Analyst Articles

Some of the best long-term investments are in companies that dominate a niche market. As an example, I recently highlighted the strong appeal of auto parts supplier Dorman Products (Nasdaq: DORM).  Investors should consider Ball Corp (NYSE: BLL) as another market niche dominator. The company makes metal packaging products, has a similarly profitable past, and an equally bright future. #-ad_banner-#You probably use Ball Corp’s products every day. It makes metal cans and containers for companies like Anheuser-Busch (NYSE: BUD), PepsiCo Inc. (NYSE: PEP), The Coca-Cola Company (NYSE: KO), and Unilever Plc (NYSE: UL). The operational dynamics at work in Ball’s… Read More

Some of the best long-term investments are in companies that dominate a niche market. As an example, I recently highlighted the strong appeal of auto parts supplier Dorman Products (Nasdaq: DORM).  Investors should consider Ball Corp (NYSE: BLL) as another market niche dominator. The company makes metal packaging products, has a similarly profitable past, and an equally bright future. #-ad_banner-#You probably use Ball Corp’s products every day. It makes metal cans and containers for companies like Anheuser-Busch (NYSE: BUD), PepsiCo Inc. (NYSE: PEP), The Coca-Cola Company (NYSE: KO), and Unilever Plc (NYSE: UL). The operational dynamics at work in Ball’s industry are quite appealing. Metal cans and bottles for the food, beverage and personal care industries represent huge markets, for which there are few good substitutes. Despite the huge market, the risk of technological disruption is low, and Ball’s products require minimal new investment in product improvements. After all, does a can of cola look any different today than it did a decade or two ago? Furthermore, Ball has already reached the size and scale that would make it difficult for new companies to enter the market. In the company’s 2014 10-K filing, Ball noted that only “Five companies manufacture… Read More

Our best investment ideas can sometimes come from paying attention to what some of the leading investors in the world are buying and selling. And when Warren Buffett himself is buying, it’s worth seeing if the stock has a place in your own portfolio. What stock has everyone’s favorite guru turned his attention to this time? Phillips 66 (NYSE: PSX). #-ad_banner-#This week, Berkshire Hathaway (NYSE: BRK-B) revealed that it now owns over 10% of Phillips 66. The company has been accumulating shares of PSX since the second quarter of this year. So is Buffett’s latest move a good buy for… Read More

Our best investment ideas can sometimes come from paying attention to what some of the leading investors in the world are buying and selling. And when Warren Buffett himself is buying, it’s worth seeing if the stock has a place in your own portfolio. What stock has everyone’s favorite guru turned his attention to this time? Phillips 66 (NYSE: PSX). #-ad_banner-#This week, Berkshire Hathaway (NYSE: BRK-B) revealed that it now owns over 10% of Phillips 66. The company has been accumulating shares of PSX since the second quarter of this year. So is Buffett’s latest move a good buy for the rest of us? Phillips 66 is a legacy of the old Conoco Phillips energy company. In 2012, the company split into two with one half becoming Conoco (NYSE: COP), the “upstream” company which conducts exploration and drilling of oil. Phillips 66 became the mid and downstream company. Phillips 66 doesn’t engage in exploration and production of oil and gas, but it transports and refines oil and gas and produces a variety of chemicals and lubricants. Since the beginning of the year, the stock price of Phillips 66 has completely disconnected with the rest of the energy sector and rallied… Read More

When it comes to financial dealings, cash is still king, accounting for 85% of global transactions.  Still, credit card usage has been growing steadily for a decade. That has helped shares of Visa (NYSE: V) rise roughly 25% annually since the company’s 2008 initial public offering (IPO). Now, all eyes are on the mobile payments market. This industry is expected to grow from $50 billion in 2014 to nearly $150 billion by 2019, according to the research firm Forrester. That sets the stage for another investment opportunity in the financial transactions market. #-ad_banner-#In July, PayPal Holdings (Nasdaq: PYPL) was spun… Read More

