Last Tuesday, all eyes were on Federal Reserve Chief Janet Yellen. In prepared testimony, she offered a few hints that interest rate increases may begin this summer.   #-ad_banner-#While the crowd is thinking about rate hikes, few are thinking about U.S. interest rates heading lower, or possibly even turning negative.   The idea may seem absurd, but is it?   The notion of negative interest rates is surely controversial. Some analysts think the Fed would never let it happen, as the massive U.S. money market system would be unable to function efficiently and profitably in… Read More

Last Tuesday, all eyes were on Federal Reserve Chief Janet Yellen. In prepared testimony, she offered a few hints that interest rate increases may begin this summer.   #-ad_banner-#While the crowd is thinking about rate hikes, few are thinking about U.S. interest rates heading lower, or possibly even turning negative.   The idea may seem absurd, but is it?   The notion of negative interest rates is surely controversial. Some analysts think the Fed would never let it happen, as the massive U.S. money market system would be unable to function efficiently and profitably in a negative rate environment.   Then there’s the relative strength of the U.S. economy, which is seemingly strong enough to counter the need for more aggressive Fed actions. An alternative view: recessionary pressures from the soaring dollar and weak foreign economies could eventually prove powerful enough to force the Fed into more rate cuts.   Thanks to decade-high strength, the dollar is squeezing U.S. multinational firms as profits earned in weaker foreign currencies are worth substantially less in dollars. Thus, analysts see U.S. corporate profits only growing about 7% overall this earnings season, down from the 11% gain projected a… Read More

  Acquisitions can be a sure-fire way to supercharge growth. But when a major buyout attempt falls through, prospects for rapid expansion may suddenly look slim.   #-ad_banner-#At first glance, that may characterize the outlook for discount merchandiser Dollar General Corp. (NYSE: DG).   On further inspection, this retailer has ample room for organic growth. DG hoped to acquire rival Family Dollar Stores, Inc. (NYSE: FDO), but was outbid by Dollar Tree, Inc. (NASDAQ: DLTR). With the competitive landscape now altered, Dollar General now has further incentive to accelerate its growth plans.   Dollar Tree will be a pretty even… Read More

  Acquisitions can be a sure-fire way to supercharge growth. But when a major buyout attempt falls through, prospects for rapid expansion may suddenly look slim.   #-ad_banner-#At first glance, that may characterize the outlook for discount merchandiser Dollar General Corp. (NYSE: DG).   On further inspection, this retailer has ample room for organic growth. DG hoped to acquire rival Family Dollar Stores, Inc. (NYSE: FDO), but was outbid by Dollar Tree, Inc. (NASDAQ: DLTR). With the competitive landscape now altered, Dollar General now has further incentive to accelerate its growth plans.   Dollar Tree will be a pretty even match for Dollar General once the Family Dollar acquisition closes next month. At that point, Dollar Tree will have as many as 12,700 locations and annual revenue of about $18 billion, compared with a pro forma 11,700 stores and $18.5 billion in sales for Dollar General. This includes the roughly 300-to-500 stores Dollar Tree will have to divest to appease antitrust regulators.   But even without Family Dollar in the fold, Dollar General could eventually boost its store count by 14,000, more than doubling its current footprint. This expansion goal is feasible because smaller stores (the kind Dollar General typically… Read More

  In recent weeks, bullish optimism and a resilient market have given investors a bit of a reprieve from rising levels of volatility. But don’t get too comfortable. The next spike in volatility can arrive without notice. Here’s how you can invest in stocks with the least volatility.   The CBOE Volatility Index, also known as the fear index, or VIX, has been trending lower for most of the year. The VIX, which gauges expectations for stock market volatility in the next 30 days, is now only around 16 —… Read More

