They’ve officially become more popular than dividends. Top companies are shelling out these extra payments in droves. The goal is to give shareholders more bang for their investment buck than dividends alone. They are a favorite of Warren Buffett and many other billionaire investors. There’s a good chance you’ve received one of these “tax-free dividends” before and didn’t even realize it. That’s because they’re buried in a company’s financial statement. But since 1982, when the SEC enacted a rule called 10b-18 as a measure of boosting the economy, these “tax-free dividends” have become a favored form of payment among shareholders. Read More

They’ve officially become more popular than dividends. Top companies are shelling out these extra payments in droves. The goal is to give shareholders more bang for their investment buck than dividends alone. They are a favorite of Warren Buffett and many other billionaire investors. There’s a good chance you’ve received one of these “tax-free dividends” before and didn’t even realize it. That’s because they’re buried in a company’s financial statement. But since 1982, when the SEC enacted a rule called 10b-18 as a measure of boosting the economy, these “tax-free dividends” have become a favored form of payment among shareholders. And companies have responded. Just look at the chart below to see how companies have been paying shareholders since 1982, especially since 2005 (hint: it hasn’t been just with traditional dividends)… Now, not every company pays these “tax-free dividends,” but the easiest way to identify which ones are making “tax-free dividend” payments is to explain the payment method itself. As I mentioned, its roots trace back to 1982. It was an awful time for the U.S. economy. We were in a recession, and still suffering from the aftershocks of gas rationing and oil shortages of the 1970s. Loans… Read More

Contrarian investing means going against the crowd, and nowhere in the market today is there a crowd bigger than the oil and energy stock naysayers. With West Texas Intermediate (WTI) crude oil trading around $50 per barrel, there are headlines almost daily forecasting prices moving into the $30s and even $20s. With oil prices down more than 50% from their highs last summer, energy stocks severely lagged the broader market for the better part of the past year. It seems no one is interested in them anymore, but this is the time when contrarian ears perk up. #-ad_banner-#In the early… Read More

Contrarian investing means going against the crowd, and nowhere in the market today is there a crowd bigger than the oil and energy stock naysayers. With West Texas Intermediate (WTI) crude oil trading around $50 per barrel, there are headlines almost daily forecasting prices moving into the $30s and even $20s. With oil prices down more than 50% from their highs last summer, energy stocks severely lagged the broader market for the better part of the past year. It seems no one is interested in them anymore, but this is the time when contrarian ears perk up. #-ad_banner-#In the early stages of a recovery from a bear market, not every group, even within a single sector, looks healthy enough to rally. However, oil services stocks have shown resilience over the past few weeks and some are even starting to move above resistance levels. Despite the daily news of a global supply gut, the shutting down of oil rigs as crude prices tumbled seems to be a recipe for a big bottleneck in supply one day. And even though global economies are still sputtering, they are improving, and with them, demand for energy. We are currently seeing what may be an… Read More

Tech stocks have been on a strong run for the past few quarters, and many of them now look pricey. Yet the sector still offers attractive bargains. Right now, Western Digital Corp. (Nasdaq: WDC) is arguably the best value around. Western Digital makes one of tech’s least glamorous products: hard disk drives. These data storage units are found in devices such as PCs, laptops, tablets and video cameras. It’s a huge market and for Western Digital, a highly profitable one. During the past three fiscal years, sales rose at nearly a 17% pace to $15.1 billion, while earnings more than… Read More

Tech stocks have been on a strong run for the past few quarters, and many of them now look pricey. Yet the sector still offers attractive bargains. Right now, Western Digital Corp. (Nasdaq: WDC) is arguably the best value around. Western Digital makes one of tech’s least glamorous products: hard disk drives. These data storage units are found in devices such as PCs, laptops, tablets and video cameras. It’s a huge market and for Western Digital, a highly profitable one. During the past three fiscal years, sales rose at nearly a 17% pace to $15.1 billion, while earnings more than doubled to $6.68 per share. Western Digital’s stock has been trouncing the S&P 500, as the chart below shows. Yet in spite of big stock gains, Western Digital is not fully-valued. Shares of the firm still only trade for about 14 times trailing 12-month earnings, and the forward price-to-earnings (P/E) ratio isn’t much above 10. Those are exceptionally cheap numbers next to the Nasdaq’s trailing and forward P/E ratios of 24 and 19, respectively. Oftentimes, stocks are underpriced because the market just doesn’t see all that much future growth potential. In Western Digital’s case, the long-term concern may… Read More

For four years I was a derivatives trader for a billion-dollar trading firm in Chicago. One important lesson I learned: pay attention to the biggest traders in the game. Professional traders go to great lengths to hide everything they do. It’s no different than poker — you don’t want your opponent to know your hand. But right now, one of the most powerful financial institutions in the world is broadcasting its hand to the world. And this isn’t just any old hand… It’s the biggest trade it has ever made — valued at more than $1.2 trillion. If history is… Read More

