Every few months, I like to review the most intriguing open market purchases made by CEOs, CFOs and other key insiders. These folks typically have a clear read on business trends — even better than the rest of us — and their cash commitment should be a catalyst for further research.  These days, I am steering clear of insider buying at energy producers. These insiders have been premature in their hopes for a rebound, and it’s simply too uncertain to know when this sector will get going again. I am, however, intrigued by other energy-related industries, such as the… Read More

Every few months, I like to review the most intriguing open market purchases made by CEOs, CFOs and other key insiders. These folks typically have a clear read on business trends — even better than the rest of us — and their cash commitment should be a catalyst for further research.  These days, I am steering clear of insider buying at energy producers. These insiders have been premature in their hopes for a rebound, and it’s simply too uncertain to know when this sector will get going again. I am, however, intrigued by other energy-related industries, such as the master limited partnerships (MLPs), many of which are more sensitive to volumes than pricing.  Here are three companies with heavy insider buying that recently caught my attention. #-ad_banner-#Kinder Morgan, Inc. (NYSE: KMI) Richard Kinder is seen by many as one of the pioneers of the energy MLP business models. His firm has either built or acquired many pipeline assets over the years, which has enabled Kinder Morgan to be among the steadiest producers of growing dividends. So when Richard Kinder paid $3.95 million to acquire 100,000 shares in mid-March, it was surely noteworthy. According to… Read More

#-ad_banner-#The commodity slump of the past few years, divergent growth rates between the United States and other developed economies and a sudden glut in crude oil have been dominating the headlines. Yet the major U.S. stock markets indexes continue to toil near all-time highs. It’s not a coincidence. The United States has clearly become a safe port in stormy seas, and many of the world’s leading hedge funds and sovereign wealth funds are selling assets abroad and doubling down on U.S. stocks. As a perhaps unintended side effect, the surging dollar has absolutely decimated a wide range of other currencies. Read More

#-ad_banner-#The commodity slump of the past few years, divergent growth rates between the United States and other developed economies and a sudden glut in crude oil have been dominating the headlines. Yet the major U.S. stock markets indexes continue to toil near all-time highs. It’s not a coincidence. The United States has clearly become a safe port in stormy seas, and many of the world’s leading hedge funds and sovereign wealth funds are selling assets abroad and doubling down on U.S. stocks. As a perhaps unintended side effect, the surging dollar has absolutely decimated a wide range of other currencies. And that spells opportunity as a wide range of global securities can now be had for fire-sale prices, at least in dollar-denominated terms. Too Soon? While the dollar continues to rally, many assume it is wise to let the process play out before starting to pick up assets among the global carnage. Yet we may be closer to the end of the currency shifts than many realize. Right around the time the Fed acts (perhaps in June) “it will be embedded in the dollar” said Jens Nordvig, Nomura’s global head of currency strategy, to… Read More

As a regular subscriber to all of the leading car magazines, I am delighted to read about the technological advances taking place. Sure the gas mileage of many vehicles keeps rising, and the electrification of propulsion is a clear game-changer, but the most fascinating changes are taking place in every nook and cranny of today’s vehicles. The cars you’ll drive in just a few years will have a range of systems that couldn’t even be dreamt half a decade ago. Many of those changes involve communications and information technologies. How hot is this segment for investors? Well, shares of Harman… Read More

As a regular subscriber to all of the leading car magazines, I am delighted to read about the technological advances taking place. Sure the gas mileage of many vehicles keeps rising, and the electrification of propulsion is a clear game-changer, but the most fascinating changes are taking place in every nook and cranny of today’s vehicles. The cars you’ll drive in just a few years will have a range of systems that couldn’t even be dreamt half a decade ago. Many of those changes involve communications and information technologies. How hot is this segment for investors? Well, shares of Harman International Industries, Inc. (NYSE: HAR) have surged 40% since I profiled the company five months ago. Frankly, this stock may be getting ahead of itself, especially when you consider that the company’s cutting edge infotainment systems will still yield just 10-to-15% annual growth. I still love the investing angle, but am less enamored of this high-flying stock. Perhaps it’s time to broaden the scope with some other auto technology stocks. Here are three on my radar: Mobileye N.V. (NYSE: MBLY) This company, which focuses on vehicle piloting technologies, was one of the hottest initial public offerings of 2014. It… Read More

Whenever you see a stock with a huge short position, you have one of two actions you can take. First, you can pile in with the crowd, as many have done with the high-profile short sale target Herbalife Ltd. (NYSE: HLF).  Or you can buck the tide and go long — if your research suggests the shorts are wrong. If you’re right and they’re wrong, then a massive short covering may push shares sharply higher, even beyond justifiable fair value. The latter is precisely what is happening with software provider Ebix, Inc. (Nasdaq: EBIX), which surged more than 15% last… Read More

