I am working on creating a trading system that uses fundamental and technical analysis. This system has been successful so far and I thought that it would be a good idea to create this trading journal to help track my trading history and also to see how I develop as an investor. It will also allow you to see what stocks I like and when I buy/sell them. You can feel free to follow these trades, or read my commentary for entertainment purposes. Feel free to post your comments as I would love to hear your input with regards to each trade.
I have used various fundamental analysis scores such as: Piotroski score, Slator Score, Predictability Score, Greenblatt Score, Altman Z- Score and Financial Health Score, to asses the overall health of these companies. I have then combined my technical analysis system in addition to these fundamental indicators to decide when to enter and when to exit. In addition to these, my entry and exit and position sizing is something that I have worked on for many years.
Position sizing or deciding how much of total capital to invest in an asset can be a very challenging task. My method of position sizing adjusts the position size based on the dollar volatility of the market, allowing me to control for the volatility of the market for a specific asset. In simpler terms, assets with higher volatility will have offsetting smaller positions while those with lower volatility will have larger positions. Normalizing for volatility allows me to effectively diversify our positions while giving each position the same chance of specific dollar loss or dollar gained. My exit and entry use various different technical indicators that I like to use and something that I like to keep for myself for the time being. Now that you have a basic idea of what I use to come up with these picks let us dive in.
This past week I have become interested in Utilities, more specifically, Water stocks. If you’re asking why or how would you invest in water then keep reading. If you’re wondering why would you invest in water, then let me explain. There is an increasing demand for water for various purposes such as personal, commercial and industrial use. Water is used to generate power in the majority of global power-generating entities and it is used extensively in agriculture. Freshwater supply is increasingly declining and the world population is increasing. There is no doubt that there is an investment opportunity here.
The water issues of Flint, Michigan may no longer be present in the News cycles, but I assure you they still haven’t solved the city’s water problem. Americans, among other countries with scares water supply need to wake up and realize that there is going to be significant scarcity in the coming decades. Sticking to the US alone, recent water quality reports have indicated that about half of US streams, akes and one-third of bays are polluted. Every year there is about 4 trillion Litters of untreated sewage, industrial waste and groundwater are introduced to US waters. The “quick shower” that we’ve become accustomed to every morning uses more water than a person would use in the whole day in a developing country. Get the picture? There is increasing demand, decreasing supply.
Water stocks are well liked by those who enjoy a safe and slow growth in addition to getting a healthy dividend. These stocks may not be as exciting as your Tech stocks, but they do provide stability. This stability is notably seen in earnings, cash flow, and their revenues. Furthermore, most utilities are highly regulated meaning that regulatory bodies set prices in such a way that companies can gain a reasonable amount of profit. This means that these companies are able to pass on their costs to the customers. With this notion in mind, they are almost guaranteed to be profitable.
I spent the last week digging around for various Water providers that could potentially provide a great investment opportunity. I think I have come up with a few great plays that could prove to be exceptionally profitable going forward to 2019.
what are some of the best water stocks to invest in?
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