I was chatting with a wealthy friend last week about the portfolio returns on my website. He interrupted me with an odd question: “Yeah, but how much did a millionaire make?!” #-ad_banner-#I wasn’t quite following him, and then it struck me. He was under the impression that large stock transactions earn a higher percentage of profit than small transactions do. And he was wrong. My friend is a self-made man, with several successful careers under his belt… but clearly none of them required a good working knowledge of math. When a stock goes up… Read More

I was chatting with a wealthy friend last week about the portfolio returns on my website. He interrupted me with an odd question: “Yeah, but how much did a millionaire make?!” #-ad_banner-#I wasn’t quite following him, and then it struck me. He was under the impression that large stock transactions earn a higher percentage of profit than small transactions do. And he was wrong. My friend is a self-made man, with several successful careers under his belt… but clearly none of them required a good working knowledge of math. When a stock goes up 10%, all shareholders make 10% profit — from the millionaire down to the guy who owns just one share. For example, Gilead Sciences (NYSE: GILD) is up 13.6% since I wrote about it a couple of months ago. All investors who bought then are up 13.6%, with slight variations based on transaction fees. (Fees are a factor, yes, but you can’t assume that the rich guy pays lower fees. As a matter of fact, small investors often manage their own accounts, with ridiculously low transaction fees, and millionaires frequently pay somebody an annual fee to manage their accounts. The case… Read More

The airline industry has taken it on the chin over the past few weeks. The NYSE Arca Airline Index was down 6% in just over a week last month on a perfect storm of bad news. #-ad_banner-#However, the index is slowly climbing higher, demonstrating the resiliency of the airline industry amid a combination of higher oil prices thanks to the conflict in Iraq, a slump in business travel in Central and South America, and downward profit revisions by European operators. Each of the big three airline stocks are down at least 4% over the past week. Delta Air Lines (NYSE:… Read More

The airline industry has taken it on the chin over the past few weeks. The NYSE Arca Airline Index was down 6% in just over a week last month on a perfect storm of bad news. #-ad_banner-#However, the index is slowly climbing higher, demonstrating the resiliency of the airline industry amid a combination of higher oil prices thanks to the conflict in Iraq, a slump in business travel in Central and South America, and downward profit revisions by European operators. Each of the big three airline stocks are down at least 4% over the past week. Delta Air Lines (NYSE: DAL) is down 8%, United Continental Holdings (NYSE: UAL) is down 5%, and American Airlines (NYSE: AAL) is down 4%. A slight pullback shouldn’t come as a surprise, considering all three stocks were up 47% or more over the past year. However, despite the pullback, all three are off their lows of the month. This type of bounce in the current environment should be seen as a big positive by investors who have been on the fence about buying airline stocks. Surprising Strength Last week, the industry took note of the fact that World Cup fever slowed… Read More

Sometimes it’s easy to recognize when “the future” is on its way. For example, think back to the time you received your very first email. For many of you, that was probably around 1990. A few of you may have gotten emails in the workplace earlier than that. Before that moment, it could have taken weeks to mail someone something as simple as a one-page note. All of a sudden that same note could be sent in less than 30 seconds. Once you got that first email, it probably didn’t take long before you realized the way you’ve been doing… Read More

Sometimes it’s easy to recognize when “the future” is on its way. For example, think back to the time you received your very first email. For many of you, that was probably around 1990. A few of you may have gotten emails in the workplace earlier than that. Before that moment, it could have taken weeks to mail someone something as simple as a one-page note. All of a sudden that same note could be sent in less than 30 seconds. Once you got that first email, it probably didn’t take long before you realized the way you’ve been doing things for decades was about to change forever. #-ad_banner-#There’s another ground-breaking invention in play that, like email did in the 1990s, promises to revolutionize one of the world’s oldest industries. Also like e-mail, early investors in this trend have the chance to make a small fortune… I’m talking about electronic cigarettes (or e-cigs) — the product that could change America’s oldest industry, Big Tobacco, forever. Before I go on, we know many of you may scoff at such a suggestion. We recognize a lot of people have reservations when it comes to investing in tobacco companies. We also understand that… Read More

If there is anything I like to see in a stock, it is resilience.  #-ad_banner-#For the past four months, Juniper Networks (NYSE: JNPR) has lagged well behind the market, but it just refused to drop below the $24 level. This maker of network infrastructure was rocked by a negative analyst opinion in May and a downgrade in June, but support held firm. And while JNPR has gone nowhere since April, money continued to flow in. The on-balance volume indicator, which measures volume traded on up days versus down days, began to rise in early April.  Theoretically, if the bulls are… Read More

