“Beat and Raise.” The pattern of beating estimates and raising forward guidance has been the key theme in each earnings season of the past two years. This time will be different. The “beat” part will likely hold as companies and the analysts that follow them continue to play the game of low expectations that then get exceeded. The “raise” part? That just got much trickier. Companies raise guidance when they have a lot of certainty about what the coming months will bring. Right now, few can say with certainty about how… Read More

“Beat and Raise.” The pattern of beating estimates and raising forward guidance has been the key theme in each earnings season of the past two years. This time will be different. The “beat” part will likely hold as companies and the analysts that follow them continue to play the game of low expectations that then get exceeded. The “raise” part? That just got much trickier. Companies raise guidance when they have a lot of certainty about what the coming months will bring. Right now, few can say with certainty about how the wide range of domestic and global events will play out. Here’s a checklist of the issues these companies face. Later on, I’ll look at the potential impact on specific sectors.   Oil prices bring caution. Expect a number of companies, especially those that are focused on consumers or have high transportation costs, to express real concern about surging oil. Stressed consumers are in no mood to help shoulder the burden. For example, airlines had successfully pushed through six fare hikes since the start of the year. On the seventh try, consumers appear to have balked and airlines had… Read More

Between 1970 and 1975, a quarter of companies in the U.S. railroad industry were forced to file for bankruptcy protection. There were simply too many competitors and they could not handle the high levels of government regulation, volatile fuel costs and the billions of dollars it took to maintain thousands of miles of track, locomotives and freight cars. Since that time, the remaining competitors have steadily merged and there are only seven leading players today. The leading players now have the size and scale to justify high capital expenditure costs and can effectively compete with the trucking… Read More

Between 1970 and 1975, a quarter of companies in the U.S. railroad industry were forced to file for bankruptcy protection. There were simply too many competitors and they could not handle the high levels of government regulation, volatile fuel costs and the billions of dollars it took to maintain thousands of miles of track, locomotives and freight cars. Since that time, the remaining competitors have steadily merged and there are only seven leading players today. The leading players now have the size and scale to justify high capital expenditure costs and can effectively compete with the trucking industry. A government report stated that railroads have seen productivity gains that have far exceeded the gains seen in other industries and the economy as a whole. In perhaps the biggest vote of confidence the industry could ever receive, Warren Buffett announced he would spend $26 billion to acquire Burlington Northern Santa Fe, one of the largest companies in the space, in late 2009. Railroads have become great investments. But I’m not interested in railroads as an investment. I’m more interested in the next sector to follow in their footsteps:… Read More

New income investors sometimes make the mistake of looking no further than a stock’s current dividend yield. After all, a stock such as biotech firm PDL BioPharma (NASDAQ: PDL) looks mighty enticing, based on its 10% yield. But looks can be misleading. A closer look at PDL reveals a dividend that may be in trouble. The company’s net income fell by more than 50% last year, and PDL paid out more in dividends than it earned as income. The company earned $92 million, but paid $130 million in… Read More

New income investors sometimes make the mistake of looking no further than a stock’s current dividend yield. After all, a stock such as biotech firm PDL BioPharma (NASDAQ: PDL) looks mighty enticing, based on its 10% yield. But looks can be misleading. A closer look at PDL reveals a dividend that may be in trouble. The company’s net income fell by more than 50% last year, and PDL paid out more in dividends than it earned as income. The company earned $92 million, but paid $130 million in dividends. When earnings decline sharply, even blue-chip companies can sometimes find their dividends in danger. A good example is General Electric (NYSE: GE), which was forced to trim its dividend by two-thirds during the economic downturn. Quarterly payments dropped from $0.31 to just $0.10. [See: “Forget GE, Buy These Stocks Instead”] Another high-profile casualty of the downturn was oil refiner Valero Energy (NYSE: VLO). Valero cut its quarterly dividend from $0.15 to $0.05, which is where the dividend remains today. So how do you protect yourself… Read More

While most energy-driven headlines today deal with $100-plus oil, dirty coal, dangerous nukes or solar dreams, one cheap, plentiful and clean fuel is usually left off stage out of the spotlight — natural gas. That’s odd, because Americans use about 62.5 billion cubic feet of natural gas a day, with some 2.1 quadrillion cubic feet in reserve. (One quadrillion is a thousand trillion.) It supplies 65 million households, 5.3 million commercial users and nearly 200,000 industrial-scale customers. Natural gas is critical to electrical power production and its importance in this area is growing dramatically. Read More

