Forecasting the price of oil has become the hot topic heading into 2016. There seems to be little consensus on direction, though. Just as many forecasts call for $20 oil as for $50 per barrel.  There have been record inflows into energy ETFs as investors try to time a bottom. In fact, Bloomberg reports “a wide range of investors collectively spent about $24 billion over the past 18 months trying — and failing — to call a bottom in oil.” While other traders franticly try to catch a falling knife, I’ve uncovered an alternative play that is all… Read More

Forecasting the price of oil has become the hot topic heading into 2016. There seems to be little consensus on direction, though. Just as many forecasts call for $20 oil as for $50 per barrel.  There have been record inflows into energy ETFs as investors try to time a bottom. In fact, Bloomberg reports “a wide range of investors collectively spent about $24 billion over the past 18 months trying — and failing — to call a bottom in oil.” While other traders franticly try to catch a falling knife, I’ve uncovered an alternative play that is all but guaranteed to rally if oil rebounds, but should also do well while we wait. Higher Oil Someday…  Despite the difficulty in timing a bottom, several factors point to an eventual rebound in oil prices. #-ad_banner-# More than $68 billion was slashed from capital spending across the energy industry in North America alone this year, with a survey by Barclays showing it could be cut by another 10% to 15% next year. Globally, the bank found capital expenditures were cut by 20% this… Read More

For decades now, investors and companies have been trying to position for an emergent China. Foreign direct investment has grown to $289 trillion in 2014 from just $38 trillion in 2000. The Shanghai Composite index surged an annualized 21% a year over the seven years to mid-2007 as investors poured into the trade.  #-ad_banner-#However, the China trade hasn’t paid as well since the end of the Great Recession. Economic growth has slowed to just under 7% and the Shanghai index has returned just 1.6% annually over the six years to 2016. To make matters worse, the Chinese Yuan has depreciated… Read More

For decades now, investors and companies have been trying to position for an emergent China. Foreign direct investment has grown to $289 trillion in 2014 from just $38 trillion in 2000. The Shanghai Composite index surged an annualized 21% a year over the seven years to mid-2007 as investors poured into the trade.  #-ad_banner-#However, the China trade hasn’t paid as well since the end of the Great Recession. Economic growth has slowed to just under 7% and the Shanghai index has returned just 1.6% annually over the six years to 2016. To make matters worse, the Chinese Yuan has depreciated 6.8% against the U.S. dollar since 2014, meaning lower returns when translated to the greenback. The Chinese government has yet to be successful in its move to transition from manufacturing to a consumer-driven economy and weak growth abroad means export growth will remain sluggish.  Against this outlook, there is still one China play that’s working. Best yet, this group of stocks should do well whether that economy picks back up or not. Pollution In China Is At Dangerous Levels Beijing issued its highest smog alert of the year in early December, raising the warning level and reporting PM2.5 levels… Read More

It’s been difficult to make a bad bet on the U.S. markets over the last six years. Historically low rates set off a run in asset prices that has topped averages for bull markets. While economic growth hasn’t surged higher than pre-financial crisis levels, it has rebounded relatively well compared to that of other countries.  But it’s beginning to look like the ride may be coming to an end. The first rate increase in nearly a decade could usher in an era of tighter monetary policy. While low energy prices could provide some upside on consumer spending, the energy sector… Read More

It’s been difficult to make a bad bet on the U.S. markets over the last six years. Historically low rates set off a run in asset prices that has topped averages for bull markets. While economic growth hasn’t surged higher than pre-financial crisis levels, it has rebounded relatively well compared to that of other countries.  But it’s beginning to look like the ride may be coming to an end. The first rate increase in nearly a decade could usher in an era of tighter monetary policy. While low energy prices could provide some upside on consumer spending, the energy sector has acted as a huge drag on corporate earnings where the group accounts for 6.6% of the S&P 500. #-ad_banner-#In fact, the S&P 500 has risen just 0.3% this year for its worst performance since 2011 and the third worst year of the last decade. Contrast this with another market that has lagged behind the S&P 500 in four of the last six years but faces significant tailwinds in 2016: Europe. While the United States was pumping hundreds of billions in fiscal and monetary stimulus into its own economy, this market was fighting fiscal tightening and slower monetary stimulus growth. … Read More

This year’s bear market in oil has taken the spotlight in the press, but it’s not the only commodity that has struggled. Natural gas has fallen 50% over the last year, reaching a low not seen in two decades. Many investors have been left scrambling to cover their losses. But I see this drop as an opportunity to focus on companies that will benefit from this epic bear market.  In fact, one company will have a huge advantage against international competition and is selling for a 35% discount to its long-term average. How To Play The Epic Bear Market In… Read More

