When NXP Semiconductors (NASDAQ: NXPI) announced the takeover of Freescale Semiconductor (NYSE: FSL) at the beginning of the month, investors seemed more than a little pleased. Shares of FSL jumped 11.8%, while NXPI blasted 17.3% higher on news.  This was just the latest run in NXPI’s powerful advance that has seen shares more than double since my system signaled it was a “buy” in December 2013. The combined company will be the No. 1 automotive semiconductor supplier, and the merger also allows NXPI to diversify across other markets. Moreover, the $40 billion, nearly all-cash deal speaks to management’s… Read More

When NXP Semiconductors (NASDAQ: NXPI) announced the takeover of Freescale Semiconductor (NYSE: FSL) at the beginning of the month, investors seemed more than a little pleased. Shares of FSL jumped 11.8%, while NXPI blasted 17.3% higher on news.  This was just the latest run in NXPI’s powerful advance that has seen shares more than double since my system signaled it was a “buy” in December 2013. The combined company will be the No. 1 automotive semiconductor supplier, and the merger also allows NXPI to diversify across other markets. Moreover, the $40 billion, nearly all-cash deal speaks to management’s confidence in the health of its company and the industry. #-ad_banner-#​In this extremely low interest rate environment, cash-rich companies have been forced to find alternative methods to grow their money, which has helped spur M&A activity. From corporations to individuals, everyone is searching for better yields. Most investors focus on dividend yields, but there is another yield that is even more important that most investors overlook. I call it the “hidden yield,” and if you are ignoring it, you’re missing roughly half of the cash companies distribute to investors. NXPI doesn’t pay a dividend, yet it has a… Read More

Between the plunge in oil prices and economic sanctions, the Russian economy is taking a one-two punch. Even as stocks markets in the United States, Europe and Japan are hitting new highs, the Market Vectors Russia ETF (NYSE: RSX) has plummeted 19% over the last year.   #-ad_banner-#Such periods of distress can also spell opportunity. Recall the investing maxim: be fearful when others are greedy and greedy when others are fearful. That’s the tack being pursued by Exxon Mobil Corp. (NYSE: XOM), which has taken note of a huge opportunity in lower asset… Read More

Between the plunge in oil prices and economic sanctions, the Russian economy is taking a one-two punch. Even as stocks markets in the United States, Europe and Japan are hitting new highs, the Market Vectors Russia ETF (NYSE: RSX) has plummeted 19% over the last year.   #-ad_banner-#Such periods of distress can also spell opportunity. Recall the investing maxim: be fearful when others are greedy and greedy when others are fearful. That’s the tack being pursued by Exxon Mobil Corp. (NYSE: XOM), which has taken note of a huge opportunity in lower asset prices, a weak ruble and one of the biggest energy finds on the planet.   Putting The Shale Revolution To Shame In the United States, the revolution in shale exploration and drilling has been the big story in energy for the last several years. However, surging production growth has led to oversupply and falling crude prices.     Even as oil prices plummet, long-term energy demand remains intact. In its 2035 energy outlook, BP forecasts 0.8% annualized demand growth of liquids, to 4.97 trillion tons of oil equivalent. Compare that to production growth of  0.7% annually to… Read More

  In the past 15 years, the obituary for the traditional “brick-and-mortar” retailer seems to have been written many times over. However, a decade-and-a-half later, online shopping only accounts for just 6%-7% of all retail sales.   #-ad_banner-#To be sure, e-commerce has clearly altered the face of retail, just not as expected. Rather than making physical store locations obsolete, an online presence has become a complementary part of the retail landscape. These days, the successful brick-and-mortar retailer is one that can deftly merge physical store and online operations to best serve customers and move inventory.   Few do this as… Read More

  In the past 15 years, the obituary for the traditional “brick-and-mortar” retailer seems to have been written many times over. However, a decade-and-a-half later, online shopping only accounts for just 6%-7% of all retail sales.   #-ad_banner-#To be sure, e-commerce has clearly altered the face of retail, just not as expected. Rather than making physical store locations obsolete, an online presence has become a complementary part of the retail landscape. These days, the successful brick-and-mortar retailer is one that can deftly merge physical store and online operations to best serve customers and move inventory.   Few do this as well as Nordstrom, Inc. (NYSE: JWN), a century-old high-end department store chain that is known for its top-notch customer service.   Though the company’s upscale image remains intact, it has evolved with the times. Today, Nordstrom Rack discount locations actually outnumber traditional Nordstrom department stores (167 to 119), while e-commerce paves the way for future growth.   Investors are clearly pleased: During the past three years, shares returned more than 57%, compared with a roughly 52% gain for the S&P 500. The outperformance of Nordstrom’s stock makes sense. During the past five fiscal years… Read More

