Many U.S. companies are riding the Chinese growth wave. However, to maximize their gains from these pioneering U.S. firms, investors still need to choose the right stocks and time their purchases correctly. #-ad_banner-#One of the best times to buy a stock is during a pullback resulting from investor bearishness. Many investors have turned bearish on China due to a slowdown in growth. Catching long-term economic trends is one way in which fortunes are made in the financial markets, but identifying these macro trends at their beginning is very difficult. Some investors luck into a long-term trend at its… Read More

Many U.S. companies are riding the Chinese growth wave. However, to maximize their gains from these pioneering U.S. firms, investors still need to choose the right stocks and time their purchases correctly. #-ad_banner-#One of the best times to buy a stock is during a pullback resulting from investor bearishness. Many investors have turned bearish on China due to a slowdown in growth. Catching long-term economic trends is one way in which fortunes are made in the financial markets, but identifying these macro trends at their beginning is very difficult. Some investors luck into a long-term trend at its start by simply being at the right place at the right time — but for the rest of us, it’s not so easy. I’ve found the best way to catch massive trends like China’s growth is to wait for a pullback within the broader upward trend. With an economy that has been growing four to five times faster than the U.S.’ over the past couple of decades, there is no question that China represents a massive opportunity for investors. Many economists expect China will overtake the United States as the world’s largest economy within the next 10 years. So while… Read More

Once again, U.S. stocks ended the week with only a small change after high daily volatility. But after two days of large gains to end the week, bear market fears seem to have subsided. Two-Day Rebound Eases Concerns of Market Drop SPDR S&P 500 (NYSE: SPY) gained 0.84% last week. The small gain masks the size of the moves seen during the week. SPY traded as low as $173.71 on Wednesday and as high as $179.87 on Friday, a jump of 3.55% from low to high in only two days. That two-day gain retraced about half of… Read More

Once again, U.S. stocks ended the week with only a small change after high daily volatility. But after two days of large gains to end the week, bear market fears seem to have subsided. Two-Day Rebound Eases Concerns of Market Drop SPDR S&P 500 (NYSE: SPY) gained 0.84% last week. The small gain masks the size of the moves seen during the week. SPY traded as low as $173.71 on Wednesday and as high as $179.87 on Friday, a jump of 3.55% from low to high in only two days. That two-day gain retraced about half of the market’s January decline.#-ad_banner-#​ Friday’s gains came after the unemployment report delivered data consistent with slow but steady economic growth. The unemployment rate fell to 6.6%, just above the Federal Reserve’s target of 6.5%. The recently popular workforce participation rate increased slightly, and the number of long-term unemployed and discouraged workers fell slightly. While employment gains are slow, the most recent report was consistent with economic expansion. In the past, recessions have started when the unemployment rate drops below the level the Fed considers to be the natural level of unemployment. Right now, the Fed believes full employment would be… Read More

The week after options expire is one of my favorite times of each month. That’s because, as usual, it means it’s time for readers of my premium advisory, Income Trader, and I to review our trades. And so far, we’ve seen outstanding results. #-ad_banner-#This past month, six put positions expired worthless. For those of you who are unfamiliar with options, that’s a good thing for us. You see, every time I make a trade, I get “Instant Income,” or money upfront for selling a put contract. And when the options I sell expire worthless, that income… Read More

The week after options expire is one of my favorite times of each month. That’s because, as usual, it means it’s time for readers of my premium advisory, Income Trader, and I to review our trades. And so far, we’ve seen outstanding results. #-ad_banner-#This past month, six put positions expired worthless. For those of you who are unfamiliar with options, that’s a good thing for us. You see, every time I make a trade, I get “Instant Income,” or money upfront for selling a put contract. And when the options I sell expire worthless, that income becomes pure profit. We have now closed 41 put option trades since last February, and 39 (95%) have expired worthless. And with the help of another income-generating strategy, covered calls, the other two trades also delivered a profit (you can read more about covered calls here). You can see the positions we closed in January below: Every trade we closed this month made a profit. Even my “worst” trade — FFIV — made a 3.9% return in just a 65-day trading period. That may not sound like a lot at first, but if you were to get a… Read More

