Great companies share one key trait: They can sustain market leadership and growth for decades and even generations. Still, on rare occasion, a dependable blue chip will start to lose its way. Over time, factors like increased competition, changing product landscapes or simply a failure to adapt with the changing times can gradually — almost imperceptibly — erode a once-dominant market leader into an outmoded underperformer. Today, perhaps the most poignant example of this is the iconic food products manufacturer Campbell Soup Co. (NYSE: CPB). While Campbell is still formidable, the core products that drove its success for generations are… Read More

Great companies share one key trait: They can sustain market leadership and growth for decades and even generations. Still, on rare occasion, a dependable blue chip will start to lose its way. Over time, factors like increased competition, changing product landscapes or simply a failure to adapt with the changing times can gradually — almost imperceptibly — erode a once-dominant market leader into an outmoded underperformer. Today, perhaps the most poignant example of this is the iconic food products manufacturer Campbell Soup Co. (NYSE: CPB). While Campbell is still formidable, the core products that drove its success for generations are now a hindrance. Simply put, consumers have been shifting to fresh and organic foods, leaving fewer dollars for the company’s less healthful pre-packaged soups, vegetable-based beverages and sauces that account for the bulk of Campbell’s revenue. Because of this trend, the firm has been stunted for many years. At $8.3 billion, the top line increased a mere 9% in the past decade. Current earnings per share (EPS) of $2.41 represent a 4% compound growth rate during that time. In fact, profits have been stuck in neutral since 2010. Campbell’s stock, unsurprisingly, has lagged the broader market. Results are… Read More

After four decades trotting the globe in search of investing insights, Franklin Templeton’s Mark Mobius has built a reputation as the “Dean of Emerging Markets.” Although Mobius oversees 18 different mutual funds, focusing on emerging markets like China, Indonesia and Thailand, his current favorite way to play emerging market economies is an unusual one: Japan.   #-ad_banner-#The approach makes sense. The Japanese economy is on an upswing, thanks in large part to aggressive monetary stimulus. A weakening yen also helps, as exports rose 17% in the past 12 months. That’s a higher growth rate than many economists had expected just… Read More

After four decades trotting the globe in search of investing insights, Franklin Templeton’s Mark Mobius has built a reputation as the “Dean of Emerging Markets.” Although Mobius oversees 18 different mutual funds, focusing on emerging markets like China, Indonesia and Thailand, his current favorite way to play emerging market economies is an unusual one: Japan.   #-ad_banner-#The approach makes sense. The Japanese economy is on an upswing, thanks in large part to aggressive monetary stimulus. A weakening yen also helps, as exports rose 17% in the past 12 months. That’s a higher growth rate than many economists had expected just a few quarters ago. And the key boost is coming from emerging markets. Take Kawasaki Heavy Industries Ltd. (OTC: KWHIY), a $9-billion industrial firm that produces heavy machinery. Shipbuilding and defense contracting are a pair of strengths for the company. The firm projects annual revenue from emerging markets will more than double to $5.4 billion by 2020 from $2.5 billion in 2012. Annual revenue from all sources is currently just over $12 billion. Lately, Kawasaki has seen especially strong orders for industrial robots in China, India and Southeast Asia, which use the robots mainly in auto manufacturing and other factory… Read More

Although ‘wide moat’ isn’t a term often applied to small cap investments, this unusual combination does exist. Take US Ecology, Inc. (Nasdaq: ECOL), a relatively small waste-management firm that handles hazardous, non-hazardous and radioactive waste. With only about $1 billion in market value and sales of $447 million last year, US Ecology is dwarfed by industry giant Waste Management, Inc. (NYSE: WM). That firm is worth nearly $25 billion and boasts annual revenue of $14 billion. Yet US Ecology displays consistency more often associated with much larger companies. Indeed, revenue and net income grew every year during the past decade… Read More

