Fix your goals before investing in stock market: Uday Dhoot

Below is the verbatim transcript of the interview

Q: Many people begin investing without having any real objective. How important is it to invest with financial goals in mind? Does it change in any way, your asset allocations or what kind of return anyone could make?

A: Investing without a goal is like shooting in the dark. Many people come to financial markets chasing the hot assets, chasing the returns but never look at what they really want from themselves. So, I think the first and the most important thing that goals help you in doing is that goals help you avoid bad investment decisions.

If you have put down your goals, the first thing that you do when you are looking at financial instruments or savings is that whenever somebody comes and tells you that - should you be investing in this product, will it help you achieving your goals. If not then this product is not for you. So, that is the most important thing that financial goals help you to figure out.

Apart from that, there are three other important reasons of how financial goals can help you in your investment decision making. First and by far the more important one of it is that it tells you the kind of risk appetite that you have. People very often have certain goals but the goals and the kind of savings that they do are not linked to the kind of risks that they are willing to take. That is where it helps you.

Secondly, it helps you to decide the kind of asset allocation that you should be going for. Let's say a particular individual can save Rs 10,000 a month, he is not willing to take risk with that investment and let's say that particular value grows at 8%. Now, at 8%, the value can grow to a certain amount during the investment horizon. Now, if investor's goal is higher than that then he has to obviously take higher amounts of risk. So, not only does it tell you what is the kind of risk appetite you have, it also tells you how your asset should be distributed.

Also Read: Why should you prefer SIP than equity funds?   

Finally, it helps you in the emotional aspect of investing. People are very emotional. We are always driven by either greed or fear. Let me relate a story from 2007. Many people in 2007 had more money in their corpus, in their savings than they needed for their retirement but because of the way market were, people were very bullish and they wanted to basically hold on.

If at the same time you had a corpus target, if you know you need Rs 2 crore for retirement and you saw that your assets were higher than Rs 2 crore, you would have then not risked anymore or you would have at least partially booked your profits. So, if this is how you think about your investments where you have a goal linked to your savings, it helps you to take a decision as to when is a good time to get out of your investments.

How should you go about this whole process of framing goals for your investments? Framing goals is basically asking four simple easy questions to yourself. The first question - is what is this goal that you are talking about? Is this a goal of going for a holiday six months down the line, is it a goal of buying a car three years down the line or is it a goal of retiring after 20 years? So, the goals could be of different types. It could be a short term goal, it could be a long term goal. So, first what you need to decide is that what is this goal that you are aiming.

Secondly, you need to figure out if you are going to use up or basically plan for this goal what is the kind of money that you are willing to spend on that goal. You need to figure that value as of today. So, if you were to plan for your kid's education and if you were to send him for an engineering education, that would cost you Rs 10 lakh today. If this goal is due 10 years from now then possibly you will need Rs 20 lakh. So, you need to start saving for that goal doing calculations on Rs 20 lakh and not on Rs 10 lakh. That is the second thing that you need to ask yourself.

The third thing that you need to ask yourself is that - how much are you currently saving towards this goal? This is very important because that gives you a real picture of where you should be and where you are. So, these are the three-four important things that you need to ask yourself to figure out whether you are progressing towards your goal or you are not progressing towards your goal. We are very certain that having goals, financial objectives towards your investments will definitely help you reap better investment decisions from your savings.

Glaxo Seeks Tafinlar-Mekinist Approval - Analyst Blog

GlaxoSmithKline (GSK) recently announced that it has submitted supplemental New Drug Applications (sNDA) to the US Food and Drug Administration (FDA) for the Tafinlar (dabrafenib)-Mekinist (trametinib) combination. The company is looking to get Tafinlar in combination with Mekinist approved for the BRAF V600 E or K mutation-positive unresectable or metastatic melanoma indication.

The regulatory applications contain data from a phase I/II study evaluating Tafinlar in combination with Mekinist versus Tafinlar alone in patients suffering from BRAF V600E or K mutation positive metastatic melanoma. The company is also looking to get the combination therapy approved in Europe for use in adults with BRAF V600 mutation-positive metastatic melanoma and submitted a marketing application for the same in Feb 2013. Glaxo has also submitted marketing application for Mekinist as a monotherapy in Europe.