While most energy-driven headlines today deal with $100-plus oil, dirty coal, dangerous nukes or solar dreams, one cheap, plentiful and clean fuel is usually left off stage out of the spotlight — natural gas. That’s odd, because Americans use about 62.5 billion cubic feet of natural gas a day, with some 2.1 quadrillion cubic feet in reserve. (One quadrillion is a thousand trillion.) It supplies 65 million households, 5.3 million commercial users and nearly 200,000 industrial-scale customers. Natural gas is critical to electrical power production and its importance in this area is growing dramatically. In the past 15 years, the amount of U.S. electricity provided by natural gas has grown from 13.2% to 23.2%. The total number of kilowatt hours attributable to natural gas is up 102.3%. And there are two reasons this trend is going to accelerate in coming years. First, gas is super efficient; it can approach 60% efficiency, nearly twice that of coal, which makes it an easier and more cost-effective way to generate power. Second, natural gas is far less polluting than coal, which is similarly cheap and abundant, and is… Read More

For the past five months, I’ve grown increasingly concerned about the steady surge in oil prices. Back in November,I noted that several sectors could be affected if oil moved past $100 a barrel. With oil now approaching $110 a barrel, you can forget that qualified statement. Oil will affect various swaths in the economy. Here’s why…   Some market watchers suggest oil has only temporarily moved onto a higher plane and that prices will eventually come back down. Then again, they’ve been saying that for the past six… Read More

For the past five months, I’ve grown increasingly concerned about the steady surge in oil prices. Back in November,I noted that several sectors could be affected if oil moved past $100 a barrel. With oil now approaching $110 a barrel, you can forget that qualified statement. Oil will affect various swaths in the economy. Here’s why…   Some market watchers suggest oil has only temporarily moved onto a higher plane and that prices will eventually come back down. Then again, they’ve been saying that for the past six months. It’s increasingly hard to see why oil prices will suddenly pull back. “The turmoil in the Middle East is unlikely to be resolved quickly or easily, meaning that oil market volatility is likely to remain high,” analysts at Merrill Lynch say. At this point, the only major catalyst to bring oil prices back down (besides a sudden resolution to all of the Middle East’s troubles) would be a slump in demand. And demand would only fall because oil prices rose so high that they choked off economic activity. Read More

During their baby phase, investors are totally in love with them. The newborn is absolutely perfect and the stockholders will coo and brag, and throw money at their pride and joy regardless of price. During the toddler phase, although the company may display poor behavior in not doing what it’s told and destroying everything in its path, including shareholder wealth, investors are still convinced they’ve got a real long-term winner. They forgive and shrug this phase off as just a part of growing up. As the company hits the elementary and middle school years, investors are still… Read More

During their baby phase, investors are totally in love with them. The newborn is absolutely perfect and the stockholders will coo and brag, and throw money at their pride and joy regardless of price. During the toddler phase, although the company may display poor behavior in not doing what it’s told and destroying everything in its path, including shareholder wealth, investors are still convinced they’ve got a real long-term winner. They forgive and shrug this phase off as just a part of growing up. As the company hits the elementary and middle school years, investors are still supportive — although not as forgiving as in the toddler years. Poor performance doesn’t go unpunished and the severity increases as the years progress. By the tumultuous high school and slacker college years, investors, like parents, often throw up their hands in frustration. The stock apparently can’t figure out what it wants to be or which direction its going. Sometimes, after this turbulent period, something wonderful often happens, but unfortunately many investors have lost patience and miss the metamorphosis. By this time, the company has grown into a mature, consistent, responsible adult. Giant chip maker Intel (Nasdaq:… Read More

This past week, two highly-respected investment publications opined that this stock is a top turnaround play. Barron’s touted that there is “hope, at last” in this name, even though its stock has fallen by more than 50% in the past decade to trail the S&P 500 and a number of archrivals badly. In this same period, the market is about flat, while rivals have returned between 75% and 150%. The Financial Times offered an analysis that was a bit more skeptical, but still concluded the CEO is making a big bet… Read More

