No one seems to know what is causing the market volatility of late.  Interest rate jitters have been limiting gains for months, but recent economic news doesn’t seem to point to an imminent increase by the Federal Reserve. Geopolitical worries surrounding Greece have not really hit asset values significantly either, and global monetary policy is still supportive of growth. #-ad_banner-#Despite there being no obvious cause, market volatility has jumped since the beginning of March, and the S&P 500 is off its recent high by almost 3%.  We have been here before though. The market dove 9.9% from April through June… Read More

No one seems to know what is causing the market volatility of late.  Interest rate jitters have been limiting gains for months, but recent economic news doesn’t seem to point to an imminent increase by the Federal Reserve. Geopolitical worries surrounding Greece have not really hit asset values significantly either, and global monetary policy is still supportive of growth. #-ad_banner-#Despite there being no obvious cause, market volatility has jumped since the beginning of March, and the S&P 500 is off its recent high by almost 3%.  We have been here before though. The market dove 9.9% from April through June of 2012 before continuing its ascent. Asset prices sold off 7.4% from mid-September through mid-October of last year, as well. Both of these sell-offs started as little more than routine profit-taking and were over within a short period.  This sell-off appears no different than prior ones, with global monetary stimulus and U.S. economic growth promising to support asset prices. Stocks have soared since the end of the recession, but valuations are not nearly as high as prior peaks.  Despite strong gains in stocks since the market’s 2009 low, there’s really little reason to believe that any sell-off will accelerate into… Read More

The housing market is currently giving mixed signals. New Home sales are rising, but sales of existing homes have been disappointing. One of the key headwinds is the issue of affordability. #-ad_banner-#There are only 1.9 million homes for sale, as many potential sellers decide to keep their house off the market for now. That lack of availability is driving prices, up 7.5% over the last year. The National Association of Realtors’ Chief Economist Lawrence Yun called this an “unhealthy” price increase. Perhaps the housing recovery will merely be slow-and-steady, rather than the more robust rebound that many have been anticipating. Read More

The housing market is currently giving mixed signals. New Home sales are rising, but sales of existing homes have been disappointing. One of the key headwinds is the issue of affordability. #-ad_banner-#There are only 1.9 million homes for sale, as many potential sellers decide to keep their house off the market for now. That lack of availability is driving prices, up 7.5% over the last year. The National Association of Realtors’ Chief Economist Lawrence Yun called this an “unhealthy” price increase. Perhaps the housing recovery will merely be slow-and-steady, rather than the more robust rebound that many have been anticipating. Millennials have yet to embrace home ownership in the same way as prior generations, and weak wage growth is an impediment for buyers seeking to move to bigger homes. Rising prices and weak availability of homes for sale may mean that people decide to stay in their current home and remodel instead of looking for other options in the market. This is contributing to an aging stock of homes with roughly two-thirds of U.S. houses more than 27 years old. This could all turn out to be good news for home improvement retailers. Sales for these firms are… Read More

An improved economy and low oil prices have done wonders for airline stocks. The value of these stocks has surged in recent years, at times beyond reasonable levels. I’m especially concerned about the risk of a sharp share price correction for Allegiant Travel Co. (Nasdaq: ALGT), a small passenger airliner with a fleet of 70 aircraft and annual revenue of $1.1 billion. #-ad_banner-#Allegiant has a sound business model, pursing flight routes in underserved U.S. cities. It also generates a robust income stream from ancillary sources like priority boarding; in-flight food and beverage service; and hotel and ground transport bookings. The… Read More

An improved economy and low oil prices have done wonders for airline stocks. The value of these stocks has surged in recent years, at times beyond reasonable levels. I’m especially concerned about the risk of a sharp share price correction for Allegiant Travel Co. (Nasdaq: ALGT), a small passenger airliner with a fleet of 70 aircraft and annual revenue of $1.1 billion. #-ad_banner-#Allegiant has a sound business model, pursing flight routes in underserved U.S. cities. It also generates a robust income stream from ancillary sources like priority boarding; in-flight food and beverage service; and hotel and ground transport bookings. The company’s growth strategy has led to double-digit revenue gains in nine of the past 10 years. Equally important, the company retains a strong balance sheet.   Allegiant is clearly an investor favorite, based on the more than 277% gain in its stock over the past three years. However, shares are now alarmingly overvalued. Allegiant’s price-to-cash flow ratio, for example, has ballooned to more than 12, compared with ratios of about 7-to-10 for rivals like JetBlue Airways Corp. (Nasdaq: JBLU), Delta Air Lines, Inc. (NYSE: DAL) and United Continental Holdings, Inc. (NYSE: UAL). Shares are also exceptionally pricey by… Read More

