As predictable as some market cycles are, they always seem to catch investors off guard. Mr. Market, senile old man that he is, just can’t seem to get past the euphoric buying around peaks and the panic selling around troughs. Smart investors know they don’t have to time a bottom perfectly. Sector leaders will always bounce back, and the wisest investors know how to pocket cash while they wait for a rebound. Some sectors are prone to extreme cycles. After a long period of high prices and capital investment, prices come crashing down and may take… Read More

As predictable as some market cycles are, they always seem to catch investors off guard. Mr. Market, senile old man that he is, just can’t seem to get past the euphoric buying around peaks and the panic selling around troughs. Smart investors know they don’t have to time a bottom perfectly. Sector leaders will always bounce back, and the wisest investors know how to pocket cash while they wait for a rebound. Some sectors are prone to extreme cycles. After a long period of high prices and capital investment, prices come crashing down and may take years to bottom. The best example of this is in agricultural commodities like corn and soybeans. Over the past 100 years, corn prices have peaked five times with the most recent at $8.54 per bushel in 2012. Each time it happened, prices soon plummeted as farmers planted as many acres as possible and supply went through the roof. Corn is now 55% off its 2012 highs, at $3.82 per bushel. Invariably, the drop in prices has led to a fall-off in planting and a drop in factors associated with increasing crop yields. And this, of course, takes a toll on… Read More

Companies that went on a debt-fueled acquisition binge when times were good start scrambling to cover their interest payments. High-flying startups with little cash flow but terrific growth start to see investor sentiment come crashing down. #-ad_banner-#I’m not saying an end to the six-year bull market is coming soon, but investors may want to start looking for companies with the balance sheet health that will make it through lean times. I’ve found one industry that has seen strong, reliable cash flows that aren’t likely to stop soon — if ever. The Affordable Care Act Has Been A Cash Machine For… Read More

Companies that went on a debt-fueled acquisition binge when times were good start scrambling to cover their interest payments. High-flying startups with little cash flow but terrific growth start to see investor sentiment come crashing down. #-ad_banner-#I’m not saying an end to the six-year bull market is coming soon, but investors may want to start looking for companies with the balance sheet health that will make it through lean times. I’ve found one industry that has seen strong, reliable cash flows that aren’t likely to stop soon — if ever. The Affordable Care Act Has Been A Cash Machine For Healthcare Companies Passage of the Affordable Care Act (ACA) sent enrollment in Medicaid and the Children’s Health Insurance Program (CHIP) soaring. These two programs provide coverage for low-income families that otherwise might not be able to afford it and is now subsidized under the ACA. Nationwide enrollment jumped 19% adding 11.2 million to the programs from the summer of 2013 to January of this year. States that implemented the ACA Medicaid expansion plan have seen even faster growth with a 26% jump in enrollments. The trend won’t end soon. Enrollment rates are still climbing and some states haven’t adopted… Read More

In June, as the third quarter got underway, consensus profits for companies in the S&P 500 were expected to show a modest 1% year-over-year dip. Three months later, analysts now think profits will slide nearly 5%, from year-earlier levels.  Of the companies that have announced guidance, 76 expect negative EPS growth for the third quarter according to FactSet Research. That compares to only 32 companies that have issued positive guidance for the three-month period so far.  The pain continues to build in the energy and materials sectors, but many other sectors are seeing downward earnings revisions as well. Fear of… Read More

In June, as the third quarter got underway, consensus profits for companies in the S&P 500 were expected to show a modest 1% year-over-year dip. Three months later, analysts now think profits will slide nearly 5%, from year-earlier levels.  Of the companies that have announced guidance, 76 expect negative EPS growth for the third quarter according to FactSet Research. That compares to only 32 companies that have issued positive guidance for the three-month period so far.  The pain continues to build in the energy and materials sectors, but many other sectors are seeing downward earnings revisions as well. Fear of higher interest rates and declining earnings growth led an 8.6% drop in the S&P 500 index, and a sharp spike in the VIX volatility index since mid-August. The trend is so bad that analysts are expecting earnings growth of just 0.6% in the fourth quarter. The revenue picture is equally challenging. Analysts think that third-quarter sales fell 3.3% against the same quarter last year. On a full-year basis, they are modeling for a 2.4% drop in sales. Unless revenue growth returns soon,  investors may start questioning whether corporate management teams can squeeze further earnings growth from continued cutbacks. The 12-month… Read More

