There isn’t a lot of mystery around what Carl Icahn looks for in an investment opportunity. He wants to own good companies with underperforming management teams. Typically, he can build a large enough position to have a major influence. Then he pushes for share buybacks, board representation, or simply a change in the corner office. Curiously, a major target for Icahn has none of those options at hand. Cash-strapped Chesapeake Energy Corp. (NYSE: CHK) was once known for a controversial CEO, as I noted in 2010. Yet fresh management has been in place for more than two years, and by… Read More

There isn’t a lot of mystery around what Carl Icahn looks for in an investment opportunity. He wants to own good companies with underperforming management teams. Typically, he can build a large enough position to have a major influence. Then he pushes for share buybacks, board representation, or simply a change in the corner office. Curiously, a major target for Icahn has none of those options at hand. Cash-strapped Chesapeake Energy Corp. (NYSE: CHK) was once known for a controversial CEO, as I noted in 2010. Yet fresh management has been in place for more than two years, and by all indications, Icahn is a fan of the company’s new leaders. In the second quarter of 2013, Icahn’s investment firm acquired 60 million shares (at an average price of $19). He bought another 6.7 million shares in the next quarter (at an average price of $23 a share). Of course oil prices subsequently collapsed, making such a large investment in an oil and gas producer seem foolhardy in hindsight. You would think that Icahn would decide that he’d made a big mistake and cash out his large stake in Chesapeake. Instead, he bought another 6.6 million shares (at $17.65 a… Read More

If you’re like me, then you never want to worry about money again… whether that means merely being financially independent or becoming filthy rich is beside the point. And while blue-chip stocks, index funds and dividend payers can keep the income flowing, the truth is these securities will take decades to amass real wealth. You’ll need something else if you’re after a seven-figure bank account: a “swing for the fences” strategy. So today I’m going to show you how to position yourself for “out-of-the-park” gains without jeopardizing your safer investments. I… Read More

If you’re like me, then you never want to worry about money again… whether that means merely being financially independent or becoming filthy rich is beside the point. And while blue-chip stocks, index funds and dividend payers can keep the income flowing, the truth is these securities will take decades to amass real wealth. You’ll need something else if you’re after a seven-figure bank account: a “swing for the fences” strategy. So today I’m going to show you how to position yourself for “out-of-the-park” gains without jeopardizing your safer investments. I call it the “20% solution.” The idea behind it is simple: dedicate a portion of your portfolio to aggressive growth stocks. Let me explain. My daughter is in private school. In a few years she may go to college. Eventually she’ll need a car, an apartment and someday a wedding. All of which cost money. For her and the rest of my family, I’ve allocated 80% of my portfolio to safe, reliable assets. These are securities that I know will allow me to keep living comfortably and adequately provide for my family. We want this money to grow hands-free. So… Read More

There’s a little-known indicator that’s making a small group of investors a lot of money. I call this indicator the “Alpha Score,” because it consistently beats the market and often with less risk than buy-and-hold investing. It can flag exactly which stocks are about to jump double and triple digits in the coming days… weeks… and months. #-ad_banner-# I’ll tell you more about the Alpha Score in a second, but just know that the indicator can range from 0 to 200. The higher… Read More

There’s a little-known indicator that’s making a small group of investors a lot of money. I call this indicator the “Alpha Score,” because it consistently beats the market and often with less risk than buy-and-hold investing. It can flag exactly which stocks are about to jump double and triple digits in the coming days… weeks… and months. #-ad_banner-# I’ll tell you more about the Alpha Score in a second, but just know that the indicator can range from 0 to 200. The higher the number, the more potential the stock has. For example, you’ve probably never heard of Westmoreland Coal (NASDAQ: WLB). It operates six surface coal mines and two power-generating units in the western United States. The company looked promising when we recommended it on Dec. 18, 2013. Westmoreland had sold 95% of its future production under long-term contracts, and the market for coal looked stable. But that’s not what attracted us to the stock. What most investors didn’t know about WLB is that it had an Alpha Score of 158. Less than 1% of stocks have a score that high at… Read More

Although large American firms were able to post a strong rebound in sales after the financial crisis, top-line growth for many firms has recently slowed considerably. More rapid profit gains are partially attributable to rock-bottom interest rates, which have helped lower interest expenses.  In the new paradigm of low sales growth, companies are cutting costs and seeking to increase operating efficiency. The trend has provided a strong tailwind for companies in business outsourcing services as corporations look to outsource jobs that can be handled more cheaply by someone else. Research firm IDC estimates sales growth for the industry… Read More

