Money is cheap and, with the Fed apparently re-embarking on an easing course, it will be getting even cheaper. This is a negative for your savings account. On the flip side, though, borrowing is not expensive — personal and corporate alike. This historically low cost of money (i.e. interest rates) has been a factor in the surge of merger and acquisition (M&A) activity over the past few years. Last year, for instance, the volume of M&A transactions jumped 16% globally from 2017 to $4.1 trillion. One of the recent standouts here is biopharma. The need to supplement or replace revenue… Read More

Money is cheap and, with the Fed apparently re-embarking on an easing course, it will be getting even cheaper. This is a negative for your savings account. On the flip side, though, borrowing is not expensive — personal and corporate alike. This historically low cost of money (i.e. interest rates) has been a factor in the surge of merger and acquisition (M&A) activity over the past few years. Last year, for instance, the volume of M&A transactions jumped 16% globally from 2017 to $4.1 trillion. One of the recent standouts here is biopharma. The need to supplement or replace revenue streams from expiring patents, consolidation, rising stock prices (which equals more equity that can be used as a takeover currency) are some of the reasons pharmaceutical and biotech companies, large and small, continue to merge. It’s eat or get eaten out there. —Recommended Link— Life-and-death investing. ​At the office, we call them “essential-service” stocks. Because people don’t just want what they sell, they need it. Nobody is going to go without air conditioning in Arizona. It can be a matter of life and death. And try spending a winter in North Dakota with no heat. Read More

If you’ve never heard of Bill James, don’t feel bad. Until recently, his name was only reverently whispered among circles of “statheads” — a small but growing community of baseball fans who sought to more accurately quantify the performance of players beyond traditional measurements. After leaving the Army, James earned degrees in English, economics and education from the University of Kansas. He got his start writing about baseball in the 1970s while working the nightshift as a security guard at the Stokely-Van Camp pork and beans cannery. But rather than following the traditional sports writing narrative, James’ curiosity led him… Read More

If you’ve never heard of Bill James, don’t feel bad. Until recently, his name was only reverently whispered among circles of “statheads” — a small but growing community of baseball fans who sought to more accurately quantify the performance of players beyond traditional measurements. After leaving the Army, James earned degrees in English, economics and education from the University of Kansas. He got his start writing about baseball in the 1970s while working the nightshift as a security guard at the Stokely-Van Camp pork and beans cannery. But rather than following the traditional sports writing narrative, James’ curiosity led him to question the way baseball statistics informed the decisions teams made about everything from game strategy to building a team. At first, his work was dismissed and considered “unreadable” by major publishers. So James self-published his writings, often accompanied by pages and pages of statistical information. As the years went by, James’ work slowly gained respect, and his research helped pioneer a field known as “sabermetrics” — or more popularly known today as “moneyball.” —Recommended Link— The Ultimate “Sticky” Revenue Stream Every company is doing it… From Comcast to Spotify… Even your local gym. I’m talking about auto… Read More

The market is new all-time highs, unemployment is near its record low, the U.S. economy is in its longest-ever expansion cycle, and the Federal Reserve is discussing a rate cut. Welcome to the new normal. #-ad_banner-#I am not going to start a long-winded discussion about the virtues or risks of extending the expansion phase or about the cyclicality of the economy, even though interest rate cuts have been historically reserved for when the economy is in a slump or turmoil. After all, monetary policies are out of investors’ control. Of course, with almost the entire world on the easing path… Read More

The market is new all-time highs, unemployment is near its record low, the U.S. economy is in its longest-ever expansion cycle, and the Federal Reserve is discussing a rate cut. Welcome to the new normal. #-ad_banner-#I am not going to start a long-winded discussion about the virtues or risks of extending the expansion phase or about the cyclicality of the economy, even though interest rate cuts have been historically reserved for when the economy is in a slump or turmoil. After all, monetary policies are out of investors’ control. Of course, with almost the entire world on the easing path and with strong economic growth relatively scarce, it would be rational to believe that the Fed may about to reverse its recent tightening policies. Fed Chair Jerome Powell said as much Wednesday in prepared testimony to the House Financial Services Committee, hinting strongly that in light of the U.S. economy not drastically improving over the past few weeks and the world’s growth slowing, a rate cut is in the cards. The market is now pricing in a 100% probability of a cut in the July 30-31 meeting. Whether or not we will remain on the easing path after that meeting… Read More

