It seems like it should be a fairly straightforward concept. You invest your money in a company for a share of future earnings. Most of the companies in which I invest have been around for longer than I have, so those earnings should be fairly stable, if not following a gradual path higher. Of course, investing can be anything but simple as the market charts its course through the new normal and you are trying to avoid the next historic crash in prices. #-ad_banner-#So when someone starts talking about ‘simple’ math that makes an investment a no-brainer, I start to… Read More

It seems like it should be a fairly straightforward concept. You invest your money in a company for a share of future earnings. Most of the companies in which I invest have been around for longer than I have, so those earnings should be fairly stable, if not following a gradual path higher. Of course, investing can be anything but simple as the market charts its course through the new normal and you are trying to avoid the next historic crash in prices. #-ad_banner-#So when someone starts talking about ‘simple’ math that makes an investment a no-brainer, I start to wonder how simple it can really be. Especially when that someone is the CEO of the company. That was the case recently during an earnings release by one of the world’s largest asset managers. Not only is the lecturing mathematician the CEO, he’s also the co-founder of the company. I admire this CEO greatly and he’s a guru in the world of private equity, but when I looked further into the details I found a few holes in his ‘simple’ math.  While I don’t agree with the CEO’s math, I did find evidence that the stock could be one of… Read More

When it comes to what people say versus what the market says, I think it is wisest to listen to the market. Just look at mining machinery maker Caterpillar (NYSE: CAT), which fell almost 1% in premarket trading on Tuesday after the company beat second-quarter earnings estimates but reported declines in profit and revenue. To top things off, the company offered one of the gloomiest year-end outlooks of the earnings season. Tell that to the market, though. That very day, after a weak premarket, the stock closed higher to the tune of 5%. Not only that, it scored a technical… Read More

When it comes to what people say versus what the market says, I think it is wisest to listen to the market. Just look at mining machinery maker Caterpillar (NYSE: CAT), which fell almost 1% in premarket trading on Tuesday after the company beat second-quarter earnings estimates but reported declines in profit and revenue. To top things off, the company offered one of the gloomiest year-end outlooks of the earnings season. Tell that to the market, though. That very day, after a weak premarket, the stock closed higher to the tune of 5%. Not only that, it scored a technical breakout, which we will get to momentarily. The company stated that global uncertainty, including the Brexit and the turmoil in Turkey, have increased risks. I’m not a fundamental analyst, but it seems to me that sort of news would boost the mining of precious metals, and indirectly, the use of Caterpillar’s equipment. Indeed, the gold market has been on the rise all year. But let’s stick to the charts. As we can see, Caterpillar broke out last week to the upside. Volume was rather heavy, too, validating the change in tone for the stock. And it is likely no coincidence… Read More

Times are good for America’s retailers. Retail sales hit a new record of $457 billion in June and are up 2.7% for the past 12 months, up from 2.2% year over year in May. The National Retail Federation recently increased its estimate for 2016 full-year retail sales growth to 3.4% from 3.1%. That’s healthy growth, especially given that inflation is practically zero. These numbers mean two things: one, U.S. employment growth is translating into greater spending power for U.S. consumers — and they are indeed spending rather than mostly saving, and two, companies that depend on U.S. consumer spending might… Read More

Times are good for America’s retailers. Retail sales hit a new record of $457 billion in June and are up 2.7% for the past 12 months, up from 2.2% year over year in May. The National Retail Federation recently increased its estimate for 2016 full-year retail sales growth to 3.4% from 3.1%. That’s healthy growth, especially given that inflation is practically zero. These numbers mean two things: one, U.S. employment growth is translating into greater spending power for U.S. consumers — and they are indeed spending rather than mostly saving, and two, companies that depend on U.S. consumer spending might perform better than recently expected in the coming quarters. #-ad_banner-#Note that I’m referring here to U.S. spending and U.S. retailers. That’s because in other parts of the world, retail sales aren’t rising quite as much if at all. Indeed, in the UK sales suffered their biggest decline in four years in the wake of the Brexit vote to leave the European Union. So while many U.S. retailers have some foreign exposure, and that doesn’t disqualify them as a potential investment, it makes sense to favor those more heavily exposed to the United States. These stocks appear attractive now and could… Read More