Although large American firms were able to post a strong rebound in sales after the financial crisis, top-line growth for many firms has recently slowed considerably. More rapid profit gains are partially attributable to rock-bottom interest rates, which have helped lower interest expenses.  In the new paradigm of low sales growth, companies are cutting costs and seeking to increase operating efficiency. The trend has provided a strong tailwind for companies in business outsourcing services as corporations look to outsource jobs that can be handled more cheaply by someone else. Research firm IDC estimates sales growth for the industry at a compound annual rate of 5.6%, to $209 billion, over the five years through 2017. In fact, shares of Automatic Data Processing, Inc. (Nasdaq: ADP), have surged 45% over the last two years. There is strong demand for the payroll services of this outsourcing market leader, which is reflected in strong investor sentiment. #-ad_banner-#With a market capitalization of roughly $40 billion, twice the size of the next largest competitor, ADP dominates business payroll services and holds nearly 7% of global market share with 2014 revenue of $12.2 billion. However, ADP is almost entirely focused in payroll management, where IDC… Read More

In the world of income investing, dividends reign supreme. Treasuries and CDs are offering historically low yields and are no longer considered the ultra-safe cash generators that they once were. In a previous issue of StreetAuthority Daily, I detailed the raw power of dividend investing (here), but this isn’t the whole story. #-ad_banner-#You see, there’s a little-known group of stocks that offer huge dividend payouts, but their yields are not displayed to the public on financial websites like Yahoo! Finance or Morningstar. This phenomenon is due to a glitch in the way the financial… Read More

In the world of income investing, dividends reign supreme. Treasuries and CDs are offering historically low yields and are no longer considered the ultra-safe cash generators that they once were. In a previous issue of StreetAuthority Daily, I detailed the raw power of dividend investing (here), but this isn’t the whole story. #-ad_banner-#You see, there’s a little-known group of stocks that offer huge dividend payouts, but their yields are not displayed to the public on financial websites like Yahoo! Finance or Morningstar. This phenomenon is due to a glitch in the way the financial media reports certain companies’ financial information. We call this group of stocks “Hidden High Yielders.” And if you know where to look, you can find companies yielding three, six… even seven times more than the yield posted on financial websites. For Hidden High Yielders, their true payout is actually much higher because there are dozens of supplemental dividends that go unreported each quarter. But by “unreported,” I don’t mean some secret way of transferring cash to a select group of well-connected insiders. These extra payments are dished out openly and uniformly… Read More

Whether it’s possible to beat the market has been the subject of much research and debate by academics and practitioners. Perhaps you’ve heard of the Efficient Market Hypothesis (EMH), which was developed around the 1960s. This academic theory states that a stock’s current price reflects all known information about that stock. This means stocks are always perfectly priced, and price changes occur efficiently as new information becomes available. Academics will tell you that, based on this theory, it’s impossible to beat the market by picking stocks. #-ad_banner-# Yet, people do. We know… Read More

Whether it’s possible to beat the market has been the subject of much research and debate by academics and practitioners. Perhaps you’ve heard of the Efficient Market Hypothesis (EMH), which was developed around the 1960s. This academic theory states that a stock’s current price reflects all known information about that stock. This means stocks are always perfectly priced, and price changes occur efficiently as new information becomes available. Academics will tell you that, based on this theory, it’s impossible to beat the market by picking stocks. #-ad_banner-# Yet, people do. We know Warren Buffett has beaten the market for more than 50 years, as just one example. In response to the EMH, Buffett argues that there are “wide discrepancies between price and value in the marketplace.” But EMH proponents argue that Buffett is an anomaly. It turns out researchers have uncovered a number of anomalies to the EMH. They have found that stocks with low price-to-earnings (P/E) ratios or PEG ratios outperform the market over the long run, and they named this the “value anomaly.” Small caps generally outperform large caps, which results in the “size anomaly.” Stocks that have beaten… Read More

