Thanks to the highly successful Marshall Plan, which helped many broken European economies get back on their feet after World War II, the U.S. managed to create a massive new market for its exports. Over the next generation, almost every major U.S. firm opened a string of sales offices on the Continent, and for some firms those offices went on to deliver a solid portion of annual sales. #-ad_banner-#But it’s been quite a while since Europe delivered real growth to U.S. firms. Instead, they’ve come to bank on Asia for sales expansion, especially in China and… Read More

Thanks to the highly successful Marshall Plan, which helped many broken European economies get back on their feet after World War II, the U.S. managed to create a massive new market for its exports. Over the next generation, almost every major U.S. firm opened a string of sales offices on the Continent, and for some firms those offices went on to deliver a solid portion of annual sales. #-ad_banner-#But it’s been quite a while since Europe delivered real growth to U.S. firms. Instead, they’ve come to bank on Asia for sales expansion, especially in China and Japan, which collectively account for more than $14 trillion in annual GDP. That’s as much as the seven next largest economies in the world — combined. (That is, except for the U.S., which generates more than $16 trillion in annual GDP.) These days, China and Japan are causing U.S. executives all kinds of headaches. Each country has a unique and growing set of problems. A few bad breaks could lead to serious headaches for regional sales offices. China Back in January, I noted that rising wages and a shaky banking sector were threatening to end China’s impressive string of… Read More

Exactly 20 years ago, a trio of Hollywood moguls (Spielberg, Katzenberg and Geffen) realized that by combining their considerable resources and Rolodexes, they could create the world’s most powerful movie studio. This studio would in effect become the “new Disney,” thanks to a strong emphasis on computer-driven animation. #-ad_banner-#Two decades later, Dreamworks Animation SKG (NYSE: DWA) has failed to fulfill its promise. Ironically, an obscure Canadian entertainment company has stolen Dreamworks’ thunder with a savvy strategy that is now reaping huge rewards. Back in 2007, many thought Dreamworks was hitting its stride. After all, it takes more than a decade… Read More

Exactly 20 years ago, a trio of Hollywood moguls (Spielberg, Katzenberg and Geffen) realized that by combining their considerable resources and Rolodexes, they could create the world’s most powerful movie studio. This studio would in effect become the “new Disney,” thanks to a strong emphasis on computer-driven animation. #-ad_banner-#Two decades later, Dreamworks Animation SKG (NYSE: DWA) has failed to fulfill its promise. Ironically, an obscure Canadian entertainment company has stolen Dreamworks’ thunder with a savvy strategy that is now reaping huge rewards. Back in 2007, many thought Dreamworks was hitting its stride. After all, it takes more than a decade to build a new movie studio from the ground up. That year, sales had nearly doubled, to $767 million; earnings before interest, taxes, depreciation and amortization (EBITDA) reached nearly $300 million — and the future looked bright. Instead of spreading its cash flow among many projects to help lower the risk that any one project might turn out badly, Dreamworks stood by its plan to release five films every two years. There have been some notable blockbusters in that slate, including the Shrek franchise, but also a lot of duds. And the duds are becoming more frequent. The just-released “Mr. Read More

We’ve come a long way from the era of conglomerates. Decades ago, management teams figured that if they can run one business well, they can run any business well. #-ad_banner-#As a result, they’d acquire a collection of unrelated businesses, convincing investors that exposure to a wide range of businesses would help smooth out the impacts of economic cycles. It was a silly notion, and as dubious investors began to apply a “conglomerate discount” to any companies that were too unwieldy to analyze, the long process of de-conglomerating began, These days, fewer conglomerates exist, but when one of them announces a… Read More

