When the Federal Reserve first suggested a gradual tightening of its monetary policy in May 2013, investors began to wonder if the long-running bull market would come to an abrupt end.  #-ad_banner-#A quick spike in interest rates at the time gave a sense that times were indeed changing. Yet investors end up shrugging off that noise: The S&P 500 rose an impressive 22% between July 1 of last year and June 30 of this year. Toss in dividends and investors garnered a 25% total return — roughly the amount investors should expect to garner over a three year period in… Read More

When the Federal Reserve first suggested a gradual tightening of its monetary policy in May 2013, investors began to wonder if the long-running bull market would come to an abrupt end.  #-ad_banner-#A quick spike in interest rates at the time gave a sense that times were indeed changing. Yet investors end up shrugging off that noise: The S&P 500 rose an impressive 22% between July 1 of last year and June 30 of this year. Toss in dividends and investors garnered a 25% total return — roughly the amount investors should expect to garner over a three year period in normal times. But these are not normal times. The stunning 191% gain for the S&P 500 since bottoming out in March 2009 is remarkable in light of the fact that the subsequent economic rebound after the Great Recession has been quite tepid. Low interest rates, a huge amount of global liquidity and very high corporate profit margins all get credit for the bull market that has exceeded the wildest expectations of even the most aggressive market strategists. At this point, it might seem the wisest path to sit back and enjoy the ride, waiting for another 20% gain over the… Read More

When Nick Woodman, founder and CEO of GoPro (Nasdaq: GPRO), appeared on “60 Minutes” last November, his company’s fate was sealed.  #-ad_banner-#​That segment showed a variety of amazing feats you could accomplish with the company’s ruggedized, miniaturized wearable digital camcorders — and it led to a huge spike in orders for the company. That led Woodman to realize that the buzz around the company was so loud that it was time to start preparing for an initial public offering (IPO). Fast forward to June 26,… Read More

When Nick Woodman, founder and CEO of GoPro (Nasdaq: GPRO), appeared on “60 Minutes” last November, his company’s fate was sealed.  #-ad_banner-#​That segment showed a variety of amazing feats you could accomplish with the company’s ruggedized, miniaturized wearable digital camcorders — and it led to a huge spike in orders for the company. That led Woodman to realize that the buzz around the company was so loud that it was time to start preparing for an initial public offering (IPO). Fast forward to June 26, 2014, and GoPro’s public debut has marked the company as one of the hottest — and perhaps most controversial — new issues on the market. How hot is this stock? Priced at $24 a share, GPRO opened at $28.65 and is already up in the low $40s (though below its $49.90 peak). For investors looking for a piece of the action, a classic conundrum has emerged: Do you buy the hot IPO in expectation of robust price appreciation in the years ahead as sales grow — or do you hold off and wait for the air to come out of… Read More

If the stock market held the Golden Raspberry award (given to the worst movie of the year), then Higher One Holdings (NYSE: ONE) would win the prize.  #-ad_banner-#The provider of financial services and other products to college campuses saw its shares plunge 62% in the first half of 2014, the worst performance of any stock in the S&P 400, 500 or 600. Higher One has dubious company: Of the 1,500 companies in those three indices, 47 have fallen at least 25% since the year began.  As we pass the midpoint of the year, it helps to scour this group of… Read More

If the stock market held the Golden Raspberry award (given to the worst movie of the year), then Higher One Holdings (NYSE: ONE) would win the prize.  #-ad_banner-#The provider of financial services and other products to college campuses saw its shares plunge 62% in the first half of 2014, the worst performance of any stock in the S&P 400, 500 or 600. Higher One has dubious company: Of the 1,500 companies in those three indices, 47 have fallen at least 25% since the year began.  As we pass the midpoint of the year, it helps to scour this group of broken stocks. Though many of them have intractable problems that will take a while to fix, some of them have the ingredients for an impressive snapback rally. This is a good time to start researching rebound candidates, but it’s not yet time to buy them. Instead, follow the “10% rule,” which is a phrase coined by my colleague Bob Bogda. The best time to buy these stocks is when they have begun to move higher again, as I discussed in late June. Here are three stock in the group of losers that I am tracking. When they start to trade… Read More

Over the past five years, dozens of country- and region-specific foreign market exchange-traded funds (ETFs) have emerged on the scene. #-ad_banner-#Want to invest in the Philippines? There’s a fund for that (iShares MSCI Philippines (Nasdaq: EPHE). Prefer Scandinavian ETFs? The Global X FTSE Nordic Region ETF (NYSE: GXF) is the fund for you. It’s a wonderful development, and more investors should be embracing these funds as they enhance their level of global exposure. But the trouble with the ETF approach is self-evident. These funds buy a basket of leading companies and then (mostly) hold on to them. Their portfolios are… Read More

