Four times a year, companies report their financial results and investors score their performance in real time with real money. Those that impress can see shares soar, while those that disappoint may suffer losses and even gap down through investors’ protective sell stops. Bottom line: Earnings season is the most volatile scheduled time of the year for stocks — and traders’ portfolios. As the chief investment strategist for Profitable Trading’s Alpha Trader, it’s my job to steer the ship for my subscribers. Today, I’m going to discuss my objectives for earnings… Read More

Four times a year, companies report their financial results and investors score their performance in real time with real money. Those that impress can see shares soar, while those that disappoint may suffer losses and even gap down through investors’ protective sell stops. Bottom line: Earnings season is the most volatile scheduled time of the year for stocks — and traders’ portfolios. As the chief investment strategist for Profitable Trading’s Alpha Trader, it’s my job to steer the ship for my subscribers. Today, I’m going to discuss my objectives for earnings season and how I manage entry risk for my readers, because many of these are ideas you can apply to your personal portfolio as well. #-ad_banner-# My primary objective is to conservatively manage the downside volatility or risk of new entries during earnings season. Paul Tudor Jones, one of the greatest hedge fund managers of all time, once said, “Risk control is the most important thing in trading.” He has also said, “Don’t focus on making money, focus on… Read More

Turnaround strategies can focus on a variety of factors. Some companies shed lagging divisions, while others pursue acquisitions to jump start growth. For John Chen, the CEO of BlackBerry Ltd. (Nasdaq: BBRY), new product development holds the key. In a recent interview at the Milken Institute Global Conference, Chen said his firm will focus on security, privacy and increasing productivity with its devices. #-ad_banner-#His comments come following a February deal with Google, Inc. (Nasdaq: GOOG) and Amazon.com, Inc. (Nasdaq: AMZN) that will bring hundreds of thousands of new applications to BlackBerry users. Is Chen planning to make more announcements that… Read More

Turnaround strategies can focus on a variety of factors. Some companies shed lagging divisions, while others pursue acquisitions to jump start growth. For John Chen, the CEO of BlackBerry Ltd. (Nasdaq: BBRY), new product development holds the key. In a recent interview at the Milken Institute Global Conference, Chen said his firm will focus on security, privacy and increasing productivity with its devices. #-ad_banner-#His comments come following a February deal with Google, Inc. (Nasdaq: GOOG) and Amazon.com, Inc. (Nasdaq: AMZN) that will bring hundreds of thousands of new applications to BlackBerry users. Is Chen planning to make more announcements that could put the Canadian smartphone company back on top? Or is it just another failed attempt to resuscitate the one-time leader in enterprise services? Chen needs a victory. BlackBerry’s shares have surged and slumped in recent years as potential buyouts, new strategies and new management failed to put the company back on track. Not long ago, BlackBerry was a market leader in the mobile enterprise services category. Now, BlackBerry’s share of the global mobile operating system (OS) market is less than 1% (compared to the 96% market share about evenly controlled by Apple iOS and Android OS devices). Read More

Investors hoping Avon Products Inc. (NYSE: AVP) will stage a big turnaround probably shouldn’t hold their breath. After numerous failed attempts to boost its faltering business, the iconic cosmetics marketer may well be a lost cause. Current media reports about a possible sale of the legacy North American segment are a clear sign of how a once-great company has fallen. Rather than risk an investment in Avon, investors should consider a lesser-known, but far more promising, beauty products retailer: Ulta Salon Cosmetics & Fragrances, Inc. (Nasdaq: ULTA). Founded in 1990, more than a century after Avon, Ulta is seen by… Read More

Investors hoping Avon Products Inc. (NYSE: AVP) will stage a big turnaround probably shouldn’t hold their breath. After numerous failed attempts to boost its faltering business, the iconic cosmetics marketer may well be a lost cause. Current media reports about a possible sale of the legacy North American segment are a clear sign of how a once-great company has fallen. Rather than risk an investment in Avon, investors should consider a lesser-known, but far more promising, beauty products retailer: Ulta Salon Cosmetics & Fragrances, Inc. (Nasdaq: ULTA). Founded in 1990, more than a century after Avon, Ulta is seen by some analysts as the most exciting growth stock in the beauty products industry. During the past three years, annual sales climbed more than 80% to $3.2 billion, net income roughly doubled to $257 million and free cash flow swelled to an all-time high of $148 million. Shares of Ulta rose roughly 70%, well outpacing the broader market. Whereas Avon is built upon a direct sales business model, Ulta takes a more traditional route. Since its founding, the company has established 774 company-owned “big box” retail outlets in 47 states, with plans to open many more in the coming… Read More

Normally this kind of information is kept secret. But due to regulatory requirements for its initial public offering (IPO), this company was forced to reveal the shocking wall street biggest scam. From 2009 to 2013, a secretive high-frequency trading firm named Virtu managed to only have one losing day. In 2014 it notched a perfect record. On its worst day, the firm was making between $800,000 and $1 million a day. It may sound too good to be true. But there it is, laid out in Virtu Financial’s… Read More

