In investing, it’s easy to get carried away with chasing the latest trends and the newest companies. I’ve found another (and often more lucrative) way to go about finding the next big stock investment.  #-ad_banner-#I call this method “the view from 50,000 feet.” In it, I mentally take a huge step backward and look at the economy as though I’ve never seen it before. This exercise enables me to see the big picture from the top down. My primary question: What themes have been consistent for more than a century? After the obvious — food, water, shelter —… Read More

In investing, it’s easy to get carried away with chasing the latest trends and the newest companies. I’ve found another (and often more lucrative) way to go about finding the next big stock investment.  #-ad_banner-#I call this method “the view from 50,000 feet.” In it, I mentally take a huge step backward and look at the economy as though I’ve never seen it before. This exercise enables me to see the big picture from the top down. My primary question: What themes have been consistent for more than a century? After the obvious — food, water, shelter — what other overriding theme has been at the forefront of economic growth? The answer is energy — electrical energy, to be exact. Without electricity, the modern world as we know it would not exist. More importantly, the use of electricity is becoming more prevalent as the world grows more technological. (I know this is very obvious, but it’s easy to overlook when it comes to investing.) Continuing to look down from 50,000 feet, I asked: What is the source of the electricity? Surely there must be great investment opportunities there.  A large part of the answer is coal. Coal generates… Read More

It’s increasingly clear that the polar vortex created havoc for retailers. As the snow piled up and temperatures plunged, many consumers simply stayed away from the malls. You can expect to hear all about it as earnings season unfolds.  #-ad_banner-#Investors have already responded, shunning consumer stocks, and the key ETFs (exchange-traded funds) that track consumer discretionary spending are all under water for the year. As Citigroup analysts noted, “The worst performing sector thus far in 2014 is Consumer Discretionary, with the Retailing industry group plummeting nearly 8% this year.” But a late winter thaw may have set the stage for… Read More

It’s increasingly clear that the polar vortex created havoc for retailers. As the snow piled up and temperatures plunged, many consumers simply stayed away from the malls. You can expect to hear all about it as earnings season unfolds.  #-ad_banner-#Investors have already responded, shunning consumer stocks, and the key ETFs (exchange-traded funds) that track consumer discretionary spending are all under water for the year. As Citigroup analysts noted, “The worst performing sector thus far in 2014 is Consumer Discretionary, with the Retailing industry group plummeting nearly 8% this year.” But a late winter thaw may have set the stage for much better days to come. And this lagging sector could deliver much better news as coming quarters unfold.  Analysts at Deutsche Bank suspect that the end of the deep freeze in early March coincided with a profound change in economic activity: “The March economic data have bounced back sharply after being severely depressed in January and February,” they wrote this week, adding that “this weather-related payback is most evident in motor vehicle sales and the index of aggregate hours.”  And though the widely followed Redbook store sales survey showed continued weakness in March, the International Council of Shopping Centers (ICSC)… Read More

Although buy-and-hold stock investing has often been harshly criticized since the financial crisis, the backlash has been way overdone.  #-ad_banner-#I firmly believe this time-honored strategy still has plenty of merit — and the long-term record of one mutual fund that’s a perfect example of buy-and-hold conclusively proves this. Take one look at its turnover ratio, and you’ll know why I say this fund is a perfect example of buy-and-hold. The ratio is zero, meaning the fund never sells — ever. If that’s not buy-and-hold, then I don’t know what is. As the following table shows, the fund has… Read More

Although buy-and-hold stock investing has often been harshly criticized since the financial crisis, the backlash has been way overdone.  #-ad_banner-#I firmly believe this time-honored strategy still has plenty of merit — and the long-term record of one mutual fund that’s a perfect example of buy-and-hold conclusively proves this. Take one look at its turnover ratio, and you’ll know why I say this fund is a perfect example of buy-and-hold. The ratio is zero, meaning the fund never sells — ever. If that’s not buy-and-hold, then I don’t know what is. As the following table shows, the fund has more than kept pace with the market and nicely outperformed its peer group (the large value category) in the intermediate term. It has handily beaten the market and its peers in the long term. The fund’s 10-year record places it in the top 1% of the large value category, and its 15-year record is good for the top 10%. Annualized Rate of Return I’m talking about ING Corporate Leaders Trust (Nasdaq: LEXCX), a $1.6 billion fund that most investors probably haven’t heard of. But anyone who considers themselves buy-and-hold investors will want to be familiar with it. Read More

The market just seems to want to go higher. In fact, we just hit yet another record high on the S&P 500, as buyers continue to default to broad market domestic equities as the place to get their returns. Yet, when things get too exuberant, I start to get a little worried — especially this time of year. #-ad_banner-#Given that it’s already April, we now have just a few weeks before a big group of investors dust off their “sell in May and go away” playbooks. This is one of those market adages that, when examined carefully, actually… Read More

