To paraphrase an old Wall Street advertisement, when Seth Klarman speaks, people listen. He tends to shy away from most investment conferences, but when he does hold court, it’s standing room only. And for good reason. His book, “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor,” is considered to be a classic of the modern era, fetching more than $1,000 on Amazon.com, now that it is out of print.  And he backs up… Read More

To paraphrase an old Wall Street advertisement, when Seth Klarman speaks, people listen. He tends to shy away from most investment conferences, but when he does hold court, it’s standing room only. And for good reason. His book, “Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor,” is considered to be a classic of the modern era, fetching more than $1,000 on Amazon.com, now that it is out of print.  And he backs up his words with numbers. The hedge fund manager has racked up 20% annualized gains for nearly three decades. Outside of the Oracle of Omaha, Warren Buffett, such sustained greatness is hard to find. What is Klarman’s secret? Identifying value investments that have a built in margin of safety. He will only make an investment if he is extremely confident that the investment won’t lose much value, even if his initial… Read More

Second-quarter earnings season was a bit of a bust. Although earnings remain at an all-time high, the pace of earnings growth continues to look weak. Earnings growth is up just 3% from last year, a small improvement from the first quarter’s 2.6% gain and the 2.8% average for the past four quarters. The headlines reflected that disappointment, with stories about the biggest… Read More

Second-quarter earnings season was a bit of a bust. Although earnings remain at an all-time high, the pace of earnings growth continues to look weak. Earnings growth is up just 3% from last year, a small improvement from the first quarter’s 2.6% gain and the 2.8% average for the past four quarters. The headlines reflected that disappointment, with stories about the biggest blue chips struggling with the weak global economy and falling short of expectations. That includes misses from bellwethers like IBM (NYSE: IBM), Google (Nasdaq: GOOG) and Microsoft (Nasdaq: MSFT). But in spite of some earnings headwinds, there were a number of companies that bucked the trend and delivered big earnings surprises. For instance, take Facebook (Nasdaq: FB), which delivered a 44% earnings surprise last month that sent the company’s share price soaring. But if you missed out on that first… Read More

There is a lot of discussion lately that we are reaching the peak of a dreaded “triple top.” Here are just a couple of the many warnings from market experts… #-ad_banner-#– If the S&P 500 and other major U.S. indexes are turned back at today’s critical, even historic, juncture, we could see a significant upcoming decline in the U.S. stock market as history repeats and also rhymes. – MarketWatch, “Is this the biggest triple top ever?” — A third top… Read More

There is a lot of discussion lately that we are reaching the peak of a dreaded “triple top.” Here are just a couple of the many warnings from market experts… #-ad_banner-#– If the S&P 500 and other major U.S. indexes are turned back at today’s critical, even historic, juncture, we could see a significant upcoming decline in the U.S. stock market as history repeats and also rhymes. – MarketWatch, “Is this the biggest triple top ever?” — A third top has now formed, and a 60% stock market drop is inevitable – and it could strike at any moment. – MoneyNews, “Market Collapse Predicted By Scientist” That’s just a sampling of the reports that are being released almost every day. In 2000 and 2007, the S&P 500 peaked near current levels. The market then plummeted, causing long and agonizing bear markets. These crashes eliminated trillions of dollars in wealth and eroded investor confidence. J.P. Morgan Asset Management recently published this chart highlighting… Read More

Small companies typically outperform over time because they have greater growth prospects than the market leaders.  Between 1927 and 2012, for instance, small caps produced annual returns of 12.9%, compared with 9.9% for large companies. Even now, when many indices have hit highs, the S&P 600 Small Cap Index has gained 31%, in the past year compared with a 23% gain for the S&P 500 over the same period. #-ad_banner-#But most… Read More

Small companies typically outperform over time because they have greater growth prospects than the market leaders.  Between 1927 and 2012, for instance, small caps produced annual returns of 12.9%, compared with 9.9% for large companies. Even now, when many indices have hit highs, the S&P 600 Small Cap Index has gained 31%, in the past year compared with a 23% gain for the S&P 500 over the same period. #-ad_banner-#But most retail investors shy away from small caps mainly because they perceive them to be part of the seedy underbelly of investing, the world of pump-and-dump boiler rooms. That reputation is not entirely undeserved. Many illiquid companies exist whose financials are at best an educated guess.  So to find small-cap stocks that could be assumed to be reasonably safe investments, I used a several-step screening process, starting with solid fundamentals and substantial… Read More

In any industry, investors weigh the relative merits of the best growth stocks versus the best value stocks. And in the race to tap into the burgeoning natural gas vehicle market, the growth stock has typically ruled the day. Westport Innovations (Nasdaq: WPRT) has become quite well known among energy industry investors while rival Fuel Systems Solutions (Nasdaq: FSYS), a struggling value stock, disappeared off radars. Back in April, I suggested that investors should give Fuel Systems Solutions a fresh… Read More

