After the market closed for trading on Wednesday, Feb. 26, short sellers quickly scanned the latest short interest data (which had just been released for the two weeks ended Feb. 15). These shorts know that if a company they are targeting is also being targeted by many others as well, they can get badly burned in a short squeeze ensues. #-ad_banner-#The fact that the short interest in struggling retailer J.C. Penney (NYSE: JCP) had just spiked another 10 million shares in just two weeks (to 128.5 million shares, representing 43% of the trading float) was a… Read More

After the market closed for trading on Wednesday, Feb. 26, short sellers quickly scanned the latest short interest data (which had just been released for the two weeks ended Feb. 15). These shorts know that if a company they are targeting is also being targeted by many others as well, they can get badly burned in a short squeeze ensues. #-ad_banner-#The fact that the short interest in struggling retailer J.C. Penney (NYSE: JCP) had just spiked another 10 million shares in just two weeks (to 128.5 million shares, representing 43% of the trading float) was a cause for concern. The morning after the fresh short interest data came out, shares were squeezed a stunning 25% higher. Management’s prediction that J.C. Penney would not run out of money any time soon was not wanted short sellers were hoping to hear. At this point, both the shorts — as well as the company’s bulls — are wondering: What’s next for this stock? Let’s take a closer look at each argument. Going Terminal? Short sellers love to target stocks that they believe will eventually fall to zero, known as a “terminal short.” And at first glance, J.C. Penney… Read More

A surging stock market has given the impression that the U.S. economy has made up for lost time over the past five years. But don’t confuse asset prices with economic activity. The vast majority of companies have sought to restrain spending, limiting capital expenditures in the face of a still-wobbly economy. #-ad_banner-#That flies in the face of historical patterns. In the past, as the economy exits recession, capital spending starts to rise, often hitting a peak in the next three to four years before the next inevitable pullback from the cyclical peak. This time around, the move toward a peak… Read More

A surging stock market has given the impression that the U.S. economy has made up for lost time over the past five years. But don’t confuse asset prices with economic activity. The vast majority of companies have sought to restrain spending, limiting capital expenditures in the face of a still-wobbly economy. #-ad_banner-#That flies in the face of historical patterns. In the past, as the economy exits recession, capital spending starts to rise, often hitting a peak in the next three to four years before the next inevitable pullback from the cyclical peak. This time around, the move toward a peak still lies in the future, perhaps into 2015 and 2016. And since we’re exiting a long phase of underinvestment in capital spending (what economists call “PP&E,” short for plants, property and equipment), companies will need to embark on an extended phase of higher capital spending, once the cycle kicks in. Instead of a cyclical peak lasting 18 to 24 months, as has been the case in the past, we may be looking at a peak that extends for three or four years. In that context, many industrial stocks are poised for better results in a year or two, and perhaps… Read More

When it comes to green investing, the playbook is constantly being rewritten. #-ad_banner-#Solar and wind stocks were all the rage in the past decade before getting hammered in 2011 and 2012. They rebounded smartly in 2013, especially solar stocks, even as falling natural gas prices led some to think that solar would remain uncompetitive. Even fuel cell stocks, which were once deeply out of favor, have surged higher lately (as I noted earlier this month). To be sure, such dramatic slumps and rebounds mean that investors need to have a strong stomach for wind, solar and fuel cell stocks. These… Read More

When it comes to green investing, the playbook is constantly being rewritten. #-ad_banner-#Solar and wind stocks were all the rage in the past decade before getting hammered in 2011 and 2012. They rebounded smartly in 2013, especially solar stocks, even as falling natural gas prices led some to think that solar would remain uncompetitive. Even fuel cell stocks, which were once deeply out of favor, have surged higher lately (as I noted earlier this month). To be sure, such dramatic slumps and rebounds mean that investors need to have a strong stomach for wind, solar and fuel cell stocks. These high-beta investments could quickly fall out of favor, especially if the market pulls back and investors avoid speculative stocks. That’s why I also like to focus on clean energy stocks that have solid and sustainable business models. Such firms aren’t making a bet that their clean energy technology will prevail — instead, they are simply harnessing other firm’s technologies to build cost-saving solutions for enterprises. Profiting By Playing It Safe No firm better epitomizes the “play it safe” approach to clean energy than Spain’s Abengoa (Nasdaq: ABNG). Back in December, I wrote that Abengoa is a world leader in… Read More

We’re in the midst of a wireless telecom revolution that promises to save consumers millions of dollars. The radical new pricing strategies adopted by wireless industry laggard T-Mobile (NYSE: TMUS) have led to all-out price wars, and things may only get worse for key rivals — and better for consumers.#-ad_banner-# T-Mobile’s aggressive pricing strategies aren’t merely a gimmick to rattle the competition: They’re aimed at building sales and profits. After digesting just-released fourth-quarter results, analysts now expect the carrier to boost revenue roughly 10% to 12% this year to around $29 billion. Operating cash flow is… Read More

