“The world is on the brink of a demographic milestone,” claims the World Health Organization (WHO). According to WHO, children have outnumbered adults since the beginning of recorded history. But this situation is poised to change. For the first time, seniors over age 65 will soon outnumber children under 5. Two factors primarily account for this shift: declining fertility rates and medical advances prolonging life spans. This demographic shift creates a big opportunity for select health care firms. #-ad_banner-#Against the backdrop of the increasing need for medical care due to longer life expectancies, a trend is emerging. U.S. hospitals appear… Read More

“The world is on the brink of a demographic milestone,” claims the World Health Organization (WHO). According to WHO, children have outnumbered adults since the beginning of recorded history. But this situation is poised to change. For the first time, seniors over age 65 will soon outnumber children under 5. Two factors primarily account for this shift: declining fertility rates and medical advances prolonging life spans. This demographic shift creates a big opportunity for select health care firms. #-ad_banner-#Against the backdrop of the increasing need for medical care due to longer life expectancies, a trend is emerging. U.S. hospitals appear to be losing patients to ambulatory and homecare services. Over the past five years, hospital inpatient stays have declined 4% while the home health care market has grown. And it looks like this trend will continue. According to a 2014 report by Transparency Market Research, the global home health care market is expected to explode to $303.6 billion in 2020, up from $176.1 billion in 2013, growing at a compound rate of more than 8% per year. One company that should be a direct beneficiary of the growth in home health care is Kentucky-based Almost Family (NASDAQ:… Read More

All major U.S. stock indices finished slightly higher last week except for the tech-heavy Nasdaq 100, which lost 0.4%, posting its second consecutive negative weekly close. As I have been stating for the past month, relative outperformance by technology is necessary to drive the broader market higher. If this recent weakness continues, it is likely to trigger a correction. From a sector standpoint, last week’s modest advance was led by defensive utilities and consumer staples, which gained 2.1% and 1.5%, respectively. However, my own ETF-based metric shows that the biggest contraction in sector bet-related assets over… Read More

All major U.S. stock indices finished slightly higher last week except for the tech-heavy Nasdaq 100, which lost 0.4%, posting its second consecutive negative weekly close. As I have been stating for the past month, relative outperformance by technology is necessary to drive the broader market higher. If this recent weakness continues, it is likely to trigger a correction. From a sector standpoint, last week’s modest advance was led by defensive utilities and consumer staples, which gained 2.1% and 1.5%, respectively. However, my own ETF-based metric shows that the biggest contraction in sector bet-related assets over the past one-week and one-month periods actually came from consumer staples. This suggests that last week’s strength in the sector is likely to be short lived and may lead to some outright weakness and relative underperformance versus the S&P 500 later this quarter. #-ad_banner-# Technology: Contracting Investor Assets a Red Flag In last week’s Market Outlook, I pointed out that the Nasdaq 100 was testing underlying support at its October uptrend line, which I identified as a critical inflection… Read More

We’re only a quarter of the way through 2015 and our Alpha Trader picks have been delivering incredible gains for our readers. Today, I want to show you eight stocks that have broken out since the beginning of the year. Some of these winners are long-term positions that are making big runs, while others are fresh entries that have soared since we purchased them. Many are still buys today with plenty of upside left, but either way they prove a point — Alpha Trader can help you crush the market. Take a look at the chart below. It shows the… Read More

We’re only a quarter of the way through 2015 and our Alpha Trader picks have been delivering incredible gains for our readers. Today, I want to show you eight stocks that have broken out since the beginning of the year. Some of these winners are long-term positions that are making big runs, while others are fresh entries that have soared since we purchased them. Many are still buys today with plenty of upside left, but either way they prove a point — Alpha Trader can help you crush the market. Take a look at the chart below. It shows the total returns several of our top picks have generated thus far in 2015. As you can see, these eight stocks are crushing it in 2015. Their average year-to-date return is a whopping 31%, compared to the S&P 500’s 1% return. That’s a difference of 30 percentage points in just a few months. These gains are not only impressive, but they show the Alpha Trader system is doing exactly what it is designed to do: find the strongest stocks in the market with less risk than buy-and-hold investing. See, by using a proprietary combination of two of the market’s most effective… Read More

