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Edward Altman developed a Z-score model based on five financial ratios to predict whether a company will go into bankrupt or not. Altman’s Z-score model is:
Z = 0.012 A + 0.014 B + 0.033 C + 0.006 D + 0.999 E.
Where:
A = net working capital / total assets
B = retained earning / total assets
C = earning before interest and taxes / total assets
D = market value of equity / book value of total liability
E = sales / total assets
Z = Z-score
If Z-score > 2.99, Z-score predict that the company will not fail within one year. Z-score between 1.81 and 2.99 is in gray area, which is difficult to predict. If Z-score < 1.81, Z-score predict that the company will fail within one year.

Troubled stock can bring you high profit. However, investing this stock is very risky. Troubled company can correct them self or can go into bankrupt. Therefore, before you invest in this stock, you need to analyze the company:

1. Assess company’s performance from its income statement, cash flow statement, and debt-to-equity ratio. An increasing profit may show signs of improvement. An increasing debt-to-equity ratio means that the company has higher risk than before. The company might try to solve their problem by borrow more debt, which is dangerous. They can get deeper into trouble.
2. Does the company have good management? Do they have great competitive advantage? If yes, then the company has high probability to overcome their problem. 
3. Check the company probability for going into bankrupt. Edward Altman developed a Z-score model based on financial ratios to predict whether a company will go into bankrupt or not.

Dogs of the Dow is a strategy that buys the 10 Dow Jones Industrial Average (DJIA) stocks with the highest dividend yield at the beginning of the year. The portfolio is adjusted at the beginning of each year to include the 10 highest yielding stocks. Michael O’ Higgins first popularized the strategy in his book, “Beating the Dow,” published in 1991. O’Higgins showed that over the 17-year period from 1973 to 1989, his Dogs strategy averaged a return of 17.9% annually, compared to 11.1% for the Dow. You can find the top ten highest yielding stocks in dogsofthedow.com. There are variations to Dogs of the Dow, like only select five companies with the lowest stock price from the 10 highest yielding stocks (the Dogs). This strategy is called Small Dogs of the Dow. However, I think that selecting based on price is a not a good strategy, because low price does not mean that they are undervalued, although low price means more liquid. I prefer using P/E and PEG for the top 10 highest yielding stocks (I haven’t tested this strategy). You can create your own strategy by choosing not only the 10 highest yielding stocks, but maybe top 20, or top 30. Then select using P/E or PEG or even price from that list. You can check the result using historical data. Do your homework and you will be rewarded.

Before you invest in stock, you must before choose your stock broker who act as the “middleman” between you and the company you want to invest. Choosing your stock broker is an important task before you invest in stock. Choosing the wrong broker can lower your return or even wipe out your returns because of their commission. Besides commission, there are also other important things to consider, like their service.
You should choose your stock broker based on your condition, like how much money do you have, what kind of instrument do you want to play with, how frequent do you trade, and how much help do you need. Buy looking at those condition you should be able to choose your stock broker. If you do not need help, don’t go with the broker which charge high commission but with good market research and excellent advice. If you need a lot of advice and lots of money, choose the broker who has full service like market research, advice, and rumors.

Dividend Reinvestment Plans (DRIPs) is a program run by public companies, which allow to reinvest dividend and/or make cash purchases directly from the company. A DRIP does not require a lot sum of money, so almost anyone can invest in it. Typically a shareholder only needs one share to participate in a company’s DRIP plan, mostly the company will not charge fee or commission for the dividend reinvestment.

Company will benefit from DRIP because it provide stable base of shareholder who are likely long-term investment strategy (buy and hold). This makes the companies stock price stable, low fluctuation. The nature of DRIP makes it difficult to liquidate shares, making it more as an instrument for long-term investing. By doing DRIP, the company keeps the capital inside thus raising additional capital.

For investor, DRIP enables them to participate into it with as little money as $10. Buying stocks from the company and bypassing the broker, will lower the cost of investing because there is no fees or commission for the broker. DRIP also helps investor by with cost averaging, because they will invest in a fix dollar amount on regular basis. Sometimes they will buy at high price, and sometimes at low price, thus averaging the price and saving investor from buying stock at high price.

Because company in this case gives dividend, it is also a form of income and therefore stills a subject for tax.

DRIP is suitable for long-term investing. You can start with a solid company with good management, and financial performance.

With income strategy we can generate profit on regular basis, buy combining buy or sell. This strategy is done by selling option either by selling calls or selling puts, and buying another option to protect the other option. This strategy is usually short-term strategy. The longer the time, the riskier it is. When we are writing option, the longer the time, the higher the probalility for the option to go against us. You can also collect income when the underlying (stock) does not move at all. There are numerous income strategy like:

• Covered call
• Vertical spread
• Horizontal spread
• Diagonal spread
• Calender spread

The Covered Call is the most basic of income strategies, but it is very effective and can also be used by experts. From the name we knew that it use the call option which is protected by something. First sell the call option. This way we can earn our income. If the option go down, then you are ok. But if the stock go up, you must be ready for the call option to be excercised. To protect your income, you must have the underlying or stock. So that, when the stock go up, you can offset the loss from the option with the stock.
You can sell In The Money or At The Money call at higher price than Out of The Money. But it is safer if you sell Out of The Money call, lower possibility of delivering the stock at the strike price of the sold call. So sell call option one or two strikes price higher than the stock. If the stock is purchased simultaneously with writing the call contract, the strategy is commonly referred to as a “buy-write”.
By using this strategy, you can own the stock and having regular income from selling call option.

Using an option spread involves combining two different option. There are various kind of spread:

• Vertical spread, buy and sell option with different strike price, same expiration date
• Horizontal spread, buy and sell option with same strike price, but different expiration date
• Diagonal spread, buy and sell option with different strike price, and different expiration date

With vertical spread, you can buy Out of The Money (OTM) call, sell further OTM call (bull call spread) or buy OTM put, sell further OTM put (bear put spread). With bull call spread, you counter the long call by the short option reward. This will bring down you cost on the trade than only buying the call option. Futher OTM call is cheaper than OTM call.
For example, ABC is trading at $26.5 on February 20, 2008. Buy the January 2009 $27.00 strike call for $1.40, and sell then January 2009 further OTM at $32.5 strike call for $0.25.

• You only need to pay $1.15, because you receive $0.25 from selling the option, to buy the $1.40 option. ($1.40-$0.25 = $1.15)
• When the stock fall, your maximum loss is the premium you paid for the position that is $1.15
• You get your maximum reward when the stock reaches the further OTM strike price, which is $32.5, because you need to exercise the option you sell. So maximum profit is the difference of strike price
• Premium paid = $5 – $1.15 = $3.85.
• You will reach your breakeven, at lower strike price + premium paid = $27.5 + $1.15 = $28.65

JPMorgan Chase & Co. recommended 16 companies that may outperform the U.S. stock market during the global recession it expects to unfold during the next two years.

The list merges the strongest convictions of its 78 stock analysts with a view that the banking crisis threatens global growth.

The companies are:

• 3M Co.
• Baxter International Inc.
• Colgate-Palmolive Co.
• CA Inc.
• Devon Energy Corp.
• General Mills Inc.
• Gilead Sciences Inc.
• Google Inc.
• Hewlett-Packard Co.
• McDonald’s Corp.
• Merck & Co.
• Monsanto Co.
• Nucor Corp.
• Philip Morris International Inc.
• Union Pacific Corp.
• Visa Inc