There is one simple rule about earnings season: have plenty of cash on hand. That’s because a few dozen stocks will fall sharply on tepid results or cautious forward outlooks and real bargains can emerge. Of course, many stocks that have been punished deserve to stay in the penalty box for quite some time. Their near-term problems are unlikely to dissipate any time soon. So you need to dig deep to find the rare diamonds in the rough that have been unfairly punished. When the dust settles on earnings season, these are precisely the kinds of stocks that value investors… Read More

There is one simple rule about earnings season: have plenty of cash on hand. That’s because a few dozen stocks will fall sharply on tepid results or cautious forward outlooks and real bargains can emerge. Of course, many stocks that have been punished deserve to stay in the penalty box for quite some time. Their near-term problems are unlikely to dissipate any time soon. So you need to dig deep to find the rare diamonds in the rough that have been unfairly punished. When the dust settles on earnings season, these are precisely the kinds of stocks that value investors will seek out. I’ve looked at a few dozen earnings season casualties and have found two of them that appear poised to claw back recent losses. SUPERVALU, Inc. (NYSE: SVU) This operator of several grocery chains was in deep distress just a few years ago. Yet a series of asset sales managed to trim the company’s debt load from around $7.6 billion in fiscal (February) 2010 to a recent $2.7 billion. And the company has managed to generate profits in each of the last two fiscal years, after generating losses in the prior three years. Cost cuts and better… Read More

Millions of Americans remain absent from the workforce, and even those with jobs are wrestling with stagnant income growth. That helps explain why retailers have experienced a half decade of subpar sales growth. Yet that bleak recent history may soon be coming to an end. Wages, job openings and retail spending are inter-locking variables, and for a change, these factors are pointing to brighter days ahead. Of course it all starts with jobs. As we saw with the most recent employment report, the national unemployment rate stands firmly below 6%, a threshold that seemed almost inconceivable just a few years… Read More

Millions of Americans remain absent from the workforce, and even those with jobs are wrestling with stagnant income growth. That helps explain why retailers have experienced a half decade of subpar sales growth. Yet that bleak recent history may soon be coming to an end. Wages, job openings and retail spending are inter-locking variables, and for a change, these factors are pointing to brighter days ahead. Of course it all starts with jobs. As we saw with the most recent employment report, the national unemployment rate stands firmly below 6%, a threshold that seemed almost inconceivable just a few years ago.     Favorable Employment Trends Source: Bureau of Labor Statistics​ Despite the robust period of job creation, employees still lacked any leverage when it came time to seek wages. Yet that dynamic may be changing. Wages in the private sector grew 2.8% in the first quarter, the best showing since 2008. That may not seem like a big jump, but the trend is encouraging. Early signs of wage growth may be having an impact on consumers. According to the University of Michigan, consumer sentiment just rose to… Read More

The roaring 1990s brought a new phrase to the investing lexicon: “market melt-up.” It is described by some as a “buy first, ask questions later” mentality, as legions of investors piggyback on a winning trade. Yet such melt-ups invariably end badly. Once some investors start to book profits, a cascade effect takes place, where selling begets further selling. We surely saw that in evidence at the start of the past decade. From peak to trough, the Nasdaq composite index fell a stunning 78.4% from 2000 to 2002. #-ad_banner-#U.S. investors were so badly burned by that event that there is still… Read More

The roaring 1990s brought a new phrase to the investing lexicon: “market melt-up.” It is described by some as a “buy first, ask questions later” mentality, as legions of investors piggyback on a winning trade. Yet such melt-ups invariably end badly. Once some investors start to book profits, a cascade effect takes place, where selling begets further selling. We surely saw that in evidence at the start of the past decade. From peak to trough, the Nasdaq composite index fell a stunning 78.4% from 2000 to 2002. #-ad_banner-#U.S. investors were so badly burned by that event that there is still a lingering distrust of stocks. And that’s a good thing. Such caution likely means we’ll stop ourselves before collectively creating another market melt-up. Unfortunately, investors in China can’t draw from past experience and are setting themselves up for the same bit of misery. Chinese stocks rose at a measured pace in 2014, but have been absolutely on fire in the past few months. These investors have been buying shares with abandon, even in the face of an increasingly apparent economic slowdown. They aren’t conducting rigorous investment analysis, but are instead simply chasing success. The economic backdrop in China… Read More

No matter how you slice it, $50 billion is a big number. That’s how much money Oracle Corp. (NYSE: ORCL) is rumored to be prepared to pay to acquire Salesforce.com, Inc. (NYSE: CRM), a fast-growing provider of customer relationship management software. Why on earth would Oracle make such a bold move? Because it has hit a growth wall. Oracle’s sales are on track to grow just 1%-to-2% in fiscal (May) 2015 and 2016. Acquiring Salesforce.com would instantly boost the top line by nearly 20%. #-ad_banner-#More importantly, it would enable Oracle’s sales force to peddle existing products to the customers doing… Read More