Bottom fishing in beaten-down equities is a popular strategy. The lower a stock goes, the greater its value may seem. A big decline can be especially appealing when it occurs in well-known, brand-name stocks.  I caution you on this approach, though. Relative strength (RS) studies have shown that underperforming stocks tend to remain underperformers. A stock’s RS can range from 0 to 100, and the lower the number, the worse its performance relative to its peers over the past six months. I have warned of the dangers of investing in stocks with low RS in the past. Trends tend to… Read More

Bottom fishing in beaten-down equities is a popular strategy. The lower a stock goes, the greater its value may seem. A big decline can be especially appealing when it occurs in well-known, brand-name stocks.  I caution you on this approach, though. Relative strength (RS) studies have shown that underperforming stocks tend to remain underperformers. A stock’s RS can range from 0 to 100, and the lower the number, the worse its performance relative to its peers over the past six months. I have warned of the dangers of investing in stocks with low RS in the past. Trends tend to persist, and trying to guess when and where a downtrend will stop can wind up being very costly. No doubt you’ve all heard the phrase, “Never try to catch a falling knife.” #-ad_banner-#But I understand the temptation, especially when we’re talking about big-name stocks that everyone knows and are often covered by the media. Personally, I like to keep emotion out of my investing decisions. That is why I rely on a stock-ranking system that combines an equity’s relative strength and a key fundamental metric to give it a score ranging from 0 to 200. I call it… Read More

At the height of the recent financial crisis, consumers discovered that banks were in no mood to make any sort of loans. In response, they sought out a new kind of bank, known as a peer-to-peer lender. Banks now likely rue the day they turned those consumers away. Peer-to-peer lending represented just $26 million worth of loans in 2009. Today, it’s a $1.7 billion business and could be a $10 billion business within five years. Peer-to-peer lending is just one of the radical changes taking place in the banking landscape. For example, banks issued 90% of all mortgages in 2009. Read More

At the height of the recent financial crisis, consumers discovered that banks were in no mood to make any sort of loans. In response, they sought out a new kind of bank, known as a peer-to-peer lender. Banks now likely rue the day they turned those consumers away. Peer-to-peer lending represented just $26 million worth of loans in 2009. Today, it’s a $1.7 billion business and could be a $10 billion business within five years. Peer-to-peer lending is just one of the radical changes taking place in the banking landscape. For example, banks issued 90% of all mortgages in 2009. Today, that figure has dropped to 58%. And small businesses, which are at the backbone of the U.S. economy, are now going out of their way to get loan quotes from alternative finance providers. #-ad_banner-#Gone are the days when local banks cultivated deep relationships with local businesses and citizens. Many of those banks have been gobbled up in an industrywide consolidation, and borrowers are quickly discovering new alternatives. Frankly, it’s easy to see why both consumers and businesses are flocking toward the upstarts. Not only do the “non-banks” offer slightly better loan rates, but they are also much more likely… Read More

All major U.S. stock indices finished in the red last week, led lower by the tech-heavy Nasdaq 100, which lost 2.8%. Throughout the past month, I have been saying that as long as technology continued to outperform, the overall market was likely to continue grinding higher. Accordingly, I view last week’s relative weakness by the Nasdaq 100 as an early warning of potential weakness in April. All sectors of the S&P 500 fell last week, with financials, technology and industrials hit hardest. The energy sector held up relatively well. Read More

All major U.S. stock indices finished in the red last week, led lower by the tech-heavy Nasdaq 100, which lost 2.8%. Throughout the past month, I have been saying that as long as technology continued to outperform, the overall market was likely to continue grinding higher. Accordingly, I view last week’s relative weakness by the Nasdaq 100 as an early warning of potential weakness in April. All sectors of the S&P 500 fell last week, with financials, technology and industrials hit hardest. The energy sector held up relatively well. #-ad_banner-# My own asset-flow-based metric continues to indicate that this beleaguered sector is historically under-invested. This suggests an emerging opportunity to overweight the sector in upcoming months and look for buying opportunities in undervalued energy assets. Dow Theory Non-Confirmation Remains in Force In the March 2 Market Outlook, I pointed out that the new closing high in the Dow Jones Industrial Average on Feb. 20 had not yet been confirmed by a corresponding new closing high in the Dow Jones Transportation Average. I said… Read More

