Investing Basics

If you read the headlines, Americans are still afraid to spend a dime. Today’s chart says that’s a bunch of bull. Starbucks (NASDAQ: SBUX) is one of the best gauges I’ve found for how the “man on the street” is feeling. No one needs to buy $4 coffee, but it is a nice little luxury if you can afford it. And with 11,000 stores in the United States, every American has easy access to the product. That gives the measure a nationwide scope. Not surprisingly, Starbucks’ business fell sharply during the recession. Read More

If you read the headlines, Americans are still afraid to spend a dime. Today’s chart says that’s a bunch of bull. Starbucks (NASDAQ: SBUX) is one of the best gauges I’ve found for how the “man on the street” is feeling. No one needs to buy $4 coffee, but it is a nice little luxury if you can afford it. And with 11,000 stores in the United States, every American has easy access to the product. That gives the measure a nationwide scope. Not surprisingly, Starbucks’ business fell sharply during the recession. Its share price followed suit. But what is our “Starbucks indicator” saying now? Evidently, the man on the street is feeling much better these days… Now Starbucks stores aren’t found just in the United States, but the lion’s share (75%) of sales and profit come from America. That means the move higher is based largely on its performance at home (sales hit a record-high last quarter). That’s great news for an economy built on consumer spending. Be sure to look for… Read More

For a decade, you’ve heard the glowing stories: enormous GDP growth, massive infrastructure building — even 15-story hotels being built in six days… China’s growth is unstoppable. It’s only a matter of time before it overtakes the United States as the largest economy in the world. Not so fast… China’s market is flashing a major warning sign. If you have money invested in Chinese stocks, keep a close eye. I use the iShares FTSE China 25 ETF (NYSE: FXI) as an easy way to keep tabs… Read More

For a decade, you’ve heard the glowing stories: enormous GDP growth, massive infrastructure building — even 15-story hotels being built in six days… China’s growth is unstoppable. It’s only a matter of time before it overtakes the United States as the largest economy in the world. Not so fast… China’s market is flashing a major warning sign. If you have money invested in Chinese stocks, keep a close eye. I use the iShares FTSE China 25 ETF (NYSE: FXI) as an easy way to keep tabs on China’s market. It holds 25 of the biggest companies in China, across all industries… banks, telecoms, oil companies. You can think of it as China’s Dow Jones Industrial Average. Well, China’s “Dow” is having problems:   A period of consolidation after a big rebound would be expected if this were anywhere but “unstoppable” China. And when you compare that flat performance with our own Dow, which has gained about 30% in the same time frame, you really start to see the trouble brewing. If you’re invested in China,… Read More

#-ad_banner-#It’s one of the first rules of investing: find stocks with strong earnings growth and reasonable valuations. We’re even taught a simple formula: look for stocks that have a price-to-earnings (P/E) ratio that is lower than the earnings growth rate, or, a PEG ratio (P/E divided by the earnings growth rate) lower than 1.0. Yet the converse is also true. Stocks with a PEG ratio over 1.0 can be overvalued. It happens without many investors even noticing. A stock rises and rises… Read More

#-ad_banner-#It’s one of the first rules of investing: find stocks with strong earnings growth and reasonable valuations. We’re even taught a simple formula: look for stocks that have a price-to-earnings (P/E) ratio that is lower than the earnings growth rate, or, a PEG ratio (P/E divided by the earnings growth rate) lower than 1.0. Yet the converse is also true. Stocks with a PEG ratio over 1.0 can be overvalued. It happens without many investors even noticing. A stock rises and rises until its value becomes disconnected from the reality on the ground. A high PEG ratio can limit further upside and make a stock especially ripe for a pullback in down markets. On the flip side, it can also make for a nice stock to short. Here’s a look at three stocks with alarmingly high PEG ratios. Each of the stocks on this table trade at least 50% above fair value when the PEG ratio test is applied. Salesforce.com (Nasdaq: CRM) This provider of contact relationship software has seen its shares fall roughly… Read More

After posting a very rapid and strong upward move, stocks tend to do one of two things: either surge even higher, or fall victim to profit-taking. They rarely stay put. That’s why it’s profitable to continually pore over recent strong gainers and assess which stocks have further… Read More