No matter how you slice it, $50 billion is a big number. That’s how much money Oracle Corp. (NYSE: ORCL) is rumored to be prepared to pay to acquire Salesforce.com, Inc. (NYSE: CRM), a fast-growing provider of customer relationship management software. Why on earth would Oracle make such a bold move? Because it has hit a growth wall. Oracle’s sales are on track to grow just 1%-to-2% in fiscal (May) 2015 and 2016. Acquiring Salesforce.com would instantly boost the top line by nearly 20%. #-ad_banner-#More importantly, it would enable Oracle’s sales force to peddle existing products to the customers doing business with Salesforce.com. And it would open the door for Salesforce’s team of sales reps to open up new leads for its customers. “Cross-selling” as they say in industry parlance. Frankly, Oracle isn’t alone. Many large tech companies are facing limited organic growth prospects, and they are using their bulletproof balance sheets to rejuvenate their business platforms. These large companies have already proven their desire to grow through acquisitions: According to Reuters, about 60% of tech mergers and acquisitions (M&A) volume over the past five years is represented by five acquirers: Facebook, Inc. (Nasdaq: FB), Google, Inc. (Nasdaq: GOOG), Oracle,… Read More

Landing a triple-digit winner is like hitting a hole-in-one. It doesn’t happen often, but it’s just as satisfying each time it happens. However, there’s an often overlooked subsection of the market that can lead to these types of gains — but you have to understand where to look, what to look for and the dangers involved. #-ad_banner-#When shares of data storage firm OCZ Technology Group, Inc. (Nasdaq: OCZ) slipped below $2 back in 2012, short sellers began to circle like sharks. The company was burning through cash at an unsustainable rate, and at the time, I noted that OCZ had… Read More

Landing a triple-digit winner is like hitting a hole-in-one. It doesn’t happen often, but it’s just as satisfying each time it happens. However, there’s an often overlooked subsection of the market that can lead to these types of gains — but you have to understand where to look, what to look for and the dangers involved. #-ad_banner-#When shares of data storage firm OCZ Technology Group, Inc. (Nasdaq: OCZ) slipped below $2 back in 2012, short sellers began to circle like sharks. The company was burning through cash at an unsustainable rate, and at the time, I noted that OCZ had “a very short window to stop the bleeding.” By late 2013, the company declared bankruptcy. Simply put, whenever you see a stock slip below the $3 mark, you may want to take a quick look at the balance sheet and cash flow statement. Falling levels of cash and persistently negative cash flow can often put a company out of business. So, what are the best companies to invest in the stock market? When I looked at biofuels provider Gevo, Inc. (Nasdaq: GEVO) back in 2012, I wrote that the company required serial capital infusions to stay afloat. At the time,… Read More

If you are reading this article, then you are likely considered a “self-directed investor.” You like to perform your own investment research and make buy, sell and short decisions on your own. But you should still know about the radical battle being raged for the hearts and minds of investors that entrust wealth building to others. #-ad_banner-#In one corner, we have traditional financial services firms such as The Charles Schwab Corp. (NYSE: SCHW), Vanguard and Fidelity Investments. In the other corner, you’ll find industry upstarts with names like Wealthfront, FutureAdvisor, Motif Investing and Betterment. These firms are all scrambling to… Read More

If you are reading this article, then you are likely considered a “self-directed investor.” You like to perform your own investment research and make buy, sell and short decisions on your own. But you should still know about the radical battle being raged for the hearts and minds of investors that entrust wealth building to others. #-ad_banner-#In one corner, we have traditional financial services firms such as The Charles Schwab Corp. (NYSE: SCHW), Vanguard and Fidelity Investments. In the other corner, you’ll find industry upstarts with names like Wealthfront, FutureAdvisor, Motif Investing and Betterment. These firms are all scrambling to establish a position in the field of robo-advising, also known as “automated investment services.” Before weighing in on which firm has built the best mousetrap and if the entire concept holds real appeal, it helps to understand what robo-advisers are and are not. Robo-advisers ask clients to fill out a quick survey that identifies an investor’s goals. They then create ideal low-cost portfolios that hold a basket of diversified exchange-traded funds. Total fees often end up at less than 1% of assets under management, compared to fees of 1%-to-2% of assets under management offered by traditional financial advisors. (Robo-adviser upfront… Read More

Would you subscribe to an investment strategy that only works a couple of times every decade? That’s the question that short sellers need to ask themselves. These contrarian investors, who borrow shares with an intention to buy them back later at a cheaper price, rarely have the wind at their backs. (For a more extensive description of short selling, please read this.) The first few years after the dot-com boom ended, short sellers had a nice run. They racked up great gains in 2008 as well. That’s it… Two ideal windows of opportunity in… Read More

