Although the housing market activity has shown periodic signs of life, we’re still awaiting a more vigorous and sustained rebound. Yet a glimpse of recent trends brings fresh hope. Real estate information firm RealtyTrac reported the resurgence of a once-popular trend: house flipping. Buyers that seek to purchase a home, fix it and sell it for a quick profit, are once again making money. Last year, the average gross profit from flipping a property was $72,400, the highest figure since 2011. The news has largely escaped media attention, but it is an important vital sign for the industry. You see,… Read More

Although the housing market activity has shown periodic signs of life, we’re still awaiting a more vigorous and sustained rebound. Yet a glimpse of recent trends brings fresh hope. Real estate information firm RealtyTrac reported the resurgence of a once-popular trend: house flipping. Buyers that seek to purchase a home, fix it and sell it for a quick profit, are once again making money. Last year, the average gross profit from flipping a property was $72,400, the highest figure since 2011. The news has largely escaped media attention, but it is an important vital sign for the industry. You see, flipping helps boost the supply of available homes, which in turn draws more buyers. In 2015, the average gross margin on house flipping has increased above 40%, with many major cities posting gross profitability on flips of 50% and higher. Pending home sales in April were up an impressive 14% from a year ago, which bodes well for the rest of the year. Pending sales are a leading indicator and the return of flipping can mean multiple sales in a year for the same property. While the recovery will help boost players in the sector, one company is set to… Read More

Although large American firms were able to post a strong rebound in sales after the financial crisis, top-line growth for many firms has recently slowed considerably. More rapid profit gains are partially attributable to rock-bottom interest rates, which have helped lower interest expenses.  In the new paradigm of low sales growth, companies are cutting costs and seeking to increase operating efficiency. The trend has provided a strong tailwind for companies in business outsourcing services as corporations look to outsource jobs that can be handled more cheaply by someone else. Research firm IDC estimates sales growth for the industry… Read More

Although large American firms were able to post a strong rebound in sales after the financial crisis, top-line growth for many firms has recently slowed considerably. More rapid profit gains are partially attributable to rock-bottom interest rates, which have helped lower interest expenses.  In the new paradigm of low sales growth, companies are cutting costs and seeking to increase operating efficiency. The trend has provided a strong tailwind for companies in business outsourcing services as corporations look to outsource jobs that can be handled more cheaply by someone else. Research firm IDC estimates sales growth for the industry at a compound annual rate of 5.6%, to $209 billion, over the five years through 2017. In fact, shares of Automatic Data Processing, Inc. (Nasdaq: ADP), have surged 45% over the last two years. There is strong demand for the payroll services of this outsourcing market leader, which is reflected in strong investor sentiment. #-ad_banner-#With a market capitalization of roughly $40 billion, twice the size of the next largest competitor, ADP dominates business payroll services and holds nearly 7% of global market share with 2014 revenue of $12.2 billion. However, ADP is almost entirely focused in payroll management, where IDC… Read More

As the S&P 500 delivered a 19.7% annualized gain over the past six years, talk of a market bubble has emerged. Concerns of a bubble in prices are not just being voiced by perma-bears like Nouriel Roubini and “Dr. Doom” Marc Faber. Nobel laureate Robert Shiller also recently questioned asset prices in the second edition of his book, “Irrational Exuberance.” For many investors, it’s tempting to think about locking in gains. While bull markets last an average 3.8 years, this one is already more than 50% longer. Selling stocks around their October 2007 highs would have protected a 119% gain… Read More

As the S&P 500 delivered a 19.7% annualized gain over the past six years, talk of a market bubble has emerged. Concerns of a bubble in prices are not just being voiced by perma-bears like Nouriel Roubini and “Dr. Doom” Marc Faber. Nobel laureate Robert Shiller also recently questioned asset prices in the second edition of his book, “Irrational Exuberance.” For many investors, it’s tempting to think about locking in gains. While bull markets last an average 3.8 years, this one is already more than 50% longer. Selling stocks around their October 2007 highs would have protected a 119% gain since the 2002 low and avoided a 55% plunge in prices to 2009. Where’s The Next Market Bubble? Trying to perfectly time the eventual correction would be a folly, but investors can start taking profits in bubbly assets while positioning in less expensive investments. Citigroup Research recently published a report, “It’s Bubble Time,” that measured valuations in the market and across sectors. The report found four themes that are driving bubbles in different assets and investments. #-ad_banner-#First, they note the story of a “new normal” where low economic growth, inflation and interest rates continue to drive bond prices higher even… Read More

Turns in investor sentiment can make you double- and even triple-digit gains if you are early enough. The risk is being too early. The wait can be excruciating — and costly.  Just ask gold bugs.  Historic money printing by the largest central banks should have stoked inflation, deflating currencies and sending gold prices higher. And the 30% plunge in gold prices in 2013 should have led to production cuts and greater demand. Yet, gold prices have gone nowhere since the beginning of 2014. The wait for gold to rebound has led to big losses for many. SPDR Gold… Read More

