Monday’s consumer spending report was lower than expected, but it didn’t stop the market from continuing to snatch up shares of consumer discretionary stocks. That makes sense: employment gains are coming in strong; personal income is rising; and energy prices have yet to rally. It all adds up to a pretty picture for companies dependent on Americans spending on nonessential goods and services this year. I advised in February that consumer discretionary stocks were starting to rally, presaging a market rebound. That turned out to be true, and the stocks I recommended then — Mohawk Industries (NYSE: MHK) and Disney… Read More

Monday’s consumer spending report was lower than expected, but it didn’t stop the market from continuing to snatch up shares of consumer discretionary stocks. That makes sense: employment gains are coming in strong; personal income is rising; and energy prices have yet to rally. It all adds up to a pretty picture for companies dependent on Americans spending on nonessential goods and services this year. I advised in February that consumer discretionary stocks were starting to rally, presaging a market rebound. That turned out to be true, and the stocks I recommended then — Mohawk Industries (NYSE: MHK) and Disney (NYSE: DIS) — have both performed well since then. But some market observers think the more recent rally in consumer discretionary stocks is somehow a bad sign, indicating a market top. I disagree. While disappointing earnings could derail the market in the short run (and create bargains for high-quality companies’ shares), so far the earnings season has been better than expected. And investors’ continued faith in consumer discretionary shares is a solid indicator that the economy remains on the right track. #-ad_banner-#I wouldn’t add to your holdings in Mohawk and Disney at this point, although both are certainly worthy of… Read More

Utility stocks performed relatively well in the early weeks of 2016. As classic “widow and orphan” investments, these safe havens attracted money from investors spooked by the overall market selloff. But in April utilities lagged the market, perhaps because of concerns that the Fed will again raise short-term interest rates. Rising rates tend to hurt utility stocks because it makes their above-average dividend yields less compelling versus bond yields.   Income investors should take note of this pause in utilities’ bull run and look to pick up shares of the best utilities at attractive prices. It’s unlikely that… Read More

Utility stocks performed relatively well in the early weeks of 2016. As classic “widow and orphan” investments, these safe havens attracted money from investors spooked by the overall market selloff. But in April utilities lagged the market, perhaps because of concerns that the Fed will again raise short-term interest rates. Rising rates tend to hurt utility stocks because it makes their above-average dividend yields less compelling versus bond yields.   Income investors should take note of this pause in utilities’ bull run and look to pick up shares of the best utilities at attractive prices. It’s unlikely that the Fed will hike short-term rates more than once in the coming months, given the uncertain global economic outlook and the upcoming presidential election (the Fed historically has been loath to influence elections in a campaign’s final months). #-ad_banner-#Utilities remain one of the best sources of investment income among U.S. stocks. As regulated providers of essential products and services — often as the monopoly provider in a certain area — utilities are virtually guaranteed a steady stream of cash from their customers. But the regulations also mean some utilities are restricted from investing in high-growth businesses. So rather than enticing… Read More

Recently I’ve noticed a disconnect in hotel stocks. Although the sector’s leading companies are performing admirably, their stocks fell sharply in 2015 and haven’t yet recovered in 2016. That’s creating a buying opportunity for on-the-ball investors today. The market has discounted hotel stocks for two main reasons. First, concern about economic growth in China and Europe has made many observers fearful that business travel will decline precipitously in the coming quarters, cutting into hotel companies’ profit margins. Second, the “sharing economy” — whose most famous exemplar, Uber, is transforming the taxi industry — has extended a prominent tendril into the… Read More

Recently I’ve noticed a disconnect in hotel stocks. Although the sector’s leading companies are performing admirably, their stocks fell sharply in 2015 and haven’t yet recovered in 2016. That’s creating a buying opportunity for on-the-ball investors today. The market has discounted hotel stocks for two main reasons. First, concern about economic growth in China and Europe has made many observers fearful that business travel will decline precipitously in the coming quarters, cutting into hotel companies’ profit margins. Second, the “sharing economy” — whose most famous exemplar, Uber, is transforming the taxi industry — has extended a prominent tendril into the lodging sector. Airbnb and other online home-rental services allow travelers to bypass hotels for homier, and often less expensive, lodgings. Some investors worry that Airbnb will disrupt the hotel business as much as Uber has rewritten the rules for taxis. #-ad_banner-#Both problems seem overblown. It’s true that China and Europe may not be growing as rapidly as the United States — which itself is hardly breaking economic growth records — but there’s no sign that hotel demand is slackening; instead, the long-term trend is still for growing business and leisure travel as emerging economies continue to grow the global middle… Read More

Few companies have suffered a faster rise and fall lately than Theranos, Inc. The company got tons of attention in recent years based on a seemingly innovative technology: a hand-held blood-testing device that promised to replace dozens of traditional blood tests by analyzing a few drops of blood obtained via pinprick rather than using vials of blood drawn with a needle. Noninvasive blood tests are a holy grail of the medical lab industry, so it’s not surprising that the privately held company attracted investors — its valuation hit $9 billion in 2014 based on hundreds of millions raised from investors. Read More