We’re in the midst of a wireless telecom revolution that promises to save consumers millions of dollars. The radical new pricing strategies adopted by wireless industry laggard T-Mobile (NYSE: TMUS) have led to all-out price wars, and things may only get worse for key rivals — and better for consumers.#-ad_banner-# T-Mobile’s aggressive pricing strategies aren’t merely a gimmick to rattle the competition: They’re aimed at building sales and profits. After digesting just-released fourth-quarter results, analysts now expect the carrier to boost revenue roughly 10% to 12% this year to around $29 billion. Operating cash flow is now expected to move up around 25% to 30% this year, to around $4.6 billion, according to consensus forecasts. And the company is starting to get the attention of hedge fund managers, many of whom like to own companies that have a chance to shake up an industry. Third Point’s Daniel Loeb bought 7.6 million shares in the fourth quarter of 2013 at an average price of $27.41. And Leon Cooperman (who I profiled a year ago) also established a fresh 3 million-share position at the same buy-in price as Loeb. Here’s the unusual thing: This stock traded under $10… Read More

When it comes to IPOs, you can either be fortunate enough to buy into a deal on the offering price… or you must wait for shares to drop back to earth. #-ad_banner-#In recent years, many new issues have busted out of the starting gate and never looked back, leaving shares trading at valuations that can only be justified with a very long time horizon. Of further concern, many of these hot IPOs hold real risk when insiders are freed from holding shares as part of the lockup expiration. As an example, I recently cautioned that 465 million shares of Twitter… Read More

When it comes to IPOs, you can either be fortunate enough to buy into a deal on the offering price… or you must wait for shares to drop back to earth. #-ad_banner-#In recent years, many new issues have busted out of the starting gate and never looked back, leaving shares trading at valuations that can only be justified with a very long time horizon. Of further concern, many of these hot IPOs hold real risk when insiders are freed from holding shares as part of the lockup expiration. As an example, I recently cautioned that 465 million shares of Twitter (NYSE: TWTR) will be hitting the market in May — a powerful headwind for a cooling IPO. Instead of following hot IPOs, it makes better sense to follow the laggards. These are the companies that have either already fallen below their offering price, or fallen sharply from their post-IPO peaks. To be sure, many of these new issues deserve the drubbing they have received, but some companies just need to deliver better and more consistent results to build a shareholder base. Here are three 2013 IPOs that have fallen out of bed but show solid turnaround potential. 1.  SFX Entertainment… Read More

When it comes to commodities, investors typically make a classic mistake: They shun them when they are out of favor, and they load up on them when prices are surging. The contrarian view is so much more profitable. #-ad_banner-#For example, I noted a few months ago that an extended period of oversupply had pushed coffee prices down to multi-year lows, but added that “signs are emerging that current coffee prices are causing too much distress among coffee growers. Yearlong protests in Brazil, the world’s largest coffee producer, has led the government to take action to prop up prices. The iPath… Read More

When it comes to commodities, investors typically make a classic mistake: They shun them when they are out of favor, and they load up on them when prices are surging. The contrarian view is so much more profitable. #-ad_banner-#For example, I noted a few months ago that an extended period of oversupply had pushed coffee prices down to multi-year lows, but added that “signs are emerging that current coffee prices are causing too much distress among coffee growers. Yearlong protests in Brazil, the world’s largest coffee producer, has led the government to take action to prop up prices. The iPath Pure Beta ETN (Nasdaq: CAFE), which had lost more than 30% of its value at that point in 2013, has rebounded 50% since then. Coffee prices are simply responding to the first rule of economics: Falling prices lead to falling supply, which eventually moves below levels of demand, providing a boost to prices. In the case of coffee, a change in growing conditions also affected those factors. Indeed, the impressive rebound in gold prices and natural gas prices are also the result of changes in demand. The factors impacting coffee, gold and natural gas are specific to those commodities and… Read More

If you racked up big gains in the stock market last year, you have Ben Bernanke and his cohorts at the Federal Reserve to thank. #-ad_banner-#The S&P 500’s 29.6% gain in 2013 (32.4% when dividends are included), which was the best year since 1997, was largely based on comments made by the Fed in December 2012. Back then, the economy was so weak that the Fed committed to keep the federal funds rate at historic lows in place until at least the middle of 2015, even later than many economists had assumed. Against such a favorable interest rate backdrop, stocks… Read More

