Although memories of the Great Recession linger, a case can be made that better days lie ahead. That’s because central banks around the world are pursuing bold stimulus measures. And the United States is looking solid enough for the Federal Reserve to contemplate its first interest rate hike in nearly a decade. Moreover, gas prices have fallen sharply, which aids consumers, and the stock market is way up, having nearly tripled from recession lows. But this is no time for investor complacency: indeed a key economic indicator suggests trouble may… Read More

Although memories of the Great Recession linger, a case can be made that better days lie ahead. That’s because central banks around the world are pursuing bold stimulus measures. And the United States is looking solid enough for the Federal Reserve to contemplate its first interest rate hike in nearly a decade. Moreover, gas prices have fallen sharply, which aids consumers, and the stock market is way up, having nearly tripled from recession lows. But this is no time for investor complacency: indeed a key economic indicator suggests trouble may be brewing just beneath the surface. The index in question: the Baltic Dry Index. As a composite measure of worldwide daily shipping prices for commodities like iron ore, steel, cement and coal, the BDI provides insight into manufacturer demand for the raw materials that, literally and figuratively, form the foundation of the global economy. Typically, a rising BDI coincides with stronger demand from producers, who’ll need raw materials to generate energy and manufacture a variety of things, from roads and bridges to cars and machinery. This is… Read More

  On Monday, March 9, investors will celebrate the sixth anniversary of the current bull market. After a brief pullback in January, the S&P 500 and Dow Jones Industrial Average have resumed their upward move and are now far above previous peaks.   #-ad_banner-#Even the tech-heavy Nasdaq is almost back at levels seen during the dot-com bubble of 2000.     Yet while many portfolios have staged an impressive rebound, consumers’ balance sheets have not. By one measure, more than a third of the population is at high risk of a personal financial crisis.   Nearly a quarter (24%) of… Read More

  On Monday, March 9, investors will celebrate the sixth anniversary of the current bull market. After a brief pullback in January, the S&P 500 and Dow Jones Industrial Average have resumed their upward move and are now far above previous peaks.   #-ad_banner-#Even the tech-heavy Nasdaq is almost back at levels seen during the dot-com bubble of 2000.     Yet while many portfolios have staged an impressive rebound, consumers’ balance sheets have not. By one measure, more than a third of the population is at high risk of a personal financial crisis.   Nearly a quarter (24%) of Americans have more credit card debt than emergency savings, according to a recent report by Bankrate, a financial publisher. Another 13% have no credit card debt, but also don’t have any emergency savings either. That is 37% of the population that would be thrown into severe financial stress were they to lose their employment or another recession were to occur.   Those approaching retirement may be even worse off. As I wrote in December, many investors may be unable to live on the traditional 4% withdrawal rule.   While the U.S. economy has been the success story… Read More

As a technical analyst, I am more concerned with a stock’s reaction to news than I am with the news itself. And with a stock such as that of chicken producer Tyson Farms (NYSE: TSN), the chart is showing positive reactions following all sorts of news. #-ad_banner-#For example, the day China banned the import of American chicken and eggs due to a bird flu scare, many stocks in the sector tumbled. Tyson was off 3.1% on Jan. 12, but just two days later it began a rally that would go on unabated for eight trading days and gain… Read More

As a technical analyst, I am more concerned with a stock’s reaction to news than I am with the news itself. And with a stock such as that of chicken producer Tyson Farms (NYSE: TSN), the chart is showing positive reactions following all sorts of news. #-ad_banner-#For example, the day China banned the import of American chicken and eggs due to a bird flu scare, many stocks in the sector tumbled. Tyson was off 3.1% on Jan. 12, but just two days later it began a rally that would go on unabated for eight trading days and gain back more than was lost. That is what I would call “shrugging it off,” and it is a positive sign for the stock. However, since the major trend was still sideways, sellers once again got active and prices eased. Then, on Jan. 30, the company topped analysts’ earnings estimates on surging sales. The bullish reaction to the news was to be expected, as TSN jumped more than 3% at the open.  But then something strange happened. Investors got cold feet and turned on the stock, sending prices tumbling to close the day off nearly 3% and 7% below the day’s… Read More

