All major U.S. indices finished in negative territory last week, giving back the previous week’s modest gains. They were led lower by the small-cap Russell 2000, which lost 2.5%. However, the four “majors” — the S&P 500, Dow Jones Industrial Average, Nasdaq 100 and Russell 2000 — are all still up 4% or more for the year. #-ad_banner-# The key level to watch is underlying support at 2,121 in the S&P 500, which has already been tested and held twice, on Sept. 12 and Oct. 13. A sustained decline below this level would represent a breakdown below the current three-month trading range. Read More

All major U.S. indices finished in negative territory last week, giving back the previous week’s modest gains. They were led lower by the small-cap Russell 2000, which lost 2.5%. However, the four “majors” — the S&P 500, Dow Jones Industrial Average, Nasdaq 100 and Russell 2000 — are all still up 4% or more for the year. #-ad_banner-# The key level to watch is underlying support at 2,121 in the S&P 500, which has already been tested and held twice, on Sept. 12 and Oct. 13. A sustained decline below this level would represent a breakdown below the current three-month trading range. It may also clear the way for a deeper sell-off in the weeks ahead. Last week’s strongest sectors were the defensive utilities (1%) and consumer staples (0.8%) groups, while real estate (-3.4%) and health care (-2.8%) were the weakest performers. Real estate was adversely affected by last week’s aggressive rise in long-term interest rates, which I will discuss in more detail later in the report. Market Fails To Rally From Oversold Conditions One way to determine the health of the market’s advance is by watching to see how it reacts to certain indicators and conditions. One of these conditions is… Read More

Restaurants and quick-service dining stocks were some of the hottest in the market over the last several years with high-flyers like Chipotle Mexican Grill (NYSE: CMG) surging and headliner IPOs from companies like Shake Shack (NYSE: SHAK).  #-ad_banner-#Non-existent inflation kept wage growth low and a recovering economy had people ready to enjoy a meal out with the family. But now the industry is facing dual threats from tough price competition against grocery stores and rising labor costs. As shares tumble across the industry, a few leaders are becoming attractive on a valuation basis and could be relatively safe from the… Read More

Restaurants and quick-service dining stocks were some of the hottest in the market over the last several years with high-flyers like Chipotle Mexican Grill (NYSE: CMG) surging and headliner IPOs from companies like Shake Shack (NYSE: SHAK).  #-ad_banner-#Non-existent inflation kept wage growth low and a recovering economy had people ready to enjoy a meal out with the family. But now the industry is facing dual threats from tough price competition against grocery stores and rising labor costs. As shares tumble across the industry, a few leaders are becoming attractive on a valuation basis and could be relatively safe from the restaurant recession. Strong fundamentals and a long-term trend in eating habits may just mean they jump higher when the environment improves. Invest At The Bottom Of The Restaurant Recession Sales at U.S. restaurants grew at the slowest pace since 2009 in the second quarter and that’s not the only headwind facing the industry. Growing wage inflation combined with slower growth in overall inflation is pressuring restaurants, which see much of their operating expenses in labor.  Restaurants have increased prices to cover the higher costs but that’s leading to a big gap in the cost to eat out versus grocery… Read More

According to the Labor Department, there were 5.8 million job openings a few months ago, matching the all-time high set in July 2015. That’s an encouraging sign. Whenever a company puts out a “Help Wanted” ad, it sends a signal that business is good.  #-ad_banner-#Of course, job creation also puts more disposable income in the hands of consumers, which account for two-thirds of the nation’s GDP. So I like the fact that HR departments are busy conducting interviews to fill positions.  But let’s face it, salaries can also be a big financial drain on a business. The average entry-level accountant… Read More

