With oil prices stabilizing, U.S. stock indexes rebounding and volatility on the decline, things are looking a lot better for investors than they were just a couple weeks ago. However, I doubt I’m alone in my sneaking suspicion that the recent sharp pullback was only a hint of what might be in store. Despite the current strength in stocks, some bearish risk factors are lurking. And these could converge relatively soon to precipitate a massive selloff that brings the S&P 500 down by 15%, 20% or maybe even more. #-ad_banner-#Ironically, some of the things that could contribute to such an… Read More

With oil prices stabilizing, U.S. stock indexes rebounding and volatility on the decline, things are looking a lot better for investors than they were just a couple weeks ago. However, I doubt I’m alone in my sneaking suspicion that the recent sharp pullback was only a hint of what might be in store. Despite the current strength in stocks, some bearish risk factors are lurking. And these could converge relatively soon to precipitate a massive selloff that brings the S&P 500 down by 15%, 20% or maybe even more. #-ad_banner-#Ironically, some of the things that could contribute to such an event are usually considered positive — like solid (if unspectacular) domestic growth. According to the International Monetary Fund, U.S. gross domestic product is on pace to climb 2.2% this year and should accelerate to 3.1% in 2015. What’s more, the slowdown in China may not be severe enough to hinder growth for the United States and the rest of the world. In the third quarter, China’s GDP actually rose at an annualized rate of 7.3%, beating calls for 7.2% expansion. The second quarter’s 7.5% growth rate was strong, too. Clearly, though, China is transitioning to slower growth after years of… Read More

As the market has so rudely demonstrated recently, it can put the screws to investors at a moment’s notice. But that hasn’t stopped some big-name stocks from rocketing to new heights. One of the latest examples occurred on October 14. That day, while stock market indices seesawed violently, shares of a well-known restaurant chain jumped more than 11%. The move took the stock to $84.30 — at that point an all-time high, though the price has since moved a bit higher. The company pleased the Street yet again in Q3, reporting an 18.8% year-over-year gain in profits and earnings per… Read More

As the market has so rudely demonstrated recently, it can put the screws to investors at a moment’s notice. But that hasn’t stopped some big-name stocks from rocketing to new heights. One of the latest examples occurred on October 14. That day, while stock market indices seesawed violently, shares of a well-known restaurant chain jumped more than 11%. The move took the stock to $84.30 — at that point an all-time high, though the price has since moved a bit higher. The company pleased the Street yet again in Q3, reporting an 18.8% year-over-year gain in profits and earnings per share (EPS) of $0.63, besting analyst expectations of $0.61. Revenues were up 10.5% year-over-year to about $447 million, surpassing consensus estimates for sales of $436 million. What’s more, Q3 marked the fourth-straight quarter in which the company met or beat earnings projections. Since the bottom line typically drives stock prices, shares of the company have been doing very well, climbing about 23% so far this year, compared with barely a 3% gain for the S&P 500. And this has been the pattern for a while. Since 2010, Domino’s Pizza, Inc. (NYSE: DPZ) grew per-share profits 92%, from $1.45… Read More

With the Dow regularly dropping triple digits in a day… Read More

If you’re looking for investment ideas, it’s hard to go wrong by checking in on Warren Buffett. Just about every week, it seems, Buffett and his well-known conglomerate Berkshire Hathaway (NYSE: BRK.A) announce yet another major stock purchase or business acquisition with dollar signs written all over it. In an interview with CNBC a couple weeks ago, for example, Buffett revealed an all-cash buyout of privately held Van Tuyl Group, the nation’s fifth largest auto dealership with annual revenue of about $9 billion and 78 locations in 10 states. Van Tuyl will be renamed Berkshire Hathaway Automotive, and the current… Read More