We’ve come a long way from the era of conglomerates. Decades ago, management teams figured that if they can run one business well, they can run any business well. #-ad_banner-#As a result, they’d acquire a collection of unrelated businesses, convincing investors that exposure to a wide range of businesses would help smooth out the impacts of economic cycles. It was a silly notion, and as dubious investors began to apply a “conglomerate discount” to any companies that were too unwieldy to analyze, the long process of de-conglomerating began, These days, fewer conglomerates exist, but when one of them announces a plan to sell or spin-off a large division, investors invariably cheer. Just this week, we saw the trend in action: News reports suggest that auto rental firm Hertz Global (NYSE: HTZ) will separate its equipment rental business, which is estimated to be worth around $4.5 billion. Shares rose more than 5% on the news. Frankly, investors have developed a Pavlovian response to spin-offs and asset sales, as they note the amazing returns such a move can generate. The Guggenheim Spin-Off ETF (NYSE: CSD) has risen a stunning 350% over the past five years while the S&P 500 has risen merely… Read More

There’s an old investing maxim that you can never fool the same group of shareholders twice. Once burned, they simply ignore you. #-ad_banner-#The only way to beat that problem is to find an entirely new group of shareholders that may be unaware of your past history. More than two years ago, I cautioned that game seller Zynga (Nasdaq: ZNGA) looked to be a flash in the pan. Still, a few months after its IPO, hype and hope had pushed Zynga’s market value to above that of legendary toy maker Hasbro (NYSE: HAS). We knew that couldn’t last. Indeed, shares of Zynga,… Read More

There’s an old investing maxim that you can never fool the same group of shareholders twice. Once burned, they simply ignore you. #-ad_banner-#The only way to beat that problem is to find an entirely new group of shareholders that may be unaware of your past history. More than two years ago, I cautioned that game seller Zynga (Nasdaq: ZNGA) looked to be a flash in the pan. Still, a few months after its IPO, hype and hope had pushed Zynga’s market value to above that of legendary toy maker Hasbro (NYSE: HAS). We knew that couldn’t last. Indeed, shares of Zynga, which soared into the teens, eventually plunged below $3. The executives at Hasbro had nothing to worry about. Well, a new group of investors believe they have discovered a hot new growth stock. And they suggest Zynga is positioned to become a long-term presence in the online gaming world. History says otherwise. And this stock may soon start to move back toward its multi-year lows. Credit Where It’s Due To be sure, Zynga’s new CEO, Don Mattrick, has stabilized operations since he took the reins last summer. He’s radically cut costs, acknowledging that a game maker with… Read More

The recent price wars initiated by T-Mobile (NYSE: TMUS) are causing all kinds of headaches for the wireless service providers. These firms had enjoyed a stable and profitable pricing environment in recent years, but are now being forced to slash their own prices to keep customers from defecting. AT&T (NYSE: T) is among the casualties, as I recently noted, and its shares have lagged the S&P 500 by more than 30% over the past year. #-ad_banner-#This is not how things were supposed to turn out. AT&T and its peers spent tens of billions of dollars constructing national networks with an… Read More

The recent price wars initiated by T-Mobile (NYSE: TMUS) are causing all kinds of headaches for the wireless service providers. These firms had enjoyed a stable and profitable pricing environment in recent years, but are now being forced to slash their own prices to keep customers from defecting. AT&T (NYSE: T) is among the casualties, as I recently noted, and its shares have lagged the S&P 500 by more than 30% over the past year. #-ad_banner-#This is not how things were supposed to turn out. AT&T and its peers spent tens of billions of dollars constructing national networks with an eye toward charging monthly service fees that would always rise a bit every year. The nation’s cable companies have deployed a similar business model, making heavy investments in broadband access, and at the moment, are reaping a huge windfall as they charge $30 to $50 for various levels of Internet access. Yet like the wireless carriers, these cable/broadband firms may also soon get a rude wake-up call. And it’s coming from the skies. Over the past decade, satellite TV providers such as DirecTV (NYSE: DTV) had hoped to undercut their terrestrial rivals by offering broadband service from orbiting satellites. Though… Read More

