The stock recommendations of brokerages should be treated as being absolutely valueless. Brokerage houses are contracted by various companies, at start up, or whenever a share release is issued; to sell those shares.
The shares are offered first to huge investment companies, at a discount, they don’t buy them for the same price you and I do. If they are finding them hard to move because the big investors think they’re over valued, or they’re rubbish, they start fishing them out to smaller investors. Often with the accompanying buzz words, and pumped up language. If you are contacted by a broker telling you to get into this, its going to be big, beware, be conservative.
Brokerage houses are commercial entities, they don’t make money by giving good advice to small investors, they make big money by selling shares wholesale, and giving good advice to their huge clients. Lets face it, if I’m putting a hundred million a year through your brokerage, I want a return, I want good advice, and good investments, or I’ll take my money else where. If you’re a small investor, they don’t make money off you. If they dump a few grands worth of dud shares on you, and you leave them, so what.
If you’re going to invest money on the stock market, devise your own investment strategy, buy the shares you think are a good trade. Learn the fundamentals. Learn why shares go up before a dividend release, and then fall. If you’re buying to resell at a greater value, learn which shares are undervalued, and why. Find out whats happening in the market, and whats driving it.
These days access to the market for the common man is more available than it has ever been. Plug in, turn on, and learn. The cut and thrust of the market can’t be studied at college, you’ve got to be in there gaining experience in the market today.
My tip, check out the smaller exploration companies, particularly iron ore. The Chinese Juggernaut needs steel, and is funding exploration, and mining. Also the burgeoning middle class world wide, but particularly Russia and china, are fueling a demand for gold, new gold companies coming to market may be well worth looking at.
Also the ramifications of the sub prime market lending practices is going to mean that some property is going to be sold cheap, real cheap. It may be of no value today, but it is hard to believe that a block of land, will not appreciate over time, no matter where it is. In ten years it may be that sub prime property will entirely recover its former value. It might be a good idea to keep a keen eye out for which companies are exposed to this liability, their share price is sure to fall, once they disclose, and this may be a good buy price, particularly for blue chip stocks.