If you own stock in Facebook (Nasdaq: FB), you’ve had to reach for the Tums, as shares have tumbled roughly 15% since early March. Yet that pullback is just a minor inconvenience when you consider that a host of other dot-com and social media stocks have plunged by 25%, 50% or more.  #-ad_banner-#No doubt about it, the mania for richly valued tech stocks has come to an end, and the odds of a rapid climb back to their 52-week highs are quite small.  By the time I looked at these stocks two… Read More

If you own stock in Facebook (Nasdaq: FB), you’ve had to reach for the Tums, as shares have tumbled roughly 15% since early March. Yet that pullback is just a minor inconvenience when you consider that a host of other dot-com and social media stocks have plunged by 25%, 50% or more.  #-ad_banner-#No doubt about it, the mania for richly valued tech stocks has come to an end, and the odds of a rapid climb back to their 52-week highs are quite small.  By the time I looked at these stocks two months ago, they had shown signs of a top. (Indeed, a number of these stocks had hit their all-time highs on March 5.) By the time I looked at this group a month later, they were in freefall.  While almost all of these stocks had fallen more than 20% from their peaks by early April, the carnage has continued for some, while others have seen their share prices stabilize.  Has this group hit bottom — and is it primed for a comeback? Not everybody’s convinced. A recent Wall Street Journal article suggests that some of these stocks… Read More

After underperforming the S&P 500 for the past several years, emerging markets represent relative bargains, especially in terms of P/E ratios and dividend yields. Then again, it’s easy to conclude that investing in still-developing economies provides limited rewards for too much risk.  #-ad_banner-#Frankly, this is a debate that pops up almost every decade. Back in 1997, Asian markets crashed on the backs of a currency crisis, and investors soon realized that they could do just fine staying close to home: While emerging markets sought to regain their footing in 1998 and 1999, U.S. stocks soared.  But over the next decade,… Read More

After underperforming the S&P 500 for the past several years, emerging markets represent relative bargains, especially in terms of P/E ratios and dividend yields. Then again, it’s easy to conclude that investing in still-developing economies provides limited rewards for too much risk.  #-ad_banner-#Frankly, this is a debate that pops up almost every decade. Back in 1997, Asian markets crashed on the backs of a currency crisis, and investors soon realized that they could do just fine staying close to home: While emerging markets sought to regain their footing in 1998 and 1999, U.S. stocks soared.  But over the next decade, the iShares MSCI Emerging Markets Index ETF (NYSE: EEM) rose 10.9% annually, compared with a 1.3% annualized gain for developed markets. Perhaps a longer view is warranted. If you are building a retirement portfolio, you’re more likely to be concerned about what kinds of markets can deliver upside over the course of a generation.  Well, a pair of strategists at Credit Suisse have gone a step further… and sought to answer that question with a century-long view. These strategists looked at the returns delivered by various markets going back to 1900 — and came up with some… Read More

Just as in the film “Groundhog Day,” my day starts the same way every day.  #-ad_banner-#I pore through dozens of Wall Street reports to stay abreast of the key issues and trends impacting various industries and companies. While boning up on the issues, I also seek out Wall Street’s preferred… Read More

Near the end of 2012, investors began to question whether drugstore chain Rite Aid (NYSE: RAD) had much of a future.  #-ad_banner-#Shares traded for just $1 — a price point that often signals possible bankruptcy ahead — as the company’s staggering $6.3 billion debt load looked set to eventually cripple the company. Rite Aid had completed its fiscal year back in February 2012, and in that year, the company had just $128 million in operating income and $529 million in interest expense. Adding insult to injury, Rite Aid was in the midst of a sales… Read More

Near the end of 2012, investors began to question whether drugstore chain Rite Aid (NYSE: RAD) had much of a future.  #-ad_banner-#Shares traded for just $1 — a price point that often signals possible bankruptcy ahead — as the company’s staggering $6.3 billion debt load looked set to eventually cripple the company. Rite Aid had completed its fiscal year back in February 2012, and in that year, the company had just $128 million in operating income and $529 million in interest expense. Adding insult to injury, Rite Aid was in the midst of a sales slump, as revenues fell in three of the four years leading up to fiscal 2013. That’s why even at just $1 a share, this was one of the most heavily shorted stocks on the market. Yet Rite Aid never ended up in bankruptcy. Management pulled out every stop to ensure that operating profits would rise to the level of interest expense — and then surpass it… which is the only way a debt-laden business can survive over the long term. Rite Aid Takes Control Of Its Debt Rising cash flow enabled Rite Aid… Read More