If there is anything I like to see in a stock, it is resilience.  #-ad_banner-#For the past four months, Juniper Networks (NYSE: JNPR) has lagged well behind the market, but it just refused to drop below the $24 level. This maker of network infrastructure was rocked by a negative analyst opinion in May and a downgrade in June, but support held firm. And while JNPR has gone nowhere since April, money continued to flow in. The on-balance volume indicator, which measures volume traded on up days versus down days, began to rise in early April.  Theoretically, if the bulls are more aggressive, more shares change hands on rally days than on declining days. That tells us there is demand for the stock, even if the trend is flat. Sooner or later, there will not be enough supply to offset it, and prices are very likely to rise. The $24 level, which is short-term support, falls in the middle of a longer-term zone of support between $23 and $25.50. The top of the range runs through the big July 2011 gap down, as well as several other important highs in 2011 and 2012. The bottom of the range hits… Read More

Throughout the spring, analysts at Lazard Capital and Leerink Swan kept pounding the table for little-known Insmed (Nasdaq: INSM).  The analysts kept telling clients that Insmed’s Arikace, which is an inhalable antiobiotic used in serious lung infections, was poised to be given a “breakthrough therapy” designation by the FDA. They even suggested such an event would come in June. Their clients should have listened. If they did, they would have scored quick gains when that scenario played out as planned. #-ad_banner-#As far as these analysts were concerned, an investment in Insmed was almost a sure thing. The clinical… Read More

Throughout the spring, analysts at Lazard Capital and Leerink Swan kept pounding the table for little-known Insmed (Nasdaq: INSM).  The analysts kept telling clients that Insmed’s Arikace, which is an inhalable antiobiotic used in serious lung infections, was poised to be given a “breakthrough therapy” designation by the FDA. They even suggested such an event would come in June. Their clients should have listened. If they did, they would have scored quick gains when that scenario played out as planned. #-ad_banner-#As far as these analysts were concerned, an investment in Insmed was almost a sure thing. The clinical data in support of Arikace were just that good. (For more on Insmed, read this profile from last year.) Of course, most other biotechs can never be considered a sure thing. Even when armed with robust efficacy and safety data, a key drug can still get the kibosh from the mercurial FDA. Still, as the Insmed example shows, biotechs that are approaching major clinical milestones, or will soon come before the FDA for final drug approval, can make for very profitable and timely trades. Even once a company has FDA approval for a key drug or… Read More

While the blue-chip Dow Jones Industrial Average is up 11% over the past 52 weeks, it has some serious catching up to do with the broader S&P 500 Index, which has gained 19% during that time.  Of the Dow 30 components, nearly a third are in negative territory for the year. Verizon Communications (NYSE: VZ) is off nearly 4% in the past 12 months. As a defensive telecom stock, VZ could benefit from a catch-up rally if the market continues higher… or a flight to safety if investors grow nervous. VZ has traded in… Read More

While the blue-chip Dow Jones Industrial Average is up 11% over the past 52 weeks, it has some serious catching up to do with the broader S&P 500 Index, which has gained 19% during that time.  Of the Dow 30 components, nearly a third are in negative territory for the year. Verizon Communications (NYSE: VZ) is off nearly 4% in the past 12 months. As a defensive telecom stock, VZ could benefit from a catch-up rally if the market continues higher… or a flight to safety if investors grow nervous. VZ has traded in a range between $52 and $45 for the past year, which puts midpoint support at roughly $48. The recent sideways consolidation between $48 and $50 targets $52 on an upside breakout. #-ad_banner-#The $52 target is about 6% higher than recent prices, but traders who use a capital-preserving stock substitution strategy could make almost 50% 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… Read More

Today, the global pharmaceutical industry is worth roughly $1 trillion. And when you look at the major players in this space — Merck (NYSE: MRK), Bayer (OTC: BAYRY), Johnson & Johnson (NYSE: JNJ), and so on — it’s hard to imagine the industry growing at any sort of rate for investors to get excited about. #-ad_banner-#But a wave of change is quietly sweeping this industry. And investors who are aware of these developments have an opportunity to position themselves to profit — ahead of the crowd. It’s no secret… Read More

Today, the global pharmaceutical industry is worth roughly $1 trillion. And when you look at the major players in this space — Merck (NYSE: MRK), Bayer (OTC: BAYRY), Johnson & Johnson (NYSE: JNJ), and so on — it’s hard to imagine the industry growing at any sort of rate for investors to get excited about. #-ad_banner-#But a wave of change is quietly sweeping this industry. And investors who are aware of these developments have an opportunity to position themselves to profit — ahead of the crowd. It’s no secret that many of the companies I just mentioned are facing some challenges. Before I tell you more about the opportunity, it’s important to understand what those challenges are.  Big Pharma seemed unstoppable until a few years ago — when three trends began pushing the industry in a new direction. The “patent cliff”: Between 2012 and 2018, patent expirations are set to erase a whopping $148 billion in sales. When those patents expire, generic makers move in, undercut the brand name and eat up the profits.  Production of new drugs is costly: PricewaterhouseCoopers estimates that for every 30 drugs in… Read More