  In recent weeks, bullish optimism and a resilient market have given investors a bit of a reprieve from rising levels of volatility. But don’t get too comfortable. The next spike in volatility can arrive without notice. Here’s how you can invest in stocks with the least volatility.   The CBOE Volatility Index, also known as the fear index, or VIX, has been trending lower for most of the year. The VIX, which gauges expectations for stock market volatility in the next 30 days, is now only around 16 — 20% below the historical average of 20.   But 2015 is still young, and severe volatility could return as investors face potential shocks to the market. A shift in U.S. monetary policy or a potential Greek exit from the eurozone are just a few potential triggers for higher volatility.   #-ad_banner-#Though volatility has been largely absent from the market in the past few years, recall that it was a key theme in 2011, when the market fell nearly 20% as part of a summer swoon. The VIX reflected investor angst during that… Read More

  Some stocks are like elite athletes. They may come with some extraneous baggage, but they still warrant a sizeable investment because they perform at such a high level.   #-ad_banner-#Perhaps the best example of this: Monsanto Co. (NYSE: MON), the well-known agricultural biotechnology firm that has sparked a lot of controversy thanks to its aggressive marketing tactics in the agricultural sector.   It all started about 20 years ago when Monsanto introduced the first genetically modified or GMO seed, an herbicide-resistant soybean that enabled farmers to spray weed killers without damaging their soybean crop. Since then, Monsanto has gotten… Read More

  Some stocks are like elite athletes. They may come with some extraneous baggage, but they still warrant a sizeable investment because they perform at such a high level.   #-ad_banner-#Perhaps the best example of this: Monsanto Co. (NYSE: MON), the well-known agricultural biotechnology firm that has sparked a lot of controversy thanks to its aggressive marketing tactics in the agricultural sector.   It all started about 20 years ago when Monsanto introduced the first genetically modified or GMO seed, an herbicide-resistant soybean that enabled farmers to spray weed killers without damaging their soybean crop. Since then, Monsanto has gotten a lot of bad press and been involved in numerous lawsuits related to its genetically modified seeds, herbicides and pesticides.   That’s the baggage. But the fact remains that Monsanto’s products remain extremely popular with farmers. Otherwise, it wouldn’t be generating industry-leading sales and profits or delivering impressive stock returns. Consider the company’s performance over the past few years.   Monsanto Financial Performance 2011-2014   2011 2012 2013 2014 Growth Rate Revenue (in billions) $11.8  $13.5  $14.9  $15.9 10.5% Net income (in billions) $1.6  $2.1 $2.5  $2.7 19.1% Earnings per share  $2.96  $3.79 $4.60  $5.22 20.8% Dividends per… Read More

  Growth and income investors seeking stocks that perform well in all economic conditions are often quickly drawn to Public Storage (NYSE: PSA), a real estate investment trust that’s basically the king of self-storage facilities.   #-ad_banner-#Public Storage’s domain is expansive, comprising more than 2,000 properties in 38 states and Europe. Its $2.1 billion in annual revenue and $35-billion market value are tops among self-storage REITs. Eight dividend hikes in the past 10 years despite a recession also sets Public Storage apart, as does its whopping $5.60 a share payout and 165% stock price gain in the past five years. Read More

  Growth and income investors seeking stocks that perform well in all economic conditions are often quickly drawn to Public Storage (NYSE: PSA), a real estate investment trust that’s basically the king of self-storage facilities.   #-ad_banner-#Public Storage’s domain is expansive, comprising more than 2,000 properties in 38 states and Europe. Its $2.1 billion in annual revenue and $35-billion market value are tops among self-storage REITs. Eight dividend hikes in the past 10 years despite a recession also sets Public Storage apart, as does its whopping $5.60 a share payout and 165% stock price gain in the past five years.   Investors shouldn’t be too quick to settle solely on Public Storage, though. There are several other excellent self-storage REITs worth considering, both for diversification and as good or better yields.   My favorite is one most investors probably wouldn’t recognize right off the bat: Sovran Self Storage, Inc. (NYSE: SSS).   But those living in Sovran’s core markets of Florida, Texas and the Mid-Atlantic states may know the company better by its brand, Uncle Bob’s Self-Storage. Typically, an Uncle Bob’s is a large, modern-looking, multi-story facility with 24-hour access, sophisticated security systems and climate control, in keeping with current… Read More