In recent days, the financial press has been filled with stories regarding the fifth anniversary of the current bull market. The market bottom came in on March 9, 2009, and few would have guessed that the next half-decade would bring such terrific market action. #-ad_banner-#Yet March 9 also stands out to investors for another reason: Back on March 9, 2000, the Nasdaq Composite Index hit 5,000 for the first time ever. A few days later, the index went into freefall, eventually moving below 1,500 a few years later. (In a potentially eerie parallel, the Dow Jones Industrial Average has closed… Read More

In recent days, the financial press has been filled with stories regarding the fifth anniversary of the current bull market. The market bottom came in on March 9, 2009, and few would have guessed that the next half-decade would bring such terrific market action. #-ad_banner-#Yet March 9 also stands out to investors for another reason: Back on March 9, 2000, the Nasdaq Composite Index hit 5,000 for the first time ever. A few days later, the index went into freefall, eventually moving below 1,500 a few years later. (In a potentially eerie parallel, the Dow Jones Industrial Average has closed lower in each trading session since March 9, 2014.) The reason for the demise of the Nasdaq in general and dot-com stocks in particular back in 2000: Valuations had become disconnected from the fundamentals. There was simply no way to justify stock prices in the context of sales or profits, and many investments became known as “story stocks.” More than a decade removed from the dot-com bubble, it’s easy to forget that painful lesson. But you shouldn’t. This chart shows us that another bubble appears to have formed — and once again, it involves dot-com stocks. While the… Read More

In each of the past few years, investors have had to pore through roughly 150 new exchange-traded funds (ETFs) annually in search of the one or two that really hold appeal. As most investors have come to realize, most newly launched funds are simply copycats of existing ETFs. For example, Fidelity and Charles Schwab launched dozens of ETFs in 2013 that are virtually identical in construction to those offered by Vanguard, iShares and others. Schwab and Fidelity just want to stop funds from flowing out the door toward other asset management firms. Yet every year also brings a handful of… Read More

In each of the past few years, investors have had to pore through roughly 150 new exchange-traded funds (ETFs) annually in search of the one or two that really hold appeal. As most investors have come to realize, most newly launched funds are simply copycats of existing ETFs. For example, Fidelity and Charles Schwab launched dozens of ETFs in 2013 that are virtually identical in construction to those offered by Vanguard, iShares and others. Schwab and Fidelity just want to stop funds from flowing out the door toward other asset management firms. Yet every year also brings a handful of new and original funds that help investors to capitalize on emerging investment themes. I’ve looked at the early slate of 2014 releases and found three new ETFs that you need to know more about. 1. First Trust Dorsey Wright Focus 5 ETF (NYSE: FV) This is a new twist for ETFs, deploying a strategy that has been used by investments firms with mutual funds and hedge funds for many years. The so-called “fund of funds” approach aims to rotate assets among funds that are showing the greatest relative strength. (To help understand this ETF’s name, First… Read More

You have to have some sympathy for the executives at San Jose, Calif.-based Echelon Corp. (Nasdaq: ELON). They’ve been trying to explain the appeal of adding wireless communications and intelligence to a range of “dumb” machines and devices for more than two decades, yet industries and consumers never quite grasped the company’s vision. Indeed, Echelon’s market value recently fell to an all-time low of just $100 million as investors grew tired of open-ended losses. #-ad_banner-#So you can imagine the company’s shock when Google (Nasdaq: GOOG) announced plans in January to acquire Nest Labs for $3.2 billion. Nest has made quick… Read More

