Most U.S. investors have never heard of China Minsheng Bank Corp. Ltd or GigaMedia Ltd. (Nasdaq: GIGM). But both companies ended up in deep trouble for using a risky corporate structure. It was a structure used by Enron back in the 1990’s, and ultimately led to the loss of billions in investors’ funds. And the hottest initial public offering of 2014, Alibaba Group Holding Ltd (Nasdaq: BABA) is using the same trick. A closer look at the issue explains why you should think twice about buying shares of Alibaba. If you already own shares, then you need to know about… Read More

Most U.S. investors have never heard of China Minsheng Bank Corp. Ltd or GigaMedia Ltd. (Nasdaq: GIGM). But both companies ended up in deep trouble for using a risky corporate structure. It was a structure used by Enron back in the 1990’s, and ultimately led to the loss of billions in investors’ funds. And the hottest initial public offering of 2014, Alibaba Group Holding Ltd (Nasdaq: BABA) is using the same trick. A closer look at the issue explains why you should think twice about buying shares of Alibaba. If you already own shares, then you need to know about this key risk. Accounting Obfuscation To help shield the true nature of its balance sheet, Enron’s financial masterminds used an unusual contract known as a variable interest structure, or VIE. Using a VIE, a company can disconnect the ownership of its assets from the claims of shareholders. In effect, key assets are placed into separate corporations, which are wholly-owned by the company’s management. Ancillary contracts are then typically established that pledge equity, assign profits and establish consulting agreements. #-ad_banner-#In the United States, embarrassed financial regulators abolished the use of a VIE after the dot-com implosion. Rules now clearly state… Read More

Homeownership in the United States is at a 19-year low at just 64.4%, according to a recent Census Bureau report. This may sound like a negative, but it is actually fueling an incredible opportunity for traders.  Rents are on the rise and vacancies are low, allowing a handful of companies that control a large portion of the U.S. rental market to prosper. Today, I’m going to tell you how you can leverage this trend into triple-digit profits in less than five months. According to real estate research firm Reis, apartment rents have risen for 23 straight quarters, increasing to an… Read More

Homeownership in the United States is at a 19-year low at just 64.4%, according to a recent Census Bureau report. This may sound like a negative, but it is actually fueling an incredible opportunity for traders.  Rents are on the rise and vacancies are low, allowing a handful of companies that control a large portion of the U.S. rental market to prosper. Today, I’m going to tell you how you can leverage this trend into triple-digit profits in less than five months. According to real estate research firm Reis, apartment rents have risen for 23 straight quarters, increasing to an average of $1,111 a month in the third quarter. This puts rent prices more than 15% above levels seen at the end of the recession in 2009. While rates are going up, rental vacancies are near a 14-year low. The rules of supply and demand dictate further acceleration in rents. #-ad_banner-#Fueling this trend is steady job growth combined with stricter mortgage qualifications making it harder to get a home. Additionally, with the housing market crash in the not-so-distant past, many would-be buyers are nervous to take the plunge. For those who do qualify for loans and are ready… Read More

Many investors spend too much time during earnings season focusing on gross profit margins. They figure that a drop in these margins means a company is losing pricing power, or they worry that the cost of goods sold is rising too fast. Yet there are often good reasons for gross margins to be flat-to-down compared to prior periods. For example, in many competitive industries, flexibility on price is a key to growing the customer base. #-ad_banner-#The best-run companies know that even if each new contract doesn’t deliver the gross margins seen in in the past, they can still flow profits… Read More

Many investors spend too much time during earnings season focusing on gross profit margins. They figure that a drop in these margins means a company is losing pricing power, or they worry that the cost of goods sold is rising too fast. Yet there are often good reasons for gross margins to be flat-to-down compared to prior periods. For example, in many competitive industries, flexibility on price is a key to growing the customer base. #-ad_banner-#The best-run companies know that even if each new contract doesn’t deliver the gross margins seen in in the past, they can still flow profits to the bottom line. That’s because fixed overhead expenses are already in place and those new incremental revenues cost relatively little to service. To see what kind of companies have a history of operating leverage, I screened for companies that have boosted earnings per share at a much faster pace on average over the past three years than sales growth. And I eliminated any companies that have not boosted sales at least 10% annually in recent years. It’s no surprise that hundreds of companies make the cut, especially since corporate America has been continually streamlining since the Great Recession of… Read More

Ask any investment advisor, and they’ll tell you that long-term gains trump short-term winnings every day of the week. Big name hedge fund managers like Buffett and Icahn have gained popularity due to their long tenures in the game and envious rates of return. #-ad_banner-#Louis Navellier is a multi-billion dollar asset manager who is a member of those ranks, carving out a niche in growth investing and earning a name for himself through decades of successful stock picking. His performance has earned him a treasure trove of accolades and support.  Even Steve Forbes has recognized the manager’s career, saying Navellier… Read More