We remind investors that both the melanoma drugs, Tafinlar and Mekinist, received approval as monotherapy in the US in May 2013. The FDA approved Tafinlar for BRAF V600E mutation-positive unresectable or metastatic melanoma patients. However, Tafinlar is not recommended for patients suffering from wild-type BRAF melanoma. The FDA also cited several warnings and precautions related to the use of Tafinlar, which can lead to fatal side effects including increasing the risk of developing new primary cutaneous malignancies.

Mekinist was approved for the treatment of patients suffering from unresectable or metastatic melanoma with BRAF V600E or V600K mutations. Mekinist has not been approved for treating patients who have received a prior BRAF inhibitor treatment.

Glaxo intends to launch the drugs in the US by early third quarter 2013. Currently approved melanoma drugs include Roche's (RHHBY) Zelboraf and Bristol-Myers Squibb Co.'s (BMY) Yervoy.

Glaxo carries a Zacks Rank #3 (Hold). We are pleased with Glaxo's label expansion efforts. Moreover, Glaxo boasts of a robust pipeline. A! number of pipeline-related news is expected in the coming quarters. Given the declining sales from generic competition, we believe Glaxo's pipeline must deliver. Companies that currently look attractive include Valeant Pharmaceuticals International, Inc. (VRX) carrying a Zacks Rank #1 (Strong Buy).

4 Stocks Triggering Breakouts on Big Volume

DELAFIELD, Wis. (Stockpickr) -- Professional traders running mutual funds and hedge funds don't just look at a stock's price moves; they also track big changes in volume activity. Often when above-average volume moves into an equity, it precedes a large spike in volatility.

>>5 Stocks Setting Up to Break Out

Major moves in volume can signal unusual activity, such as insider buying or selling -- or buying or selling by "superinvestors."

Unusual volume can also be a major signal that hedge funds and momentum traders are piling into a stock ahead of a catalyst. These types of traders like to get in well before a large spike, so it's always a smart move to monitor unusual volume. That said, remember to combine trend and price action with unusual volume. Put them all together to help you decipher the next big trend for any stock.

>>4 Red-Flag Stocks to Sell This Fall

With that in mind, let's take a look at several stocks rising on unusual volume today.

Compania Cervecerias Unidas

Compania Cervecerias Unidas (CCU) is a diversified beverage company operating principally in Chile and Argentina. This stock closed up 6.8% to $28.50 in Friday's trading session.

Friday's Volume: 654,000

Three-Month Average Volume: 147,417

Volume % Change: 351%

>>5 Stocks Under $10 Set to Soar

From a technical perspective, CCU ripped higher here back above its 50-day moving average at $28.03 with strong upside volume. This move is quickly pushing shares of CCU within range of triggering a near-term breakout trade. That trade will hit if CCU manages to take out its 200-day moving average at $30.20 and then once it takes out more near-term overhead resistance at $30.23 with high volume.

Traders should now look for long-biased trades in CCU as long as it's trending above Friday's low of $26.75 or above its 50-day at $28.03, and then once it sustains a move or close above those breakout levels with volume that hits near or above 147,417 shares. If that breakout hits soon, then CCU will set up to re-test or possibly take out its next major overhead resistance levels at $33 to its 52-week high at $34.95.

EZchip Semiconductor

EZchip Semiconductor (EZCH) is engaged in the development and marketing of solutions and Internet applications to improve the connectivity and performance of corporate LAN and WAN. This stock closed up 3.4% to $29.14 in Friday's trading session.

Friday's Volume: 244,000

Three-Month Average Volume: 154,722

Volume % Change: 105%

>>5 Stocks Insiders Love Right Now

From a technical perspective, EZCH bounced higher here right above some near-term support at $28.04 and back above both its 200-day at $28.73 and its 50-day at $29.01 with above-average volume. This stock recently formed a double bottom chart pattern at $27.77 to $28.04, after pulling back from its August high of $32.79. Shares of EZCH are now quickly moving within range of triggering a near-term breakout trade. That trade will hit if EZCH manages to take out some near-term overhead resistance at $29.55 with high volume.

