Joel Jackson dreams of becoming the next Henry Ford. The British expatriate has moved to Kenya to launch Africa’s first local automaker. #-ad_banner-#Sure, Mercedes-Benz and others have built European-engineered cars in South Africa for decades, but no one has ever designed, built and sold a 100% African car.  Jackson’s Mobius Two, an $11,500 SUV, is aimed squarely at Africa’s burgeoning middle class, which would like to own cars but often must pay up to 75% in excise taxes to import a foreign vehicle. You can understand why this fledgling entrepreneur is so excited as he raises money to get his… Read More

Joel Jackson dreams of becoming the next Henry Ford. The British expatriate has moved to Kenya to launch Africa’s first local automaker. #-ad_banner-#Sure, Mercedes-Benz and others have built European-engineered cars in South Africa for decades, but no one has ever designed, built and sold a 100% African car.  Jackson’s Mobius Two, an $11,500 SUV, is aimed squarely at Africa’s burgeoning middle class, which would like to own cars but often must pay up to 75% in excise taxes to import a foreign vehicle. You can understand why this fledgling entrepreneur is so excited as he raises money to get his business off the ground. As a recent article in The Economist noted, the International Monetary Fund “predicts that four of the world’s six fastest-growing economies in 2014 will be in sub-Saharan Africa. And for the first time in living memory, inflation will dip below the GDP growth rate.” Nigeria, which is expected to pass South Africa as the region’s largest economy this year, is expected to grow 7.4%, according to the IMF.  ‘Hopeless’ No Longer The Economist has made a major about-face when it comes to Africa. Back in 2000, its writers called Africa “hopeless,”… Read More

The stock markets of 2013 and 2014 now share one thing in common: They’ve each had a 5% pullback. #-ad_banner-#It happened just once last year (in late May and June after investors sensed that the Federal Reserve would start to taper) and already has happened in 2014, just 35 days into the trading year. How unusual was the market action last year? It was only the fifth year in the past 50 with one or fewer pullbacks of 5%, according to Bespoke Investment Research. In other words, such pullbacks should be expected several times a year. As I noted last… Read More

The stock markets of 2013 and 2014 now share one thing in common: They’ve each had a 5% pullback. #-ad_banner-#It happened just once last year (in late May and June after investors sensed that the Federal Reserve would start to taper) and already has happened in 2014, just 35 days into the trading year. How unusual was the market action last year? It was only the fifth year in the past 50 with one or fewer pullbacks of 5%, according to Bespoke Investment Research. In other words, such pullbacks should be expected several times a year. As I noted last week, there aren’t especially good reasons for the current round of market weakness, so the damage may stay contained at current levels. (Unless margin selling kicks in, which is my biggest worry right now, as it induces a vicious cycle of further selling.) Still, the market pullback has created a chance to scour for fresh openings. And one of my favorite research moves is to identify stocks with heavy insider buying that have now fallen below levels where insiders bought in. These stocks of course can fall further (given that insiders are notoriously bad market timers), but the recent insider… Read More

Five years after the economy spiraled into recession, U.S. consumers are in a very different place.#-ad_banner-# Chastened by the hangover from their borrowing binges of 2006 and 2007, they’ve spent the subsequent years paying off bills, and building up equity in their homes. The Federal Reserve notes that consumers’ debt-to income ratio, which peaked at 122% five years ago, is now back below 100%. Yet even as consumers are now more capable of spending money, they still don’t want to. Wal-Mart (NYSE: WMT) is just the latest retailer to tell investors that sales trends are lousy. Read More

Five years after the economy spiraled into recession, U.S. consumers are in a very different place.#-ad_banner-# Chastened by the hangover from their borrowing binges of 2006 and 2007, they’ve spent the subsequent years paying off bills, and building up equity in their homes. The Federal Reserve notes that consumers’ debt-to income ratio, which peaked at 122% five years ago, is now back below 100%. Yet even as consumers are now more capable of spending money, they still don’t want to. Wal-Mart (NYSE: WMT) is just the latest retailer to tell investors that sales trends are lousy. Spending by lower-income Americans is really anemic, judging by comments from Wal-Mart and others. Dozens of other retailers already told us of the tough spending environment, which has triggered an investor exodus from the sector over the past three months. The Biggest Laggards In A Lagging Sector* *This table only includes retailers in the S&P 400, 500 and 600.  Beyond these three-month laggards, many other retailers are trading far from their 52-week highs, so this table doesn’t fully reflect the sector’s woes. For investors looking to enhance exposure to this out-of-favor, group, there are two… Read More

Wilbur Ross is a man of large appetites. He doesn’t nibble around the edges with his investments — he consumes them with abandon.#-ad_banner-# At various points in his career, he’s committed almost all of his capital to one major investment, whether it’s distressed steel-making, out-of-favor textile making, or any other business that is flirting with bankruptcy but represent deep value through a corporate restructuring. His most famous move, as we noted last year: “Ross picked up numerous steel and mining ventures that had gone bankrupt. He sold his steel holdings for $4.5 billion in 2005 to ArcelorMittal, making $2.5 billion… Read More

