Investors in small-cap stocks have rarely had it this good. The Russell 2000, which stood below 400 in early 2009, is quickly approaching the 1,200 mark.  It’s as though two decades worth of gains have been packed into just five years. The small-cap surge shouldn’t have come as a total surprise. As I noted on our sister site InvestingAnswers.com a few years ago, small-cap stocks often outperform large-cap stocks when the overall economy is coming out of a recession. Post-Recession Performance (prior to 2009) Yet as we turn the page and head into… Read More

Investors in small-cap stocks have rarely had it this good. The Russell 2000, which stood below 400 in early 2009, is quickly approaching the 1,200 mark.  It’s as though two decades worth of gains have been packed into just five years. The small-cap surge shouldn’t have come as a total surprise. As I noted on our sister site InvestingAnswers.com a few years ago, small-cap stocks often outperform large-cap stocks when the overall economy is coming out of a recession. Post-Recession Performance (prior to 2009) Yet as we turn the page and head into 2014, it’s crucial that you understand how a changing economy will influence this trend. For a host of factors, small caps are likely poised to underperform their large-cap peers.#-ad_banner-# In August, I explained why investors should shift assets into larger companies, and since then, the reasons for owning big-cap companies have only strengthened. First, the market has moved even higher since last August, with the Russell 2000 up another 9% and the S&P 500 Index rising another 8%. If investors are looking to lock in profits in 2014, then larger companies, especially those with robust buyback and dividend policies, are… Read More

As the fourth quarter comes to an end, company insiders are about to go into a quiet period. Many companies adhere to a strict no-trading policy between the end of the quarter and the eventual release of quarterly earnings. As a result, a wide range of insiders have been scrambling to make their purchases in recent weeks. Here’s a close look at some of the more notable buying activity. (All insider information supplied by InsiderInsights.com.) 1. Occidental Petroleum (NYSE: OXY ) A pair of insiders acquired a combined 7,000 shares in December of this energy driller at an average price… Read More

As the fourth quarter comes to an end, company insiders are about to go into a quiet period. Many companies adhere to a strict no-trading policy between the end of the quarter and the eventual release of quarterly earnings. As a result, a wide range of insiders have been scrambling to make their purchases in recent weeks. Here’s a close look at some of the more notable buying activity. (All insider information supplied by InsiderInsights.com.) 1. Occidental Petroleum (NYSE: OXY ) A pair of insiders acquired a combined 7,000 shares in December of this energy driller at an average price of $92 a share. The purchases came after Occidental posted third-quarter results a month earlier that were solidly ahead of forecasts. But insiders aren’t buying on the prospects for further profit momentum, but instead for Occidental’s planned financial engineering.#-ad_banner-# Occidental has identified a range of assets it intends to sell, and much of the proceeds will go toward a share buyback. Merrill Lynch, which rates shares a “buy” with a $130 price target, thinks Occidental can buy back $12-$15 billion in stock over the next few years, which would reduce the share count by 15%-20%. Formal asset sales are expected… Read More

In most instances, it no longer pays to retain the services of a sophisticated stock broker. Many self-directed investors are now perfectly capable of building their own portfolios, or at least well-served by a lower-cost independent financial advisor.#-ad_banner-# But stock brokers still hold one clear virtue: They can get you a piece of a hot new IPO, right at the offering price, if the broker’s firm helped underwrite the deal. The rest of us have had to wait until these IPOs have already begun trading. Often times, these stocks open for trading far above the offering price, which makes it… Read More

In most instances, it no longer pays to retain the services of a sophisticated stock broker. Many self-directed investors are now perfectly capable of building their own portfolios, or at least well-served by a lower-cost independent financial advisor.#-ad_banner-# But stock brokers still hold one clear virtue: They can get you a piece of a hot new IPO, right at the offering price, if the broker’s firm helped underwrite the deal. The rest of us have had to wait until these IPOs have already begun trading. Often times, these stocks open for trading far above the offering price, which makes it hard to spot a good entry point. A few months ago, I suggested that most of the time, “you should wait for these stocks to come back into earth before giving them a fresh look.” Roughly a month later, I gave an example of how to patiently wait for IPOs, highlighting the deep value in busted IPO Ply Gem Holdings (Nasdaq: PGEM). That turned out to be a timely suggestion as shares have begun to rebound. Frankly, it’s hard to find such scenarios where good companies have been deeply oversold. Most of the stocks that plunge after IPO (such as Violin… Read More

The stock market rarely gives you a chance to prove your investment thesis in real-time. Expectations for share price moves usually take many quarters to play out, if not longer. Yet a recent set of events has opened a window to provide a simple test for a recent suggested trading strategy. Nearly two months ago, I noted that the early snowpack in Siberia was an accurate predictor of colder-than-usual weather in the United States. And that would have a profound effect on natural gas prices as consumption increased. That part of the thesis played out like a charm. It’s been… Read More

