Shares of oil stocks plunged again as the price of West Texas Intermediate wiped out nearly half of its late-January rebound. Sluggish demand growth and stubbornly high supply has had investors whipsawed for months.  In all the confusion, it is difficult not to look at the long-term picture and be positive on oil and shares of energy companies. The dramatic cut in the North American rig count has to eventually curtail supply. Even on more uncertain forecasts, China and India are both expected to grow their economies by nearly 7% this year with higher energy demand in tow.  … Read More

Shares of oil stocks plunged again as the price of West Texas Intermediate wiped out nearly half of its late-January rebound. Sluggish demand growth and stubbornly high supply has had investors whipsawed for months.  In all the confusion, it is difficult not to look at the long-term picture and be positive on oil and shares of energy companies. The dramatic cut in the North American rig count has to eventually curtail supply. Even on more uncertain forecasts, China and India are both expected to grow their economies by nearly 7% this year with higher energy demand in tow.   #-ad_banner-#So far, Mr. Market has made a fool of the long-term perspective. Oil prices have fallen consistently since mid-2014 and more investors throw in the towel every day. The argument is to buy when there’s blood in the streets — but that’s not so easy to do when you’re already bleeding. How can you take advantage of the long-term upside for oil without the short-term pain? It turns out, Warren Buffett may have found the perfect balance. What’s The Future For Oil? Right now, no one knows what exactly to expect from the price of oil. No sooner… Read More

Most sectors of the S&P 500 have been caught in the market sell-off lately, with all except utilities in the red for the year. #-ad_banner-#The market rout has left one staple of American progress down 12% year to date. But it has been battered, along with its entire sector, for nearly a year. Shares now trade for a 30% discount to their long-term P/E ratio, while numerous catalysts are lining up for a rebound.  Relief On The Horizon For Rail Stocks Weak commodity prices (especially for coal), falling industrial output and strength in the U.S. dollar have taken… Read More

Most sectors of the S&P 500 have been caught in the market sell-off lately, with all except utilities in the red for the year. #-ad_banner-#The market rout has left one staple of American progress down 12% year to date. But it has been battered, along with its entire sector, for nearly a year. Shares now trade for a 30% discount to their long-term P/E ratio, while numerous catalysts are lining up for a rebound.  Relief On The Horizon For Rail Stocks Weak commodity prices (especially for coal), falling industrial output and strength in the U.S. dollar have taken a major toll on railroad stocks. The Dow Jones U.S. Railroads Index has fallen roughly 40% in the past 12 months. Union Pacific (NYSE: UNP) — the No. 1 railroad company in the United States with 32,000 route miles running across 23 states in the western two-thirds of the country — is no exception. Earlier this month, UNP slid 3.5% in one day after it reported dismal fourth-quarter results. While pricing was 3.5% higher year over year, volume sank 9% and earnings per share fell 19%. Shares are now 45% off their 52-week high, set in February, and… Read More

These days it seems as if the market doesn’t know whether it wants to break through fears of higher rates and a slowing China or crash lower into a new bear market. The VIX volatility index has jumped to an average 24.1 in the first month of 2016 against an average of just 16.7 in 2015. The S&P 500 tumbled 9% in the first three weeks and triple-digit moves in the Dow are a daily occurrence.  In the frenzy of daily trading, it’s easy to lose sight of the long-term potential to make money. When asset prices plunge, it’s easy… Read More

These days it seems as if the market doesn’t know whether it wants to break through fears of higher rates and a slowing China or crash lower into a new bear market. The VIX volatility index has jumped to an average 24.1 in the first month of 2016 against an average of just 16.7 in 2015. The S&P 500 tumbled 9% in the first three weeks and triple-digit moves in the Dow are a daily occurrence.  In the frenzy of daily trading, it’s easy to lose sight of the long-term potential to make money. When asset prices plunge, it’s easy to forget about the 221% total return on the S&P 500 since the bottom of the financial crisis in March 2009 or the 375% cumulative return over the last two decades. #-ad_banner-#In fact, the recent market selloff may be your opportunity to pick up some of the best performers of the last 20 years at a discount. A lot of these bellwether names saw their stock prices surge over the last few years but have come down to more reasonable values in the last month.  They’ve made millionaires of investors over the last two decades and may be ready to… Read More

China has taken the spotlight lately and GDP growth at its lowest in more than two decades is contributing to the worst January on the stock market  since 1970. The hopes of thousands of companies looking for double-digit Chinese growth to save sluggish developed market sales seems to be falling apart. But talk of a ‘two-speed economy’ is emerging for the nation of 1.39 billion and there might yet be hope for investors.  #-ad_banner-#Looking deeper into the data, I’ve found some sectors and industries posting quarterly and annual growth. In fact, annual growth in one industry is forecast at nearly… Read More