If you racked up big gains in the stock market last year, you have Ben Bernanke and his cohorts at the Federal Reserve to thank. #-ad_banner-#The S&P 500’s 29.6% gain in 2013 (32.4% when dividends are included), which was the best year since 1997, was largely based on comments made by the Fed in December 2012. Back then, the economy was so weak that the Fed committed to keep the federal funds rate at historic lows in place until at least the middle of 2015, even later than many economists had assumed. Against such a favorable interest rate backdrop, stocks faced little resistance. Indeed, throughout 2013, the likelihood of an imminent increase in the federal funds rate remained off the table. And three Fed governors even suggested in December that interest rates would remain untouched into 2016. But in the early months of 2014, the Fed playbook is starting to look different. The recently released minutes from the past Fed meeting in late January show that some Fed governors are getting anxious. As The Wall Street Journal noted recently, Fed governors have begun discussing “the possibility of rate hikes in the near future.” An increasing number… Read More

Thanks to an impressive recent rally, a number of stocks that had temporarily pulled back to bargain levels have already surged back to fresh highs. If you’re looking for solid bargains among companies that are at the top of their game… good luck. To find true bargains, you need to look at companies that have stumbled. Operational missteps are about the only reason for a stock to be out of favor these days. The key is to find the companies that have the ingredients to fix their problems. Here’s a look at three stocks trading well below recent highs —… Read More

Thanks to an impressive recent rally, a number of stocks that had temporarily pulled back to bargain levels have already surged back to fresh highs. If you’re looking for solid bargains among companies that are at the top of their game… good luck. To find true bargains, you need to look at companies that have stumbled. Operational missteps are about the only reason for a stock to be out of favor these days. The key is to find the companies that have the ingredients to fix their problems. Here’s a look at three stocks trading well below recent highs — each with catalysts to regain its footing in coming quarters. 1. Hercules Offshore (Nasdaq: HERO ) This provider of offshore drilling rigs and other equipment appears caught in a product cycle transition. The company is completing a new slate of rigs to put into service, but investors have grown concerned that those new rigs haven’t secured new long-term contracts. HERO, which traded up to nearly $8 last summer, now hovers around $4.50. That works out to be around six times projected 2015 profit forecasts. Shares of Hercules also trade well below book value, and have been a recent beneficiary of… Read More

Every quarter, we take a close look at the latest buys and sells from leading hedge fund managers. These “gurus” often commit millions of dollars to their favorite stocks. But they rarely show any broad predilection for any particular industry or sector. Yet many of the recent filings by these gurus show deep interest in just one group of companies: our nation’s energy refiners. These firms, which distill crude oil into gasoline, diesel and other petrochemicals, are emerging from a long slump as a rising output of U.S. oil enables them to generate higher processing volumes. I discussed the renaissance… Read More

Every quarter, we take a close look at the latest buys and sells from leading hedge fund managers. These “gurus” often commit millions of dollars to their favorite stocks. But they rarely show any broad predilection for any particular industry or sector. Yet many of the recent filings by these gurus show deep interest in just one group of companies: our nation’s energy refiners. These firms, which distill crude oil into gasoline, diesel and other petrochemicals, are emerging from a long slump as a rising output of U.S. oil enables them to generate higher processing volumes. I discussed the renaissance in energy refining back in August, and since then, the performance of the group has been mixed: #-ad_banner-#The divergent performances are due to regional positioning, as firms with Gulf Coast refineries have benefited from the elimination of a major supply bottleneck at a key storage hub in Oklahoma that has impacted underlying oil prices. Some firms have also suffered from unforeseen maintenance outages that led to sharp (though temporary) temporary dividend cuts. Despite their pullbacks since August, I remain a fan of CVR Refining (Nasdaq: CVRR), which I profiled in November, as well as Alon USA… Read More

Thanks, Old Man Winter. Consumers have already been in a sour mood, and you’re not helping matters. Icy roads and bitter winds have left many people to stay at home — and keep their cash in their pocket. #-ad_banner-#For companies that have been looking for signs that retail spending is finally ready to grow, this roadblock has been unwelcome. The bleak winter likely explains why retail spending on goods and services like cars, restaurants and gas stations slipped 0.4% in January on a seasonally adjusted basis, according to the National Retail Federation. Yet before you conclude that the era of… Read More

Thanks, Old Man Winter. Consumers have already been in a sour mood, and you’re not helping matters. Icy roads and bitter winds have left many people to stay at home — and keep their cash in their pocket. #-ad_banner-#For companies that have been looking for signs that retail spending is finally ready to grow, this roadblock has been unwelcome. The bleak winter likely explains why retail spending on goods and services like cars, restaurants and gas stations slipped 0.4% in January on a seasonally adjusted basis, according to the National Retail Federation. Yet before you conclude that the era of robust consumer spending will never return, consider an interesting stat offered up by J.P. Morgan: In just the past two years, consumers’ net worth has expanded by $13 trillion. So if consumers have stronger balance sheets, why aren’t they spending? The key takeaway from these economists: “It is our view this is likely just a delayed reaction and that the increase in net worth will ultimately translate into stronger spending.” To be sure, much of the increase in wealth is attributable to a surging stock market. Many may feel that such gains are ephemeral, especially after seeing their net worth… Read More