We’re right in the middle of earnings season, which means that most mid- and large-cap companies have reported results, with small-cap stocks getting set to move into the spotlight. #-ad_banner-#And thus far, two clear themes have emerged: Relatively few companies have been able to broadly surpass analysts’ forecasts — but one sector is building up an impressive head of steam, with strong earnings now and even stronger earnings to come. Bad Weather — Or End Of An Era? Of the more than 1,000 companies that have delivered quarterly results thus far, only 14 can be considered to be true… Read More

We’re right in the middle of earnings season, which means that most mid- and large-cap companies have reported results, with small-cap stocks getting set to move into the spotlight. #-ad_banner-#And thus far, two clear themes have emerged: Relatively few companies have been able to broadly surpass analysts’ forecasts — but one sector is building up an impressive head of steam, with strong earnings now and even stronger earnings to come. Bad Weather — Or End Of An Era? Of the more than 1,000 companies that have delivered quarterly results thus far, only 14 can be considered to be true “beat and raise” stocks. These are companies that not only deliver solid trailing results, but also offer solid enough guidance to lead analysts to raise their forward outlooks as well.  Specifically, these companies have: • Topped first-quarter earnings forecasts by at least 25%. • Seen their 2014 and 2015 full-year profit outlooks move higher since results were released. • Trade for less than 20 times projected 2015 profits, which is a likely cut-off point for remaining value to justify your time and energy researching them at a greater depth. Source: Yahoo Finance Over the… Read More

It’s been nearly a decade since the shale revolution began. Suddenly, the U.S. was being referred to as the “Saudi Arabia of natural gas,” and hundreds of companies decided to spend massive sums of money to explore shale formations. #-ad_banner-#It was a heady time, with dreams of future riches. Yet, as they’ll tell you in business school, you should only invest money in your business to the extent that future cash flows will benefit. Otherwise, you’ll go bankrupt.  That’s the sad lesson now being learned by executives at Forest Oil (NYSE: FST). The company has been on a spending bender… Read More

It’s been nearly a decade since the shale revolution began. Suddenly, the U.S. was being referred to as the “Saudi Arabia of natural gas,” and hundreds of companies decided to spend massive sums of money to explore shale formations. #-ad_banner-#It was a heady time, with dreams of future riches. Yet, as they’ll tell you in business school, you should only invest money in your business to the extent that future cash flows will benefit. Otherwise, you’ll go bankrupt.  That’s the sad lesson now being learned by executives at Forest Oil (NYSE: FST). The company has been on a spending bender for quite some time — with little to show for it.  Blame goes a series of once-promising wells that never really produced the oil and gas as expected. As a result, Forest Oil’s cash flow statement can make you wince. If you are wondering how a company that already carried nearly $3 billion in net debt at the end of 2008 has managed to stay afloat despite massive annual negative free cash flow, the answer lies in asset sales — many of them. Forest Oil has sold off many of its most promising oil fields to pay… Read More

As I noted earlier this week, the U.S. economy appears to have exited the winter slowdown in robust fashion. Coupled with firmer employment trends and a more positive outlook for corporate spending, there is reason to believe that we may see the economy grow at pace last seen back in 2005, when growth exceeded 3%. We’ll need to finish this year on a strong note for that to happen, but it’s a clear possibility. U.S. GDP Growth #-ad_banner-#Still, robust economic growth won’t necessarily translate into strong gains for all kinds of stocks. As I noted… Read More

As I noted earlier this week, the U.S. economy appears to have exited the winter slowdown in robust fashion. Coupled with firmer employment trends and a more positive outlook for corporate spending, there is reason to believe that we may see the economy grow at pace last seen back in 2005, when growth exceeded 3%. We’ll need to finish this year on a strong note for that to happen, but it’s a clear possibility. U.S. GDP Growth #-ad_banner-#Still, robust economic growth won’t necessarily translate into strong gains for all kinds of stocks. As I noted a few days ago, value stocks, many of which have leverage to a firmer economy, are more in favor these days, and high-priced growth stocks are stumbling.  In fact, some pockets of the market will actually suffer in a stronger economy. Here’s what you need to know.  Rising Rates Nearly six months ago, I noted that the interest rate yield curve will give a clear picture of a firming economy. To be sure, the 10-year Treasury isn’t yet reflecting an economic pickup, with the yield currently around 2.75%. Yet it’s important to understand that economic growth in the… Read More

As Steve Jobs prepped Apple (Nasdaq: AAPL) CEO Tim Cook to take the reins of the world’s most innovative consumer electronics company a few years ago, we can speculate on a likely bit of advice:  “Focus on the business, not on Wall Street.” #-ad_banner-#To be sure, Cook was getting an earful from Wall Street analysts and activist investors such as Carl Icahn a year ago, when shares were sliding toward the $400 mark. At the time, I noted that respected tech analyst Steve Milunovich of UBS said Apple’s high cash balances and slowing growth should fuel aggressive buybacks. CEO Cook… Read More

