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Random walk says that stock price movement is random. It has the same probability of a stock to go up or to go down. So it is impossible to predict price movement, thus taking profit from that. Because of that, the best strategy is therefore buy and hold. It is still a debate whether this theory is true or not.

Oct. 30 — US gross domestic product contracted at a 0.3 percent annual pace, less than forecast, a Commerce Department report showed today in Washington. The last major economic data before the election also showed that a record two-decade consumer spending boom ended last quarter as the credit crunch deepened.

Consumer spending dropped at a 3.1 percent annual pace, the biggest since 1980. The 6.4 percent rate of decline in spending on non-durable goods, like clothing and food, was the biggest since 1950. But narrower trade deficit and a smaller decline in inventories prevented a deeper contraction.

Relative price strength measures price trends that indicates how a stock is performing relative to other stocks in its industry. It is calculated by dividing percentage changes of a stock with the percentage changes of an appropriate index.

The PEG ratio compares a stock price/earning (P/E) to its expected EPS (Earning Per Share) growth. If a company’s stock has P/E 20, and its EPS is expected to grow 20%, then PEG will be 20/20 = 1. PEG equals one, means that it has fair value not undervalue nor overvalue.

PEG can help investor in finding low valued stock. If PEG lower than 1, it is possibly a sign of undervalued stock. In addition, if PEG is greater than 1, it might indicate that the stock is overvalued. Growth stock usually has PEG greater than 1 because it is expected to have high growth. Always remember to compare PEG and other ratio with other companies which are in the same industry and preferable the same size.
The hard thing when using PEG is getting the EPS growth. We can’t predict EPS growth accurately, although companies usually set the companies growth target. Anything can happened in the future, so PEG might be misleading.

Preferred stock has higher priority than common stock. Preferred stock provides a specific dividend that is paid before any dividends are paid to common stock holders. Prefer stock pays a fix dividend, but the company does not have to pay this if it doesn’t have the money to do so. Preferred stock also has higher priority in the event of liquidation. Preferred stock holders are paid first than common stock holder in the event of bankrupt. However, preferred stock does not have any voting rights like common stock holder.
Preferred stock are usually cumulative, the dividend will accrue even if they are not actually paid. Once the company has the ability to pay dividend again, shareholders must be paid for their accrued dividends.

Stock split refers to a company action that increases the number of outstanding shares, by lowering their price. If a company have 1000 shares with a price of $5, and split its stock “2 for 1”, then there will be 2/1*1000 = 2000 shares with the price of ½*5= $2.5. Common ratios are 2-for-1, 3-for-2, and 3-for-1.
Stock split usually brings price increase, but research does not prove this. If an investor thinks that stock split will increase price, then many people will buy it so the price tends to increase. Company usually do stock split to give signal that the company has good prospect in the future. They can also think that the price is too high for small investor, so they do the stock split. By making it affordable for small investor, its liquidation will increase.

Dillard’s Inc. (DDS:US) fell 7.2 percent to $3.10. The department-store chain may have its debt rating cut by Moody’s Investors Service, which cited the company’s “continuing weak operating performance.”

So I expect them company’s share will keep go down. I bought Nov 08 put at $2.5. The symbol is DDSWZ.

For example, suppose XYZ stock is trading at $40 and I think the fair value is $45. So the stock is not priced correctly and I want to buy it. But current price is not selling at deep discount. So I then sell a put with a strike price of $37. This would give me some money from selling option. If I had to buy the stock at $37, I would be happy because I think the fair value is $45. So I’m actually buying on discount.