There’s a handful of well-known names that have left their imprint on the investing world, whether it was with unprecedented streaks of market-beating returns or famous bets against major events (think financial crisis and “breaking” the Bank of England). At the top of that list is usually the “Oracle of Omaha,” aka Warren Buffett. But another notable money manager is Peter Lynch. He ran the Magellan Fund at Fidelity Investments between 1977 and 1990. All he did was churn out an average return of over 29% per year, which was more the double what the S&P 500 did over the… Read More

There’s a handful of well-known names that have left their imprint on the investing world, whether it was with unprecedented streaks of market-beating returns or famous bets against major events (think financial crisis and “breaking” the Bank of England). At the top of that list is usually the “Oracle of Omaha,” aka Warren Buffett. But another notable money manager is Peter Lynch. He ran the Magellan Fund at Fidelity Investments between 1977 and 1990. All he did was churn out an average return of over 29% per year, which was more the double what the S&P 500 did over the same period. He also wrote two notable books — “Beating the Street” and “One Up on Wall Street” — as well as a lesser-known book, “Learn to Earn.”  Lynch was also famous for his simple investing philosophy and a number of famous mantras and terms used in finance today such as “invest in what you know” and “ten bagger” — an investment worth ten times its original purchase price.  At his core, Lynch was a bottom-up, kick-the-tires type of stock picker. He wasn’t interested in hot stocks or industries. He was wary of companies that were growing earnings at an… Read More

It’s hard to predict whether a stock will do well. Many investors simply follow the trend: buying high in order to sell even higher. This momentum strategy is a valid one. Like a freight train, a moving stock is hard to stop — there must be a very good reason for a high-momentum stock to stop in its tracks and head in the opposite direction. This is a strategy that can be surprisingly difficult to execute, though. Fundamentally, good stock analysis is still required. You cannot simply buy the hottest ticket out there on the expectation that it will continue… Read More

It’s hard to predict whether a stock will do well. Many investors simply follow the trend: buying high in order to sell even higher. This momentum strategy is a valid one. Like a freight train, a moving stock is hard to stop — there must be a very good reason for a high-momentum stock to stop in its tracks and head in the opposite direction. This is a strategy that can be surprisingly difficult to execute, though. Fundamentally, good stock analysis is still required. You cannot simply buy the hottest ticket out there on the expectation that it will continue moving — not if you take investing seriously. A big picture, too, can change on a dime: the world out there is unpredictable, and nobody can know whether bad news is coming. And psychologically, it might be difficult to keep buying an uptrend when the market trades at fresh all-time highs amid a barrage of macroeconomic worries. Another strategy is to look for bargains. Those stocks might not be the market’s darlings and might not have the trend-related wind at their backs, but it should not necessarily mean that they have no potential. A real bargain — a fundamentally strong… Read More

I recently ran through a little exercise with my premium Income Trader readers, looking at the potential upside in the stock market. And I’d like to share it with you… I’m starting with the simple assumption that the bull market will continue. Now, there are dozens of reasons for why the bull market shouldn’t continue. Yet, prices keep rising. Old traders often say, “The trend is your friend,” and that has certainly been the case this year. The trend has been relentlessly up, despite weakening economic data, a potential trade war, and many other problems. Traders have largely… Read More

I recently ran through a little exercise with my premium Income Trader readers, looking at the potential upside in the stock market. And I’d like to share it with you… I’m starting with the simple assumption that the bull market will continue. Now, there are dozens of reasons for why the bull market shouldn’t continue. Yet, prices keep rising. Old traders often say, “The trend is your friend,” and that has certainly been the case this year. The trend has been relentlessly up, despite weakening economic data, a potential trade war, and many other problems. Traders have largely ignored these potential problems, and the S&P 500 gained more than 17% since the start of the year. The “up” move has been interrupted by several declines, with the most serious one (in May) pushing prices down by almost 8%. To see how much higher prices could go, I started by looking at fundamentals. The Fundamental Picture Over the long run, the average price-to-earnings (P/E) ratio of the stock market has been about 17. The next chart looks at price targets for the S&P 500 based on estimates from Standard & Poor’s. To develop earnings estimates… Read More