According to the Labor Department, there were 5.8 million job openings a few months ago, matching the all-time high set in July 2015. That’s an encouraging sign. Whenever a company puts out a “Help Wanted” ad, it sends a signal that business is good.  #-ad_banner-#Of course, job creation also puts more disposable income in the hands of consumers, which account for two-thirds of the nation’s GDP. So I like the fact that HR departments are busy conducting interviews to fill positions.  But let’s face it, salaries can also be a big financial drain on a business. The average entry-level accountant earns $48,000 a year. A new recruit for the marketing department will run $45,000. And a new computer hardware engineer will make $66,000.  These are median national figures, with salaries escalating in certain regions and for those with more experience on their resume. And let’s not forget about healthcare, pensions, payroll taxes and bonuses.  Some large companies have tens of thousands of workers on the payrolls, the equivalent of a small city. So you can see how labor is typically one of the biggest expenses chipping away at profit margins. Don’t get me wrong, any organization is only as good… Read More

Third-quarter earnings season has ushered in an important turning point for the S&P 500. With more than 25% of the index reporting, earnings are on pace to increase 0.1% from the same period last year. That 0.1% increase doesn’t exactly jump off the page. But with S&P 500 earnings declining for five consecutive quarters, a return to earnings growth is a positive signal for U.S. stocks. This reversal back to earnings growth is being led by some of America’s most popular brands. #-ad_banner-#For example, JPMorgan Chase’s (NYSE: JPM) per-share earnings of $1.58 beat expectations by 13%. Similarly, Walgreens Boots Alliance’s… Read More

Third-quarter earnings season has ushered in an important turning point for the S&P 500. With more than 25% of the index reporting, earnings are on pace to increase 0.1% from the same period last year. That 0.1% increase doesn’t exactly jump off the page. But with S&P 500 earnings declining for five consecutive quarters, a return to earnings growth is a positive signal for U.S. stocks. This reversal back to earnings growth is being led by some of America’s most popular brands. #-ad_banner-#For example, JPMorgan Chase’s (NYSE: JPM) per-share earnings of $1.58 beat expectations by 13%. Similarly, Walgreens Boots Alliance’s (NYSE: WBA) earnings of $1.07 beat expectations by 8%. While these reports are both excellent in their own right, one company crushed them both. In fact, I am calling it the best earnings report of the season, beating expectations by 100%. In the short run, that should help shares outperform the S&P 500 for the rest of the year. In the long run, this exceptional quarter signals that this market leader still has plenty of growth ahead. A Massive Positive Earnings Surprise Should Trigger Post-Earnings Drift Netflix (Nasdaq: NFLX) should be a familiar name. It virtually created the streaming… Read More

All successful stock market investors have one thing in common. Sure, they may have very different ideas and styles, but this one thing remains true across the board. No matter who you ask, from Warren Buffett to your local investment advisor, they will all agree on this single point.    #-ad_banner-#The point is there is a difference between price and value in the stock market. While the ordinary investor chases price, the winning long-term stock investor understands the importance of value. Understanding value enables you to purchase stocks that are underpriced in the market. These diamonds in the rough are often… Read More

All successful stock market investors have one thing in common. Sure, they may have very different ideas and styles, but this one thing remains true across the board. No matter who you ask, from Warren Buffett to your local investment advisor, they will all agree on this single point.    #-ad_banner-#The point is there is a difference between price and value in the stock market. While the ordinary investor chases price, the winning long-term stock investor understands the importance of value. Understanding value enables you to purchase stocks that are underpriced in the market. These diamonds in the rough are often stocks that will create wealth over the long term. One way to think about the difference between value and price is that value is real worth, while the price is nothing more than how much market participants are willing to pay. In other words, the price is often reflective of the herd mentality. And these numbers are typically far apart.   Investors are often willing to pay far more than stock is worth due to hype and upside price momentum. At the same time, stock prices can also be lower than the actual value of the stock. This is often… Read More

 Knowing that you timed a trade perfectly is one of the best feelings an investor can experience. Even if you’ve had scores of winning trades over the course of your trading career, the rush of making a great call never goes away. Today, I want to talk about a recent victory of mine — not to brag, but because there is something more I want to share with you. If you’re ready to take your trading to the next level, this could be a game changer. #-ad_banner-#Earlier this month, I warned traders to stay away from former market darling Chipotle Mexican Grill… Read More