Whenever you see a stock with a huge short position, you have one of two actions you can take. First, you can pile in with the crowd, as many have done with the high-profile short sale target Herbalife Ltd. (NYSE: HLF).  Or you can buck the tide and go long — if your research suggests the shorts are wrong. If you’re right and they’re wrong, then a massive short covering may push shares sharply higher, even beyond justifiable fair value. The latter is precisely what is happening with software provider Ebix, Inc. (Nasdaq: EBIX), which surged more than 15% last week on the heels of better-than-expected fourth quarter results. Last summer, I wrote about how Ebix’s growth-through-acquisition strategy created an operational mess, but management was already making progress in streamlining recently-acquired divisions. I figured shares would eventually rise to the mid $20’s, though a short squeeze has pushed it past that mark. Currently, a similar set-up is in place for another heavily-shorted stock: CARBO Ceramics, Inc. (NYSE: CRR). Fully 42% of Carbo’s shares are held by short sellers, equating to roughly 10 days’ worth of trading volume. The stock fell from $156 a year ago to a recent… Read More

Companies that take radical steps in pursuit of growth are often accorded very rich valuations. Case in point: Amazon.com, Inc. (Nasdaq: AMZN), which as I recently wrote, has a valuation that bears no relation to it’s financial measures, such as free cash flow. #-ad_banner-#In one respect, such companies are fortunate. In the absence of traditional valuation measurements, they are often given a free pass from a fundamental analysis perspective. Of course, when a once-hot growth company starts to mature, such valuations start to matter a lot. A deep look at grocer Whole Foods Market, Inc. (NYSE: WFM) provides an example… Read More

Companies that take radical steps in pursuit of growth are often accorded very rich valuations. Case in point: Amazon.com, Inc. (Nasdaq: AMZN), which as I recently wrote, has a valuation that bears no relation to it’s financial measures, such as free cash flow. #-ad_banner-#In one respect, such companies are fortunate. In the absence of traditional valuation measurements, they are often given a free pass from a fundamental analysis perspective. Of course, when a once-hot growth company starts to mature, such valuations start to matter a lot. A deep look at grocer Whole Foods Market, Inc. (NYSE: WFM) provides an example of an absurdly overvalued stock — one you should avoid or outright short. The Air Pocket Becomes Permanent Roughly a year ago, shares of Whole Foods hit an air pocket as heightened competition from firms such as The Fresh Market, Inc. (Nasdaq: TFM) and Sprouts Farmers Market, Inc. (Nasdaq: SFM) led to slowing growth. Yet, in recent months, shares of Whole Foods have staged a remarkable rebound. The explanation for this stock’s sudden renaissance is quite simple: Whole Foods has delivered 8% same stores sales growth and 23% annual profit growth since 1994, and investors have recently… Read More

A classic Twilight Zone episode entitled “A Most Unusual Camera” posed an interesting question. If you could take pictures of events that have not yet happened, then what kind of pictures would you take? The characters in that episode took the camera to the race track and snapped photos of the race results — from tomorrow’s races. Investors might be tempted to take pictures of tomorrow’s stock prices. #-ad_banner-#Well, some investors do try to game the system that way, using historical data to predict tomorrow’s hot stocks. It’s called seasonal investing and can involve anything from how a specific set… Read More

A classic Twilight Zone episode entitled “A Most Unusual Camera” posed an interesting question. If you could take pictures of events that have not yet happened, then what kind of pictures would you take? The characters in that episode took the camera to the race track and snapped photos of the race results — from tomorrow’s races. Investors might be tempted to take pictures of tomorrow’s stock prices. #-ad_banner-#Well, some investors do try to game the system that way, using historical data to predict tomorrow’s hot stocks. It’s called seasonal investing and can involve anything from how a specific set of stocks perform around a certain event, to how specific industries perform during certain times of the year.  There has actually been a great deal of analysis on this subject. Ontario, Canada-based investment adviser Brooke Thackray publishes an annual guide entitled “How to Profit from Seasonal Market Trends.” This year’s version, which spans more than 200 pages and can be bought on Amazon.com, runs through a broad range of trading strategies that can be deployed month after month. In fact, this approach underpins the Horizons Seasonal Rotation ETF (Toronto: HAC), which trades on the Toronto Stock Exchange. (Call your broker… Read More

#-ad_banner-#At this point in President Obama’s first term, the world looked very different. The still-anemic economy made it hard to fathom how we would ever get out from under a crushing government debt load. Government spending far surpassed revenue and concerns grew that our key financial backers (such as Chinese bondholders) would pull the rug out from under us. Fast forward to 2015, and the notion that our national debt is any sort of real problem has simply vanished. Sure, the Republican party has been recently threatening government agency shutdowns, but this time the issue is immigration… Read More

#-ad_banner-#At this point in President Obama’s first term, the world looked very different. The still-anemic economy made it hard to fathom how we would ever get out from under a crushing government debt load. Government spending far surpassed revenue and concerns grew that our key financial backers (such as Chinese bondholders) would pull the rug out from under us. Fast forward to 2015, and the notion that our national debt is any sort of real problem has simply vanished. Sure, the Republican party has been recently threatening government agency shutdowns, but this time the issue is immigration and not our nation’s unstable finances. The percentage of Americans that believe that deficit reduction should be Washington’s top priority has slid to a recent 64%, from 72% in 2013, according to a recent survey conducted by Pew Research. However, events across the Atlantic Ocean could bring this issue right back onto the front pages. Make no mistake, decent economic growth, coupled with somewhat higher tax rates on people making more than $250,000 a year, has helped narrow the annual shortfall. What was a $1.4 trillion annual budget gap in fiscal (September) 2009 is now much smaller. A… Read More

