It’s easy to overlook things… especially if you’re not really looking for them. It’s the approach most investors have had with financial stocks. Since the crisis of 2008, the financial services business has changed radically. The “too big to fail” firms — Bank of America (NYSE: BAC), JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C) and the like — have enjoyed stock price rebounds but still suffer from constant regulatory scrutiny and risk. #-ad_banner-#Their earnings multiples are temptingly low, but for good reason: uncertainty. It’s really hard to figure out how these firms make money and how… Read More

It’s easy to overlook things… especially if you’re not really looking for them. It’s the approach most investors have had with financial stocks. Since the crisis of 2008, the financial services business has changed radically. The “too big to fail” firms — Bank of America (NYSE: BAC), JPMorgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C) and the like — have enjoyed stock price rebounds but still suffer from constant regulatory scrutiny and risk. #-ad_banner-#Their earnings multiples are temptingly low, but for good reason: uncertainty. It’s really hard to figure out how these firms make money and how much they’re going to make going forward. So the market, which gets it right every now and then, doesn’t have a whole lot of confidence in their ability. It’s even worse for super regional and regional banks. Traditionally, they’ve had to lend money to make money. Since 2008, despite the Federal Reserve’s best efforts to encourage them to do so, they just won’t lend money. Most of their revenue is derived from existing business and “feeing” their current customers to death. That’s a poor business model that no one should invest in. So once past mega-cap financials and regional banks,… Read More

There’s an old saying in the restaurant business: “Feed the rich, eat with the poor. Feed the poor, eat with the rich.” #-ad_banner-#It’s pretty self-explanatory. The guy who owns the four Popeye’s Fried Chicken locations probably has better personal cash flow than the owner of the high-end, nouvelle, southwest creole joint in a rehabbed old cotton warehouse downtown. Interestingly enough, that same philosophy can be applied to the car business. From 1919 to 1937, the Duesneberg name was the gold standard in transportation for tycoon and Hollywood types. Only 712 cars were produced. But 39-year-old… Read More

There’s an old saying in the restaurant business: “Feed the rich, eat with the poor. Feed the poor, eat with the rich.” #-ad_banner-#It’s pretty self-explanatory. The guy who owns the four Popeye’s Fried Chicken locations probably has better personal cash flow than the owner of the high-end, nouvelle, southwest creole joint in a rehabbed old cotton warehouse downtown. Interestingly enough, that same philosophy can be applied to the car business. From 1919 to 1937, the Duesneberg name was the gold standard in transportation for tycoon and Hollywood types. Only 712 cars were produced. But 39-year-old Henry Ford had a different business model. Ford (NYSE: F) had moving assembly lines and a good quality, but produced only a bare bones Model T automobile. You could get it in any color you wanted — as long as it was black. The rest is history. Tesla Motors (Nasdaq: TSLA), I’m afraid, is today’s Duesenberg. And the company’s stock does not merit its price. Led by another young business visionary, Elon Musk, Tesla manufactures an amazingly stylish and powerful all-electric sports car. My 11-year-old son has had the privilege of riding in one. “Dad!” he exclaimed. “It doesn’t… Read More

My great-grandfather owned a small department store in the Pacific Northwest. With the help of my great -grandmother (who, I am told, watched the cash register like a hawk), they built a successful business — which they sold before the onset of the Great Depression. #-ad_banner-#From what I can piece together, my great-grandfather was a shrewd merchant — but I’m thankful the family got out of the department store business back then. Today, I don’t think we’d be as lucky. Two years ago, I gave the bear case for J.C. Penney (NYSE: JCP). (Last week, my colleague David Sterman gave… Read More

My great-grandfather owned a small department store in the Pacific Northwest. With the help of my great -grandmother (who, I am told, watched the cash register like a hawk), they built a successful business — which they sold before the onset of the Great Depression. #-ad_banner-#From what I can piece together, my great-grandfather was a shrewd merchant — but I’m thankful the family got out of the department store business back then. Today, I don’t think we’d be as lucky. Two years ago, I gave the bear case for J.C. Penney (NYSE: JCP). (Last week, my colleague David Sterman gave a bullish take.) Back then, JCP traded at around $27. Today, the stock is treading water just above $6. Granted, most of J.C. Penney’s wounds seemed mostly self- inflicted due to the hedge-fund-controlled board selecting a CEO with zero department store experience who tried to radically revamp the entire franchise and wound up alienating the store’s well-established core demographic. However, the company (and the department store sector as a whole) had been in critical condition prior to the stumble. Face it. Big department stores are a dying breed — and I’ve found the next casualty. Window Dressing My wife’s… Read More

The Aflac (NYSE: AFL) duck is one of the strongest brands today. It’s genius marketing. But there’s much more to this behemoth than a clever and enduring ad campaign. The stock is a must-own. I first wrote about Aflac for StreetAuthority three years ago. The stock is higher than when I first profiled it, and the earnings projections are right about where I put them (give or take a few cents). Yet the market is still not that crazy about the stock. Good — that means better prices for us. #-ad_banner-#With a market cap of close to $30… Read More