Traders should now look for long-biased trades in EZCH as long as it's trending above those double bottom levels at $28.04 to $27.77and then once it sustains a move or close above $29.55 with volume that hits near or above 154,722 shares. If that breakout hits soon, then EZCH will set up to re-test or possibly take out its next major overhead resistance levels at $32 to $32.79. Any high-volume move above $32.79 will then give EZCH a chance to tag its next major overhead resistance level at $35.49.

Gentex

Gentex (GNTX) designs, develops, manufactures and markets proprietary electro-optic products, including automatic-dimming rearview mirrors for the automotive industry and fire protection products mainly for the commercial building industry. This stock closed up 3.3% to $24.93 in Friday's trading session.

Friday's Volume: 2.93 million

Three-Month Average Volume: 914,017

Volume % Change: 202%

>>5 Big Trades for September Bounce

From a technical perspective, GNTX ripped higher here and broke out above some near-term overhead resistance at $24.68 with heavy upside volume. This stock recently formed a double bottom chart pattern $22.34 to $22.33, and following that bottom, shares of GNTX have trended back above its 50-day moving average at $23.18. Shares of GNTX are now quickly moving within range of triggering another breakout trade. That trade will hit if GNTX manages to clear some near-term overhead resistance at $25.25 and then once it takes out its 52-week high at $25.40 with high volume.

Traders should now look for long-biased trades in GNTX as long as it's trending above Friday's low of $23.86 or above some more near-term support at $23.50 and then once it sustains a move or close above those breakout levels with volume that hits near or above 914,017 shares. If that breakout hits soon, then GNTX will set up to enter new 52-week-high territory, which is bullish technical price action. Some possible upside targets off that breakout are $27.50 to $30.

Oasis Petroleum

Oasis Petroleum (OAS) is an exploration and production company. This stock closed up 3.6% at $43.42 in Friday's trading session.

Friday's Volume: 4.25 million

Three-Month Average Volume: 1.66 million

Volume % Change: 184%

>>3 Big Stocks on Traders' Radars

From a technical perspective, OAS jumped sharply higher here right above its 50-day moving average of $40.80 with heavy upside volume. This move is quickly pushing shares of OAS within range of triggering a near-term breakout trade. That trade will hit if OAS manages to take out Friday's intraday high of $44 and then once it clears its 52-week high at $44.17 with high volume.

Traders should now look for long-biased trades in OAS as long as it's trending above support at $42 or above its 50-day at $40.80, and then once it sustains a move or close above those breakout levels with volume that this near or above 1.66 million shares. If that breakout hits soon, then OAS will set up to enter new 52-week-high territory above $44.17, which is bullish technical price action. Some possible upside targets off that move are $47 to $50.

To see more stocks rising on unusual volume, check out the Stocks Rising on Unusual Volume portfolio on Stockpickr.

-- Written by Roberto Pedone in Delafield, Wis.

RELATED LINKS:

>>3 Stocks Rising on Big Volume

>>4 Tech Stocks Under $10 Moving Higher

>>5 Big Short-Squeeze Stocks Ready to Pop

Follow Stockpickr on Twitter and become a fan on Facebook.

At the time of publication, author had no positions in stocks mentioned.

Roberto Pedone, based out of Delafield, Wis., is an independent trader who focuses on technical analysis for small- and large-cap stocks, options, futures, commodities and currencies. Roberto studied international business at the Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany. His work has appeared on financial outlets including

CNBC.com and Forbes.com. You can follow Pedone on Twitter at www.twitter.com/zerosum24 or @zerosum24.

What's This Stock Really Worth?

Investing is all about predicting the future. When you buy a stock, you trade your hard-earned cash today for those shares in the hope that sometime in the future, you'll get back more cash than you handed over in the first place. Whether or not you do get more back than you paid will depend in large part on how much the company behind that stock earns during the time you own it.

