For years, market strategists have tried to explain that investor bullishness is bad for future stock returns, and when investors are very bearish, it’s a great time to buy. They’re right. I’ve gone over 25 years of data compiled by the American Association of Individual Investors (AAII), and found this investing maxim to be remarkably accurate. And guess what? The AAII’s weekly survey has just revealed another low in investor sentiment. First, let’s take a look at what happened in the late 1980s when investors had just come out of a sharp market crash (the infamous… Read More

For years, market strategists have tried to explain that investor bullishness is bad for future stock returns, and when investors are very bearish, it’s a great time to buy. They’re right. I’ve gone over 25 years of data compiled by the American Association of Individual Investors (AAII), and found this investing maxim to be remarkably accurate. And guess what? The AAII’s weekly survey has just revealed another low in investor sentiment. First, let’s take a look at what happened in the late 1980s when investors had just come out of a sharp market crash (the infamous Black Friday of October, 1987) and sentiment was fairly bearish. This table shows the annual low point for investor sentiment from 1987 through 1993 and how the market subsequently fared. Throughout this period, investors were very bearish, and less than one in five investors considered themselves to be bullish. Those lonely bulls sure made some money, though. Reported Date Bullish Neutral Bearish 1-Mo. Return 6-Mo. Return 1-Year Return 2-Year Return 3-Year Return 12/11/87 23.0% 45.0% 32.0% +3% +9% +18% +48% +40% 07/22/88 16.0% 58.0% 26.0% -1% +9% +30% +34% +45% 03/10/89 13.0%… Read More

Heading off early next week ahead of the Labor Day weekend? So are many others, including Wall Street traders. As they leave their trading desks, trading volumes can get awfully light. That makes the markets vulnerable — on the upside or the downside — to any news items that are unexpected. With a dearth of corporate news but a boatload of economic releases next week, investors need to stay vigilant. Here’s a look at four key items to watch: 1) On Tuesday, August 30th, we’ll get the latest reading from the monthly Case-Shiller home… Read More

Heading off early next week ahead of the Labor Day weekend? So are many others, including Wall Street traders. As they leave their trading desks, trading volumes can get awfully light. That makes the markets vulnerable — on the upside or the downside — to any news items that are unexpected. With a dearth of corporate news but a boatload of economic releases next week, investors need to stay vigilant. Here’s a look at four key items to watch: 1) On Tuesday, August 30th, we’ll get the latest reading from the monthly Case-Shiller home price index. The data reflects June prices, and this report is coming off a surprisingly robust tally the prior month that showed a +4.6% gain in home prices in May. In fact, this report has looked a tad better for 15 straight months, after bottoming with an -18% drop in February, 2009. Many of those ensuing months were still negative, but less so as time passed. Now, with a string of three straight positive readings, can we keep it up? Any reading above +5.0% would be a real positive for the markets and could boost housing stocks. Then again,… Read More

It’s easy to trot out legendary investor Peter Lynch’s name every time you find an undervalued fast-growing company, but the truth is that Lynch had many different criteria that had to be met before he would purchase a stock. I always keep certain Peter Lynch criteria in… Read More

When the topic is the current market, a lot of pundits like to talk about “the new normal” — that is to say, a range-bound stock market confined by a slow-growth economy. But when it comes to finding decent long-term… Read More

As tech stocks were exploding in the late 1990s, companies offering video conferencing technology were all the rage. Investors assumed that all business meetings would eventually be replaced by video and audio feeds, allowing for virtual face-to-face collaboration. A decade later, the industry has made major inroads (if not completely… Read More

In times of crisis, investors invariably seek shelter in the almighty dollar. The perceived resilience of the U.S. economy has given the impression that we are simply too large a ship to sink. And although we are well past the scary times of 18 months ago, the global economy still feels dicey, and the dollar, which rallied sharply as the global economy crumbled, still remains fairly strong against the euro and the Chinese yuan. Yet as the global economy sputters back to life during the next year or two, the dollar… Read More

In times of crisis, investors invariably seek shelter in the almighty dollar. The perceived resilience of the U.S. economy has given the impression that we are simply too large a ship to sink. And although we are well past the scary times of 18 months ago, the global economy still feels dicey, and the dollar, which rallied sharply as the global economy crumbled, still remains fairly strong against the euro and the Chinese yuan. Yet as the global economy sputters back to life during the next year or two, the dollar is likely to resume its downward drift that had begun back in 2007 and 2008. If it weakens in a slow and steady fashion, it could help pave the way for a long-awaited export boom that finally reverses stubborn trade deficits and spurs a badly-needed employment surge in our nation’s heartland. Why the long-term bearishness on the dollar? Here are three reasons why… 1. For starters, our budget deficits for fiscal 2010 and 2011 are at record levels (on a non-inflation-adjusted basis). The amount of debt held by the public (that is, excluding intergovernmental… Read More

Super-investor Warren Buffett has made a big bet on Johnson & Johnson (NYSE: JNJ), adding more than 17.4 million shares to the portfolio of his holding company, Berkshire Hathaway (NYSE: BRK-B). His stake in J&J is worth about $2.4 billion at current prices. The move can be seen as a classic Buffett “value” play: J&J shares, at about $58, are well off their 52-week high of $66.20 and are down nearly -10% for the year. The company has annual revenue of more than $60 billion and consistently earns returns on… Read More

Super-investor Warren Buffett has made a big bet on Johnson & Johnson (NYSE: JNJ), adding more than 17.4 million shares to the portfolio of his holding company, Berkshire Hathaway (NYSE: BRK-B). His stake in J&J is worth about $2.4 billion at current prices. The move can be seen as a classic Buffett “value” play: J&J shares, at about $58, are well off their 52-week high of $66.20 and are down nearly -10% for the year. The company has annual revenue of more than $60 billion and consistently earns returns on shareholder equity of between 25% and 30%. It has posted an increase in earnings for at least the past 10 years, and 2010 profit forecasts imply a +188.3% increase in net earnings since 2000. (Earnings have surprised to the upside for the past five years, according to Bloomberg.) The J&J stake wasn’t the only health-care bet made by the 79-year-old Buffett, whom Forbes lists as the second-richest man in the United States, with an estimated net worth of $40 billion, second only to… Read More

General Electric (NYSE: GE) is back. Its shares have more than doubled from the early 2009 swoon to near $16 and profits have begun to rebound. Then again, maybe not. Shares never traded below $30 in the middle part of the… Read More

I’ve never been an alarmist. I spend far more time talking about promising investment opportunities than spouting financial doom and gloom. But there’s a real debt crisis brewing in the United States, and turning a blind eye to the problem won’t make it go away. An endless… Read More

Warren Buffett and his geeky, bridge-playing sidekick Bill Gates have talked 40 billionaires, including some of the business world’s marquee names, into giving half their fortunes to charity.   It’s an interesting scenario: If the avuncular Buffett showed up at your house and asked you to donate half… Read More