Common sense doesn’t always lead to profitable investing decisions. In fact, making an investment based on what feels good or appears to be common sense can often lead to losses. #-ad_banner-# This is because the stock market tends to attract the highest number of investors at exactly the wrong time. Professional investors understand this and generally buy a stock when the public is scared or simply not interested.     One of the hardest things for new investors to grasp is the basic rule of buying weakness and selling strength. Common sense and the feel-good method of investing is to buy… Read More

Common sense doesn’t always lead to profitable investing decisions. In fact, making an investment based on what feels good or appears to be common sense can often lead to losses. #-ad_banner-# This is because the stock market tends to attract the highest number of investors at exactly the wrong time. Professional investors understand this and generally buy a stock when the public is scared or simply not interested.     One of the hardest things for new investors to grasp is the basic rule of buying weakness and selling strength. Common sense and the feel-good method of investing is to buy a stock when it is going up. Professional investors buy stocks on pullbacks and sell into strength — the exact opposite of what the majority does. I’m not suggesting that buying strength or when a stock is climbing never works. Under certain circumstances, breakout trading or strength buying makes sense. However, most of the time, waiting for a pullback in an overall uptrend creates the optimal entry level.   The reason for this fact is big-money investors generally only buy bargains. They never want to pay top dollar for any asset. The professionals understand the difference between value and price. … Read More

If you’ve been in the market this year, you are likely pretty happy with your results. Indeed, the bias this year has been all about the bulls, and until we see the price action reflect otherwise, the big winners are likely to keep on giving in 2014. #-ad_banner-# For traders like me who love to ride strong momentum stocks during bull markets, I think the best place to put new capital to work is in those big winners trading at or near new highs. One tech stock that fits this description perfectly is Micron Technology (NASDAQ: MU). The company is… Read More

If you’ve been in the market this year, you are likely pretty happy with your results. Indeed, the bias this year has been all about the bulls, and until we see the price action reflect otherwise, the big winners are likely to keep on giving in 2014. #-ad_banner-# For traders like me who love to ride strong momentum stocks during bull markets, I think the best place to put new capital to work is in those big winners trading at or near new highs. One tech stock that fits this description perfectly is Micron Technology (NASDAQ: MU). The company is one of the largest makers of computing memory chips in the world, but you don’t have to have a very long memory to know that the stock has been a trader’s dream of late. Year to date, MU has delivered a gain of nearly 245%, an incredible run for a large-cap tech stock that’s been around for some time. And though shares are more than 50% above their long-term, 200-day moving average, there have been scant episodes this year where traders got scared and sold the stock off because it was perceived as being overbought. From a fundamental… Read More

Businesses are swimming in cash right now. As of the beginning of the third quarter, the 500 largest U.S. companies collectively held $1.27 trillion. That’s about 13.5% more than this time last year. If you converted all this money into $100 bills and stacked them up, the pile would stretch 800 miles high. #-ad_banner-#And if it was spent at the rate of $250 million a year, it would take 5,100 years to exhaust the supply… So where is this cash coming from? And more importantly, how can investors take advantage of this $1.3 trillion problem?  Let me explain… Borrowing accounts… Read More

Businesses are swimming in cash right now. As of the beginning of the third quarter, the 500 largest U.S. companies collectively held $1.27 trillion. That’s about 13.5% more than this time last year. If you converted all this money into $100 bills and stacked them up, the pile would stretch 800 miles high. #-ad_banner-#And if it was spent at the rate of $250 million a year, it would take 5,100 years to exhaust the supply… So where is this cash coming from? And more importantly, how can investors take advantage of this $1.3 trillion problem?  Let me explain… Borrowing accounts for some of the corporate cash hoard. But mostly, it’s that companies are simply generating cash faster than they are spending it, creating healthy amounts of free cash flow (FCF) — a company’s fuel for dividends and growth. I consider free cash flow the best measure of a company’s earnings power. The calculation is simple. You start with operating cash flows and then subtract any capital expenditures made for property, plants and equipment (PPE). The result is the true cash generated by the business after all the regular bills (salary, rent, etc.) have been paid and after any discretionary spending… Read More