Few companies have suffered a faster rise and fall lately than Theranos, Inc. The company got tons of attention in recent years based on a seemingly innovative technology: a hand-held blood-testing device that promised to replace dozens of traditional blood tests by analyzing a few drops of blood obtained via pinprick rather than using vials of blood drawn with a needle. Noninvasive blood tests are a holy grail of the medical lab industry, so it’s not surprising that the privately held company attracted investors — its valuation hit $9 billion in 2014 based on hundreds of millions raised from investors. A partnership with Walgreens (Nasdaq: WBA) that same year seemed likely to make Theranos a household name. But starting last fall, Theranos’ credibility was damaged by a series of negative reports about the effectiveness and accuracy of its device. Federal officials at more than one agency reportedly are probing the company, including a potential criminal investigation, and Walgreens has threatened to drop its relationship. Some analysts predict the company won’t survive.  #-ad_banner-#If this episode casts a pall over other medical lab testing companies, it will only obscure the investment potential of that rare gem: a surefire growth industry. Medical lab… Read More

Technologists tell us we’re in the early stages of the third wave of the Internet: the Internet of Things (IoT). It follows the first wave, in which people adopted the Internet through desktop computers, and the second wave, in which the world adopted use of the Internet through mobile devices, such as smartphones. In this third wave, millions of people around the world are adopting apps, devices and systems that integrate the Internet with our day-to-day lives in new ways. Within the next decade, every machine, vehicle and electronic device will incorporate features that connect to the Internet and make… Read More

Technologists tell us we’re in the early stages of the third wave of the Internet: the Internet of Things (IoT). It follows the first wave, in which people adopted the Internet through desktop computers, and the second wave, in which the world adopted use of the Internet through mobile devices, such as smartphones. In this third wave, millions of people around the world are adopting apps, devices and systems that integrate the Internet with our day-to-day lives in new ways. Within the next decade, every machine, vehicle and electronic device will incorporate features that connect to the Internet and make use of its advantages — including remote monitoring and control, data accumulation and retrieval, and automation of functions now done manually. #-ad_banner-#Some examples of IoT already in widespread use are Fitbits, credit-card-accepting parking meters and smart TVs. More and more cars are equipped with Internet connections, and it’s no longer a novelty when a friend says he can control his thermostat or lock his front door remotely. From smoke detectors that automatically call the fire department to factory machinery that responds to orders made 5,000 miles away, the IoT will soon become a fact of life. It’s estimated that 90%… Read More

“The future is already here,” science fiction writer William Gibson famously said. “It’s just not evenly distributed.” While that statement is in some sense obvious — global inequality makes it so — it’s also of profound importance to investors looking for high-growth stocks. #-ad_banner-#Information technology transformed every area of human life in the 20th century. The rate of change accelerated with the personal computer in the 1980s, shifted into overdrive when Internet access became ubiquitous in the 1990s and exploded with the proliferation of mobile Internet in the 2000s. We’re now experiencing the domino effect of these enormous technological changes… Read More

“The future is already here,” science fiction writer William Gibson famously said. “It’s just not evenly distributed.” While that statement is in some sense obvious — global inequality makes it so — it’s also of profound importance to investors looking for high-growth stocks. #-ad_banner-#Information technology transformed every area of human life in the 20th century. The rate of change accelerated with the personal computer in the 1980s, shifted into overdrive when Internet access became ubiquitous in the 1990s and exploded with the proliferation of mobile Internet in the 2000s. We’re now experiencing the domino effect of these enormous technological changes as tens of thousands of innovators around the world expand on these technologies and popular platforms to create products, services and new technologies. An investor’s challenge is to see the future that’s already here — in a publicly traded company’s technology — and connect the dots to a few years from now, when the company is distributing that technology to a much wider market. The further challenge is determining when a stock is trading at a valuation that underestimates the revenue and cash flows generated by that future distribution. To that end, consider two up-and-coming tech stocks that I think… Read More

People have been expecting a boom in renewable energy for years — but now it might finally be happening. Bloomberg New Energy Finance and the United Nations New Energy Program reported in March that renewable energy as a percentage of global energy production is growing faster than expected: wind, solar, geothermal and biomass together made up more than half of all new electricity-production capacity brought online in 2015, an unprecedented milestone. Renewable energy accounted for 10.3% of the world’s power production in 2015, up from 9.1% in 2014. Throw hydroelectric and nuclear power into the mix, and non-fossil-fuel production now… Read More

