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

In case you couldn’t tell from the $4-a-gallon gasoline prices in your area, oil prices have been on the move. $80 per barrel, $90, $100… All have been sped past like interstate mile markers. The chart below pretty much says it all. As you can see,… Read More

The technology industry saw a nice uptick in mergers and acquisitions activity in 2010. The total transaction amount doubled from the previous year to $107.1 billion, while the number of deals increased by 73% to 165, according to a recent report from PwC’s Transaction… Read More

In investing, assets that have performed well in the past have a good chance of continuing to do well in the future. This is especially true when the factors that have driven the outperformance remain in place to drive the future performance. Investment research firm Lipper recently released data detailing the best investments of the past decade. Below is an overview of the top five performers of the past 10 years. As you will see, a couple of recurring factors have driven the stellar results, so I expect them to continue to do so for many more years for a… Read More

In investing, assets that have performed well in the past have a good chance of continuing to do well in the future. This is especially true when the factors that have driven the outperformance remain in place to drive the future performance. Investment research firm Lipper recently released data detailing the best investments of the past decade. Below is an overview of the top five performers of the past 10 years. As you will see, a couple of recurring factors have driven the stellar results, so I expect them to continue to do so for many more years for a number of these top performers. 1. Precious metals Annual gains in the past decade: 25.4% Precious metals such as gold and silver were used in the past as currencies, but these days they qualify primarily as an alternative asset under the commodity asset class. In addition to gold and silver, this category also consists of metals such as platinum, palladium and diamonds. This investment class collectively had its best decade in more than 30 years, as demand for metals increased for… Read More