The Aflac (NYSE: AFL) duck is one of the strongest brands today. It’s genius marketing. But there’s much more to this behemoth than a clever and enduring ad campaign. The stock is a must-own. I first wrote about Aflac for StreetAuthority three years ago. The stock is higher than when I first profiled it, and the earnings projections are right about where I put them (give or take a few cents). Yet the market is still not that crazy about the stock. Good — that means better prices for us. #-ad_banner-#With a market cap of close to $30 billion, Aflac sells supplemental health and life insurance in the U.S. and Japan. Most products are underwritten on an individual basis, but the company began writing group policies in recent years. In the U.S., Aflac’s product focus is primarily asset and income loss due to illness or injury. In Japan, the company’s focus is on designing products designed to help pay medical costs not covered under Japan’s national health insurance system. This is where I see the most opportunity for growth in the U.S. business. But more on that later. Aflac’s financial position is probably the best insurance for investor… Read More

What’s wrong with Cisco Systems (Nasdaq: CSCO)? Seriously? That’s a good question that the market, in its infinite wisdom, has been unable to figure out for nearly 15 years. To borrow a phrase made famous by Wall Street legend Art Cashin, CSCO’s chart looks like “the EKG of a potato”: #-ad_banner-#I’ve been following the stock just for most of my career. I remember during the tech bubble days when the water cooler talk was of Cisco’s “whisper number” — the Street’s general yet quiet consensus on how much the company would beat its expected earnings. Those were incredibly… Read More

What’s wrong with Cisco Systems (Nasdaq: CSCO)? Seriously? That’s a good question that the market, in its infinite wisdom, has been unable to figure out for nearly 15 years. To borrow a phrase made famous by Wall Street legend Art Cashin, CSCO’s chart looks like “the EKG of a potato”: #-ad_banner-#I’ve been following the stock just for most of my career. I remember during the tech bubble days when the water cooler talk was of Cisco’s “whisper number” — the Street’s general yet quiet consensus on how much the company would beat its expected earnings. Those were incredibly shortsighted days as you can see from the stock’s 80% tumble during the tech bust. But after that, something marvelous happened: The stock became a bond. One of the tenets of Warren Buffett’s stock selection process is that if a business has a strong, well-established market position and competitive advantage, its earnings (and payouts) should be so predictable that owning its stock is like owning a bond. The example Buffett usually cites is his investment in soft drink giant Coca-Cola (NYSE: KO). The Oracle of Omaha has said on more than one occasion: “A ham sandwich could run Coca-Cola.” Cisco… Read More

I have a small television in my office tuned to CNBC. I keep the sound off. It’s not that I rely on it for information — rather, I like to have some idea of what the herd is thinking and what they’re being told. As always, the whole story isn’t being discussed. #-ad_banner-#So far this year, the Dow Jones Industrial Average and the broader S&P 500 Index are off about 3.7% and 1.6%, respectively. Although these seem like modest pullbacks, many investors remain nervous for a couple of reasons.  First, 2013 brought the type of outsize gains that haven’t been… Read More

I have a small television in my office tuned to CNBC. I keep the sound off. It’s not that I rely on it for information — rather, I like to have some idea of what the herd is thinking and what they’re being told. As always, the whole story isn’t being discussed. #-ad_banner-#So far this year, the Dow Jones Industrial Average and the broader S&P 500 Index are off about 3.7% and 1.6%, respectively. Although these seem like modest pullbacks, many investors remain nervous for a couple of reasons.  First, 2013 brought the type of outsize gains that haven’t been enjoyed in many years. Second, many investors are still shell-shocked from 2008-2009, so any volatility whatsoever sends them running for cover. If a low-single-digit pullback makes them nervous, the pullbacks I’m about to discuss might really freak them out.  I’ve found a handful of high-quality stocks that are trading at an average discount of 16% to their 52-week highs, with an average dividend yield close to 5%. These are well-run companies — two in high-growth industries — with strong business models. Held as a basket, all three provide excellent diversification. Olin Corp. (NYSE: OLN ) Olin is one of… Read More

America is an agricultural juggernaut. #-ad_banner-#The United States has more arable land than any other nation on the planet and some of the highest crop yields per acre. However, only 20% of the country’s land area, about 408 million acres, is used for crop production. With this combination of amazing efficiency and the lack of capacity utilization, it’s clear that U.S. agriculture is a growth industry.  Seriously, agriculture has been an American growth industry since Squanto taught the pilgrims how to grow corn. But there’s real money to be made now. Outside of raw farmland — which has actually seen… Read More

