America is an agricultural juggernaut. #-ad_banner-#The United States has more arable land than any other nation on the planet and some of the highest crop yields per acre. However, only 20% of the country’s land area, about 408 million acres, is used for crop production. With this combination of amazing efficiency and the lack of capacity utilization, it’s clear that U.S. agriculture is a growth industry.  Seriously, agriculture has been an American growth industry since Squanto taught the pilgrims how to grow corn. But there’s real money to be made now. Outside of raw farmland — which has actually seen… Read More

America is an agricultural juggernaut. #-ad_banner-#The United States has more arable land than any other nation on the planet and some of the highest crop yields per acre. However, only 20% of the country’s land area, about 408 million acres, is used for crop production. With this combination of amazing efficiency and the lack of capacity utilization, it’s clear that U.S. agriculture is a growth industry.  Seriously, agriculture has been an American growth industry since Squanto taught the pilgrims how to grow corn. But there’s real money to be made now. Outside of raw farmland — which has actually seen some bubble-style price expansion over the past few years — the best way to cash in on the American Renaissance in agriculture is by owning the three D’s of American agriculture: chemical manufacturers Dow Chemical (NYSE: DOW) and DuPont (NYSE: DD), and equipment king Deere & Co. (NYSE: DE). All three names offer exceptional growth and value. Dow: Consistent Growth, With More To Come Since the market bottom of 2009, investors in DOW have been well rewarded. Not including dividends, the stock has produced an average annual return of 160%:  While some observers might think that the stock… Read More

In the corner offices of the nation’s major airlines, industry executives are still beaming about the “great re-rating of 2013.” #-ad_banner-#That was when deeply cyclical airline stocks, which were once tagged with extremely low price-to-earnings (P/E) ratios and EBITDA (earnings before interest, taxes, depreciation and amortization) multiples, started to earn much firmer ratios that were much more in line with the broader market. It’s a move I suspected might happen back in 2011, while Delta Airlines (NYSE: DAL) was trading for less than five times trailing earnings. At the time, I thought investors would eventually award a higher multiple as business… Read More

In the corner offices of the nation’s major airlines, industry executives are still beaming about the “great re-rating of 2013.” #-ad_banner-#That was when deeply cyclical airline stocks, which were once tagged with extremely low price-to-earnings (P/E) ratios and EBITDA (earnings before interest, taxes, depreciation and amortization) multiples, started to earn much firmer ratios that were much more in line with the broader market. It’s a move I suspected might happen back in 2011, while Delta Airlines (NYSE: DAL) was trading for less than five times trailing earnings. At the time, I thought investors would eventually award a higher multiple as business grew more predictable. If shares simply traded up to eight times projected 2012 profits, then DAL would double in value to $16, I figured. Shares now trade for around $30, or around 11.5 times forward earnings and around seven times projected 2014 EBITDA. In effect, the whole airline group has benefited from a trend toward higher P/E multiples — to a much greater extent than I had anticipated. Investors no longer fear a deep downturn for airline industry profits. In a similar vein, investors can stop worrying about the nation’s top automakers. Like the airlines, automakers now sport… Read More

As investors are undoubtedly aware, the broader market, as measured by the SPDR S&P 500 (NYSE: SPY), is down 5% since the beginning of the year.  Yet one stock that is actually showing a small gain for the year is private equity firm Blackstone Group (NYSE: BX): #-ad_banner-#While SPY is below its 50- and 100-day moving averages, BX is still above its 50-day (blue line) and its 100-day averages. BX has a price-to-earnings growth (PEG) ratio of 0.43, signaling that it is undervalued. The PEG ratio compares a stock’s… Read More

As investors are undoubtedly aware, the broader market, as measured by the SPDR S&P 500 (NYSE: SPY), is down 5% since the beginning of the year.  Yet one stock that is actually showing a small gain for the year is private equity firm Blackstone Group (NYSE: BX): #-ad_banner-#While SPY is below its 50- and 100-day moving averages, BX is still above its 50-day (blue line) and its 100-day averages. BX has a price-to-earnings growth (PEG) ratio of 0.43, signaling that it is undervalued. The PEG ratio compares a stock’s price-to-earnings (P/E) ratio with its earnings growth rate. A PEG ratio of 1 is considered fair value. The company pays a $2.32 annual dividend, for a current yield of 7.1%. But we can turbocharge the income on this high-yielding stock with a covered call strategy. A call option is an option to buy or sell shares at an agreed-upon price (the strike price) within a certain period of time. The buyer of a call option purchases the right (but not the obligation) to buy the shares at the strike price. The seller of a call option… Read More

This year is already a sharp contrast to 2013, when the overall stock market rose an impressive 32%. Following the recent pullbacks, the market only needs to shed about 5% more to meet the widely accepted definition of a correction (a decline of at least 10%).#-ad_banner-# It has been a while since stock investors have had to endure such pain, so further sell-offs may prompt many to seek safer havens — especially if a full-on correction materializes soon. Since bonds don’t generally offer much in the way of returns right now, investors who want to dial back risk… Read More

