For anyone with more than a decade in the markets, the “value premium” is almost a sacred rule. The idea that stocks with lower valuation premiums would beat their more expensive “growth” peers is almost a given. Nobel laureates Eugene Fama and Kenneth French first identified the value premium in 1992, comparing returns on high book-to-market value stocks against low book-to-market stocks. It’s one of the three factors in their asset pricing model built to explain excess returns in a portfolio. Since the financial crisis, the outperformance of value stocks has been called into question, with… Read More

For anyone with more than a decade in the markets, the “value premium” is almost a sacred rule. The idea that stocks with lower valuation premiums would beat their more expensive “growth” peers is almost a given. Nobel laureates Eugene Fama and Kenneth French first identified the value premium in 1992, comparing returns on high book-to-market value stocks against low book-to-market stocks. It’s one of the three factors in their asset pricing model built to explain excess returns in a portfolio. Since the financial crisis, the outperformance of value stocks has been called into question, with growth stocks easily besting their value peers. The shift has turned the traditional investing theme on its head, and even one guru of value investing has questioned the future of cheap stocks. But economic realities are catching up to growth investing and value stocks may be ready to retake their dominance.  Two economic scenarios await investors over the next several years — and neither is good for growth stocks. When one of these futures begins to take shape, value names may prove to be the only path to profits. The Death Of Value Investing Has Been Greatly Exaggerated The… Read More

Short sellers get a bad rap. They are often villainized by the media for “ganging up” on troubled companies or even causing market crashes. There is little evidence to support the latter, though, and the truth is short sellers are a necessary part of the market. They help provide liquidity and keep overpriced stocks in check. I don’t know about you, but I’m not content only making profits on the upside. There is an extraordinary amount of money to be made on the downside, especially in a market like this. But when you short a stock, you risk an unlimited… Read More

Short sellers get a bad rap. They are often villainized by the media for “ganging up” on troubled companies or even causing market crashes. There is little evidence to support the latter, though, and the truth is short sellers are a necessary part of the market. They help provide liquidity and keep overpriced stocks in check. I don’t know about you, but I’m not content only making profits on the upside. There is an extraordinary amount of money to be made on the downside, especially in a market like this. But when you short a stock, you risk an unlimited loss for a limited gain. I’m a probability guy, and I don’t like those odds. Plus, there is a strategy for profiting when stocks fall that offers limited risk and substantial (though not quite unlimited) gains. Given that, I’m not sure why anyone would choose to short stocks. Now, my strategy involves options, another area of the market that gets a bad rap. But unlike short selling, options — when used properly — can actually help limit your risk. —Recommended Link— $43K A Year For Life… (Takes 20 Minutes) Want an extra $43,543 a year in bonus income? You… Read More

What an incredible year it’s been in the stock market. The Nasdaq has soared over 29%, and the DJIA and the S&P 500 are both trading higher by more than 15% during the last 52 weeks.  Investors rejoiced as the Trump administration made one broad-reaching, bullish proclamation after another. Talk of revitalizing the American economy, major tax reform, and huge infrastructure spending has supercharged core industries, taking the stock market along for the ride.  It’s seemed like there’s been nowhere to go but up as Trump-driven enthusiasm sweeps the economy.  Investors Beware The old saying holds true for the… Read More

What an incredible year it’s been in the stock market. The Nasdaq has soared over 29%, and the DJIA and the S&P 500 are both trading higher by more than 15% during the last 52 weeks.  Investors rejoiced as the Trump administration made one broad-reaching, bullish proclamation after another. Talk of revitalizing the American economy, major tax reform, and huge infrastructure spending has supercharged core industries, taking the stock market along for the ride.  It’s seemed like there’s been nowhere to go but up as Trump-driven enthusiasm sweeps the economy.  Investors Beware The old saying holds true for the stock market: What goes up, must come down. Historically high levels hit a significant speed bump on May 17, with a sharp decline across the board. While the market quickly recovered, it revealed a major disconnect in the Trump-fueled rally.  Remember, the stock market is an anticipatory mechanism, meaning it moves based on what is expected to happen rather than what has occurred. The dramatic enthusiasm for change is being tempered by political challenges. The President’s rhetoric is no longer enough to power the economic boom — investors want the promised changes to actually materialize.  Frustration is starting to set… Read More

What started as a minor theme just decades ago looks to be turning the corner with the force of more than 75 million investors in the United States alone.  Investors have long supported the idea of a greater good through philanthropic projects. But it wasn’t until late in the 20th century that they started accepting dual-missions of profitability and social responsibility at companies in which they invested. The idea has fought a tough argument against the traditional singular mandate of increasing wealth. Now it seems the theme is becoming a major force, and new evidence points to surprising upside for… Read More

What started as a minor theme just decades ago looks to be turning the corner with the force of more than 75 million investors in the United States alone.  Investors have long supported the idea of a greater good through philanthropic projects. But it wasn’t until late in the 20th century that they started accepting dual-missions of profitability and social responsibility at companies in which they invested. The idea has fought a tough argument against the traditional singular mandate of increasing wealth. Now it seems the theme is becoming a major force, and new evidence points to surprising upside for investors. As the market shifts to rewarding socially-responsible companies, investors need to know what to look for and how to take advantage of the new paradigm. A Generation Of Impact Investors Impact investing is led by not only financial criteria but also influenced by environmental, social and governance standards (ESG). Adopting an ESG framework means management is explicitly embracing social issues and responsibilities beyond shareholder profits.  #-ad_banner-#Several endowments and pension funds have adopted ESG rules for companies in which they will invest but the theme has yet to be adopted by many individual investors. University endowments, pension funds, and… Read More

Long second fiddle to the United States, China is racing to become the world’s largest economic power. Investors who heed the call are positioned to ride the bullish wave to handsome profits over the long term.  Make no mistake, China has and will continue to experience growing pains, but this is part of the economic expansion process. Savvy investors have used the short-lived bearish periods to snap up equities at deeply discounted prices.  And right now, it’s looking like the ideal time to buy into the Chinese financial sector.  The Current State Of The Chinese Economy Many investors were… Read More

Long second fiddle to the United States, China is racing to become the world’s largest economic power. Investors who heed the call are positioned to ride the bullish wave to handsome profits over the long term.  Make no mistake, China has and will continue to experience growing pains, but this is part of the economic expansion process. Savvy investors have used the short-lived bearish periods to snap up equities at deeply discounted prices.  And right now, it’s looking like the ideal time to buy into the Chinese financial sector.  The Current State Of The Chinese Economy Many investors were shaken by April’s nearly 3% decline in the Shanghai stock market.  The bearish volatility resulted from regulators clamping down on shadow banking and speculative trading. While short-term bearish, these moves will benefit patient investors.  The Xinhua News Agency recently stated that the changes toward stability, “have provided a good external environment and a window of opportunity to reduce leverage in the financial system, strengthen supervision and ward off risks… Over the past week, interbank rates trended higher, bond and capital markets suffered from sustained corrections and some institutions faced liquidity pressure. However, these have little impact on the stability of… Read More

Do you ever wonder why investors get so worked up about rising interest rates? Well, the most obvious answer is that higher rates will elevate corporate borrowing costs, which can bite into profits. But there is an even more fundamental reason.  At the end of the day, we only invest… Read More

On a recent trip to Des Moines to teach a class for financial professionals, the weather didn’t cooperate. This kept me from flying.  So a road trip was in order. Now, it’s a 20-hour trip by car from Florida. While the plan wasn’t to drive straight through, tunnel vision kept… Read More