It’s become conventional wisdom that the U.S. labor market has an awful lot of embedded slack. Wage growth remains anemic, and millions of Americans are still looking for work, fully six years after the last recession ended. #-ad_banner-#But the conventional wisdom  is wrong. For employees with the right set of skills (and typically a college degree), we have already reached what economists call “full employment.” That was the message that Stanley Fischer, the Vice Chairman of the Federal Reserve, noted in a round of interviews with Bloomberg News, The Wall Street Journal, and others in early August. … Read More

It’s become conventional wisdom that the U.S. labor market has an awful lot of embedded slack. Wage growth remains anemic, and millions of Americans are still looking for work, fully six years after the last recession ended. #-ad_banner-#But the conventional wisdom  is wrong. For employees with the right set of skills (and typically a college degree), we have already reached what economists call “full employment.” That was the message that Stanley Fischer, the Vice Chairman of the Federal Reserve, noted in a round of interviews with Bloomberg News, The Wall Street Journal, and others in early August.  Indeed the job market is far tighter than many might think. The Federal Reserve has found that over long periods, roughly 2.0% of college grads are without work, on average, at any given time. By their measure, that figure is closer to 1.0% right now, indicating a current adjusted unemployment rate in negative territory.  Here’s the remarkable thing about the current employment picture: The construction industry, which is heavily dependent on the housing sector, remains weak, but is finally getting stronger as housing starts begin to build steam. Housing starts have been very strong recently, hitting… Read More

Growing up in the 1970’s, I thought America was doomed. Inflation was on a path into double-digit territory, and unemployment rates remained stubbornly high. Economists even coined a term for our malaise, adding the unemployment and inflation rates together in a combined “misery index.”  By 1980, this figure briefly exceeded 20%. Misery Index Highs In The United States   Unemployment Rate + Inflation Rate = Misery Index May 1959 5.1% 0.3% 5.4% November 1965 4.1% 1.6% 5.7% June 1980 7.6% 14.4% 22.0% April 1998 4.3% 1.4% 5.7% October 2006 4.4% 1.3% 5.7%… Read More

Growing up in the 1970’s, I thought America was doomed. Inflation was on a path into double-digit territory, and unemployment rates remained stubbornly high. Economists even coined a term for our malaise, adding the unemployment and inflation rates together in a combined “misery index.”  By 1980, this figure briefly exceeded 20%. Misery Index Highs In The United States   Unemployment Rate + Inflation Rate = Misery Index May 1959 5.1% 0.3% 5.4% November 1965 4.1% 1.6% 5.7% June 1980 7.6% 14.4% 22.0% April 1998 4.3% 1.4% 5.7% October 2006 4.4% 1.3% 5.7% January 2015 5.7% -0.1% 5.6% Source: LPL Research, Haver Analytics   Although it may seem counter-intuitive, 1980 would have been a brilliant time to become bullish. Indeed the major stock market indices have risen so much in the past 35 years precisely because the misery index has fallen from its lofty heights. The reasoning is quite simple. Falling inflation helps boost the earnings multiple applied to stocks, because corporations generate higher profits when they operate in an environment of fuller employment. And higher multiples on higher profits always translates into market gains. #-ad_banner-# Misery Can Help Change The Status Quo… Read More

#-ad_banner-#What separates a successful value investor from the pack? Experience. The world’s top value investors will tell you that they all began their careers by buying value stocks too early. With time, they learned to avoid such a mistake. They all have war stories about such “value traps.” But how can you identify — and avoid — such stocks? And when do these stocks morph into compelling opportunities? The signposts are quite simple. Let me cite large mining equipment provider Joy Global, Inc. (NYSE: JOY) as an example. At the start of 2015, this company’s stock had already seen a… Read More

#-ad_banner-#What separates a successful value investor from the pack? Experience. The world’s top value investors will tell you that they all began their careers by buying value stocks too early. With time, they learned to avoid such a mistake. They all have war stories about such “value traps.” But how can you identify — and avoid — such stocks? And when do these stocks morph into compelling opportunities? The signposts are quite simple. Let me cite large mining equipment provider Joy Global, Inc. (NYSE: JOY) as an example. At the start of 2015, this company’s stock had already seen a 30% pullback from its 52-week-high, and was trading for less than six times cyclical peak earnings (of $7.18 a share, earned back in fiscal (October) 2012). Such low multiples on deep cycle stocks often bring out the value investors, who begin to accumulate shares in anticipation of an eventual cyclical upturn. Not this time. Buying shares in early 2015 would have been disastrous. Why was this a stock to avoid? First, because commodity prices have remained in freefall. As long as prices for iron ore, gold and other metals are falling, demand for mining equipment is bound to continue… Read More

#-ad_banner-#When a company stumbles repeatedly, investors eventually throw in the towel and sell their shares. Paradoxically, that may be the very best time to consider such a stock. With few supporters and legions of detractors, the bad news is mostly priced in and any potential good news is heavily discounted. Of course you need to identify the potential positive catalysts that are coming down the pike. And you need to see management take action, not simply issue empty promises. Bring these factors together and you may be looking at a great turnaround stock. I’ve found two such stocks that appear… Read More