This year’s bear market in oil has taken the spotlight in the press, but it’s not the only commodity that has struggled. Natural gas has fallen 50% over the last year, reaching a low not seen in two decades. Many investors have been left scrambling to cover their losses. But I see this drop as an opportunity to focus on companies that will benefit from this epic bear market.  In fact, one company will have a huge advantage against international competition and is selling for a 35% discount to its long-term average. How To Play The Epic Bear Market In Natural Gas Bear markets like the one in natural gas are extremely rare. And with prices touching 20-year lows on an inflation-adjusted basis,  you’d be hard-pressed to find an investment that has produced more losses.  There doesn’t appear to be any bottom for prices either. Both cost drivers, industrial demand and weather, look unfavorable for at least another quarter. Industrial output in the United States declined in August and September and broader economic growth has been mostly a result of consumer spending. Across the United States, record temperatures are being recorded as the El Nino weather phenomenon looks to… Read More

One of the most important points in the curriculum for the Chartered Financial Analyst (CFA) designation is diversification across asset classes. More than stock picking or top-down economic analysis, analysts are taught to take advantage of all asset classes to produce risk-adjusted returns for clients.  It’s a sound strategy, but one that runs up against problems when you start adding commodities to a portfolio. While assets such as stocks, bonds and real estate all produce cash returns through interest and dividends, investments in commodities offer no returns until you sell them. #-ad_banner-# Sure, mining companies may pay dividends,… Read More

One of the most important points in the curriculum for the Chartered Financial Analyst (CFA) designation is diversification across asset classes. More than stock picking or top-down economic analysis, analysts are taught to take advantage of all asset classes to produce risk-adjusted returns for clients.  It’s a sound strategy, but one that runs up against problems when you start adding commodities to a portfolio. While assets such as stocks, bonds and real estate all produce cash returns through interest and dividends, investments in commodities offer no returns until you sell them. #-ad_banner-# Sure, mining companies may pay dividends, but that adds company-specific risks to the portfolio. Meanwhile, share prices may move more closely with the stock market than with actual commodity prices. The good news is that one simple strategy lets traders produce immediate cash returns on commodities. And as the stock market wobbles heading into 2016 and higher interest rates threaten the business cycle, several signs point to this being a good time to invest in gold. Gold Bugs May Soon Be Rewarded After more than three years of falling prices, there is reason to believe gold could make a comeback.  First, for many investors, gold provides… Read More

As interest rates hit historic lows, many investors piled into high-yield energy stocks for yield believing that the U.S. energy revolution would keep dividend payments increasing.  The crash in oil prices has put cash flow in danger and high debt loads from the heady acquisition days is weighing on balance sheets. Share prices have tumbled, sending yields on some energy plays to 10% and higher.  But dividends are being cut to protect cash flow and investors are being trapped into stocks with huge losses and without the yield they were expecting. Is your favorite energy stock about to make the… Read More

As interest rates hit historic lows, many investors piled into high-yield energy stocks for yield believing that the U.S. energy revolution would keep dividend payments increasing.  The crash in oil prices has put cash flow in danger and high debt loads from the heady acquisition days is weighing on balance sheets. Share prices have tumbled, sending yields on some energy plays to 10% and higher.  But dividends are being cut to protect cash flow and investors are being trapped into stocks with huge losses and without the yield they were expecting. Is your favorite energy stock about to make the announcement? Learn the warning signs and check out two names that may be in trouble. Energy Companies Are Bleeding Cash As if last year’s selloff in oil was not enough, the price of West-Texas Intermediate (WTI) has fallen 20% since the end of the third quarter and broke $36 a barrel recently. For the fourth quarter, energy companies in the S&P 500 are expected to post a 34% decline in year-over-year sales and a staggering 65% drop in earnings. Many in the space have already begun protecting cash by cutting dividend payments or reducing capital expenditures. E&P giant Chesapeake… Read More

As companies release their profit outlooks for 2016, some investors are getting worried about the six-year bull market. One of the largest companies based in my hometown just released its outlook and it sent shares skidding down toward 52-week lows.  But we’ve heard this story before. Management lowers expectations so the market doesn’t get too far ahead of itself only to consistently beat when results are reported. In fact, this company has beaten expectations in 11 of the past 12 quarters. What more, I’m expecting one key trend to turn very soon, leading to big upside and a… Read More

As companies release their profit outlooks for 2016, some investors are getting worried about the six-year bull market. One of the largest companies based in my hometown just released its outlook and it sent shares skidding down toward 52-week lows.  But we’ve heard this story before. Management lowers expectations so the market doesn’t get too far ahead of itself only to consistently beat when results are reported. In fact, this company has beaten expectations in 11 of the past 12 quarters. What more, I’m expecting one key trend to turn very soon, leading to big upside and a much stronger 2016 than anyone expects, which is why I’m getting positioned now. Des Moines, Iowa-based Principal Financial Group (NYSE: PFG) provides 401(k) employer plans, annuity and insurance products to 20 million global customers, many of which are small and medium-sized businesses. The company has built an attractive position in the market by targeting firms that don’t generally show up on the radar of larger insurance companies. #-ad_banner-# While most insurance companies are dependent on investment income, Principal has focused on growing its fee-based revenue through asset management and retirement services. Since investment income and other rate-sensitive products… Read More

