There are only two ways to score huge gains. Find a stock that is relatively unknown, and build a position before the crowd arrives. Or find a stock that is widely known, but widely loathed. In the case of Melco Crown Entertainment Ltd. (Nasdaq: MPEL), the first scenario has already played out, and the second scenario is just coming into play. When I first looked at this Macau-focused casino operator, shares were trading under $5. I looked at this stock a few years later when shares traded at $18 and noted considerable remaining upside. Shares eventually moved above $35. This… Read More

There are only two ways to score huge gains. Find a stock that is relatively unknown, and build a position before the crowd arrives. Or find a stock that is widely known, but widely loathed. In the case of Melco Crown Entertainment Ltd. (Nasdaq: MPEL), the first scenario has already played out, and the second scenario is just coming into play. When I first looked at this Macau-focused casino operator, shares were trading under $5. I looked at this stock a few years later when shares traded at $18 and noted considerable remaining upside. Shares eventually moved above $35. This stock’s meteoric rise was due to the fact that few investors knew about the company in 2010. Even as it gained adherents in subsequent years, many investors underestimated the powerful cash flow potential on Melco’s business model. Back in 2010, Melco Crown generated around $90 million in operating profits. By 2014, that figure had grown to $685 million. Yet Melco Crown, along with other Macau-focused casino operators, is now making headlines for different reasons. A sharp crackdown on corruption in China has led many Chinese high rollers to stay close to home, avoiding any appearance of conspicuous consumption. And as… Read More

Investment bankers are having a field day. They’ve been helping their clients pursue a stunning amount of deals, pushing the phrase “Merger Mondays” back on to the front page. What kind of volume are we talking about? More than $1 trillion worth of deals have been announced thus far in 2015, according to Dealogic. That puts us on pace for the second-busiest year of M&A activity ever (though still trailing the pace seen in 2007, a record-setting year). The tech sector can always be counted on for a vigorous pace of deals, and this year is no exception. And the… Read More

Investment bankers are having a field day. They’ve been helping their clients pursue a stunning amount of deals, pushing the phrase “Merger Mondays” back on to the front page. What kind of volume are we talking about? More than $1 trillion worth of deals have been announced thus far in 2015, according to Dealogic. That puts us on pace for the second-busiest year of M&A activity ever (though still trailing the pace seen in 2007, a record-setting year). The tech sector can always be counted on for a vigorous pace of deals, and this year is no exception. And the hottest industries within technology — adtech and datacenters — are leading the way. That makes this a fine time to focus on the companies that might soon catch a bid. Digital Marketing From 2008 through 2012, major tech firms such as Facebook, Inc. (Nasdaq: FB), Google, Inc. (Nasdaq: GOOG) and Yahoo, Inc. (Nasdaq: YHOO) spent a combined $6 billion in cash and stock to acquire small, privately-held advertising technology firms. Fast forward to 2014 and that level of adtech deals took place in just one year. And the industry M&A has already surpassed $5 billion thus far in 2015,… Read More

There isn’t a lot of mystery around what Carl Icahn looks for in an investment opportunity. He wants to own good companies with underperforming management teams. Typically, he can build a large enough position to have a major influence. Then he pushes for share buybacks, board representation, or simply a change in the corner office. Curiously, a major target for Icahn has none of those options at hand. Cash-strapped Chesapeake Energy Corp. (NYSE: CHK) was once known for a controversial CEO, as I noted in 2010. Yet fresh management has been in place for more than two years, and by… Read More

There isn’t a lot of mystery around what Carl Icahn looks for in an investment opportunity. He wants to own good companies with underperforming management teams. Typically, he can build a large enough position to have a major influence. Then he pushes for share buybacks, board representation, or simply a change in the corner office. Curiously, a major target for Icahn has none of those options at hand. Cash-strapped Chesapeake Energy Corp. (NYSE: CHK) was once known for a controversial CEO, as I noted in 2010. Yet fresh management has been in place for more than two years, and by all indications, Icahn is a fan of the company’s new leaders. In the second quarter of 2013, Icahn’s investment firm acquired 60 million shares (at an average price of $19). He bought another 6.7 million shares in the next quarter (at an average price of $23 a share). Of course oil prices subsequently collapsed, making such a large investment in an oil and gas producer seem foolhardy in hindsight. You would think that Icahn would decide that he’d made a big mistake and cash out his large stake in Chesapeake. Instead, he bought another 6.6 million shares (at $17.65 a… Read More

The recipe for a top-performing IPO is quite simple: Bring in a broad cross section of investment banks to underwrite the deal, ensuring an ample number of bullish research reports; deliver knockout results in your first quarter as a public company; and steer clear of any sort of controversy. The executives at Etsy, Inc. (Nasdaq: ETSY) heeded none of those lessons. And quite predictably, the company’s shares have already been tossed in the dust bin. Yet as the company finds its footing in coming quarters, this operator of an online crafts-oriented marketplace, could still turn out to be… Read More