China has taken the spotlight lately and GDP growth at its lowest in more than two decades is contributing to the worst January on the stock market  since 1970. The hopes of thousands of companies looking for double-digit Chinese growth to save sluggish developed market sales seems to be falling apart. But talk of a ‘two-speed economy’ is emerging for the nation of 1.39 billion and there might yet be hope for investors.  #-ad_banner-#Looking deeper into the data, I’ve found some sectors and industries posting quarterly and annual growth. In fact, annual growth in one industry is forecast at nearly 20% for at least three more years.  One company is about to capitalize on that growth. It’s not the hyped investment that everyone knows but a smaller rival that may get a big boost from a smaller base as it gets into the China game. Not All Of China Is Slowing China’s slowing growth has been an overhang for years but seems to have boiled over on the fourth quarter GDP report. Economic growth in the world’s second largest economy slowed to just 6.8% and finished 2015 at the slowest pace in 25 years. Power generation saw its first… Read More

Investors fled the mortgage REIT space ahead of higher short-term borrowing costs and the end of the Federal Reserve’s purchases of mortgage-backed securities. But a look at how one high-yield mortgage REIT performed over the past two cycles of higher rates may indicate the worst is over. Annaly Capital Management (NYSE: NLY) is the largest publicly traded mortgage REIT. It invests mostly in government-sponsored and agency mortgage-backed securities.  Agency debt doesn’t pay as high a yield but carries an implicit guarantee by the government, so it involves almost no credit risk. That means the company is able to… Read More

Investors fled the mortgage REIT space ahead of higher short-term borrowing costs and the end of the Federal Reserve’s purchases of mortgage-backed securities. But a look at how one high-yield mortgage REIT performed over the past two cycles of higher rates may indicate the worst is over. Annaly Capital Management (NYSE: NLY) is the largest publicly traded mortgage REIT. It invests mostly in government-sponsored and agency mortgage-backed securities.  Agency debt doesn’t pay as high a yield but carries an implicit guarantee by the government, so it involves almost no credit risk. That means the company is able to borrow on extremely low short-term rates and lend on higher long-term rates. #-ad_banner-# The downside is that the interest spread is extremely low — just 0.76% in the third quarter. To increase profits, companies use debt many times the equity on their balance sheets. Annaly has significantly reduced its debt leverage over the past decade though. Its debt-to-equity ratio was as high as 9.8 in 2005 but fell to just 5.9 last year. This is well below the industry average of 8 times equity. Even if management decides to maintain a conservative balance sheet, it could still increase leverage to… Read More

The S&P 500 broke 1860 last week, nearly 13% down from its 52-week high last May and into correction territory. With no bottom in sight for oil prices and question marks on global growth, fresh calls come out daily for an end to the seven-year bull market. If the market does fall 20% from its high to make the official mark for bear territory, it would be one of only seven other times it’s done so in the last 50 years according to Yardeni Research.  #-ad_banner-#If you believe the old maxim to buy when there’s blood in the… Read More

The S&P 500 broke 1860 last week, nearly 13% down from its 52-week high last May and into correction territory. With no bottom in sight for oil prices and question marks on global growth, fresh calls come out daily for an end to the seven-year bull market. If the market does fall 20% from its high to make the official mark for bear territory, it would be one of only seven other times it’s done so in the last 50 years according to Yardeni Research.  #-ad_banner-#If you believe the old maxim to buy when there’s blood in the streets, today could turn out to be a profitable entry point for investors. In four of those seven bear markets, stocks were up an average of 28% within a year and were up an average of 8% one year following all seven declines. But investors won’t have to wait for the S&P 500 to reach its bear inflection point to start finding bargains. I’ve found another market that is already down nearly 40% from its 52-week high — and some short-term catalysts could mean a rebound. Beyond the near-term upside, this market has strong long-term fundamentals to take it even… Read More

Fourth quarter earnings season is here and expectations are for a decline of 5.3% for companies in the S&P 500 on a year-ago basis. This would mark the third consecutive quarter of lower earnings, the worst streak since the third quarter of 2009.  While materials and energy are feeling the most pain, analysts have downgraded their EPS estimates in nine of the ten sectors tracked by FactSet Research over the past three months. It’s not just earnings that are looking weak in this market. Revenue is on track to post its fourth consecutive quarterly decline with analysts expected a dip… Read More

