In the most recent weekly survey conducted by the American Association of Individual Investors, investor sentiment is at a multi-year low, thanks to soft first-quarter economic and earnings data. Sentiment may worsen even further if predictions of a weaker-than-expected second quarter prove accurate. With the mood souring, a bullish outlook might seem out of touch, especially coming from an economically sensitive industry like truck manufacturing. But I certainly wouldn’t characterize management at commercial truck maker Paccar, Inc. (Nasdaq: PCAR) as out of touch. In fact, they are very bullish. And why not? The nation’s second-largest producer of heavy-duty trucks (mainly… Read More

In the most recent weekly survey conducted by the American Association of Individual Investors, investor sentiment is at a multi-year low, thanks to soft first-quarter economic and earnings data. Sentiment may worsen even further if predictions of a weaker-than-expected second quarter prove accurate. With the mood souring, a bullish outlook might seem out of touch, especially coming from an economically sensitive industry like truck manufacturing. But I certainly wouldn’t characterize management at commercial truck maker Paccar, Inc. (Nasdaq: PCAR) as out of touch. In fact, they are very bullish. And why not? The nation’s second-largest producer of heavy-duty trucks (mainly the class 8 “big rigs” it sells under the well-known Kenworth and Peterbilt brands) has seen a robust rebound in sales trends in recent years. Sales approached $19 billion in 2014,  more than double the recession low of $8 billion and an all-time company record. Paccar is off to strong start this year. During the Q1 conference call in April, management reported sales and earnings that handily beat estimates. They also raised their full-year estimate for industrywide class 8 truck sales in the United States and Canada to 260,000-to-290,000 units, versus an earlier projection for unit sales of 250,000-to-280,000. That… Read More

#-ad_banner-#For some investors, the current bull market has dubious underpinnings. That’s because “financial engineering,” where firms pour cash into oversized share repurchase and dividend payment programs, are creating an artificial boost to core growth rates. Yet such moves often means sacrificing equipment upgrades, product development and other crucial long-term investments. Sooner or later, firms that underinvest in their businesses risk serious underperformance. That’s why I seek innovators with a demonstrated commitment to research and development. These firms tend to display the solid, consistent organic growth necessary to evolve into an Apple, Inc. (Nasdaq: AAPL) or 3M Co. (NYSE:… Read More

#-ad_banner-#For some investors, the current bull market has dubious underpinnings. That’s because “financial engineering,” where firms pour cash into oversized share repurchase and dividend payment programs, are creating an artificial boost to core growth rates. Yet such moves often means sacrificing equipment upgrades, product development and other crucial long-term investments. Sooner or later, firms that underinvest in their businesses risk serious underperformance. That’s why I seek innovators with a demonstrated commitment to research and development. These firms tend to display the solid, consistent organic growth necessary to evolve into an Apple, Inc. (Nasdaq: AAPL) or 3M Co. (NYSE: MMM). Along with these stalwarts, one of my favorite firms using R&D to generate strong organic growth is Autoliv, Inc. (NYSE: ALV), a mid-size auto safety products maker with annual sales of $9.1 billion. Autoliv doesn’t neglect dividends and share repurchases, but keeps such efforts in check. At this firm, innovation is a top priority, which has been rewarded by investors with a nearly 100% gain during the past three years, far outpacing the S&P 500’s roughly 50% gain. Founded more than six decades ago, Sweden’s Autoliv is the leading provider of “passive” auto safety products… Read More

Later this year, there will be a rare passing of the demographic baton, as millennials surpass the baby boomers as the nation’s largest living generation. Millennials are those born from 1981 to 1997, while the baby boomer generation arose from 1946 to 1964. By year end, there will be more than 75 million millennials and just under 75 million baby boomers, according to projections by the Pew Research Center, a Washington, DC-based think tank. Moreover, that gap will widen over time, thanks to immigration and an eventual reduction in the number of baby boomers. For investors,… Read More