Turns in investor sentiment can make you double- and even triple-digit gains if you are early enough. The risk is being too early. The wait can be excruciating — and costly.  Just ask gold bugs.  Historic money printing by the largest central banks should have stoked inflation, deflating currencies and sending gold prices higher. And the 30% plunge in gold prices in 2013 should have led to production cuts and greater demand. Yet, gold prices have gone nowhere since the beginning of 2014. The wait for gold to rebound has led to big losses for many. SPDR Gold Shares (NYSE: GLD) is nearly 11% off its 52-week highs, and the Market Vectors Gold Miners ETF (NYSE: GDX) is down 29% from its highs of the past year. #-ad_banner-# But for the leader in the space, this year may be a turning point. Better still, we can make double-digit returns even if the stock goes nowhere. Where are the Gold Bugs Now? Relative to the fervor for gold over the past several years, it seems you hardly hear pundits talk of the… Read More

The initial public offering class of 2014 was surely an elite group. 275 companies raised a combined $85 billion, the highest amount since 2000. High-profile companies such as Alibaba Group Holding Ltd. (NYSE: BABA) led the pack, scoring a sharp 38% first-day gain. Yet other notable IPOs that managed to generate impressive first-day gains eventually fell out of favor. Roughly six months ago, I cautioned against chasing shares of LendingClub Corp. (NYSE: LC), after shares had surged roughly 60% from the IPO price. “Investors may want to consider waiting for a better entry point as enthusiasm wanes,” I noted then. Read More

The initial public offering class of 2014 was surely an elite group. 275 companies raised a combined $85 billion, the highest amount since 2000. High-profile companies such as Alibaba Group Holding Ltd. (NYSE: BABA) led the pack, scoring a sharp 38% first-day gain. Yet other notable IPOs that managed to generate impressive first-day gains eventually fell out of favor. Roughly six months ago, I cautioned against chasing shares of LendingClub Corp. (NYSE: LC), after shares had surged roughly 60% from the IPO price. “Investors may want to consider waiting for a better entry point as enthusiasm wanes,” I noted then. Still, I have been keeping a close eye on the shares, as this banking game-changer held vast long-term potential. Although the stock has fallen nearly 40% from its post-IPO high, several deals subsequently signed with powerhouses like Google, Inc. (Nasdaq: GOOG) and Alibaba should boost growth over the next several years. Revenue is already expected to grow 85% this year and the company’s industry — peer-to-peer lending — is projected to grow 40% a year for the next decade. The Future Of Banking Is Online Peer lending has gone from being an internet curiosity to… Read More

Scientists and environmentalists have been talking about climate change for more than a decade, but the topic has thus far had minimal impact on our daily lives.   That is until the last few years, as an historic drought has spread across most of California. More than two-thirds of the state is in “extreme” drought conditions as it enters its fourth year of low rainfall. Regulators have recently instituted the first-ever mandatory cuts to water usage for residential and commercial customers. The problem may not be California’s alone. Elsewhere in the United States, and around the globe, water crises have… Read More

Scientists and environmentalists have been talking about climate change for more than a decade, but the topic has thus far had minimal impact on our daily lives.   That is until the last few years, as an historic drought has spread across most of California. More than two-thirds of the state is in “extreme” drought conditions as it enters its fourth year of low rainfall. Regulators have recently instituted the first-ever mandatory cuts to water usage for residential and commercial customers. The problem may not be California’s alone. Elsewhere in the United States, and around the globe, water crises have begun to emerge with increasing frequency. Might we all be subject to wide-scale water rationing one day? Even if we don’t experience the nightmare desert scenes portrayed in so many post-apocalyptic movies, we will surely need more efficient monitoring and treatment of our water resources in the future. Depleting water resources could mean huge sales for two companies in particular. Is California The Future For Everyone? California’s historic drought has led to the state’s first ever mandatory water conservation law. One of the state’s 10 largest reservoirs, the New Melones, may be dry by this fall and nine reservoirs are… Read More

Even great companies can see their stock prices sink on short-term factors and negative headlines. If you want to outperform the market, then you have to be ready to avoid these near-term catalysts, take profits and wait to take advantage of lower prices down the road. I warned investors in late 2013 that one such company could be hit by the outcry for higher wages despite a strong business model and an excellent brand. Within a month of the article, shares were 20% lower. Since then, however, the share price has jumped 45% in about 18 months. Now that very… Read More