Over the past five years, dozens of country- and region-specific foreign market exchange-traded funds (ETFs) have emerged on the scene. #-ad_banner-#Want to invest in the Philippines? There’s a fund for that (iShares MSCI Philippines (Nasdaq: EPHE). Prefer Scandinavian ETFs? The Global X FTSE Nordic Region ETF (NYSE: GXF) is the fund for you. It’s a wonderful development, and more investors should be embracing these funds as they enhance their level of global exposure. But the trouble with the ETF approach is self-evident. These funds buy a basket of leading companies and then (mostly) hold on to them. Their portfolios are stocked with great companies — and not-so-great ones. The mutual fund approach can be a bit savvier, allowing for tactical asset shifts into the best companies. But these funds are typically pricier, and in any event, they tend to spread their assets around among so many companies that it’s hard to profit from the success of any particular investment. Case in point: the Baron Emerging Markets Fund (Nasdaq: BEXFX), which I profiled back in April. Morningstar gives it five stars, and its first glance, it’s impressive to note that its top three holdings (South Africa’s Steinhoff International and Brazil’s Smiles… Read More

When it comes to quarterly results, too many companies try to game the system. #-ad_banner-#They tell analysts what they expect to earn in the quarter, and then magically meet or exceed earnings per share (EPS) forecasts every time. Do they have a crystal ball at the start of the quarter and know how results will turn out? Nope.  They simply make a series of accounting adjustments — a booked order turned into a sale here, an expense deferred there — and are able to come up with whatever net income figure they like. (Here… Read More

When it comes to quarterly results, too many companies try to game the system. #-ad_banner-#They tell analysts what they expect to earn in the quarter, and then magically meet or exceed earnings per share (EPS) forecasts every time. Do they have a crystal ball at the start of the quarter and know how results will turn out? Nope.  They simply make a series of accounting adjustments — a booked order turned into a sale here, an expense deferred there — and are able to come up with whatever net income figure they like. (Here are some examples of financial trickery.) Of course, such accounting shenanigans can come back to bite them. You can only manipulate the books for so long until your balance sheet, income statement and cash flow statement become harder to reconcile. Eventually, these companies will have to deliver more realistic financial figures, usually after management has had a chance to cash out of their stock options. Nobody’s forcing you to own such companies. In fact, a pair of exchange-traded funds (ETFs) can help you avoid them — and since accounting tricks never going out of style, these funds are worth a… Read More

The long-awaited homebuilding recovery has yet to materialize, and new headwinds may be building. #-ad_banner-#This was supposed to be the year that homebuilders could finally celebrate. The rate of new-home construction has been well below average, thanks to still-low levels of new household formation. The Millennial generation has been shacking up with mom and dad — or renting — but many have expected a slowly improving U.S. economy to alter that dynamic. The fact that mortgage interest rates remain near generational lows has been seen as another positive catalyst. Yet the hoped for… Read More

The long-awaited homebuilding recovery has yet to materialize, and new headwinds may be building. #-ad_banner-#This was supposed to be the year that homebuilders could finally celebrate. The rate of new-home construction has been well below average, thanks to still-low levels of new household formation. The Millennial generation has been shacking up with mom and dad — or renting — but many have expected a slowly improving U.S. economy to alter that dynamic. The fact that mortgage interest rates remain near generational lows has been seen as another positive catalyst. Yet the hoped for rebound still isn’t here. The U.S. Commerce Department recently reported that construction levels were weaker than expected in May. If you’re bullish on the U.S. economy, then you know this sector needs to rumble back to life. Residential construction plays a huge role in the U.S. economy, supporting a wide range of ancillary industries, and a firmer pace of housing construction and sales would make a meaningful dent in our nation’s employment rate.  Housing needs to get busy. At some point, perhaps sooner rather than later, the benign interest rate environment may vanish, and rising mortgage rates… Read More

In the generation after World War II, air travel changed the face of business and leisure.  #-ad_banner-#Vast distances could suddenly be traversed and companies like Boeing (NYSE: BA), Douglas Aircraft and Fokker sold all the planes they could build. The Brazilian government wanted in on the action, and in 1969, launched Embraer (NYSE: ERJ). Few expected a country like Brazil, which had not yet developed a mature manufacturing base at that point, to have any chance of building a global jet maker that could compete with established Northern Hemisphere rivals. It was a bumpy flight for this aviation upstart, which… Read More

In the generation after World War II, air travel changed the face of business and leisure.  #-ad_banner-#Vast distances could suddenly be traversed and companies like Boeing (NYSE: BA), Douglas Aircraft and Fokker sold all the planes they could build. The Brazilian government wanted in on the action, and in 1969, launched Embraer (NYSE: ERJ). Few expected a country like Brazil, which had not yet developed a mature manufacturing base at that point, to have any chance of building a global jet maker that could compete with established Northern Hemisphere rivals. It was a bumpy flight for this aviation upstart, which was almost shut down in the early 1990s before the government decided to privatize it. Soon thereafter, Embraer listed its shares in Brazil, and its American depositary receipts (ADRs) began trading in the U.S. in the summer of 2000 at around $13 a share, moving into the low $20s a year later. Yet the events of 9/11 would doom air travel for the foreseeable future, and this stock plunged to around $8 in October 2001. Of course, as we now know, air travel didn’t cease to exist. And as the airline industry recovered, so did Embraer, which began rolling out… Read More

