It boggles my mind to think about how many billions of casseroles have been made by American moms and eaten by eye-rolling American kids over the past century. #-ad_banner-# That’s a weird thing to obsess about, I know — but it’s not really the casseroles I’m thinking about. It’s the casserole dishes and, most likely, many of those glass dishes were manufactured by Corning (NYSE: GLW). Throughout its long history — it was founded in 1851 — Corning has made glass for lots of different things. But during the tech boom of the late 20th century, this old-line American… Read More

It boggles my mind to think about how many billions of casseroles have been made by American moms and eaten by eye-rolling American kids over the past century. #-ad_banner-# That’s a weird thing to obsess about, I know — but it’s not really the casseroles I’m thinking about. It’s the casserole dishes and, most likely, many of those glass dishes were manufactured by Corning (NYSE: GLW). Throughout its long history — it was founded in 1851 — Corning has made glass for lots of different things. But during the tech boom of the late 20th century, this old-line American industrial company reinvented itself as a cutting-edge technology company making fiber-optic cable for the information superhighway.  Then the bottom fell out: GLW was pretty much hung out to dry by the market as investors realized that, in typical American fashion, telecom providers had gotten ahead of themselves and overbuilt their fiber-optic networks. “There’s no way Corning will ever make money again,” said the skeptics. Then Corning reinvented itself again, thanks to smartphones and tablets — with a product they had developed called Gorilla Glass, which turned out to be perfect for these devices. I last profiled Corning in… Read More

As traders, we constantly deal with various levels of uncertainty. If anyone tells you that they have found a “sure thing” when it comes to your investments, you should run (not walk) in the opposite direction.#-ad_banner-# Instead of dealing with certainties, we must constantly seek the optimum balance between high probability (having a strong chance of success) and high profitability (generating a high rate of return). Most of the time, these two dynamics work inversely. If you find a trade that has the potential to triple your money, the probability of that trade will likely be very low. Read More

As traders, we constantly deal with various levels of uncertainty. If anyone tells you that they have found a “sure thing” when it comes to your investments, you should run (not walk) in the opposite direction.#-ad_banner-# Instead of dealing with certainties, we must constantly seek the optimum balance between high probability (having a strong chance of success) and high profitability (generating a high rate of return). Most of the time, these two dynamics work inversely. If you find a trade that has the potential to triple your money, the probability of that trade will likely be very low. On the other hand, you can set up a trade with a very high probability of success, but the actual return on that trade will likely be small (think Treasury bonds). As covered call traders, we have a unique ability to pick out specifically where on the probability/profitability continuum we want our trade to sit. Depending on how aggressive or conservative we want to be, we can pick an options contract that gives us the right amount of protection, or the amount of potential returns that we are looking for. Setting Up Covered Call Positions Based On Probability For… Read More

Imagine a company that not only filed bankruptcy in 2009, but was bounced from owner to owner as a nearly toxic asset that fateful year. Things were so bad for this once thriving American firm that it was forced to accept a $4 billion bailout.#-ad_banner-#​ Despite Uncle Sam’s helping hand, the situation was so negative that the company stopped trading on the U.S. stock exchanges. While there’s now serious talk about being relisted, this formerly downtrodden company currently trades in the U.S. only under its foreign benefactor’s ticker symbol. This company isn’t some no-name widget maker. It was… Read More

Imagine a company that not only filed bankruptcy in 2009, but was bounced from owner to owner as a nearly toxic asset that fateful year. Things were so bad for this once thriving American firm that it was forced to accept a $4 billion bailout.#-ad_banner-#​ Despite Uncle Sam’s helping hand, the situation was so negative that the company stopped trading on the U.S. stock exchanges. While there’s now serious talk about being relisted, this formerly downtrodden company currently trades in the U.S. only under its foreign benefactor’s ticker symbol. This company isn’t some no-name widget maker. It was once a leading American manufacturer whose brands have remained respected and international household names despite its fall from grace. Today, an unexpected resurgence of consumer demand for some of its leading products has enabled the company to post dramatically improved numbers as well as create a unique, profitable opportunity for investors. I am talking about Chrysler Group, maker of the iconic Jeep SUV and Ram pickup models. Decimated by the financial crisis combined with soaring gasoline prices, it looked like sales of SUVs and light trucks would never recover to their pre-crisis levels. Now that the worst of the downturn… Read More

While thumbing through an old copy of “Beating the Street” recently, I came across a basic but powerful concept that applies just as much now as it did when legendary investor Peter Lynch wrote the book in 1993.#-ad_banner-# Basically, Lynch reminds readers that just because a stock is already a huge multi-bagger doesn’t necessarily mean its high-flying days are over. After I read that, one particular stock came to mind. Like most stocks, the one I’m thinking of took a major beating during the financial crisis. It sank to about $7 per share in… Read More

