While old media stocks like Viacom (Nasdaq: VIAB), Walt Disney (NYSE: DIS) and 21st Century Fox (Nasdaq: FOXA) were hit with bad news and huge losses last week, Netflix (Nasdaq: NFLX) scored three straight record closing highs before succumbing to profit-taking on Friday. Shares have been on a tear, more than doubling in the past four months. I’m sure plenty of investors are kicking themselves for missing the boat, but it’s not too late. When a stock makes a new all-time high, especially a high-momentum growth stock like NFLX, it tends to keep moving higher. And Friday’s sell-off provides an… Read More

While old media stocks like Viacom (Nasdaq: VIAB), Walt Disney (NYSE: DIS) and 21st Century Fox (Nasdaq: FOXA) were hit with bad news and huge losses last week, Netflix (Nasdaq: NFLX) scored three straight record closing highs before succumbing to profit-taking on Friday. Shares have been on a tear, more than doubling in the past four months. I’m sure plenty of investors are kicking themselves for missing the boat, but it’s not too late. When a stock makes a new all-time high, especially a high-momentum growth stock like NFLX, it tends to keep moving higher. And Friday’s sell-off provides an attractive short-term entry level. Netflix is being driven by strong growth domestically and abroad. On July 15, the video streaming giant reported better-than-expected second-quarter earnings of $0.06 per share on revenues of $1.64 billion. #-ad_banner-# At the end of the quarter, its subscriber count stood at 65.6 million globally, 31% higher than the same quarter last year. Both domestic and international subscriber gains were well ahead of estimates, and the company introduced its services in Australia and New Zealand. Now it has its sights set on Japan and Europe. The Japanese launch is set for Sept. 2. And in Europe,… Read More

Just a week after successfully rebounding from its 200-day moving average, the S&P 500 collapsed right back into this widely watched major trend proxy at the end of last week for the third time since late June.   The index’s inability to sustain a rally from a major support level like this is problematic. It suggests a lack of bullish conviction by investors and may be the precursor to the first real corrective decline in years.   #-ad_banner-# All major U.S. indices closed in the red last week, led lower by the small-cap Russell 2000, which lost 2.6%. Two weeks… Read More

Just a week after successfully rebounding from its 200-day moving average, the S&P 500 collapsed right back into this widely watched major trend proxy at the end of last week for the third time since late June.   The index’s inability to sustain a rally from a major support level like this is problematic. It suggests a lack of bullish conviction by investors and may be the precursor to the first real corrective decline in years.   #-ad_banner-# All major U.S. indices closed in the red last week, led lower by the small-cap Russell 2000, which lost 2.6%. Two weeks ago, I pointed out an emerging bearish chart pattern in this market-leading index that continues to target a decline to 1,175, which is 2.6% below Friday’s close. Defensive Utilities Stand Out In last week’s report, I said utilities were on my radar screen as a potential sector to overweight this quarter. It was actually the only sector of the S&P 500 to post a positive close last week, gaining 0.9%. Utilities now appear poised for more strength and relative outperformance.  The chart of the Utilities Select Sector SPDR ETF (NYSE: XLU) displays a bullish inverse head-and-shoulders pattern that emerged as… Read More

Everyone makes mistakes, especially when it comes to investing. Some errors simply come with the territory. Others are so detrimental they could be costing you upward of three, eight, even as much as 21 times the returns you would have earned by not making them. Today’s essay is dedicated to identifying two of the deadliest investing mistakes you might not know you’re making. #-ad_banner-# Mistake #1: Growth stocks are not the fastest or safest way to grow your retirement. Ask ten investors the best way to grow your wealth in the… Read More

Everyone makes mistakes, especially when it comes to investing. Some errors simply come with the territory. Others are so detrimental they could be costing you upward of three, eight, even as much as 21 times the returns you would have earned by not making them. Today’s essay is dedicated to identifying two of the deadliest investing mistakes you might not know you’re making. #-ad_banner-# Mistake #1: Growth stocks are not the fastest or safest way to grow your retirement. Ask ten investors the best way to grow your wealth in the stock market, and I’m willing to bet nine of them will tell you the answer is long-term growth stocks. After all, growth stocks are plowing their cash back into the company, so surely they must be growing faster, right? Wrong. The truth is that dividend stocks — not growth stocks — have proven to be the best tools for building a robust nest egg. Not only have dividend stocks grown faster over time, they’ve also shown considerably more resilience in bear markets than growth stocks. In fact, Ned… Read More