Later this year, there will be a rare passing of the demographic baton, as millennials surpass the baby boomers as the nation’s largest living generation. Millennials are those born from 1981 to 1997, while the baby boomer generation arose from 1946 to 1964. By year end, there will be more than 75 million millennials and just under 75 million baby boomers, according to projections by the Pew Research Center, a Washington, DC-based think tank. Moreover, that gap will widen over time, thanks to immigration and an eventual reduction in the number of baby boomers. For investors, the implications are clear: Millennials are set to become the nation’s main growth engine, taking over the role baby boomers began to assume in the mid-1960s. To be sure, millennials face their share of obstacles to prosperity such as a tepid economy, somewhat gloomy job prospects and, in many cases, heavy student loan debt. But they have two powerful factors in their favor: the sheer size of their generation and the U.S. economy’s renowned resilience. Together, these factors should translate to progressively greater spending power, which sooner or later, will rival that of the baby boomers. That backdrop warrants a… Read More

Investors hoping Avon Products Inc. (NYSE: AVP) will stage a big turnaround probably shouldn’t hold their breath. After numerous failed attempts to boost its faltering business, the iconic cosmetics marketer may well be a lost cause. Current media reports about a possible sale of the legacy North American segment are a clear sign of how a once-great company has fallen. Rather than risk an investment in Avon, investors should consider a lesser-known, but far more promising, beauty products retailer: Ulta Salon Cosmetics & Fragrances, Inc. (Nasdaq: ULTA). Founded in 1990, more than a century after Avon, Ulta is seen by… Read More

Investors hoping Avon Products Inc. (NYSE: AVP) will stage a big turnaround probably shouldn’t hold their breath. After numerous failed attempts to boost its faltering business, the iconic cosmetics marketer may well be a lost cause. Current media reports about a possible sale of the legacy North American segment are a clear sign of how a once-great company has fallen. Rather than risk an investment in Avon, investors should consider a lesser-known, but far more promising, beauty products retailer: Ulta Salon Cosmetics & Fragrances, Inc. (Nasdaq: ULTA). Founded in 1990, more than a century after Avon, Ulta is seen by some analysts as the most exciting growth stock in the beauty products industry. During the past three years, annual sales climbed more than 80% to $3.2 billion, net income roughly doubled to $257 million and free cash flow swelled to an all-time high of $148 million. Shares of Ulta rose roughly 70%, well outpacing the broader market. Whereas Avon is built upon a direct sales business model, Ulta takes a more traditional route. Since its founding, the company has established 774 company-owned “big box” retail outlets in 47 states, with plans to open many more in the coming… Read More

Bear markets are painful but necessary. They rid the market of the “irrational exuberance” that fuels asset bubbles and allows stock pickers to better separate the wheat from the chaff. Bear markets can also take place in specific sectors, as is happening right now in the energy market.  Yet in such lean times, the best companies can actually turn headwinds into tailwinds. That’s exactly what’s happening at Helmerich & Payne, Inc. (NYSE: HP). #-ad_banner-#H&P owns and operates one of the world’s largest fleets of drilling rigs (primarily land-based). The rigs are typically contracted out to exploration and production companies looking… Read More

Bear markets are painful but necessary. They rid the market of the “irrational exuberance” that fuels asset bubbles and allows stock pickers to better separate the wheat from the chaff. Bear markets can also take place in specific sectors, as is happening right now in the energy market.  Yet in such lean times, the best companies can actually turn headwinds into tailwinds. That’s exactly what’s happening at Helmerich & Payne, Inc. (NYSE: HP). #-ad_banner-#H&P owns and operates one of the world’s largest fleets of drilling rigs (primarily land-based). The rigs are typically contracted out to exploration and production companies looking to extract oil and gas from various shale formations in the United States. Like the rest of the sector, H&P is beginning to feel the effects of low energy prices. In its recent earnings report, the company saw a 1% decline in revenue to $883 million and 14% drop in net income to $150 million. Underlying these declines were shrinking active rig counts and falling dayrates, the daily amount H&P can charge for the use of its rigs. There was also a huge drop in utilization, or the percentage of active rigs contracted out. In Q2, utilization was just 68%,… Read More