America is an agricultural juggernaut. #-ad_banner-#The United States has more arable land than any other nation on the planet and some of the highest crop yields per acre. However, only 20% of the country’s land area, about 408 million acres, is used for crop production. With this combination of amazing efficiency and the lack of capacity utilization, it’s clear that U.S. agriculture is a growth industry.  Seriously, agriculture has been an American growth industry since Squanto taught the pilgrims how to grow corn. But there’s real money to be made now. Outside of raw farmland — which has actually seen some bubble-style price expansion over the past few years — the best way to cash in on the American Renaissance in agriculture is by owning the three D’s of American agriculture: chemical manufacturers Dow Chemical (NYSE: DOW) and DuPont (NYSE: DD), and equipment king Deere & Co. (NYSE: DE). All three names offer exceptional growth and value. Dow: Consistent Growth, With More To Come Since the market bottom of 2009, investors in DOW have been well rewarded. Not including dividends, the stock has produced an average annual return of 160%:  While some observers might think that the stock… Read More

When it comes to picking investments, stock guys like me have it easy.#-ad_banner-# Let’s say we’re looking for a stock. Well, we like spaghetti. We know that other people like spaghetti. We know that the Whatsamattayou Pasta Co. is the largest manufacturer of dried pasta in the country. The company makes money, and the stock looks undervalued. We buy.  Bond guys have it much tougher. They have to be way better than stock guys at math and economics and reading the tea leaves. That’s why I really respect the work they do. No wonder the colorful political pundit… Read More

When it comes to picking investments, stock guys like me have it easy.#-ad_banner-# Let’s say we’re looking for a stock. Well, we like spaghetti. We know that other people like spaghetti. We know that the Whatsamattayou Pasta Co. is the largest manufacturer of dried pasta in the country. The company makes money, and the stock looks undervalued. We buy.  Bond guys have it much tougher. They have to be way better than stock guys at math and economics and reading the tea leaves. That’s why I really respect the work they do. No wonder the colorful political pundit James Carville once said he’d like to be reincarnated as the bond market — that way, he could “scare the hell out of everybody.”  So, when I decided to write about the bond market, I had to approach it from a stock guy’s perspective. As I’ve mentioned, I’m not a “wiggle reader,” as I like to call chartists. However, the charts on the 10-year Treasury yield have grabbed my attention big time: This one-year chart is pretty self-explanatory: Rates are trending lower. And there’s money to be made. Bond prices have an inverse relationship to bond yields: Prices… Read More

What do you call 10,000 baby boomers turning 65 every day for the next 20 years? If you’re a big pharmaceutical company, you might call it an ATM.#-ad_banner-# Investors got a taste of this in the late ’90s when drugmaker Pfizer (NYSE: PFE) introduced the erectile dysfunction wonder drug Viagra. Money was made as competitors came out with “me too” products, and Big Pharma threw itself into R&D for products tailored to serve this huge (65 million-plus) and aging market.  However, after a rally at the end of the 20th century, pharma stocks came back to earth with… Read More

What do you call 10,000 baby boomers turning 65 every day for the next 20 years? If you’re a big pharmaceutical company, you might call it an ATM.#-ad_banner-# Investors got a taste of this in the late ’90s when drugmaker Pfizer (NYSE: PFE) introduced the erectile dysfunction wonder drug Viagra. Money was made as competitors came out with “me too” products, and Big Pharma threw itself into R&D for products tailored to serve this huge (65 million-plus) and aging market.  However, after a rally at the end of the 20th century, pharma stocks came back to earth with the rest of the market and spent almost a decade chugging sideways. But as markets crawled out of the wreckage of the financial crisis, pharma stocks have quietly broken out and moved higher. Five years ago, I began including shares of Eli Lilly (NYSE: LLY) in my clients’ equity portfolios. At the time, the meat-and-potatoes metrics of the stock were impressive: single-digit trailing and forward price-to-earnings (P/E) ratios, a dividend yield over 5%, a mountain of cash, skilled and committed management, and a full, promising new product pipeline — which is the difference between life and death in the pharma… Read More

It boggles my mind to think about how many billions of casseroles have been made by American moms and eaten by eye-rolling American kids over the past century. #-ad_banner-# That’s a weird thing to obsess about, I know — but it’s not really the casseroles I’m thinking about. It’s the casserole dishes and, most likely, many of those glass dishes were manufactured by Corning (NYSE: GLW). Throughout its long history — it was founded in 1851 — Corning has made glass for lots of different things. But during the tech boom of the late 20th century, this old-line American… Read More

It boggles my mind to think about how many billions of casseroles have been made by American moms and eaten by eye-rolling American kids over the past century. #-ad_banner-# That’s a weird thing to obsess about, I know — but it’s not really the casseroles I’m thinking about. It’s the casserole dishes and, most likely, many of those glass dishes were manufactured by Corning (NYSE: GLW). Throughout its long history — it was founded in 1851 — Corning has made glass for lots of different things. But during the tech boom of the late 20th century, this old-line American industrial company reinvented itself as a cutting-edge technology company making fiber-optic cable for the information superhighway.  Then the bottom fell out: GLW was pretty much hung out to dry by the market as investors realized that, in typical American fashion, telecom providers had gotten ahead of themselves and overbuilt their fiber-optic networks. “There’s no way Corning will ever make money again,” said the skeptics. Then Corning reinvented itself again, thanks to smartphones and tablets — with a product they had developed called Gorilla Glass, which turned out to be perfect for these devices. I last profiled Corning in… Read More