Last week, I told traders to beware of one of the biggest market disconnects in history. While earnings for S&P 500 have declined for six straight quarters — the worst stretch in market history with the exception of the 2007-2009 recession — stock prices are hitting new all-time highs. It makes absolutely no sense! #-ad_banner-# This situation is cause for a bear market. At minimum, I’m looking for a near-term drop in stocks. This doesn’t mean you need to exit the markets en masse, though. As I mentioned last week, there are tools that can be used to combat volatility… Read More

Last week, I told traders to beware of one of the biggest market disconnects in history. While earnings for S&P 500 have declined for six straight quarters — the worst stretch in market history with the exception of the 2007-2009 recession — stock prices are hitting new all-time highs. It makes absolutely no sense! #-ad_banner-# This situation is cause for a bear market. At minimum, I’m looking for a near-term drop in stocks. This doesn’t mean you need to exit the markets en masse, though. As I mentioned last week, there are tools that can be used to combat volatility and the market insanity. In particular, I highlighted a strategy that not only reduces your risk, but also increases your chances of success to as high as 90% per trade. That is because you can profit whether a stock — or index — goes up, down or sideways. It’s called a bear put spread, and while it takes a bit more work on your part, I can guarantee it will be well worth the effort. Last week, I explained the ins and outs of the strategy. If you missed that article, I suggest you read it now to familiarize yourself… Read More

The U.S. stock market cooled off a little this past week on the heels of four consecutive weekly gains. The tech-heavy Nasdaq 100 and small-cap Russell 2000 closed slightly higher, but the benchmark S&P 500 and blue-chip Dow Jones Industrial Average finished the week fractionally lower. #-ad_banner-# The S&P 500 has already risen 9.1% since its Brexit low, and my work now suggests downside risk may exceed upside potential in the near term. Technology was largely responsible for what little market strength there was last week, with the sector advancing… Read More

The U.S. stock market cooled off a little this past week on the heels of four consecutive weekly gains. The tech-heavy Nasdaq 100 and small-cap Russell 2000 closed slightly higher, but the benchmark S&P 500 and blue-chip Dow Jones Industrial Average finished the week fractionally lower. #-ad_banner-# The S&P 500 has already risen 9.1% since its Brexit low, and my work now suggests downside risk may exceed upside potential in the near term. Technology was largely responsible for what little market strength there was last week, with the sector advancing 1.4%. Consumer staples, energy and utilities were the worst-performing sectors. Asbury Research’s own ETF asset flows-based metric shows that the biggest inflow of sector bet-related investor dollars over the past one-month and three-month periods went into health care, which fueled the sector’s outperformance. Since its March 17 low, health care has gained 13.4% — more than double the broader market’s 6.5% gain. As long as these inflows of investor assets continue, I expect this trend to continue. Texas Instruments Crushes the Market In the July 11 Market Outlook, I pointed out a bullish breakout in technology bellwether Texas… Read More

I have a long time client who is always convinced that the financial sky is falling. Recently he called me, worried that the nation is $19 trillion in debt. He’s not alone in this worry — $19 trillion sounds like a lot. But is that a real number? And how fast is the debt train hurtling towards us? So I decided to do some research. #-ad_banner-# In the most recent audit of the Bureau of Fiscal Services for fiscal years 2014 and 2015 by the Government Accountability Office, the total gross federal debt outstanding is $18.138 trillion. That’s 4.5% less… Read More