As the fourth quarter comes to an end, company insiders are about to go into a quiet period. Many companies adhere to a strict no-trading policy between the end of the quarter and the eventual release of quarterly earnings. As a result, a wide range of insiders have been scrambling to make their purchases in recent weeks. Here’s a close look at some of the more notable buying activity. (All insider information supplied by InsiderInsights.com.) 1. Occidental Petroleum (NYSE: OXY ) A pair of insiders acquired a combined 7,000 shares in December of this energy driller at an average price… Read More

As the fourth quarter comes to an end, company insiders are about to go into a quiet period. Many companies adhere to a strict no-trading policy between the end of the quarter and the eventual release of quarterly earnings. As a result, a wide range of insiders have been scrambling to make their purchases in recent weeks. Here’s a close look at some of the more notable buying activity. (All insider information supplied by InsiderInsights.com.) 1. Occidental Petroleum (NYSE: OXY ) A pair of insiders acquired a combined 7,000 shares in December of this energy driller at an average price of $92 a share. The purchases came after Occidental posted third-quarter results a month earlier that were solidly ahead of forecasts. But insiders aren’t buying on the prospects for further profit momentum, but instead for Occidental’s planned financial engineering.#-ad_banner-# Occidental has identified a range of assets it intends to sell, and much of the proceeds will go toward a share buyback. Merrill Lynch, which rates shares a “buy” with a $130 price target, thinks Occidental can buy back $12-$15 billion in stock over the next few years, which would reduce the share count by 15%-20%. Formal asset sales are expected… Read More

Advertising is everywhere you look (or listen): It’s in your car, your home, and in every storefront you pass as you stroll around the block.#-ad_banner-# The industry has so much power that it affects nearly everything you see, hear and do. The sector is so potent that it drives demand, which is one of the two primary forces of every market-based economic system. As you can imagine, there are huge profits to be made by investing in this industry. Revenues are expected to reach $178 billion in the United States alone during 2013. However, many investors don’t usually even think… Read More

Advertising is everywhere you look (or listen): It’s in your car, your home, and in every storefront you pass as you stroll around the block.#-ad_banner-# The industry has so much power that it affects nearly everything you see, hear and do. The sector is so potent that it drives demand, which is one of the two primary forces of every market-based economic system. As you can imagine, there are huge profits to be made by investing in this industry. Revenues are expected to reach $178 billion in the United States alone during 2013. However, many investors don’t usually even think about this business when choosing investments. This is because it’s so intertwined with our lives that the majority don’t even give it a second thought. Just how does this sector drive economic demand? One of the first concepts taught in economics is supply and demand. These are the underlying forces that make commerce, and even entire economies, function. Understanding this practical implication of supply and demand is one of the keys to successful investing, and even operating a profitable business. And advertising is oftentimes not merely the grease on the economic wheel — it can be the wheel itself. Demand,… Read More

In a stellar year for most sectors, many health-related stocks have outperformed. iShares US Medical Devices (NYSE: IHI) is up 32% year to date compared to a 25% gain in the S&P 500. And among that fund’s holdings is Boston Scientific (NYSE: BSX), whose stellar run in 2013 has led to shares doubling. Beginning the year just below $6 a share, BSX has climbed higher in $2 increments in a methodical stair-step pattern. Each push above technical resistance from $6 to $8 to $10 held the previous ceiling as solid price support. The recent $10 to $12 range projects a… Read More

In a stellar year for most sectors, many health-related stocks have outperformed. iShares US Medical Devices (NYSE: IHI) is up 32% year to date compared to a 25% gain in the S&P 500. And among that fund’s holdings is Boston Scientific (NYSE: BSX), whose stellar run in 2013 has led to shares doubling. Beginning the year just below $6 a share, BSX has climbed higher in $2 increments in a methodical stair-step pattern. Each push above technical resistance from $6 to $8 to $10 held the previous ceiling as solid price support. The recent $10 to $12 range projects a move to $14 on an upside breakout through $12 resistance. Only a weekly close below $10 would negate the bullish bias. #-ad_banner-#The $14 target is about 22% higher than recent prices, but traders who use a capital-preserving, stock substitution strategy could see a 100% return on a move to that level. One major advantage of using a long call option rather than buying a stock outright is putting up much less capital to control 100 shares — that’s the power of leverage. But with all of the potential strike and expiration combinations, choosing an option can be a… Read More

