The notion of a wide moat around your castle has been around for centuries. The early moats were designed to repel rivals and prevent them from invading and conquering. Today’s moats also keep rivals at bay. Companies that have built a solid moat around their business, limiting the threat of competition and price wars to some degree, tend to garner higher valuations from investors. How do we know that? Because the Market Vectors Wide Moat ETF (NYSE: MOAT) exchange-traded fund (ETF), which debuted in April 2012, is handily outperforming its benchmark, the S&P 500 Index. The question for… Read More

The notion of a wide moat around your castle has been around for centuries. The early moats were designed to repel rivals and prevent them from invading and conquering. Today’s moats also keep rivals at bay. Companies that have built a solid moat around their business, limiting the threat of competition and price wars to some degree, tend to garner higher valuations from investors. How do we know that? Because the Market Vectors Wide Moat ETF (NYSE: MOAT) exchange-traded fund (ETF), which debuted in April 2012, is handily outperforming its benchmark, the S&P 500 Index. The question for investors: Is it better to own this fund, or to try to find your own companies with solid moats? To answer this, let’s first look at how this ETF is constructed. Deep Concentration Unlike many ETFs that own a tiny slice of hundreds of companies, this ETF has a roughly 5% weighting in just 20 companies. In the portfolio, you’ll find household names such as Coca-Cola (NYSE: KO), Cisco Systems (Nasdaq: CSCO), eBay (Nasdaq: EBAY) and Bank of New York (NYSE: BNY). It’s immediately clear why companies like Cisco or eBay get the nod as they possess the products… Read More

During bull markets, Wall Street traders like to “buy the dips.” This mantra was the order of the day, literally, when I was a hedge fund trader during the tech bull of the 1990s. Over the past year, the buy-the-dip philosophy has served traders well, as stocks have largely rebounded from every minor incursion into the red.#-ad_banner-#​ Now, however, the market is experiencing much more than mere dips. Today, we are getting something akin to “air pockets,” meaning we are seeing some very sharp sell-offs in stocks in reaction to the news. The latest of these… Read More

During bull markets, Wall Street traders like to “buy the dips.” This mantra was the order of the day, literally, when I was a hedge fund trader during the tech bull of the 1990s. Over the past year, the buy-the-dip philosophy has served traders well, as stocks have largely rebounded from every minor incursion into the red.#-ad_banner-#​ Now, however, the market is experiencing much more than mere dips. Today, we are getting something akin to “air pockets,” meaning we are seeing some very sharp sell-offs in stocks in reaction to the news. The latest of these air pockets came during Wednesday’s trading, as the market dropped sharply on the Federal Open Market Committee’s release of its October policy statement before rebounding off the session lows. The culprit here was fear that the Federal Reserve still hadn’t ruled out the possibility of a December tapering of its current $85 billion-a-month bond-buying program. Basically, I think traders got a little too complacent over the prospect of the Fed holding off tapering until 2014. The possibility, however remote, of a taper in December caused some skittish money to cash in. Still, there are a lot of underinvested money managers… Read More

Shorting the yen and going long Japanese stocks have basically been no-brainer investments for the past couple of years. That’s especially true when you consider there’s an exchange-traded fund (ETF) that accomplishes both: the WisdomTree Japan Hedged Equity Fund (NYSE: DXJ).  DXJ has gained 48% over the past two years and 25% this year, but it’s been flat or slightly negative for the past six months. One reason DXJ has slowed is that talk of a U.S. government shutdown sent investors to the yen as a safe haven, pushing it… Read More

Shorting the yen and going long Japanese stocks have basically been no-brainer investments for the past couple of years. That’s especially true when you consider there’s an exchange-traded fund (ETF) that accomplishes both: the WisdomTree Japan Hedged Equity Fund (NYSE: DXJ).  DXJ has gained 48% over the past two years and 25% this year, but it’s been flat or slightly negative for the past six months. One reason DXJ has slowed is that talk of a U.S. government shutdown sent investors to the yen as a safe haven, pushing it higher.  I suspect now that all is quiet on that front that the yen will continue its downward trend.#-ad_banner-# Still, there’s speculation that this trade may be dead. It all boils down to whether Japanese Prime Minister Shinzo Abe sticks to his loose monetary policy, aka Abenomics, which has been in place since he took office in December 2012. Abe vowed to kick-start Japan’s stagnant economy by deploying a bond-buying program of 7.5 trillion yen ($75 billion) a month, much like the U.S. is doing. The strategy was designed to reflate the world’s third-largest economy by devaluing the… Read More

Investors are always looking for the newest strategies and tactics to extract profits from the financial markets. Newer and faster is often believed to be superior to the old, traditional ways of doing things.#-ad_banner-#​ Thanks to technology, this belief holds particularly true when it comes to the financial markets. Today, with the advent of personal computers, stock-screening programs, technical analysis tools with hundreds of built-in indicators, and near-instant news services, investing is easier and more efficient — and hopefully more profitable — than ever. However, sometimes it pays to slow down and look back at the old ways… Read More