This year is already a sharp contrast to 2013, when the overall stock market rose an impressive 32%. Following the recent pullbacks, the market only needs to shed about 5% more to meet the widely accepted definition of a correction (a decline of at least 10%).#-ad_banner-# It has been a while since stock investors have had to endure such pain, so further sell-offs may prompt many to seek safer havens — especially if a full-on correction materializes soon. Since bonds don’t generally offer much in the way of returns right now, investors who want to dial back risk but still make money should consider top-flight large-cap stocks with attractive yields. You might think they’d be hard to find after the market’s long run-up, but they’re available — right under our noses, really. To spot them, just scan the list of stocks in the Dow Jones Industrial Average. You’ll quickly see the index’s top five dividend payers all have generous yields in the 4% to 6% range. And you should be able to count on them for attractive payouts for years to come. Read More

Some stocks just never allow you to gain an edge through fundamental research — even by the most rigorous analytical minds. #-ad_banner-#These stocks become so popular that they become disconnected from any sort of fundamental valuation, and you can simply hold your nose and buy along with the crowd. Or you can be gutsy and look to sell shares short. Score one for the fundamental analysts. Heading into quarterly results, Twitter (NYSE: TWTR) was a major focus for short sellers, as I noted three weeks ago. The short interest has risen further since that article was published, to 32.7 million shares… Read More

Some stocks just never allow you to gain an edge through fundamental research — even by the most rigorous analytical minds. #-ad_banner-#These stocks become so popular that they become disconnected from any sort of fundamental valuation, and you can simply hold your nose and buy along with the crowd. Or you can be gutsy and look to sell shares short. Score one for the fundamental analysts. Heading into quarterly results, Twitter (NYSE: TWTR) was a major focus for short sellers, as I noted three weeks ago. The short interest has risen further since that article was published, to 32.7 million shares by mid-January. And these short sellers may be tempted to lock in gains after shares plunged more than 20% this week.  But they shouldn’t close out those short positions just yet — Twitter has an additional 20% to 25% downside from here. Twitter faces two challenges: It needs to sharply boost its audience, and it needs to figure out how to make much more money off of that audience. These are concerns I spelled out late last month on our sister site ProfitableTrading.com. Among the reasons why this stock may be headed to just $40 (or… Read More

The past few years have been a great time to be an investor. Federal Reserve Chairman Ben Bernanke’s zero interest rate policy has fueled large gains in just about every market sector since 2009. There’s little question that his policies are bullish in the short term, but what happens when the Fed’s easy money stops? #-ad_banner-#For an answer to this, we can take a page out of baseball history.  In 1998, Mark McGwire set a record by hitting 70 home runs during the season, while Sammy Sosa hit 66. The previous record of 61 home runs had been set in… Read More

The past few years have been a great time to be an investor. Federal Reserve Chairman Ben Bernanke’s zero interest rate policy has fueled large gains in just about every market sector since 2009. There’s little question that his policies are bullish in the short term, but what happens when the Fed’s easy money stops? #-ad_banner-#For an answer to this, we can take a page out of baseball history.  In 1998, Mark McGwire set a record by hitting 70 home runs during the season, while Sammy Sosa hit 66. The previous record of 61 home runs had been set in 1961 by Roger Maris. In 2001, Barry Bonds broke McGwire’s record by hitting 73 home runs.  At the time, baseball was an exciting sport to watch as home run records captured headlines. Later, fans learned that the hitters were abusing steroids. Home run outputs returned to normal after league-wide steroid testing became the norm in 2003.  Fed policy is acting like a performance-enhancing drug for the market. When it stops easing, I believe the markets will be unable to continue climbing at the frantic pace seen during the past year. Returns will be below average for some time, and stock… Read More

I love stories about regular people who have excelled in their chosen profession. The hedge fund and financial world is rife with tales of individuals who have built vast fortunes despite starting from modest beginnings. #-ad_banner-#To me, the most inspiring stories are about people who have fought their way to top, been knocked down, and then regained their top-dog status. These people are generally mavericks who go against the grain –and, in the financial realm, can find value in overlooked stocks that most of the investment world can’t readily see.  One of my favorite consistently successful money managers… Read More

I love stories about regular people who have excelled in their chosen profession. The hedge fund and financial world is rife with tales of individuals who have built vast fortunes despite starting from modest beginnings. #-ad_banner-#To me, the most inspiring stories are about people who have fought their way to top, been knocked down, and then regained their top-dog status. These people are generally mavericks who go against the grain –and, in the financial realm, can find value in overlooked stocks that most of the investment world can’t readily see.  One of my favorite consistently successful money managers is Ken Griffin of hedge fund Citadel LLC. Griffin started trading out of his college dorm room in 1986. He was so successful that he was quickly able to raise a million dollars from investors. By 1990, Griffin launched the Citadel Investment Group with a little over $4 million. This fund has grown to one of the largest hedge funds in the world with over $17 billion under management.  Griffin’s trip to the top has not been without its tribulations. One example is that during the financial crisis, Citadel sustained a drawdown of nearly 50%. During this time, many hedge… Read More