For four years I was a derivatives trader for a billion-dollar trading firm in Chicago. One important lesson I learned: pay attention to the biggest traders in the game. Professional traders go to great lengths to hide everything they do. It’s no different than poker — you don’t want your opponent to know your hand. But right now, one of the most powerful financial institutions in the world is broadcasting its hand to the world. And this isn’t just any old hand… It’s the biggest trade it has ever made — valued at more than $1.2 trillion. If history is any guide, there’s a lot of money to be made from reading the cards right. Let me explain. Since 1900, there have been a total of 32 bull markets in U.S. stocks. During this 114-year period, the current bull market is the fourth longest, currently lasting 75 months. The market bottomed out at 666 in March 2009. It has since surged more than 200% and is now trading above 2,000. In the meantime, international stocks have struggled. The chart below depicts this disparity, showing the S&P 500 versus the Vanguard FTSE All-World ex-US ETF (NYSE: VEU) over the last five… Read More

“The world is on the brink of a demographic milestone,” claims the World Health Organization (WHO). According to WHO, children have outnumbered adults since the beginning of recorded history. But this situation is poised to change. For the first time, seniors over age 65 will soon outnumber children under 5. Two factors primarily account for this shift: declining fertility rates and medical advances prolonging life spans. This demographic shift creates a big opportunity for select health care firms. #-ad_banner-#Against the backdrop of the increasing need for medical care due to longer life expectancies, a trend is emerging. U.S. hospitals appear… Read More

“The world is on the brink of a demographic milestone,” claims the World Health Organization (WHO). According to WHO, children have outnumbered adults since the beginning of recorded history. But this situation is poised to change. For the first time, seniors over age 65 will soon outnumber children under 5. Two factors primarily account for this shift: declining fertility rates and medical advances prolonging life spans. This demographic shift creates a big opportunity for select health care firms. #-ad_banner-#Against the backdrop of the increasing need for medical care due to longer life expectancies, a trend is emerging. U.S. hospitals appear to be losing patients to ambulatory and homecare services. Over the past five years, hospital inpatient stays have declined 4% while the home health care market has grown. And it looks like this trend will continue. According to a 2014 report by Transparency Market Research, the global home health care market is expected to explode to $303.6 billion in 2020, up from $176.1 billion in 2013, growing at a compound rate of more than 8% per year. One company that should be a direct beneficiary of the growth in home health care is Kentucky-based Almost Family (NASDAQ:… Read More

All major U.S. stock indices finished slightly higher last week except for the tech-heavy Nasdaq 100, which lost 0.4%, posting its second consecutive negative weekly close. As I have been stating for the past month, relative outperformance by technology is necessary to drive the broader market higher. If this recent weakness continues, it is likely to trigger a correction. From a sector standpoint, last week’s modest advance was led by defensive utilities and consumer staples, which gained 2.1% and 1.5%, respectively. However, my own ETF-based metric shows that the biggest contraction in sector bet-related assets over… Read More

All major U.S. stock indices finished slightly higher last week except for the tech-heavy Nasdaq 100, which lost 0.4%, posting its second consecutive negative weekly close. As I have been stating for the past month, relative outperformance by technology is necessary to drive the broader market higher. If this recent weakness continues, it is likely to trigger a correction. From a sector standpoint, last week’s modest advance was led by defensive utilities and consumer staples, which gained 2.1% and 1.5%, respectively. However, my own ETF-based metric shows that the biggest contraction in sector bet-related assets over the past one-week and one-month periods actually came from consumer staples. This suggests that last week’s strength in the sector is likely to be short lived and may lead to some outright weakness and relative underperformance versus the S&P 500 later this quarter. #-ad_banner-# Technology: Contracting Investor Assets a Red Flag In last week’s Market Outlook, I pointed out that the Nasdaq 100 was testing underlying support at its October uptrend line, which I identified as a critical inflection… Read More

We’re only a quarter of the way through 2015 and our Alpha Trader picks have been delivering incredible gains for our readers. Today, I want to show you eight stocks that have broken out since the beginning of the year. Some of these winners are long-term positions that are making big runs, while others are fresh entries that have soared since we purchased them. Many are still buys today with plenty of upside left, but either way they prove a point — Alpha Trader can help you crush the market. Take a look at the chart below. It shows the… Read More

We’re only a quarter of the way through 2015 and our Alpha Trader picks have been delivering incredible gains for our readers. Today, I want to show you eight stocks that have broken out since the beginning of the year. Some of these winners are long-term positions that are making big runs, while others are fresh entries that have soared since we purchased them. Many are still buys today with plenty of upside left, but either way they prove a point — Alpha Trader can help you crush the market. Take a look at the chart below. It shows the total returns several of our top picks have generated thus far in 2015. As you can see, these eight stocks are crushing it in 2015. Their average year-to-date return is a whopping 31%, compared to the S&P 500’s 1% return. That’s a difference of 30 percentage points in just a few months. These gains are not only impressive, but they show the Alpha Trader system is doing exactly what it is designed to do: find the strongest stocks in the market with less risk than buy-and-hold investing. See, by using a proprietary combination of two of the market’s most effective… Read More