The market just seems to want to go higher. In fact, we just hit yet another record high on the S&P 500, as buyers continue to default to broad market domestic equities as the place to get their returns. Yet, when things get too exuberant, I start to get a little worried — especially this time of year. #-ad_banner-#Given that it’s already April, we now have just a few weeks before a big group of investors dust off their “sell in May and go away” playbooks. This is one of those market adages that, when examined carefully, actually does have some statistical merit. The theory here relies on historical trends that show May tends to be a relative weak month for stocks, while June has historically been a down month for equities over the past five decades.  A few years ago, I did some research on the sell in May strategy using the “Stock Trader’s Almanac.” What I determined was that if you went long the market on Nov. 1, 1972, and then spent the next 37 years (through 2009) selling on April 30, and then rebuying on Nov. 1 and holding until April 30, your average annual… Read More

In each of the past few years, investors have had to pore through roughly 150 new exchange-traded funds (ETFs) annually in search of the one or two that really hold appeal. As most investors have come to realize, most newly launched funds are simply copycats of existing ETFs. For example, Fidelity and Charles Schwab launched dozens of ETFs in 2013 that are virtually identical in construction to those offered by Vanguard, iShares and others. Schwab and Fidelity just want to stop funds from flowing out the door toward other asset management firms. Yet every year also brings a handful of… Read More

In each of the past few years, investors have had to pore through roughly 150 new exchange-traded funds (ETFs) annually in search of the one or two that really hold appeal. As most investors have come to realize, most newly launched funds are simply copycats of existing ETFs. For example, Fidelity and Charles Schwab launched dozens of ETFs in 2013 that are virtually identical in construction to those offered by Vanguard, iShares and others. Schwab and Fidelity just want to stop funds from flowing out the door toward other asset management firms. Yet every year also brings a handful of new and original funds that help investors to capitalize on emerging investment themes. I’ve looked at the early slate of 2014 releases and found three new ETFs that you need to know more about. 1. First Trust Dorsey Wright Focus 5 ETF (NYSE: FV) This is a new twist for ETFs, deploying a strategy that has been used by investments firms with mutual funds and hedge funds for many years. The so-called “fund of funds” approach aims to rotate assets among funds that are showing the greatest relative strength. (To help understand this ETF’s name, First… Read More

Sometimes an investment idea is so strong, it bears repeating. #-ad_banner-#In late February, my colleague Michael Vodicka implored readers to give emerging market stocks a fresh look. Though he cautioned that these struggling markets may not have yet hit bottom, he added that “the MSCI Emerging Markets Index is trading at just 11 times earnings. Not only is that a massive 40% discount to the MSCI World Index, it’s the widest gap since the financial crisis of 2008 and a 10-year low.” As a potential catalyst, Michael noted that the recent price rebound for many commodities should help bolster a… Read More

Sometimes an investment idea is so strong, it bears repeating. #-ad_banner-#In late February, my colleague Michael Vodicka implored readers to give emerging market stocks a fresh look. Though he cautioned that these struggling markets may not have yet hit bottom, he added that “the MSCI Emerging Markets Index is trading at just 11 times earnings. Not only is that a massive 40% discount to the MSCI World Index, it’s the widest gap since the financial crisis of 2008 and a 10-year low.” As a potential catalyst, Michael noted that the recent price rebound for many commodities should help bolster a number of emerging market economies. But there’s another, even more powerful reason to own emerging markets, which merely strengthens the investment case: They reduce risk. That may seem counterintuitive, so let me explain. Risk-Adjusted Returns Back in November, S&P Capital’s Global Equity Strategist Alec Young took a look at historical market returns to identify how domestic and foreign stocks performed each year. If these two asset classes merely mirrored each other, then there would be no need to own foreign stocks. But as we saw in 2013, U.S. stocks soared, while emerging markets slumped. The advantage to owning asset… Read More

The energy market has been resilient as crude oil has stabilized above $100 a barrel with another recovery from recent lows. The three-year range from roughly $80 to $110 targets a move to $140 per barrel on a technical breakout above the highs. Brazilian stocks, on the other hand, have been moving down since their 2011 peak, as emerging markets gave back some of the record gains that began in 2009. iShares MSCI Brazil Capped (NYSE: EWZ) is trading about 45% below its 2011 highs. However, a bullish divergence, with new lows in price without new highs in volatility, is… Read More

The energy market has been resilient as crude oil has stabilized above $100 a barrel with another recovery from recent lows. The three-year range from roughly $80 to $110 targets a move to $140 per barrel on a technical breakout above the highs. Brazilian stocks, on the other hand, have been moving down since their 2011 peak, as emerging markets gave back some of the record gains that began in 2009. iShares MSCI Brazil Capped (NYSE: EWZ) is trading about 45% below its 2011 highs. However, a bullish divergence, with new lows in price without new highs in volatility, is signaling stabilization. Brazilian oil company Petrobras (NYSE: PBR) plummeted from a peak near $77 in 2008 to a low below $15. The stock saw a recovery in 2009 to around $50 before beginning its long, long downtrend. For the past nine months, PBR has traded sideways between $18 and $12. A modest upside objective is a move to the $15 midpoint, and the combination of strength in oil prices and bargain basement prices in Brazil makes PBR a good reward-to-risk play. #-ad_banner-#The $15 target is about 34% higher than recent prices, but traders who use a… Read More