In any industry, investors weigh the relative merits of the best growth stocks versus the best value stocks. And in the race to tap into the burgeoning natural gas vehicle market, the growth stock has typically ruled the day. Westport Innovations (Nasdaq: WPRT) has become quite well known among energy industry investors while rival Fuel Systems Solutions (Nasdaq: FSYS), a struggling value stock, disappeared off radars. Back in April, I suggested that investors should give Fuel Systems Solutions a fresh look, as a solid near-term catalyst was in place: GM (NYSE: GM) was gearing up to launch new pickup trucks with Fuel Systems’ compressed natural gas (CNG) engines. And shares are up more than 30% since then. I still think Fuel Systems is a solid investment opportunity, but I also think it’s time to give Westport — the former industry high-flier — a fresh look. While shares of Fuel Systems have been surging, shares of Westport Innovations have been sliding. But… Read More

It is an oversimplification to summarize George Soros’ investment philosophy based on the theory of reflexivity into a single sentence, but it is useful to think of the theory as telling us that a trend will continue until it reverses. Reflexivity also points out the direction of the trend can be influenced by underlying economic factors and the perception of traders and policymakers about the trend. That makes analyzing trends more complicated because we need to… Read More

It is an oversimplification to summarize George Soros’ investment philosophy based on the theory of reflexivity into a single sentence, but it is useful to think of the theory as telling us that a trend will continue until it reverses. Reflexivity also points out the direction of the trend can be influenced by underlying economic factors and the perception of traders and policymakers about the trend. That makes analyzing trends more complicated because we need to consider what policymakers might do and how traders will react in addition to prices.#-ad_banner-# The entire global economy might be thought of as a group of trends under the theory of reflexivity. What happens in the U.S. affects Japan, for example, just as policies in Japan have an impact on the U.S. These effects can be seen in exchange rates, a market in which Soros has demonstrated mastery. His most famous trade — a bet against the Bank of England — made him $1 billion in one day. Read More

The first rule of business is customer diversification. You should never have just one major customer, just in case that relationship sours. But what happens if you have only one key customer — and that customer steals… Read More

So far this year, stock market gains have been driven by price-to-earnings (P/E) ratio expansion. That could change in the second half of the year. Earnings Growth Could Add To Market Gains Second-quarter earnings have been coming in slightly better than expected. Nearly two-thirds of companies reporting so far have beaten expectations. Earnings per… Read More

So far this year, stock market gains have been driven by price-to-earnings (P/E) ratio expansion. That could change in the second half of the year. Earnings Growth Could Add To Market Gains Second-quarter earnings have been coming in slightly better than expected. Nearly two-thirds of companies reporting so far have beaten expectations. Earnings per share (EPS) for the S&P 500 index are on track for 3.9% growth compared with a year ago. With growth being so slow, many analysts are worried about a potential market decline. As usual, concern grew when major indexes dropped from all-time highs last week.#-ad_banner-# After losing 1% last week, SPDR S&P 500 (NYSE: SPY) is still up about 23.5% on a total return basis in the past 12 months. Total return has come from earnings… Read More

A lot of corporate managers call themselves “idea people.” But even the best ideas are hard to value. After all, how much does a well-prepared business strategy or a dynamite marketing concept really add to a company’s bottom line? There’s only one sector I’m aware of where ideas can be immediately and precisely valued in dollars and cents. In fact, in this business, clients directly purchase ideas — often at six- or seven-figure price tags. It sounds too good to be… Read More

A lot of corporate managers call themselves “idea people.” But even the best ideas are hard to value. After all, how much does a well-prepared business strategy or a dynamite marketing concept really add to a company’s bottom line? There’s only one sector I’m aware of where ideas can be immediately and precisely valued in dollars and cents. In fact, in this business, clients directly purchase ideas — often at six- or seven-figure price tags. It sounds too good to be true, I know. All the more so given that these ideas can be generated for almost no cost — offering a return on investment that’s mathematically close to infinite. I’m not talking about high-priced business management consulting or branding services. Businesses in those sectors usually require substantial overhead expenses in order to create and sell their concepts. The industry I’m talking about is much simpler than that. Million-dollar ideas in this sector can quite literally be made by a single… Read More

The duck-billed platypus defies all scientific reason. This beaver-tailed, otter-footed, semi-aquatic creature is the only mammal on the planet that lays eggs instead of giving live birth. On top of that, it is the ONLY living representative of its family and species. Basically, the platypus is an inexplicable freak of nature. Although the platypus officially has no relatives, I have a theory that it may be distantly related to financial and commodity markets — which often also look really weird and defy explanation. Recently, I’ve noticed an odd disconnect between the price of… Read More

The duck-billed platypus defies all scientific reason. This beaver-tailed, otter-footed, semi-aquatic creature is the only mammal on the planet that lays eggs instead of giving live birth. On top of that, it is the ONLY living representative of its family and species. Basically, the platypus is an inexplicable freak of nature. Although the platypus officially has no relatives, I have a theory that it may be distantly related to financial and commodity markets — which often also look really weird and defy explanation. Recently, I’ve noticed an odd disconnect between the price of oil and the performance of oil- and energy-related stocks. I’m no Dennis Gartman or Jim Rogers, so reading commodity price tea leaves is not my thing. But there’s something going on — and if there’s something quirky going on in the investment world, there’s an opportunity to make money. Here’s an interesting chart of the one-year price action on West Texas Intermediate crude (WTI): The spot… Read More