Wilbur Ross is a man of large appetites. He doesn’t nibble around the edges with his investments — he consumes them with abandon.#-ad_banner-# At various points in his career, he’s committed almost all of his capital to one major investment, whether it’s distressed steel-making, out-of-favor textile making, or any other business that is flirting with bankruptcy but represent deep value through a corporate restructuring. His most famous move, as we noted last year: “Ross picked up numerous steel and mining ventures that had gone bankrupt. He sold his steel holdings for $4.5 billion in 2005 to ArcelorMittal, making $2.5 billion for (his firm) WL Ross and $300 million for himself.” That and other moves once led New York magazine to call Ross the “Bottom-Feeder King.”   These days, Ross has been unable to identify any major assets on the cusp of bankruptcy — the economy has been too healthy for that. Instead, he’s acquiring sizable stakes in companies that he views as severely undervalued. Though that approach continues to serve him well, one of his investments has been an utter disaster. Back in the third quarter of 2010, Ross bought nearly 2 million shares of energy… Read More

If the market was looking to get our attention, it has it now. Since Jan. 13, the S&P has dropped at least 1% on three occasions. It now stands nearly 5% below its 52-week high.  At this point, investors have begun to wonder if the market choppiness is a sign of a looming correction, which is defined as a 10% pullback (a bear market is a pullback of 20% or more). It’s been quite a while since we’ve had a market correction: It happened once in 2010, 2011 and in the middle of 2012, but it hasn’t happened… Read More

If the market was looking to get our attention, it has it now. Since Jan. 13, the S&P has dropped at least 1% on three occasions. It now stands nearly 5% below its 52-week high.  At this point, investors have begun to wonder if the market choppiness is a sign of a looming correction, which is defined as a 10% pullback (a bear market is a pullback of 20% or more). It’s been quite a while since we’ve had a market correction: It happened once in 2010, 2011 and in the middle of 2012, but it hasn’t happened since. #-ad_banner-#Notably, each correction has been followed by an impressive rebound, and some investors would welcome such a purge. In a market where values remain hard to find, pullbacks create solid openings. If we are entering into a corrective phase, history suggests it would last a couple of months. (The 2011 correction was quite rapid and due solely to the government shutdown.) Frankly, it’s unclear if the market’s recent gyrations will trigger a major directional shift. The economy appears fairly healthy, earnings season has been reasonably impressive, and Washington gridlock doesn’t seem to be an issue at the… Read More

To apply a shopworn phrase to the bull market of 2013:  “A rising tide lifted all boats.” #-ad_banner-# Or at least many of them. Investors gravitated toward almost any company that was delivering decent quarterly results, making it ever harder to spot deep value. Companies that stumbled through a series of challenging quarters, however, stayed in investors’ doghouse. Yet as the world’s top investors will tell you, real profits are made in the unloved stocks, not the loved ones. That was clearly logic in place for Bill Gates and his investment firm: While most investors were shunning heavy equipment maker Caterpillar… Read More

To apply a shopworn phrase to the bull market of 2013:  “A rising tide lifted all boats.” #-ad_banner-# Or at least many of them. Investors gravitated toward almost any company that was delivering decent quarterly results, making it ever harder to spot deep value. Companies that stumbled through a series of challenging quarters, however, stayed in investors’ doghouse. Yet as the world’s top investors will tell you, real profits are made in the unloved stocks, not the loved ones. That was clearly logic in place for Bill Gates and his investment firm: While most investors were shunning heavy equipment maker Caterpillar (NYSE: CAT), Gates and his team were loading up. Though Gates likely sees many virtues for Caterpillar, it’s the company’s financial firepower that may have held the greatest appeal. As I noted back in September, “Caterpillar’s cash flow is so robust that its dividend was hiked at a double-digit pace in 2012 and again in 2013, even as the company is in the midst of a $7.5 billion share buyback program.” Fast-forward to January, and Gates is looking wiser than most. Caterpillar just topped earnings per share (EPS) forecasts by more than 20%, leading to fresh surge in the stock. Read More

To profit from the short-term openings the market hands you, it takes the right strategy.#-ad_banner-# That’s a lesson I had to learn after correctly predicting that the U.S. would be in for a remarkably cold winter. Though temperatures in much of the U.S. have fallen to the lowest levels in years, the stock picks I suggested simply didn’t have enough leverage to weather as I anticipated. As I noted in late December, those picks rose only modestly as winter dug in, even as natural gas-focused exchange-traded funds (ETFs) fared a lot better. The explanation is straightforward. As I noted last month,… Read More

To profit from the short-term openings the market hands you, it takes the right strategy.#-ad_banner-# That’s a lesson I had to learn after correctly predicting that the U.S. would be in for a remarkably cold winter. Though temperatures in much of the U.S. have fallen to the lowest levels in years, the stock picks I suggested simply didn’t have enough leverage to weather as I anticipated. As I noted in late December, those picks rose only modestly as winter dug in, even as natural gas-focused exchange-traded funds (ETFs) fared a lot better. The explanation is straightforward. As I noted last month, “Many energy traders don’t trust quick moves in energy prices, and they assume that profit-taking will soon ensue. If gas prices move back below $4 per thousand cubic feet (Mcf), then these companies will generate a lesser benefit.” Since then, natural gas prices have kept surging, and these stocks still haven’t budged much. Yet a change in the weather provides a shot at redemption. Those rapidly surging ETFs appear set to reverse course, and you can even invest in this strategy without initiating a short sale. Plunging Storage The surge in gas prices is due to rising gas… Read More