While thumbing through an old copy of “Beating the Street” recently, I came across a basic but powerful concept that applies just as much now as it did when legendary investor Peter Lynch wrote the book in 1993.#-ad_banner-# Basically, Lynch reminds readers that just because a stock is already a huge multi-bagger doesn’t necessarily mean its high-flying days are over. After I read that, one particular stock came to mind. Like most stocks, the one I’m thinking of took a major beating during the financial crisis. It sank to about $7 per share in October 2008 after trading between $11 and $18 during the prior 12 months. But in 2009, it rebounded like a champ, posting a 94% gain to finish the year just over $19. Since the darkest days of 2008, the stock is up 650% and now trades near $49 a share. After such a steep run-up, shareholders in this company, AutoNation (NYSE: AN), may be wondering if now is a good time to sell. After all, how much higher can the stock go after a sevenfold rise in five years? Quite a bit higher, in my opinion. I think the stock… Read More

I’ve said it at least a hundred times, and I’ll say it at least a hundred more… the vast majority of the world’s best high-yield stocks are NOT based in the United States… Don’t believe me? Consider this… Of the 118 companies that pay dividend yields of more than 12%, only 25 of them are based in the U.S. Although the number fluctuates daily, that means roughly 79% of the world’s highest yields are found outside the United States. #-ad_banner-#Unfortunately, most investors don’t consider foreign stocks when they’re looking for dividend investments. They automatically dismiss other countries as “risky” and… Read More

I’ve said it at least a hundred times, and I’ll say it at least a hundred more… the vast majority of the world’s best high-yield stocks are NOT based in the United States… Don’t believe me? Consider this… Of the 118 companies that pay dividend yields of more than 12%, only 25 of them are based in the U.S. Although the number fluctuates daily, that means roughly 79% of the world’s highest yields are found outside the United States. #-ad_banner-#Unfortunately, most investors don’t consider foreign stocks when they’re looking for dividend investments. They automatically dismiss other countries as “risky” and “unproven.” That’s a mistake. Just because a company is located outside the U.S., it doesn’t mean it’s risky. In fact, sometimes investing in foreign countries can actually be safer than investing here at home. Let’s face it, the past 14 years haven’t been kind to American equities. From the start of the millennium to December 31, 2013, the S&P 500 returned just 64%, including dividends. That’s equivalent to a pathetic 3.6% annualized return — barely enough to keep pace with inflation. Meanwhile, problems in Washington are only making matters worse. A ballooning national debt, the “fiscal cliff,” and billions of… Read More

Successful investing is all about figuring out what something is worth and then paying significantly less than that for it. If you can do that over and over again, you’ll have found yourself a recipe for success.#-ad_banner-#​ It sounds easy, but of course it isn’t. It takes a lot of hard work and patience to find situations where the market is offering up such juicy bargains.  I believe that there is one such bargain sitting in plain view today. This is a well-known company that I think offers investors the chance to buy a dollar’s worth of assets… Read More

Successful investing is all about figuring out what something is worth and then paying significantly less than that for it. If you can do that over and over again, you’ll have found yourself a recipe for success.#-ad_banner-#​ It sounds easy, but of course it isn’t. It takes a lot of hard work and patience to find situations where the market is offering up such juicy bargains.  I believe that there is one such bargain sitting in plain view today. This is a well-known company that I think offers investors the chance to buy a dollar’s worth of assets for 25 cents. The evidence to support that valuation is quite compelling, but the question of when that value might be realized is difficult to answer. The company I’m talking about is Sears Holdings (Nasdaq: SHLD).  Many people are familiar with the Sears story. Hedge fund manager Eddie Lampert gained control of Kmart in 2003 by buying up the company’s debt and exchanging that debt for equity during bankruptcy proceedings. That was a home run for Lampert. Then in 2004, Lampert had Kmart acquire Sears to form Sears Holdings. Investors were thrilled with this hedge fund star taking control of two… Read More

Exactly one year ago, analysts at Merrill Lynch raised their price target on little-known Intercept Pharmaceuticals (Nasdaq: ICPT) from $29 to $42, due to “an increased conviction that the company’s lead drug OCA will be approved by the FDA.” They were right to be bullish — but they missed on the magnitude of this stock’s potential upside. Bullish feedback from the FDA pushed this stock from under $75 on Jan. 8 to $445 on Jan. 10. It’s hard to recall the last time a stock went vertical like that.#-ad_banner-#​ But… Read More

Exactly one year ago, analysts at Merrill Lynch raised their price target on little-known Intercept Pharmaceuticals (Nasdaq: ICPT) from $29 to $42, due to “an increased conviction that the company’s lead drug OCA will be approved by the FDA.” They were right to be bullish — but they missed on the magnitude of this stock’s potential upside. Bullish feedback from the FDA pushed this stock from under $75 on Jan. 8 to $445 on Jan. 10. It’s hard to recall the last time a stock went vertical like that.#-ad_banner-#​ But the bloom is already off the rose, and shares opened trading this week with a more than $50 plunge. As the dust settles, it’s time to see if the pullback is just a bump in the road, or signs of more weakness to come. An Unmet Need Any biotech company that aims for glory should target an unmet medical need and a large patient population. It’s a swing-for-the-fences opportunity that rarely pays off, but Intercept appears to have succeeded with its key drug: obeticholic acid (OCA). OCA is derived from naturally occurring chemicals in the bile duct, which aids… Read More