In most instances, it no longer pays to retain the services of a sophisticated stock broker. Many self-directed investors are now perfectly capable of building their own portfolios, or at least well-served by a lower-cost independent financial advisor.#-ad_banner-# But stock brokers still hold one clear virtue: They can get you a piece of a hot new IPO, right at the offering price, if the broker’s firm helped underwrite the deal. The rest of us have had to wait until these IPOs have already begun trading. Often times, these stocks open for trading far above the offering price, which makes it… Read More

In most instances, it no longer pays to retain the services of a sophisticated stock broker. Many self-directed investors are now perfectly capable of building their own portfolios, or at least well-served by a lower-cost independent financial advisor.#-ad_banner-# But stock brokers still hold one clear virtue: They can get you a piece of a hot new IPO, right at the offering price, if the broker’s firm helped underwrite the deal. The rest of us have had to wait until these IPOs have already begun trading. Often times, these stocks open for trading far above the offering price, which makes it hard to spot a good entry point. A few months ago, I suggested that most of the time, “you should wait for these stocks to come back into earth before giving them a fresh look.” Roughly a month later, I gave an example of how to patiently wait for IPOs, highlighting the deep value in busted IPO Ply Gem Holdings (Nasdaq: PGEM). That turned out to be a timely suggestion as shares have begun to rebound. Frankly, it’s hard to find such scenarios where good companies have been deeply oversold. Most of the stocks that plunge after IPO (such as Violin… Read More

Investors rarely have the chance to use “highflier” and “utility stock” in the same sentence, but that description fits a utility stock I first recommended nearly three years ago to a tee. #-ad_banner-#Since then, shares have climbed an impressive 67%. During the past three years, they’ve delivered an average annual return of 22.1%, besting the S&P 500’s three-year return of 15.2% by nearly seven full percentage points. I can almost hear you asking yourself, “What utility stock could possibly perform anywhere near that well? There certainly aren’t any domestic utilities that can do it.” And you’d probably be… Read More

Investors rarely have the chance to use “highflier” and “utility stock” in the same sentence, but that description fits a utility stock I first recommended nearly three years ago to a tee. #-ad_banner-#Since then, shares have climbed an impressive 67%. During the past three years, they’ve delivered an average annual return of 22.1%, besting the S&P 500’s three-year return of 15.2% by nearly seven full percentage points. I can almost hear you asking yourself, “What utility stock could possibly perform anywhere near that well? There certainly aren’t any domestic utilities that can do it.” And you’d probably be right. To identify this high-flying utility, I had to look to emerging markets where economies and energy use are typically growing much faster than in the United States. The company I found was a leading independent coal-fired energy producer located in China. Because the firm was cranking up output to keep pace with China’s economic expansion, sported a 4.7% dividend yield, and had a stock with below-average volatility, I thought every investor should know about it. I’m referring to Huaneng Power International (NYSE: HNP), which owns and operates approximately 175 primarily coal-fired power plants in 19 Chinese provinces and Singapore. Read More

Do you want to become a millionaire? That’s obviously a rhetorical question… the majority of us would love it. But what’s your plan for achieving that goal? #-ad_banner-#If your plan is to make that sort of wealth in the stock market, then what’s your strategy? Blue-chip stocks, index funds, or do you want to watch your “daily paychecks,” as my colleague Amy Calistri would say, roll in by the truck load? All of these strategies are great. There’s nothing wrong with them and they’ll probably make you money in the long run. But while investing in just steady-eddy, mature companies… Read More

Do you want to become a millionaire? That’s obviously a rhetorical question… the majority of us would love it. But what’s your plan for achieving that goal? #-ad_banner-#If your plan is to make that sort of wealth in the stock market, then what’s your strategy? Blue-chip stocks, index funds, or do you want to watch your “daily paychecks,” as my colleague Amy Calistri would say, roll in by the truck load? All of these strategies are great. There’s nothing wrong with them and they’ll probably make you money in the long run. But while investing in just steady-eddy, mature companies may keep the income flowing in, it isn’t going to make you a millionaire anytime soon. They’re not going to give you those “knocked-out-of-the-park” returns that you’ve heard about since you first learned of the stock market. No, I’m convinced that if your goal is to reach a seven-figure bank account, you need to add a “swing for the fences” element to your overall portfolio strategy… I call it the “10% solution.” The idea behind it is simple. If your goal is to become a millionaire in the market, then you need to dedicate a portion of your portfolio to… Read More