If you hold any biotech stocks in your portfolio, then it’s time for a gut check. Share prices in this high-risk/high-reward group posted their biggest one-week loss in recent memory, leading investors to figure out if it’s time to get out now… or to commit more funds. How bad was the carnage? The SPDR S&P Biotech ETF (NYSE: XBI) slid nearly 10% on the week, and for many individual stocks, the erosion was far more severe. #-ad_banner-#Cancer-focused biotech Exelixis saw its shares plunge on poor clinical testing data, but all of these other stocks fell out for seemingly… Read More

If you hold any biotech stocks in your portfolio, then it’s time for a gut check. Share prices in this high-risk/high-reward group posted their biggest one-week loss in recent memory, leading investors to figure out if it’s time to get out now… or to commit more funds. How bad was the carnage? The SPDR S&P Biotech ETF (NYSE: XBI) slid nearly 10% on the week, and for many individual stocks, the erosion was far more severe. #-ad_banner-#Cancer-focused biotech Exelixis saw its shares plunge on poor clinical testing data, but all of these other stocks fell out for seemingly no explicable reason. Actually, there was a negative catalyst impacting this whole group: Congress recently questioned a move by Gilead Sciences (Nasdaq: GILD) to price a new hepatitis C drug at more than $1,000 per pill. Many investors quickly concluded that new drugs in development from other biotech firms may not fetch the high reimbursement rates that analysts had been suggesting.  To be sure, few drugs in development will be priced quite that boldly. (Indeed, Gilead subsequently relented and suggested that many insurers will get 20% to 30% discounts from that list price.) Yet the issue reminds investors… Read More

Over the past few quarters, there have been rumblings that the bull market is getting long in the tooth, and the time is at hand to shift more assets into cash.#-ad_banner-# To be sure, the direst predictions about the market have simply not come to pass. Yet the recent market performance may not be as impressive as you think. As an example, though the Nasdaq composite index has staged some impressive mini-rallies in the past few quarters, it’s really treading water. The day after Christmas, the Nasdaq stood at 4,167. Three months later, it has fallen to near 4,150. The… Read More

Over the past few quarters, there have been rumblings that the bull market is getting long in the tooth, and the time is at hand to shift more assets into cash.#-ad_banner-# To be sure, the direst predictions about the market have simply not come to pass. Yet the recent market performance may not be as impressive as you think. As an example, though the Nasdaq composite index has staged some impressive mini-rallies in the past few quarters, it’s really treading water. The day after Christmas, the Nasdaq stood at 4,167. Three months later, it has fallen to near 4,150. The key concern is that a sideways market often portends a broader directional shift. The major averages get stuck in a range as buyers continue to pour funds in and a similar number of investors head for the exits. Often times, the buyers can get fatigued, and sellers start to take control. To be sure, the market (as viewed by the Nasdaq) has been stuck in a few ruts over the past year and managed to reach new heights in subsequent months. But before you conclude that this is just another consolidation phase before the next upward move, take… Read More

Everywhere you turn these days, you’ll read another story about a massive wave of insider selling taking place. For example, a University of Michigan finance professor recently told MarketWatch that “The current message of the insider data ‘is as pessimistic as I’ve ever seen over the last 25 years.'” #-ad_banner-#Can you blame them? Millions of dollars in paper profits have been created for thousands of employees at public companies, and none of them want to wait around in case the market pulls back. But even as the levels of insider selling have surged, there has also… Read More

Everywhere you turn these days, you’ll read another story about a massive wave of insider selling taking place. For example, a University of Michigan finance professor recently told MarketWatch that “The current message of the insider data ‘is as pessimistic as I’ve ever seen over the last 25 years.'” #-ad_banner-#Can you blame them? Millions of dollars in paper profits have been created for thousands of employees at public companies, and none of them want to wait around in case the market pulls back. But even as the levels of insider selling have surged, there has also been a considerable amount of insider buying. I’ve pored through a few hundred recent filings to spot which companies have solid clusters of buying, and I’ve noted that some of the most intriguing purchases are taking place in the energy sector. (All data provided by InsiderInsights.com.) 1. Diamond Offshore (NYSE: DO ) It’s turning out to be a tough year for companies that lease deepwater drilling rigs. A glut of rigs has led to falling lease rates, and you can see the trend in this firm’s numbers. Sales peaked at $3.3 billion in 2011, and earnings… Read More

In recent quarters, a very clear trend has emerged among short sellers: #-ad_banner-#As a group, they’ve lost the nerve to go after the market’s most richly valued stocks. They’ve learned that focusing on the extremely rich multiples of many dot-com companies has caused many headaches, and you won’t find most of these firms at the top of the short interest lists these days. Still, these high-flying Internet companies, which I panned earlier this month, often trade for absurd multiples of price to expectations for 2016 free cash flow, which may eventually come back to bite them. Though the shorts are… Read More