Exactly one quarter ago, with the Dow Jones Industrial Average hitting 11,000, I asked a simple question: will the next move be to 12,000 or back to 10,000? Well, the bulls ruled the day, and the market has tacked on another 9% gain since then. This rally seems to never end.   The sharp rise off the March 2009 bottom made clear sense. So many good companies were selling at such low valuations that you needed to ignore the noise and simply pick the best apples from the barrel. Yet the most recent move in the… Read More

Exactly one quarter ago, with the Dow Jones Industrial Average hitting 11,000, I asked a simple question: will the next move be to 12,000 or back to 10,000? Well, the bulls ruled the day, and the market has tacked on another 9% gain since then. This rally seems to never end.   The sharp rise off the March 2009 bottom made clear sense. So many good companies were selling at such low valuations that you needed to ignore the noise and simply pick the best apples from the barrel. Yet the most recent move in the market is a bit more puzzling. The markets were approaching fair value last spring, then pulled back and have since gone on to post another impressive rally. The Dow has rallied roughly 20% in the past five months, which works out to be a nearly 50% annualized gain. At a time where you should expect 10% to 15% annual market gains — at best — we should be truly grateful. We should also take a more cautious posture. Here’s why. Factors behind the move As I noted, the market would potentially rally… Read More

Let’s see if this describes your investing during the past few years: In 2008, you got out of the market, but only after your retirement account lost 35%. Then, even after the market started to rally, you just couldn’t pull the trigger to get back in. The memory of those sleepless nights was still too fresh.  But sitting on the sidelines hasn’t been without pain. As the market rebounded, your money-market fund paid an average of 0.07%, meaning you were on pace to double your money in 990 years. Savings and certificate of deposit… Read More

Let’s see if this describes your investing during the past few years: In 2008, you got out of the market, but only after your retirement account lost 35%. Then, even after the market started to rally, you just couldn’t pull the trigger to get back in. The memory of those sleepless nights was still too fresh.  But sitting on the sidelines hasn’t been without pain. As the market rebounded, your money-market fund paid an average of 0.07%, meaning you were on pace to double your money in 990 years. Savings and certificate of deposit rates were only slightly better. If this describes what you went through, don’t worry. You’re not alone. As of last week, more than $2.7 trillion dollars sat in stingy-yielding money-market mutual funds. But it doesn’t have to be that way. I have a way to earn considerably more on your cash… Millions of investors, one simple solution I recently asked some of my Daily Paycheck subscribers about their investing experience during the past few years… Turns out, many of them were in the same boat. They used… Read More

Are you an income investor or a growth investor? It’s pretty much been accepted as common knowledge that a stock either offers great dividends, or great potential for price appreciation, but not both. If you look hard enough though — and far enough down the market cap scale… Read More

In order to make money in stocks, you’ve got to invest. Not just money — you’ve got to invest time to watch and watch and watch a gathered list of stocks and be ready to pounce when opportunities present themselves. Here are three stocks that have been on my watch list and now look like promising buys. 1. Couer D’Alene Mines Corp. (NYSE: CDE) At the start of each year, investors fret that this may be the year that China finally cools. But that’s been a bad bet recently and I’m betting that this year’s China… Read More

In order to make money in stocks, you’ve got to invest. Not just money — you’ve got to invest time to watch and watch and watch a gathered list of stocks and be ready to pounce when opportunities present themselves. Here are three stocks that have been on my watch list and now look like promising buys. 1. Couer D’Alene Mines Corp. (NYSE: CDE) At the start of each year, investors fret that this may be the year that China finally cools. But that’s been a bad bet recently and I’m betting that this year’s China scare will also prove to be unwarranted, despite possible troubles in that country’s housing sector. The rest of the economy simply has too much momentum, which is why I agree with commodity bulls that China’s insatiable demand for all kinds of metals and minerals will keep this asset class on the rise in 2011. My favorite current commodities play is Couer D’Alene, an 80-year-old company that is ramping up production of gold, silver, zinc and iron ore. It’s been a “show-me” stock lately as it starts to boost output at some new mines. Read More