While momentum stocks can be unbeatable when they’re on a roll, they can also quickly shift course and unwind recent gains. But I don’t see that happening any time soon for one widely-owned momentum stock. Shares of leading video game maker Electronic Arts, Inc. (Nasdaq: EA) have surged more than 500% in the past three years, yet a set of catalysts should take shares yet higher in coming quarters. Don’t assume that strong stock price gains translate into an overvalued stock. EA’s profits have quickly risen in tandem with the share price, and the stock is actually more than… Read More

While momentum stocks can be unbeatable when they’re on a roll, they can also quickly shift course and unwind recent gains. But I don’t see that happening any time soon for one widely-owned momentum stock. Shares of leading video game maker Electronic Arts, Inc. (Nasdaq: EA) have surged more than 500% in the past three years, yet a set of catalysts should take shares yet higher in coming quarters. Don’t assume that strong stock price gains translate into an overvalued stock. EA’s profits have quickly risen in tandem with the share price, and the stock is actually more than 20% undervalued relative to peers, with a price-to-earnings ratio of 27 versus the industry average of 34. Look for that profit momentum to continue. EA is garnering a great deal of buzz for a November 2015 launch of a new Star Wars game, which will be released a month before the next instalment of the popular movie franchise. Management projects that the game will sell nine-to-10 million units in fiscal (March) 2016. #-ad_banner-#UBS analyst Eric Sheridan is even more optimistic. He sees unit sales of 12-to-14 million based on consumer surveys and an enthusiastic response to the new Star Wars… Read More

#-ad_banner-#The twin pillars of global population growth and economic development are leading to concerns about water scarcity. In the inaugural article of this three-part series, I painted the issue in broad strokes. Part two delved into the world of irrigation technology and how outdated and inefficient methods are slowing being replaced with modern, conservation-oriented systems. Agriculture and irrigation currently account for a bulk of water usage and that is unlikely to change (for the better) any time soon. Over the course of coming decades, natural fresh water sources will be depleted in various regions across the world, and the only… Read More

#-ad_banner-#The twin pillars of global population growth and economic development are leading to concerns about water scarcity. In the inaugural article of this three-part series, I painted the issue in broad strokes. Part two delved into the world of irrigation technology and how outdated and inefficient methods are slowing being replaced with modern, conservation-oriented systems. Agriculture and irrigation currently account for a bulk of water usage and that is unlikely to change (for the better) any time soon. Over the course of coming decades, natural fresh water sources will be depleted in various regions across the world, and the only solution is to invest in efficient, renewable sources of potable water. However, at current spending levels, the world is ill prepared. In a 2009 report, the United Nations estimated that the annual global water infrastructure financing gap (between what is required and what is currently being spent each year) may be as high as $85 billion, with over a third of that attributed to developed Asia and China.  A Salty Problem Earth’s surface is dominated by water, 97% of which is salty. If even a fraction of that can be converted to drinkable water for municipal purposes and usable… Read More

With each passing year, access to clean, potable water is an increasingly contentious issue. In part one of this three-part series on water scarcity, I outlined the issue at hand. To recap, at current consumption rates, half the world’s population will be living in water-stressed areas within 15 years, and by 2050, water availability will fall by half. Farmers currently use roughly 70% of available fresh water, and more than half the water they use is lost to run-off and evaporation. #-ad_banner-#The only solution: Increased capital investment in water infrastructure, especially in agriculture. To understand which companies stand to benefit,… Read More

With each passing year, access to clean, potable water is an increasingly contentious issue. In part one of this three-part series on water scarcity, I outlined the issue at hand. To recap, at current consumption rates, half the world’s population will be living in water-stressed areas within 15 years, and by 2050, water availability will fall by half. Farmers currently use roughly 70% of available fresh water, and more than half the water they use is lost to run-off and evaporation. #-ad_banner-#The only solution: Increased capital investment in water infrastructure, especially in agriculture. To understand which companies stand to benefit, you must first analyze the current state of irrigation technology. Replacing The Old World The most common irrigation is gravity-based system, referred to as furrow irrigation, which involves water running down slight declines in canals. This process is inefficient and often leads to overwatering and wasted resources. Increasingly, this technique is being replaced by pivot, lateral and drip irrigation systems, which reduce weed growth and increase crop yields by providing optimal water levels to the plant’s roots. These systems are aided by automated wireless and GPS monitoring systems that release water at times of the day when less water… Read More

#-ad_banner-#Although the Earth has more water than land, only 1% of the vital liquid is actually potable. Across the globe, limited supplies of clean water are in danger as demand surges. The only solution: better management of existing fresh water and cheaper, more efficient methods of turning undrinkable water into pure H2O. Welcome to a three-part look at this vital issue. The problem will not be solved overnight (or any time soon), making this a long-term source of global concern, while generating serious profits for savvy investors. Today’s essay is an overview of the topic. Part two centers on companies… Read More