  Steel stocks have fallen deeply out of favor with the group losing about 25% of its value over the past year, according to Morningstar. The industry’s biggest players, U.S. Steel Corp. (NYSE: X) and ArcelorMittal (NYSE: MT) have fallen 60% or more from their cyclical peaks.   For bargain hunters, a decline of this magnitude might be seen as an opportunity to hunt for deep values. You can’t blame investors for such a reaction.   We saw a similar pullback in energy stocks in recent months, yet many key energy stocks and ETFs have now made rapid rebounds from… Read More

  Steel stocks have fallen deeply out of favor with the group losing about 25% of its value over the past year, according to Morningstar. The industry’s biggest players, U.S. Steel Corp. (NYSE: X) and ArcelorMittal (NYSE: MT) have fallen 60% or more from their cyclical peaks.   For bargain hunters, a decline of this magnitude might be seen as an opportunity to hunt for deep values. You can’t blame investors for such a reaction.   We saw a similar pullback in energy stocks in recent months, yet many key energy stocks and ETFs have now made rapid rebounds from their recent lows. For example, the Energy Select Sector SPDR (NYSE: XLE), an ETF that provides broad exposure to energy stocks, has spiked almost 9% already after apparently hitting bottom a month ago.   However, I’m not so keen on a similar rebound in steel stocks or ETFs.   Steel and oil are subject to distinct economic variables. Many experts believe that energy prices will regain much of their lost value by next year, albeit with a high degree of near-term volatility. #-ad_banner-#However, there are a number of reasons why the steel industry could be a perilous value… Read More

  We expect the stock market to show occasional volatility, but even the staid bond market has been delivering some jolts recently.   #-ad_banner-#Rising bond price volatility reflects the growing concern about the timing, frequency and magnitude of upcoming interest rate hikes by the Federal Reserve. The risk of loss of principal has rarely been higher, especially for income investors that have boosted their exposure to high-yield corporate debt and other riskier types of bonds, in search of better returns.   With global political and economic turmoil apt to worsen, investors are understandably looking to the world’s leading money managers… Read More

  We expect the stock market to show occasional volatility, but even the staid bond market has been delivering some jolts recently.   #-ad_banner-#Rising bond price volatility reflects the growing concern about the timing, frequency and magnitude of upcoming interest rate hikes by the Federal Reserve. The risk of loss of principal has rarely been higher, especially for income investors that have boosted their exposure to high-yield corporate debt and other riskier types of bonds, in search of better returns.   With global political and economic turmoil apt to worsen, investors are understandably looking to the world’s leading money managers for insight into how best to navigate increasingly choppy markets. In the fixed-income arena, you might want to keep a close eye on 55-year-old Jeffrey Gundlach, CEO of Los Angeles-based DoubleLine Capital.   Gundlach is widely seen as the new “bond king,” replacing Bill Gross. That bond fund manager — and bond market prognosticator — had often been seen as the “Warren Buffett of bonds.” The passing of the torch to Gundlach occurred after Gross stepped down as chief investment officer of the Pacific Investment Management Company (PIMCO), a firm he co-founded in 1971.   DoubleLine, which Gundlach co-founded in… Read More

  The European Central Bank’s (ECB) recent announcement of a huge bond-buying program has made investors understandably giddy. The move could help jumpstart Europe’s flagging economy.   #-ad_banner-#Moreover, a similar program of so-called quantitative easing by the Federal Reserve was a major tailwind in the multi-year run-up of U.S. stocks to all-time highs. So investors are anticipating a similar effect on European stocks from ECB stimulus.   The impact on exchange-traded funds (ETFs) that invest in European stocks, bonds and commodities is already evident, as they are seeing record inflows. In January, these funds took in an all-time one-month high… Read More