As Steve Jobs prepped Apple (Nasdaq: AAPL) CEO Tim Cook to take the reins of the world’s most innovative consumer electronics company a few years ago, we can speculate on a likely bit of advice:  “Focus on the business, not on Wall Street.” #-ad_banner-#To be sure, Cook was getting an earful from Wall Street analysts and activist investors such as Carl Icahn a year ago, when shares were sliding toward the $400 mark. At the time, I noted that respected tech analyst Steve Milunovich of UBS said Apple’s high cash balances and slowing growth should fuel aggressive buybacks. CEO Cook initially appeared uninterested in such a suggestion, though Apple has gone on to be an aggressive buyer of its own shares (which I’ll discuss in greater detail in a moment).  Cook instead aimed to shift investors’ focus to Apple’s legendary product innovation engine, dropping many hints in subsequent quarters that Apple’s engineers were developing powerful extensions to the core iPhone/iPad/iTunes/MacBook platform. And though we’ve been hearing about rumors of a new television ecosystem and a wearable iWatch, Cook is still running a business based on products developed under Steve Jobs.  It’s time for Cook to get cracking. Will the long… Read More

When a company is referred to as a “poor man’s American Express (NYSE: AXP),” it may seem like a backhanded compliment. #-ad_banner-#But it’s a fair analogy for Discover Financial Services (NYSE: DFS). The credit card issuer and financial services firm caters to a middle-income demographic, a clear peg down from AmEx’s focus on upper-income consumers and small businesses.  But Discover’s management takes a backseat to no one when it comes to delivering robust and shareholder-friendly moves. Based on recent actions, Discover is emerging as one of the top Total Yield plays of 2014. Discover has seemingly always been on the… Read More

When a company is referred to as a “poor man’s American Express (NYSE: AXP),” it may seem like a backhanded compliment. #-ad_banner-#But it’s a fair analogy for Discover Financial Services (NYSE: DFS). The credit card issuer and financial services firm caters to a middle-income demographic, a clear peg down from AmEx’s focus on upper-income consumers and small businesses.  But Discover’s management takes a backseat to no one when it comes to delivering robust and shareholder-friendly moves. Based on recent actions, Discover is emerging as one of the top Total Yield plays of 2014. Discover has seemingly always been on the margins of the financial services industry, never holding dominant market share in any of the niches in which it operates. Sears Holdings (Nasdaq: SHLD) launched the company in 1985 and eventually unloaded it to Morgan Stanley (NYSE: MS), which eventually disposed of it through the IPO market (in 2007).  Yet through it all, Discover’s management has built a very respectable franchise. CEO David Nelms has been in charge for a decade and gets high marks from analysts. “The company has made great strides during his tenure, and Discover’s relatively high capital levels and excellent underwriting kept the company in good… Read More

If you live in Southern California and look out on the horizon, you may notice a lot of cargo ships along the coastline these days.  #-ad_banner-#According to the Port of Los Angeles, the volume of goods being shipped in (measured by container volumes) rose 41% in March. The volume of goods being shipped out rose an also impressive 22% from a year ago. On a combined import/export basis, that marks the sharpest year-over-year monthly gain since 2007.  This surge in port traffic helps explain a view of the economy that is starting to spread. Economic activity stalled over… Read More

If you live in Southern California and look out on the horizon, you may notice a lot of cargo ships along the coastline these days.  #-ad_banner-#According to the Port of Los Angeles, the volume of goods being shipped in (measured by container volumes) rose 41% in March. The volume of goods being shipped out rose an also impressive 22% from a year ago. On a combined import/export basis, that marks the sharpest year-over-year monthly gain since 2007.  This surge in port traffic helps explain a view of the economy that is starting to spread. Economic activity stalled over the winter, thanks in large part to the “polar vortex,” but came roaring back to life as the quarter came to an end. We also know that trade and economic activity are strengthening by looking at the Dow Jones Transportation Index (DJT) which just hit a new all-time high, and when paired with peaks in the Dow Jones Industrial Average, is seen as a bullish sign, according to the Dow Theory. We will hear more about the pace of economic growth on April 30, when first-quarter GDP growth rates are announced. The headline number will look… Read More

A couple of months ago, the fund planners at Invesco PowerShares closed the book on one of the most unusual chapters in investing history, announcing a move to shut down the PowerShares Lux Nanotech Portfolio exchange-traded fund (ETF). A lack of interest was the main culprit in its demise. #-ad_banner-#For many investors, the move signaled the end of the decade-long hype around nanotechnology stocks. Back in 2006, with nanotech mania in full bloom, Businessweek predicted that this emerging technology would represent a $2.6 trillion industry by 2014. That prediction overestimated the industry’s potential by at least… Read More