In recent quarters, a very clear trend has emerged among short sellers: #-ad_banner-#As a group, they’ve lost the nerve to go after the market’s most richly valued stocks. They’ve learned that focusing on the extremely rich multiples of many dot-com companies has caused many headaches, and you won’t find most of these firms at the top of the short interest lists these days. Still, these high-flying Internet companies, which I panned earlier this month, often trade for absurd multiples of price to expectations for 2016 free cash flow, which may eventually come back to bite them. Though the shorts are still steering clear of these stocks, long-oriented investors appear increasingly inclined to book profits as they start to drift away from their 52-week highs: Notably, Facebook (Nasdaq: FB), Priceline.com (Nasdaq: PCLN) and Tesla Motors (Nasdaq: TSLA) all appear to have peaked about a month ago, dropping since by double digits, even as the Nasdaq flirts with new all-time highs. Of all of these stocks, I still think Twitter (NYSE: TWTR) and Priceline represent the greatest openings for short sellers looking to target frothy dot-com stocks. Curiously, short sellers are going after the major tech firms that… Read More

It may be just a coincidence, but soon after a key financial agency cautioned investors about the risks in business development companies (BDCs), these investments lost some of the momentum they had seen in 2010 through 2012. #-ad_banner-#Though many these of stocks are unlikely to deliver the sharp gains they saw in the first few years after the Great Recession, solid values still remain among a few of them. Too Much Leverage? Back in January 2013, the Financial Industry Regulatory Authority (FINRA) expressed concern that these companies carried a lot more risk than investors realized:… Read More

It may be just a coincidence, but soon after a key financial agency cautioned investors about the risks in business development companies (BDCs), these investments lost some of the momentum they had seen in 2010 through 2012. #-ad_banner-#Though many these of stocks are unlikely to deliver the sharp gains they saw in the first few years after the Great Recession, solid values still remain among a few of them. Too Much Leverage? Back in January 2013, the Financial Industry Regulatory Authority (FINRA) expressed concern that these companies carried a lot more risk than investors realized: “Fueled by the availability of low-cost financing, BDCs run the risk of over-leveraging their relatively illiquid portfolios.” Indeed, the high use of leverage turned out to be an Achilles’ heel back in 2008 as a number of BDCs’ portfolio holdings began to show signs of stress. Fearing that the BDCs would develop cash crunches, investors fled these stocks, some of which lost 80% or more of their value. These days, few such concerns seem to exist. Many corporations have either reduced debt or extended maturities at lower rates. But the smaller, privately held companies that BDCs both lend to and… Read More

Few investments are driven by psychology and fear as much as gold. Concerns about ruinous inflation, global tensions or economic instability can send investors out of stocks and right into the seemingly safe harbor of gold. Is the fear trade back on? A double-digit rebound in gold prices since the year began has led some investors to wonder if gold is poised for a great 2014 after a dismal slump in 2013 when gold prices fell more than $400 an ounce. Junior gold miners have fared even better: The Market Vectors Junior Gold Miner ETF (NYSE: GDXJ) is up roughly… Read More

Few investments are driven by psychology and fear as much as gold. Concerns about ruinous inflation, global tensions or economic instability can send investors out of stocks and right into the seemingly safe harbor of gold. Is the fear trade back on? A double-digit rebound in gold prices since the year began has led some investors to wonder if gold is poised for a great 2014 after a dismal slump in 2013 when gold prices fell more than $400 an ounce. Junior gold miners have fared even better: The Market Vectors Junior Gold Miner ETF (NYSE: GDXJ) is up roughly 35% in the past three months. #-ad_banner-#Much of the impetus for an upward move in gold prices was the building tensions in Ukraine, which led to concerns about potential military escalation. It’s now apparent that financial sanctions, and not a deepening of a war posture, will characterize the hardening Russia/European Union relationship, and the risk factor is slowly receding. Also, concerns had arisen that a slowing Chinese economy might create higher global uncertainty. China’s economy is slowing, but the Chinese government will restore stability if necessary by increasing stimulus spending. Yet the key reasons behind gold’s… Read More

Investors tend to give their portfolio half of the attention it needs. #-ad_banner-#They add stocks and funds to the mix, presumably making a commitment in dollar value that is commensurate with the perceived risk of any investment. But once an asset makes it into their portfolio, they don’t always actively monitor how the investment is faring — or how it fits in with the changing economy. Years may pass before you take a fresh, deep look at what you really own. I have met many investors who own a hundred stocks or more, simply because they could never know when… Read More

Investors tend to give their portfolio half of the attention it needs. #-ad_banner-#They add stocks and funds to the mix, presumably making a commitment in dollar value that is commensurate with the perceived risk of any investment. But once an asset makes it into their portfolio, they don’t always actively monitor how the investment is faring — or how it fits in with the changing economy. Years may pass before you take a fresh, deep look at what you really own. I have met many investors who own a hundred stocks or more, simply because they could never know when to sell any particular investment. Here’s a simple, four-step method to make sure your portfolio is in fighting shape. 1. Focus On Weightings It’s often wise to let your winners ride, especially if the news that propelled shares higher continues to flow. But your best portfolio picks can eventually start to account for an outsize portion of your portfolio. There’s no great rule of thumb about how much is too much, but generally speaking, any one holding that has come to represent 15% or 20% of your portfolio needs very close scrutiny. Unless you have done an… Read More