Wall Street tends to take a binary view of even well-seasoned companies: Love ’em or hate ’em. Right now, the Street is overreacting to some snags at one of the world’s leading financial services firms, American Express Co. (NYSE: AXP).  In 2015, American Express is the Dow Jones Industrial Average’s worst performer, falling more than 16%.    Shares have weakened due to the company’s susceptibility to the strong dollar. Like other large multinationals, AXP generates substantial profits in foreign currencies. With the greenback at an 11-year high, those profits lose significant value when exchanged back to dollars. The market reacted… Read More

Wall Street tends to take a binary view of even well-seasoned companies: Love ’em or hate ’em. Right now, the Street is overreacting to some snags at one of the world’s leading financial services firms, American Express Co. (NYSE: AXP).  In 2015, American Express is the Dow Jones Industrial Average’s worst performer, falling more than 16%.    Shares have weakened due to the company’s susceptibility to the strong dollar. Like other large multinationals, AXP generates substantial profits in foreign currencies. With the greenback at an 11-year high, those profits lose significant value when exchanged back to dollars. The market reacted very harshly to an announcement in February regarding the loss of an exclusive 16-year co-branding agreement with Costco Wholesale Corp. (Nasdaq: COST), a relationship that accounts for 10% of all American Express cards in use.  American Express decided to walk away from the agreement, which ends next April, because the two companies couldn’t negotiate a mutually satisfactory fee arrangement. Costco plans to replace AXP with Citigroup, Inc. (NYSE: C) and Visa, Inc. (NYSE: V). The recent loss of a similar, though much smaller, relationship with budget airliner JetBlue Airways Corp. (Nasdaq: JBLU) hasn’t helped investor sentiment either. Adding insult, American… Read More

In college, I had an eccentric statistics professor who was fond of a quote by the famous American poet Henry Wadsworth Longfellow: “Into each life some rain must fall.” My professor repeated this often, especially when passing out test scores. Were he alive today, he’d probably have the same thing to say about any number of once-amazing growth companies that finally hit a wall. One such example is the well-known fast-casual café and bakery chain Panera Bread Co. (Nasdaq: PNRA). Panera was virtually unstoppable for years, adding hundreds of locations, posting superior growth in comparable-store sales (“comps”) and delivering very… Read More

In college, I had an eccentric statistics professor who was fond of a quote by the famous American poet Henry Wadsworth Longfellow: “Into each life some rain must fall.” My professor repeated this often, especially when passing out test scores. Were he alive today, he’d probably have the same thing to say about any number of once-amazing growth companies that finally hit a wall. One such example is the well-known fast-casual café and bakery chain Panera Bread Co. (Nasdaq: PNRA). Panera was virtually unstoppable for years, adding hundreds of locations, posting superior growth in comparable-store sales (“comps”) and delivering very impressive profits. From the end of 2007 through May 2013, the firm’s stock shot up 429%. But it hasn’t been the same since. After topping out at about $193 a share, Panera encountered heavy turbulence. Two years and a couple gut-wrenching rollercoaster rides later, the stock sits about 4% short of its all-time high. So what happened? For one thing, top line growth has slowed. After rocketing 25% annually from 2007 through 2013, sales growth sharply decelerated to the current 6%-to-7% pace. Profits declined about 3% last year and further drops are a distinct possibility this year. A… Read More

More than three years have passed since the last official stock market correction (entailing a pullback of at least 10%). But deep selloffs have intermittently struck in just about every corner of the market, sometimes producing phenomenal buying opportunities. One of the best: iconic firearms maker Smith & Wesson Holding Corp. (Nasdaq: SWHC). Smith & Wesson was a casualty of the “gun bubble” that popped almost a year ago, triggering a selloff in gun-industry stocks that nearly halved the company’s market value. While asset bubbles are often a function of euphoria, fear was the initial positive catalyst in this case. Read More

