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I am having trouble picking between Deutsche Bank stock (DB) and Lihua INTL stock (LIWA). Both are strong buys, and both come with a questionable risk factor. My question is which should I invest in (short term) and why?

Aug 05, 2012 by Shane from Shadow Hills, CA in  |  Flag
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11 votes

Shane, sorry to break this to you...but if you are asking this question, as you evidently are, then you should not be buying either stock. Instead, and assuming that foreign stock exposure is appropriate for your financial objectives and circumstances, then you are far better off investing in a low cost, passively managed, highly diversified fund of foreign stocks. Of course, you could also benefit by seeking the advice of a qualified, no-commission investment advisor who could help you evaluate you financial objectives and design an investment portfolio that fits your needs.

1 Comment   |  Flag   |  Aug 05, 2012 from Morristown, NJ
George Cones, JD

Shane, David is giving you some very good advice here.

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Flag |  Aug 06, 2012 near Wilmington, DE

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5 votes

If you're looking for stock-picking advice on this forum, I think you will be disappointed. Any stock investment has its merits and its risks. Whether or not these or any other investment make sense for you in your particular situation depends on so many factors. There is a saying that to every question there is a simple answer and the simple answer is usually wrong.

In your situation, you're asking about a "short term" investment. Well, what does "short term" mean to you? Every stock has its own firm-specific risks that you alluded to. What level of risk can you handle? What is your "risk capacity" (which is different than your risk profile and focuses on your total resource picture - income, debt, insurance coverage, emergency reserves)? So, given that, are you prepared to lose your investment? Because that is the mindset you need to have when putting money at risk. If not, then you should not be considering such an investment choice.

What's your time frame for holding period? Yes, you did say short-term but within that period are you looking to do "trading" versus "investing"? Important because there are tax implications for this.

You've obviously done your research so the next question is "What's your exit strategy?" No successful investor makes money without a firm idea of the exit strategy when going it. So what will be the target "sell" price? What will be your benchmark to know that this has been a successful investment worthy of the risk of your hard-earned capital? To be fair, you really need to count your "cost of capital," taxes and trading costs to get a good idea of the "hurdle rate" you need to clear to make this or any other investment worthwhile.

What is your investment process? This goes hand-in-glove with the exit strategy. It also takes the emotion out of the buy and sell decision.

If you are looking for specific stock picking advice, then here is my two cents: You really need to understand what's behind the numbers. This means diving into whatever information is available and getting a strong understanding as to the sources of revenue, the plans that management has, the kinds of risk exposure in the balance sheet and such.

I personally think that financials in general have too much exposure to credit and execution risks. Any bank that also does proprietary trading has the potential of a "London Whale" in waiting. And there are so may other great ways to get solid dividend yields from international stocks.

To help mitigate firm-specific risks, I tend toward Exchange Traded Funds because at least there is liquidity as well as exposure to multiple firms at a fraction of the investment needed to take a position in only one stock.

Comment   |  Flag   |  Aug 05, 2012 from Amesbury, MA

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3 votes
Eric Level 17

I have to lean a little on the previous two answers you've already recieved, but I will offer this as well. Your question is "Which should I invest in the short term and why?" The fact that you include short term and invest in the same sentance should be a red flag. Investing should always be long term in nature. Trading is more appropriate for shorter time frames, but involves different risks. My recommendation is find an independant advisor that can handle your long term investments and short term trades through either models they run or portfolio managers that they use. Trading is a full time job and should only be done by individuals that can dedicate a substantial amount of time to it.

Comment   |  Flag   |  Aug 06, 2012 from Denver, CO

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