An inexpensively-priced stock isn’t always a bargain. A thorough fundamental analysis is essential to spot the chance that overlooked problems will make it a perilous value trap. As an example, take the venerable property & casualty (P&C) insurer and long-time Dow component The Travelers Companies Inc. (NYSE: TRV). A price-to-earnings (P/E) ratio of just under 10 was low enough to make it the cheapest stock in the Dow Jones Industrial Average until very recently. (Faltering oil and gas giant Chevron Corp. (NYSE: CVX) now holds that distinction, with a P/E of a little over 9.) #-ad_banner-# But you can’t interpret… Read More

An inexpensively-priced stock isn’t always a bargain. A thorough fundamental analysis is essential to spot the chance that overlooked problems will make it a perilous value trap. As an example, take the venerable property & casualty (P&C) insurer and long-time Dow component The Travelers Companies Inc. (NYSE: TRV). A price-to-earnings (P/E) ratio of just under 10 was low enough to make it the cheapest stock in the Dow Jones Industrial Average until very recently. (Faltering oil and gas giant Chevron Corp. (NYSE: CVX) now holds that distinction, with a P/E of a little over 9.) #-ad_banner-# But you can’t interpret TRV’s low valuation as a buying opportunity without confirmation. After all, revenue growth has been below-average for several years and profit margins have stagnated in the face of a persistently soft market for P&C policies. The key question now: is TRV withering under tough industry conditions, or is it still a fundamentally robust enterprise that’s substantially underpriced? Market sentiment suggests the former. TRV’s stock is up solidly in the past few years, but not nearly as much as those of major rivals such as Markel Corporation (NYSE: MKL), The Hanover Insurance Group Inc. (NYSE: THG) and HCC Insurance Holdings Inc. Read More

Here at StreetAuthority, we repeatedly stress the importance of compounding. It’s the best way we know to leverage small investments into major gains — if you have the patience to ride them out over the long haul. You’ll often find such opportunities among small cap stocks. According to Morningstar, small caps outperform large-caps by two percentage points per year over the long term. #-ad_banner-# One of my favorite compounders is Heico Corporation (NYSE: HEI), a mid-cap aerospace and defense company which has a compounding record that blows away its peer group. Over the past 20 years, this… Read More

Here at StreetAuthority, we repeatedly stress the importance of compounding. It’s the best way we know to leverage small investments into major gains — if you have the patience to ride them out over the long haul. You’ll often find such opportunities among small cap stocks. According to Morningstar, small caps outperform large-caps by two percentage points per year over the long term. #-ad_banner-# One of my favorite compounders is Heico Corporation (NYSE: HEI), a mid-cap aerospace and defense company which has a compounding record that blows away its peer group. Over the past 20 years, this stock has delivered 22% annualized returns. Heico operates two business segments: its Flight Support Group, with makes parts and components for aircraft accounts for roughly two-thirds of revenue; and its Electronic Technologies Group, which makes electrical components in the aviation, defense, and healthcare industries. Heico’s past success can be tied to a terrific management team, which has identified and successfully integrated a string of acquisitions. Acquisitions are tough to get right. The Harvard Business Review notes that 70% to 90% of acquisitions fail to meet revenue and profitability targets that were laid out prior to the acquisition. On Heico’s most… Read More

#-ad_banner-#I’m fortunate to live in a city with generally strong economic activity and new business development. Still, even in the shadow of new construction, there are businesses dying off.  A few days ago I stopped in for lunch at a local place, only to see an “Out of Business” sign on the door. A few miles away, a well-known chain restaurant finally threw in the towel and moved out of its location as well. I also noticed across the street, yet another chain-restaurant location is now vacant.  Still, we have an abundance of casual dining options in my city. And… Read More