There are as many ways to analyze the stock market as there are analysts. However, one method that has been proven in theory — and, more importantly, in real life — is relative strength investing. The idea is that stocks, sectors and markets all have inertia, not unlike an aircraft carrier powering across the ocean. The more inertia an asset has, whether it is from a bull market, a powerful sector or simple demand for shares, the more likely it will continue moving forward. Conversely, the more it will take to reverse its course. #-ad_banner-#In the stock market, we’ve all… Read More

There are as many ways to analyze the stock market as there are analysts. However, one method that has been proven in theory — and, more importantly, in real life — is relative strength investing. The idea is that stocks, sectors and markets all have inertia, not unlike an aircraft carrier powering across the ocean. The more inertia an asset has, whether it is from a bull market, a powerful sector or simple demand for shares, the more likely it will continue moving forward. Conversely, the more it will take to reverse its course. #-ad_banner-#In the stock market, we’ve all heard gurus profess that they buy the strongest stocks in the strongest sectors. This is the basis of relative strength investing. It is also the essence of top down investing where we look for the market-leading sectors and then drill down for individual stocks at the top of their sector “class.” It is no secret that biotech has been one of the strongest groups in the market. In the past two years, the iShares Nasdaq Biotechnology (NASDAQ: IBB) is up 113% compared with 33% for the S&P 500. Biotech has actually been outperforming the broader market since… Read More

The struggles for wireless communications firm BlackBerry Ltd (Nasdaq: BBRY) have been underway for years. #-ad_banner-#In early 2013, the company’s business model was showing signs of stress, thanks to surging competition from Apple, Inc. (Nasdaq: AAPL), Samsung, Google, Inc. (Nasdaq: GOOG) and others. Back then, short sellers held nearly 140 million shares, or an estimated 29% of the outstanding share float. As a group, they anticipated a major downdraft ahead. Fast forward to 2015 and shares have fallen by half. Yet short sellers haven’t booked profits and moved on. They now hold 95 million shares short, or 19.5% of the… Read More

The struggles for wireless communications firm BlackBerry Ltd (Nasdaq: BBRY) have been underway for years. #-ad_banner-#In early 2013, the company’s business model was showing signs of stress, thanks to surging competition from Apple, Inc. (Nasdaq: AAPL), Samsung, Google, Inc. (Nasdaq: GOOG) and others. Back then, short sellers held nearly 140 million shares, or an estimated 29% of the outstanding share float. As a group, they anticipated a major downdraft ahead. Fast forward to 2015 and shares have fallen by half. Yet short sellers haven’t booked profits and moved on. They now hold 95 million shares short, or 19.5% of the outstanding share float, making Blackberry the fifth most heavily shorted stock on the Nasdaq. A fresh look at quarterly results reveals why these short sellers still see downside ahead. Stabilizing The Ship To be fair, Blackberry’s CEO John Chen inherited quite a mess when he took control of the company in late 2013. Revenues were falling fast, and a high cost structure led to rising losses. Chen is now more than halfway through a two-year restructuring process that is starting to bear fruit. Chen furloughed hundreds of staffers, and annual operating expenses have now dropped by more than $2… Read More

No one seems to know what is causing the market volatility of late.  Interest rate jitters have been limiting gains for months, but recent economic news doesn’t seem to point to an imminent increase by the Federal Reserve. Geopolitical worries surrounding Greece have not really hit asset values significantly either, and global monetary policy is still supportive of growth. #-ad_banner-#Despite there being no obvious cause, market volatility has jumped since the beginning of March, and the S&P 500 is off its recent high by almost 3%.  We have been here before though. The market dove 9.9% from April through June… Read More

No one seems to know what is causing the market volatility of late.  Interest rate jitters have been limiting gains for months, but recent economic news doesn’t seem to point to an imminent increase by the Federal Reserve. Geopolitical worries surrounding Greece have not really hit asset values significantly either, and global monetary policy is still supportive of growth. #-ad_banner-#Despite there being no obvious cause, market volatility has jumped since the beginning of March, and the S&P 500 is off its recent high by almost 3%.  We have been here before though. The market dove 9.9% from April through June of 2012 before continuing its ascent. Asset prices sold off 7.4% from mid-September through mid-October of last year, as well. Both of these sell-offs started as little more than routine profit-taking and were over within a short period.  This sell-off appears no different than prior ones, with global monetary stimulus and U.S. economic growth promising to support asset prices. Stocks have soared since the end of the recession, but valuations are not nearly as high as prior peaks.  Despite strong gains in stocks since the market’s 2009 low, there’s really little reason to believe that any sell-off will accelerate into… Read More