You have to have some sympathy for the executives at San Jose, Calif.-based Echelon Corp. (Nasdaq: ELON). They’ve been trying to explain the appeal of adding wireless communications and intelligence to a range of “dumb” machines and devices for more than two decades, yet industries and consumers never quite grasped the company’s vision. Indeed, Echelon’s market value recently fell to an all-time low of just $100 million as investors grew tired of open-ended losses. #-ad_banner-#So you can imagine the company’s shock when Google (Nasdaq: GOOG) announced plans in January to acquire Nest Labs for $3.2 billion. Nest has made quick inroads in the consumer market by adding wireless intelligence to thermostats and other “dumb” devices. Echelon’s executives can at least take solace in the fact that investors have pushed its stock up 50% in hopes of a Google-style buyout. Why would Google pay so much money for a company that reportedly had just a $300 million revenue run rate? Because Nest, along with many other firms, are in the forefront of an emerging industry niche that could be worth $44 billion a year by 2017, according to research group GSMA. That firm solely estimates how much money will be spent… Read More

In a bull market that has propped up a wide range of sectors and industries, few have benefited as much as biotech stocks. The bigger biotechs, such as Gilead Sciences (Nasdaq: GILD) and Amgen (Nasdaq: AMGN), have helped the Nasdaq Biotech Index post a two-year return of 120% — triple that of the S&P 500. A few dozen smaller biotechs have even done far better than that. #-ad_banner-#Positive FDA clinical data has boosted once-obscure biotechs such as Puma Biotech (Nasdaq: PBYI), Clovis Oncology (Nasdaq; CLVS) or Acadia Pharmaceuticals (Nasdaq: ACAD), 250%, 300% and 1,500%, respectively, over the past two years. Intercept… Read More

In a bull market that has propped up a wide range of sectors and industries, few have benefited as much as biotech stocks. The bigger biotechs, such as Gilead Sciences (Nasdaq: GILD) and Amgen (Nasdaq: AMGN), have helped the Nasdaq Biotech Index post a two-year return of 120% — triple that of the S&P 500. A few dozen smaller biotechs have even done far better than that. #-ad_banner-#Positive FDA clinical data has boosted once-obscure biotechs such as Puma Biotech (Nasdaq: PBYI), Clovis Oncology (Nasdaq; CLVS) or Acadia Pharmaceuticals (Nasdaq: ACAD), 250%, 300% and 1,500%, respectively, over the past two years. Intercept Pharmaceuticals (Nasdaq: ICTP), which I discussed a few months ago, shot up 400% in just one week. The two-year timeframe is essential if you hope to score those kinds of gains. Any biotech stock that is just a few quarters away from delivering meaningful late stage clinical trial data has already caught investors’ interest, so some of the gains have already been tallied. With a two- or even three-year time horizon, you can try to identify earlier-stage biotechs that are just starting to garner Wall Street chatter. To be sure, this is an industry where it pays to hear what… Read More

From late December to mid-January, airline stocks made another move higher, thanks to expectations of another banner year in 2014. It’s been quite a run for the major carriers such as Delta Airlines (NYSE: DAL) and United Continental Holdings (NYSE: UAL), which have surged more than 600% and 900%, respectively, over the past five years. #-ad_banner-#Credit goes to an investor willingness to stop worrying about the next industry bankruptcy. These carriers are now much more financially stable, and the era of booms and busts has likely passed. Share prices no longer deserve to trade at four or five times trailing… Read More

From late December to mid-January, airline stocks made another move higher, thanks to expectations of another banner year in 2014. It’s been quite a run for the major carriers such as Delta Airlines (NYSE: DAL) and United Continental Holdings (NYSE: UAL), which have surged more than 600% and 900%, respectively, over the past five years. #-ad_banner-#Credit goes to an investor willingness to stop worrying about the next industry bankruptcy. These carriers are now much more financially stable, and the era of booms and busts has likely passed. Share prices no longer deserve to trade at four or five times trailing earnings, which had often historically been the case. Both of these carriers now trade for more than 10 times this year’s earnings. Yet headwinds are beginning to gather for this industry, and United is especially vulnerable. In recent weeks, analysts have been trimming their profit forecasts for the company, mostly due to a large number of flight cancellations as the nation endured a deep freeze. Three months ago, analysts had assumed that UAL would lose $0.36 a share in the current quarter, which is seasonally weak. But the carrier told investors that bad weather has had a deep impact, and… Read More