Turnabout is fair play. Just as Monster Worldwide (NYSE: MWW) took the job recruitment industry by storm a decade ago, catching recruitment firms and newspaper advertisers off guard, LinkedIn (Nasdaq: LNKD) eventually turned Monster into an also-ran. #-ad_banner-#​Back in 2008, LinkedIn had just $79 million in revenue while Monster had $1.3 billion. Fast-forward to 2013, and Monster’s revenues slumped to just $800 million, while LinkedIn’s sales base surpassed $1.5 billion. And look for more of the same in 2014 and 2015, by which time LinkedIn’s sales are expected to approach $3 billion. Monster’s projected 2015 sales: stuck at… Read More

Turnabout is fair play. Just as Monster Worldwide (NYSE: MWW) took the job recruitment industry by storm a decade ago, catching recruitment firms and newspaper advertisers off guard, LinkedIn (Nasdaq: LNKD) eventually turned Monster into an also-ran. #-ad_banner-#​Back in 2008, LinkedIn had just $79 million in revenue while Monster had $1.3 billion. Fast-forward to 2013, and Monster’s revenues slumped to just $800 million, while LinkedIn’s sales base surpassed $1.5 billion. And look for more of the same in 2014 and 2015, by which time LinkedIn’s sales are expected to approach $3 billion. Monster’s projected 2015 sales: stuck at around $800 million. At least that was the consensus view before each of these firms released quarterly results late last week.  LinkedIn is starting to show growing pains, while Monster, for the second straight quarter, showed signs of a growth rebound. That may explain why shares of Monster have soared 50% since mid-October while shares of LinkedIn have tumbled nearly 20%. Despite those divergent stock moves, shares of LinkedIn still trade for more than 11 times projected 2014 sales while Monster is valued at less than one times sales. The question for investors: Is that kind of valuation… Read More

What a way to start 2014! Gloom and doom have struck the stock market with a roughly 1,000-point decline in the Dow Jones Industrial Average. #-ad_banner-#The Federal Reserve’s dialing back of its massive bond buying program, emerging-market weakness and several economic indicators turning downward are some of the culprits of the heavy selling in the first month of the year. While many supposed stock market experts and perma-bears are claiming that the selling is signaling much more downside to come, I wholeheartedly disagree. This selling is nothing more than simple profit-taking after the incredible bull market of 2013. One very… Read More

What a way to start 2014! Gloom and doom have struck the stock market with a roughly 1,000-point decline in the Dow Jones Industrial Average. #-ad_banner-#The Federal Reserve’s dialing back of its massive bond buying program, emerging-market weakness and several economic indicators turning downward are some of the culprits of the heavy selling in the first month of the year. While many supposed stock market experts and perma-bears are claiming that the selling is signaling much more downside to come, I wholeheartedly disagree. This selling is nothing more than simple profit-taking after the incredible bull market of 2013. One very practical reason is that investors wanted to delay paying taxes on their capital gains. This caused many to wait until 2014 to take profits. Another obvious reason is the fact that markets never travel in a straight line for long. There is always selling after a move higher, and this time that selling took longer, so it was more severe. I am confident in the stock market and think this pullback is a great time to find bargains. While many stocks sold off during January, a few bucked the downward trend. In fact, I located a stock that gained 8%… Read More

Using a covered call strategy can be a great way to generate steady returns in your portfolio. As a general rule, I expect my covered call trades to increase my capital by about 25% to 35% per year, depending on the market environment. (If you’re new to the covered call strategy, click here for an introduction to how this strategy works.) Whenever I set up a new covered call trade, there are a number of different dynamics to be aware of.#-ad_banner-# I always want to start with an underlying stock that has a high probability of increasing in price. I… Read More

Using a covered call strategy can be a great way to generate steady returns in your portfolio. As a general rule, I expect my covered call trades to increase my capital by about 25% to 35% per year, depending on the market environment. (If you’re new to the covered call strategy, click here for an introduction to how this strategy works.) Whenever I set up a new covered call trade, there are a number of different dynamics to be aware of.#-ad_banner-# I always want to start with an underlying stock that has a high probability of increasing in price. I typically look for stocks with strong fundamental growth and a chart pattern that indicates investors are steadily buying the stock. Next, I want to make sure that the option contract we use has plenty of premium built into it. Since we make our income by selling attractively priced call options, we need to make sure we’re getting a good value for the contracts we sell. There are a number of variables that go into picking the right options contract. In previous articles, we’ve discussed the need to carefully select the right strike price and the right expiration date. It’s also… Read More