Although ‘wide moat’ isn’t a term often applied to small cap investments, this unusual combination does exist. Take US Ecology, Inc. (Nasdaq: ECOL), a relatively small waste-management firm that handles hazardous, non-hazardous and radioactive waste. With only about $1 billion in market value and sales of $447 million last year, US Ecology is dwarfed by industry giant Waste Management, Inc. (NYSE: WM). That firm is worth nearly $25 billion and boasts annual revenue of $14 billion. Yet US Ecology displays consistency more often associated with much larger companies. Indeed, revenue and net income grew every year during the past decade (except 2009 and 2010 when the economy was in bad shape). Plus, this year will be the firm’s eleventh straight with a dividend. Free cash flow, now $43 million annually, is at an all-time high, which bodes well for dividend growth. And despite large acquisition costs last year, US Ecology is in solid financial shape, with debt levels not much greater than the industry average. Such results would be impossible to achieve without a formidable moat, a term coined by investing legend Warren Buffett to describe hard-to-penetrate economic defenses typically surrounding the strongest companies. US Ecology boasts several. Recurring Revenue… Read More

Slumping oil prices are crushing profits across the energy sector. And it won’t be long before the sector’s weakest players are forced to take drastic action in an attempt to survive. (My colleague Joseph Hogue touched on this theme last month.) There are currently several hundred distressed energy companies, most of which are smaller, highly-leveraged shale drillers. Some of these firms have perhaps three-to-six months of solvency remaining. Thus, by summer, we should begin seeing a spike in asset sales, restructurings and other cash-raising maneuvers as cash balances dry up. #-ad_banner-#Mergers and acquisitions, or M&A, is especially popular in these… Read More

Slumping oil prices are crushing profits across the energy sector. And it won’t be long before the sector’s weakest players are forced to take drastic action in an attempt to survive. (My colleague Joseph Hogue touched on this theme last month.) There are currently several hundred distressed energy companies, most of which are smaller, highly-leveraged shale drillers. Some of these firms have perhaps three-to-six months of solvency remaining. Thus, by summer, we should begin seeing a spike in asset sales, restructurings and other cash-raising maneuvers as cash balances dry up. #-ad_banner-#Mergers and acquisitions, or M&A, is especially popular in these situations. Simply put, weaker firms are more likely to pull through if they combine forces with a competitor or are bought out by one of the stronger industry players. As struggling energy companies increasingly opt for M&A, they’ll need investment banking expertise to shepherd them through the process. A top energy industry advisor: Evercore Partners, Inc. (NYSE: EVR). While the name may not be as well-recognized as those of huge rivals like The Goldman Sachs Group, Inc. (NYSE: GS) and Morgan Stanley (NYSE: MS), Evercore has an impressive track record. The firm was among the bankers involved in the high-profile… Read More

While insider action can provide valuable hints about where a stock is headed, many investors consider this activity most helpful with buying decisions. After all, as legendary fund manager Peter Lynch once noted, insiders might sell their firm’s stock for any number of reasons. But they only buy it for one reason: they think it’s going to go up. And who better to make such a call than the people most closely associated with a company? Trouble is, keeping abreast of insider buying trends in such a large universe of stocks is much too time-consuming for most individual investors. But… Read More

While insider action can provide valuable hints about where a stock is headed, many investors consider this activity most helpful with buying decisions. After all, as legendary fund manager Peter Lynch once noted, insiders might sell their firm’s stock for any number of reasons. But they only buy it for one reason: they think it’s going to go up. And who better to make such a call than the people most closely associated with a company? Trouble is, keeping abreast of insider buying trends in such a large universe of stocks is much too time-consuming for most individual investors. But no matter. There’s a simpler way to own stocks with heavy insider buying, and recent performance suggests it’s capable of generating market-beating returns. The method: investing in exchange-traded funds designed specifically to offer broad exposure to stocks with robust insider buying. Currently, there are two choices, the Guggenheim Insider Sentiment ETF (NYSE: NFO) and the Direxion All Cap Insider Sentiment ETF (NYSE: KNOW). Both are index funds (with reasonable expense ratios of less than 70 basis points). NFO tracks the Sabrient Insider Sentiment Index, an equal-weight benchmark of the 100 stocks with the highest composite rankings incorporating four factors: the… Read More

