For any investors in search of yield, May 21, 2013, will be remembered for a long time to come. That’s the day that Federal Reserve released the minutes from a prior meeting, suggesting that the multi-year massive stimulus program known as quantitative easing would start to wind down. Though the Fed wouldn’t actually take such action for a few more quarters, the psychological blow against dividend-paying stocks had begun. Competing fixed-income investments began to rise, leading yield-producing stocks to be among the worst performers of the rest of 2013. #-ad_banner-#Perhaps no group took it quite as hard as… Read More

For any investors in search of yield, May 21, 2013, will be remembered for a long time to come. That’s the day that Federal Reserve released the minutes from a prior meeting, suggesting that the multi-year massive stimulus program known as quantitative easing would start to wind down. Though the Fed wouldn’t actually take such action for a few more quarters, the psychological blow against dividend-paying stocks had begun. Competing fixed-income investments began to rise, leading yield-producing stocks to be among the worst performers of the rest of 2013. #-ad_banner-#Perhaps no group took it quite as hard as the mortgage REITs (also known as mREITs). These firms had been making a killing on the wide spreads between low short-term rates and higher mortgage rates. And as interest rates begin to move higher, the profit margins at these firms may compress. For investors, there are two important questions to consider: Are these companies still capable of solid profits in the years ahead? And is it wise to wait the two to three years before the rising rate cycle has fully played out before they become safe to buy? The Road Ahead Make no mistake, the mREITs would be… Read More

In the notoriously fickle apparel industry, trends can change quickly. For investors who are looking for exposure to the sector, it’s best to be diversified. #-ad_banner-#The Gap Inc. (NYSE: GPS) is one of the best diversified apparel retailers in the market. In addition to its three core brands (Gap, Banana Republic and Old Navy), it has a popular women’s athletic brand, Athleta, that’s been going head to head with Lululemon (Nasdaq: LULU) and winning market share. With its brand portfolio, Gap has a unique ability to target low-end and high-end shoppers alike.  Gap got very aggressive with its… Read More

In the notoriously fickle apparel industry, trends can change quickly. For investors who are looking for exposure to the sector, it’s best to be diversified. #-ad_banner-#The Gap Inc. (NYSE: GPS) is one of the best diversified apparel retailers in the market. In addition to its three core brands (Gap, Banana Republic and Old Navy), it has a popular women’s athletic brand, Athleta, that’s been going head to head with Lululemon (Nasdaq: LULU) and winning market share. With its brand portfolio, Gap has a unique ability to target low-end and high-end shoppers alike.  Gap got very aggressive with its promotions in December, including offering discounts of up to 50% off for most of the month. This should have helped drive more traffic to Gap’s stores as consumers flocked to deals and focused on discount brands.  What’s more is that Gap recently posted December same-store sales that were flat, but sales for the holiday season were up 2% year over year. In its most recent quarter, Gap posted earnings per share (EPS) of $0.72, up from $0.63 in the year-earlier period.  Back From The Brink Do you remember how Gap struggled in the latter part of the past decade?… Read More

Shares of troubled Canadian smartphone maker BlackBerry (Nasdaq: BBRY) soared more than 9% Tuesday after a Department of Defense report that said its handsets were still the Pentagon’s top choice. It anticipates that about 80,000 devices will start to be connected to its new network beginning at the end of January.#-ad_banner-# Despite the company’s ongoing struggles, it continues to offer leading security features. This is a significant contributing factor to the Defense Department’s choice, and the news showed BlackBerry (formerly known as Research in Motion) still has a hold on this lucrative part of the market. More positive news came… Read More

Shares of troubled Canadian smartphone maker BlackBerry (Nasdaq: BBRY) soared more than 9% Tuesday after a Department of Defense report that said its handsets were still the Pentagon’s top choice. It anticipates that about 80,000 devices will start to be connected to its new network beginning at the end of January.#-ad_banner-# Despite the company’s ongoing struggles, it continues to offer leading security features. This is a significant contributing factor to the Defense Department’s choice, and the news showed BlackBerry (formerly known as Research in Motion) still has a hold on this lucrative part of the market. More positive news came Tuesday with the announcement that the company is looking to divest the majority of its Canadian real estate. Specifically, BlackBerry wants to sell and lease back over 3 million square feet. This would raise a significant amount of cash for its turnaround plans. BlackBerry’s new CEO, John Chen, has only been at the helm for a few short months, but he has already made some significant moves. For example, in December, Chen formed a deal with Foxconn Technology Group, which also assembles Apple (Nasdaq: AAPL) iPhones, to outsource design and production. This should allow BBRY to focus more on its… Read More

It costs about five times as much to insure a Ferrari than a regular car. That’s partly because with top speeds above 200 mph, the probability of an accident is much higher in a Ferrari.#-ad_banner-#​ The options market is built on that same principle of risk versus reward — except instead of fast cars, it’s all about the VIX. Also known as the “fear index,” the VIX measures investors’ expectations for volatility in the S&P 500 Index in the next 30 days. When the VIX is high, the market is expecting lots of volatility — and for options… Read More

