A tip of the cap is in order for my colleague Andy Obermueller, the author of StreetAuthority’s Game-Changing Stocks newsletter. When I joined forces with Andy and the rest of the team here back in 2010, Andy turned me on to an investment niche that I had never heard of… Read More

Five years into a remarkable industry rebound, auto makers — and their parts suppliers — now generate record profit margins that would have been unthinkable a half decade ago. The streamlining of almost every player has led to robust levels of the most important metric you should track: Free cash flow (FCF). One benefit of such financial strength: stock buybacks have been a major ongoing theme for auto parts suppliers. #-ad_banner-#Of course, the FCF and other financial metrics grow much larger when you are talking about the industry’s top dogs: Ford Motor Co. (NYSE: F) and… Read More

Five years into a remarkable industry rebound, auto makers — and their parts suppliers — now generate record profit margins that would have been unthinkable a half decade ago. The streamlining of almost every player has led to robust levels of the most important metric you should track: Free cash flow (FCF). One benefit of such financial strength: stock buybacks have been a major ongoing theme for auto parts suppliers. #-ad_banner-#Of course, the FCF and other financial metrics grow much larger when you are talking about the industry’s top dogs: Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM). Both firms look far healthier — from a financial perspective — than they did a decade ago. (Earlier this week, Ford preannounced a challenging period ahead but largely reiterated long-term financial targets.) These companies share so many common traits that it’s easy to compare them on an apples-to-apples basis to see which company’s stock holds greater appeal. Roughly three years ago, I gave Ford the edge — their valuations were comparable, but Ford’s management was much stronger. When I looked at these two stocks again in 2013, I noted that Ford still had the edge. Read More

Insiders at many companies tend to take a simplistic view to their own company’s stock. If the business outlook is bright but the company’s shares lose value, they tend to become knee-jerk buyers. #-ad_banner-#Indeed in any solid market pullback, you’ll see insider buying activity surge. The problem with such a response: The market can grind even lower, pushing share prices lower than the prices paid by insiders. For the rest of us, such pullbacks are a gift. They point the way towards bullish insider sentiment and allow us to buy in at a discount to what the insiders paid. Here’s… Read More

Insiders at many companies tend to take a simplistic view to their own company’s stock. If the business outlook is bright but the company’s shares lose value, they tend to become knee-jerk buyers. #-ad_banner-#Indeed in any solid market pullback, you’ll see insider buying activity surge. The problem with such a response: The market can grind even lower, pushing share prices lower than the prices paid by insiders. For the rest of us, such pullbacks are a gift. They point the way towards bullish insider sentiment and allow us to buy in at a discount to what the insiders paid. Here’s a look at three stocks that can now be bought at an even better price than insiders recently paid. Terex Corp. (NYSE: TEX) A range of insiders began acquiring stock in early August, when shares stood at $42. The pace of buying activity picked up in recent days, as shares drift down to a 52-week low of $32. Frankly, the earlier insider buying was premature, as Terex lowered Q3 guidance in mid-September. The company is seeing a slowdown in demand for its cranes and construction equipment in various emerging market economies. Terex is known as a “late cycle play,” as… Read More

They’re popping the champagne corks in Denver, Colorado, where fund management firm Janus Capital Group, Inc. resides. Shares of Janus surged more than 43% on today, inflating the company’s market value by nearly $1 billion. Investors figure the sudden and unexpected hiring of legendary bond fund manager Bill Gross will generate massive amounts of new business for Janus. Yet, it may be time to put the cork into the champagne bottle. The road ahead for Bill Gross — and the bond market — is likely to be much more challenging. #-ad_banner-#Make no mistake, Bill Gross is one of the brightest… Read More

They’re popping the champagne corks in Denver, Colorado, where fund management firm Janus Capital Group, Inc. resides. Shares of Janus surged more than 43% on today, inflating the company’s market value by nearly $1 billion. Investors figure the sudden and unexpected hiring of legendary bond fund manager Bill Gross will generate massive amounts of new business for Janus. Yet, it may be time to put the cork into the champagne bottle. The road ahead for Bill Gross — and the bond market — is likely to be much more challenging. #-ad_banner-#Make no mistake, Bill Gross is one of the brightest minds in the bond business. His wise prognostications helped draw $270 billion into his firm’s Pimco Total Return Fund (Nasdaq: PTTRX). And Janus executives hope he will have a similar magic touch at his new firm.  Even before his arrival, Janus rebounded from its tarnished dot-com legacy and now manages more than $30 billion in bond assets.  According to various media reports, Gross will oversee Janus’ Global Unconstrained Bond Fund (Nasdaq: JUCAX) — which was launched in May 2014 — and he will also help further develop the firm’s fixed-income investment strategies. An unexpectedly long rally When I started… Read More