I have been in the investment business for more than two decades. In that time, I’ve heard many debates about the relative importance of high levels of insider ownership. The arguments against it are indeed compelling. #-ad_banner-#First, management may own so much stock that they feel compelled to aggressively talk up a company’s prospects, solely to boost the value of shares. Second, when management controls a lot of stock, they may start to ignore the wishes of outside investors and take steps that enrich themselves ahead of other shareholders (such as board-approved excessive compensation levels). Lastly, a high concentration of… Read More

I have been in the investment business for more than two decades. In that time, I’ve heard many debates about the relative importance of high levels of insider ownership. The arguments against it are indeed compelling. #-ad_banner-#First, management may own so much stock that they feel compelled to aggressively talk up a company’s prospects, solely to boost the value of shares. Second, when management controls a lot of stock, they may start to ignore the wishes of outside investors and take steps that enrich themselves ahead of other shareholders (such as board-approved excessive compensation levels). Lastly, a high concentration of shares in the hands of a few may lead to thin trading floats, which boost volatility and bid-ask spreads. My view: high levels of insider ownership are mostly a good thing, because you want management to have the same goal as you: a higher stock price. But I was never fully convinced of that view, until I came across a landmark study on the topic. A pair of finance professors (hailing from Sweden and Germany) found that “investing in firms in which the CEO owns a substantial fraction of shares (for example more than 10% of outstanding… Read More

Investors know that there are multiple ways to approach stock-picking. Momentum investors, for example, identify hot stocks that have the support of key technical patterns. It’s a strategy that has been put to great use in StreetAuthority’s Maximum Profit newsletter. #-ad_banner-#I tend to identify investment opportunities through a different tack: contrarian investing, which is used by Warren Buffett and many other gurus. At the simplest level, such an approach targets out-of-favor stocks that may possess ample latent upside, or exceedingly popular stocks that appear ripe for a pullback. As an example, that approach recently led me to conclude that shares… Read More

Investors know that there are multiple ways to approach stock-picking. Momentum investors, for example, identify hot stocks that have the support of key technical patterns. It’s a strategy that has been put to great use in StreetAuthority’s Maximum Profit newsletter. #-ad_banner-#I tend to identify investment opportunities through a different tack: contrarian investing, which is used by Warren Buffett and many other gurus. At the simplest level, such an approach targets out-of-favor stocks that may possess ample latent upside, or exceedingly popular stocks that appear ripe for a pullback. As an example, that approach recently led me to conclude that shares of Amazon.com, Inc. (Nasdaq: AMZN) were now fully valued or even overvalued. Yet, I don’t always consider popular stocks to be overvalued — if they have the catalysts in place for more upside. Companies, such as Netflix, Inc. (Nasdaq: NFLX) or Salesforce.com, Inc.  (NYSE: CRM), continue to revolutionize their respective industry niches, and you simply can’t bet against them, even as they remain near all-time highs. Contrarian investing works so well with dot-com stocks, simply because these stocks can trade all over the map. As an example, I was a big fan of LinkedIn Corp. (NYSE: LNKD) when its shares… Read More

Heading into the 2013 holiday season, the Amazon.com, Inc. (Nasdaq: AMZN) juggernaut could not be stopped.   #-ad_banner-#The company’s website was so busy that shippers United Parcel Service, Inc. (NYSE: UPS) and FedEx Corp. (NYSE: FDX) were overwhelmed, leading to missed delivery dates. In December 2013, investors saw that as a nice problem to have and pushed Amazon’s stock above $400 for the first time in its history. The rally seemed logical: few companies can boast of 18 straight years of at least 20% sales growth, as Amazon did that year.   Soon after, investors concluded that consistently strong sales… Read More

Heading into the 2013 holiday season, the Amazon.com, Inc. (Nasdaq: AMZN) juggernaut could not be stopped.   #-ad_banner-#The company’s website was so busy that shippers United Parcel Service, Inc. (NYSE: UPS) and FedEx Corp. (NYSE: FDX) were overwhelmed, leading to missed delivery dates. In December 2013, investors saw that as a nice problem to have and pushed Amazon’s stock above $400 for the first time in its history. The rally seemed logical: few companies can boast of 18 straight years of at least 20% sales growth, as Amazon did that year.   Soon after, investors concluded that consistently strong sales growth wasn’t enough to justify nosebleed valuations. The company’s roughly $185 billion valuation was hard to square with just $2 billion in free cash flow. A few months later, when management warned that 2014 free cash flow would actually drop from 2013 levels, investors began to head for the exits. By the middle of spring, shares moved below $300, as investors grew weary of yet more growth for its own sake. “Show us the money” demanded investors. But investors are a fickle lot, and concerns about a lack of free cash flow are evidently no longer a concern. Since bottoming… Read More