The recipe for a top-performing IPO is quite simple: Bring in a broad cross section of investment banks to underwrite the deal, ensuring an ample number of bullish research reports; deliver knockout results in your first quarter as a public company; and steer clear of any sort of controversy. The executives at Etsy, Inc. (Nasdaq: ETSY) heeded none of those lessons. And quite predictably, the company’s shares have already been tossed in the dust bin. Yet as the company finds its footing in coming quarters, this operator of an online crafts-oriented marketplace, could still turn out to be one of the hottest IPOs of 2015. A 50% Downdraft To understand this stock’s rebound potential, we should first review the litany of bad news that has beset this stock. On April 16, shares of Etsy opened for trading at $31 a share, and within a few hours, moved above $35. In many respects, the Wall Street hype machine was not engaged in the offering. Etsy’s management decided to mostly place shares among retail investors (many of whom are Etsy’s clients) and as a result, major institutions such as mutual fund firms like Fidelity Investments weren’t in a position to get a big part… Read More

As a resident of New York State’s Hudson Valley, I have met dozens of local citizens who worked for International Business Machines Corp. (NYSE: IBM) in its heyday. A massive set of layoffs in 1993 meant that Big Blue’s local presence is now almost gone, and the local economy has yet to recover. Two decades later, IBM is still backpedaling. A current initiative, known as Project Chrome, is culling another 100,000 employees from IBM’s global employment base. In some respects, CEO Ginni Rometty has no choice. IBM’s revenue base has already peaked and is expected to drop a precipitous 10%… Read More

As a resident of New York State’s Hudson Valley, I have met dozens of local citizens who worked for International Business Machines Corp. (NYSE: IBM) in its heyday. A massive set of layoffs in 1993 meant that Big Blue’s local presence is now almost gone, and the local economy has yet to recover. Two decades later, IBM is still backpedaling. A current initiative, known as Project Chrome, is culling another 100,000 employees from IBM’s global employment base. In some respects, CEO Ginni Rometty has no choice. IBM’s revenue base has already peaked and is expected to drop a precipitous 10% this year to around $83.5 billion. IBM has few fans among Wall Street analysts.  As Goldman Sachs’ Bill Shope wrote, “the company faces many secular pressures and transformation costs ahead. His $146 price target represents roughly 15% downside.” Why is IBM so unpopular with many tech analysts? The company’s focus on slashing expenses and buying back massive amounts of stock to maintain earnings per share is considered to be a last-ditch attempt to artificially maintain investor support. But it’s not working. Shares of IBM have lagged the Nasdaq Composite index by 91 percentage points over the past three years. Read More

While most investors tend to focus on large and stable companies with decent growth prospects, some investors only seek out undiscovered stocks that have the potential to double, triple or even quadruple your investment. The companies underpinning such potential gains are often known as “game-changers” because they possess a new technology that can completely alter existing industry dynamics. My colleague, Andy Obermueller, who pen’s StreetAuthority’s Game-Changing Stocks, has shown an uncanny knack for revealing such companies over the years. Yet as you seek out such companies, don’t just focus on their income statements. Instead, keep a close eye on the… Read More

While most investors tend to focus on large and stable companies with decent growth prospects, some investors only seek out undiscovered stocks that have the potential to double, triple or even quadruple your investment. The companies underpinning such potential gains are often known as “game-changers” because they possess a new technology that can completely alter existing industry dynamics. My colleague, Andy Obermueller, who pen’s StreetAuthority’s Game-Changing Stocks, has shown an uncanny knack for revealing such companies over the years. Yet as you seek out such companies, don’t just focus on their income statements. Instead, keep a close eye on the company’s levels of cash. The best time to own such stocks is often right after the balance sheet has been bolstered. Let me give an example. Back in September 2013, I saw huge potential upside for Novavax, Inc. (Nasdaq: NVAX), which had been developing a range of treatments for various viruses. Considering that this stock had moved sideways in prior years made it seem foolish to predict robust imminent upside. But Novavax did something that instantly changed sentiment. It raised a lot of money.  Novavax typically finished every year with $30-to-$40 million in the bank. Investors rightly understood… Read More

Ask five investors to define a value stock, and you’ll get five different answers. Some like to use the price-to-earnings ratio, others prefer stocks that trade at a low price in relation to book value, while others deploy complex multi-variable models to find deeply hidden bargain stocks. To my mind, the best approach lies in free cash flow, which is operating cash flow minus capital expenditures. It’s the only tried and true way to know that a company is generating the cash to buy back stock, pay dividends, reduce debt or make acquisitions. Looking at companies in the S&P 500,… Read More

Ask five investors to define a value stock, and you’ll get five different answers. Some like to use the price-to-earnings ratio, others prefer stocks that trade at a low price in relation to book value, while others deploy complex multi-variable models to find deeply hidden bargain stocks. To my mind, the best approach lies in free cash flow, which is operating cash flow minus capital expenditures. It’s the only tried and true way to know that a company is generating the cash to buy back stock, pay dividends, reduce debt or make acquisitions. Looking at companies in the S&P 500, the average stock is valued at around 25 times trailing free cash flow. Said another way, such a value suggests a 4% free cash flow yield (100/25=4). If you can find good companies with a free cash flow yield in excess of 6%, then you are looking at a certifiable bargain. If you are in search of S&P 500 stock with a free cash flow yield in excess of 10%, then you have just three choices. Company TTM Free Cash Flow ($mill.) Market Cap ($mill.) Free Cash Flow Yield AGL Resources (GAS) $871 $6,030 14.4% Genworth Financial (GNW) $624 $3,934… Read More