  The European Central Bank’s (ECB) recent announcement of a huge bond-buying program has made investors understandably giddy. The move could help jumpstart Europe’s flagging economy.   #-ad_banner-#Moreover, a similar program of so-called quantitative easing by the Federal Reserve was a major tailwind in the multi-year run-up of U.S. stocks to all-time highs. So investors are anticipating a similar effect on European stocks from ECB stimulus.   The impact on exchange-traded funds (ETFs) that invest in European stocks, bonds and commodities is already evident, as they are seeing record inflows. In January, these funds took in an all-time one-month high of $13.7 billion, with the lion’s share going to equity-focused ETFs, according to BlackRock, Inc. (NYSE: BLK).   European stocks have risen nearly 5% thus far in 2015, based on the performance of the MSCI EAFE (Europe, Australasia and Far East) Index. In contrast, the S&P 500 is roughly flat thus far this year.   If you’re bullish on Europe, then there’s a key risk factor to consider before you dive in: the strong U.S. dollar. The greenback is at a 10-year high against a basket of foreign currencies, including the euro. For U.S. Read More

  Right around the time analysts gave up trying to predict the bottom for oil prices, the all-important commodity mounted a strong comeback.         In fact, oil’s recent reversal is leading to predictions that the commodity has finally bottomed and is poised for a “V-shaped recovery,” which means it could rise so fast that its price chart forms the letter V.   What’s more, many asset managers have started to say it’s safe to go back into oil stocks and, in some cases, are forecasting such stocks will be 2015’s best investments.   Those are… Read More

  Right around the time analysts gave up trying to predict the bottom for oil prices, the all-important commodity mounted a strong comeback.         In fact, oil’s recent reversal is leading to predictions that the commodity has finally bottomed and is poised for a “V-shaped recovery,” which means it could rise so fast that its price chart forms the letter V.   What’s more, many asset managers have started to say it’s safe to go back into oil stocks and, in some cases, are forecasting such stocks will be 2015’s best investments.   Those are bold claims, and they could be right. But I doubt it.   #-ad_banner-#Simply put, the fundamentals behind the bear market in oil haven’t changed much: there are still too many factors that could weigh on oil prices in coming months. Indeed, there are at least four reasons why it’s probably far too soon to call a bottom in oil and why prices could still set new lows before heading consistently higher.   1. Production Far Outpaces Demand Plunging oil is prompting many U.S. energy firms to cut output. Oilfield services firm Baker Hughes, Inc. (NYSE: BHI) notes that during the… Read More

  When gauging market sentiment about a company, don’t bother spending hours on reading and research. Just look at its stock chart.   Right now, the market has been shunning shares of the world’s largest online travel agency, Priceline Group, Inc. (Nasdaq: PCLN). It has slumped 25% since peaking in March 2014, signifying a move into its own bear market.   Clearly, after many years of exceptional growth, Priceline has fallen out of favor.   #-ad_banner-#Several factors explain the current bearishness, including currency headwinds. Priceline generates 87% of its revenue outside the United States, with 60% coming… Read More

  When gauging market sentiment about a company, don’t bother spending hours on reading and research. Just look at its stock chart.   Right now, the market has been shunning shares of the world’s largest online travel agency, Priceline Group, Inc. (Nasdaq: PCLN). It has slumped 25% since peaking in March 2014, signifying a move into its own bear market.   Clearly, after many years of exceptional growth, Priceline has fallen out of favor.   #-ad_banner-#Several factors explain the current bearishness, including currency headwinds. Priceline generates 87% of its revenue outside the United States, with 60% coming from Europe alone. The company’s detractors figure the strong dollar is sure to create a big drag on profits, especially with central bank stimulus in Europe positioning the dollar for even greater gains against the euro.   Priceline bears are also concerned that global economic weakness will hinder travel-related spending by foreign consumers. And they point to Priceline’s sales and marketing outlays, arguing that these costs have risen much too quickly for the firm to maintain strong margins.   These are valid concerns.   However, I believe the market has overreacted to them and the stock is now an unusually… Read More