Your returns will also depend on how the company did versus what the market expected of it during that time frame, as well as the market's expectations for the company's future at the time you sell. Those expectations matter so much because they form the foundation of a company's true worth -- what value investors call its intrinsic value.

Compensate for your broken crystal ball
Nobody really knows what a company will report as its earnings in future quarters, The best any of us can really do is estimate. Because you're estimating, the farther out in the future you go, the worse your estimates are. Also, because of inflation, risk, and the loss of use of your cash while it's out of your hands, a dollar potentially earned in the future is worth less than that same dollar held for certain in your hand today.

As a result, valuing a company takes more than just adding up the cash it's expected to earn in the future. It also takes reducing those future earnings back to a lower value today, to compensate for those factors.

That sort of valuation model is known as a "discount model," and it's one of the most common ways to estimate an intrinsic value for a company. It's not perfect -- no projection system is. The main advantage of the model is that it's based on risk-adjusted financial flows over time. The main disadvantage? Well, as with any forward-looking projection, it's based on assumptions, and those assumptions may be wrong.

What counts
To build a discounted earnings model, there are several key questions you need to answer. Three of the most important are:

What is the company earning now? How are those earnings expected to change over time? What return do you need to be adequately compensated for the risks you're taking?

That return level is an important consideration, as it provides the discount rate you use in your analysis. There are several different ways to arrive at a discount rate; my personal preference is to start at 12% and then move up from there based on risk factors.

Why 12%? Well, over the long haul, the total return on the S&P 500 with dividends reinvested has been in the neighborhood of 10%. Investing in a 500-stock-strong index is inherently less risky than investing in an individual company. After all, the odds of 500 of the largest companies around going bankrupt is a lot lower than the odds of any one of them failing.

Assuming that long-run historic trend holds true for the future, investing in an ETF like the S&P Depository Receipt that tracks the S&P 500 would provide 10% total returns. That extra 2 percentage points starts to compensate for the additional risk of buying an individual stock. If a company or an industry is particularly risky, I'll dial that discount rate up even higher.

For instance, when I went bank-stock shopping for the real-money Inflation-Protected Income Growth portfolio, I used a 15% discount rate. After all, banking crises aren't exactly rare, and nearly all the banks were affected by the recent financial crisis. Indeed, even some large banks, like Bank of America (NYSE: BAC  ) and Citigroup (NYSE: C  ) haven't recovered well enough from that most recent crisis to begin restoring their dividends. Your money may be safe in a bank, but it's at risk in the bank's stock.

For Bank of America, a big part of the issue seems to be lack of consistent earnings. In spite of the recent economic stabilization, Bank of America reported a quarterly loss as recently as last September's quarter. It looks like the bank's ill-timed purchase of mortgage giant Countrywide during the financial crisis is still haunting it.

Citigroup, on the other hand, has been a laggard throughout the recovery, only recently passing the Federal Reserve's stress test, and still in need of some balance-sheet repair to be fully back up to snuff.

What's it worth today?
The bank that fit that real-money portfolio's criteria was Wells Fargo (NYSE: WFC  ) , which I estimated at the time as being worth about $226 billion. Solid earnings and stock market gains since then have propelled Wells Fargo's market cap to around $235 billion, above that initial estimate. Given that the market cap now exceeds my original fair value estimate, it makes sense to review it again to see whether that gain makes the company a candidate to sell.

Since the most recent banking crisis is fading, the economy seems to be stabilizing, and Wells Fargo continues to perform solidly, I'm willing to dial back that discount rate to 14%. From an earnings perspective, over the past four quarters, Wells Fargo has earned $19.777 billion in income applicable to common shares. That leaves the question of its growth, which analysts estimate will be around 7.22% annualized over the next five years.

With that information in hand, valuing the company's stock becomes a spreadsheet exercise. For this example, we'll use a three-stage discounted earnings calculation. For the first five-year stage, we'll assume the company grows at that 7.22% analyst estimated rate. For the second five-year stage, we'll assume the company grows at a lower rate of 5%, and for the third (perpetual) stage, we'll assume it grows forever at around 3% -- about in line with long-run inflation.