A key theme for the current five-year bull market: Bigger is not always better.#-ad_banner-# GE (NYSE: GE) is the nation’s largest industrial firm, yet its shares continue to lag behind the broader market by a wide margin. IBM (NYSE: IBM) has one of the largest revenue bases in the tech sector, but it’s trading at two-year lows. And in the agricultural sector, Archer Daniels Midland (NYSE: ADM), has underperformed the S&P 500 by nearly 60 percentage points over the past five years.  Yet it’s unwise to lump these three firms together. IBM and GE must make major changes to their… Read More

A key theme for the current five-year bull market: Bigger is not always better.#-ad_banner-# GE (NYSE: GE) is the nation’s largest industrial firm, yet its shares continue to lag behind the broader market by a wide margin. IBM (NYSE: IBM) has one of the largest revenue bases in the tech sector, but it’s trading at two-year lows. And in the agricultural sector, Archer Daniels Midland (NYSE: ADM), has underperformed the S&P 500 by nearly 60 percentage points over the past five years.  Yet it’s unwise to lump these three firms together. IBM and GE must make major changes to their business models to reinvigorate growth. ADM, in contrast, just needs to wait for industry dynamics to strengthen — and such a change may already be at hand.  Analysts at Citigroup expect “2014 will be a big recovery year in Archer’s major operations.” They recently upgraded shares to “buy” with a $45 price target.  The key factor driving ADM’s business is storage: The more crops that farmers grow, the more that ADM will prosper. A drought in the U.S. Midwest hampered business in the 2012-13 growing season, but according to the U.S. Department of Agriculture, the 2013-14 growing season has produced… Read More

Bear markets bring lower prices and increased volatility. The increase in volatility is at least partly caused by the lower prices. As prices fall in a bear market, investors become worried that prices will continue falling. These worries will lead many investors to sell, and this adds to the downward pressure on prices. We can see both of those forces at work in this chart for SPDR S&P 500 (NYSE: SPY): #-ad_banner-#In a bear market, volatility increases, and it can remain at elevated levels for some time. Sustained volatility could be helpful to traders… Read More

Bear markets bring lower prices and increased volatility. The increase in volatility is at least partly caused by the lower prices. As prices fall in a bear market, investors become worried that prices will continue falling. These worries will lead many investors to sell, and this adds to the downward pressure on prices. We can see both of those forces at work in this chart for SPDR S&P 500 (NYSE: SPY): #-ad_banner-#In a bear market, volatility increases, and it can remain at elevated levels for some time. Sustained volatility could be helpful to traders looking to minimize their losses in a bear market. Covered call options can help investors boost their profits at any time. This is a conservative strategy that generates income from exiting positions in your portfolio. A call option gives the buyer the right to buy a stock at a predetermined price (called the “strike” or “exercise” price) for a predetermined amount of time. Call sellers have an obligation to sell the underlying shares to the buyer if the buyer exercises that right. With a covered call, you sell a call option on a stock that you own. The risk is… Read More

Over the past few weeks, I’ve been chatting with my colleague and StreetAuthority’s Managing Editor, Bob Bogda, about the potential for home run stocks. These are the kinds that can deliver gains in one year that many other stocks take a decade to achieve. #-ad_banner-# No area is as ripe for such upside as micro-cap stocks, which typically have market caps between $50 million and $200 million. Micro-caps tend to toil in anonymity — right up until the time they deliver great news. Caught off guard, investors can push such stocks up by 50% or even 100%. Of course, with such… Read More

Over the past few weeks, I’ve been chatting with my colleague and StreetAuthority’s Managing Editor, Bob Bogda, about the potential for home run stocks. These are the kinds that can deliver gains in one year that many other stocks take a decade to achieve. #-ad_banner-# No area is as ripe for such upside as micro-cap stocks, which typically have market caps between $50 million and $200 million. Micro-caps tend to toil in anonymity — right up until the time they deliver great news. Caught off guard, investors can push such stocks up by 50% or even 100%. Of course, with such potential reward comes risk. Micro-caps can also shed value at a rapid pace, especially if the market loses steam. Case in point: I suggested back in September that Merge Healthcare (Nasdaq: MRGE) could double in value, but MRGE has fallen 27% since then. I still think Merge is an intriguing health care opportunity, but clearly my enthusiasm was premature. That’s why you need to take a basket approach to micro-caps. Placing too many funds in just one micro-cap stock is too risky. The other two stocks in that September article bear out that premise: Novavax (Nasdaq: NVAX) is up 77% since… Read More