When it comes to insider activities, actions speak louder than words. Too often, we see a company issue a bullish outlook while company executives and directors are unloading large blocks of stock. That kind of cognitive dissonance creates a big red flag. Yet when insiders speak bullishly and choose to buy rather than sell, the signal to investors is crystal clear.  Here are some companies that are noting bullish prospects, right at a time when insiders are getting more skin in the game.  (All data supplied by insiderinsights.com.) General Electric Co. (NYSE: GE) Insiders tend to spend a few… Read More

When it comes to insider activities, actions speak louder than words. Too often, we see a company issue a bullish outlook while company executives and directors are unloading large blocks of stock. That kind of cognitive dissonance creates a big red flag. Yet when insiders speak bullishly and choose to buy rather than sell, the signal to investors is crystal clear.  Here are some companies that are noting bullish prospects, right at a time when insiders are getting more skin in the game.  (All data supplied by insiderinsights.com.) General Electric Co. (NYSE: GE) Insiders tend to spend a few hundred thousand dollars when they are feeling bullish. Yet the directors at this conglomerate are taking much bolder action. William Beattie, a company director, acquired $20 million in stock in the open market in February.  #-ad_banner-#In early April, GE unveiled a far-reaching restructuring that would see the company exit the capital markets business and focus more squarely on the industrial side of the business. My colleague Chris Walczak recently predicted that “the long-term impact of divesting GE Capital’s assets will be a huge win for shareholders.” Insiders agree. Since April 20, four other directors have acquired another collective $2 million… Read More

A turnaround specialist can help to deliver huge returns for investors. By cutting costs or re-orienting a company into more appealing markets, a money loser can steadily morph into a money-maker. That’s been the hope for Lourenco Goncalves, who became CEO of beleaguered miner Cliffs Natural Resources, Inc. (NYSE: CLF) last summer. #-ad_banner-#Under his watch, the company’s per ton mining costs have fallen, he’s slashed general overhead (with corporate headcount falling from a peak of 338 to a recent 139), and Goncalves reduced the company’s exposure to global markets. The re-focused business is directed more squarely on North America, which… Read More

A turnaround specialist can help to deliver huge returns for investors. By cutting costs or re-orienting a company into more appealing markets, a money loser can steadily morph into a money-maker. That’s been the hope for Lourenco Goncalves, who became CEO of beleaguered miner Cliffs Natural Resources, Inc. (NYSE: CLF) last summer. #-ad_banner-#Under his watch, the company’s per ton mining costs have fallen, he’s slashed general overhead (with corporate headcount falling from a peak of 338 to a recent 139), and Goncalves reduced the company’s exposure to global markets. The re-focused business is directed more squarely on North America, which has better pricing dynamics. Moreover, a series of asset sales has enabled Cliff’s to pare debt by more than $1 billion in recent years. All of these factors have bought the company ample breathing room to sustain an eventual potential turnaround. Had this company not taken such bold action, Cliff’s might have already declared bankruptcy by now. Trouble is, those moves won’t help the stark reality of an industry that has too much supply and not enough demand. And shares of this miner, despite a recent mini-rebound (in an otherwise extended slump), may fall to just $1. That represents more… Read More

When Applied Materials, Inc. (Nasdaq: AMAT), the world’s largest semiconductor equipment manufacturer announced plans in 2011 to acquire Varian Semi for more than $4 billion, many industry participants cried foul. After all, AMAT, as the company is known, was already so dominant in the industry that it seemed unfair for it to grow yet larger. So when AMAT announced in 2014 that it planned to absorb rival Tokyo Electron, for more than $9 billion, competitors pleaded with regulators to nix the deal. Six months later, those regulators indeed expressed serious anti-trust concerns, and AMAT’s management has quietly canceled its proposed… Read More

When Applied Materials, Inc. (Nasdaq: AMAT), the world’s largest semiconductor equipment manufacturer announced plans in 2011 to acquire Varian Semi for more than $4 billion, many industry participants cried foul. After all, AMAT, as the company is known, was already so dominant in the industry that it seemed unfair for it to grow yet larger. So when AMAT announced in 2014 that it planned to absorb rival Tokyo Electron, for more than $9 billion, competitors pleaded with regulators to nix the deal. Six months later, those regulators indeed expressed serious anti-trust concerns, and AMAT’s management has quietly canceled its proposed merger. Simply put, with roughly $10 billion in annual revenues, this company is now too large to make any more deals. And that’s a good thing. Management has a new plan, which could fuel 40% upside for this slumping stock. In a moment, I’ll explain the perfect entry point for this stock. One hint: it’s coming very soon. Go-It-Alone Makes Sense While management likely wishes the Tokyo Electron deal could have been consummated, not all investors think it made complete sense. Tokyo Electron has seen recent market share losses, and AMAT’s core growth rate would likely have dimmed once… Read More