It costs about five times as much to insure a Ferrari than a regular car. That’s partly because with top speeds above 200 mph, the probability of an accident is much higher in a Ferrari.#-ad_banner-#​ The options market is built on that same principle of risk versus reward — except instead of fast cars, it’s all about the VIX. Also known as the “fear index,” the VIX measures investors’ expectations for volatility in the S&P 500 Index in the next 30 days. When the VIX is high, the market is expecting lots of volatility — and for options traders, there is nothing more important than the VIX. It is the single most important factor affecting options pricing.  With the Federal Reserve crushing expectations of weakness in the S&P 500, the VIX has been near record lows: That low reading on the VIX is both good and bad for put sellers. It’s good because it lowers the probability of being put shares. But it’s bad because it reduces the value of the premium I collect when selling a put. And with the VIX falling for the past few years, it has become less profitable to sell puts. … Read More

A few months ago, my colleague Dave Goodboy examined the risks and rewards of what he called “the financial world’s Super Bowl”  — initial public offerings, or IPOs.#-ad_banner-# Because IPOs can be so risky, he recommended investing in them with an exchange-traded fund (ETF). He also described his favorite ETF for the job, the First Trust U.S. IPO Index Fund (NYSE: FPX). I also think ETFs are the best way to play the exciting IPO market, but there’s another option that became available right around the time of Dave’s article. I thought investors… Read More

A few months ago, my colleague Dave Goodboy examined the risks and rewards of what he called “the financial world’s Super Bowl”  — initial public offerings, or IPOs.#-ad_banner-# Because IPOs can be so risky, he recommended investing in them with an exchange-traded fund (ETF). He also described his favorite ETF for the job, the First Trust U.S. IPO Index Fund (NYSE: FPX). I also think ETFs are the best way to play the exciting IPO market, but there’s another option that became available right around the time of Dave’s article. I thought investors should know about it because it provides broad exposure to IPOs and can be a great complement to FPX. This newer ETF complements FPX in a couple of ways. First, it focuses a lot more on small and midsize companies, like data analysis software firm Splunk (Nasdaq: SPLK) and payment processing technology provider Vantiv (Nasdaq: VNTV) — two stocks that are among the newer ETF’s top 10 holdings. (By the way, both have been hot, climbing nearly 40% and 20%, respectively, since the newer fund’s launch last October.) Another way the newer ETF can complement FPX is through sector diversification. Read More

I can’t believe more people aren’t taking advantage of this… With bond yields near record lows and traditional income securities like savings accounts and certificates of deposit earning next to nothing, we’re regularly finding “instant yields” as high as 9.2%… 13.7%… and even some as much as 19.8%. #-ad_banner-#For instance, right now our research is showing an opportunity to collect a $1,575 cash payment from Visa (NYSE: V) for a 7.8% instant yield… a $980 cash payment from Starbucks (NYSE: SBUX) for a 12.8% instant yield… and we’ve even identified an opportunity to earn a $2,070 payment from International Business… Read More

I can’t believe more people aren’t taking advantage of this… With bond yields near record lows and traditional income securities like savings accounts and certificates of deposit earning next to nothing, we’re regularly finding “instant yields” as high as 9.2%… 13.7%… and even some as much as 19.8%. #-ad_banner-#For instance, right now our research is showing an opportunity to collect a $1,575 cash payment from Visa (NYSE: V) for a 7.8% instant yield… a $980 cash payment from Starbucks (NYSE: SBUX) for a 12.8% instant yield… and we’ve even identified an opportunity to earn a $2,070 payment from International Business Machines (NYSE: IBM) for a 9.6% instant yield.   And the best part thing about these “instant yields” is that there’s nothing complicated about them. To collect, you don’t have to monitor your brokerage statement daily. Nor do you need a million-dollar bank account and access to a high-powered financial advisor. In fact, all you really need is 100 shares of a single stock — and the willingness to sell those shares for a profit. I’m talking, as you might have guessed, about selling covered calls. If you read this recent issue of StreetAuthority Daily, then you know that a… Read More

Roughly a decade ago, technology futurists predicted we’d be living in a paperless world by now. It hasn’t happened as fast as they predicted, but with each passing year, digital publishing — from newspapers to utility bills to corporate invoices — is tightening its grip. #-ad_banner-#The executives at Xerox (NYSE: XRX) saw the writing on the wall, realizing that demand for its printers, copiers and fax machines did not have a bright future. So in 2009, they made an audacious $6.4 billion bid for Affiliated Computer Services (ACS), a leading provider of business process management and outsourcing services. Read More