The stock market rarely gives you a chance to prove your investment thesis in real-time. Expectations for share price moves usually take many quarters to play out, if not longer. Yet a recent set of events has opened a window to provide a simple test for a recent suggested trading strategy. Nearly two months ago, I noted that the early snowpack in Siberia was an accurate predictor of colder-than-usual weather in the United States. And that would have a profound effect on natural gas prices as consumption increased. That part of the thesis played out like a charm. It’s been quite cold in much of the eastern United States, which led to a faster-than-expected drawdown in gas storage. And that has led natural gas prices to quickly spike. In that column, I recommended three companies that had an inordinately high exposure to gas, relative to most oil and gas producers. How have those stocks fared? Decently, but not nearly as fast as the underlying commodity price itself. #-ad_banner-#Considering gas prices have surged roughly 30% in that time, these moves might be seen as a disappointment, disproving the thesis that these… Read More

Short sellers are wrapping up another tough year, as a liquidity-fueled rally has helped to levitate even the most dubious business models.#-ad_banner-#​ Some short sellers have even thrown in the towel, noting that John Maynard Keynes’ maxim that “the market can stay irrational longer than you can stay solvent.” But signs are emerging that this losing approach to the market may finally be gaining traction. In recent weeks, a range of heavily-shorted stocks have indeed begun to move lower, which may be a sign that short selling will again be a useful component… Read More

Short sellers are wrapping up another tough year, as a liquidity-fueled rally has helped to levitate even the most dubious business models.#-ad_banner-#​ Some short sellers have even thrown in the towel, noting that John Maynard Keynes’ maxim that “the market can stay irrational longer than you can stay solvent.” But signs are emerging that this losing approach to the market may finally be gaining traction. In recent weeks, a range of heavily-shorted stocks have indeed begun to move lower, which may be a sign that short selling will again be a useful component of your broader portfolio strategy in 2014. If you are looking at potential short sale candidates, here are four that are in the targets of short sellers right now. 1. Bank of America (NYSE: BAC )​ Shares of this banking giant have rebounded more than 200% over the past two years. Joining its major banking peers, Bank of America finally trades back up above book value, taking away one of the lone pillars of value. That argues for muted upside in the year ahead. Yet it’s the downside risk that is coming into focus as well. In… Read More

Following the basic rules of supply and demand can yield winning investment strategies — regardless of the industry.#-ad_banner-#​ Of course, this rule holds more weight in the commodities sector than any other. Falling supply and rising demand can yield robust gains, though this entire asset class has gone the wrong way in 2013. Supply has overwhelmed demand, and the prices for most commodities have been flat to down. The PowerShares DB Commodity Index ETF (NYSE: DBC), which tracks energy, mining and agricultural commodity prices, is off nearly 10% this year, badly lagging the S&P 500’s 25% gain. Read More

Following the basic rules of supply and demand can yield winning investment strategies — regardless of the industry.#-ad_banner-#​ Of course, this rule holds more weight in the commodities sector than any other. Falling supply and rising demand can yield robust gains, though this entire asset class has gone the wrong way in 2013. Supply has overwhelmed demand, and the prices for most commodities have been flat to down. The PowerShares DB Commodity Index ETF (NYSE: DBC), which tracks energy, mining and agricultural commodity prices, is off nearly 10% this year, badly lagging the S&P 500’s 25% gain. In response to falling prices for many commodities, producers have been restraining output, and if the laws of economics apply, then supply should fall below the levels of demand, leading prices to firm up. That process is surely underway in many areas, but unfortunately will take a considerable amount of time to play out. Here’s a deeper breakdown of specific commodity trends, and how they will likely fare in 2014. Gold And Silver​ When companies decide to invest millions to develop a gold or silver mine, then they better have a long-term focus. It can take years… Read More

It’s been a good year for stocks that make up the Dow Jones Industrial Average, as 28 of the 30 components have risen in value (with IBM (NYSE: IBM) and Caterpillar (NYSE: CAT) as the only laggards).#-ad_banner-#​ And it’s been an even better year for the Dogs of the Dow. These are the 10 stocks that had the highest dividend yields when the year began, and this group has gained 25.5% in 2013 against a 24% gain for the broader index, according to DogsoftheDow.com. To be sure, that is not a significant… Read More

It’s been a good year for stocks that make up the Dow Jones Industrial Average, as 28 of the 30 components have risen in value (with IBM (NYSE: IBM) and Caterpillar (NYSE: CAT) as the only laggards).#-ad_banner-#​ And it’s been an even better year for the Dogs of the Dow. These are the 10 stocks that had the highest dividend yields when the year began, and this group has gained 25.5% in 2013 against a 24% gain for the broader index, according to DogsoftheDow.com. To be sure, that is not a significant level of outperformance. History has shown that this approach works best in so-so markets, and is not primed for relatively better gains when then market slumps badly or soars sharply. Considering the market has fared very well in 2013, 2014 gains may be much more muted, and if so, the Dow of the Dogs approach may again lead to sharp outperformance. Why Hated Is Good The appeal of this approach is self-evident. High dividend yields are a sign that a company is out of favor. And it’s a lot easier for a stock that has no supporters to win… Read More