Since the 2008 collapse, sales of light vehicles have been the standout for the U.S. economy. Against a backdrop of sluggish growth in wages and retail, sales of autos and light trucks have surged to a 15-year record this year. However, not all auto-related stocks are created equal. And investors who aren’t selective may soon find themselves in the red.  That’s because there are two critical roadblocks approaching that could derail the industry’s terrific bull run. But despite the coming headwinds, there are two auto stocks that I like going into next year. Dual Roadblocks Coming For The Auto Industry… Read More

Since the 2008 collapse, sales of light vehicles have been the standout for the U.S. economy. Against a backdrop of sluggish growth in wages and retail, sales of autos and light trucks have surged to a 15-year record this year. However, not all auto-related stocks are created equal. And investors who aren’t selective may soon find themselves in the red.  That’s because there are two critical roadblocks approaching that could derail the industry’s terrific bull run. But despite the coming headwinds, there are two auto stocks that I like going into next year. Dual Roadblocks Coming For The Auto Industry Many believe that sales will continue to soar, pointing to the fact that the average vehicle on the road is 11.5 years old — a record. But what is not as frequently mentioned is that the average age is creeping higher largely as a result of vehicle quality. Cars are holding up better, and new car buyers are holding onto their vehicle for an average of 77.8 months before selling them, an increase of 26 months since 2006.  More than the age of cars on the road, much of the surge in demand for new cars can be attributed… Read More

While investors are hyper-focused on retailers this time of year, I see an overlooked opportunity in a prominent department store chain. Macy’s (NYSE: M) popped 8% on July 15 when activist investor Starboard Value announced an undisclosed stake and plans to push for a spinoff of the company’s real estate properties into a real estate investment trust (REIT).  The month before, Macy’s CFO Karen Hoguet cooled REIT rumors, saying the company preferred to control its locations. But investors continued to hold out hope, as similar strategies had sent shares of companies like Sears Holdings (Nasdaq: SHLD) and Darden… Read More

While investors are hyper-focused on retailers this time of year, I see an overlooked opportunity in a prominent department store chain. Macy’s (NYSE: M) popped 8% on July 15 when activist investor Starboard Value announced an undisclosed stake and plans to push for a spinoff of the company’s real estate properties into a real estate investment trust (REIT).  The month before, Macy’s CFO Karen Hoguet cooled REIT rumors, saying the company preferred to control its locations. But investors continued to hold out hope, as similar strategies had sent shares of companies like Sears Holdings (Nasdaq: SHLD) and Darden Restaurants (NYSE: DRI) skyward. But those hopes were dashed when third-quarter results were released earlier this month. Management expressed its opposition to a spinoff and lowered its full-year outlook — a one-two punch that sent shares plunging 14% in one day. With REIT speculation dead and short-term traders shaken out, the shares look like a great bargain. #-ad_banner-# Real Estate Still Holds A Great Deal Of Promise Starboard estimated Macy’s real estate holdings at $21 billion this summer, which is nearly double… Read More

If there’s one topic that has defined investing this year, it has been investor fear of rising interest rates. After more than six years of historically low rates, it was all but inevitable that the Federal Open Market Committee (FOMC) would finally begin to increase rates starting this year. That fear has lead investors to sell their stocks in rate-sensitive sectors such as utilities and consumer staples. Traditional thinking says that higher interest rates could put the dividends for those investor staples at risk. As for the rest of the market, many worry that higher borrowing costs would weigh on… Read More

If there’s one topic that has defined investing this year, it has been investor fear of rising interest rates. After more than six years of historically low rates, it was all but inevitable that the Federal Open Market Committee (FOMC) would finally begin to increase rates starting this year. That fear has lead investors to sell their stocks in rate-sensitive sectors such as utilities and consumer staples. Traditional thinking says that higher interest rates could put the dividends for those investor staples at risk. As for the rest of the market, many worry that higher borrowing costs would weigh on the economy and send the entire market reeling. As a result, the S&P 500 went nowhere for most of the year. Then in mid-August, with bets rising on a September rate hike, the market tumbled 11% in just over a week. While the market has recovered from that fall, the odds are back on for a rate hike after the December FOMC meeting…   But if you’re thinking it’s time again to sell your utilities or consumer staples, you’re wrong. Rising Rates Could Be Great For These Sectors While the theory that rate-sensitive sectors should underperform when rates rise… Read More