When it comes to financial dealings, cash is still king, accounting for 85% of global transactions.  Still, credit card usage has been growing steadily for a decade. That has helped shares of Visa (NYSE: V) rise roughly 25% annually since the company’s 2008 initial public offering (IPO). Now, all eyes are on the mobile payments market. This industry is expected to grow from $50 billion in 2014 to nearly $150 billion by 2019, according to the research firm Forrester. That sets the stage for another investment opportunity in the financial transactions market. #-ad_banner-#In July, PayPal Holdings (Nasdaq: PYPL) was spun off from corporate parent eBay (Nasdaq: EBAY). The spin-off was long overdue. As long as PayPal was officially a property of eBay, there was little chance it would partner with Amazon.com (Nasdaq: AMZN), one of eBay’s largest competitors. Now that PayPal is independent, the partnership restrictions related to eBay are gone. A potential partnership with the largest online retailer is a huge market opportunity and could be a huge catalyst for the stock price. PayPal has been a phenomenal growth story. Launched in 1998, the company was one of the first to enter the electronic transfer space. In 2002, it… Read More

Market volatility: it can either be feared or embraced. Shrewd investors know that the market’s wild swings are an opportunity to buy shares of good companies that have been oversold. In the last two weeks since reporting its third quarter earnings, The Walt Disney Company (NYSE: DIS) has fallen nearly 20%. #-ad_banner-# The sell-off comes despite the fact that quarterly results were quite robust. Each of Disney’s four main divisions posted strong revenue and operating earnings growth, which led to record per share profits of $1.45, three cents ahead of estimates. Simply put, this pullback is a terrific opportunity for… Read More

Market volatility: it can either be feared or embraced. Shrewd investors know that the market’s wild swings are an opportunity to buy shares of good companies that have been oversold. In the last two weeks since reporting its third quarter earnings, The Walt Disney Company (NYSE: DIS) has fallen nearly 20%. #-ad_banner-# The sell-off comes despite the fact that quarterly results were quite robust. Each of Disney’s four main divisions posted strong revenue and operating earnings growth, which led to record per share profits of $1.45, three cents ahead of estimates. Simply put, this pullback is a terrific opportunity for long-term investors to buy one of the most dominant companies in the world at a fantastic price.  Disney Has Already Demonstrated Impressive Rebound Skills After bottoming out during the recession, Disney’s financial rebound has been quite impressive. As you can see in the chart below, earnings have grown at a 19% annual pace over the past five years. Take a look: And although Disney is most famous for its movies and theme parks, the division that has the biggest overall impact on the company‚Äôs performance is the media networks division, which in 2014 contributed over… Read More

While the economy currently appears to be on firm footing, investors should always be prepared for the next, inevitable recession.  Indeed it’s wise to have some portfolio exposure to companies that can actually thrive during downturns. #-ad_banner-#Case in point: Dorman Products (Nasdaq: DORM), a leading supplier of replacement automotive parts. The company’s counter-cyclical business model enables it to weather recessions better than most companies.  Why should you consider such a stock right now? Although sales of new cars and trucks are currently quite strong, history suggests that such momentum won’t last.  In nearly every recession going back to 1980, sales of vehicles have dropped sharply from cyclical… Read More

While the economy currently appears to be on firm footing, investors should always be prepared for the next, inevitable recession.  Indeed it’s wise to have some portfolio exposure to companies that can actually thrive during downturns. #-ad_banner-#Case in point: Dorman Products (Nasdaq: DORM), a leading supplier of replacement automotive parts. The company’s counter-cyclical business model enables it to weather recessions better than most companies.  Why should you consider such a stock right now? Although sales of new cars and trucks are currently quite strong, history suggests that such momentum won’t last.  In nearly every recession going back to 1980, sales of vehicles have dropped sharply from cyclical peaks. When a recession hits, consumers tend to repair rather than replace their aging cars and trucks. Dorman’s strength throughout all phases of the business cycle is perfectly illustrated in its consistent sales growth. The company managed to increase sales, even during the economic downturn of 2008 and 2009.  According to the Institute for Highway Safety, the average age of all cars on the road is still a record 11.5 years and is expected to stay in near there for the next several years. The relatively high age of the current national fleet suggests that demand for auto parts… Read More