All the talk lately is about the much belated return to 5,000 on the Nasdaq, a level not achieved since just prior to the bursting of the Internet bubble in 2000. The tech-heavy index has risen about 15% over the past year and has jumped more than 100% over the past five.  Now shares of the companies in the index trade for 31 times trailing earnings, a premium of 67% to the valuation of the stocks in the S&P 500. You can’t help but wonder if the Nasdaq is in for another tumble. To be fair, things are… Read More

All the talk lately is about the much belated return to 5,000 on the Nasdaq, a level not achieved since just prior to the bursting of the Internet bubble in 2000. The tech-heavy index has risen about 15% over the past year and has jumped more than 100% over the past five.  Now shares of the companies in the index trade for 31 times trailing earnings, a premium of 67% to the valuation of the stocks in the S&P 500. You can’t help but wonder if the Nasdaq is in for another tumble. To be fair, things are not the same as they were in 2000. Back then, the index reached a valuation of 175 times trailing earnings and startup tech companies dominated the price action. Today, tech companies make up just 55% of the largest 100 companies in the index, followed by consumer stocks (27%) and health care (14%). But just because it’s not an obvious bubble does not mean we can sound the all clear. #-ad_banner-# The Bubble Chorus Grows Some notable investors have joined a… Read More

#-ad_banner-#At this point in President Obama’s first term, the world looked very different. The still-anemic economy made it hard to fathom how we would ever get out from under a crushing government debt load. Government spending far surpassed revenue and concerns grew that our key financial backers (such as Chinese bondholders) would pull the rug out from under us. Fast forward to 2015, and the notion that our national debt is any sort of real problem has simply vanished. Sure, the Republican party has been recently threatening government agency shutdowns, but this time the issue is immigration… Read More

#-ad_banner-#At this point in President Obama’s first term, the world looked very different. The still-anemic economy made it hard to fathom how we would ever get out from under a crushing government debt load. Government spending far surpassed revenue and concerns grew that our key financial backers (such as Chinese bondholders) would pull the rug out from under us. Fast forward to 2015, and the notion that our national debt is any sort of real problem has simply vanished. Sure, the Republican party has been recently threatening government agency shutdowns, but this time the issue is immigration and not our nation’s unstable finances. The percentage of Americans that believe that deficit reduction should be Washington’s top priority has slid to a recent 64%, from 72% in 2013, according to a recent survey conducted by Pew Research. However, events across the Atlantic Ocean could bring this issue right back onto the front pages. Make no mistake, decent economic growth, coupled with somewhat higher tax rates on people making more than $250,000 a year, has helped narrow the annual shortfall. What was a $1.4 trillion annual budget gap in fiscal (September) 2009 is now much smaller. A… Read More

All major U.S. stock indices closed lower for the second consecutive week, led by the broad market S&P 500, which lost 1.6%.  #-ad_banner-#Despite the recent decline, all major indices remain in positive territory for 2015, led by the tech-heavy Nasdaq 100, which is up 3.9%. As long as technology and small-cap issues continue to outperform the broader market, as has been the case thus far this year, I view the recent weakness as a temporary countertrend correction rather than a sustainable decline. Ironically, Friday’s market collapse was triggered by perhaps the… Read More

All major U.S. stock indices closed lower for the second consecutive week, led by the broad market S&P 500, which lost 1.6%.  #-ad_banner-#Despite the recent decline, all major indices remain in positive territory for 2015, led by the tech-heavy Nasdaq 100, which is up 3.9%. As long as technology and small-cap issues continue to outperform the broader market, as has been the case thus far this year, I view the recent weakness as a temporary countertrend correction rather than a sustainable decline. Ironically, Friday’s market collapse was triggered by perhaps the best economic news so far this year. The U.S. economy added 295,000 jobs in February as the unemployment rate declined to 5.5%. On an annual basis, this is the best period of job gains in nearly 15 years.  But a quantitative easing-inspired mindset had traders thinking that good economic news is bad news for U.S. stocks because it will encourage the Federal Reserve to raise interest rates sooner rather than later this year.  I view this as a temporary reaction that should eventually provide a better intermediate-term buying opportunity. At the end of the day, rising… Read More

I was fortunate to have begun my career during the dot-com boom. It taught me how to successfully navigate a market during a forming bubble… and its eventual bust. #-ad_banner-#The most important lessons I learned on the floor during those years were to watch closely for bubbles, be careful of crowded trades and always anticipate the crowd’s future movements. While they may seem obvious, all three can be extremely difficult to accomplish when you’re in the heat of the moment; especially if you tend to be an emotional trader. Following these tactics allowed me to make money during the late… Read More