#-ad_banner-#When a company stumbles repeatedly, investors eventually throw in the towel and sell their shares. Paradoxically, that may be the very best time to consider such a stock. With few supporters and legions of detractors, the bad news is mostly priced in and any potential good news is heavily discounted. Of course you need to identify the potential positive catalysts that are coming down the pike. And you need to see management take action, not simply issue empty promises. Bring these factors together and you may be looking at a great turnaround stock. I’ve found two such stocks that appear poised to finally move up from their multi-year lows. The potential six-to-12 month upside: 50% or more once these factors come into play. Testing Icahn’s Patience The first turnaround candidate ranks as one of Carl Icahn’s rare missteps. Last summer, his investment firm acquired 38.8 million shares of Hertz Global Holdings, Inc. (NYSE: HTZ) at an average price $28.48 a share. Soon after that major purchase, Hertz’s board announced that a seemingly minor set of accounting problems were actually quite extensive.  Almost the entire management team was replaced, and in the fourth quarter of 2014, Icahn boosted his stake… Read More

Here’s a simple question: Do you invest in stocks or in companies? Stock-focused investors assess financial statements, technical charts and other gauges to help them know a good value when they see one. Investors in companies prefer to focus on the business itself, while fundamental and technical considerations play a secondary role. #-ad_banner-#This “buy a great company at any price” approach may seem foolish, but it’s actually quite wise. Let me explain. Great companies will deliver solid returns year after year. You may not find such a company… Read More

Here’s a simple question: Do you invest in stocks or in companies? Stock-focused investors assess financial statements, technical charts and other gauges to help them know a good value when they see one. Investors in companies prefer to focus on the business itself, while fundamental and technical considerations play a secondary role. #-ad_banner-#This “buy a great company at any price” approach may seem foolish, but it’s actually quite wise. Let me explain. Great companies will deliver solid returns year after year. You may not find such a company before the crowd, but you can still reap ample gains after the train has left the station. To illustrate my point, let’s talk about Magellan Midstream Partners, L.P. (NYSE: MMP). A decade ago, this nationwide oil and gas pipeline operator was added to my colleague Nathan Slaughter’s High-Yield Investing portfolio when shares traded for around $10. At the time, the company paid a $1 annual dividend, good for an impressive 10% yield. If you were a subscriber to Nathan’s newsletter at the start of 2011, you would likely have noted that… Read More

#-ad_banner-#These are gloomy times at the headquarters of digital advertising firm Rocket Fuel, Inc. (Nasdaq: FUEL).  Many of the company’s employees became paper millionaires during the September 2013 initial public offering (IPO). Shares opened for the first day of trading at $29 and soared to $62 by the end of the day. These days, shares languish around $8 and most employee stock options are deeply underwater. Yet this company’s share price implosion was quite predictable. That’s because management pursued the maxim “growth for its own sake.” They forgot that investors eventually expect sales growth to turn into profit growth. Indeed… Read More

#-ad_banner-#These are gloomy times at the headquarters of digital advertising firm Rocket Fuel, Inc. (Nasdaq: FUEL).  Many of the company’s employees became paper millionaires during the September 2013 initial public offering (IPO). Shares opened for the first day of trading at $29 and soared to $62 by the end of the day. These days, shares languish around $8 and most employee stock options are deeply underwater. Yet this company’s share price implosion was quite predictable. That’s because management pursued the maxim “growth for its own sake.” They forgot that investors eventually expect sales growth to turn into profit growth. Indeed this is a lesson learned — and forgotten — every decade. Back in 2008, strategists at consulting firm AT Kearney spelled out this growth trap in great detail. A simple look at Rocket Fuel’s financial statements paints a picture of a company with minimal expense restraint. Although investors initially applauded this company’s remarkable growth trajectory, they couldn’t understand why losses kept on rising. Rocket Fuel’s desire to “step on the gas” in terms of headcount spending has ultimately been a huge turn off. Instead, investors need to steer clear of companies with negative operating leverage. … Read More

#-ad_banner-#Just because you ignore something doesn’t mean it will go away. At least that’s the view of the American Society of Civil Engineers. They’ve been repeatedly sounding the alarms regarding our nation’s rapidly-crumbling infrastructure, and their calls to action only grow louder. In their most recent quadrennial report card these engineers handed out a grade of D+, and estimate it would take $3.6 trillion to get our schools, roads, ports, highways and railroads up to snuff. Though Washington remains in denial about this huge problem, it will inevitably require hundreds of billions… Read More