Even as investors were re-embracing stocks in 2010 and 2011, they scored really big gains with one of the hottest commodities in the world: Silver. The precious metal soared in price from under $20 in August 2010 to nearly $50 an ounce by the next spring. In the hindsight, the silver spike was a classic bubble, fueled by inflation concerns that simply never materialized. Though few people could have guessed that silver would be capable of a 150% nine-month gain, few also would have predicted that the eventual slump in silver would be so extended. Silver… Read More

Even as investors were re-embracing stocks in 2010 and 2011, they scored really big gains with one of the hottest commodities in the world: Silver. The precious metal soared in price from under $20 in August 2010 to nearly $50 an ounce by the next spring. In the hindsight, the silver spike was a classic bubble, fueled by inflation concerns that simply never materialized. Though few people could have guessed that silver would be capable of a 150% nine-month gain, few also would have predicted that the eventual slump in silver would be so extended. Silver prices fell back below $30 an ounce by the start of 2013, and they’ve been in freefall ever since. A snapback to 2011 peaks is out of the cards. You can get a sense of just how painful the silver slump has been by glancing at the performance of key exchange-traded funds (ETFs).  The leveraged (2-times and 3-times) funds have been among the market’s worst performers. And when it comes to the silver producers themselves, it appears as if sentiment has  utterly collapsed. In… Read More

As we head into the final quarter of the year, a clear narrative has emerged. We’re on track for the most robust job growth in a decade, while consumer spending slowed to a crawl in 2014. A key explanation for the disconnect: The quality of jobs being created aren’t very good, and they don’t pay enough money to support a thriving consumer economy. #-ad_banner-#But that narrative is too simple. Buried in the employment reports, you’ll find data that suggest we’re also creating well-paying jobs in the energy sector, professional services, technology and elsewhere. That translates to a strong likelihood that… Read More

As we head into the final quarter of the year, a clear narrative has emerged. We’re on track for the most robust job growth in a decade, while consumer spending slowed to a crawl in 2014. A key explanation for the disconnect: The quality of jobs being created aren’t very good, and they don’t pay enough money to support a thriving consumer economy. #-ad_banner-#But that narrative is too simple. Buried in the employment reports, you’ll find data that suggest we’re also creating well-paying jobs in the energy sector, professional services, technology and elsewhere. That translates to a strong likelihood that the national unemployment rate will to decrease to less than 6% faster — by one-to-two years — than most economists predicted in 2012. Here’s the good news that few are talking about: consumer spending, which only recently was seen as lifeless, is actually springing to life. According to the Commerce Department, retail spending rose 0.6% sequentially in August, and 5.0% from a year earlier. Auto sales and spending on personal care and healthcare led the way. When you’re talking about a part of the economy that accounts for more than $400 billion in monthly activity, this is a… Read More

If you’ve been watching the market action in recent days, you’ll notice a growing sense of unease. The S&P 500 has repeatedly scaled past 2,000, only to be rebuffed. Is it simply buyers’ fatigue or instead the result of growing concerns about the economies in China and Europe and military action in the Middle East? Frankly, the news outside our borders has been mostly negative, and we may be hearing about the rising set of challenges being faced by export-focused U.S. multinationals as earnings season gets underway in a few weeks. To be sure, the stocks that comprise the S&P… Read More

If you’ve been watching the market action in recent days, you’ll notice a growing sense of unease. The S&P 500 has repeatedly scaled past 2,000, only to be rebuffed. Is it simply buyers’ fatigue or instead the result of growing concerns about the economies in China and Europe and military action in the Middle East? Frankly, the news outside our borders has been mostly negative, and we may be hearing about the rising set of challenges being faced by export-focused U.S. multinationals as earnings season gets underway in a few weeks. To be sure, the stocks that comprise the S&P 500 aren’t in crisis mode — most of them trade near their all-time highs. Yet further down the food chain, small caps and micro caps are quickly breaking down. The Russell 2000 index has begun to drift steadily lower, and many of the underlying components in that index are now 30%, 40% or more from their 52-week highs.  In fact, more than 140 stocks hit 52-week lows on Monday, September 22, on each the Nasdaq and the New York Stock Exchange. That’s the largest number we’ve seen all year. The divergence between small cap stocks and their larger peers… Read More