If I had to nominate the best-run business of the early 21st century, Netflix (Nasdaq: NFLX), Apple (Nasdaq: AAPL) and Priceline (Nasdaq: PCLN) make the first ballot. Each company took a fresh look at their industry… and introduced revolutionary new approaches that left rivals flat-footed.#-ad_banner-# Priceline, in particular, deserves special mention, not only for its visionary ability to rewrite the rules of the century-old travel industry, but for a knack to acquire any emerging rival that could further boost growth and eliminate competitive threats. Priceline’s purchases of Agoda and Booking.com in 2007 and Kayak.com in 2012 partially explain why this… Read More

If I had to nominate the best-run business of the early 21st century, Netflix (Nasdaq: NFLX), Apple (Nasdaq: AAPL) and Priceline (Nasdaq: PCLN) make the first ballot. Each company took a fresh look at their industry… and introduced revolutionary new approaches that left rivals flat-footed.#-ad_banner-# Priceline, in particular, deserves special mention, not only for its visionary ability to rewrite the rules of the century-old travel industry, but for a knack to acquire any emerging rival that could further boost growth and eliminate competitive threats. Priceline’s purchases of Agoda and Booking.com in 2007 and Kayak.com in 2012 partially explain why this company has boosted sales at least 20% in each of the past seven years, and is expected to do so again in 2014 and 2015. Still, Priceline’s current $67 billion market value, which equates to roughly 35 times trailing earnings, embeds an awful lot of success. And investors, as they have pushed shares into quadruple-digit territory, may have overlooked some serious speed bumps in the road ahead. If you have been fortunate to own this stock all the way up, it may be time to cash in your winnings. Three reasons in particular come to mind. 1. Bumpy Quarters It’s… Read More

Though I tend to generally find the customer service at major companies to be lacking, I give high marks to satellite TV operator DirecTV (NYSE: DTV). The company charges me a lot of money every month, but backs it up with professional customer support and trouble-free service. #-ad_banner-#Yet DirecTV is facing a problem that many companies are experiencing: Growth is slowing, and the company is likely to add few new customers this year. It’s a good thing that management spent heavily to build up its service years ago and has few major new investments to make these days. That enables… Read More

Though I tend to generally find the customer service at major companies to be lacking, I give high marks to satellite TV operator DirecTV (NYSE: DTV). The company charges me a lot of money every month, but backs it up with professional customer support and trouble-free service. #-ad_banner-#Yet DirecTV is facing a problem that many companies are experiencing: Growth is slowing, and the company is likely to add few new customers this year. It’s a good thing that management spent heavily to build up its service years ago and has few major new investments to make these days. That enables DirectTV to generate more than $2 billion free cash flow, year in and year out. Shareholders have directly benefited from the cash production. A look at earnings per share explains why, as I’ll show in a moment. Take a look at the company’s key income statement metrics across the span of five years. Since 2009, sales have grown nearly 50% (largely thanks to growth in Latin America), operating profits have risen 150% and net profits have nearly tripled. Yet the company’s earnings per share have risen more than 400%. Credit goes to a rapidly shrinking share count, thanks… Read More

After a five-year bull market, can investors still find inexpensive blue-chip stocks? #-ad_banner-#Perhaps that’s the wrong question to ask. Some companies such as AT&T (NYSE: T) may hold value, by traditional metrics, but that doesn’t make shares a bargain. The company’s competitive positioning spells tough days ahead, making this Dow component more of a value trap. Still, it’s interesting to see where AT&T and its peers stand in terms of value metrics. Though many of them have risen sharply in the past five years, a firming U.S. economy could take them well higher over the next half-decade. So to rephrase… Read More

After a five-year bull market, can investors still find inexpensive blue-chip stocks? #-ad_banner-#Perhaps that’s the wrong question to ask. Some companies such as AT&T (NYSE: T) may hold value, by traditional metrics, but that doesn’t make shares a bargain. The company’s competitive positioning spells tough days ahead, making this Dow component more of a value trap. Still, it’s interesting to see where AT&T and its peers stand in terms of value metrics. Though many of them have risen sharply in the past five years, a firming U.S. economy could take them well higher over the next half-decade. So to rephrase their earlier question: Which stocks in the Dow currently hold the most appeal, based on both value and growth metrics? First, let’s look at the value side of things. Simply looking at price-to-earnings (P/E) ratios, based on projected 2015 profits, reveals a group of companies facing either low growth prospects or volatile earnings patterns that typically justify a lower multiple. (All data supplied by ThomsonReuters.) To be sure, telephone service providers are seeing a profit-sapping pricing environment that is unlikely to go away, and major oil companies are having to spend rising sums of money to tap into… Read More