#-ad_banner-#I’m fortunate to live in a city with generally strong economic activity and new business development. Still, even in the shadow of new construction, there are businesses dying off.  A few days ago I stopped in for lunch at a local place, only to see an “Out of Business” sign on the door. A few miles away, a well-known chain restaurant finally threw in the towel and moved out of its location as well. I also noticed across the street, yet another chain-restaurant location is now vacant.  Still, we have an abundance of casual dining options in my city. And just like in nature, the cruel reality is that some businesses will feast while others starve. The weakest must find a way to differentiate themselves and attract customers — or risk extinction.  That’s true everywhere — and it’s especially important to keep in mind when investing. I’ve been thinking about this a great deal lately as I re-read the profound insights of Michael Porter, the legendary business school professor at Harvard. He is a leading authority on competitive strategies and when he’s not teaching classes or writing books, he mentors newly-appointed CEOs at large corporations. Frankly, the key messages Porter… Read More

The odds of a September interest rate hike surged to 52% on Wednesday, up from 38% at the beginning of the week. The jump — which came on the back of surprisingly strong U.S. service-sector growth and comments by Atlanta Federal Reserve President Dennis Lockhart — caused some rate-sensitive stocks… Read More

Too often, companies are painted with a broad brush, and are mistakenly lumped in with seemingly comparable businesses that don’t quite measure up. Case in point: a misreading of the core business model of Ameriprise Financial Inc. (NYSE: AMP). The market still thinks of this company as an old-line insurer. But a business model transformation suggests it’s time for a fresh look. No longer a traditional insurance company, this company is now a money management juggernaut, with about 9,700 financial advisors and more than $800 billion in assets under management (AUM). But the market is ignoring this transformation. Today Ameriprise… Read More

Too often, companies are painted with a broad brush, and are mistakenly lumped in with seemingly comparable businesses that don’t quite measure up. Case in point: a misreading of the core business model of Ameriprise Financial Inc. (NYSE: AMP). The market still thinks of this company as an old-line insurer. But a business model transformation suggests it’s time for a fresh look. No longer a traditional insurance company, this company is now a money management juggernaut, with about 9,700 financial advisors and more than $800 billion in assets under management (AUM). But the market is ignoring this transformation. Today Ameriprise sports a price-to-earnings (P/E) ratio of 14.5, which is nearly 24% below the industry average of 19. #-ad_banner-# Why the discrepancy? Ameriprise is still widely compared with insurers because life insurance and annuities were the firm’s core offerings when it was spun off from American Express Co. (NYSE: AXP) a decade ago. On average, companies focusing on such products are only trading for around 13 times earnings, thanks to growth-stifling headwinds such as low interest rates and poor pricing power. But in this case, misperception is the mother of opportunity. At some point, the market will realize its mistake and… Read More

#-ad_banner-#Famed value investor Benjamin Graham once quipped: “When you can buy a dollar for 40 cents, you don’t have to worry about what the stock market is doing.”  That simple credo perfectly sums up the theory of modern value investing — only purchase stocks that are trading at a sizeable discount to their intrinsic value. Graham’s mantra is similar to that age-old Wall Street mantra to “buy low and sell high.” It sounds simple enough, but it is deceptively complex in practice.  The truth is value investing can often require leaning against the consensus view and looking for pockets of… Read More

#-ad_banner-#Famed value investor Benjamin Graham once quipped: “When you can buy a dollar for 40 cents, you don’t have to worry about what the stock market is doing.”  That simple credo perfectly sums up the theory of modern value investing — only purchase stocks that are trading at a sizeable discount to their intrinsic value. Graham’s mantra is similar to that age-old Wall Street mantra to “buy low and sell high.” It sounds simple enough, but it is deceptively complex in practice.  The truth is value investing can often require leaning against the consensus view and looking for pockets of value in less glamorous sectors and not-so-obvious stocks. Other times they’re right in front of your face the whole time.  Below, I profile two companies that I think they may just be the most undervalued stocks in America. Cisco Systems, Inc. (Nasdaq: CSCO) Cisco is among the market’s best-known stocks. It’s a dominant firm in a high-margin business. During the past five fiscal years, Cisco’s revenue rose from $36 billion in 2009 to $47 billion in fiscal 2014 — an increase of 31%. Despite the rise in sales, earnings have held steady. Under normal… Read More