One of the most important lessons I learned during my days in the Army was the KISS principle: Keep it simple, stupid. #-ad_banner-#Outside of the military, one of the greatest minds of all time believed in the KISS philosophy, but Albert Einstein expressed the idea in more poetic terms: “Everything should be made as simple as possible, but not simpler.” I bring that same mindset to investment analysis. I want every process to be as simple as possible, but not so simple that I’m leaving out anything important. While I have spent a great deal of time studying complex investment… Read More

One of the most important lessons I learned during my days in the Army was the KISS principle: Keep it simple, stupid. #-ad_banner-#Outside of the military, one of the greatest minds of all time believed in the KISS philosophy, but Albert Einstein expressed the idea in more poetic terms: “Everything should be made as simple as possible, but not simpler.” I bring that same mindset to investment analysis. I want every process to be as simple as possible, but not so simple that I’m leaving out anything important. While I have spent a great deal of time studying complex investment techniques, what I discovered is that the KISS principle applies in investment analysis as well as it did in the military. For example, although I look at complex valuation models, the simple PEG ratio consistently identifies undervalued stocks. The PEG ratio compares the price-to-earnings (P/E) ratio to the growth rate of earnings per share (EPS). A stock is considered fairly valued when the PEG ratio is equal to 1, which means the P/E ratio equals the EPS growth rate. I have found the PEG ratio to be a much more useful tool than other fundamental valuation methods for finding a… Read More

The Chinese government’s crackdown on corruption, increased high-roller scrutiny and a partial smoking ban have put a serious damper on the Asian gambling mecca of Macau. #-ad_banner-#Gaming revenue in the former Portuguese colony fell for the eighth consecutive month in January, down 17.4% year over year. February is expected to be much worse — the worst on record, in fact, with analysts anticipating a 35% to 42% decline over 2014 levels. U.S.-based casino operators are also seeing lower gaming revenue from Sin City. After four years of annual gains, gambling revenue on the Las Vegas Strip fell 2.1% in 2014,… Read More

The Chinese government’s crackdown on corruption, increased high-roller scrutiny and a partial smoking ban have put a serious damper on the Asian gambling mecca of Macau. #-ad_banner-#Gaming revenue in the former Portuguese colony fell for the eighth consecutive month in January, down 17.4% year over year. February is expected to be much worse — the worst on record, in fact, with analysts anticipating a 35% to 42% decline over 2014 levels. U.S.-based casino operators are also seeing lower gaming revenue from Sin City. After four years of annual gains, gambling revenue on the Las Vegas Strip fell 2.1% in 2014, according to the Gaming Control Board. While gaming stocks in general seem unattractive against this backdrop, one in particular already appears to be against the ropes with lofty valuations, high debt levels and poor technicals. This makes it a prime target for a sell-off after next week’s earnings report. MGM Resorts International (NYSE: MGM) currently trades at 40 times forward earnings, almost double its peer group average of 23. While companies that are growing earnings faster than their peers often deserve a higher P/E ratio, analysts are only forecasting EPS growth of 12.5% a year for MGM for the next… Read More

One of my favorite strategies is to buy stocks that remain below prior highs but are in sectors that are already showing strength. As long as the stock is technically sound, it is ripe to play catch-up. #-ad_banner-#Most technical analysts will agree that a good deal of any stock’s potential for gains depends on the overall strength of its sector. Fundamentally, it makes sense that if there is enough business to go around in the industry then any individual company can take advantage of the demand. Again, the company has to be sound and also prove that it can rally,… Read More

One of my favorite strategies is to buy stocks that remain below prior highs but are in sectors that are already showing strength. As long as the stock is technically sound, it is ripe to play catch-up. #-ad_banner-#Most technical analysts will agree that a good deal of any stock’s potential for gains depends on the overall strength of its sector. Fundamentally, it makes sense that if there is enough business to go around in the industry then any individual company can take advantage of the demand. Again, the company has to be sound and also prove that it can rally, because stocks with terrible charts can easily get left behind. Just take a look at RadioShack (OTC: RSHCQ) in a soaring consumer electronics group.  The hotel sector has generally outperformed the S&P 500 since the entire market corrected in 2011. It stalled in December but now looks to be getting its mojo back on the heels of strong earnings reports from several of the larger-cap member stocks.  Many stocks in the group show positive technical signs, including rising on-balance volume and up gaps. The former suggests continued demand for shares. The latter proves that demand with a rush… Read More

These are five of the most widely owned stocks in the market. You have, without a doubt, heard of them, and it’s very possible you even own a few. #-ad_banner-#Despite being featured prominently in the media and being held by some of the world’s top investment gurus, I wouldn’t touch any of them with a 10-foot pole. One of these stocks is owned by hedge fund titan Steve Mandel of Lone Pine Capital, who holds 2.8 million shares of this casino and resort operator. But it has collapsed 25% over the past six months. I’m also recommending you… Read More