As investors scan the business news each morning, they often gloss past major acquisition announcements. Most deals don’t involve and don’t have much impact on stocks in your portfolio. But such news can be a fertile source of investment ideas. You can look at these deals, including the valuations, and start to gain an idea of what it means for rival stocks. Sometimes, you’ll find a sharply undervalued rival, simply by connecting the dots. Let me give you an example. Two years ago, I noted that ad agency MDC Partners, Inc. (Nasdaq: MDCA) may soon rally because French advertising and… Read More

As investors scan the business news each morning, they often gloss past major acquisition announcements. Most deals don’t involve and don’t have much impact on stocks in your portfolio. But such news can be a fertile source of investment ideas. You can look at these deals, including the valuations, and start to gain an idea of what it means for rival stocks. Sometimes, you’ll find a sharply undervalued rival, simply by connecting the dots. Let me give you an example. Two years ago, I noted that ad agency MDC Partners, Inc. (Nasdaq: MDCA) may soon rally because French advertising and marketing agency, WPP Plc (Nasdaq: WPPGY), spent $540 million to acquire a rival digital-focused ad firm. On an apples-to-apples basis, MDCA, which became a key player in digital marketing strategies, would be worth more than $30 a share. At the time, shares traded for just $11. I thought the $30 price target seemed too rich: “Frankly, I don’t see this stock going much past $20,” I concluded.  Shares eventually surged to $26 before a recent pullback to $20. In this very same industry (digital advertising), the connect-the-dots trade has just happened again. And it all starts with the September 12,… Read More

Wonder why the U.S. economic recovery feels so tenuous? Blame the housing construction industry, which typically accounts for 4%-to-5% of GDP, but represents just 2% of the economy these days. Though home prices in many markets have moved up from their 2008-2010 lows, the pace of new home construction has remained extremely low. According to the St. Louis branch of the Federal Reserve, residential construction permits are at roughly half the levels seen from 1995 through 2007. The impact: Simply returning to the long-term average would likely add around 1.5 million jobs to the… Read More

Wonder why the U.S. economic recovery feels so tenuous? Blame the housing construction industry, which typically accounts for 4%-to-5% of GDP, but represents just 2% of the economy these days. Though home prices in many markets have moved up from their 2008-2010 lows, the pace of new home construction has remained extremely low. According to the St. Louis branch of the Federal Reserve, residential construction permits are at roughly half the levels seen from 1995 through 2007. The impact: Simply returning to the long-term average would likely add around 1.5 million jobs to the economy, shaving the unemployment rate by roughly a percentage point.   Note: not all permit applications lead to actual construction, and actual new home builds are lower. What makes the housing slump especially remarkable is that borrowing costs are quite low and bank lending standards have been gradually easing.  And if you are wondering about supply and demand, know that the U.S. population has grown by roughly 20 million since 2006. Potential first-time homebuyers are still traumatized by the last economic downturn — many of them remain at home with their parents or… Read More

California and Texas, the nation’s most populous states, with a combined population of 65 million people, share another key trait: They are both parched. According to the National Oceanic and Atmospheric Administration, both states are experiencing a drought across roughly 80% of their land mass. That’s a real crisis when you consider how important agriculture is in those two states. And the phrase “mega-drought” may soon enter our lexicon. The American Meteorological Society’s Journal of Climate now warns that the U.S. Southwest may be facing decades of such extreme… Read More

California and Texas, the nation’s most populous states, with a combined population of 65 million people, share another key trait: They are both parched. According to the National Oceanic and Atmospheric Administration, both states are experiencing a drought across roughly 80% of their land mass. That’s a real crisis when you consider how important agriculture is in those two states. And the phrase “mega-drought” may soon enter our lexicon. The American Meteorological Society’s Journal of Climate now warns that the U.S. Southwest may be facing decades of such extreme dry conditions. #-ad_banner-#A solution may lie offshore: Seawater can be scrubbed through reverse osmosis filters, providing potable water to increasingly parched Southern California. Companies such as Consolidated Water (Nasdaq: CWCO) build and operate such plants. Other dry areas, such as the Middle East, are starting to boost investments in this technology. Solutions for the U.S. heartland will likely require greater water efficiency. The Oglala aquifer, which supplies water to many farms in the Central United States, has seen rapid depletion. As a result, conservation measures are expanding to curb water… Read More