More than three years have passed since the last official stock market correction (entailing a pullback of at least 10%). But deep selloffs have intermittently struck in just about every corner of the market, sometimes producing phenomenal buying opportunities. One of the best: iconic firearms maker Smith & Wesson Holding Corp. (Nasdaq: SWHC). Smith & Wesson was a casualty of the “gun bubble” that popped almost a year ago, triggering a selloff in gun-industry stocks that nearly halved the company’s market value. While asset bubbles are often a function of euphoria, fear was the initial positive catalyst in this case. Many feared that the Obama administration would make firearms harder to obtain, which supported rapid growth of gun sales and massive gains for firearm stocks in recent years. At Smith & Wesson, sales more than doubled to a record $627 million in fiscal (April) 2014 from $237 million in 2007 (the year before Obama took office). Between his January 2009 inauguration and May 2014, the firm’s stock rose more than sixfold. But gun demand finally crashed, sinking Smith & Wesson’s sales, profits and stock price along with it. However, the company is in the midst of an impressive turnaround in… Read More

Sometimes, nothing improves a company’s outlook like a smart, well-timed acquisition. When done right, these deals can transform companies with unexciting prospects into compelling growth stories. Mid-size defense firm Harris Corp. (NYSE: HRS) is set to make such a transformation this summer, when its $4.8-billion buyout of industry peer Exelis, Inc. (NYSE: XLS) is scheduled to close. Harris, known for secure tactical radio communication systems, wasn’t in trouble before the deal announcement, but it certainly wasn’t in expansion mode, either. By fiscal (June) 2014, annual sales had actually returned to the recession level of about $5 billion, despite a brief… Read More

Sometimes, nothing improves a company’s outlook like a smart, well-timed acquisition. When done right, these deals can transform companies with unexciting prospects into compelling growth stories. Mid-size defense firm Harris Corp. (NYSE: HRS) is set to make such a transformation this summer, when its $4.8-billion buyout of industry peer Exelis, Inc. (NYSE: XLS) is scheduled to close. Harris, known for secure tactical radio communication systems, wasn’t in trouble before the deal announcement, but it certainly wasn’t in expansion mode, either. By fiscal (June) 2014, annual sales had actually returned to the recession level of about $5 billion, despite a brief spike to nearly $6 billion a few years earlier. Earnings per share of $4.95 in 2014  weren’t much better than 2010 and 2011’s totals of $4.28 and $4.60, respectively. Harris has been a good dividend source, more than doubling its payout since 2010. If not for that, the stock probably wouldn’t have been able to deliver solid gains over the past five years. In all likelihood, shares were driven up mainly by income investors seeking higher yields than were typically available in bonds. To avoid shedding market value as the Federal Reserve raises interest rates, Harris will need… Read More

Although new consumer technologies can capture a great deal of buzz, they are often just the tip of the tech iceberg. Many of the sector’s most lucrative developments occur completely behind the scenes. For instance, many investors are unaware of the groundbreaking advances being made in machine vision systems. These relatively new, camera-based technologies essentially endow robots with the superhuman vision necessary for high-speed manufacturing, often with extremely small components. Coupled with the appropriate software, the technology enables robots to identify, assemble and inspect products far too fast for the human eye to follow. The development of machine vision systems… Read More

Although new consumer technologies can capture a great deal of buzz, they are often just the tip of the tech iceberg. Many of the sector’s most lucrative developments occur completely behind the scenes. For instance, many investors are unaware of the groundbreaking advances being made in machine vision systems. These relatively new, camera-based technologies essentially endow robots with the superhuman vision necessary for high-speed manufacturing, often with extremely small components. Coupled with the appropriate software, the technology enables robots to identify, assemble and inspect products far too fast for the human eye to follow. The development of machine vision systems began more than half a century ago, but has only taken off in the past decade or so. In 2005, it was a $1.3 billion industry. Since then, machine vision has ballooned into a $4.5 billion market and is projected to more than double to $9.5 billion by 2020. The best way to play the trend: Cognex Corp. (Nasdaq: CGNX). Shares of this technology leader have posted robust gains and still have plenty of room left to run. Founded in 1981, Cognex sells machine vision systems that facilitate the production of cars, mobile devices, drugs and packaged foods,… Read More