Ask any investment advisor, and they’ll tell you that long-term gains trump short-term winnings every day of the week. Big name hedge fund managers like Buffett and Icahn have gained popularity due to their long tenures in the game and envious rates of return. #-ad_banner-#Louis Navellier is a multi-billion dollar asset manager who is a member of those ranks, carving out a niche in growth investing and earning a name for himself through decades of successful stock picking. His performance has earned him a treasure trove of accolades and support.  Even Steve Forbes has recognized the manager’s career, saying Navellier “has had a most enviable long-term investment record.” The de facto growth guru publishes his long stock picks every quarter in a 13F filing as required by the SEC.  This quarter, he’s submitted those picks a month in advance, giving us a fresh look as to what his portfolio looks like without the typical 45-day delay. Navellier sunk a quarter of a billion dollars into four new stocks in Q3 of this year.  However, the four fit within the narrative of a market finally flipping over (which I covered in detail recently), while still keeping some growth stock traits. Tailoring… Read More

Although material or worker shortages can really crimp the growth for companies and even entire industries, they can also present big opportunities. Take the ongoing shortage of skilled drivers who can handle big rigs and other heavy-duty vehicles. As recently reported by the Business Insider, the United States is short 30,000 truck drivers because of increasing regulation, somewhat stingy pay, loss of qualified drivers during the recession and a lack of interest in truck driving among young people. #-ad_banner-#And it looks like the situation could get quite a bit worse, with the truck driver shortfall projected to rise nearly eightfold… Read More

Although material or worker shortages can really crimp the growth for companies and even entire industries, they can also present big opportunities. Take the ongoing shortage of skilled drivers who can handle big rigs and other heavy-duty vehicles. As recently reported by the Business Insider, the United States is short 30,000 truck drivers because of increasing regulation, somewhat stingy pay, loss of qualified drivers during the recession and a lack of interest in truck driving among young people. #-ad_banner-#And it looks like the situation could get quite a bit worse, with the truck driver shortfall projected to rise nearly eightfold to 239,000 by 2022. Since truck driving is a high-turnover profession, the trucking industry will need about 100,000 new drivers a year for the next decade to close the gap, according to the American Trucking Associations. It’s a serious issue, causing supply chain disruption, lost revenues and poorer performance in a number of industries like dairy, agriculture and consumer goods in addition to the trucking industry itself. And that’s not good for the economy. But it is good for a company that can help solve the problem. Now, this firm’s not in recruiting and staffing, so it won’t be attracting… Read More

Mark Twain understood the mind of an investor. The world-renowned author once proclaimed: “A dollar picked up in the road is more satisfaction to us than the 99 which we had to work for, and the money won in the stock market snuggles into our hearts in the same way.” #-ad_banner-#Twain acknowledged the rush that can accompany earning money without any labor. He understood that the human brain is not wired for clear thinking in regard to money. That’s because the area of the brain that responds to financial reward is the same part that lights up from cocaine. This… Read More

Mark Twain understood the mind of an investor. The world-renowned author once proclaimed: “A dollar picked up in the road is more satisfaction to us than the 99 which we had to work for, and the money won in the stock market snuggles into our hearts in the same way.” #-ad_banner-#Twain acknowledged the rush that can accompany earning money without any labor. He understood that the human brain is not wired for clear thinking in regard to money. That’s because the area of the brain that responds to financial reward is the same part that lights up from cocaine. This presents a major problem. Investors become insatiable, searching high and low for the next “big winners.” What they’re really interested in is a get-rich-quick scheme. That’s a terrific way to lose money — and quickly. However, if you are a regular reader of my Game-Changing Stocks newsletter, then you know that I have been making the habit of finding stocks with the most “big winner” potential into a science for a while. Take electric car maker Tesla (Nasdaq: TSLA) for example. On Dec. 20, 2010, I first profiled and recommended the company to my readers. Since then, it has become… Read More

Retirement is supposed to be a relaxing reward for decades of hard work and responsible saving. Unfortunately the reality is that too many either cannot afford to retire or cannot relax as they see the rising cost of healthcare eat away at their nest egg. #-ad_banner-#The growing cost of aging does not appear to be getting any easier. Healthcare inflation is among the highest across all groups of goods and services at an average rate of 3.4% over the last 10 years, against an average 2.3% rate of inflation in consumer prices. The… Read More

Retirement is supposed to be a relaxing reward for decades of hard work and responsible saving. Unfortunately the reality is that too many either cannot afford to retire or cannot relax as they see the rising cost of healthcare eat away at their nest egg. #-ad_banner-#The growing cost of aging does not appear to be getting any easier. Healthcare inflation is among the highest across all groups of goods and services at an average rate of 3.4% over the last 10 years, against an average 2.3% rate of inflation in consumer prices. The graph below shows inflation in healthcare costs and the difference between healthcare inflation and the increase across all consumer prices. In only two of the last twenty years have healthcare costs not increased faster than general inflation. And when that happened, costs jumped the following years. Not only do healthcare costs grow faster than other costs, but people over 65 years old pay a disproportionate amount of their income to healthcare — an average of $5,069 a year in healthcare costs, 12.2% of their total spending and well above the 7.1% spent by all others. Fortunately for investors looking… Read More