Investors are often told that the best time to buy is when everyone seems to be excessively negative on a sector or a country. That was certainly true in 2013 for investors who were able to trade in the sovereign debt of Greece.#-ad_banner-#​ Investors enjoyed a gain of 47% on Greek government debt last year even as fears of Greek default lingered throughout the year and the economic news remained mostly negative. Of course, most individual investors couldn’t actually invest directly in Greek bonds, and returns from investments that were available to individual investors were significantly lower. For… Read More

Investors are often told that the best time to buy is when everyone seems to be excessively negative on a sector or a country. That was certainly true in 2013 for investors who were able to trade in the sovereign debt of Greece.#-ad_banner-#​ Investors enjoyed a gain of 47% on Greek government debt last year even as fears of Greek default lingered throughout the year and the economic news remained mostly negative. Of course, most individual investors couldn’t actually invest directly in Greek bonds, and returns from investments that were available to individual investors were significantly lower. For example, the Global X FTSE Greece 20 ETF (NYSE: GREK) gained 25% in 2013, less than U.S. stocks — even though Greek stocks should have benefited from the same factors that drove Greek bonds higher.  Given the higher risk Greek stocks provided, buying when the news was negative in early 2013 doesn’t seem to have been a wise investment for most individuals. The example of Greece illustrates some problems with the idea of buying bad news — there is no way to know when the news is bad enough to drive big gains, and there is no way to be… Read More

One of the unremarked themes of the great bull market of 2013 was investors’ surging appetite for risk.#-ad_banner-# Stocks that were already trading at rich valuations caught fire, sometimes pushing their valuations into nosebleed territory. Case in point: Twitter (NYSE: TWTR), which surged from $40 in late November to more than $70 a month later.  Who would have the nerve to go against such a powerful run by selling shares short? Plenty of investors, as it turns out. According to short interest data released Jan. 10, the short interest in Twitter surged 24% in the two weeks that ended Dec. Read More

One of the unremarked themes of the great bull market of 2013 was investors’ surging appetite for risk.#-ad_banner-# Stocks that were already trading at rich valuations caught fire, sometimes pushing their valuations into nosebleed territory. Case in point: Twitter (NYSE: TWTR), which surged from $40 in late November to more than $70 a month later.  Who would have the nerve to go against such a powerful run by selling shares short? Plenty of investors, as it turns out. According to short interest data released Jan. 10, the short interest in Twitter surged 24% in the two weeks that ended Dec. 31, to 29.4 million shares.  The fact that shares have already plunged more than 20% since Christmas has likely emboldened short sellers to hike their positions further. Ratings downgrades from Morgan Stanley and Cantor Fitzgerald, along with bearish new coverage from Cowen, surely helped the short sellers with their cause. But these shorts are likely stepping up their positions for another reason: In a matter of weeks, Twitter will deliver fourth-quarter earnings and issue a 2014 outlook. The company is facing an extremely high set of expectations, and anything less than a blowout may lead still-bullish investors to take profits. Read More

Traders are struggling to understand what the unemployment report means to the Federal Reserve and to the markets, but their initial assessment seems to be bullish.#-ad_banner-#​ Concerns About Spending Offset by Weak Jobs Data SPDR S&P 500 ETF (NYSE: SPY) gained 0.68% last week despite negative news from several companies throughout the week. Until Friday, retailers dominated the news about the stock market. J. C. Penney (NYSE: JCP) and Sears (NASDAQ: SHLD) reported disappointing holiday sales and the stocks sold off. Other retailers also reported lower sales. Addressing future profitability, Macy’s (NYSE: M) jumped after… Read More

Traders are struggling to understand what the unemployment report means to the Federal Reserve and to the markets, but their initial assessment seems to be bullish.#-ad_banner-#​ Concerns About Spending Offset by Weak Jobs Data SPDR S&P 500 ETF (NYSE: SPY) gained 0.68% last week despite negative news from several companies throughout the week. Until Friday, retailers dominated the news about the stock market. J. C. Penney (NYSE: JCP) and Sears (NASDAQ: SHLD) reported disappointing holiday sales and the stocks sold off. Other retailers also reported lower sales. Addressing future profitability, Macy’s (NYSE: M) jumped after announcing plans to cut costs. SPDR S&P Retail ETF (NYSE: XRT) has a high correlation with SPY, and weakness in retailers would be a warning sign that the broad stock market is vulnerable to a sell-off. On Friday, however, traders’ concerns shifted away from retailers to the broader economy. The unemployment report showed that job creation stalled in December, and the weakness was generally considered to be bullish for stocks, bonds and gold. As usual, traders trying to anticipate what the Federal Reserve will do seemed to drive the market. Last month, the Fed announced that it would begin tapering… Read More