Normally this kind of information is kept secret. But due to regulatory requirements for its initial public offering (IPO), this company was forced to reveal the shocking wall street biggest scam. From 2009 to 2013, a secretive high-frequency trading firm named Virtu managed to only have one losing day. In 2014 it notched a perfect record. On its worst day, the firm was making between $800,000 and $1 million a day. It may sound too good to be true. But there it is, laid out in Virtu Financial’s IPO prospectus for any and everyone to see. But Virtu isn’t alone. J.P. Morgan didn’t have a single losing day in 2013. Bank of America notched a perfect performance of its own in the first quarter of 2013. Clearly, Wall Street trades and invests its own money differently than the traditional buy-and-hold strategy its clients typically use. I’ll let you in on one of Wall Street’s best-kept secrets: selling put options. Does that sound scary? Intimidating? If it does, there’s a very good reason for… Read More

As the S&P 500 clings to its all-time high and investors wonder if its 21 times earnings multiple is a little pricey, one market makes it look like a bargain-basement deal. This stock market is trading for a staggering 44 times trailing earnings and has more than doubled in the past year. What’s even more perplexing is that stocks keep making fresh highs even as fundamentals continue to deteriorate. The government has taken notice though, and may soon remove the punch bowl from the party. It may not be long before a correction turns into a full-blown market… Read More

As the S&P 500 clings to its all-time high and investors wonder if its 21 times earnings multiple is a little pricey, one market makes it look like a bargain-basement deal. This stock market is trading for a staggering 44 times trailing earnings and has more than doubled in the past year. What’s even more perplexing is that stocks keep making fresh highs even as fundamentals continue to deteriorate. The government has taken notice though, and may soon remove the punch bowl from the party. It may not be long before a correction turns into a full-blown market crisis. How Quickly Sentiment Can Turn Anyone invested in the Chinese market over the past decade knows how important sentiment is to prices. After a meteoric rise and subsequent crash during the global financial crisis, things seemed to improve quickly as the Shanghai Composite recovered off its late 2008 lows.  Hopes that stock prices would surge again as the world’s second largest economy became a global powerhouse were dashed as the Shanghai Composite lost close to 40% in the five years following its 2009 high.  But then, as the government sought to cool overheating in the property market, investors found… Read More

No matter how you slice it, $50 billion is a big number. That’s how much money Oracle Corp. (NYSE: ORCL) is rumored to be prepared to pay to acquire Salesforce.com, Inc. (NYSE: CRM), a fast-growing provider of customer relationship management software. Why on earth would Oracle make such a bold move? Because it has hit a growth wall. Oracle’s sales are on track to grow just 1%-to-2% in fiscal (May) 2015 and 2016. Acquiring Salesforce.com would instantly boost the top line by nearly 20%. #-ad_banner-#More importantly, it would enable Oracle’s sales force to peddle existing products to the customers doing… Read More

No matter how you slice it, $50 billion is a big number. That’s how much money Oracle Corp. (NYSE: ORCL) is rumored to be prepared to pay to acquire Salesforce.com, Inc. (NYSE: CRM), a fast-growing provider of customer relationship management software. Why on earth would Oracle make such a bold move? Because it has hit a growth wall. Oracle’s sales are on track to grow just 1%-to-2% in fiscal (May) 2015 and 2016. Acquiring Salesforce.com would instantly boost the top line by nearly 20%. #-ad_banner-#More importantly, it would enable Oracle’s sales force to peddle existing products to the customers doing business with Salesforce.com. And it would open the door for Salesforce’s team of sales reps to open up new leads for its customers. “Cross-selling” as they say in industry parlance. Frankly, Oracle isn’t alone. Many large tech companies are facing limited organic growth prospects, and they are using their bulletproof balance sheets to rejuvenate their business platforms. These large companies have already proven their desire to grow through acquisitions: According to Reuters, about 60% of tech mergers and acquisitions (M&A) volume over the past five years is represented by five acquirers: Facebook, Inc. (Nasdaq: FB), Google, Inc. (Nasdaq: GOOG), Oracle,… Read More

All major U.S. indices closed in the red last week, continuing their recent pattern of see-sawing between positive and negative weekly closes. With the exception of the tech-heavy Nasdaq, they remain essentially unchanged for 2015.   It is noteworthy that the weakest of the major indices last week were the small-cap Russell 2000 and Nasdaq 100, which lost 3.1% and 1.3%, respectively. These two market leaders are the very indices that must remain strong to keep the broader market afloat this summer. If they don’t, it is likely that we will see our first real stock… Read More