Tech stocks have been on a strong run for the past few quarters, and many of them now look pricey. Yet the sector still offers attractive bargains. Right now, Western Digital Corp. (Nasdaq: WDC) is arguably the best value around. Western Digital makes one of tech’s least glamorous products: hard disk drives. These data storage units are found in devices such as PCs, laptops, tablets and video cameras. It’s a huge market and for Western Digital, a highly profitable one. During the past three fiscal years, sales rose at nearly a 17% pace to $15.1 billion, while earnings more than… Read More

Tech stocks have been on a strong run for the past few quarters, and many of them now look pricey. Yet the sector still offers attractive bargains. Right now, Western Digital Corp. (Nasdaq: WDC) is arguably the best value around. Western Digital makes one of tech’s least glamorous products: hard disk drives. These data storage units are found in devices such as PCs, laptops, tablets and video cameras. It’s a huge market and for Western Digital, a highly profitable one. During the past three fiscal years, sales rose at nearly a 17% pace to $15.1 billion, while earnings more than doubled to $6.68 per share. Western Digital’s stock has been trouncing the S&P 500, as the chart below shows. Yet in spite of big stock gains, Western Digital is not fully-valued. Shares of the firm still only trade for about 14 times trailing 12-month earnings, and the forward price-to-earnings (P/E) ratio isn’t much above 10. Those are exceptionally cheap numbers next to the Nasdaq’s trailing and forward P/E ratios of 24 and 19, respectively. Oftentimes, stocks are underpriced because the market just doesn’t see all that much future growth potential. In Western Digital’s case, the long-term concern may… Read More

Fabled activist investor Carl Icahn doesn’t seem to care much about what short sellers think. On March 11, he bought nearly seven million shares, then worth about $93 million, of one of the most heavily shorted stocks in the S&P 500: exploration and production firm Chesapeake Energy Corp. (NYSE: CHK). The move boosted Icahn’s stake in Chesapeake by a percentage point (to 11% or roughly 73 million shares). Buying more of the stock may seem reckless considering its 55% price decline since June and exceptionally high short interest, which currently stands at almost 111 million shares. That equates to about… Read More

Fabled activist investor Carl Icahn doesn’t seem to care much about what short sellers think. On March 11, he bought nearly seven million shares, then worth about $93 million, of one of the most heavily shorted stocks in the S&P 500: exploration and production firm Chesapeake Energy Corp. (NYSE: CHK). The move boosted Icahn’s stake in Chesapeake by a percentage point (to 11% or roughly 73 million shares). Buying more of the stock may seem reckless considering its 55% price decline since June and exceptionally high short interest, which currently stands at almost 111 million shares. That equates to about 19% of the float. However, time should prove Icahn right about Chesapeake, even if the near-term looks ugly. As the second largest natural gas producer in the United States, next to Exxon Mobil Corp. (NYSE: XOM), Chesapeake is highly vulnerable to the natural gas supply glut resulting from North American overproduction. The glut pushed the price of natural gas down by more than 40% since last June, to around $2.65 per million British Thermal Units (BTU). Despite that drop, natural gas prices remained high enough in 2014 for Chesapeake to finish out the year… Read More

An improved economy and low oil prices have done wonders for airline stocks. The value of these stocks has surged in recent years, at times beyond reasonable levels. I’m especially concerned about the risk of a sharp share price correction for Allegiant Travel Co. (Nasdaq: ALGT), a small passenger airliner with a fleet of 70 aircraft and annual revenue of $1.1 billion. #-ad_banner-#Allegiant has a sound business model, pursing flight routes in underserved U.S. cities. It also generates a robust income stream from ancillary sources like priority boarding; in-flight food and beverage service; and hotel and ground transport bookings. The… Read More