 Knowing that you timed a trade perfectly is one of the best feelings an investor can experience. Even if you’ve had scores of winning trades over the course of your trading career, the rush of making a great call never goes away. Today, I want to talk about a recent victory of mine — not to brag, but because there is something more I want to share with you. If you’re ready to take your trading to the next level, this could be a game changer. #-ad_banner-#Earlier this month, I warned traders to stay away from former market darling Chipotle Mexican Grill (NYSE: CMG). The company has been desperately spending to restore its reputation and sales after outbreaks of E. coli and other food-borne illnesses at several locations sickened hundreds of people across the country. But a look at the company’s fundamentals (and its empty restaurants) made it clear that a turnaround had so far eluded the company. Despite this, shares were trading at an astronomical 115 times estimated earnings, the highest in the stock’s history. And with the company scheduled to report Q3 earnings on Oct. 25, my models were showing a high likelihood of an earnings miss. Sure enough, when… Read More

I am a huge proponent of following Peter Lynch’s mantra of buying what you know in the stock market. Mr. Lynch intended for this saying to be the impetus that launched further research into the company, rather than as the only reason to make a buy or sell decision in the stock market. When used correctly, it can be a powerful way to create investment ideas to explore for your portfolio.   #-ad_banner-#Taking this saying to heart, I am always looking for the next big thing when it comes to food. As a foodie who loves the American classics such… Read More

I am a huge proponent of following Peter Lynch’s mantra of buying what you know in the stock market. Mr. Lynch intended for this saying to be the impetus that launched further research into the company, rather than as the only reason to make a buy or sell decision in the stock market. When used correctly, it can be a powerful way to create investment ideas to explore for your portfolio.   #-ad_banner-#Taking this saying to heart, I am always looking for the next big thing when it comes to food. As a foodie who loves the American classics such as hamburgers, I keep a close eye on the fast and gourmet burger joints that seem to be popping up everywhere. I was thrilled to see the success of Shake Shack (NYSE: SHAK). Starting out as a humble hot dog cart in Manhattan, the company launched its IPO in January 2015. Given the simple start, the IPO alone was a testament to American capital markets and our never-ending love of fast-food hamburgers. However, Shake Shack continued to surprise and confound critics, with shares more than doubling on their first day of trading. Even more, the stock continued to rocket higher… Read More

Looking at his brokerage statement, Ira’s heart sinks. He once thought his savings were sufficient to last the rest of his life. But his retirement account balances have fallen to levels that make him nervous. He’s now thinking he may need to find part-time work. Ira isn’t alone. Many retirees struggle to generate enough income to pay their bills.   #-ad_banner-#The fault for this lies squarely with the Federal Reserve. Their zero interest-rate policy (ZIRP) has driven investors to lower yielding and higher risk investments. You see, interest rates have declined for more than three decades. But in the last… Read More

Looking at his brokerage statement, Ira’s heart sinks. He once thought his savings were sufficient to last the rest of his life. But his retirement account balances have fallen to levels that make him nervous. He’s now thinking he may need to find part-time work. Ira isn’t alone. Many retirees struggle to generate enough income to pay their bills.   #-ad_banner-#The fault for this lies squarely with the Federal Reserve. Their zero interest-rate policy (ZIRP) has driven investors to lower yielding and higher risk investments. You see, interest rates have declined for more than three decades. But in the last decade, they have been hammered. The long-term average return on 10-Year Treasuries is 6%. That generates about $600 in annual interest income on a $10,000 investment. But with the 10-Year currently yielding just 1.7%, seniors with the same investment today earn a mere $170 a year.   That’s a 72% decline in income. And it’s only going to get worse. The Fed is roughly 350 basis points behind their own schedule for where rates should be. It will take years to normalize rates from current levels, especially as rates in many places are negative. These Policies Have Hurt Retirees… Read More