The New Zealand kiwi is nearing an all-time high against the dollar. #-ad_banner-#​That’s great news for any U.S. exporters looking to sell goods into that country, as U.S. made products become relatively less expensive. On the flip side, the surging kiwi makes New Zealand a costlier destination for U.S. travelers.  Yet for investors, this currency move represents a completely different set of issues. And currency moves may be the single most important factor when you are trading in and out of foreign investments. Apologies to advanced investors, but a few basic explanations are in order. When… Read More

The New Zealand kiwi is nearing an all-time high against the dollar. #-ad_banner-#​That’s great news for any U.S. exporters looking to sell goods into that country, as U.S. made products become relatively less expensive. On the flip side, the surging kiwi makes New Zealand a costlier destination for U.S. travelers.  Yet for investors, this currency move represents a completely different set of issues. And currency moves may be the single most important factor when you are trading in and out of foreign investments. Apologies to advanced investors, but a few basic explanations are in order. When you buy shares of a foreign stock (likely through an American depositary receipt), mutual fund or exchange-traded fund (ETF), your dollars must be converted into the local currency. And if that currency rises in value, as the New Zealand kiwi just has, then your investment rises in value by an identical amount, as you own kiwi-denominated assets, not dollar-denominated assets. (This notion mostly applies to stocks as most foreign bonds are mostly denominated in dollars or euros.) We saw the impact of a surging currency in recent quarters, as the Indian rupee staged a remarkable rebound against the U.S. dollar last… Read More

If you’re like most investors, then you probably repeatedly made the same mistake as you learned the rules of the game.  #-ad_banner-#You likely spotted a great bargain stock, bought shares and waited for something to happen. Shares likely stayed stuck at bargain levels, testing your patience. And you finally gave up waiting and sold shares, only to discover a year or two later that the stock did eventually rebound in a big way. What’s the lesson learned from that experience? That you should simply wait an indefinite period and stick around long enough for the eventual rebound? No. Such a strategy… Read More

If you’re like most investors, then you probably repeatedly made the same mistake as you learned the rules of the game.  #-ad_banner-#You likely spotted a great bargain stock, bought shares and waited for something to happen. Shares likely stayed stuck at bargain levels, testing your patience. And you finally gave up waiting and sold shares, only to discover a year or two later that the stock did eventually rebound in a big way. What’s the lesson learned from that experience? That you should simply wait an indefinite period and stick around long enough for the eventual rebound? No. Such a strategy will lead you to tie up all of your investor dollars in a bunch of dud stocks, leaving you with no funds to pursue new ideas. The better strategy: Create watch lists and track these stocks. Checking in on them frequently (I prefer daily) allows you to finally hop on board when these stocks start to become timely. Let me cite a few examples. Shares of Maxwell Technologies (Nasdaq: MXWL), a maker of ultra-capacitors, slumped sharply in the spring of 2012 as the company noted a slowdown in sales and a set of potentially fraudulent actions by some key… Read More

As Amazon.com (Nasdaq: AMZN) ventures into a few new categories every year, it foots the bill by redeploying cash flow from other, more mature divisions. #-ad_banner-#As a result, the company typically ekes out only $2 billion in annual free cash flow (defined as operating cash flow minus capital expenditures). For a company with nearly $75 billion in revenue last year, $2 billion isn’t much. Investors presume that Amazon’s free cash flow profile will be a lot more impressive — once it stops its breakneck pace of new product and service launches. At the other end of the spectrum, you have… Read More

As Amazon.com (Nasdaq: AMZN) ventures into a few new categories every year, it foots the bill by redeploying cash flow from other, more mature divisions. #-ad_banner-#As a result, the company typically ekes out only $2 billion in annual free cash flow (defined as operating cash flow minus capital expenditures). For a company with nearly $75 billion in revenue last year, $2 billion isn’t much. Investors presume that Amazon’s free cash flow profile will be a lot more impressive — once it stops its breakneck pace of new product and service launches. At the other end of the spectrum, you have companies that are already quite mature. They have few growth initiatives to pursue, and much of their operating cash flow is converted right into free cash flow. Such stocks tend to be shunned by growth investors, but for the value crowd, they hold great appeal. Their robust free cash flow can be used to pay down debt, boost the dividend or induce share buybacks — the three pillars of what we call Total Yield. I scanned all of the companies in the S&P 400 (mid-cap) and S&P 500, looking for companies that generate impressive levels of free cash flow. I… Read More