Would you subscribe to an investment strategy that only works a couple of times every decade? That’s the question that short sellers need to ask themselves. These contrarian investors, who borrow shares with an intention to buy them back later at a cheaper price, rarely have the wind at their backs. (For a more extensive description of short selling, please read this.) The first few years after the dot-com boom ended, short sellers had a nice run. They racked up great gains in 2008 as well. That’s it… Two ideal windows of opportunity in… Read More

Would you subscribe to an investment strategy that only works a couple of times every decade? That’s the question that short sellers need to ask themselves. These contrarian investors, who borrow shares with an intention to buy them back later at a cheaper price, rarely have the wind at their backs. (For a more extensive description of short selling, please read this.) The first few years after the dot-com boom ended, short sellers had a nice run. They racked up great gains in 2008 as well. That’s it… Two ideal windows of opportunity in 15 years. And we’re not cherry-picking the data. In the 1980s, the S&P 500 lost value just once (1981). And in the 1990s, the index also had just one down year (1990).     Short selling is so tough simply because, over the long haul, stock markets inexorably rise in value. #-ad_banner-#But that doesn’t mean short selling has no role to play. Savvy investors will tell you that by adding selective short positions to an otherwise long-oriented portfolio, you can boost your risk-adjusted returns. The key is to take a “long/short”… Read More

Until less than a decade ago, there was no real need to address the forty-year ban on exporting crude oil from the United States. Over the 38 years to 2008, the country had seen an average annual decline of 1.7% in production and was only exporting a very small amount to Canada. That all changed with the shale drilling revolution as oil production jumped 74% to 8.68 million barrels a day over the six years through 2014. #-ad_banner-#Lifting the oil export ban in 2015 could add $1.8 trillion to our nation’s annual GDP, according to a 2014 study by NERA… Read More

Until less than a decade ago, there was no real need to address the forty-year ban on exporting crude oil from the United States. Over the 38 years to 2008, the country had seen an average annual decline of 1.7% in production and was only exporting a very small amount to Canada. That all changed with the shale drilling revolution as oil production jumped 74% to 8.68 million barrels a day over the six years through 2014. #-ad_banner-#Lifting the oil export ban in 2015 could add $1.8 trillion to our nation’s annual GDP, according to a 2014 study by NERA Economic Consulting, a nonpartisan consulting group. The resulting acceleration in economic growth could create an additional 230,000-to-380,000 jobs in the five years to 2020. With such strong benefits to the economy, why is it taking Washington so long to repeal the antiquated ban on crude exports? Besides environmentalists that argue lifting of the ban would result in higher domestic production, the fight to keep the ban in place is being fought by one industry, in particular, because it could mean disaster for its profitability. The industry may soon lose that fight and you might consider protecting your portfolio before it… Read More

More than three years have passed since the last official stock market correction (entailing a pullback of at least 10%). But deep selloffs have intermittently struck in just about every corner of the market, sometimes producing phenomenal buying opportunities. One of the best: iconic firearms maker Smith & Wesson Holding Corp. (Nasdaq: SWHC). Smith & Wesson was a casualty of the “gun bubble” that popped almost a year ago, triggering a selloff in gun-industry stocks that nearly halved the company’s market value. While asset bubbles are often a function of euphoria, fear was the initial positive catalyst in this case. Read More

More than three years have passed since the last official stock market correction (entailing a pullback of at least 10%). But deep selloffs have intermittently struck in just about every corner of the market, sometimes producing phenomenal buying opportunities. One of the best: iconic firearms maker Smith & Wesson Holding Corp. (Nasdaq: SWHC). Smith & Wesson was a casualty of the “gun bubble” that popped almost a year ago, triggering a selloff in gun-industry stocks that nearly halved the company’s market value. While asset bubbles are often a function of euphoria, fear was the initial positive catalyst in this case. Many feared that the Obama administration would make firearms harder to obtain, which supported rapid growth of gun sales and massive gains for firearm stocks in recent years. At Smith & Wesson, sales more than doubled to a record $627 million in fiscal (April) 2014 from $237 million in 2007 (the year before Obama took office). Between his January 2009 inauguration and May 2014, the firm’s stock rose more than sixfold. But gun demand finally crashed, sinking Smith & Wesson’s sales, profits and stock price along with it. However, the company is in the midst of an impressive turnaround in… Read More

$71.8 billion. That’s the amount of cash this one sector in the S&P 500 paid stockholders in 2007. Put another way, this industry accounted for nearly one-third of all dividends in the entire S&P 500. However, the financial crash took its toll on this industry — all but eliminating these hefty shareholder payouts in recent years. As a result, investors went elsewhere for income. But now the tides have turned. These companies have mounted an amazing comeback and recently reclaimed their spot as the market’s top dividend-payers. Read More