It’s a tale of two markets.  #-ad_banner-#Value stocks, which are well represented in the Dow Jones Industrial Average and S&P 500 Index remain near all-time highs, while growth stocks, more clearly represented by the Nasdaq Composite Index, appears to be on unstable ground. The Nasdaq index itself isn’t too far from its peak, but many underlying growth stocks have plunged badly during this earnings season. As an example, the S&P posted around 60 new 52-week highs and 60 new lows last Friday, while the Nasdaq saw 21 new 52-week highs against 139 new lows, a nearly 1-to-7 ratio. Short sellers… Read More

It’s a tale of two markets.  #-ad_banner-#Value stocks, which are well represented in the Dow Jones Industrial Average and S&P 500 Index remain near all-time highs, while growth stocks, more clearly represented by the Nasdaq Composite Index, appears to be on unstable ground. The Nasdaq index itself isn’t too far from its peak, but many underlying growth stocks have plunged badly during this earnings season. As an example, the S&P posted around 60 new 52-week highs and 60 new lows last Friday, while the Nasdaq saw 21 new 52-week highs against 139 new lows, a nearly 1-to-7 ratio. Short sellers are on the case. The latest short seller data, released on May 9 and reflecting short positions through the end of April, show a great deal of macro positioning by short sellers. Their use of exchange-traded funds (ETFs) as proxies for bearish bets is a strong tell in this market. Here’s a look at some key funds, and how shorts are adjusting their exposure. Broadly speaking, short sellers are boosting their exposure to tech stocks and small caps, while reducing their exposure to value stocks, bank stocks and utility stocks. Some of this is a valuation call: Tech… Read More

Carl Icahn is a notoriously headstrong man. He never hesitates to shame, cajole and coerce CEOs until they start following his advice. Icahn’s cage-rattling approach has surely led to some impressive investment returns. #-ad_banner-#While Icahn still grabs many headlines when he browbeats companies like Apple (Nasdaq: AAPL) until they announce share buybacks large enough to satisfy him, an up-and-comer in the hedge fund industry has taken a very different approach.  Mark Rachesky, who worked for Icahn earlier in his career, has become known as a “passive activist.” He follows the Icahn playbook by pursuing undervalued companies that can take steps to… Read More

Carl Icahn is a notoriously headstrong man. He never hesitates to shame, cajole and coerce CEOs until they start following his advice. Icahn’s cage-rattling approach has surely led to some impressive investment returns. #-ad_banner-#While Icahn still grabs many headlines when he browbeats companies like Apple (Nasdaq: AAPL) until they announce share buybacks large enough to satisfy him, an up-and-comer in the hedge fund industry has taken a very different approach.  Mark Rachesky, who worked for Icahn earlier in his career, has become known as a “passive activist.” He follows the Icahn playbook by pursuing undervalued companies that can take steps to unlock value — but he takes those steps as an insider, not an outsider. Rachesky’s approach could be described by the adage “You can catch more flies with honey than vinegar.” The Studio Standoff Icahn and Rachesky actually squared off a few years ago over film studio Lions Gate Entertainment (NYSE: LGF). Icahn wanted the company to either take value-unlocking steps or sell him the company outright. Lions Gate was also being targeted by Rachesky, but in a much calmer manner.  After repeated pushbacks from Lions Gate, Icahn lost the will to fight and sold his shares in the… Read More

We are truly in the golden age of cash flow. #-ad_banner-#Corporate profit margins have been so strong in recent years that companies have been pulling in large sums of cash every quarter. In the first few years after the economic crisis of 2008, companies sought to hoard their cash, but starting around 2010, growing share buybacks and rising dividends became the name of the game. Companies now dole out almost as much as they take in, leaving cash balances fairly static. That’s fine: Companies are well-cushioned against the next (and inevitable) economic downturn. And with cash flow continuing to pour in… Read More

We are truly in the golden age of cash flow. #-ad_banner-#Corporate profit margins have been so strong in recent years that companies have been pulling in large sums of cash every quarter. In the first few years after the economic crisis of 2008, companies sought to hoard their cash, but starting around 2010, growing share buybacks and rising dividends became the name of the game. Companies now dole out almost as much as they take in, leaving cash balances fairly static. That’s fine: Companies are well-cushioned against the next (and inevitable) economic downturn. And with cash flow continuing to pour in as margins remain near peak levels, look for more dividend hikes and fresh buyback announcements. About the only thing that could derail the buyback-and-dividend freight train would be an increase in acquisitions — but most companies are continuing to eschew acquisitions and the risks they entail. In the context of solid dividends and buybacks, it’s fair to ask: Is it better to own a company that produces solid and predictable dividends, or one that plans on buying back stock? Let’s take a look at the pros and cons of each scenario, starting with dividends. Scenario 1: The Company Begins Issuing… Read More