I was fortunate to have begun my career during the dot-com boom. It taught me how to successfully navigate a market during a forming bubble… and its eventual bust. #-ad_banner-#The most important lessons I learned on the floor during those years were to watch closely for bubbles, be careful of crowded trades and always anticipate the crowd’s future movements. While they may seem obvious, all three can be extremely difficult to accomplish when you’re in the heat of the moment; especially if you tend to be an emotional trader. Following these tactics allowed me to make money during the late 1990s and 2000s, a historically turbulent time. I’m not bringing this up to pat myself in the back. It’s because what I’m seeing in the market today is eerily familiar. Specifically, one of my favorite indicators is pointing to a bubble in U.S. equities. As I mentioned previously, the forward price-to-earnings (P/E) ratio is at extreme levels. The last time it flashed its current reading was at the end of 2009, and within six months, the market had undergone a correction. The previous time it was even close to this high was in October 2007, when stocks began a 17-month,… Read More

Warren Buffett and many other top value investors have one simple rule: “Buy good stocks when they’re down.” These days, such investors should be giving a fresh look at Swiss pharmaceutical giant Roche Holding AG (OTC: RHHBY).   #-ad_banner-#The company’s stock has slid out of favor following unfavorable results from a pair of high-profile clinical trials last year.   One involved Roche’s experimental Alzheimer’s drug, Gantenerumab, which showed such low efficacy that the trial was stopped early. In the second trial, results were insufficient to extend indications for one of Roche’s existing breast cancer treatments, Kadcyla. Read More

Warren Buffett and many other top value investors have one simple rule: “Buy good stocks when they’re down.” These days, such investors should be giving a fresh look at Swiss pharmaceutical giant Roche Holding AG (OTC: RHHBY).   #-ad_banner-#The company’s stock has slid out of favor following unfavorable results from a pair of high-profile clinical trials last year.   One involved Roche’s experimental Alzheimer’s drug, Gantenerumab, which showed such low efficacy that the trial was stopped early. In the second trial, results were insufficient to extend indications for one of Roche’s existing breast cancer treatments, Kadcyla.   Since the results of the two trials were released in December, shares of Roche are down roughly 8%.   A significant drop in earnings last year, related to a transient spike in operating costs, have also helped turn investors against Roche.       However, it’s only a matter of time before the negative sentiment wears off. Once investors realize that Roche remains a leading provider of cancer drugs and that the company produces robust dividends, the share price could quickly recover.   Roche still has Herceptin, Avastin and Rituxan, a blockbuster trio used to treat breast,… Read More

#-ad_banner-#By now, even the most casual investor (and American taxpayer) is familiar with the American International Group, Inc. (NYSE: AIG) story.   The company’s financial products division drove the company to the brink of bankruptcy, and the largest private sector bailout in American history saved it.   But those who dismiss AIG as an investment opportunity today because of past mismanagement are missing an incredible turnaround opportunity.   The company has divested numerous assets in an effort to slim down and simplify. Most importantly, it no longer has the financial products division… Read More

#-ad_banner-#By now, even the most casual investor (and American taxpayer) is familiar with the American International Group, Inc. (NYSE: AIG) story.   The company’s financial products division drove the company to the brink of bankruptcy, and the largest private sector bailout in American history saved it.   But those who dismiss AIG as an investment opportunity today because of past mismanagement are missing an incredible turnaround opportunity.   The company has divested numerous assets in an effort to slim down and simplify. Most importantly, it no longer has the financial products division that destroyed shareholder wealth in 2008 and 2009. Despite these positive steps, the company’s turnaround is still in the early stages and offers a lot of upside for patient investors.   If you’ve been hesitant to believe in and invest in the post-crisis AIG, then most of Wall Street agrees with you. AIG’s share price has barely budged these last 18 months, while the rest of the market has shot to new highs.   AIG’s lackluster stock performance, while share prices of rivals have surged, has created striking valuation differences among property and casualty insurance industry stocks. Competitors, like the… Read More

I have been in the investment business for more than two decades. In that time, I’ve heard many debates about the relative importance of high levels of insider ownership. The arguments against it are indeed compelling. #-ad_banner-#First, management may own so much stock that they feel compelled to aggressively talk up a company’s prospects, solely to boost the value of shares. Second, when management controls a lot of stock, they may start to ignore the wishes of outside investors and take steps that enrich themselves ahead of other shareholders (such as board-approved excessive compensation levels). Lastly, a high concentration of… Read More

I have been in the investment business for more than two decades. In that time, I’ve heard many debates about the relative importance of high levels of insider ownership. The arguments against it are indeed compelling. #-ad_banner-#First, management may own so much stock that they feel compelled to aggressively talk up a company’s prospects, solely to boost the value of shares. Second, when management controls a lot of stock, they may start to ignore the wishes of outside investors and take steps that enrich themselves ahead of other shareholders (such as board-approved excessive compensation levels). Lastly, a high concentration of shares in the hands of a few may lead to thin trading floats, which boost volatility and bid-ask spreads. My view: high levels of insider ownership are mostly a good thing, because you want management to have the same goal as you: a higher stock price. But I was never fully convinced of that view, until I came across a landmark study on the topic. A pair of finance professors (hailing from Sweden and Germany) found that “investing in firms in which the CEO owns a substantial fraction of shares (for example more than 10% of outstanding… Read More