The chickens are coming home to roost. After a remarkable eight-month rally in the dollar, many U.S. firms are finally feeling the pinch. In the near-term, investors need to brace for a cautious earnings season. Yet, as I’ll explain in a moment, there are still ample reasons for long-term optimism, especially when the dollar loses momentum and/or the global economy starts to rebound in earnest. The strong dollar, which blunts the competitiveness of American firms, both at home and abroad, will have a clear impact on first-quarter results and forward outlooks. According to FactSet Research, 85 companies… Read More

The chickens are coming home to roost. After a remarkable eight-month rally in the dollar, many U.S. firms are finally feeling the pinch. In the near-term, investors need to brace for a cautious earnings season. Yet, as I’ll explain in a moment, there are still ample reasons for long-term optimism, especially when the dollar loses momentum and/or the global economy starts to rebound in earnest. The strong dollar, which blunts the competitiveness of American firms, both at home and abroad, will have a clear impact on first-quarter results and forward outlooks. According to FactSet Research, 85 companies in the S&P 500 have already warned of a Q1 profit shortfall, while just 16 companies have pre-announced that results will be better than expected. If that figure of 16 holds, it will be the lowest number since the first quarter of 2006. While much has been made of the dimming profit picture for energy companies, the pain is also building for industrial firms, many of which have global sales exposure. You can see the growing headwinds for this sector by glancing at the recent monthly reports from the Institute of Supply Management.  Is The Manufacturing Sector Headed for… Read More

Legendary banker J.P. Morgan was once asked by a reporter how the stock market will do. “It will fluctuate,” was his terse reply. But J.P. Morgan might have changed his response if he were alive today. Over the last three years,  the market has slowly marched upward with very few swings along the way. A look at a popular gauge of market choppiness (the volatility index, commonly referred to as the fear gauge, or the “VIX”) shows extremely low volatility in the equity markets since 2012. In tandem with the drop in volatility has been a slump in… Read More

Legendary banker J.P. Morgan was once asked by a reporter how the stock market will do. “It will fluctuate,” was his terse reply. But J.P. Morgan might have changed his response if he were alive today. Over the last three years,  the market has slowly marched upward with very few swings along the way. A look at a popular gauge of market choppiness (the volatility index, commonly referred to as the fear gauge, or the “VIX”) shows extremely low volatility in the equity markets since 2012. In tandem with the drop in volatility has been a slump in trading volume, which has been steadily falling since the financial crisis. For discount brokerages like TD Ameritrade Holding Corp. (NYSE: AMTD) and E*TRADE Financial Corp. (Nasdaq: ETFC), low trading volume is bad for business. TD Ameritrade earns more than 40% of its revenue from trading commissions; for E*TRADE, commissions are 25% of revenue. Yet J.P. Morgan’s insight on markets still remains relevant. Financial crises (such as  oil shocks) happen from time to time. And when these phenomena appear, trading volume and market volatility will rebound off of current low levels. #-ad_banner-#In the first part of 2015, as investors… Read More

You’ll find the best investment opportunities among companies in clear need of a tune-up. Back in 2012, aircraft builder The Boeing Co. (NYSE: BA) was in seemingly dire straits. Its newest jumbo jet (the Dreamliner) was proving tricky to build and management didn’t actually produce a trouble-free plane until the 66th Dreamliner left the factory. At that point, shares looked ripe for take-off and have more than doubled since I profiled this Dow component. If you are a subscriber to our premium service Total Yield, then you’re likely familiar with Boeing’s progress. Nearly a year ago, Nathan Slaughter,… Read More

You’ll find the best investment opportunities among companies in clear need of a tune-up. Back in 2012, aircraft builder The Boeing Co. (NYSE: BA) was in seemingly dire straits. Its newest jumbo jet (the Dreamliner) was proving tricky to build and management didn’t actually produce a trouble-free plane until the 66th Dreamliner left the factory. At that point, shares looked ripe for take-off and have more than doubled since I profiled this Dow component. If you are a subscriber to our premium service Total Yield, then you’re likely familiar with Boeing’s progress. Nearly a year ago, Nathan Slaughter, who pens the newsletter, noted that Boeing’s smoother-running production lines and swelling backlog have enabled the company to return huge sums of money to shareholders. He added Boeing to his Total Yield portfolio last summer and is now reaping the gains. I’ve recently taken a fresh look at Boeing and think this company — and its Total Yield potential — may be even better than Nathan realizes. Simply put, Boeing’s cash flow in 2018, 2019 and beyond, will likely blow past even the most bullish Wall Street forecasts. And credit goes to tough steps management is taking right now. Re-Examining… Read More