Some argue that the total number of stocks covered by Wall Street analysts is shrinking at an alarming rate. SmartMoney put out an interesting article underlining this fact, illustrating that the total stocks covered today is quite small compared to a few years ago.
To make the comparison more relevant, SmartMoney shows that in 2000 there were more than 7,600 firms that captured the attention of at least three analysts. Since then, the number has fallen dramatically down to below 6,000 such companies. This change could be explained in part by the fact that analysts prefer to analyze big companies which show potential for a further development.
This logic is quite simple, as every investor would rather invest in a more reliable company rather than a small one that could turn into a nightmare. Another factor that determines analysts' decision to cover the bigger companies is the fact that the bigger companies tend to have more news available that the analysts can use to discuss the companies new developments that attract investor attention. However, limiting the decision of which stocks to cover to these criteria could leave out many potentially attractive stocks for investors to consider.
With the announcements this morning that Cerberus Capital Management LP, a $24 billion investment firm, will buy 80.1% of Chrysler for $7.4 billion, it's officially a trend that private equity is in the driver's seat. Cerberus already owns 51% of General Motors Corp. (NYSE: GM)'s GMAC -- the Finance unit -- and Ford Motor Co. (NYSE: F)'s founding family wants to sell out. Why does private equity find the automobile business so appealing?
There's an interesting side issue going on here: founding families are realizing that now is the time to sell. This topic is being covered in excruciating detail [subscription] with the proposed merger between News Corp. (NYSE: NWS) and Dow Jones & Company Inc. (NYSE: DJ).
Founding families have it great. They can clip million dollar annual coupons and spend their time riding motorcycles and playing tennis. But selling out means giving up on that lifestyle. So the willingness of founding families to sell spells trouble for public equity investors. Here's why:
Dow Jones (NYSE: DJ) implied volatility Flat prior to CNBC report of NWS bid.
NWS makes $60 dollar bid for DJ according to CNBC's David Faber.
DJ overall option implied volatility of 24 was near its 26-week average according to Track Data prior to DJ trading halt, suggesting non-directional risk before report.
New York Times (NYSE: NYT) volatility spikes on NWS interest in DJ reported by CNBC.
NYT is recently up $1.82 to $25.21. NWS makes $60 dollar bid for DJ according to CNBC's David Faber.
NYT May option implied volatility of 27 is above its 26-week average of 23 according to Track Data, suggesting larger price risk.
Just imagine: Your car begins to stall and you pull into the auto repair shop. After a prolonged examination, the mechanic says, "it's your transmission." You reply, "let's have a look." You lift the hood, dig around and say, "there, it was just a detached spark plug." Then, you spend the money you saved on a sweet new set of 14" diamond cut-out chrome spinner hubcaps.
Yes, this could be you. In a recent article, SmartMoney.com offers some guidance on car independence, with Five Auto Repair Shop Tricks, one of which claims that sometimes, when the mechanic has no idea what's wrong, he'll randomly replace parts. According to the story, these so-called parts-replacers "just don't have the knowledge to properly diagnose car troubles ... but some are purposely lax, banking on the idea that you'll keep coming in to get more work done."
Whether or not you suspect your auto repair shop is not exactly 100 percent honest, it's good to have a general understanding of how your four-wheel money pit works. DoItYourself.com, which has categories on how to do practically anything on your own -- including get a divorce -- has a fairly detailed section on auto repair, with such a comprehensive database on clamps and hangers, belts and fuel lines, radiators and filters, that you may just decide, you know, I'd rather pay to have this done.
But you can always count on YouTube's Backyard Mechanics, who in the following video demonstrate exactly how to change the oil on your Dodge Intrepid. (Warning: Content may include flannel shirts and/or excessive facial hair):
B. Brandon Barker is the author of the novel Operation EMU.
This story is more about saving than investing. If your net worth is less than $10,000, you need to save, save and save some more! Future articles will address larger sums.
I have been asked many times in person and in the comments section about how to get started as an investor. Since it is essential to have something to invest besides your time, two things above all are required: Educate yourself, and be thrifty in your spending habits.
Most people reading the AOL Money & Finance section probably have ten grand to invest. If you do not currently have $10,000 to invest you are in trouble and there is no time to waste.
First: Reduce spending on extras, even extras you think you need to live.
The Power 30 is Smart Money's November 2006 cover story. It features Warren Buffett and touts the magazine's list of 30 people you could learn from. There is no doubt you could learn from many of these brilliant economic minds. However, Smart Money did not choose to do much more than simply identify them. There was almost nothing to learn unless you wanted to know what they were currently reading. This story would have been better placed in People magazine than Smart Money.
For example, Whitney Tilson, Founder, T2 Partners is listed as having a large following among value investors. They mention him starting his investment fund at age 32 and doubling his investors' money in just seven years. BIG DEAL, I say. They must be joking. No offense to Mr. Tilson, but the average market return is 10% so doubling your investment in seven years is basically an average showing -- minus his fees and subscription costs, it might even be worse than the average.
Here is my Power List -- six glaring omissions of people left off the list that I think matter much more than some that made the cut:
Alan Abelson, lead editorial writer for Barron's who is quick to point out market fallacies with an astute and well-read high level of cogitation. He gives you something to think about every week.
James Cramer, of the Street.com and NBC fame who has a following that long ago passed ten's of millions of readers, listeners, watchers and Wall Streeters. He may not always be right, but he is very influential.
Bill Gates, of Microsoft Corporation (NASDAQ:MSFT) fame, the wealthiest man in the world and largest philanthropist with his finger on the pulse of many worlds, I need not say more.
Alan Greenspan may not be sitting on his Federal Reserve perch these days but when he speaks the world is listening. If he were to change his manner of expression to one of more specific and harsh tone you would not want to be holding the stock or bond he was trashing.
Charlie Munger is a titan in the investment world and has had the ear of Warren Buffett for several decades. If Buffett is listening, you and I should be listening.
Ken Heebner of the CGM Funds is one of those guys you would pay to have lunch with and has a track Record that makes some of the others seem like novices, for some real insights read this.
There are easily another fifty that deserve mention. Next time Smart Money, please give us some information we can use and not more lists. I get something valuable from every issue of Smart Money, but this story was not it.
Interested in reading more? Check out my other posts for Blogging Stocks here.
Sheldon Liber is the CEO of a small private investment company and the vice president for Design and Research of an Architecture & Planning firm.
Some argue that the total number of stocks covered by Wall Street analysts is shrinking at an alarming rate. SmartMoney put out an interesting article underlining this fact, illustrating that the total stocks covered today is quite small compared to a few years ago. 
With the announcements this morning that 
Dow Jones
Just imagine: Your car begins to stall and you pull into the auto repair shop. After a prolonged examination, the mechanic says, "it's your transmission." You reply, "let's have a look." You lift the hood, dig around and say, "there, it was just a detached spark plug." Then, you spend the money you saved on a sweet new set of 14" diamond cut-out chrome spinner hubcaps.
This story is more about saving than investing. If your net worth is less than $10,000, you need to save, save and save some more! Future articles will address larger sums.
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