Despite an impression that too many investors focus only on quarterly results, most investors assess a stock’s value on future trends. The notion that “the market looks ahead” is based on the idea that 2013 share prices reflect projected financial results in 2014 and 2015.#-ad_banner-# That’s the only way you can explain the stunning gains for casual dining stocks. Recently, they’ve been continually setting new all-time highs, even as consumer confidence and spending remain in a funk.  According to Deutsche Bank, this group of stocks trades for 24 times 2014 profits. That’s well above the five-year average of… Read More

Despite an impression that too many investors focus only on quarterly results, most investors assess a stock’s value on future trends. The notion that “the market looks ahead” is based on the idea that 2013 share prices reflect projected financial results in 2014 and 2015.#-ad_banner-# That’s the only way you can explain the stunning gains for casual dining stocks. Recently, they’ve been continually setting new all-time highs, even as consumer confidence and spending remain in a funk.  According to Deutsche Bank, this group of stocks trades for 24 times 2014 profits. That’s well above the five-year average of 18. “Our biggest concern heading into 2014 is that investors decide restaurant stocks are too expensive and seek out better values elsewhere,” Deutsche Bank’s analysts noted in a recent report. To my mind, such a rotation appears inevitable. Better Days Ahead? To be sure, restaurants are expected to benefit from falling agricultural prices. On an aggregated basis, these restaurant operators predict that their food costs will rise just 2% in 2014, which would be the lowest rate since 2010. “However, lower food inflation can be a double-edged sword to the extent this leads to heightened discounting,” note the Deutsche… Read More

While most companies will have plenty to cheer these holidays, as their stock prices soared in 2013, some companies would just as soon turn the page and focus on the new year.#-ad_banner-#​ Companies operating in the mining industry certainly fall into the latter category. This sector hasn’t suffered such tough times in several years. The sharp drop in commodity prices led to the rapid slump in demand for all kinds of mining equipment. Mining is a highly cyclical business, and though investors have been shunning mining stocks in 2013, signs of stabilization should boost them in 2014, especially… Read More

While most companies will have plenty to cheer these holidays, as their stock prices soared in 2013, some companies would just as soon turn the page and focus on the new year.#-ad_banner-#​ Companies operating in the mining industry certainly fall into the latter category. This sector hasn’t suffered such tough times in several years. The sharp drop in commodity prices led to the rapid slump in demand for all kinds of mining equipment. Mining is a highly cyclical business, and though investors have been shunning mining stocks in 2013, signs of stabilization should boost them in 2014, especially as the outlook for better days ahead comes into focus. And when that happens, investors will focus on the companies with a great deal of leverage. It helps if these companies have a wide moat around their business (that is, a significant competitive advantage that is extremely difficult to copy or emulate), thereby creating a barrier to entry for competing firms. This implies that they will have full pricing power when business conditions improve. Titan International (NYSE: TWI) fits this bill. The company makes huge truck tires used by massive mining trucks, agricultural equipment and other off-road mega-vehicles. TWI will… Read More

For developers of campus housing, the corks are going back on the champagne bottles.​ Shares of EdR (NYSE: EDR) (formerly known as Educational Realty Trust), Campus Crest Communities (NYSE: CCG) and American Campus Communities (NYSE: ACC) have fallen 15% to 40% this year, at a time when the S&P 500 Index has risen more than 20%.#-ad_banner-# What went wrong? Slowing college enrollment trends, sector overbuilding, and an escalation in transaction prices for new properties that has led to lower returns on investment. Investors are now questioning whether it’s smart to buy these stocks. And if… Read More

For developers of campus housing, the corks are going back on the champagne bottles.​ Shares of EdR (NYSE: EDR) (formerly known as Educational Realty Trust), Campus Crest Communities (NYSE: CCG) and American Campus Communities (NYSE: ACC) have fallen 15% to 40% this year, at a time when the S&P 500 Index has risen more than 20%.#-ad_banner-# What went wrong? Slowing college enrollment trends, sector overbuilding, and an escalation in transaction prices for new properties that has led to lower returns on investment. Investors are now questioning whether it’s smart to buy these stocks. And if so, which one stands out? To answer that question, we can look at a range of financial metrics. The Enrollment Reversal This had been something of a “no-brainer” asset class. Many colleges have chronic housing shortages and are increasingly look to private developers to help fill the gap. That trend remains in place.  But another factor, an expectation of ever-rising enrollment trends, isn’t panning out.  “While most industry estimates have enrollment growing by 1% through 2020, growth has been more flat and we expect a slight decrease through 2017 based on demographics. We note though that there is a… Read More