Although U.S. stocks began the third quarter on a down note due to worries about slowing global growth, they could soon treat investors to more record highs. #-ad_banner-#And the catalyst? Earnings season. With many economists saying the U.S. had a very good second quarter, the number of domestic firms with sales and profits above the Street’s expectations could be surprisingly high. One firm that’s likely to be among the outperformers has actually been exceeding expectations for a while. Including the first quarter of 2013, for instance, it has delivered positive earnings surprises five straight times, with beats ranging… Read More

Although U.S. stocks began the third quarter on a down note due to worries about slowing global growth, they could soon treat investors to more record highs. #-ad_banner-#And the catalyst? Earnings season. With many economists saying the U.S. had a very good second quarter, the number of domestic firms with sales and profits above the Street’s expectations could be surprisingly high. One firm that’s likely to be among the outperformers has actually been exceeding expectations for a while. Including the first quarter of 2013, for instance, it has delivered positive earnings surprises five straight times, with beats ranging from about 4% to more than 11%. Based on how well the company has been doing, it’s a good bet to keep the streak alive when it reports second-quarter performance on July 31. What’s more, the stock of leading auto parts manufacturer BorgWarner (NYSE: BWA) should remain an excellent long-term investment despite more than quadrupling during the past five years. If you’re not familiar with BorgWarner, it’s a leading innovator of auto and commercial vehicle parts designed to enhance fuel efficiency and reduce carbon emissions. The company generates 70% of revenues from such items as turbochargers, emission system… Read More

Investors who try to uncover value among companies with a lot of insider buying have their work cut out for them.   #-ad_banner-#First, they need to confirm that the buying activity is done with real money and not merely stock option conversions. Some folks will tell you that getting company stock for free and then hanging onto it is a vote of confidence, but it’s not.  You also need to separate the buying activity by officers and directors, rather than major investors, which can be classified as insiders if their stakes in the company are large enough. I sometimes track… Read More

Investors who try to uncover value among companies with a lot of insider buying have their work cut out for them.   #-ad_banner-#First, they need to confirm that the buying activity is done with real money and not merely stock option conversions. Some folks will tell you that getting company stock for free and then hanging onto it is a vote of confidence, but it’s not.  You also need to separate the buying activity by officers and directors, rather than major investors, which can be classified as insiders if their stakes in the company are large enough. I sometimes track the moves of such major investors, but at the end of the day, they aren’t truly insiders.  Lastly, you need to confirm that share prices still hover in the same area as when the buying took place. Shares often rise quickly on news of insider buying, and if that happens, it’s often too late to capitalize on the bullish insider activity. I’ve spent the past few days reviewing a broad range of insider buying activity that has taken place over the past month, and tossed out most candidates for further research, for the reasons noted above. But these six companies… Read More

The world’s richest man, Bill Gates, has been a pioneer when it comes to investing in boring industries. These investments are ‘steady as she goes’ when it comes to being big plays on the broader economy. #-ad_banner-#His favorite investments include the likes of railroad operators and garbage disposal companies. You can also add heavy equipment makers to his list of boring investments. Gates’ favorite picks in this space include two of the world’s largest equipment makers. My colleague David Sterman highlighted Gates’ love for Caterpillar (NYSE: CAT) earlier this year, including the fact that the equipment giant is a great… Read More

The world’s richest man, Bill Gates, has been a pioneer when it comes to investing in boring industries. These investments are ‘steady as she goes’ when it comes to being big plays on the broader economy. #-ad_banner-#His favorite investments include the likes of railroad operators and garbage disposal companies. You can also add heavy equipment makers to his list of boring investments. Gates’ favorite picks in this space include two of the world’s largest equipment makers. My colleague David Sterman highlighted Gates’ love for Caterpillar (NYSE: CAT) earlier this year, including the fact that the equipment giant is a great Total Yield play. Gates’ owns 11.2 million shares (just under 2% of the company) through the Bill & Melinda Gates Foundation. While Caterpillar is still a great stock to own, one of Gates’ most underrated investments is Deere & Co. (NYSE: DE). Gates is Deere’s largest shareholder, owning 8.1% of the company through his private investment fund, Cascade Investment. Nearly 80% of Deere’s revenue is derived from agricultural and turf equipment, which includes tractors, loaders and combines. Its construction equipment segment makes up less than 20% of revenues, and includes loaders, dozers and excavators. The construction business should get a… Read More