Your caffeine buzz is about to get a whole lot more expensive.  #-ad_banner-#Coffee prices have been quickly rising, as seen by the iPath Pure Beta Coffee ETN (NYSE: CAFE), which has risen 80% in the past six months. Blame it on poor growing conditions, which have reduced crop yields. The price of coffee should also concern you if own shares of any coffee chains. Some such as Starbucks (Nasdaq: SBUX) have been wise enough to hedge their exposure through long-term hedging contracts, while others such as Dunkin’ Brands (Nasdaq: DNKN) lacked that foresight. Understanding how commodity prices and… Read More

Your caffeine buzz is about to get a whole lot more expensive.  #-ad_banner-#Coffee prices have been quickly rising, as seen by the iPath Pure Beta Coffee ETN (NYSE: CAFE), which has risen 80% in the past six months. Blame it on poor growing conditions, which have reduced crop yields. The price of coffee should also concern you if own shares of any coffee chains. Some such as Starbucks (Nasdaq: SBUX) have been wise enough to hedge their exposure through long-term hedging contracts, while others such as Dunkin’ Brands (Nasdaq: DNKN) lacked that foresight. Understanding how commodity prices and hedging strategies will impact your investment is an underappreciated topic. Indeed commodity prices — and companies’ ability to hedge against sudden spikes — can explain why earnings forecasts steadily rise and fall. For example, consider cotton. That commodity has been on a tear recently, but Hanesbrands (NYSE: HBI), one of the world’s largest buyers of cotton, has locked in more than 95% of its cotton needs for the next year at prices that now look like a bargain. That foresight explains why this stock is at all-time highs — despite surging cotton prices. Other consumers of cotton such as Gap… Read More

This is shaping up to be one of the most tumultuous earnings seasons in quite some time. #-ad_banner-#Stocks as diverse as Whole Foods (Nasdaq: WFM), AOL (NYSE: AOL) and Intuitive Surgical (Nasdaq: ISRG) are being hammered in the face of tepid quarterly results. The Nasdaq has been especially wobbly in recent weeks, posting sharp drops every few trading sessions. It’s times like these that companies must prove their mettle, providing investors with solid reasons to hang on to their shares and avoid the temptation to lock in profits in what has been an extended bull market. And one of the… Read More

This is shaping up to be one of the most tumultuous earnings seasons in quite some time. #-ad_banner-#Stocks as diverse as Whole Foods (Nasdaq: WFM), AOL (NYSE: AOL) and Intuitive Surgical (Nasdaq: ISRG) are being hammered in the face of tepid quarterly results. The Nasdaq has been especially wobbly in recent weeks, posting sharp drops every few trading sessions. It’s times like these that companies must prove their mettle, providing investors with solid reasons to hang on to their shares and avoid the temptation to lock in profits in what has been an extended bull market. And one of the best ways to show support for a flagging stock is through share buybacks.  Many believe that buybacks pave the path to higher upside. Indeed, a portfolio of companies buying back shares, as reflected by the PowerShares Buyback Achievers ETF (NYSE: PKW), which has handily outperformed the S&P 500 in this bull market. Yet you should also consider buyback stocks for their defensive characteristics. Buyback plans provide demand for shares at times when buyers are scarce. And if buyback programs are large enough, they can help boost earnings per share (EPS) by a solid margin, even when income growth… Read More

John Maynard Keynes famously said that “The market can remain irrational longer than you can stay solvent.”  Short sellers are also aware of that painful axiom, and many of them lost money in 2013 betting against some of the market’s most popular stocks. And perhaps no single stock defied the logic and reason of short sellers as much as 3D Systems (NYSE: DDD). Back in September, I took note of emerging concerns about the health of this company’s financial statements and suggested that aggressive accounting would be this stock’s undoing. Still, shares of this and other 3-D printers rose ever higher,… Read More

John Maynard Keynes famously said that “The market can remain irrational longer than you can stay solvent.”  Short sellers are also aware of that painful axiom, and many of them lost money in 2013 betting against some of the market’s most popular stocks. And perhaps no single stock defied the logic and reason of short sellers as much as 3D Systems (NYSE: DDD). Back in September, I took note of emerging concerns about the health of this company’s financial statements and suggested that aggressive accounting would be this stock’s undoing. Still, shares of this and other 3-D printers rose ever higher, and 3D Systems was valued at roughly 125 times trailing earnings. That’s what happens when a stock surges 4,000% in five years. #-ad_banner-#​Of course, when momentum investors lose interest, stocks such as 3D Systems can’t fall back on any sort of intrinsic value, and a nearly 50% plunge thus far in 2014 has been equally sobering. The question now is: Should you buy it? The short answer: More boulders may lie ahead, and you should wait for an even better entry price. Organic Vs. Inorganic Growth 3D Systems has been dogged by its… Read More