Economics is known as “the dismal science” for good reason. Like the weather, economic winds can shift on a moment’s notice, rendering recent forecasts completely moot. But the current economy is proving to be even trickier than usual.#-ad_banner-# In the final months of 2013, the economy was developing a full-blown head of steam — despite the impact of the October government shutdown. The U.S. economy grew at a 4.1% annual pace in the third quarter and a 3.2% clip in the fourth quarter. As the year began, all signs pointed to robust 3% growth in 2014, which would have been… Read More

Economics is known as “the dismal science” for good reason. Like the weather, economic winds can shift on a moment’s notice, rendering recent forecasts completely moot. But the current economy is proving to be even trickier than usual.#-ad_banner-# In the final months of 2013, the economy was developing a full-blown head of steam — despite the impact of the October government shutdown. The U.S. economy grew at a 4.1% annual pace in the third quarter and a 3.2% clip in the fourth quarter. As the year began, all signs pointed to robust 3% growth in 2014, which would have been the strongest showing since 2005. Quite suddenly, the U.S. economy is looking less perky. Since the start of the year, we’ve seen: • Two straight months of non-farm payroll growth below 125,000, blunting the employment momentum we’d seen in prior months. • U.S. exports fell 1.8% in December (data were released in early February) as global demand for our goods and services are starting to weaken. The key trouble spot: Exports to the European Union fell 9% in December. And in the months ahead, demand coming from emerging markets may slump, especially in countries that have been hit by sliding… Read More

Even as the market rally was building a solid head of steam in the years following the Great Recession of 2008, two key sectors remained sharply out of favor. Both insurance stocks and banking stocks traded far below book value, which created a rare opening for deep value investors. The price-to-book disconnect was especially profound with banking giant Citigroup (NYSE: C). As I noted nearly two years ago, shares had traded down to just 53% of book value by the summer of 2011, and with the passage of time, investors seized on that gap, eventually pushing shares up to $55.  Yet… Read More

Even as the market rally was building a solid head of steam in the years following the Great Recession of 2008, two key sectors remained sharply out of favor. Both insurance stocks and banking stocks traded far below book value, which created a rare opening for deep value investors. The price-to-book disconnect was especially profound with banking giant Citigroup (NYSE: C). As I noted nearly two years ago, shares had traded down to just 53% of book value by the summer of 2011, and with the passage of time, investors seized on that gap, eventually pushing shares up to $55.  Yet a recent pullback has widened the price-book gap again: #-ad_banner-#At the end of 2013, shares of Citigroup had nearly moved all the way up to book value, though shares, at a recent $47, are again nearly 15% below book value. The pullback is attributable to concerns about the bank’s emerging-markets operations; those concerns are increasingly looking overblown. To be sure, Citigroup has aggressively pursued emerging-markets exposure while most other U.S. banks have avoided expanding into those markets. That should really pay off over the longer term, as emerging markets still represent the most dynamic long-term growth opportunities. Read More

  We’re barely a month into 2014, and it’s already promising to be an interesting year. In this month alone, natural gas is up 20%… shares of Apple plunged double-digits after a bad earnings announcement… and emerging markets have gone belly-up. In fact, they have been absolutely pummeled since the beginning of the January. As you can see from the chart above, emerging markets — as represented by the WisdomTree Emerging Markets Equity ETF (NYSE: DEM) — have fallen 9% since Jan. 1. Michael Vodicka explains the bearish sentiment towards emerging markets in his most recent issue of… Read More

  We’re barely a month into 2014, and it’s already promising to be an interesting year. In this month alone, natural gas is up 20%… shares of Apple plunged double-digits after a bad earnings announcement… and emerging markets have gone belly-up. In fact, they have been absolutely pummeled since the beginning of the January. As you can see from the chart above, emerging markets — as represented by the WisdomTree Emerging Markets Equity ETF (NYSE: DEM) — have fallen 9% since Jan. 1. Michael Vodicka explains the bearish sentiment towards emerging markets in his most recent issue of High-Yield International:       The Fed’s quantitative easing (QE) program supported low borrowing costs in the United States for the past few years. That enabled large institutional investors to borrow at a low rate in the United States and deploy that capital into high-yield securities in emerging markets, such as emerging-market bonds, which are currently yielding around 10% in Brazil. That low-risk carry trade was extremely profitable when the 10-year Treasury was trading below 2%. But now that interest rates are back on the upswing and yield spreads are compressing, this low-risk trade is becoming less profitable. That is… Read More