All major U.S. indices finished lower last week, reversing the previous week’s advance (minus the Dow), as the market continues the unusual one week up, one week down pattern that has dominated most of 2015. As a result, the broader market S&P 500 is only up 2.4% almost halfway through the year despite a lot of day-to-day volatility that has frightened investors. #-ad_banner-# All sectors of the S&P 500 gave up some ground last week, led lower by energy, down 2.3%, and industrials, which lost 1.9%. My own ETF asset flow-based… Read More

All major U.S. indices finished lower last week, reversing the previous week’s advance (minus the Dow), as the market continues the unusual one week up, one week down pattern that has dominated most of 2015. As a result, the broader market S&P 500 is only up 2.4% almost halfway through the year despite a lot of day-to-day volatility that has frightened investors. #-ad_banner-# All sectors of the S&P 500 gave up some ground last week, led lower by energy, down 2.3%, and industrials, which lost 1.9%. My own ETF asset flow-based metric shows that the biggest outflow of investor assets over the past one-week and one-month periods came from energy. This reversed the strong inflows I pointed out earlier this year, which fueled the sector’s strength and relative outperformance in March and April. Recent outflows warn of more weakness in energy, at least over the near term. Bigger picture, however, my metric also shows that the energy sector currently comprises just 14% of all ETF-related sector bets, compared to 20% historically. This indicates that, despite recent weakness, energy is still historically very under-invested amid favorable conditions for more relative… Read More

In April 2015, I recommended that my Top 10 Stocks readers buy Kraft Foods (Nasdaq: KRFT). Within 24 hours of my recommendation, the company received a takeover offer from The H. J. Heinz Company — backed by legendary investor Warren Buffett’s Berkshire Hathaway and Brazilian private equity giant 3G Capital. Powered by this top-tier endorsement as well as a considerable premium to market on the offer, Kraft soared 45% in two weeks following my recommendation. It was one of the most dramatic wins I’ve ever had the pleasure to be involved with. Read More

In April 2015, I recommended that my Top 10 Stocks readers buy Kraft Foods (Nasdaq: KRFT). Within 24 hours of my recommendation, the company received a takeover offer from The H. J. Heinz Company — backed by legendary investor Warren Buffett’s Berkshire Hathaway and Brazilian private equity giant 3G Capital. Powered by this top-tier endorsement as well as a considerable premium to market on the offer, Kraft soared 45% in two weeks following my recommendation. It was one of the most dramatic wins I’ve ever had the pleasure to be involved with. #-ad_banner-#But the truth is that my readers and I nearly missed out on the opportunity. Fortunately I paid attention to the right metrics. The fact is, the timing of my investment was complete serendipity. I had no inkling that a buyout was on tap for Kraft. Had I waited 24 hours to release my April issue, we would have missed the stock’s double-digit bounce entirely. But looking back, there were a number of indicators — some of which were downright glaring — that showed Kraft was ripe for this kind of lavish attention. Read More

For long-term investors, certain characteristics can make a stock virtually irresistible. Key attributes include a compelling portfolio of indispensable products, dominant market share, consistently strong cash flow and clear avenues for future growth. Indeed, such virtues are common in what StreetAuthority refers to as “Forever Stocks.” The term applies to shares of firms that are so financially sound and perform so reliably over the long haul, that investors can feel reasonably safe owning shares for decades. I see such promise in Amphenol Corp. (NYSE: APH), a top producer of electronic and fiber optic connectors, cable and interconnect systems. Amphenol displays… Read More

For long-term investors, certain characteristics can make a stock virtually irresistible. Key attributes include a compelling portfolio of indispensable products, dominant market share, consistently strong cash flow and clear avenues for future growth. Indeed, such virtues are common in what StreetAuthority refers to as “Forever Stocks.” The term applies to shares of firms that are so financially sound and perform so reliably over the long haul, that investors can feel reasonably safe owning shares for decades. I see such promise in Amphenol Corp. (NYSE: APH), a top producer of electronic and fiber optic connectors, cable and interconnect systems. Amphenol displays nearly all of the strengths that long-term investors covet. And with a couple relatively small tweaks, this company could attain the status of Forever Stock. In terms of financial performance, the firm could hardly be more reliable. As the following table shows, revenue, earnings and free cash flow all grew significantly in every full year but one since 2005. Sales, for example, have been compounding by about 13% annually. Any declines were limited to the Great Recession, and in all cases strong growth resumed within a year. Industry-leading profit margins were a consistent theme throughout the period. Amphenol Corp. Financial… Read More