Plugging those values into a discounted earnings spreadsheet produces these results:

Year

Nominal Earnings

Discounted Earnings

1	$21,204,899,400	$18,600,788,947
2	$22,735,893,137	$17,494,531,499
3	$24,377,424,621	$16,454,067,258
4	$26,137,474,679	$15,475,483,258
5	$28,024,600,351	$14,555,099,253
6	$29,425,830,368	$13,406,012,470
7	$30,897,121,887	$12,347,643,065
8	$32,441,977,981	$11,372,829,138
9	$34,064,076,880	$10,474,974,206
10	$35,767,280,724	$9,648,002,559
Perpetual	$334,911,810,415	$90,340,387,594
	Intrinsic Value Estimate:	$230,169,819,248

Source: Author's calculations, based on inputs from Wells Fargo's 8-K earnings release filing from July 12, 2013, and Yahoo! Finance analyst estimates.

Or in other words, my current best estimate for Wells Fargo values the company at around $230 billion, slightly above my initial estimate, but just below its recent market capitalization of $235 billion.

So what?
Since the intrinsic value calculation is an estimate and it's really close to the company's market capitalization, I don't currently plan to sell Wells Fargo from the iPIG portfolio based on valuation. But if the market should decide to price Wells Fargo at a substantial premium to that estimate -- say at around $280 billion -- then I'd consider the sale. On the flip side, should the market put the company on sale -- say for closer to $200 billion -- I'd consider buying more. As it is, Wells Fargo looks like a hold.

Is there such a thing as a bank whose stock is worth owning?
Many investors are terrified about investing in big banking stocks after the crash, but the sector has one notable standout. In a sea of mismanaged and dangerous peers, it rises above the rest as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.

Lockheed Successful in Advanced Gun System Weapons Test

Lockheed Martin (NYSE: LMT  ) just went four-for-four. In a press release Wednesday, Lockheed Martin described how its new munition for the U.S. Navy's Advanced Gun System (designed for use aboard Zumwalt-class DDG 1000 guided missile destroyers) was fired four times against a variety of targets 45 miles away -- and hit and destroyed each and every one.

Lockheed's Long Range Land Attack Projectile, Source: Lockheed Martin.

The munition in question, designated the Long Range Land Attack Projectile (LRLAP), is a 155-mm round designed to be fired from Zumwalt-class ships standing offshore in support of coastal expeditionary assaults or operations in or near coastal cities. Powered by a rocket motor and guided by electronics, the LRLAP is said to be three times more effective than the Navy's traditional 5-inch cannon rounds.

Lockheed Martin LRLAP program manager Richard Benton was quoted in the company press release as saying that, once approved for use, "LRLAP will greatly enhance the capability of the Navy to respond to fire support requests by deployed troops ashore."

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Introducing the Sci-Fi Franchise That Beats "Star Wars" and "Star Trek"

Star Wars may be worth at least $4 billion to Walt Disney and Star Trek the subject of 12 mostly successful films and six television series for Viacom, but neither beats Doctor Who, the BBC adventure series about a wandering Time Lord that has thrilled audiences for five decades. The Guinness Book of World Records honored the show in 2009 as the most successful sci-fi series of all time.

Is that really fair? Taste is subjective, after all, and each series has seen more than its share of wins. For Fool contributor Tim Beyers, what makes Doctor Who so interesting is how prevalent "Whovians," as fans of the show are called, tend to be at pop culture events.

They came out in force at Denver Comic-Con, Tim says in the following video, overwhelming a conference room just for a chance to see Colin Baker and Daphne Ashbrook. In the 1980s, Baker succeeded Peter Davison as the sixth incarnation of The Doctor. Ashbrook appeared in a 1996 movie playing The Doctor's human traveling companion. That they both still attract so many fans speaks to the longevity of the franchise.

On a worldwide basis, more than 77 million in 48 countries watch The Doctor regularly, Reuters reports. Expect even more this November, when a 50th anniversary special airs. Neither the Starks and Lannisters of Game of Thrones nor the zombies of The Walking Dead have so large or fervent a fan base.