$71.8 billion. That’s the amount of cash this one sector in the S&P 500 paid stockholders in 2007. Put another way, this industry accounted for nearly one-third of all dividends in the entire S&P 500. However, the financial crash took its toll on this industry — all but eliminating these hefty shareholder payouts in recent years. As a result, investors went elsewhere for income. But now the tides have turned. These companies have mounted an amazing comeback and recently reclaimed their spot as the market’s top dividend-payers. In the next 12 months, this group is slated to distribute $56.5 billion in payments. That’s a full $1 billion more than the runner-up: technology. I’m talking about the financial sector. You see, these companies are not free to raise their dividends whenever they like. New regulations implemented after the financial crisis force them to seek permission from the Federal Reserve. Well, permission granted. Having successfully completed the gauntlet of tests, the nation’s biggest banks were given the green light to share their growing wealth with… Read More

For the past five years, investing in agricultural commodities has not been for the faint of heart. After rebounding quickly from the Great Recession on heavy demand from emerging markets, record harvests and slowing Chinese demand led to a general downtrend in prices, with volatile spikes in 2012 and 2014. This year, we’ve seen corn and wheat prices fall on an upgrade in production forecasts by the USDA and lowered expectations for export demand. Beyond strong expectations for this year’s harvest, a strong dollar is making U.S. crops relatively more expensive on the global market. But could this… Read More

For the past five years, investing in agricultural commodities has not been for the faint of heart. After rebounding quickly from the Great Recession on heavy demand from emerging markets, record harvests and slowing Chinese demand led to a general downtrend in prices, with volatile spikes in 2012 and 2014. This year, we’ve seen corn and wheat prices fall on an upgrade in production forecasts by the USDA and lowered expectations for export demand. Beyond strong expectations for this year’s harvest, a strong dollar is making U.S. crops relatively more expensive on the global market. But could this be a repeat of prior years when prices spiked due to higher demand or lower-than-expected supply? Beyond long-term catalysts to support prices, there are several near-term issues that could drive prices for corn and other grains higher this year.  Population Explosion Supports Grain Demand  It may have taken more than 200,000 years for the global population to reach 1 billion, but it took only 123 years to grow that number to 2 billion. In 2012, that number hit 7 billion, and the UN predicts we’ll add our next billion by 2026, a span of just 14 years. #-ad_banner-#Beyond the absolute… Read More

In recent weeks, news reports have suggested that music streaming service Spotify is in the process of raising another $400 million. The proposed cash injection values the firm at a rumored $8.4 billion. That’s a seemingly rich valuation, but these days, fast-growing companies that are transforming industries are meriting such interest in the venture capital community. Yet Spotify’s valuation got me thinking: Why is it worth $8.4 billion, while publicly-traded rival Pandora Media, Inc. (NYSE: P) is valued at less than $4 billion? In early 2014, Pandora had the market value that Spotify now seems to merit. What gives? Surely… Read More

In recent weeks, news reports have suggested that music streaming service Spotify is in the process of raising another $400 million. The proposed cash injection values the firm at a rumored $8.4 billion. That’s a seemingly rich valuation, but these days, fast-growing companies that are transforming industries are meriting such interest in the venture capital community. Yet Spotify’s valuation got me thinking: Why is it worth $8.4 billion, while publicly-traded rival Pandora Media, Inc. (NYSE: P) is valued at less than $4 billion? In early 2014, Pandora had the market value that Spotify now seems to merit. What gives? Surely a closer look is warranted.  To understand the distinctive market valuations, a few issues need to be covered. First, Pandora is public, which means that its valuation is solely a reflection of supply and demand for shares. The company may be worth a lot more, (as I’ll note in a moment regarding analyst sentiment), but a potential change to its royalty deal has kept demand for shares at a low point. Spotify, which doesn’t yet need to cater to the fickle whims of public markets, can garner a valuation that solely pleases a small group of investors: its… Read More

All major U.S. indices closed higher last week following a loss the week earlier, as the market continued what has thus far been a choppy but relatively flat 2015. One exception has been the tech-heavy Nasdaq 100, which led last week, closing 4.3% higher, and is now up 7.1% for the year.  As I have been stating here for some time, the market is vulnerable to an overdue summer correction as the Federal Reserve gets closer to an inevitable interest rate hike. However, as long as perennial market leaders like the Nasdaq 100 and small-cap Russell… Read More

