The Federal Reserve is normally between a rock and a hard place. That’s the nature of its job. On one hand, it has to keep inflation in check and prevent the economy from overheating. On… Read More

Risk equals return. It’s one of the most widely-held maxims in investing and, if you look at the numbers, the sentiment rings true. Stocks have returned about 9.5% a year since 1926, according to Ibbotson & Associates, clearly better than the roughly 5.5% return bonds have delivered annually during that… Read More

In the investment business, we’re very good at talking about when to buy. We can wax poetic about the single-digit piece-to-earnings (P/E) ratio and the deep-discount to book value or the return on equity. It’s the selling part we all need to work on… The reasons investors hang on to a stock are so vast and complex, it would take a team of psychiatrists at least a decade to begin analyzing them. Typically, the two major reasons are greed and emotional attachment. Greed is… Read More

In the investment business, we’re very good at talking about when to buy. We can wax poetic about the single-digit piece-to-earnings (P/E) ratio and the deep-discount to book value or the return on equity. It’s the selling part we all need to work on… The reasons investors hang on to a stock are so vast and complex, it would take a team of psychiatrists at least a decade to begin analyzing them. Typically, the two major reasons are greed and emotional attachment. Greed is simple: we like making money and we want to make more. The emotional attachment is the weird part. I’ve always been a big fan of the Warren Buffett philosophy on how to deal with the emotions involved in holding stocks: that stock doesn’t know that you own it. The hundred shares of Cisco (Nasdaq: CSCO) doesn’t tell you it loves you when you come home from work. If it does, we’ve got bigger problems. It’s OK to sell stuff. Look at it like you would a party. Eventually you have to… Read More

The “Dogs of the Dow” strategy consists of buying a basket of the cheapest stocks out of the 30 components of the Dow Jones Industrial Average. One of the more popular strategies in recent years has been to buy Dow stocks with the highest… Read More

Business school professors often speak of the “efficient-market hypothesis,” which posits that stock prices reflect all available public information and therefore are never overvalued or undervalued; they’re, instead, are perfectly valued. These professors are wrong. In many instances, the market gets it wrong, and a stock can remain mispriced, even after an important piece of news is digested by buyers and sellers. I was reminded of this after looking at the stock action of Assured Guaranty (NYSE: AGO) on Friday, April 15. The company’s stock rose 24% in just one day, but as you more… Read More

Business school professors often speak of the “efficient-market hypothesis,” which posits that stock prices reflect all available public information and therefore are never overvalued or undervalued; they’re, instead, are perfectly valued. These professors are wrong. In many instances, the market gets it wrong, and a stock can remain mispriced, even after an important piece of news is digested by buyers and sellers. I was reminded of this after looking at the stock action of Assured Guaranty (NYSE: AGO) on Friday, April 15. The company’s stock rose 24% in just one day, but as you more deeply analyze the news that affected the stock, it’s easy to conclude that shares should have risen by a good deal more than that. The process may take several weeks or months, but when complete, this $17 stock could shoot up into the low to mid-$20s. Bank of America’s mea culpa Assured Guaranty provides insurance to bond buyers. If those bonds default, then the buyers can make a claim. It’s been a very lucrative business for many years, controlled by Assured Guaranty, MBIA (NYSE: MBI) and Ambac Financial (Nasdaq:… Read More

If you’re seeking worthy biotech stocks, don’t let the industry’s high price-to-earnings (P/E) ratio of 28 deter you. Though generally expensive, the biotech sector still has great values. In fact, there are biotech stocks with P/E ratios less than half the… Read More

February 18, 2011 may turn out to be a notable day for investors. That’s when the S&P 500 hit a 30-month high. Since then, the index has plunged, rebounded and cooled anew, even as global conditions have become much more challenging. Throw in the fact that consumer sentiment and spending levels are dropping as gas prices rise, and we may not reach back to those February highs for the rest of the year. At least that’s how short-sellers hope things will play out. They’re stepping up bearish bets, hoping the broader market will help their investment… Read More

February 18, 2011 may turn out to be a notable day for investors. That’s when the S&P 500 hit a 30-month high. Since then, the index has plunged, rebounded and cooled anew, even as global conditions have become much more challenging. Throw in the fact that consumer sentiment and spending levels are dropping as gas prices rise, and we may not reach back to those February highs for the rest of the year. At least that’s how short-sellers hope things will play out. They’re stepping up bearish bets, hoping the broader market will help their investment targets to fall in price. If they’re wrong and the market can power up to new highs, then these short sellers may be forced to close out those bearish bets and re-buy shares, unwittingly adding buying pressure to the very stocks they want to go down. With that in mind, I’m looking at three stocks that are increasingly in the sights of short sellers. Each stock has seen at least a 25% spike in short interest in the two weeks ended March 30. What do the shorts see? And how will this play out?… Read More

It may sound too good to be true. But, it isn’t. I’ve found a stock that’s up more than 600% in the past two years — and it still has room to run. Best of all, a recent pullback has made shares a lot cheaper. But this may… Read More

In the world of investing, no news can often be good news. A wide range of energy sources have been hit by bad news in recent months. Yet one key energy source has been out of the spotlight, but is likely to actually benefit from the unfolding events of 2011. Read More

A few weeks ago I named railroad stock Union Pacific (NYSE: UNP) as the most undervalued name in the S&P 500. That stance hasn’t changed. But, being the most undervalued name in the large-cap world doesn’t mean it’s the most potent railroad… Read More