Seven years into a bull run and stocks are undeniably expensive. FactSet Research finds that every sector but one is trading above its five- and ten-year average price-to-earnings ratio on a forward basis.  There’s good reason for higher P/E ratios, stock prices keep rising even as the companies in the S&P 500 have reported five consecutive quarters of lower earnings. As investors rush in to send the market to new highs, their share of earnings is getting smaller. #-ad_banner-#And stocks may be set to get even more expensive throughout the rest of the year. Analysts expect earnings to decline for… Read More

Seven years into a bull run and stocks are undeniably expensive. FactSet Research finds that every sector but one is trading above its five- and ten-year average price-to-earnings ratio on a forward basis.  There’s good reason for higher P/E ratios, stock prices keep rising even as the companies in the S&P 500 have reported five consecutive quarters of lower earnings. As investors rush in to send the market to new highs, their share of earnings is getting smaller. #-ad_banner-#And stocks may be set to get even more expensive throughout the rest of the year. Analysts expect earnings to decline for a sixth straight quarter when reports start coming out in October. The question is, how much more expensive can stocks get before investor enthusiasm starts to crumble? Is there any value left in the market? How Much More Expensive Can Stocks Get? Companies in the S&P 500 are trading at a 20% premium to the average 10-year forward P/E multiple. Nine of the ten sectors in the index trade above their five- and ten-year average multiples with premiums on 10-year multiples ranging from 24.6% (consumer staples) to 7% (information technology).  Investors will need to remain exuberantly optimistic if the… Read More

The current bull run in stocks has lasted longer than any other, save the tech bubble of the 90s.  That in itself shouldn’t be cause for alarm — bull markets don’t die of old age. What should worry investors, however, is the massive disconnect between economic fundamentals and stock valuations.  From weakening retail sales to corporate America heading for its sixth consecutive quarter of declining earnings, the fundamentals of the market conflict with the record highs we’re seeing nearly every day. But missing out on further upside isn’t an option for most investors either. #-ad_banner-#What to do when all the… Read More

The current bull run in stocks has lasted longer than any other, save the tech bubble of the 90s.  That in itself shouldn’t be cause for alarm — bull markets don’t die of old age. What should worry investors, however, is the massive disconnect between economic fundamentals and stock valuations.  From weakening retail sales to corporate America heading for its sixth consecutive quarter of declining earnings, the fundamentals of the market conflict with the record highs we’re seeing nearly every day. But missing out on further upside isn’t an option for most investors either. #-ad_banner-#What to do when all the data screams crash but the market keeps moving higher?  You find stocks that beat the market during a crash.  A Tale Of Two Worlds, Exuberant Markets Versus Dismal Economics Profit expectations have come down for the third quarter, which is likely to mark six consecutive quarters of falling earnings for companies in the S&P 500. The global economy is struggling and the only thing keeping the United States out of recession has been auto sales and housing. Auto sales are weakening and uncertainty around Brexit may be enough to push the United States into a recession over the next… Read More

When Walt Disney moved to Los Angeles in 1923 and created Disney Brothers Studio, he had little to his name, having already failed with a previous studio company.  His legacy is now worth a market cap of $157 billion, spanning film, TV, sports and theme parks. In the last five years alone, shares of The Walt Disney Company (NYSE: DIS) have jumped 235% as the entertainment powerhouse uses its reach to dominate multiple industries. #-ad_banner-#The rise of China and 1.35 billion consumers could bring the next Disney story, and one of the world’s richest men already has plans for creating his… Read More

When Walt Disney moved to Los Angeles in 1923 and created Disney Brothers Studio, he had little to his name, having already failed with a previous studio company.  His legacy is now worth a market cap of $157 billion, spanning film, TV, sports and theme parks. In the last five years alone, shares of The Walt Disney Company (NYSE: DIS) have jumped 235% as the entertainment powerhouse uses its reach to dominate multiple industries. #-ad_banner-#The rise of China and 1.35 billion consumers could bring the next Disney story, and one of the world’s richest men already has plans for creating his empire.  He’s got the ear of the Chinese government and a $30 billion-plus head start on building the next global entertainment dynamo. From Property Development To Entertainment Empire The Dalian Wanda Group is already the world’s largest property developer, and now has its sight set on developing a global entertainment business to rival any other. The company is developing six theme parks in China, as well as hotel and tourism properties internationally.   The company also owns Infront Sports & Media, a media and marketing company for international sporting events and federations. The company represents 170 rights holders, including… Read More

Growth investors are notoriously fickle when it comes to earnings reports. Unbridled enthusiasm leads them to bid up shares of rising stars, only to stampede for the exits when the company fails to meet ridiculously high expectations. Sometimes it doesn’t even take an earnings miss to send shares crashing, but merely a change in the company’s financial outlook. Lowered guidance may send analysts and shareholders fleeing, even if the company is still on a strong growth trajectory. In many cases, it’s not long before investors calm down and once again look at the company rationally. They reassess the longer-term outlook… Read More