This past week, two highly-respected investment publications opined that this stock is a top turnaround play. Barron’s touted that there is “hope, at last” in this name, even though its stock has fallen by more than 50% in the past decade to trail the S&P 500 and a number of archrivals badly. In this same period, the market is about flat, while rivals have returned between 75% and 150%. The Financial Times offered an analysis that was a bit more skeptical, but still concluded the CEO is making a big bet on “fresh growth” that relies on beefing up sales to emerging markets, reemphasizing key divisions that focus on infrastructure, and returning to research and development to drive innovation in the coming decade. Those statements are all well and good, but the historical numbers show that General Electric (NYSE: GE) has lost its way and needs a turnaround to return to the growth heyday it experienced while under the fearless leadership of Jack Welch. The truth is that current CEO Jeff Immelt has had an uphill battle since taking the helm in 2001, as Welch saddled… Read More

Many investors tend to focus on how a stock will fare in coming weeks and months. Company executives have a very different task. They need to stay focused on a much bigger picture, building a business that can grow for years to come. If investors push a stock down due to near-term issues, then executives have a clear move to make: Buy company shares while they’re not fully appreciated. Here are two stocks that have been pursued by insiders in recent weeks. Later on, I’ll give my take on whether or not they are compelling “buys”… Read More

Many investors tend to focus on how a stock will fare in coming weeks and months. Company executives have a very different task. They need to stay focused on a much bigger picture, building a business that can grow for years to come. If investors push a stock down due to near-term issues, then executives have a clear move to make: Buy company shares while they’re not fully appreciated. Here are two stocks that have been pursued by insiders in recent weeks. Later on, I’ll give my take on whether or not they are compelling “buys” right now… Rentrak (Nasdaq: RENT) When information and media-measuring firm Nielsen Holdings (Nasdaq: NLSN) pulled off an initial public offering (IPO) in January, many institutional investors gave the $10 billion (in market value) company a fresh look. But they may be wiser to give industry upstart Rentrak their attention instead. This $300 million company is slowly stealing business away from Nielsen and some analysts think the company can be an earnings powerhouse in a few years. If you came… Read More

Did you know the United States withholds a portion of dividends paid to many foreign investors? This amount comes right off the top, before the payment even hits an investor’s account. Even after this cut, the foreign investor will still have to pay taxes on what’s left. But the United States isn’t just being greedy. Just about every nation does something similar. Switzerland withholds up to 35% of dividends paid to foreign investors… Israel withholds up to 25%… Canada takes 15% off the… Read More

Did you know the United States withholds a portion of dividends paid to many foreign investors? This amount comes right off the top, before the payment even hits an investor’s account. Even after this cut, the foreign investor will still have to pay taxes on what’s left. But the United States isn’t just being greedy. Just about every nation does something similar. Switzerland withholds up to 35% of dividends paid to foreign investors… Israel withholds up to 25%… Canada takes 15% off the top. Typically the higher yields found abroad can make up the difference. For instance, the high yields on foreign utilities can still make them worthwhile to most investors, even with the withholding. And truth be told, you can get this withheld money back. Investors filing for a foreign tax credit via IRS Form 1116 can reclaim foreign dividends withheld. But you won’t receive this cash until you file your tax return, sometimes up to a year after the… Read More

From employment trends to factory production levels to trade figures, all signs are pointing to an improving U.S. economy. And in the early stages of any economic rebound, investors always flock to stocks with small market capitalizations. Back in 1990, when the economy was about to break out of its shell, the Russell 2000 Index, which focuses on small cap stocks, rose 100% during the next 36 months. These days, these small caps are back in vogue again. The Russell 2000 has risen… Read More

From employment trends to factory production levels to trade figures, all signs are pointing to an improving U.S. economy. And in the early stages of any economic rebound, investors always flock to stocks with small market capitalizations. Back in 1990, when the economy was about to break out of its shell, the Russell 2000 Index, which focuses on small cap stocks, rose 100% during the next 36 months. These days, these small caps are back in vogue again. The Russell 2000 has risen for seven of the last eight months. The index is now within just a few points of all-time highs hit back in 2007. Unlike blue chip stocks found in the S&P 500, smaller company stocks in the Russell 2000 tend to be much more volatile. Of course, that means even bigger gains in rising markets for some names. Right now, I’m taking a closer look at the hottest small caps, those Russell 2000 components that rose more than 50% in March. These sharp moves may be a harbinger of even better days ahead, or… Read More