Like many other Americans, I had my share of student loans, and was fortunate enough to consolidate them at a 2.75% rate back in 2003. So at first I didn’t understand why there was so much concern surrounding student loan debt today.  But after I saw the reality of today’s student loan debt — the building mountain of debt and the relatively high interest rates — I see the enormity of the problem.  #-ad_banner-#In fact, there are some fairly uncanny similarities between the student loan issue and the 2007/2008 housing bubble that sent our economy into the worst financial crisis… Read More

Like many other Americans, I had my share of student loans, and was fortunate enough to consolidate them at a 2.75% rate back in 2003. So at first I didn’t understand why there was so much concern surrounding student loan debt today.  But after I saw the reality of today’s student loan debt — the building mountain of debt and the relatively high interest rates — I see the enormity of the problem.  #-ad_banner-#In fact, there are some fairly uncanny similarities between the student loan issue and the 2007/2008 housing bubble that sent our economy into the worst financial crisis in recent memory.  Could student loans be the next crisis for the markets? Is there anywhere an investor could hide when it happens? The impact on the economy and investments may be profound. Let’s explore further.  Are Student Loans A Bubble? Student loan debt approached nearly $1.3 trillion in the second quarter this year, having grown at a compound annual rate of 11% since 2006. That total is double the amount of credit card loans held by commercial banks (see the chart, below). It costs an average of $26,828 for tuition at a four-year public university with the average… Read More

After a rapid ascent and then descent, many Chinese stocks are now back in bargain territory. The Hong Kong Index, for example, now trades for less than 10 times trailing earnings. While the government-mandated transition to a consumption-based economy has led to some economic dislocation, reforms around one sector may mean that stocks are undervalued even further. In fact, one industry leader could be valued at a sharp a discount to intrinsic value if reforms are pushed through as planned. The Chinese Government Wants Out Of The Pipeline Business As part of a broad reform of the energy sector,… Read More

After a rapid ascent and then descent, many Chinese stocks are now back in bargain territory. The Hong Kong Index, for example, now trades for less than 10 times trailing earnings. While the government-mandated transition to a consumption-based economy has led to some economic dislocation, reforms around one sector may mean that stocks are undervalued even further. In fact, one industry leader could be valued at a sharp a discount to intrinsic value if reforms are pushed through as planned. The Chinese Government Wants Out Of The Pipeline Business As part of a broad reform of the energy sector, the Chinese government announced plans in May to spin off pipeline assets at the two largest oil & gas companies, PetroChina (NYSE: PTR) and Sinopec (NYSE: SHI). Industry competitors argue that the two companies’ ownership of 89% of the country’s total pipeline capacity acts as a barrier to entry for others. By operating the pipeline assets independently,  other upstream explorers will have easier access to the nation’s pipeline transportation capacity. While the government has not released a timeline for finalizing the reform, analysts are expecting spinoffs to take place in the next six months. During the recent period of excessive… Read More

Even in the beaten down commodities sector, you can find stocks with clear upside catalysts. Case in point: shares of metals miner Glencore surged more than 10% last week (on the London Stock Exchange) on news that the firm planned to  suspend operations at a pair of African copper mines, issue new shares, cut its dividend and sell assets in an attempt to  preserve cash and cash flow. The move is seen as an inflection point for the industry and similar steps may soon be taken by other commodities producers. Industry wide output cuts of various commodities could set the… Read More

Even in the beaten down commodities sector, you can find stocks with clear upside catalysts. Case in point: shares of metals miner Glencore surged more than 10% last week (on the London Stock Exchange) on news that the firm planned to  suspend operations at a pair of African copper mines, issue new shares, cut its dividend and sell assets in an attempt to  preserve cash and cash flow. The move is seen as an inflection point for the industry and similar steps may soon be taken by other commodities producers. Industry wide output cuts of various commodities could set the stage for supply and demand to come back into equilibrium, which would boost pricing. Copper, in particular, may be subject to a brightening pricing picture. Are Commodities About To Head Higher? Of course, demand from China remains as the clearest headwind for commodity producers. Chinese imports of raw and finished goods have now fallen for 10 straight months, which has led to speculation of further policy easing by the Chinese government. Zhou Xiaochuan, governor of China’s central bank, told the G20 finance ministers earlier this month that the recent correction in stock prices is nearly over. Remarks like these… Read More

For five years, investors wondered if China’s growth story was dead and its market would ever rise again. Then late last year, investors began rushing back in, sending the Shanghai Composite zooming higher. The index surged nearly non-stop until June of this year, when it looked like the… Read More