Investors know that there are multiple ways to approach stock-picking. Momentum investors, for example, identify hot stocks that have the support of key technical patterns. It’s a strategy that has been put to great use in StreetAuthority’s Maximum Profit newsletter. #-ad_banner-#I tend to identify investment opportunities through a different tack: contrarian investing, which is used by Warren Buffett and many other gurus. At the simplest level, such an approach targets out-of-favor stocks that may possess ample latent upside, or exceedingly popular stocks that appear ripe for a pullback. As an example, that approach recently led me to conclude that shares… Read More

Investors know that there are multiple ways to approach stock-picking. Momentum investors, for example, identify hot stocks that have the support of key technical patterns. It’s a strategy that has been put to great use in StreetAuthority’s Maximum Profit newsletter. #-ad_banner-#I tend to identify investment opportunities through a different tack: contrarian investing, which is used by Warren Buffett and many other gurus. At the simplest level, such an approach targets out-of-favor stocks that may possess ample latent upside, or exceedingly popular stocks that appear ripe for a pullback. As an example, that approach recently led me to conclude that shares of Amazon.com, Inc. (Nasdaq: AMZN) were now fully valued or even overvalued. Yet, I don’t always consider popular stocks to be overvalued — if they have the catalysts in place for more upside. Companies, such as Netflix, Inc. (Nasdaq: NFLX) or Salesforce.com, Inc.  (NYSE: CRM), continue to revolutionize their respective industry niches, and you simply can’t bet against them, even as they remain near all-time highs. Contrarian investing works so well with dot-com stocks, simply because these stocks can trade all over the map. As an example, I was a big fan of LinkedIn Corp. (NYSE: LNKD) when its shares… Read More

All major U.S. stock indices closed lower last week following three weeks of higher closes, except for the small-cap Russell 2000, which was up just 0.1%. Despite last week’s setback, the major indices are still in the black for 2015 and are being led by the tech-heavy Nasdaq 100 and Russell 2000, up 4.8% and 2.4% respectively. These indices typically lead the market higher during healthy bullish trends. The two strongest sectors last week were consumer staples and consumer discretionary, the latter of which saw the largest weekly increase in sector bet-related investor assets according to… Read More

All major U.S. stock indices closed lower last week following three weeks of higher closes, except for the small-cap Russell 2000, which was up just 0.1%. Despite last week’s setback, the major indices are still in the black for 2015 and are being led by the tech-heavy Nasdaq 100 and Russell 2000, up 4.8% and 2.4% respectively. These indices typically lead the market higher during healthy bullish trends. The two strongest sectors last week were consumer staples and consumer discretionary, the latter of which saw the largest weekly increase in sector bet-related investor assets according to my own ETF-based metric. #-ad_banner-#​The Consumer Discretionary Select Sector SPDR ETF (NYSE: XLY) has outperformed the S&P 500 SPDR ETF (NYSE: SPY) by 3.3% since I identified positive asset flows in the sector on Jan. 5, and has outperformed by 4.9% since I first identified consumer discretionary as a potential buying opportunity in the Dec. 8 Market Outlook. Seasonality Supports Recent Market Strength In last week’s report, I discussed an emerging breakout from… Read More

Last Tuesday, all eyes were on Federal Reserve Chief Janet Yellen. In prepared testimony, she offered a few hints that interest rate increases may begin this summer.   #-ad_banner-#While the crowd is thinking about rate hikes, few are thinking about U.S. interest rates heading lower, or possibly even turning negative.   The idea may seem absurd, but is it?   The notion of negative interest rates is surely controversial. Some analysts think the Fed would never let it happen, as the massive U.S. money market system would be unable to function efficiently and profitably in… Read More

Last Tuesday, all eyes were on Federal Reserve Chief Janet Yellen. In prepared testimony, she offered a few hints that interest rate increases may begin this summer.   #-ad_banner-#While the crowd is thinking about rate hikes, few are thinking about U.S. interest rates heading lower, or possibly even turning negative.   The idea may seem absurd, but is it?   The notion of negative interest rates is surely controversial. Some analysts think the Fed would never let it happen, as the massive U.S. money market system would be unable to function efficiently and profitably in a negative rate environment.   Then there’s the relative strength of the U.S. economy, which is seemingly strong enough to counter the need for more aggressive Fed actions. An alternative view: recessionary pressures from the soaring dollar and weak foreign economies could eventually prove powerful enough to force the Fed into more rate cuts.   Thanks to decade-high strength, the dollar is squeezing U.S. multinational firms as profits earned in weaker foreign currencies are worth substantially less in dollars. Thus, analysts see U.S. corporate profits only growing about 7% overall this earnings season, down from the 11% gain projected a… Read More

