Want to invest wisely in today's bear market?
The secret, says Jon Markman, managing editor of MSN's MoneyCentral Investor Web site, is to take the economy's pulse by scouring companies' economic reports, filtering out the best picks and watching smart money's every move.
"Train yourself to read, to put together a macro view of the world through financial reports," said Markman, author of the recently published book "Online Investing: How to Find the Right Stocks at the Right Time." "Once you establish a big economic point of view, you can drill down the best investments for that type of environment."
Why do today's investors need to try their hand at being oracles? Because if companies like Cisco, Nortel and Texas Instruments are saying that even they have no idea what the economic future holds, you know it's a tough climate where it's pretty much everyone for themselves.
"For companies of this caliber to be blindsided suggests the downward spiral is much more severe than people really understand," said Markman, a weekly columnist for MoneyCentral and former writer and editor for The Los Angeles Times. "It's important for investors to separate false beliefs from the truth."
Fortunately the truth is out there, tucked into the Internet's nooks and crannies. And, Markman said, learning what's happening inside various industries may prove your best investment bet.
"Online investing is good for finding new ideas," Markman said. "Next, you've got to research those ideas."
For example, if the United States boosts its attacks on Iraq, you might predict an energy price spike. So you need to research natural gas and oil drilling companies.
Screening stocks
By using online stock screener software Markman recommends MoneyCentral's Link at msn.com, www.barcharts.com and stockcharts.com you can select the industry you are interested in, in this case energy, and use screening criteria to check which oil drilling stock is the cheapest or which natural gas options are under or overperforming.
For economic news, Markman recommends www.dismalscientist.com, and the online financial pages of the Wall Street Journal (www.wsj.com), The New York Times (www.nytimes.com) and the Washington Post (www.washingtonpost.com).
For company-specific research, he touts his Money Central at msn.com (it was named the best Web site for investors by Barron's magazine for four years running), as well as marketguide.com, 10Kwizard.com and www .freeedgar.com. For portfolio tracking, he likes MSN, clearstation.com and quicken.com.
By mining these sites, you can unearth raw data, SEC documents and other statistical information you need.
Markman also recommends finding out what the "smart money" is doing.
"I like to perform legal espionage on hedge funds," the columnist said. "If you run a screen at MoneyCentral for which stocks are outperforming the most, you find a lot of names you never heard of. You can see who are the smart people driving up that price."
Investment tracking
To track top investors, Markman goes to www.freeedgar.com. There, you can type in the outperforming stock's symbol, click on filings and look for the ones listed as "13Gs." These documents name the buying mutual or hedge fund, list how much they own as well as the manager who bought it (an SEC filing is required when a manager buys more than 5 percent).
Another Markman favorite is lionshares.com, which lists hedge fund managers' names and what the stock they own is worth.
"It gives you a sense of if you are on the right track," Markman said.
Then you can compile a list of the savviest portfolio managers to track and mimic.
As for Markman, his year 2000 strategies "worked well until the meltdown."
Though his momentum portfolio did poorly, his growth picks and value stocks outperformed the market by two to three times until September, he said. Then the deterioration began; his portfolio ended the year down 28.1 percent.
Right now, value stocks those with price-to-earnings ratios lower than the market, which these days means the Dow Jones industrials like tobacco, paper and coal producers are still in favor. Markman estimates the market is about a quarter of its way through the value cycle.
Given this climate, he recommends that investors focus on stocks that are cheap relative to cash flow and earnings, and that have insider buying. To spot the insiders with the best track records, Markman suggests checking out the site insiderscores.com.
Time testing
How much time do you need to pour into being a good, serious investor?
"It depends on how interested you are in this stuff," Markman said. "For the majority of people, buying a few index funds is all they need to do. They can do that once in their lifetime and never spend another moment's thought."
Armchair investors take note: Beating the market using online techniques can be done in 30 minutes a day, month or year.
"Of course, to become an expert, a whiz a superb investor will require 30 to 50 hours a week of intense study," Markman said. "All of which can be done online and with a telephone."
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