I have a long time client who is always convinced that the financial sky is falling. Recently he called me, worried that the nation is $19 trillion in debt. He’s not alone in this worry — $19 trillion sounds like a lot. But is that a real number? And how fast is the debt train hurtling towards us? So I decided to do some research. #-ad_banner-# In the most recent audit of the Bureau of Fiscal Services for fiscal years 2014 and 2015 by the Government Accountability Office, the total gross federal debt outstanding is $18.138 trillion. That’s 4.5% less than $19 trillion. Don’t you feel better? Here’s one of the most interesting facts I uncovered. Nearly one third of the outstanding debt, 27.6% to be exact, is held by federal government agencies such as the Social Security Administration, FDIC, the Postal Service Retirees Fund, or the Department of Labor’s unemployment trust fund. If we subtract federally held debt then that means that $13.12 trillion of what the report refers to as marketable securities (they can be resold at any time) are held by the public. But all this debt is going to mature one day? Yes it is. In… Read More

If you invest in stocks, you probably love the thrill of buying an undervalued gem that rises 50% in a few months — or that triples over two years. Who doesn’t? It’s a great feeling. But it doesn’t happen every day. And counting on a big score is no substitute for a well-constructed, diversified portfolio that builds wealth over time. For most investors, the foundation of a long-term portfolio is a mix of large-, mid- and small-cap stocks that includes some dependable income payers. Dividend-paying stocks tend to be less volatile, and the income they generate provides ballast to a… Read More

If you invest in stocks, you probably love the thrill of buying an undervalued gem that rises 50% in a few months — or that triples over two years. Who doesn’t? It’s a great feeling. But it doesn’t happen every day. And counting on a big score is no substitute for a well-constructed, diversified portfolio that builds wealth over time. For most investors, the foundation of a long-term portfolio is a mix of large-, mid- and small-cap stocks that includes some dependable income payers. Dividend-paying stocks tend to be less volatile, and the income they generate provides ballast to a portfolio that also includes more aggressive offerings. #-ad_banner-#But in addition to those benefits, most dividend payers allow investors to generate wealth over time through an underrated strategy that couldn’t be simpler: using dividends to buy more shares by automatically reinvesting them. Dividend reinvestment is a common practice in retirement plans for investors under 59½. That’s because it allows for no-decision buy-and-hold investing in a portfolio that doesn’t allow withdrawals anyway. (Outside a retirement portfolio, it’s not a bad choice either — just remember that you’ll have to pay taxes on the dividend amounts, so you’ll need to use cash from… Read More

Netflix (Nasdaq: NFLX) lost a staggering $6 billion of its market cap in one day as shares plunged 14% on July 19. The company’s second-quarter earnings report was a shocking disappointment as subscriber numbers came in well below expectations. Analysts were quick to cut earnings estimates and question target prices following the news, but this kind of post-earnings mayhem is nothing new for the world’s largest streaming subscription service. In fact, data over the past 10 quarters shows double-digit price swings are the norm after the company’s earnings announcements. #-ad_banner-#… Read More

Netflix (Nasdaq: NFLX) lost a staggering $6 billion of its market cap in one day as shares plunged 14% on July 19. The company’s second-quarter earnings report was a shocking disappointment as subscriber numbers came in well below expectations. Analysts were quick to cut earnings estimates and question target prices following the news, but this kind of post-earnings mayhem is nothing new for the world’s largest streaming subscription service. In fact, data over the past 10 quarters shows double-digit price swings are the norm after the company’s earnings announcements. #-ad_banner-# And historical data uncovers another interesting post-earnings trend that traders can take advantage of. Bad News Can’t Keep Netflix Down Few stocks are as volatile as Netflix after it reports earnings. Looking at the past 10 earnings announcements, shares have fallen an average of 11% on disappointing reports and have gained an average of 13% when the company reports good news. But a funny thing happens following the big post-earnings moves… the shares tend to move higher regardless of whether the company reports good news or bad. Shares of NFLX moved an average of 6% higher in the month following… Read More