All major U.S. indices closed in the red last week, continuing their recent pattern of see-sawing between positive and negative weekly closes. With the exception of the tech-heavy Nasdaq, they remain essentially unchanged for 2015.   It is noteworthy that the weakest of the major indices last week were the small-cap Russell 2000 and Nasdaq 100, which lost 3.1% and 1.3%, respectively. These two market leaders are the very indices that must remain strong to keep the broader market afloat this summer. If they don’t, it is likely that we will see our first real stock market correction since the quantitative easing era began years ago. Materials, up 2%, and energy, up 1.1%, were the strongest sectors last week. The two weakest sectors were health care, down 2.3%, and consumer discretionary, which lost 1.7%. #-ad_banner-# In the March 23 Market Outlook, I told readers it was time to protect profits on bullish positions in the consumer discretionary sector, as it had outperformed the S&P 500 by 6% since I identified it as an investment opportunity in… Read More

Robert Shiller is a professor of economics at Yale University, a closely followed housing index is named in his honor, and in 2013, he won a Nobel Prize for his research in economics. Between 2005 and 2007, he was one of the few who sounded the warning bells about a potential bubble in the U.S. and global housing markets. Investors who followed Schiller’s advice avoided real estate at the top of a massive bubble. Investors who ignored him suffered huge losses. Today, he’s warning of a new danger. And if… Read More

Robert Shiller is a professor of economics at Yale University, a closely followed housing index is named in his honor, and in 2013, he won a Nobel Prize for his research in economics. Between 2005 and 2007, he was one of the few who sounded the warning bells about a potential bubble in the U.S. and global housing markets. Investors who followed Schiller’s advice avoided real estate at the top of a massive bubble. Investors who ignored him suffered huge losses. Today, he’s warning of a new danger. And if history is any guide, it pays to listen. “I’m thinking about getting out of the United States somewhat,” said Schiller in a February CNBC interview. “Europe is so much cheaper.” To that effect, he’s already invested in Spanish and Italian indexes. Schiller’s decision is based on particular valuation models, which he developed. He did this by looking at a common ratio, price-to-earnings, in a new light: adjusted for market cycles over a longer period of time. Shiller’s cyclically-adjusted P/E ratio is commonly referred to as the CAPE ratio. Currently, the United States has… Read More

Bear markets are painful but necessary. They rid the market of the “irrational exuberance” that fuels asset bubbles and allows stock pickers to better separate the wheat from the chaff. Bear markets can also take place in specific sectors, as is happening right now in the energy market.  Yet in such lean times, the best companies can actually turn headwinds into tailwinds. That’s exactly what’s happening at Helmerich & Payne, Inc. (NYSE: HP). #-ad_banner-#H&P owns and operates one of the world’s largest fleets of drilling rigs (primarily land-based). The rigs are typically contracted out to exploration and production companies looking… Read More

Bear markets are painful but necessary. They rid the market of the “irrational exuberance” that fuels asset bubbles and allows stock pickers to better separate the wheat from the chaff. Bear markets can also take place in specific sectors, as is happening right now in the energy market.  Yet in such lean times, the best companies can actually turn headwinds into tailwinds. That’s exactly what’s happening at Helmerich & Payne, Inc. (NYSE: HP). #-ad_banner-#H&P owns and operates one of the world’s largest fleets of drilling rigs (primarily land-based). The rigs are typically contracted out to exploration and production companies looking to extract oil and gas from various shale formations in the United States. Like the rest of the sector, H&P is beginning to feel the effects of low energy prices. In its recent earnings report, the company saw a 1% decline in revenue to $883 million and 14% drop in net income to $150 million. Underlying these declines were shrinking active rig counts and falling dayrates, the daily amount H&P can charge for the use of its rigs. There was also a huge drop in utilization, or the percentage of active rigs contracted out. In Q2, utilization was just 68%,… Read More

What are the characteristics of good business leaders? Honesty, financial responsibility and a focus on rewarding shareholders are surely key attributes. In my mind, management acumen and integrity is probably the most overlooked  aspect that underpins a company’s success. Here’s a closer look at how bad management can sour your investment.    Freeport-McMoRan, Inc. (NYSE: FCX) is a $24 billion (in market value) diversified commodities producer. It owns copper and gold mines along with oil and gas properties. #-ad_banner-#The slump in both metals and oil prices has been a double whammy for this company, but commodity prices will fluctuate through… Read More

What are the characteristics of good business leaders? Honesty, financial responsibility and a focus on rewarding shareholders are surely key attributes. In my mind, management acumen and integrity is probably the most overlooked  aspect that underpins a company’s success. Here’s a closer look at how bad management can sour your investment.    Freeport-McMoRan, Inc. (NYSE: FCX) is a $24 billion (in market value) diversified commodities producer. It owns copper and gold mines along with oil and gas properties. #-ad_banner-#The slump in both metals and oil prices has been a double whammy for this company, but commodity prices will fluctuate through cycles. The key is how Freeport-McMoRan handled the slump, which has negatively impacted investors’ returns. In the first quarter of 2015, the company announced a huge write-down in the value of its oil and gas assets and announced it was considering selling or spinning parts of that division off to “unlock shareholder value.” The truth: the company’s foray into oil and gas was a disaster from the start. A decision to acquire McMoRan Exploration, a former subsidiary, was an unwise move. Even though crude oil prices were high in 2012, McMoRan Exploration was in trouble and running out of cash. Read More