These are five of the most widely owned stocks in the market. You have, without a doubt, heard of them, and it’s very possible you even own a few. #-ad_banner-#Despite being featured prominently in the media and being held by some of the world’s top investment gurus, I wouldn’t touch any of them with a 10-foot pole. One of these stocks is owned by hedge fund titan Steve Mandel of Lone Pine Capital, who holds 2.8 million shares of this casino and resort operator. But it has collapsed 25% over the past six months. I’m also recommending you stay away from a blue-chip heavy equipment manufacturer that has shed 18% in the past 26 weeks, a much-touted alternative energy stock that is down 31%, and a huge oil services firm that lost a whopping 36% during that same time.  Plus, there’s a popular chipmaker that is down 15% in the past six months and has basically been dead money for the past two years. Although these companies are very different, they all have two things in common. First, each of these stocks has low relative strength (RS). Relative strength compares the price performance of a stock against every… Read More

“This is what competitive devaluation looks like.” #-ad_banner-#That’s what Bloomberg anchor Olivia Sterns said Wednesday morning, referring to news that China’s central bank was cutting rates. In an effort to revive slowing economic growth, the People’s Bank of China decided to cut its reserve requirement ratio (RRR) — the amount of deposits banks must hold in reserve rather than lend out — by 0.5% for large commercial banks and 1% for smaller banks. This is the first time the bank has cut the ratio in almost three years, and its effort is estimated to increase cash in the system by… Read More

“This is what competitive devaluation looks like.” #-ad_banner-#That’s what Bloomberg anchor Olivia Sterns said Wednesday morning, referring to news that China’s central bank was cutting rates. In an effort to revive slowing economic growth, the People’s Bank of China decided to cut its reserve requirement ratio (RRR) — the amount of deposits banks must hold in reserve rather than lend out — by 0.5% for large commercial banks and 1% for smaller banks. This is the first time the bank has cut the ratio in almost three years, and its effort is estimated to increase cash in the system by 700 billion yuan, or $112 billion. China’s economic growth, while still relatively strong around 7%, has been slowing for the past few years, but the central bank had previously been reluctant to increase monetary stimulus. So, why ease up now? In short, because everyone else is doing it. When the buying power of one currency falls, it makes imports from other countries much more expensive. Not only do the locals buy more of their domestic products, but so do other foreign markets, leading to a boost in demand for domestic products and employment. It does a pretty good job of… Read More

Even where I live in Canada, glimpses of bare brown earth are starting to dapple white snow. It’s not yet time for me to plant my garden, but that moment is not far off.  #-ad_banner-#I’m not alone in my interest to grow some of my own food. Gardening ranks as one of the most popular outdoor leisure activities in North America. Additionally, the National Gardening Association reports that a well-maintained garden can help save you several hundred dollars a year in food costs. Gardening is expanding beyond backyard plots, as community gardens and even urban apartment gardens increase in popularity. Read More

Even where I live in Canada, glimpses of bare brown earth are starting to dapple white snow. It’s not yet time for me to plant my garden, but that moment is not far off.  #-ad_banner-#I’m not alone in my interest to grow some of my own food. Gardening ranks as one of the most popular outdoor leisure activities in North America. Additionally, the National Gardening Association reports that a well-maintained garden can help save you several hundred dollars a year in food costs. Gardening is expanding beyond backyard plots, as community gardens and even urban apartment gardens increase in popularity.   A key beneficiary of this increasing interest in gardening is Scotts Miracle-Gro (NYSE: SMG). The Ohio-based company was started in 1868 and is the world’s largest marketer of branded lawn and garden products.  Its global consumer segment, which accounts for roughly 90% of revenue, sells such products as fertilizers, grass seed, spreaders, and plant pest and disease control products. Some of its better-known brands are Scotts, Miracle-Gro, Ortho and Roundup.   It also generates revenue through its lawn care service division, which is the No. 2 player the country and provides residential and commercial lawn, tree and shrub care,… Read More

One of my favorite investing tactics is to target stocks that are fundamentally solid but get hit hard when investors overact to news stories. Russia’s ban on U.S. chicken and oversupply concerns helped knock the United States’ third-largest poultry processor 25% off its summer highs. #-ad_banner-#​I recommended a bullish options play on Sanderson Farms (NASDAQ: SAFM) in late June that quickly netted us 42% profits as the stock hit a 52-week high in mid-July. Shortly after, Vladimir Putin imposed a one-year embargo on U.S. agricultural products, including chicken, in response to Western economic sanctions stemming from… Read More