#-ad_banner-#Just because you ignore something doesn’t mean it will go away. At least that’s the view of the American Society of Civil Engineers. They’ve been repeatedly sounding the alarms regarding our nation’s rapidly-crumbling infrastructure, and their calls to action only grow louder. In their most recent quadrennial report card these engineers handed out a grade of D+, and estimate it would take $3.6 trillion to get our schools, roads, ports, highways and railroads up to snuff. Though Washington remains in denial about this huge problem, it will inevitably require hundreds of billions of dollars just to keep our infrastructure report card from getting any worse. In 2012, I looked at the companies that are best-positioned for this challenge. A year later, I took a look at the best infrastructure-focused exchange-traded funds (ETFs) for investors to consider. Yet since my last look at this theme, a new investment reality has taken root. While the United States will eventually start investing in infrastructure, some countries aren’t deferring this badly-needed investment. They’re spending a lot of money on infrastructure right now. China has been an ongoing… Read More

At the start of 2015, investors could choose from 1,411 exchange-traded funds. And that figure keeps on growing as fund sponsors open three or four funds for every one that they close. These firms are launching funds simply because the demand is there. But how much is too much? After all, so many new ETFs these days seem to be quite similar to existing offerings. For example, there are now dozens of ETFs that track the S&P 500, or a basket of stocks that are substantively similar.  As far as I’m concerned, it’s much more interesting to discover new… Read More

At the start of 2015, investors could choose from 1,411 exchange-traded funds. And that figure keeps on growing as fund sponsors open three or four funds for every one that they close. These firms are launching funds simply because the demand is there. But how much is too much? After all, so many new ETFs these days seem to be quite similar to existing offerings. For example, there are now dozens of ETFs that track the S&P 500, or a basket of stocks that are substantively similar.  As far as I’m concerned, it’s much more interesting to discover new ETFs that aren’t simply the “same-old, same-old.” Here’s a look at five ETFs that have launched in 2015, and deserve clear consideration if you want the best lazy portfolio for 2015. Innovator IBD 50 ETF (NYSE: FFTY) Here at StreetAuthority, we are big fans of companies that seek out — and profit from — innovation.  In fact in our Top 10 Stocks newsletter, we have a portfolio of stocks that we call “American Innovators.” This new ETF, launched in April, holds a basket of 50 innovative companies, many of which are launching products. Top holdings include chipmaker, Avago Technologies… Read More

#-ad_banner-#Right about now, the phrase “3-D printing” is the source of much eye-rolling. There was so much hype built around companies like 3-D Systems Corp. (NYSE: DDD) and Stratasys Ltd. (Nasdaq: SSYS), but impossibly high hopes for such firms were bound to be dashed. Each stock now sells for a fraction of their all-time high, and they have a long road ahead as they try to rebuild investor confidence. Still, it’s important to keep your eyes on the prize in this industry: 3-D printing remains as one of the most exciting new developments in the global industrial landscape. For investors,… Read More

#-ad_banner-#Right about now, the phrase “3-D printing” is the source of much eye-rolling. There was so much hype built around companies like 3-D Systems Corp. (NYSE: DDD) and Stratasys Ltd. (Nasdaq: SSYS), but impossibly high hopes for such firms were bound to be dashed. Each stock now sells for a fraction of their all-time high, and they have a long road ahead as they try to rebuild investor confidence. Still, it’s important to keep your eyes on the prize in this industry: 3-D printing remains as one of the most exciting new developments in the global industrial landscape. For investors, it’s a matter of finding the right horse to ride. Despite all the current gloom, 3-D printing industry revenues are slated to rise more than 50% this year, to more than $5 billion. Research firm Canalys predicts that the market will grow in excess of 40% annually through 2019 as well. Surging demand for 3-D hardware and software is coming from best-of-breed industrial firms such as The Boeing Co. (NYSE: BA), BMW and General Electric Co. (NYSE: GE). The industry’s two biggest players made a classic mistake. They tried to develop a soup-to-nuts set of… Read More

“You can’t time the market.” It’s one of the most often-repeated investment phrases. And it’s wrong. History has shown that a simple ratio delivers impressive market gains. In fact, it appears when most investors have little desire to buy stocks. Let me explain. Every week, the American Association of Individual Investors (AAII) asks its members to answer one simple question in an online survey: Regarding the future direction of the stock market, are you bullish, bearish or neutral? Over the long haul, investors feel bullish about 39% of the time, and at times of maximum optimism, more than… Read More

“You can’t time the market.” It’s one of the most often-repeated investment phrases. And it’s wrong. History has shown that a simple ratio delivers impressive market gains. In fact, it appears when most investors have little desire to buy stocks. Let me explain. Every week, the American Association of Individual Investors (AAII) asks its members to answer one simple question in an online survey: Regarding the future direction of the stock market, are you bullish, bearish or neutral? Over the long haul, investors feel bullish about 39% of the time, and at times of maximum optimism, more than half of respondents will answer with a bullish response.  #-ad_banner-#Yet at rare pressure points in the market, what Sir John Templeton once cited as “the point of maximum pessimism,” the entire crowd can turn bearish. Indeed at various points over the past three decades, the vast majority of respondents in the AAII survey express extreme bearishness. Presumably, such investors are selling stocks at these times and moving to cash.  And that has proven to be a big mistake. I’ve tallied the market performance whenever the crowd turns bearish, and on almost every occasion the market has gone on to post… Read More