If you’ve been watching late night television, you’ve surely come across many infomercials that tout the promise of real estate riches. Six-figure incomes are promised — on just one single-family home — with  the use of massive amounts of leverage. To hear the pitchmen, you can simply have the renters pay off the mortgage. It’s a persuasive argument, but one that falls apart in action. #-ad_banner-#My own experience buying single-family (SFR) houses started in 2002, and by 2006 I owned as many as six homes. I still own a few rentals after selling most just before the housing bubble burst,… Read More

If you’ve been watching late night television, you’ve surely come across many infomercials that tout the promise of real estate riches. Six-figure incomes are promised — on just one single-family home — with  the use of massive amounts of leverage. To hear the pitchmen, you can simply have the renters pay off the mortgage. It’s a persuasive argument, but one that falls apart in action. #-ad_banner-#My own experience buying single-family (SFR) houses started in 2002, and by 2006 I owned as many as six homes. I still own a few rentals after selling most just before the housing bubble burst, but in my experience, I found that real estate is far from passive income. Calls come in at all hours for repairs and the bookkeeping can be a part-time job itself. I now prefer a simpler way to invest in real estate:  real estate investment trusts (REITs). Until just a few years ago, REITs exclusively focused on commercial property. In 2013, new REITs were launched that focused on single-family properties. I’ve found one REIT in particular could be a perfect substitute for managing your own portfolio of houses. A Great Time To Get Your Start In This Popular Investment… Read More

As the market made new highs over the past six years, many companies could seemingly do no wrong. Investors rushed into highfliers as enthusiasm trumped reason, driving prices even higher.  When enthusiasm begins to crumble, though, as it has in the recent market sell-off, these investor favorites are typically some of the hardest hit. Luckily, due to their high levels of volatility, they can be even more profitable on the way down and offer a hedge against market weakness in your overall portfolio. To that end, one once-soaring stock –which boasts a valuation more than five times that… Read More

As the market made new highs over the past six years, many companies could seemingly do no wrong. Investors rushed into highfliers as enthusiasm trumped reason, driving prices even higher.  When enthusiasm begins to crumble, though, as it has in the recent market sell-off, these investor favorites are typically some of the hardest hit. Luckily, due to their high levels of volatility, they can be even more profitable on the way down and offer a hedge against market weakness in your overall portfolio. To that end, one once-soaring stock –which boasts a valuation more than five times that of the S&P 500 — may be headed for a big drop that traders can leverage into 25% profits. Shares of Under Armour (NYSE: UA) have rocketed more than 1,500% over the past six years as the apparel company posted strong growth, added new products such as footwear and accessories, and took market share from larger rivals. #-ad_banner-# After the huge run up, shares trade for an unbelievable 103 times trailing earnings. And there are numerous risks beyond its sky-high valuation. For starters, the company is aggressively expanding — both internationally and through new products like its line… Read More

Although many investors like to see companies spend their cash on dividends, internal investments and acquisitions, share buybacks  are an equally valid use of cash. In fact, when share prices are falling, such repurchases may actually be the best use of cash. To my mind, buybacks in tandem with dividends (what we here at StreetAuthority call “Total Yield”), underpins one of the most profitable opportunities in investing. #-ad_banner-#Get A Total Yield From Your Investments Some investors are no fan of buybacks. They note that repurchases made when a stock is trading near 52-week highs appear ill-timed. But the main… Read More

Although many investors like to see companies spend their cash on dividends, internal investments and acquisitions, share buybacks  are an equally valid use of cash. In fact, when share prices are falling, such repurchases may actually be the best use of cash. To my mind, buybacks in tandem with dividends (what we here at StreetAuthority call “Total Yield”), underpins one of the most profitable opportunities in investing. #-ad_banner-#Get A Total Yield From Your Investments Some investors are no fan of buybacks. They note that repurchases made when a stock is trading near 52-week highs appear ill-timed. But the main purpose of buybacks is to reduce shares outstanding, and that always leads to a direct increase in earnings per share. Even when share prices are high, share buybacks can benefit the company. Companies are not like individual investors which measure their returns on the price of stocks compared to the price when they purchased. While companies are under no obligation to complete their authorized buyback programs when the market hits a rough patch, repurchase programs are typically instituted with a multi-quarter time horizon, and companies rarely cease such programs out of fear when the market is falling. Moreover, a fixed… Read More