Heading into the 2013 holiday season, the Amazon.com, Inc. (Nasdaq: AMZN) juggernaut could not be stopped.   #-ad_banner-#The company’s website was so busy that shippers United Parcel Service, Inc. (NYSE: UPS) and FedEx Corp. (NYSE: FDX) were overwhelmed, leading to missed delivery dates. In December 2013, investors saw that as a nice problem to have and pushed Amazon’s stock above $400 for the first time in its history. The rally seemed logical: few companies can boast of 18 straight years of at least 20% sales growth, as Amazon did that year.   Soon after, investors concluded that consistently strong sales… Read More

Heading into the 2013 holiday season, the Amazon.com, Inc. (Nasdaq: AMZN) juggernaut could not be stopped.   #-ad_banner-#The company’s website was so busy that shippers United Parcel Service, Inc. (NYSE: UPS) and FedEx Corp. (NYSE: FDX) were overwhelmed, leading to missed delivery dates. In December 2013, investors saw that as a nice problem to have and pushed Amazon’s stock above $400 for the first time in its history. The rally seemed logical: few companies can boast of 18 straight years of at least 20% sales growth, as Amazon did that year.   Soon after, investors concluded that consistently strong sales growth wasn’t enough to justify nosebleed valuations. The company’s roughly $185 billion valuation was hard to square with just $2 billion in free cash flow. A few months later, when management warned that 2014 free cash flow would actually drop from 2013 levels, investors began to head for the exits. By the middle of spring, shares moved below $300, as investors grew weary of yet more growth for its own sake. “Show us the money” demanded investors. But investors are a fickle lot, and concerns about a lack of free cash flow are evidently no longer a concern. Since bottoming… Read More

As a value investor, I hate to overpay. That’s not just true of stocks, but pretty much anything else… tools, lawn equipment, you name it. My kids call that cheap, but they don’t really understand.  #-ad_banner-#The goal isn’t just to buy the cheapest option in any particular category. In some cases, I buy the top-of-the line model. What matters is the relationship between price (what you pay) and value (what you get). In short, I strive to get my money’s worth and maximize my returns.  But how do we determine value? Price… Read More

As a value investor, I hate to overpay. That’s not just true of stocks, but pretty much anything else… tools, lawn equipment, you name it. My kids call that cheap, but they don’t really understand.  #-ad_banner-#The goal isn’t just to buy the cheapest option in any particular category. In some cases, I buy the top-of-the line model. What matters is the relationship between price (what you pay) and value (what you get). In short, I strive to get my money’s worth and maximize my returns.  But how do we determine value? Price is right there in black and white, but value can be much harder to quantify. Usually, the best way to approximate what an asset is worth involves comparisons to similar items.  In real estate, home appraisals are based on comparisons to other properties of similar age and square footage in the surrounding neighborhood. And if you’re trying to assess the value of a pre-owned 2009 Honda Accord, there are resources to see what other buyers have paid for that particular make and model. Armed with this information, you have a much better idea of… Read More

Whether you enjoy fast-food or not, there’s something interesting going on in the industry. #-ad_banner-#It’s so interesting in fact that I did a deep dive and found a great way to profit from the changing dynamics. If I’m right, then savvy investors stand to pocket some nice gains from this opportunity. As you may have recently heard, effective March 1, McDonald’s (NYSE: MCD) CEO Don Thompson will resign from the fast-food giant, which had been languishing for some time under his leadership. The straw that broke the camel’s back appears to be McDonald’s recently… Read More

Whether you enjoy fast-food or not, there’s something interesting going on in the industry. #-ad_banner-#It’s so interesting in fact that I did a deep dive and found a great way to profit from the changing dynamics. If I’m right, then savvy investors stand to pocket some nice gains from this opportunity. As you may have recently heard, effective March 1, McDonald’s (NYSE: MCD) CEO Don Thompson will resign from the fast-food giant, which had been languishing for some time under his leadership. The straw that broke the camel’s back appears to be McDonald’s recently reported drop in same-store sales, the first since 2002. Shares of the storied company have fared poorly — losing about 3% in the past year, greatly underperforming the S&P 500, which is up 13.9% in the same time period. But this poor performance isn’t new. For the past five years, MCD shares are up 51.6%… still a pretty paltry showing given the market’s 94% advance in the same period. Many market pundits are faulting McDonald’s soon to be ex-CEO for the poor performance. While there were likely some… Read More