Growth investors are notoriously fickle when it comes to earnings reports. Unbridled enthusiasm leads them to bid up shares of rising stars, only to stampede for the exits when the company fails to meet ridiculously high expectations. Sometimes it doesn’t even take an earnings miss to send shares crashing, but merely a change in the company’s financial outlook. Lowered guidance may send analysts and shareholders fleeing, even if the company is still on a strong growth trajectory. In many cases, it’s not long before investors calm down and once again look at the company rationally. They reassess the longer-term outlook — the same story that probably got them excited about the stock in the first place — and bid shares right back up. #-ad_banner-# So, when I see a best-of-breed company in one of my favorite long-term industries plummet after its earnings report, I get excited. Herd Quick To Bail On This Growth Stock… And Then Buy Again Few firms have been as innovative in information security as FireEye (Nasdaq: FEYE) with its advanced detection technology and threat intelligence feed. Security advisory firm SSP Blue estimates global spending on information… Read More

The chorus of investing gurus sounding the alarm on bubbles in both the bond and stock market grows almost daily. It started as early as last year with Vanguard founder Jack Bogle warning that stocks could return as little as 6% annually over the next decade based on record low interest rates and overvaluation. #-ad_banner-#​DoubleLine Capital Chief Executive Jeffrey Gundlach said last month that investors have entered, “a world of uber complacency,” recommending that investors sell everything and that the stock market should be, “down massively.” The $100 billion L.A.-based asset manager also went “maximum negative” on U.S. Treasuries, marking… Read More

The chorus of investing gurus sounding the alarm on bubbles in both the bond and stock market grows almost daily. It started as early as last year with Vanguard founder Jack Bogle warning that stocks could return as little as 6% annually over the next decade based on record low interest rates and overvaluation. #-ad_banner-#​DoubleLine Capital Chief Executive Jeffrey Gundlach said last month that investors have entered, “a world of uber complacency,” recommending that investors sell everything and that the stock market should be, “down massively.” The $100 billion L.A.-based asset manager also went “maximum negative” on U.S. Treasuries, marking a familiar alarm among smart money that investors may find no safety in bonds either. Bond guru Bill Gross has previously been critical of the massive monetary programs by central banks globally and told Bloomberg this month that it’s, “devolved into Ponzi finance,” and have become, “promises that can never be kept.” Looking at valuations, the Janus Capital Manager said he doesn’t like bonds or most stocks, but admitted that investors need to put their money to work.  In fact, against the potential for the financial system to “implode”, Gross said the Janus Unconstrained Fund is holding just 5% in… Read More

Everywhere you look there seems to be malaise about global economic growth and the outlook for markets. Forecasts for economic growth are continuously downgraded, and more than a third of global bonds carry a negative yield as investors rush to safety. However, digging deeper in the data uncovers a market disconnect between this wall of worry and a booming global payments processing industry.  #-ad_banner-#Visa Inc. (NYSE: V) beat expectations to report a 10% increase in global payment volume and a “remarkably steadfast consumer in the face of significant global instability.”  Here in my office in Colombia, I’m watching the shift… Read More

Everywhere you look there seems to be malaise about global economic growth and the outlook for markets. Forecasts for economic growth are continuously downgraded, and more than a third of global bonds carry a negative yield as investors rush to safety. However, digging deeper in the data uncovers a market disconnect between this wall of worry and a booming global payments processing industry.  #-ad_banner-#Visa Inc. (NYSE: V) beat expectations to report a 10% increase in global payment volume and a “remarkably steadfast consumer in the face of significant global instability.”  Here in my office in Colombia, I’m watching the shift to a cashless society happen first hand as people get tired of carrying large stacks of bills and instead opt for credit and debit cards. This shift in emerging markets could carry global payment growth, with Boston Consulting Group (BCG) forecasting as much as $900 billion in transaction-based revenue growth up for grabs through 2024. One market leader is taking advantage of the Brexit shakeup to snap up a competitor at a 12% discount, expanding its global footprint. Even better, its board just authorized a massive share buyback, and earnings this year could be well over expectations. Consumers Seem Unaffected… Read More

It seems like it should be a fairly straightforward concept. You invest your money in a company for a share of future earnings. Most of the companies in which I invest have been around for longer than I have, so those earnings should be fairly stable, if not following a gradual path higher. Of course, investing can be anything but simple as the market charts its course through the new normal and you are trying to avoid the next historic crash in prices. #-ad_banner-#So when someone starts talking about ‘simple’ math that makes an investment a no-brainer, I start to… Read More