Would you subscribe to an investment strategy that only works a couple of times every decade? That’s the question that short sellers need to ask themselves. These contrarian investors, who borrow shares with an intention to buy them back later at a cheaper price, rarely have the wind at their backs. (For a more extensive description of short selling, please read this.) The first few years after the dot-com boom ended, short sellers had a nice run. They racked up great gains in 2008 as well. That’s it… Two ideal windows of opportunity in 15 years. And we’re not cherry-picking the data. In the 1980s, the S&P 500 lost value just once (1981). And in the 1990s, the index also had just one down year (1990).     Short selling is so tough simply because, over the long haul, stock markets inexorably rise in value. #-ad_banner-#But that doesn’t mean short selling has no role to play. Savvy investors will tell you that by adding selective short positions to an otherwise long-oriented portfolio, you can boost your risk-adjusted returns. The key is to take a “long/short”… Read More

In recent weeks, news reports have suggested that music streaming service Spotify is in the process of raising another $400 million. The proposed cash injection values the firm at a rumored $8.4 billion. That’s a seemingly rich valuation, but these days, fast-growing companies that are transforming industries are meriting such interest in the venture capital community. Yet Spotify’s valuation got me thinking: Why is it worth $8.4 billion, while publicly-traded rival Pandora Media, Inc. (NYSE: P) is valued at less than $4 billion? In early 2014, Pandora had the market value that Spotify now seems to merit. What gives? Surely… Read More

In recent weeks, news reports have suggested that music streaming service Spotify is in the process of raising another $400 million. The proposed cash injection values the firm at a rumored $8.4 billion. That’s a seemingly rich valuation, but these days, fast-growing companies that are transforming industries are meriting such interest in the venture capital community. Yet Spotify’s valuation got me thinking: Why is it worth $8.4 billion, while publicly-traded rival Pandora Media, Inc. (NYSE: P) is valued at less than $4 billion? In early 2014, Pandora had the market value that Spotify now seems to merit. What gives? Surely a closer look is warranted.  To understand the distinctive market valuations, a few issues need to be covered. First, Pandora is public, which means that its valuation is solely a reflection of supply and demand for shares. The company may be worth a lot more, (as I’ll note in a moment regarding analyst sentiment), but a potential change to its royalty deal has kept demand for shares at a low point. Spotify, which doesn’t yet need to cater to the fickle whims of public markets, can garner a valuation that solely pleases a small group of investors: its… Read More

Over the past half decade, large biotechnology stocks have delivered robust gains across the board. These companies sell a range of very popular drugs and have been generating massive profits. At the other end of the spectrum, small biotechs, most of which are still in their developmental stage, have been a hit-or-miss proposition, with a lot more hits and misses. Yet one group of small biotechs has been on fire, and gains look set to continue. Investors are only now coming to realize that the young, recently-public companies working on gene therapy aren’t a flash in the pan, but a… Read More

Over the past half decade, large biotechnology stocks have delivered robust gains across the board. These companies sell a range of very popular drugs and have been generating massive profits. At the other end of the spectrum, small biotechs, most of which are still in their developmental stage, have been a hit-or-miss proposition, with a lot more hits and misses. Yet one group of small biotechs has been on fire, and gains look set to continue. Investors are only now coming to realize that the young, recently-public companies working on gene therapy aren’t a flash in the pan, but a vanguard in the fight against many maladies. Since I profiled these stocks a year ago, they have exploded higher. On average, they have risen 191% over the past 12 months. (For more background, please read the April 2014 article.)  The catalysts for these stocks are quite clear: either they have announced impressive clinical advances, or secured the endorsement (and financial backing) of the big drug makers. For example: In December 2014, bluebird bio, Inc. (Nasdaq: BLUE) announced that patients in early stage trial were given the company’s LentiGlobin355 drug, and their need for chronic blood transfusions simply ceased. Read More

We often write about a group of stocks known as the “Dividend Aristocrats.” These stocks have a long track record of dividend payment increases, which make them among the most reliable income-producing investments you can find. But these stocks have one clear drawback: they are so loved by so many investors that their share prices often get pushed up to levels that translate into a mediocre dividend yield. Among the more than 50 stocks that qualify for Dividend Aristocrat status, only three of them — AT&T, Inc. (NYSE: T), HCP, Inc. (NYSE: HCP) and Consolidated Edison, Inc. (NYSE: ED) —… Read More

We often write about a group of stocks known as the “Dividend Aristocrats.” These stocks have a long track record of dividend payment increases, which make them among the most reliable income-producing investments you can find. But these stocks have one clear drawback: they are so loved by so many investors that their share prices often get pushed up to levels that translate into a mediocre dividend yield. Among the more than 50 stocks that qualify for Dividend Aristocrat status, only three of them — AT&T, Inc. (NYSE: T), HCP, Inc. (NYSE: HCP) and Consolidated Edison, Inc. (NYSE: ED) — have dividend yields above 4%. The 30-day SEC Yield on the ProShares S&P 500 Dividend Aristocrat ETF (NYSE: NOBL) is just 1.96%. Yet there is another group of stocks that have no shot at ever joining the Dividend Aristocrats. They are simply ignored by any investor that craves dividend stability. These companies, by the very nature of their business models, are simply in no position to guarantee that dividends will remain constant and growing. In fact, from time to time, these companies decide not to pay a dividend at all. Let me use Northern Tier Energy LP (NYSE: NTI) as… Read More