One of my favorite investing tactics is to target stocks that are fundamentally solid but get hit hard when investors overact to news stories. Russia’s ban on U.S. chicken and oversupply concerns helped knock the United States’ third-largest poultry processor 25% off its summer highs. #-ad_banner-#​I recommended a bullish options play on Sanderson Farms (NASDAQ: SAFM) in late June that quickly netted us 42% profits as the stock hit a 52-week high in mid-July. Shortly after, Vladimir Putin imposed a one-year embargo on U.S. agricultural products, including chicken, in response to Western economic sanctions stemming from the Ukrainian conflict. The news sent shockwaves through the American poultry industry. But its effects are being felt to a much greater extent in Russia, where I hear they are turning to crocodile meat to get their protein.  While Russia accounted for nearly 40% of U.S. chicken exports in the 1990s, that number has dropped to just 7% recently, according to the National Chicken Council.  With a number of bullish tailwinds, I think the sell-off in SAFM represents a chance to pocket another big profit over the next few months. What’s especially striking about the stock’s decline is that shares… Read More

One of the best income strategies in the world involves a market some investors completely ignore. It allows individual investors to generate income from the best companies in the world without buying stocks most of the time. #-ad_banner-#I’ve been recommending trades in this market for over a year. And so far, the results have been astounding — each of the 85 trades I’ve closed has been a winner. I don’t want to beat around the bush or make this sound like some super-secret investing strategy only I can tell you about. I am talking about selling options. Now,… Read More

One of the best income strategies in the world involves a market some investors completely ignore. It allows individual investors to generate income from the best companies in the world without buying stocks most of the time. #-ad_banner-#I’ve been recommending trades in this market for over a year. And so far, the results have been astounding — each of the 85 trades I’ve closed has been a winner. I don’t want to beat around the bush or make this sound like some super-secret investing strategy only I can tell you about. I am talking about selling options. Now, before you decide that you never want to try options trading, let me show you what a recent subscriber to my Income Trader newsletter, which focuses on selling options, had to say about my strategy: “When I first started using [Amber’s] picks, my goal was to earn $500. Then I quickly realized I can earn at least $1,000 per month. I use the profits to buy more… Not only are your picks excellent with low risk, it teaches you to look for other options on your own, which… Read More

Above all the earnings and geopolitical news last week, the big headline was a turnover in the executive suite of the Golden Arches.  #-ad_banner-#Under the oversight of Don Thompson, the $90 billion fast-food behemoth posted declining sales. And the stock price languished in 2014 as the S&P 500 posted a double-digit gain for the year. After nearly two and a half years at the top, investors blamed Thompson for a string of poor menu rollouts and almost five consecutive quarters of lower U.S. same-store sales. McDonald’s (NYSE: MCD) reported a 21% drop in global profits when it announced… Read More

Above all the earnings and geopolitical news last week, the big headline was a turnover in the executive suite of the Golden Arches.  #-ad_banner-#Under the oversight of Don Thompson, the $90 billion fast-food behemoth posted declining sales. And the stock price languished in 2014 as the S&P 500 posted a double-digit gain for the year. After nearly two and a half years at the top, investors blamed Thompson for a string of poor menu rollouts and almost five consecutive quarters of lower U.S. same-store sales. McDonald’s (NYSE: MCD) reported a 21% drop in global profits when it announced fourth-quarter earnings earlier this month, sending shares 1.5% lower on the day. Investor disappointment was short-lived though, and MCD jumped more than 5% when the company announced that Chief Brand Officer Steve Easterbrook would take over as CEO in March. But can the 47-year-old Brit remake the American fast-food icon?   Competition has been tough in the space for years, and sales were already in decline when Thompson took over in July 2012. Easterbrook had been successful on several fronts at McDonalds UK, but it may prove more difficult to turn a global ship. But for investors looking… Read More

There are two technical directives battling for the fortunes of Caterpillar (NYSE: CAT) right now. The first says to never try to catch a falling knife. The other, which traces back to 18th-century banker Baron Rothschild, says to buy when there’s blood in the streets. #-ad_banner-#But when we toss a few more conditions into the mix, namely major support, terrible sentiment and a beefy dividend yield, the battle goes to the Baron.  This blue-chip stock has likely seen the worst of its bear market and will pay us to hold it while we wait for better times that should be… Read More

There are two technical directives battling for the fortunes of Caterpillar (NYSE: CAT) right now. The first says to never try to catch a falling knife. The other, which traces back to 18th-century banker Baron Rothschild, says to buy when there’s blood in the streets. #-ad_banner-#But when we toss a few more conditions into the mix, namely major support, terrible sentiment and a beefy dividend yield, the battle goes to the Baron.  This blue-chip stock has likely seen the worst of its bear market and will pay us to hold it while we wait for better times that should be coming. Shares of the heavy equipment maker certainly fell hard over the past six months from a perch above $111 to their current price just above $79. That nearly 30% decline qualifies as a full-fledged bear market.   And just when it looked as if some bottom fishers were coming in, the company released worse-than-expected fourth-quarter earnings and a weak outlook for the coming year. The stock plunged more than 7% on Jan. 27. While that sounds like bad news, it may actually be good news for the stock.  After a six-month decline, the huge single-day drop on gigantic volume… Read More