Hedge fund managers, along with many financial writers on the Internet, have no qualm focusing their attention on sharply overvalued stocks.#-ad_banner-# To these folks, any stock that has entered into a bubble needs to be called to task. But Wall Street analysts rarely take a negative view on stocks. Even when they do dislike a stock (or its valuation), they’ll simply rate it a “hold” or “neutral.” In very rare instances, you’ll see an “underperform” or “sell” rating, but even then, these analysts typically have target prices close to the current trading price. Yet in recent days, I’ve noticed some… Read More

Hedge fund managers, along with many financial writers on the Internet, have no qualm focusing their attention on sharply overvalued stocks.#-ad_banner-# To these folks, any stock that has entered into a bubble needs to be called to task. But Wall Street analysts rarely take a negative view on stocks. Even when they do dislike a stock (or its valuation), they’ll simply rate it a “hold” or “neutral.” In very rare instances, you’ll see an “underperform” or “sell” rating, but even then, these analysts typically have target prices close to the current trading price. Yet in recent days, I’ve noticed some unusually gutsy calls from the “it’s always sunny” Wall Street analysts. They’ve been singling out certain stocks, citing severe levels of overvaluation. Even if you are long these stocks, it pays to listen to what these analysts have to say. And if you are looking for short sale ideas, then these stocks are a fine place to start. 1. Twitter (NYSE: TWTR ) It’s easy to see why some may think this stock is overvalued: The company is valued at 34 times projected 2014 sales. I can’t recall ever seeing a figure that high before. Indeed, short sellers are now… Read More

Over the past decade, we’ve spent a considerable amount of time researching master limited partnerships (MLPs). They’ve emerged as a popular way to benefit from our nation’s rapidly growing energy infrastructure. Most MLPs are focused on the energy sector, though some are involved in real estate and other entities (such as pro basketball’s Boston Celtics). #-ad_banner-#MLPs have soared in popularity as they’ve delivered stellar returns. According to the National Association of Publicly Traded Partnerships, the Alerian MLP Index (a proxy for almost all publicly traded energy MLPs) delivered a 16.5% annualized gain in the 10 years ended December 2012. That… Read More

Over the past decade, we’ve spent a considerable amount of time researching master limited partnerships (MLPs). They’ve emerged as a popular way to benefit from our nation’s rapidly growing energy infrastructure. Most MLPs are focused on the energy sector, though some are involved in real estate and other entities (such as pro basketball’s Boston Celtics). #-ad_banner-#MLPs have soared in popularity as they’ve delivered stellar returns. According to the National Association of Publicly Traded Partnerships, the Alerian MLP Index (a proxy for almost all publicly traded energy MLPs) delivered a 16.5% annualized gain in the 10 years ended December 2012. That beat the annualized gains of commodities (10.6%), small cap stocks (9.7%), the S&P 500 (7.1%) and hedge funds (6.8%). Many of our favorite MLPs continue to possess robust growth prospects in the years ahead as well, thanks to industry plans to dig for more oil and gas and to build more pipelines to transport these energy sources. The appeal of these MLPs is self-evident: They offer juicy dividend yields and are structured to avoid paying income taxes. That second factor can also be seen as a clear negative: Since they don’t pay taxes on their profits,… Read More

For the past few decades, oil refining has been a lousy business. An arcane set of regulations and fierce competition from abroad created lots of headaches with only small returns.#-ad_banner-#​ The U.S. shale boom changes all that. Our newfound abundance of oil and gas means U.S. refiners can produce gasoline, diesel and other distillates at cheaper prices than their foreign rivals. The U.S. has even begun to become a major exporter of these refined products.  The change in fortune has caught the industry off guard. Suddenly, leading firms are producing massive amounts of cash… Read More

For the past few decades, oil refining has been a lousy business. An arcane set of regulations and fierce competition from abroad created lots of headaches with only small returns.#-ad_banner-#​ The U.S. shale boom changes all that. Our newfound abundance of oil and gas means U.S. refiners can produce gasoline, diesel and other distillates at cheaper prices than their foreign rivals. The U.S. has even begun to become a major exporter of these refined products.  The change in fortune has caught the industry off guard. Suddenly, leading firms are producing massive amounts of cash flow, and they are scrambling for ways to reward investors. Many of the refiners I profiled back in August are now in the midst of massive share buyback programs, dividend boosts and debt reduction — the three components that make up impressive Total Yields. Simply put, “Total Yield” stocks are companies that use the cash they generate to 1) pay steady dividends, 2) buy back large amounts of their own stock, and 3) pay down debt. Why should investors care about these three strategies? When companies execute on all three fronts, it beats the S&P 500 — as well as regular… Read More