Roughly a decade ago, technology futurists predicted we’d be living in a paperless world by now. It hasn’t happened as fast as they predicted, but with each passing year, digital publishing — from newspapers to utility bills to corporate invoices — is tightening its grip. #-ad_banner-#The executives at Xerox (NYSE: XRX) saw the writing on the wall, realizing that demand for its printers, copiers and fax machines did not have a bright future. So in 2009, they made an audacious $6.4 billion bid for Affiliated Computer Services (ACS), a leading provider of business process management and outsourcing services. The move delivered instant returns. Fast-forward to 2014, and those returns are still flowing in. Xerox is now one of the leading generators of “Total Yield,” which is a key investment strategy you should be tracking. Simply put, “Total Yield” stocks are companies that use the cash they generate to 1) pay steady dividends, 2) buy back large amounts of their own stock, and 3) pay down debt. Why should investors care about these three strategies? When companies execute on all three fronts, it beats the S&P 500 — as well as regular dividend investing — hands down. (To learn… Read More

Driven by a surge in e-commerce, low interest rates and accommodative Federal Reserve policy, this stock surged over 46% higher in 2013. #-ad_banner-#But at the start of 2014, the company suffered a reversal of fortune. Word of a weaker-than-expected Christmas season, combined with profit-taking, sent shares tumbling. An earnings warning from the company accelerated the selling. The selling intensified despite the company’s strong fundamentals, incredible $10 billion stock repurchase plan and solid dividend. Shares have plunged nearly 8% since the selling began. The selling resulted in many investors panicking or avoiding the stock completely. While this reaction is… Read More

Driven by a surge in e-commerce, low interest rates and accommodative Federal Reserve policy, this stock surged over 46% higher in 2013. #-ad_banner-#But at the start of 2014, the company suffered a reversal of fortune. Word of a weaker-than-expected Christmas season, combined with profit-taking, sent shares tumbling. An earnings warning from the company accelerated the selling. The selling intensified despite the company’s strong fundamentals, incredible $10 billion stock repurchase plan and solid dividend. Shares have plunged nearly 8% since the selling began. The selling resulted in many investors panicking or avoiding the stock completely. While this reaction is understandable, it is the exact opposite of what savvy investors do. Although sell-offs are often harbingers of worse things to come, they’re also often great opportunities to purchase shares at a discount. This is particularly true when the stock’s fundamentals are strong and the selling is an overreaction to short-term bad news.  I think that’s the case here — and investors should buy rather than sell shares of package delivery giant United Parcel Service (NYSE: UPS), which is setting up to be an incredibly discounted buy candidate.  A nearly $93 billion company that posted revenue of nearly $55 billion and… Read More

One of the benefits of the covered call strategy is that it is usually a “set and forget” type of approach. By that, I mean that we can set up our positions (buying stocks and selling call options), and then wait until the option contracts expire to make any adjustments. #-ad_banner-#While the majority of covered call positions are held until maturity, there are certain times when it makes sense to adjust a position before the options expire in order to reduce risk or to capture an even bigger profit. We’ve previously covered adjustments to covered call positions for the… Read More

One of the benefits of the covered call strategy is that it is usually a “set and forget” type of approach. By that, I mean that we can set up our positions (buying stocks and selling call options), and then wait until the option contracts expire to make any adjustments. #-ad_banner-#While the majority of covered call positions are held until maturity, there are certain times when it makes sense to adjust a position before the options expire in order to reduce risk or to capture an even bigger profit. We’ve previously covered adjustments to covered call positions for the purpose of risk management. Today, I want to focus on adjustments to covered call positions that move dramatically in our favor. In these situations, the objective is to maximize our profit and make the most efficient use of our capital. Anatomy Of An Accelerated Covered Call Position To understand both why and how to take advantage of a covered call position that moves sharply in our favor, let’s set up a hypothetical trade to see exactly how the different components of the trade work together. For our example, let’s assume we are buying the iShares Silver Trust (NYSE: SLV)… Read More

For much of the past five years, many companies have been squarely focused on their own operations, using excess cash to pay dividends, buy back stock, or reduce debt — the three pillars of what we call Total Yield. #-ad_banner-#Look for more of the same in 2014, as companies continue to generate stunning amounts of cash flow.  And also look for a lot more deal-making in the year ahead. The conditions are ripe for a boom in mergers and acquisitions (M&A), and various sectors will really heat up as the deals flow.  On the face of it, companies appear… Read More

For much of the past five years, many companies have been squarely focused on their own operations, using excess cash to pay dividends, buy back stock, or reduce debt — the three pillars of what we call Total Yield. #-ad_banner-#Look for more of the same in 2014, as companies continue to generate stunning amounts of cash flow.  And also look for a lot more deal-making in the year ahead. The conditions are ripe for a boom in mergers and acquisitions (M&A), and various sectors will really heat up as the deals flow.  On the face of it, companies appear to continue shunning major mergers and acquisitions. The economic crisis in 2008 and 2009 left many firms feeling too cautious to make bold moves. But some of that caution was shed in 2013.   According to ThomsonReuters, the total dollar value of all M&A activity in the U.S. rose 11% last year, to more than $1 trillion. The sectors and industries that saw the most action were oil and gas ($227 billion), wireless telecom ($175 billion), commercial real estate ($161 billion), and metals and mining ($93 billion). Looking at the macroeconomic backdrop, a case can be made for even more… Read More