There’s a reason why Brazil, Russia, India and China (the so-called BRIC nations) captivated investors in the 1990s and 2000s. #-ad_banner-#Those four countries together host nearly 3 billion people. That created the opportunity for rapid growth in domestic consumption as hundreds of millions of people moved into the middle class. Yet the BRICs have lost much of their luster in recent years. Only China has been able to maintain robust economic growth rates, and even that economy is beginning to wobble. Until Brazil, Russia and India in particular sort out their bottleneck and rule-of-law challenges, their economies will remain hampered. Read More

There’s a reason why Brazil, Russia, India and China (the so-called BRIC nations) captivated investors in the 1990s and 2000s. #-ad_banner-#Those four countries together host nearly 3 billion people. That created the opportunity for rapid growth in domestic consumption as hundreds of millions of people moved into the middle class. Yet the BRICs have lost much of their luster in recent years. Only China has been able to maintain robust economic growth rates, and even that economy is beginning to wobble. Until Brazil, Russia and India in particular sort out their bottleneck and rule-of-law challenges, their economies will remain hampered. In the face of such challenges, investors have been moving downstream to a group of countries, known as frontier markets. These markets typically have 30 million to 250 million people, and in many instances, have been pursuing investor-friendly policies that have helped to generate solid growth in both domestic consumption and exports. Indonesia, with nearly 250 million people, has been a clear success story: Its economy has grown from $95 billion in 1980 to $750 billion in 2010, according to the International Monetary Fund (IMF). U.S. Investors latched onto Indonesian stocks in a big way when country-specific exchange-traded funds (ETFs)… Read More

“GARP” — short for “growth at a reasonable price” — is an investing style you’ll hear about from many fund managers. These folks like to find solidly growing business models, yet with valuations that are respectable. In recent years, it was hard to be a GARP investor, as the best growth stocks began to trade up to valuations that were hard to justify. #-ad_banner-#Not anymore. The steady drawdown in tech stocks has left many of them squarely back in the “reasonably priced” camp. My favorite metric to find them: the PEG ratio, which is the price-to-earnings… Read More

“GARP” — short for “growth at a reasonable price” — is an investing style you’ll hear about from many fund managers. These folks like to find solidly growing business models, yet with valuations that are respectable. In recent years, it was hard to be a GARP investor, as the best growth stocks began to trade up to valuations that were hard to justify. #-ad_banner-#Not anymore. The steady drawdown in tech stocks has left many of them squarely back in the “reasonably priced” camp. My favorite metric to find them: the PEG ratio, which is the price-to-earnings ratio (P/E) divided by the earnings growth rate.  Ideally, you’ll find stocks with a PEG ratio below 1.0, which means that the P/E ratio is lower than the earnings growth rate.  Of course, growth investors come in two camps: those seeking out companies delivering torrid profit growth and moderate P/E ratios, or those seeking out tamer growth but even lower P/E ratios. I went scouring the basket of tech stocks, slicing and dicing them according to various GARP approaches. Every one of these firms is expected to boost earnings per share (EPS) by at least 20% in 2015 and again… Read More

With almost no fanfare, high-yield bonds (also known as junk bonds) hit a major milestone this week.  #-ad_banner-#The average junk bond saw its after-market yield dip below 5%. That’s down from 5.67% at the start of the year, and just a tick above the all-time low of 4.96%, set in 2013. A deep look at why these yields are plunging suggests you’d be wise to book profits in such bonds right now, as the factors that are driving them may not last much longer. To be sure, virtually every type of bond is in rally mode. Spanish bonds, for example,… Read More

With almost no fanfare, high-yield bonds (also known as junk bonds) hit a major milestone this week.  #-ad_banner-#The average junk bond saw its after-market yield dip below 5%. That’s down from 5.67% at the start of the year, and just a tick above the all-time low of 4.96%, set in 2013. A deep look at why these yields are plunging suggests you’d be wise to book profits in such bonds right now, as the factors that are driving them may not last much longer. To be sure, virtually every type of bond is in rally mode. Spanish bonds, for example, which still carry a considerable amount of economic risk, have seen their yields fall from 7.5% two years ago to a recent 3.6%. Similar bond rallies are taking place all across the globe. David Woo, who follows the global bond market, suspects China may have a hand in all this. That country’s move to rein in the issuance of credit has led excess Chinese capital to rotate into U.S. government bonds. And that bond buying has led to liquidity pouring into many other types of bonds. Bonds typically rally when economic conditions weaken, but Woo notes that a range of… Read More

As is often the case with an extended bull market, value is now trumping growth.  #-ad_banner-#Many once-soaring tech stocks have come crashing downward in 2014, even as some once-loathed sectors are heating up. And few sectors were as disliked as the insurers, which have been among the deep value plays in this bull market. Back in April 2013, I noted that Protective Life (NYSE: PL), for example, sported a stunning 23% free cash flow yield.  And a month later, I noted that many insurers, including Protective Life, traded at a considerable discount to book value. This insurer is no longer a deep… Read More