All major U.S. indices closed higher last week following a loss the week earlier, as the market continued what has thus far been a choppy but relatively flat 2015. One exception has been the tech-heavy Nasdaq 100, which led last week, closing 4.3% higher, and is now up 7.1% for the year.  As I have been stating here for some time, the market is vulnerable to an overdue summer correction as the Federal Reserve gets closer to an inevitable interest rate hike. However, as long as perennial market leaders like the Nasdaq 100 and small-cap Russell 2000 continue to outperform the broader market, this year’s modest overall advance can continue in the near term. #-ad_banner-# All sectors of the S&P 500 finished in positive territory last week, led by technology and consumer discretionary.  Although energy was the weakest sector, my own ETF-based metric shows it had the biggest inflow of sector bet-related investor assets over the past one-month and three-month periods. This suggests the likelihood of more outright strength and… Read More

I am a chartered market technician with 20 years of experience managing money. In that time, I’ve found that trend following is the basis for profit, no matter the investment system. When I became the chief investment strategist of Profitable Trading’s Alpha Trader service, I started employing my technical models to help determine which stocks were ripe for picking. #-ad_banner-#The main way I do this is by determining a stock’s Alpha Score. In a nutshell, every stock has one, and it… Read More

I am a chartered market technician with 20 years of experience managing money. In that time, I’ve found that trend following is the basis for profit, no matter the investment system. When I became the chief investment strategist of Profitable Trading’s Alpha Trader service, I started employing my technical models to help determine which stocks were ripe for picking. #-ad_banner-#The main way I do this is by determining a stock’s Alpha Score. In a nutshell, every stock has one, and it can range from 0 to 200 — the higher the score, the better. It is based on two proven indicators — one technical and one fundamental — and it provides a way to rank every stock in the market from best to worst. But finding the best Alpha Score stocks to recommend isn’t as easy as simply hitting a button and sending out a list of the three-to-five stocks at the top of the list. Each week, I start out with dozens of securities that meet the system’s criteria. From there,… Read More

Sometimes, nothing improves a company’s outlook like a smart, well-timed acquisition. When done right, these deals can transform companies with unexciting prospects into compelling growth stories. Mid-size defense firm Harris Corp. (NYSE: HRS) is set to make such a transformation this summer, when its $4.8-billion buyout of industry peer Exelis, Inc. (NYSE: XLS) is scheduled to close. Harris, known for secure tactical radio communication systems, wasn’t in trouble before the deal announcement, but it certainly wasn’t in expansion mode, either. By fiscal (June) 2014, annual sales had actually returned to the recession level of about $5 billion, despite a brief… Read More

Sometimes, nothing improves a company’s outlook like a smart, well-timed acquisition. When done right, these deals can transform companies with unexciting prospects into compelling growth stories. Mid-size defense firm Harris Corp. (NYSE: HRS) is set to make such a transformation this summer, when its $4.8-billion buyout of industry peer Exelis, Inc. (NYSE: XLS) is scheduled to close. Harris, known for secure tactical radio communication systems, wasn’t in trouble before the deal announcement, but it certainly wasn’t in expansion mode, either. By fiscal (June) 2014, annual sales had actually returned to the recession level of about $5 billion, despite a brief spike to nearly $6 billion a few years earlier. Earnings per share of $4.95 in 2014  weren’t much better than 2010 and 2011’s totals of $4.28 and $4.60, respectively. Harris has been a good dividend source, more than doubling its payout since 2010. If not for that, the stock probably wouldn’t have been able to deliver solid gains over the past five years. In all likelihood, shares were driven up mainly by income investors seeking higher yields than were typically available in bonds. To avoid shedding market value as the Federal Reserve raises interest rates, Harris will need… Read More

Over the past half decade, large biotechnology stocks have delivered robust gains across the board. These companies sell a range of very popular drugs and have been generating massive profits. At the other end of the spectrum, small biotechs, most of which are still in their developmental stage, have been a hit-or-miss proposition, with a lot more hits and misses. Yet one group of small biotechs has been on fire, and gains look set to continue. Investors are only now coming to realize that the young, recently-public companies working on gene therapy aren’t a flash in the pan, but a… Read More

Over the past half decade, large biotechnology stocks have delivered robust gains across the board. These companies sell a range of very popular drugs and have been generating massive profits. At the other end of the spectrum, small biotechs, most of which are still in their developmental stage, have been a hit-or-miss proposition, with a lot more hits and misses. Yet one group of small biotechs has been on fire, and gains look set to continue. Investors are only now coming to realize that the young, recently-public companies working on gene therapy aren’t a flash in the pan, but a vanguard in the fight against many maladies. Since I profiled these stocks a year ago, they have exploded higher. On average, they have risen 191% over the past 12 months. (For more background, please read the April 2014 article.)  The catalysts for these stocks are quite clear: either they have announced impressive clinical advances, or secured the endorsement (and financial backing) of the big drug makers. For example: In December 2014, bluebird bio, Inc. (Nasdaq: BLUE) announced that patients in early stage trial were given the company’s LentiGlobin355 drug, and their need for chronic blood transfusions simply ceased. Read More