#-ad_banner-#Although the Earth has more water than land, only 1% of the vital liquid is actually potable. Across the globe, limited supplies of clean water are in danger as demand surges. The only solution: better management of existing fresh water and cheaper, more efficient methods of turning undrinkable water into pure H2O. Welcome to a three-part look at this vital issue. The problem will not be solved overnight (or any time soon), making this a long-term source of global concern, while generating serious profits for savvy investors. Today’s essay is an overview of the topic. Part two centers on companies working to improve irrigation techniques. The final piece focuses on desalination and the companies reducing costs and improving efficiency in the industry. Water, Water, Everywhere The ongoing drought in California has brought home a clear reality for many Americans. Although residents of the nation’s most populous state will never die of thirst, their ability to serve as one of the nation’s primary agricultural hubs has become imperiled. Pull back the lens to a global scale and the problem is more apparent: agriculture accounts for approximately 70% of total global water consumption.  Source: International Fund for… Read More

#-ad_banner-#These are gloomy times at the headquarters of digital advertising firm Rocket Fuel, Inc. (Nasdaq: FUEL).  Many of the company’s employees became paper millionaires during the September 2013 initial public offering (IPO). Shares opened for the first day of trading at $29 and soared to $62 by the end of the day. These days, shares languish around $8 and most employee stock options are deeply underwater. Yet this company’s share price implosion was quite predictable. That’s because management pursued the maxim “growth for its own sake.” They forgot that investors eventually expect sales growth to turn into profit growth. Indeed… Read More

#-ad_banner-#These are gloomy times at the headquarters of digital advertising firm Rocket Fuel, Inc. (Nasdaq: FUEL).  Many of the company’s employees became paper millionaires during the September 2013 initial public offering (IPO). Shares opened for the first day of trading at $29 and soared to $62 by the end of the day. These days, shares languish around $8 and most employee stock options are deeply underwater. Yet this company’s share price implosion was quite predictable. That’s because management pursued the maxim “growth for its own sake.” They forgot that investors eventually expect sales growth to turn into profit growth. Indeed this is a lesson learned — and forgotten — every decade. Back in 2008, strategists at consulting firm AT Kearney spelled out this growth trap in great detail. A simple look at Rocket Fuel’s financial statements paints a picture of a company with minimal expense restraint. Although investors initially applauded this company’s remarkable growth trajectory, they couldn’t understand why losses kept on rising. Rocket Fuel’s desire to “step on the gas” in terms of headcount spending has ultimately been a huge turn off. Instead, investors need to steer clear of companies with negative operating leverage. … Read More

Always cast your line where the big fish swim. With tens of thousands of potential investment choices, one smart strategy is to follow the smart money — the kind managed by the sort people who seldom guess wrong. #-ad_banner-#In most instances, that means hedge funds. These special investments are open only to the (really) rich. This is actually defined by federal law. To qualify, an individual must have a net worth greater than a million bucks, not counting home equity. An individual also needs to have $200,000 in annual income (or… Read More

Always cast your line where the big fish swim. With tens of thousands of potential investment choices, one smart strategy is to follow the smart money — the kind managed by the sort people who seldom guess wrong. #-ad_banner-#In most instances, that means hedge funds. These special investments are open only to the (really) rich. This is actually defined by federal law. To qualify, an individual must have a net worth greater than a million bucks, not counting home equity. An individual also needs to have $200,000 in annual income (or household income of greater than $300,000), with a reasonable belief that the income stream will continue. Hedge funds have professional management. I’m talking about the pinstriped suit crowd that actually run the world; the private jet types who use “weekend” as a verb. Let’s be very clear, though. Most hedge funds, no matter how lovely their managers’ suits, do not beat the market over time. That might be one reason why Warren Buffett made a famous $1 million bet that a basket of five hedge funds couldn’t beat the market over… Read More

By many measures, the U.S. housing market looks better than it has since before the financial crisis. Sales of newly-built homes are picking up, and applications for new building permits recently hit an eight-year high. Home listings are up, and so are mortgage applications (despite rising borrowing costs). In the first quarter, real estate investment expanded at a 5% annualized rate while mortgage delinquencies and foreclosures continued to decline. That makes this a good time to seek out a pure play on real estate. My top pick is the number-one supplier of wallboard and joint compound used in building construction… Read More

