average, this is a good time to sell. Conversely, it’s a good time to own a stock when it is above its 40-week moving average. From E-Letter #252.

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Answer #3: D – Its market capitalization is $100 million or less. Stocks of this size can be affected significantly by recommendations from investment advisors and publications. However, such volatility can mean greater profits, too. From E-Letter #257.

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Answer #4: A – 25%. We use a 25% trailing stop because it’s an easy number for us to remember. Otherwise, it’s a rather arbitrary number, but very effective in limiting our losses in any one investment. From E-Letter #250.

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Answer #5: D – Real estate stocks and homebuilder stocks. Investing in real estate has officially reached the level of cocktail-party talk-the death knell for any investment angle (remember all the chattering about tech stocks back in the late 1990s?). However, investing in Real Estate Investment Trusts (REITs) and homebuilders is a sound way to spread risk and avoid the hassles of being a landlord, while still having a stake in investment real estate. From E-Letter #256.

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So how did you do? I hope that today’s Pop Quiz shows you how much ground we’ve covered just in the last few e-Letters. Please let us know what you might like to learn about in future issues of the Investment U e-Letter.

Good Investing,

Steve

 Today’s Investment U Cribsheet

• Everything we’ve covered in today’s Pop Quiz is fully explained in the IU e-Letter Archives, which are easily accessible by clicking here.

• Insider Selling: How to Profit From The Insiders’ Unfair Advantage
• The Healthcare Debate: We’ll Stick to Earning Profits
• CEOs: Put Your Money Where Your Mouth Is

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