It seems like it should be a fairly straightforward concept. You invest your money in a company for a share of future earnings. Most of the companies in which I invest have been around for longer than I have, so those earnings should be fairly stable, if not following a gradual path higher. Of course, investing can be anything but simple as the market charts its course through the new normal and you are trying to avoid the next historic crash in prices. #-ad_banner-#So when someone starts talking about ‘simple’ math that makes an investment a no-brainer, I start to wonder how simple it can really be. Especially when that someone is the CEO of the company. That was the case recently during an earnings release by one of the world’s largest asset managers. Not only is the lecturing mathematician the CEO, he’s also the co-founder of the company. I admire this CEO greatly and he’s a guru in the world of private equity, but when I looked further into the details I found a few holes in his ‘simple’ math.  While I don’t agree with the CEO’s math, I did find evidence that the stock could be one of… Read More

Netflix (Nasdaq: NFLX) lost a staggering $6 billion of its market cap in one day as shares plunged 14% on July 19. The company’s second-quarter earnings report was a shocking disappointment as subscriber numbers came in well below expectations. Analysts were quick to cut earnings estimates and question target prices following the news, but this kind of post-earnings mayhem is nothing new for the world’s largest streaming subscription service. In fact, data over the past 10 quarters shows double-digit price swings are the norm after the company’s earnings announcements. #-ad_banner-#… Read More

Netflix (Nasdaq: NFLX) lost a staggering $6 billion of its market cap in one day as shares plunged 14% on July 19. The company’s second-quarter earnings report was a shocking disappointment as subscriber numbers came in well below expectations. Analysts were quick to cut earnings estimates and question target prices following the news, but this kind of post-earnings mayhem is nothing new for the world’s largest streaming subscription service. In fact, data over the past 10 quarters shows double-digit price swings are the norm after the company’s earnings announcements. #-ad_banner-# And historical data uncovers another interesting post-earnings trend that traders can take advantage of. Bad News Can’t Keep Netflix Down Few stocks are as volatile as Netflix after it reports earnings. Looking at the past 10 earnings announcements, shares have fallen an average of 11% on disappointing reports and have gained an average of 13% when the company reports good news. But a funny thing happens following the big post-earnings moves… the shares tend to move higher regardless of whether the company reports good news or bad. Shares of NFLX moved an average of 6% higher in the month following… Read More

Emerging markets have had a tough few years. Slowing growth in China after the global financial crisis has meant reduced commodity demand and weaker investor sentiment for the group. Then the plunge in crude prices led to lower income for oil-producing nations, along with weakening currencies and falling foreign direct investment.  But 2016 looked to be the year the group could turn a corner. The price of oil and of some metals has rebounded, and dollar strength has plateaued. The iShares MSCI Emerging Markets (NYSE: EEM) was up 26% in mid-July from its January low.  #-ad_banner-#One particular emerging market looked… Read More

Emerging markets have had a tough few years. Slowing growth in China after the global financial crisis has meant reduced commodity demand and weaker investor sentiment for the group. Then the plunge in crude prices led to lower income for oil-producing nations, along with weakening currencies and falling foreign direct investment.  But 2016 looked to be the year the group could turn a corner. The price of oil and of some metals has rebounded, and dollar strength has plateaued. The iShares MSCI Emerging Markets (NYSE: EEM) was up 26% in mid-July from its January low.  #-ad_banner-#One particular emerging market looked to be a standout among the group, with shares of its country fund up 37% from the January low just to the end of April. The country’s current account deficit, the difference between exports and imports, shrank to a five-year low in 2015 and foreign investors were pouring money into the economy. That is, until political uncertainty started gripping the country in late April and erupted in a failed coup this month.  Shares of the country fund are now down 22% from their 52-week high and may be the best buy in emerging markets this year. Historical evidence shows that… Read More

President Obama hasn’t come out with his own “crisis of confidence” speech as did President Carter, but there is definitely an air of economic malaise that is holding the country back.  Even as unemployment has dropped to below 5% and job numbers have risen, the U.S. economy has continued to struggle to post any kind of substantial growth. Four of the past five quarters have seen GDP growth of 2% or less, which is not the kind of progress you would expect in a bull market. #-ad_banner-#But there is a glass-is-half-full perspective to this new normal of slow growth. One… Read More

President Obama hasn’t come out with his own “crisis of confidence” speech as did President Carter, but there is definitely an air of economic malaise that is holding the country back.  Even as unemployment has dropped to below 5% and job numbers have risen, the U.S. economy has continued to struggle to post any kind of substantial growth. Four of the past five quarters have seen GDP growth of 2% or less, which is not the kind of progress you would expect in a bull market. #-ad_banner-#But there is a glass-is-half-full perspective to this new normal of slow growth. One sector may be in an economic sweet spot where it benefits from low input costs and enjoys pricing power that will help margins expand. There is one company within this sector not only benefits from the economic outlook but also from the potential for several big catalysts that could play out before the end of the year. Is The New Normal Of Weak Economic Growth Bad For All Stocks? The advance estimate for U.S. second quarter GDP growth will be released on July 29, with market expectations for 2.3% on a seasonally adjusted annual rate. That would be more… Read More