Fourth quarter earnings season is here and expectations are for a decline of 5.3% for companies in the S&P 500 on a year-ago basis. This would mark the third consecutive quarter of lower earnings, the worst streak since the third quarter of 2009.  While materials and energy are feeling the most pain, analysts have downgraded their EPS estimates in nine of the ten sectors tracked by FactSet Research over the past three months. It’s not just earnings that are looking weak in this market. Revenue is on track to post its fourth consecutive quarterly decline with analysts expected a dip of 3.3% in sales compared to the same period last year. #-ad_banner-#It’s been a tough quarter for most companies and may get worse before it gets better.  But one company looks to buck the trend and could actually report stronger-than-expected earnings. This company has a history of beating expectations and operates within one of the few bright spots in the economy. The Only Stable Market Right Now Is The Job Market The U.S. employment picture has been one of the few bright spots in the economy, adding 292,000 jobs in December. In fact, jobless claims finished 2015 at the… Read More

The S&P 500 is close to 10% off its 52-week high, while all of its sectors are in the red for the year. Meanwhile, the small-cap Russell 2000 is teetering on the edge of a bear market. Stocks are at a critical point. They could rebound as they have over and over in this seven-year bull market, or we could be facing a major correction. #-ad_banner-#One important piece of data coming out this month could be the straw that breaks the market’s back and sends stocks tumbling. Market Head Fake Or Heading Down? Investors have enjoyed a great… Read More

The S&P 500 is close to 10% off its 52-week high, while all of its sectors are in the red for the year. Meanwhile, the small-cap Russell 2000 is teetering on the edge of a bear market. Stocks are at a critical point. They could rebound as they have over and over in this seven-year bull market, or we could be facing a major correction. #-ad_banner-#One important piece of data coming out this month could be the straw that breaks the market’s back and sends stocks tumbling. Market Head Fake Or Heading Down? Investors have enjoyed a great ride over the past seven years, though it hasn’t all been smooth sailing. The S&P 500 has undergone a 10% correction in three of the past five years. While the market recovered each time, rewarding investors with the guts to stay in, there is good reason to believe we won’t be so lucky this time. On Monday, Alcoa (NYSE: AA) kicked off the unofficial start to the fourth-quarter earnings season. FactSet expects companies in the S&P 500 will show a 5.3% year-over-year decline in profits. If earnings do come in lower, it will be the third consecutive quarter of falling… Read More

When the Federal Reserve started raising rates in 1994, it drove interest rates up 2.5% in less than a year. The result was a bond market massacre that bled into stocks for a 3% loss on the year for the S&P 500.       There’s no question that the Fed needs to normalize rates right now after an historic easy money policy but the question is, how quickly will rates increase and should investors be worried about a repeat of 1994? #-ad_banner-#It’s a question that forced the market to a loss of 0.7% last year — and analysts… Read More

When the Federal Reserve started raising rates in 1994, it drove interest rates up 2.5% in less than a year. The result was a bond market massacre that bled into stocks for a 3% loss on the year for the S&P 500.       There’s no question that the Fed needs to normalize rates right now after an historic easy money policy but the question is, how quickly will rates increase and should investors be worried about a repeat of 1994? #-ad_banner-#It’s a question that forced the market to a loss of 0.7% last year — and analysts are predicting still higher rates through 2016. Against this fear in the market, there’s good reason to believe that rates aren’t going anywhere. If long-term rates stay low, it could be one of the biggest head-fakes of the year and lead to a huge rebound in rate-sensitive investments. Rates Go Up, Treasuries Fall? The Federal Reserve began its historic path to normalize rates after six years of easy money on December 16. Since that time, the rate on the 10-year Treasury has actually decreased by 0.15% rather than increased. Pundits will attribute the drop in rates to market volatility… Read More

With markets tumbling everywhere you look, I’ve started shifting focus to the Best of Breed stocks that will weather a correction… or worse. If economic growth slows or if investors just get a little jittery, I want to be in stocks that dominate their market and have rock-solid balance sheets to get them over a rough spot. While market weakness or general economic disappointment might weigh on these stocks, they’ll be able to withstand the environment far better than competitors and will emerge stronger.  #-ad_banner-#One of my favorite Best of Breed stocks isn’t resting on a huge lead within its… Read More

With markets tumbling everywhere you look, I’ve started shifting focus to the Best of Breed stocks that will weather a correction… or worse. If economic growth slows or if investors just get a little jittery, I want to be in stocks that dominate their market and have rock-solid balance sheets to get them over a rough spot. While market weakness or general economic disappointment might weigh on these stocks, they’ll be able to withstand the environment far better than competitors and will emerge stronger.  #-ad_banner-#One of my favorite Best of Breed stocks isn’t resting on a huge lead within its market, it’s expanding into other markets and cross-selling new products. While competitors will see lower sales on any economic pullback, this company may actually increase sales as customers entrench their business with one provider that can provide bundled discount offers.  This Best of Breed Is Expanding Its Market Red Hat (NYSE: RHT) is the de facto source for the Linux open source operating system. Popularity of the Linux OS has grown and it now drives more than half of all servers with Red Hat supporting 75% of paid Linux deployments. The company has a strong competitive advantage in its… Read More