If you’re looking for investment ideas, it’s hard to go wrong by checking in on Warren Buffett. Just about every week, it seems, Buffett and his well-known conglomerate Berkshire Hathaway (NYSE: BRK.A) announce yet another major stock purchase or business acquisition with dollar signs written all over it. In an interview with CNBC a couple weeks ago, for example, Buffett revealed an all-cash buyout of privately held Van Tuyl Group, the nation’s fifth largest auto dealership with annual revenue of about $9 billion and 78 locations in 10 states. Van Tuyl will be renamed Berkshire Hathaway Automotive, and the current owner, Larry Van Tuyl, will stay on as chairman. For individual investors, the most important revelation was that Buffett sees value in the auto dealership industry overall and plans to buy “a lot more car dealers” in coming years. You see, a huge factor in favor of auto dealerships right now is pent up demand. Because of tougher times in the economy, many people have been putting off new vehicle purchases and keeping their old cars pretty much until the bitter end. According to Mr. Van Tuyl, who was with Buffett at the CNBC interview, the vehicles serviced at his… Read More

Nobody buys stock to lose money, but it happens. It might go something like this: You hear about what sounds like a game-changing company, and of course you’re skeptical. So-called game changers are a dime a dozen these days. Still, this particular company looks like a standout, so you do all your due diligence — and, indeed, the firm seems all it’s cracked up to be, with a unique product line that’s gaining popularity, a strong balance sheet and impressive top- and bottom-line growth. Its stock is up a lot, but all signs indicate plenty more… Read More

Nobody buys stock to lose money, but it happens. It might go something like this: You hear about what sounds like a game-changing company, and of course you’re skeptical. So-called game changers are a dime a dozen these days. Still, this particular company looks like a standout, so you do all your due diligence — and, indeed, the firm seems all it’s cracked up to be, with a unique product line that’s gaining popularity, a strong balance sheet and impressive top- and bottom-line growth. Its stock is up a lot, but all signs indicate plenty more upside to come. So you look for a good entry point and establish a position. Maybe you even buy more of the stock than usual because the future of the company is just that bright. Management and analysts see it disrupting an established industry and grabbing huge market share from the old guard. But a few years later, none of that has come to pass. It so happens the firm hit saturation a lot quicker than anticipated, so now sales and profits are falling, margins are shrinking and the stock is taking a beating. Read More

Movie buffs may remember a strange film from 1999 called “Being John Malkovich.” In it, puppeteer Craig Schwartz (played by John Cusack) finds a magic portal into the mind of the well-known actor John Malkovich. As the movie title suggests, the portal lets people be Malkovich and live life in his shoes. #-ad_banner-#That’s impossible, of course, but it sort of makes you think of whose shoes you might want to step into if you could. And I’ll bet a lot of investors would pick the famous activist money manager Bill Ackman, who’s fond of taking large stakes in companies and… Read More

Movie buffs may remember a strange film from 1999 called “Being John Malkovich.” In it, puppeteer Craig Schwartz (played by John Cusack) finds a magic portal into the mind of the well-known actor John Malkovich. As the movie title suggests, the portal lets people be Malkovich and live life in his shoes. #-ad_banner-#That’s impossible, of course, but it sort of makes you think of whose shoes you might want to step into if you could. And I’ll bet a lot of investors would pick the famous activist money manager Bill Ackman, who’s fond of taking large stakes in companies and then using his influence to push for changes that benefit shareholders. The man clearly knows what he’s doing. Through his hedge fund company Pershing Square Capital Management, he generated a total return of nearly 1,200% in the past decade before fees, according to Forbes. That’s about 10 times what the S&P 500 delivered during the same period. Although you can’t actually be Bill Ackman, it’s easy enough to track his long portfolio through SEC filings — and there’s one holding in particular I’d like to bring to your attention. The company, a well-known supplier of industrial gases and chemicals with… Read More

After cratering during the recession, the number of U.S. initial public offerings has jumped dramatically. That’s especially true in the past couple years, as the following table illustrates. Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 # of IPOs 192 196 213 31 63 154 125 128 222 211 Source: IPO ETF manager Renaissance Capital. Yearly breakdown based on IPO pricing date — excludes SPACs, closed-end funds and trusts. What the numbers don’t reveal, though, is not every IPO has been warmly greeted. For instance, investors clearly weren’t excited about the… Read More