It’s increasingly obvious that the Federal Reserve Open Market Committee (FOMC) will start to raise short-term interest rates by the end of this year. For banks, insurance companies, and many other financial institutions, higher rates can’t come soon enough, as they will start to generate higher interest income on their vast cash balances. Yet one financial services company in particular has especially strong leverage to rising rates, making it a timely investment. #-ad_banner-# Federated Investors (NYSE: FII) is an asset management firm with a focus on equity, fixed income, and money market accounts. Money market funds are investment… Read More

It’s increasingly obvious that the Federal Reserve Open Market Committee (FOMC) will start to raise short-term interest rates by the end of this year. For banks, insurance companies, and many other financial institutions, higher rates can’t come soon enough, as they will start to generate higher interest income on their vast cash balances. Yet one financial services company in particular has especially strong leverage to rising rates, making it a timely investment. #-ad_banner-# Federated Investors (NYSE: FII) is an asset management firm with a focus on equity, fixed income, and money market accounts. Money market funds are investment vehicles in which the primary focus is protection of principal. Fund managers invest in only very short-term bonds where the risk of loss is nearly zero. In normal interest rate environments, the firm keeps a sliver of the investment profits for itself. But these are not normal interest rate times. With short-term yields at nearly zero, Federated Investors has not been able to cover the costs of running the funds. Instead of charging the cost difference to fund investors, Federated Investors has voluntarily issued “fee waivers” to its clients. The waived fees, which would constitute a significant source of revenue… Read More

Here at StreetAuthority, we repeatedly stress the importance of compounding. It’s the best way we know to leverage small investments into major gains — if you have the patience to ride them out over the long haul. You’ll often find such opportunities among small cap stocks. According to Morningstar, small caps outperform large-caps by two percentage points per year over the long term. #-ad_banner-# One of my favorite compounders is Heico Corporation (NYSE: HEI), a mid-cap aerospace and defense company which has a compounding record that blows away its peer group. Over the past 20 years, this… Read More

Here at StreetAuthority, we repeatedly stress the importance of compounding. It’s the best way we know to leverage small investments into major gains — if you have the patience to ride them out over the long haul. You’ll often find such opportunities among small cap stocks. According to Morningstar, small caps outperform large-caps by two percentage points per year over the long term. #-ad_banner-# One of my favorite compounders is Heico Corporation (NYSE: HEI), a mid-cap aerospace and defense company which has a compounding record that blows away its peer group. Over the past 20 years, this stock has delivered 22% annualized returns. Heico operates two business segments: its Flight Support Group, with makes parts and components for aircraft accounts for roughly two-thirds of revenue; and its Electronic Technologies Group, which makes electrical components in the aviation, defense, and healthcare industries. Heico’s past success can be tied to a terrific management team, which has identified and successfully integrated a string of acquisitions. Acquisitions are tough to get right. The Harvard Business Review notes that 70% to 90% of acquisitions fail to meet revenue and profitability targets that were laid out prior to the acquisition. On Heico’s most… Read More

In search of the next great growth stock, investors typically seek out innovative technology companies. Yet one of the most appealing growth stocks in recent memory is a  140 year-old company that makes water tanks and heaters for residential and commercial buildings. Indeed a savvy expansion into new markets has helped A. O. Smith Corp. (NYSE: AOS) generate impressive top- and bottom-line growth. And the business momentum appears set to continue. During the recent domestic housing crisis,  A. O. Smith predictably struggled. This is a stock that will always be correlated with the U.S. housing market, which accounts for more… Read More