I bet most investors, even risk-tolerant ones, would be fibbing if they said they weren’t nervous at all right now. #-ad_banner-#With so many top analysts, economists and money managers saying we’re due for a big correction or extended rough patch in stocks, who wouldn’t be at least a little jumpy? (I am, and I have very high risk tolerance.) With plenty of fear to go around, many investors probably wouldn’t mind injecting a good dose of safety into their portfolios — something a lot more conservative but still able to earn a decent return. With interest rates so low, cash,… Read More

I bet most investors, even risk-tolerant ones, would be fibbing if they said they weren’t nervous at all right now. #-ad_banner-#With so many top analysts, economists and money managers saying we’re due for a big correction or extended rough patch in stocks, who wouldn’t be at least a little jumpy? (I am, and I have very high risk tolerance.) With plenty of fear to go around, many investors probably wouldn’t mind injecting a good dose of safety into their portfolios — something a lot more conservative but still able to earn a decent return. With interest rates so low, cash, CDs and bonds won’t do — not on their own, anyway. Certainly, it’s necessary to have at least some exposure to stocks, but how much? And to what kinds? For instance, should there be exposure to foreign stocks, or are these too risky? What ratio of fixed-income and cash is appropriate? Clearly, investors seeking greater safety have many questions to consider. Fortunately, I’ve found an investment — an exchange-traded fund (ETF) — that I think has all the answers. This ETF hasn’t been around that long but plenty long enough to prove its mettle, in my opinion. In fact, a… Read More

Joel Jackson dreams of becoming the next Henry Ford. The British expatriate has moved to Kenya to launch Africa’s first local automaker. #-ad_banner-#Sure, Mercedes-Benz and others have built European-engineered cars in South Africa for decades, but no one has ever designed, built and sold a 100% African car.  Jackson’s Mobius Two, an $11,500 SUV, is aimed squarely at Africa’s burgeoning middle class, which would like to own cars but often must pay up to 75% in excise taxes to import a foreign vehicle. You can understand why this fledgling entrepreneur is so excited as he raises money to get his… Read More

Joel Jackson dreams of becoming the next Henry Ford. The British expatriate has moved to Kenya to launch Africa’s first local automaker. #-ad_banner-#Sure, Mercedes-Benz and others have built European-engineered cars in South Africa for decades, but no one has ever designed, built and sold a 100% African car.  Jackson’s Mobius Two, an $11,500 SUV, is aimed squarely at Africa’s burgeoning middle class, which would like to own cars but often must pay up to 75% in excise taxes to import a foreign vehicle. You can understand why this fledgling entrepreneur is so excited as he raises money to get his business off the ground. As a recent article in The Economist noted, the International Monetary Fund “predicts that four of the world’s six fastest-growing economies in 2014 will be in sub-Saharan Africa. And for the first time in living memory, inflation will dip below the GDP growth rate.” Nigeria, which is expected to pass South Africa as the region’s largest economy this year, is expected to grow 7.4%, according to the IMF.  ‘Hopeless’ No Longer The Economist has made a major about-face when it comes to Africa. Back in 2000, its writers called Africa “hopeless,”… Read More

Even after a horrendous January and amid the bear market talk dominating the financial news, I remain bullish on the stock market. I will even so far as to say that one interest rate-sensitive sector that thrived in 2013 will continue its winning ways into next year.#-ad_banner-#​ There is no question that January was a difficult month for the stock market. A combination of the Federal Reserve starting to dial back on its massive bond-buying program, emerging-market fears and even the end of Ben Bernanke’s term as Fed chairman fueled investor anxiety. In addition, interest rates started a… Read More

Even after a horrendous January and amid the bear market talk dominating the financial news, I remain bullish on the stock market. I will even so far as to say that one interest rate-sensitive sector that thrived in 2013 will continue its winning ways into next year.#-ad_banner-#​ There is no question that January was a difficult month for the stock market. A combination of the Federal Reserve starting to dial back on its massive bond-buying program, emerging-market fears and even the end of Ben Bernanke’s term as Fed chairman fueled investor anxiety. In addition, interest rates started a slow climb higher, prompting an overreaction on the sell side.  Uncertainty is stocks’ #1 enemy. Seeing as some of the past month’s uncertainty has been realized, I think the overall downward price trend will soon stabilize, forcing stocks back into their long-term upward drift.  But rather than speculate about the future, let’s look at what actually occurred in the first month of 2014, with the Dow Jones Industrial Average as a guide.  After hitting an all-time high near 16,600 at the end of December, the Dow dropped to just under 15,700 by Jan. 31. Yet it’s crucial to remember the… Read More