An improved economy and low oil prices have done wonders for airline stocks. The value of these stocks has surged in recent years, at times beyond reasonable levels. I’m especially concerned about the risk of a sharp share price correction for Allegiant Travel Co. (Nasdaq: ALGT), a small passenger airliner with a fleet of 70 aircraft and annual revenue of $1.1 billion. #-ad_banner-#Allegiant has a sound business model, pursing flight routes in underserved U.S. cities. It also generates a robust income stream from ancillary sources like priority boarding; in-flight food and beverage service; and hotel and ground transport bookings. The company’s growth strategy has led to double-digit revenue gains in nine of the past 10 years. Equally important, the company retains a strong balance sheet.   Allegiant is clearly an investor favorite, based on the more than 277% gain in its stock over the past three years. However, shares are now alarmingly overvalued. Allegiant’s price-to-cash flow ratio, for example, has ballooned to more than 12, compared with ratios of about 7-to-10 for rivals like JetBlue Airways Corp. (Nasdaq: JBLU), Delta Air Lines, Inc. (NYSE: DAL) and United Continental Holdings, Inc. (NYSE: UAL). Shares are also exceptionally pricey by… Read More

While the Nasdaq Composite index recently rebounded to levels last seen in 2000, investors shouldn’t celebrate: as a group, technology stocks provided essentially zero return for 15 years. But that’s only true of investments that tracked the tech-laden Nasdaq. Results were far better in another very unique tech fund: the Fidelity Select IT Services Portfolio Fund (NYSE: FBSOX). #-ad_banner-#Those who put money in the mutual fund at the peak of the tech boom on March 10, 2000, have since seen their investments advance nearly 11% annually, compared to less than 1% a year for the Nasdaq. That makes FBSOX the… Read More

While the Nasdaq Composite index recently rebounded to levels last seen in 2000, investors shouldn’t celebrate: as a group, technology stocks provided essentially zero return for 15 years. But that’s only true of investments that tracked the tech-laden Nasdaq. Results were far better in another very unique tech fund: the Fidelity Select IT Services Portfolio Fund (NYSE: FBSOX). #-ad_banner-#Those who put money in the mutual fund at the peak of the tech boom on March 10, 2000, have since seen their investments advance nearly 11% annually, compared to less than 1% a year for the Nasdaq. That makes FBSOX the top tech fund since the bubble burst, according to Reuters. As the following chart shows, FBSOX chugged along as the Nasdaq soared into the stratosphere and then plunged back to earth. The fund was eventually caught in the downdraft, but managed to elude the worst of the meltdown. This fund is the classic tortoise versus the hare. It avoids buzzworthy tech stocks, many of which are prone to boom-and-bust cycles and instead focuses on another type of tech stock: the behind-the-scenes, unsung heroes of the IT revolution. For example, this fund’s third-largest holding, Cognizant Technology Solutions Corp. (Nasdaq:… Read More

Based on this year’s 17% spike in the Stoxx Europe 600 Index, it seems investors have found a home in European stocks. They’re especially enthused about the German market, which is currently sitting on more than a 23% gain and recently cracked 12,000 for the first time. As Europe’s strongest economy, and the world’s fourth largest, Germany may seem like a no-brainer investment. Especially now, as the European Central Bank (ECB) embarks on a historic bond-buying program aimed at sparking economic activity across the region. However, I think many investors are following the herd into European (and German)… Read More

Based on this year’s 17% spike in the Stoxx Europe 600 Index, it seems investors have found a home in European stocks. They’re especially enthused about the German market, which is currently sitting on more than a 23% gain and recently cracked 12,000 for the first time. As Europe’s strongest economy, and the world’s fourth largest, Germany may seem like a no-brainer investment. Especially now, as the European Central Bank (ECB) embarks on a historic bond-buying program aimed at sparking economic activity across the region. However, I think many investors are following the herd into European (and German) stocks on the assumption that these equities have nowhere to go but up. While investing in Europe still makes great sense for the long haul, investors may become disappointed with the results of ECB stimulus. Best House In A Tough Neighborhood So what does Germany have going for it? Jobs and wage growth, for starters. After peaking at about 8% during the last recession, German unemployment is down to 4.7% — low by any standard and a far cry from the region-wide average of 11.2%. Youth unemployment, which remains at alarming levels in southern Europe, is a more modest 7.1%… Read More