As is often the case with an extended bull market, value is now trumping growth.  #-ad_banner-#Many once-soaring tech stocks have come crashing downward in 2014, even as some once-loathed sectors are heating up. And few sectors were as disliked as the insurers, which have been among the deep value plays in this bull market. Back in April 2013, I noted that Protective Life (NYSE: PL), for example, sported a stunning 23% free cash flow yield.  And a month later, I noted that many insurers, including Protective Life, traded at a considerable discount to book value. This insurer is no longer a deep bargain, now that Japan’s Dai-ichi has announced plans to buy it for $5.7 billion. Notably, Protective Life carries just $4.2 billion in tangible book value, implying a nice premium to book in this purchase price. Why would Dai-ichi pay such a stiff price? Because the Japanese financial services firm realizes that the U.S. insurance market is on the cusp of a cyclical upturn, thanks to rising insurance premiums. Insurers always have pricing power when companies start to feel more optimistic about business conditions. In fact, Dai-ichi intends to use Protective Life as a platform to acquire other, smaller… Read More

There are several ways to define value, but our favorites typically offer juicy income streams or a deep wellspring of net assets that are actually worth more than the share price. It’s nice to find stocks that offer high dividend yields or trade below book value, but one group of stocks checks both boxes. Value squared, if you will. I’m talking about the mREITs (mortgage real estate investment trusts), which buy mortgages at a discount to their face value. You already know the sector is cheap when you see these kinds of dividend yields. And the view sharpens once… Read More

There are several ways to define value, but our favorites typically offer juicy income streams or a deep wellspring of net assets that are actually worth more than the share price. It’s nice to find stocks that offer high dividend yields or trade below book value, but one group of stocks checks both boxes. Value squared, if you will. I’m talking about the mREITs (mortgage real estate investment trusts), which buy mortgages at a discount to their face value. You already know the sector is cheap when you see these kinds of dividend yields. And the view sharpens once you look at their balance sheets. Every one of these mREITs trades for less than tangible book value. #-ad_banner-#As a quick recap, these mREITs borrow low-rate, short-term debt and use the funds to buy bonds consisting of pools of mortgages guaranteed by government-sponsored giants Fannie Mae (OTC: FNMA) and Freddie Mac (OTC: FMCC). They also use leverage to amplify their profits. The borrow-to-buy strategy worked like a charm in the years after the Great Recession, as mortgage bonds sold at very low prices on fears of a further housing slump. As the housing market has stabilized, the mortgage… Read More

Six years after the global Great Recession began, most European economies remain in a very deep funk. #-ad_banner-#And the continent’s bankers are growing nervous. Chronic high levels of unemployment have already been a long-standing concern, and now the European Central Bank (ECB) is struggling with another mandate: price stability. Europe may be on the cusp of falling asset prices, which can lead to a series of negative ripple effects. The eurozone inflation rate slipped to an annualized 0.5% in April, and Goldman Sachs’ economists estimate that figure fell to just 0.3% in May. Fears are rising that prices may start to… Read More

Six years after the global Great Recession began, most European economies remain in a very deep funk. #-ad_banner-#And the continent’s bankers are growing nervous. Chronic high levels of unemployment have already been a long-standing concern, and now the European Central Bank (ECB) is struggling with another mandate: price stability. Europe may be on the cusp of falling asset prices, which can lead to a series of negative ripple effects. The eurozone inflation rate slipped to an annualized 0.5% in April, and Goldman Sachs’ economists estimate that figure fell to just 0.3% in May. Fears are rising that prices may start to shrink, and once price deflation takes root, it is hard to reverse it. That fear is bringing out a rarely used arrow in the quiver: negative interest rates charged by the ECB on the money that banks park on their balance sheets, which can strongly encourage banks to step up their pace of lending. Higher lending often leads to higher spending, by both businesses and consumers alike. The ECB is lowering its main refinancing rate from 0.25% to 0.15%, and the rate it pays to banks for their deposits from zero to minus 0.1%. (The ECB is also freeing up… Read More

At many companies, a key window is about to close…#-ad_banner-# Several weeks before a quarter ends, insiders are blocked from conducting any more transactions in company stock. It’s a smart move that helps reduce the chance that an insider will profit (by buying or selling) in the face of quarterly results that are better (or worse) than outsiders are expecting.  Yet before the insider trading activity slows sharply, these folks have sure been busy: The past 30 days has seen a tremendous amount of selling, as you’d expect in a stock market hitting all-time highs, but also a large amount… Read More

At many companies, a key window is about to close…#-ad_banner-# Several weeks before a quarter ends, insiders are blocked from conducting any more transactions in company stock. It’s a smart move that helps reduce the chance that an insider will profit (by buying or selling) in the face of quarterly results that are better (or worse) than outsiders are expecting.  Yet before the insider trading activity slows sharply, these folks have sure been busy: The past 30 days has seen a tremendous amount of selling, as you’d expect in a stock market hitting all-time highs, but also a large amount of insider buying. Here are the recent buys that have caught my eye. (All data supplied by InsiderInsights.com.) 1. Clean Energy Fuels (Nasdaq: CLNE ) In early March, three directors bought a combined $250,000 of this stock, and in early June, director Warren Mitchell followed that up with another $180,000 purchase. This has been a vexing story for investors, as the company’s base of natural gas filling stations is not yet large enough to push the company into profitability. Shares have slid from the mid-$20s two years ago to a recent $10.  The good news: The business is… Read More