Investors are always looking for the newest strategies and tactics to extract profits from the financial markets. Newer and faster is often believed to be superior to the old, traditional ways of doing things.#-ad_banner-#​ Thanks to technology, this belief holds particularly true when it comes to the financial markets. Today, with the advent of personal computers, stock-screening programs, technical analysis tools with hundreds of built-in indicators, and near-instant news services, investing is easier and more efficient — and hopefully more profitable — than ever. However, sometimes it pays to slow down and look back at the old ways of doing things. Taking a step back and slowing down provides an opportunity to locate an overlooked and mostly forgotten money-making tool, method or strategy that remains a solid edge in today’s market. I rediscovered one such strategy — a way to purchase financial assets at a discount — that was first used more than a century ago, in 1893. These investments are often passed down from generation to generation, and they keep on churning out profits for each new holder. Some even have been in continuous operation for the past half-century with the same management team in place. While there… Read More

The Lone Ranger was a big fan of silver.  He named his horse after the shiny metal and fashioned bullets out of it. If werewolves ever threatened Wild West homesteaders, I’m sure the masked man and Tonto could’ve taken care of them. Lately, silver bulls probably feel like the Lone Ranger — with the emphasis on the “Lone.” With the recent correction in precious metals prices, silver has been pounded extra hard. Since its top in mid-2011, iShares Silver Trust (NYSE: SLV), which tracks the price of silver, has slid more than 50%. Compare that with… Read More

The Lone Ranger was a big fan of silver.  He named his horse after the shiny metal and fashioned bullets out of it. If werewolves ever threatened Wild West homesteaders, I’m sure the masked man and Tonto could’ve taken care of them. Lately, silver bulls probably feel like the Lone Ranger — with the emphasis on the “Lone.” With the recent correction in precious metals prices, silver has been pounded extra hard. Since its top in mid-2011, iShares Silver Trust (NYSE: SLV), which tracks the price of silver, has slid more than 50%. Compare that with the gold tracker iShares Gold Trust (NYSE: GLD), which has given back less than 30%. Why?  Secondary trades like silver are often afterthoughts for investors. When the price of the popular asset class seems to bid up, buyers will violently pile in to a cheaper alternative. The cheaper the investment, the higher it climbs. They are also punished more severely when things go south. But as always, the herd, in its infinite lack of wisdom, is missing a major point: Silver is useful outside of being a currency proxy. Recently, I discussed a short-term trading idea for GLD  based purely… Read More

In the expanding universe of exchange-traded funds (ETFs), it’s sink or swim. #-ad_banner-# Any ETFs that fail to gain a big enough investor following eventually are shut down. It simply costs too much to operate fund that only has a few million dollars and trades only a few thousand shares… Read More

The stock market is on fire. It’s surging upward to challenge the record highs set at the start of August. It will not be surprising if these highs are taken out by the end of the year.#-ad_banner-# I bet by this point, many readers are thinking: “What, have you lost… Read More

Hedge funds, those once mysterious investment vehicles of the ultra wealthy, have recently been thrust into the public eye.  Outsize returns combined with media coverage of the wild and crazy lifestyles of fraudulent rogue fund managers have sparked widespread interest in this form of investment. Colorful yet true tales of hedge fund managers faking suicides by crashing planes and leaping from bridges add to the mythos surrounding the business. While the negative aspects of hedge funds operated by criminal types have dominated the news and captured the public’s imagination, the fraudsters are a tiny minority of the business.#-ad_banner-# Tremendous positive… Read More

Hedge funds, those once mysterious investment vehicles of the ultra wealthy, have recently been thrust into the public eye.  Outsize returns combined with media coverage of the wild and crazy lifestyles of fraudulent rogue fund managers have sparked widespread interest in this form of investment. Colorful yet true tales of hedge fund managers faking suicides by crashing planes and leaping from bridges add to the mythos surrounding the business. While the negative aspects of hedge funds operated by criminal types have dominated the news and captured the public’s imagination, the fraudsters are a tiny minority of the business.#-ad_banner-# Tremendous positive global impact has also resulted from the proliferation of hedge funds. One example is Paul Tudor Jones’ Robin Hood Foundation. Made up of hedge fund managers and others in the financial business, this philanthropic organization has distributed more than $1 billion to help fight poverty in New York City. The most appealing thing about the group is that all administrative costs are paid for directly from the board of directors’ own pockets. This means 100% of donations go directly to those who need it most. There are numerous other philanthropic organizations that would not exist if… Read More

Over the past few years at StreetAuthority, we’ve been chronicling the remarkable pace of share buybacks. So many companies are buying back $500 million or even $1 billion in stock that this trend has become one of the most powerful themes of the… Read More

In a bear market, diversification reduces losses. In a bull market, diversification can reduce your gains. This is the trade-off all investors face. The price of decreased risk is almost always lower returns. Despite its disadvantages, holding a diversified rather than a concentrated portfolio is usually the best choice for an individual investor. Diversification is also the best choice for many institutional investors, including the managers of large endowment… Read More

In a bear market, diversification reduces losses. In a bull market, diversification can reduce your gains. This is the trade-off all investors face. The price of decreased risk is almost always lower returns. Despite its disadvantages, holding a diversified rather than a concentrated portfolio is usually the best choice for an individual investor. Diversification is also the best choice for many institutional investors, including the managers of large endowment funds at colleges and charities. Managers of these funds must balance current income needs and demands for growth of capital that will allow the institution to continue meeting its goals in the future. Historically, diversification has been the best way to strike this balance. One of the research papers we recently read showed how profitable it would be to perfectly time the markets. If you could invest each… Read More