Why should this matter to you as an investor? Because passion can be a powerful profit driver. Look at AMC Networks (NASDAQ: AMCX  ) . Thanks to The Walking Dead, which debuted on the network in October 2010, revenue growth accelerated from 10.1% in 2011 to 13.9% last year, according to data supplied by S&P Capital IQ.

For Doctor Who, the difficulty for American investors is that there is no way to invest in the BBC directly. Yet there are alternatives: Amazon.com and Apple (NASDAQ: AAPL  ) , principally.

Both companies sell single episodes and full seasons of The Doctor's adventures. Amazon, like Netflix, also streams prior seasons, while Apple says iTunes executes some 800,000 TV downloads daily. Parts 1 and 2 of the latest season rank in the top 10 of iTunes downloads in Science Fiction and Fantasy.

Investing in Apple means getting a cut of the profits from those downloads. Amazon offers a similar opportunity. Will you take it? Please watch the video for Tim's full take, and then leave a comment to let us know which shows you're downloading, and from which service.

Screen the future ... right now
The business side of television is about to change forever -- exploding value for certain companies that are prepared for the change. The Motley Fool's special free report "Who Will Own the Future of Television?" details the risks and opportunities in the future of TV -- just click here.

Will These Punches Knock Out Bank of America?

Brian Moynihan has held the top spot at Bank of America (NYSE: BAC  ) for roughly three and a half years, and the bank's share price is down roughly 20% during his reign. That sounds ugly -- but considering the stock was down a crushing 70% for the three and half years before he took over, it doesn't look so bad.

The vast majority of the blame for the stock's spiral down is placed on former CEO Ken Lewis, who oversaw most of the bank's toxic acquisitions. But now, a few disgruntled shareholders are starting to question whether Moynihan is leading a culture of cutting corners and peeving customers in order to cut costs quickly. 

The most recent of the heated complaints comes from a familiar voice. Finger Interests Number One filed a rare Sec Form PX14A6G and lambasted Moynihan and team regarding recent accusations from former employees who were allegedly "rewarded for delaying and denying Home Affordable Modification Program ("HAMP") modifications so that Bank of America could generate more fees and steer existing borrowers to more profitable in house products."

A voice from the past
Finger Interest is a familiar voice because it has long been a critic of Bank of America's management and board since the onset of the crisis. In this clip from 2009, Jonathan Finger advocates for the removal of then-CEO Ken Lewis, who would later step down.

While Finger Interest did not call for the removal of Moynihan (the letter lauded the bank's work to clean up legacy issues and the balance sheet), the distaste for the bank's culture was palatable.

"If true, the six affidavits filed by former employees of Bank of America in the Massachusetts case are damning, and evidence of unethical behavior and, more importantly point to a corporate culture of not just "short termism", but of outright corruption and a disregard for laws, regulation, and of course, customers."

Ouch. The bank has been in recovery mode and generated handsome profits for investors who scooped up shares on the cheap in late 2011 and early 2012, but can its battered reputation with customer begin to weigh the stock down? American Banker released its 2013 survey of bank reputations, and Bank of America ranked dead last.

Can this really hurt the stock?
Despite the stigma, investors may happily overlook the scathing profiles as long as Bank of America continues to post more improved financial results. The harsh criticism makes the news and headlines, but it rarely moves the stock. Going forward, financial performance should be the single largest contributor to movements in the share price.

No bank ever wants to be cursed on Main Street, but B of A generates the majority of its revenue from its Global Banking, Global Markets, and Global Wealth and Investment Management (GWIM) businesses -- all segments that operated under a slightly different light and perception than the bank's troubled mortgage and consumer businesses, which are often the object of the public outcry.

It may take years, or even decades, for the big banks to regain public favor, but if returns on equity crank higher and balance sheets strengthen, investors will gladly overlook some unhappy customers in exchange for healthy profits.

Many investors are scared about investing in big banking stocks after the crash, but the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as "The Only Big Bank Built to Last." You can uncover the top pick that Warren Buffett loves in The Motley Fool's new report. It's free, so click here to access it now.