Whenever a stock is in the middle of a short squeeze, you can hop on board for quick gains. It’s certainly unwise to short such a stock while in this trading phase. But once the dust settles, and shorts have bought back a lot of stock, fresh opportunities may emerge to capture renewed downside. That appears to be the very straightforward setup for struggling retailer J.C. Penney (NYSE: JCP). Back in February, while shares were halfway through a rebound move from $5 to $9, I suggested you could profit from the short squeeze.  Three months later, this trading window has now… Read More

Whenever a stock is in the middle of a short squeeze, you can hop on board for quick gains. It’s certainly unwise to short such a stock while in this trading phase. But once the dust settles, and shorts have bought back a lot of stock, fresh opportunities may emerge to capture renewed downside. That appears to be the very straightforward setup for struggling retailer J.C. Penney (NYSE: JCP). Back in February, while shares were halfway through a rebound move from $5 to $9, I suggested you could profit from the short squeeze.  Three months later, this trading window has now closed. The size of the short position has shrunk from 128.5 million shares back then, to 91 million by the end of April, to 78 million by the middle of May — but don’t look for the short position to fall much further. A fresh view of quarterly results suggests there are ample reasons to suspect that the remaining shorts will stand their ground. Downside exists toward the all-time low of $4.90 a share. To see why that is, I should first make clear that J.C. Penney is no longer a candidate for bankruptcy, as many… Read More

When you go to the mall to buy a pack of batteries from RadioShack (NYSE: RSH), neighboring shops hope you’ll pop in for sunglasses, T-shirts or baked cookies. That was the notion that inspired Victor Gruen, who designed the first fully enclosed shopping mall in the 1950s. (The Southdale Mall, in Edina, Minnesota, is still in use today.) #-ad_banner-#​Gruen understood that by grouping shops together in one central place, each store would benefit from what’s known as a network effect. Today, that network is unraveling, potentially threatening the entire shopping mall concept.  RadioShack, for example, is in the… Read More

When you go to the mall to buy a pack of batteries from RadioShack (NYSE: RSH), neighboring shops hope you’ll pop in for sunglasses, T-shirts or baked cookies. That was the notion that inspired Victor Gruen, who designed the first fully enclosed shopping mall in the 1950s. (The Southdale Mall, in Edina, Minnesota, is still in use today.) #-ad_banner-#​Gruen understood that by grouping shops together in one central place, each store would benefit from what’s known as a network effect. Today, that network is unraveling, potentially threatening the entire shopping mall concept.  RadioShack, for example, is in the process of closing 1,000 stores, many of them in malls. Countless impulse buyers, in search of the company’s products, have one less reason to go to the mall, and as a result, neighboring retailers will see reduced foot traffic.  We’re not just talking about the loss of a store here and there. According to a recent tally by USA Today, thousands of stores are set to close over the next few years. The important names in this group are Barnes & Noble (NYSE: BKS), J.C. Penney (NYSE: JCP), Sears Holdings (Nasdaq: SHLD) and Toys ‘R Us. These are known… Read More

Few U.S. investors have heard of Switzerland’s Holcim (OTC: HCMLY) and France’s Lafarge (OTC: LFRGY), which trade on the pink sheets. But they are well known in Europe, with $40 billion in combined sales in 2013. Back in April, these two cement producers announced plans to merge, creating an entity that will be more than twice as large as its next closest competitor, Mexico’s Cemex (NYSE: CX).  #-ad_banner-#Why should you care about this European merger? Because Cemex may soon experience a pitched battle for market… Read More

Few U.S. investors have heard of Switzerland’s Holcim (OTC: HCMLY) and France’s Lafarge (OTC: LFRGY), which trade on the pink sheets. But they are well known in Europe, with $40 billion in combined sales in 2013. Back in April, these two cement producers announced plans to merge, creating an entity that will be more than twice as large as its next closest competitor, Mexico’s Cemex (NYSE: CX).  #-ad_banner-#Why should you care about this European merger? Because Cemex may soon experience a pitched battle for market share. Despite its south-of-the-border heritage, Cemex has a substantial presence here in the U.S. With 21% market share, it is the leading cement supplier in the U.S. This merger, if approved, would push Cemex to #2. More importantly, market share battles often lead to price wars, and Cemex simply can’t afford one. Holcim and Lafarge know that Cemex is in a weakened state and will likely look to press their beleaguered rival in hopes of creating financial distress.  A decade ago, the global economy was quite healthy, and construction cranes were popping up in almost every major city. Cemex’s executives… Read More