It was a good party while it lasted. Investors were swept up in “Macau fever,” bidding up any and all investments that profited from the Chinese protectorate’s newfound status as the Las Vegas of Asia.  And few had it as good as Melco Crown Entertainment (NASDAQ: MPEL). The company opened a series of casino gaming and entertainment resorts and saw revenue surge from around $360 million in 2007 to more than $5 billion last year.  I first looked at the company in 2010. Shares surged nearly 1,000% from then to their all-time highs in March. But since then, shares have plunged… Read More

It was a good party while it lasted. Investors were swept up in “Macau fever,” bidding up any and all investments that profited from the Chinese protectorate’s newfound status as the Las Vegas of Asia.  And few had it as good as Melco Crown Entertainment (NASDAQ: MPEL). The company opened a series of casino gaming and entertainment resorts and saw revenue surge from around $360 million in 2007 to more than $5 billion last year.  I first looked at the company in 2010. Shares surged nearly 1,000% from then to their all-time highs in March. But since then, shares have plunged 44%, giving us a perfect buying opportunity. The pullback was a result of a slowdown in gambling revenues. Chinese citizens, especially high-rollers, have ben tacitly discouraged from being big spenders while the government cracks down on corruption. #-ad_banner-#Make no mistake, Macau’s long-term future remains bright. China continues to mint new millionaires every year, and Macau — as a lure for both gambling and entertainment — is a heck of a lot closer for them than Las Vegas. The casino titan is also expanding its empire across Asia. Melco is ready to launch its first casino in… Read More

As the market steadily advanced to fresh highs earlier this year, some investors grew queasy. Global tensions, the Fed’s imminent end to its bond buying program and valuations that seemed stretched led many investors to move to the sidelines, boosting the percent of their portfolio tied up in cash. #-ad_banner-#For those investors, holding cash now looks quite prescient. Not only did a high cash position enable them to sideswipe losses in small caps, energy stocks and other recent slumping asset classes, but it also gave them the liquidity to snap up stocks that are clearly oversold (something fully-invested investors simply… Read More

As the market steadily advanced to fresh highs earlier this year, some investors grew queasy. Global tensions, the Fed’s imminent end to its bond buying program and valuations that seemed stretched led many investors to move to the sidelines, boosting the percent of their portfolio tied up in cash. #-ad_banner-#For those investors, holding cash now looks quite prescient. Not only did a high cash position enable them to sideswipe losses in small caps, energy stocks and other recent slumping asset classes, but it also gave them the liquidity to snap up stocks that are clearly oversold (something fully-invested investors simply can’t do). If you have built up cash and are now looking to profit from the sharp drop seen in many stocks, then here are three stocks on my radar, all of which possess at least 100% potential upside. Synergy Pharmaceuticals, Inc. (Nasdaq: SGYP) This is an intriguing biotech with a big problem on its hands. It is developing a new drug, plecanatide, which is showing impressive efficacy of treatment for irritable bowel syndrome in clinical trials. A rival, Ironwood Pharmaceuticals, Inc. (Nasdaq: IRWD) already has a competing drug on the market, helping the company garner a $1.8 billion market… Read More

Since my first column for StreetAuthority nearly five years ago, I have repeatedly extolled the virtues of a favorite value gauge: Free cash flow — the cash that’s left over after some profits have been diverted to capital spending. Robust free cash flow can be a boon for investors. Often, they’re used to increase dividends, buy back shares and reduce debt load. When these three strategies are used effectively, they make for a powerful trifecta that has a demonstrated history of beating the market over time. In fact, they’re so powerful that they form the basis of our premium newsletter,… Read More

Since my first column for StreetAuthority nearly five years ago, I have repeatedly extolled the virtues of a favorite value gauge: Free cash flow — the cash that’s left over after some profits have been diverted to capital spending. Robust free cash flow can be a boon for investors. Often, they’re used to increase dividends, buy back shares and reduce debt load. When these three strategies are used effectively, they make for a powerful trifecta that has a demonstrated history of beating the market over time. In fact, they’re so powerful that they form the basis of our premium newsletter, Total Yield. #-ad_banner-#As it turns out, some value investing adherents prefer a slightly different take on this approach. They prefer to see how much earnings before interest, taxes, depreciation and amortization, or EBITDA, a company produces in relation to its enterprise value, or EV — market value plus debt, minus cash. These value investors point to a study showing that “If all you did was buy the 10% of stocks with the cheapest EBITDA/EV ratios on an annual basis, you’d have outperformed the market by more than 5% annually over the… Read More