After cratering during the recession, the number of U.S. initial public offerings has jumped dramatically. That’s especially true in the past couple years, as the following table illustrates. Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 # of IPOs 192 196 213 31 63 154 125 128 222 211 Source: IPO ETF manager Renaissance Capital. Yearly breakdown based on IPO pricing date — excludes SPACs, closed-end funds and trusts. What the numbers don’t reveal, though, is not every IPO has been warmly greeted. For instance, investors clearly weren’t excited about the late-2012 debut of a leading plastics manufacturer. In this case, the initial release called for 29.4 million shares at $16 per share, which was at the low end of the projected range of $16-to-$18. Even worse, the stock only opened a little above $15 when trading began on October 4, 2012. And within four days, the price sank as low as $13.48 — nearly a 16% drop from the IPO price. Above-average debt was a key reason for the market’s harsh welcome of Berry Plastics Group, Inc. (NYSE: BERY), which makes thermoform drinking cups, blow-molded… Read More

Most great businesses have one thing in common: cash. Far from simply not hurting for it, they’ve typically got plenty on the balance sheet. They generally have healthy free cash flow, too. #-ad_banner-#​For investors, a great way to gain exposure to these things is through the insurance industry. Insurance can be a fantastic cash generator because premiums tend to go up regularly, leading to a more consistent revenue stream and steady growth of profits. Still, insurance companies face risk, mainly from having to pay out so much for claims that their cash position and… Read More

Most great businesses have one thing in common: cash. Far from simply not hurting for it, they’ve typically got plenty on the balance sheet. They generally have healthy free cash flow, too. #-ad_banner-#​For investors, a great way to gain exposure to these things is through the insurance industry. Insurance can be a fantastic cash generator because premiums tend to go up regularly, leading to a more consistent revenue stream and steady growth of profits. Still, insurance companies face risk, mainly from having to pay out so much for claims that their cash position and bottom line suffers. But that’s not as big a concern for the industry’s middlemen — insurance brokerages — because they’re not underwriters or payers. Rather, their main job is connecting customers with insurers and for this they collect commissions and fees. The insurance brokerage I prefer is one of the top two in the United States, as well as a leading provider of human resources, management and economics consulting services. It has an extremely tough competitor in main rival Aon Hewitt Plc (NYSE: AON), with both firms offering high-level expertise, generating… Read More

All-time investing great Warren Buffett is well-known for taking large positions in stocks he likes, and his top holdings naturally include many of the market’s most familiar names. Yet as a value seeker and contrarian, he also bets boldly on lesser-known firms — like a leading but still under-the-radar building materials supplier based in Chicago. Through his well-known conglomerate Berkshire Hathaway, Inc. (NYSE: BRK.A), Buffett holds about 39 million shares of the company worth $1.1 billion based on a recent stock price of $28.10. #-ad_banner-#This gives him a 27% stake, making him by far… Read More

All-time investing great Warren Buffett is well-known for taking large positions in stocks he likes, and his top holdings naturally include many of the market’s most familiar names. Yet as a value seeker and contrarian, he also bets boldly on lesser-known firms — like a leading but still under-the-radar building materials supplier based in Chicago. Through his well-known conglomerate Berkshire Hathaway, Inc. (NYSE: BRK.A), Buffett holds about 39 million shares of the company worth $1.1 billion based on a recent stock price of $28.10. #-ad_banner-#This gives him a 27% stake, making him by far the company’s single-largest shareholder. The next largest is a German building materials producer with a nearly 14% stake. I doubt many individual investors know of the company, which currently generates $3.6 billion in annual revenue, mainly by making wallboard and joint compound for the residential and commercial construction and remodeling markets. But the simple fact that Buffett owns it, and in large quantity, makes USG Corp. (NYSE: USG) well worth consideration. Clearly, Buffett has major confidence in the housing recovery or he wouldn’t risk so much on USG, which is about as pure a play… Read More

The September 19 initial public offering of Chinese internet giant Alibaba Group Holding Limited (NYSE: BABA) was every bit the extravaganza analysts predicted. And there’s a good chance that, in the long run, Alibaba shareholders will be well rewarded. Like many Chinese stocks, though, Alibaba is… Read More