A couple of months ago, the fund planners at Invesco PowerShares closed the book on one of the most unusual chapters in investing history, announcing a move to shut down the PowerShares Lux Nanotech Portfolio exchange-traded fund (ETF). A lack of interest was the main culprit in its demise. #-ad_banner-#For many investors, the move signaled the end of the decade-long hype around nanotechnology stocks. Back in 2006, with nanotech mania in full bloom, Businessweek predicted that this emerging technology would represent a $2.6 trillion industry by 2014. That prediction overestimated the industry’s potential by at least $2.5 trillion.  A decade ago, the phrase “nano” was applied to many hot new technology developments. By some estimates, more than $20 billion in government and corporate research funds were invested in the burgeoning technology. The premise was simple. Scientists had found ways to develop ultra-tiny particles that could be used in a range of biotech, industrial and cosmetic applications.  We’re talking smaller than “micro”… smaller than “milli.” You have to get far, far smaller than the width of a human hair, to one-millionth of a meter, to get a sense of just how tiny nano-size particles are. So what… Read More

As an investor, there are two things you need to know about the field of biotechnology. First, a number of established and newly public companies are making remarkable progress on various research fronts. #-ad_banner-#Second, almost all of these stocks have been placed in the bargain bin, as investors pull their money out of this once-hot sector. With those two factors in place, it’s time to double up on your biotech research efforts, which is why I’ve been giving these stocks more ink than usual in recent weeks.  One of the most interesting things about this group is how various companies… Read More

As an investor, there are two things you need to know about the field of biotechnology. First, a number of established and newly public companies are making remarkable progress on various research fronts. #-ad_banner-#Second, almost all of these stocks have been placed in the bargain bin, as investors pull their money out of this once-hot sector. With those two factors in place, it’s time to double up on your biotech research efforts, which is why I’ve been giving these stocks more ink than usual in recent weeks.  One of the most interesting things about this group is how various companies are clustering their research efforts around particular medical breakthroughs. Just last week, I took note of the group of companies looking to alter DNA mutations through the process of gene therapy.  There is also a cluster of companies working with RNA, which has a slightly different role in the human body. As is the case with DNA, companies working on RNA fixes also seek ways to block the impact of rogue genes, in a process known as RNA interference (RNAi). The basic idea is to cause the body to stop making bad proteins that can cause… Read More

When assessing a stock’s value, investors often apply a PEG ratio (price-to-earnings divided by the earnings growth rate). #-ad_banner-#And when it comes to fast-growing, richly valued stocks, both numbers in that equation can get pretty lofty. Netflix (Nasdaq: NFLX), for example, is expected to boost per-share profits at least 80% in 2014 and again in 2015, seemingly justifying the fact that shares trade for around 45 times projected 2015 profits. But such high numbers highlight the double-barreled vulnerability that such stocks have. If growth projections slow, not only will analysts have to lower their earnings assumptions, but they will have… Read More

When assessing a stock’s value, investors often apply a PEG ratio (price-to-earnings divided by the earnings growth rate). #-ad_banner-#And when it comes to fast-growing, richly valued stocks, both numbers in that equation can get pretty lofty. Netflix (Nasdaq: NFLX), for example, is expected to boost per-share profits at least 80% in 2014 and again in 2015, seemingly justifying the fact that shares trade for around 45 times projected 2015 profits. But such high numbers highlight the double-barreled vulnerability that such stocks have. If growth projections slow, not only will analysts have to lower their earnings assumptions, but they will have to lower target multiples on that growth as well. And when that happens, a stock can lose up to half its value — overnight.   That’s precisely what has happened to a pair of former high-fliers in the tech sector. A growth reset has led to sharply lower valuations, though a fresh look reveals that it’s time to buy.  Here’s a closer look at them. 1. Infoblox (Nasdaq: BLOX ) As the management of corporate networks grows ever more complex, niche business models have sprung up to help IT managers focus on various aspects of the networks. Infoblox, which made its public debut… Read More

A few years ago, the phrase “smart-beta ETFs” barely existed in the investing lexicon. Yet these exchange-traded funds are now the hottest category among fund sponsors, with nearly 400 of these funds now managing more than $150 billion in assets — with plans for many more to be launched in coming years. #-ad_banner-#The key question: Are they worth it — or are they just a bad marketing concept in search of your funds?  Smart betas were launched to address a clear problem that emerged in the fund community. Low-cost traditional ETFs were launched to provide investors with access to simple,… Read More

A few years ago, the phrase “smart-beta ETFs” barely existed in the investing lexicon. Yet these exchange-traded funds are now the hottest category among fund sponsors, with nearly 400 of these funds now managing more than $150 billion in assets — with plans for many more to be launched in coming years. #-ad_banner-#The key question: Are they worth it — or are they just a bad marketing concept in search of your funds?  Smart betas were launched to address a clear problem that emerged in the fund community. Low-cost traditional ETFs were launched to provide investors with access to simple, passively managed portfolios that need not account for the salaries of million-dollar fund managers.  Yet their “buy the whole group” approach to any theme, whether it was a particular industry, country or asset class, meant that each portfolio was packed with both good and bad investments. In defense of higher-priced mutual funds, at least fund managers took the time to weed out presumably bad investments and hold only good investments.  The smart-beta ETFs aimed to be the best of both worlds: a higher degree of portfolio rebalancing to weed out the duds, in a fund that still was cheaper to… Read More