Understanding this one catalyst could dramatically change where and how you invest… Right now, it’s the foundation of the largest wealth transfer in history. More money will change hands over the coming years from this trend than the annual sales of Wal-Mart, Kroger, Costco, Target and Sears combined. It’s revolutionized entire industries, created new markets and saved entire corporations. Take the baby food industry for example. In the early 40s and 50s this very catalyst helped launch a relatively unknown company, called the Freemont Canning Company, into a global icon. The company — now better known as Gerber — went… Read More

Understanding this one catalyst could dramatically change where and how you invest… Right now, it’s the foundation of the largest wealth transfer in history. More money will change hands over the coming years from this trend than the annual sales of Wal-Mart, Kroger, Costco, Target and Sears combined. It’s revolutionized entire industries, created new markets and saved entire corporations. Take the baby food industry for example. In the early 40s and 50s this very catalyst helped launch a relatively unknown company, called the Freemont Canning Company, into a global icon. The company — now better known as Gerber — went from selling just 590,000 jars of baby food per year to nearly two million jars per day. By 1955, Gerber’s sales swelled to 1.8 billion jars of baby food per year. It sold more jars of baby food in one year than in the company’s first 18 years combined. It’s also what helped boost Buster Brown’s shoe sales. The company went from selling $6 million worth of merchandise in 1949 to more than $30 million in sales in less than nine years — a 400% increase. Nobody understood this trend better than a man named Lee… Read More

While the Nasdaq Composite index recently rebounded to levels last seen in 2000, investors shouldn’t celebrate: as a group, technology stocks provided essentially zero return for 15 years. But that’s only true of investments that tracked the tech-laden Nasdaq. Results were far better in another very unique tech fund: the Fidelity Select IT Services Portfolio Fund (NYSE: FBSOX). #-ad_banner-#Those who put money in the mutual fund at the peak of the tech boom on March 10, 2000, have since seen their investments advance nearly 11% annually, compared to less than 1% a year for the Nasdaq. That makes FBSOX the… Read More

While the Nasdaq Composite index recently rebounded to levels last seen in 2000, investors shouldn’t celebrate: as a group, technology stocks provided essentially zero return for 15 years. But that’s only true of investments that tracked the tech-laden Nasdaq. Results were far better in another very unique tech fund: the Fidelity Select IT Services Portfolio Fund (NYSE: FBSOX). #-ad_banner-#Those who put money in the mutual fund at the peak of the tech boom on March 10, 2000, have since seen their investments advance nearly 11% annually, compared to less than 1% a year for the Nasdaq. That makes FBSOX the top tech fund since the bubble burst, according to Reuters. As the following chart shows, FBSOX chugged along as the Nasdaq soared into the stratosphere and then plunged back to earth. The fund was eventually caught in the downdraft, but managed to elude the worst of the meltdown. This fund is the classic tortoise versus the hare. It avoids buzzworthy tech stocks, many of which are prone to boom-and-bust cycles and instead focuses on another type of tech stock: the behind-the-scenes, unsung heroes of the IT revolution. For example, this fund’s third-largest holding, Cognizant Technology Solutions Corp. (Nasdaq:… Read More

#-ad_banner-#Although the market action was a bit choppy in the first quarter of 2015, one fact is inescapable: the major indices are all within a few percentage points of their all-time highs. Yet, for hundreds of stocks in those indices, there is little reason for good cheer. Share prices are far from the 52-week high and aren’t  on many investor’s “buy list” right now. For contrarian investors, an unloved status can spell opportunity. Today’s out-of-favor stocks often become tomorrow’s in-favor stocks. They just need headwinds to morph into tailwinds. With that in mind, I’ve spent the past… Read More

#-ad_banner-#Although the market action was a bit choppy in the first quarter of 2015, one fact is inescapable: the major indices are all within a few percentage points of their all-time highs. Yet, for hundreds of stocks in those indices, there is little reason for good cheer. Share prices are far from the 52-week high and aren’t  on many investor’s “buy list” right now. For contrarian investors, an unloved status can spell opportunity. Today’s out-of-favor stocks often become tomorrow’s in-favor stocks. They just need headwinds to morph into tailwinds. With that in mind, I’ve spent the past week analyzing the market’s laggards. Many of them toil in the beleaguered energy sector, and even though oil prices have staged an impressive recent mini-rally, I remain concerned about what will happen when our nation’s oil storage tanks finally hit capacity in coming months. So, I focused my research on companies outside this sector. Here are three stocks that appear to have hit bottom and have catalysts for a rebound. Rayonier Advanced Materials, Inc. (NYSE: RYAM) Investors love to hear about spin-offs. Shares of the parent company typically post nice gains after spin-off plans are announced, and shares of… Read More