Even great companies can see their stock prices sink on short-term factors and negative headlines. If you want to outperform the market, then you have to be ready to avoid these near-term catalysts, take profits and wait to take advantage of lower prices down the road. I warned investors in late 2013 that one such company could be hit by the outcry for higher wages despite a strong business model and an excellent brand. Within a month of the article, shares were 20% lower. Since then, however, the share price has jumped 45% in about 18 months. Now that very same stock could be facing near-term catalysts to the downside. Another plunge in the shares could offer another great buying opportunity or it could wipe out all of your returns if you don’t take profits beforehand. This Company Is Juiced For Profits Jamba, Inc. (Nasdaq: JMBA), based in California, is the top retailer of the growing freshly-squeezed juice and smoothie market, with 100 million annual visitors to its 862 Jamba Juice stores. The company rolled out four grocery products to 300 stores in California through the last quarter of 2014 and plans on a national… Read More

More than a year after it was first proposed, the $45 billion  merger between Comcast Corp. (Nasdaq: CMCSA) and Time Warner Cable, Inc. (NYSE: TWC) was canceled last month. The deal would have been the answer to an aging cable communications industry, creating a giant with sufficient scale to withstand the slow decline of cable and satellite subscriptions. It turns out, the giant may have been too large for regulators to allow, and Comcast pulled its bid before Washington could kill it. #-ad_banner-#But it won’t stop the wave of industry consolidation. That’s because of rising competition from firms like Netflix,… Read More

More than a year after it was first proposed, the $45 billion  merger between Comcast Corp. (Nasdaq: CMCSA) and Time Warner Cable, Inc. (NYSE: TWC) was canceled last month. The deal would have been the answer to an aging cable communications industry, creating a giant with sufficient scale to withstand the slow decline of cable and satellite subscriptions. It turns out, the giant may have been too large for regulators to allow, and Comcast pulled its bid before Washington could kill it. #-ad_banner-#But it won’t stop the wave of industry consolidation. That’s because of rising competition from firms like Netflix, Inc. (Nasdaq: NFLX) and others, which has led to a 13% drop in live television viewership over the past year, according to Nomura Research.   Broadband Is The Future Of The Industry Regulators made it no secret that control over the broadband market was a big factor in their expected disapproval of the proposed Comcast-TWC deal. Comcast served 21 million internet customers and TWC had 11.4 million customers at the end of the first quarter. The combined entity  would have controlled 55% of the domestic broadband market, along with 30% of the cable TV market. (Though analysts had been comparing… Read More

#-ad_banner-#As countless companies have noted on recent conference calls, the surging U.S. dollar is creating a strong challenge for U.S.-based multinationals. It has risen roughly 12% against the euro since the fourth quarter of 2013. Companies with strong revenue overseas post lower sales when the foreign currencies they are holding are translated into dollars (i.e. it takes more of the currency to equal one dollar). Of the 11 companies in the Dow 30 that break out revenue from Europe, eight reported a year-over-year decline in fourth quarter sales, thanks to currency impact. Adding insult, foreign rivals are having an easier… Read More

#-ad_banner-#As countless companies have noted on recent conference calls, the surging U.S. dollar is creating a strong challenge for U.S.-based multinationals. It has risen roughly 12% against the euro since the fourth quarter of 2013. Companies with strong revenue overseas post lower sales when the foreign currencies they are holding are translated into dollars (i.e. it takes more of the currency to equal one dollar). Of the 11 companies in the Dow 30 that break out revenue from Europe, eight reported a year-over-year decline in fourth quarter sales, thanks to currency impact. Adding insult, foreign rivals are having an easier time selling goods and services in the United States, thanks to their weaker currencies. The bad news continues: among the 105 companies that warned the market of disappointing earnings ahead of the official Q1 release, 69 of them pointed to the stronger dollar as a key factor. As this chart shows, a rising number of U.S. companies have deep exposure to foreign markets.  A simple way to gauge the dollar fallout: Companies that derived 90% of their revenue from within the United States saw shares jump by 13% (in the six months ended February 2015), according to research… Read More

Spotting emerging trends in the market is the best way I have found to make oversized returns in equities. By getting ahead of market sentiment for a particular sector, idea or theme, you can take advantage of the herd mentality without being part of the herd. This quarter, and potentially for much of the year, I am looking for two major themes to develop.  The first is a cooling or even reversal of the U.S. dollar’s rally, which began in force late last year and continued through March.  The second theme, which is indirectly related to the first, is a… Read More

Spotting emerging trends in the market is the best way I have found to make oversized returns in equities. By getting ahead of market sentiment for a particular sector, idea or theme, you can take advantage of the herd mentality without being part of the herd. This quarter, and potentially for much of the year, I am looking for two major themes to develop.  The first is a cooling or even reversal of the U.S. dollar’s rally, which began in force late last year and continued through March.  The second theme, which is indirectly related to the first, is a stabilization of oil prices and improved sentiment in the space. Oil prices have bounced off their March lows, and near-term catalysts could help support them and bring investors back into the space. If even one of these two themes plays out, it could mean strong upside for today’s pick. If both themes develop, as they should, it could mean up to 56% returns for traders. Oil’s Rebound and Europe’s Turn for Growth The European Central Bank (ECB) was slow to adopt quantitative easing, the kind of bond-buying program that spurred growth in the United States, instead opting for… Read More