People have been expecting a boom in renewable energy for years — but now it might finally be happening. Bloomberg New Energy Finance and the United Nations New Energy Program reported in March that renewable energy as a percentage of global energy production is growing faster than expected: wind, solar, geothermal and biomass together made up more than half of all new electricity-production capacity brought online in 2015, an unprecedented milestone. Renewable energy accounted for 10.3% of the world’s power production in 2015, up from 9.1% in 2014. Throw hydroelectric and nuclear power into the mix, and non-fossil-fuel production now accounts for a third of total power production.  #-ad_banner-#This trend is almost certain to continue, as nations around the world try to reduce carbon emissions to slow global warming. Last December in Paris, almost every nation on Earth agreed to do so, and since then scientists have reported ever-more-dire warnings about the consequences if they fail.  What does this mean for investors? For one thing, billions of dollars will be spent on non-carbon power sources over the next few years. In 2015 alone, $286 billion was spent on new renewable electricity capacity. So the market-share leaders in solar and wind… Read More

It’s earnings season. And the consensus on Wall Street, Main Street and beyond is that this quarter could be a bloodbath for corporate earnings in almost every industry. Analysts expect overall earnings for the S&P 500 to decline 9.1% from the first quarter of 2015. The main reason is fairly simple: energy and financial companies are having their worst quarters in many years. We all know oil and natural gas prices hit historic lows in February; though they’ve rallied, it won’t be enough to help them this quarter. For financial services companies, the stock-market volatility early in the quarter hurt… Read More

It’s earnings season. And the consensus on Wall Street, Main Street and beyond is that this quarter could be a bloodbath for corporate earnings in almost every industry. Analysts expect overall earnings for the S&P 500 to decline 9.1% from the first quarter of 2015. The main reason is fairly simple: energy and financial companies are having their worst quarters in many years. We all know oil and natural gas prices hit historic lows in February; though they’ve rallied, it won’t be enough to help them this quarter. For financial services companies, the stock-market volatility early in the quarter hurt trading profits and reduced demand for brokerage and other investment-related services; at the same time some banks suffered from loan defaults from the energy sector. #-ad_banner-#There are a couple of pieces of good news regarding earnings: One, consumer discretionary, healthcare and telecom companies are expected to post positive earnings overall. If you’ve followed my advice to add to your positions in these areas in recent months, those holdings should partly protect your portfolio from earnings-related drops. Two, and most significant, the gloomy earnings season probably will create buying opportunities among quality stocks that get beaten up — either because their… Read More

As I discussed yesterday, the U.S. economy continues to show surprising signs of strength and resilience. Job growth, consumer spending and manufacturing production are on the rise six years into a recovery. And for the markets, it’s significant that confidence in the U.S. economy seems to be rebounding from the gloomy mood early this year. What does this mean for your portfolio? #-ad_banner-#In general, the overall U.S. stock markets should perform well when the economy is growing and inflation and interest rates are historically low. But the devil is in the details. Defensive stocks, like electric utilities and blue chip… Read More

As I discussed yesterday, the U.S. economy continues to show surprising signs of strength and resilience. Job growth, consumer spending and manufacturing production are on the rise six years into a recovery. And for the markets, it’s significant that confidence in the U.S. economy seems to be rebounding from the gloomy mood early this year. What does this mean for your portfolio? #-ad_banner-#In general, the overall U.S. stock markets should perform well when the economy is growing and inflation and interest rates are historically low. But the devil is in the details. Defensive stocks, like electric utilities and blue chip stocks with above-average dividend yields, tend to underperform in such a climate. Yet global investors remain anxious about China, Europe and other economies outside our shores — so safe haven stocks may do just fine. Still, the best performers should be those in areas that thrive when Americans are employed and have extra money in their pockets. And some specific industries could benefit from trends impacting them regardless of the wider economic scenario. Here are the sectors most likely to outperform over the next 12 months: Consumer Discretionary: By definition, companies in the consumer discretionary space sell goods and services… Read More

It takes a licking but keeps on ticking: the U.S. economy shows no signs of altering the slow-but-steady economic growth path it’s been on for years now. More important, the healthy job-growth trend we’ve seen for two years remains in place. That’s true in spite of potential trainwrecks in Europe and Asia. Investors seem to agree on this interpretation of the data, which is why markets are behaving much differently now than they did in January. Let’s examine what the indicators are telling us — and in part two of this article later this week, I’ll tell you what it… Read More

It takes a licking but keeps on ticking: the U.S. economy shows no signs of altering the slow-but-steady economic growth path it’s been on for years now. More important, the healthy job-growth trend we’ve seen for two years remains in place. That’s true in spite of potential trainwrecks in Europe and Asia. Investors seem to agree on this interpretation of the data, which is why markets are behaving much differently now than they did in January. Let’s examine what the indicators are telling us — and in part two of this article later this week, I’ll tell you what it means for our portfolios. #-ad_banner-#​The U.S. Economy: The economy has been growing slowly but steadily for many years, but in the past year job growth picked up — a sign that employers have enough confidence in demand for their goods and services that they’re willing to increase capacity even if it means higher expenses. The U.S. economy has created at least 200,000 jobs in 21 of the 24 months since March 2014 — nothing like the gains we saw in the 1990s, but far better than the early years of the recovery. Job growth isn’t only in low-wage service sectors… Read More