In search of the next great growth stock, investors typically seek out innovative technology companies. Yet one of the most appealing growth stocks in recent memory is a  140 year-old company that makes water tanks and heaters for residential and commercial buildings. Indeed a savvy expansion into new markets has helped A. O. Smith Corp. (NYSE: AOS) generate impressive top- and bottom-line growth. And the business momentum appears set to continue. During the recent domestic housing crisis,  A. O. Smith predictably struggled. This is a stock that will always be correlated with the U.S. housing market, which accounts for more than 40% of total company sales. As the U.S. housing market recovered, so too has A.O. Smith. The company has grown its earnings per share 38% annually since 2010. Yet even as the housing market has bounced back from formerly depressed levels, there is still plenty of slack in the housing market. New housing starts bottomed out in the recession and are still below historical averages. At around 1.2 million housing starts per year, the current pace of new home construction is only around half of new household formation. Housing construction still has a lot of… Read More

#-ad_banner-#Most value investing articles share one clear theme: Any company firing on all cylinders won’t trade for single -digit price-to-earnings ratios. Low valuations are typically applied to companies that have a deep set of problems.   Whether it is a company-specific, industry-specific or economy-specific problem, a key impediment is in the way. The challenge is identifying great companies that are experiencing near-term difficulties, but have a defined path to improve financial results. Patient investors who can achieve that are often rewarded with capital gains and dividend raises. Chevron Corp. (NYSE: CVX) is a perfect example of… Read More

#-ad_banner-#Most value investing articles share one clear theme: Any company firing on all cylinders won’t trade for single -digit price-to-earnings ratios. Low valuations are typically applied to companies that have a deep set of problems.   Whether it is a company-specific, industry-specific or economy-specific problem, a key impediment is in the way. The challenge is identifying great companies that are experiencing near-term difficulties, but have a defined path to improve financial results. Patient investors who can achieve that are often rewarded with capital gains and dividend raises. Chevron Corp. (NYSE: CVX) is a perfect example of a great company facing industry specific problems. In the first quarter of 2014, the average price of a barrel of oil Chevron sold was more than $98 per barrel, but in Q1 of 2015, the average price of a barrel of oil was down to just over $48. Chevron is extremely sensitive to the price of oil. The company estimated that from quarter to quarter, operating cash flow can rise or fall between $325 million-to-$350 million for every dollar change in the price of crude oil. Naturally, Chevron saw its share price fall alongside the price of oil. Read More

Value investing is simultaneously the easiest and most difficult investing philosophy to follow. It’s so simple to buy cheap, out-of-favor assets, but extremely difficult to execute in real time. Among the cheapest and most out-of-favor assets today are commodities and the companies that pull those products out of the ground. While commodity companies have been hit hard, shares of Australia-based BHP Billiton Ltd. (NYSE: BHP) have fallen too far.  The company has a terrific track record, an excellent management team and will deliver strong long-term results to patient shareholders. A number of essential commodities are trading at multi-year lows. The… Read More

Value investing is simultaneously the easiest and most difficult investing philosophy to follow. It’s so simple to buy cheap, out-of-favor assets, but extremely difficult to execute in real time. Among the cheapest and most out-of-favor assets today are commodities and the companies that pull those products out of the ground. While commodity companies have been hit hard, shares of Australia-based BHP Billiton Ltd. (NYSE: BHP) have fallen too far.  The company has a terrific track record, an excellent management team and will deliver strong long-term results to patient shareholders. A number of essential commodities are trading at multi-year lows. The free-falling price of oil has been well covered, but coal and many of the industrial metals are well below the highs of 2011 and 2012. Coming out of the financial crisis, China went on an unprecedented infrastructure spending spree. Iron and copper producers rushed to increase production as demand and the underlying prices spiked. However, as China’s demand has cooled, prices for iron and copper — that make up around 60% of BHP’s business — have come crashing down. Over time, excess supply will leave the market, and prices will stabilize. While China’s demand for these materials could be… Read More