By many measures, the U.S. housing market looks better than it has since before the financial crisis. Sales of newly-built homes are picking up, and applications for new building permits recently hit an eight-year high. Home listings are up, and so are mortgage applications (despite rising borrowing costs). In the first quarter, real estate investment expanded at a 5% annualized rate while mortgage delinquencies and foreclosures continued to decline. That makes this a good time to seek out a pure play on real estate. My top pick is the number-one supplier of wallboard and joint compound used in building construction and remodeling, USG Corp. (NYSE: USG). The company has certainly seen its share of turmoil. Shortly after emerging from bankruptcy in 2006, USG found itself mired in the financial crisis. This brought five-straight years of painful losses, totaling nearly $2.2 billion, as building and remodeling activity tanked. Operations got back into the black in 2013, but growth slowed dramatically last year as the housing recovery took a breather. Now the recovery is picking up steam, and there’s a powerful catalyst to keep it going: the millennial generation. As I noted in a recent profile of spirits maker Constellation Brands, Inc. Read More

If you want to start an instant argument, find adherents of technical analysis and adherents of fundamental analysis, and then ask them which investing approach is better. The technical analysts will tell you that a close read of a company’s financial statements won’t help you know if a stock represents a timely investment. The fundamental analysts will counter that simply looking at a series of trading charts only tells you where a stock has been, not where it is going. #-ad_banner-#With all due respect, they are both wrong. The real secret… Read More

If you want to start an instant argument, find adherents of technical analysis and adherents of fundamental analysis, and then ask them which investing approach is better. The technical analysts will tell you that a close read of a company’s financial statements won’t help you know if a stock represents a timely investment. The fundamental analysts will counter that simply looking at a series of trading charts only tells you where a stock has been, not where it is going. #-ad_banner-#With all due respect, they are both wrong. The real secret to successful investing is the marriage of both approaches. In fact, I’ve singled out a pair of factors — one from each camp — that can be used in tandem to deliver robust gains. It’s an approach that has led me to bag triple-digit gains, often in a matter of months, with stocks that represent a range of industries. I want to walk you through this two-pronged approach, what I call the “Alpha Score,” so you can profit from my strategy in your daily trading activities. It’s All Relative The… Read More

Some argue that America is on the decline. From ballooning government debt to prolonged conflict overseas to scandalous behavior on Wall Street, it’s easy to think that these talking heads might be on to something. #-ad_banner-#Likewise, conventional wisdom says that American industry is “over the hill.” Many observers today believe that U.S. firms simply can’t compete with the likes of the emerging Chinese and Brazilian markets. It’s certainly true that on a basic scale, those economies are growing faster. America’s 1.9% GDP growth last year doesn’t come close to China’s 7.7%. Read More

Some argue that America is on the decline. From ballooning government debt to prolonged conflict overseas to scandalous behavior on Wall Street, it’s easy to think that these talking heads might be on to something. #-ad_banner-#Likewise, conventional wisdom says that American industry is “over the hill.” Many observers today believe that U.S. firms simply can’t compete with the likes of the emerging Chinese and Brazilian markets. It’s certainly true that on a basic scale, those economies are growing faster. America’s 1.9% GDP growth last year doesn’t come close to China’s 7.7%. Sure, America has its problems. There’s no denying that. But if you look a little deeper, you’ll find that there’s one area — perhaps the most important area — where America still firmly leads the globe. Innovation. Across the Fortune 500 landscape, you’ll find hundreds of American companies allocating huge sums of money toward research & development (R&D). Just look at Forbes’ recent list of the world’s most innovative companies. Six firms out of the top 10 on the list are headquartered in the United States. Read More

Lofty valuations can be an enigma. While they often mean that a stock is overheated and set to correct, they can also reflect investor optimism. If investors think a company will outperform, then they’re often happy to pay a large premium for its stock. The final interpretation depends on the company. #-ad_banner-#Take Acuity Brands, Inc. (NYSE: AYI), for example, which is the world’s top producer of lighting fixtures and related accessories for commercial and other nonresidential settings. The firm’s price-to-earnings (P/E) ratio of 42 is about twice that of the broader stock market. But rather than being a sell signal,… Read More

Lofty valuations can be an enigma. While they often mean that a stock is overheated and set to correct, they can also reflect investor optimism. If investors think a company will outperform, then they’re often happy to pay a large premium for its stock. The final interpretation depends on the company. #-ad_banner-#Take Acuity Brands, Inc. (NYSE: AYI), for example, which is the world’s top producer of lighting fixtures and related accessories for commercial and other nonresidential settings. The firm’s price-to-earnings (P/E) ratio of 42 is about twice that of the broader stock market. But rather than being a sell signal, this relatively high P/E signals widespread confidence in Acuity’s future. The company has increased earnings by 20% annually since 2010, and the market sees it keeping up a similar pace of expansion in the coming years. Why should investors expect sustained strong growth? Because the company operates in a fragmented industry, and the company’s solid 20% market share should keep growing, thanks to a 1.7-million item product portfolio. Plus, the firm is far outclassing rivals in the industry’s premier growth segment: light-emitting diode (LED)-related products, which are gradually replacing those based on traditional fluorescent lightbulbs. Acuity capitalizes on this hot… Read More