An improved economy and low oil prices have done wonders for airline stocks. The value of these stocks has surged in recent years, at times beyond reasonable levels. I’m especially concerned about the risk of a sharp share price correction for Allegiant Travel Co. (Nasdaq: ALGT), a small passenger airliner with a fleet of 70 aircraft and annual revenue of $1.1 billion. #-ad_banner-#Allegiant has a sound business model, pursing flight routes in underserved U.S. cities. It also generates a robust income stream from ancillary sources like priority boarding; in-flight food and beverage service; and hotel and ground transport bookings. The… Read More

An improved economy and low oil prices have done wonders for airline stocks. The value of these stocks has surged in recent years, at times beyond reasonable levels. I’m especially concerned about the risk of a sharp share price correction for Allegiant Travel Co. (Nasdaq: ALGT), a small passenger airliner with a fleet of 70 aircraft and annual revenue of $1.1 billion. #-ad_banner-#Allegiant has a sound business model, pursing flight routes in underserved U.S. cities. It also generates a robust income stream from ancillary sources like priority boarding; in-flight food and beverage service; and hotel and ground transport bookings. The company’s growth strategy has led to double-digit revenue gains in nine of the past 10 years. Equally important, the company retains a strong balance sheet.   Allegiant is clearly an investor favorite, based on the more than 277% gain in its stock over the past three years. However, shares are now alarmingly overvalued. Allegiant’s price-to-cash flow ratio, for example, has ballooned to more than 12, compared with ratios of about 7-to-10 for rivals like JetBlue Airways Corp. (Nasdaq: JBLU), Delta Air Lines, Inc. (NYSE: DAL) and United Continental Holdings, Inc. (NYSE: UAL). Shares are also exceptionally pricey by… Read More

Bottom fishing in beaten-down equities is a popular strategy. The lower a stock goes, the greater its value may seem. A big decline can be especially appealing when it occurs in well-known, brand-name stocks.  I caution you on this approach, though. Relative strength (RS) studies have shown that underperforming stocks tend to remain underperformers. A stock’s RS can range from 0 to 100, and the lower the number, the worse its performance relative to its peers over the past six months. I have warned of the dangers of investing in stocks with low RS in the past. Trends tend to… Read More

Bottom fishing in beaten-down equities is a popular strategy. The lower a stock goes, the greater its value may seem. A big decline can be especially appealing when it occurs in well-known, brand-name stocks.  I caution you on this approach, though. Relative strength (RS) studies have shown that underperforming stocks tend to remain underperformers. A stock’s RS can range from 0 to 100, and the lower the number, the worse its performance relative to its peers over the past six months. I have warned of the dangers of investing in stocks with low RS in the past. Trends tend to persist, and trying to guess when and where a downtrend will stop can wind up being very costly. No doubt you’ve all heard the phrase, “Never try to catch a falling knife.” #-ad_banner-#But I understand the temptation, especially when we’re talking about big-name stocks that everyone knows and are often covered by the media. Personally, I like to keep emotion out of my investing decisions. That is why I rely on a stock-ranking system that combines an equity’s relative strength and a key fundamental metric to give it a score ranging from 0 to 200. I call it… Read More

All major U.S. stock indices finished in the red last week, led lower by the tech-heavy Nasdaq 100, which lost 2.8%. Throughout the past month, I have been saying that as long as technology continued to outperform, the overall market was likely to continue grinding higher. Accordingly, I view last week’s relative weakness by the Nasdaq 100 as an early warning of potential weakness in April. All sectors of the S&P 500 fell last week, with financials, technology and industrials hit hardest. The energy sector held up relatively well. Read More

All major U.S. stock indices finished in the red last week, led lower by the tech-heavy Nasdaq 100, which lost 2.8%. Throughout the past month, I have been saying that as long as technology continued to outperform, the overall market was likely to continue grinding higher. Accordingly, I view last week’s relative weakness by the Nasdaq 100 as an early warning of potential weakness in April. All sectors of the S&P 500 fell last week, with financials, technology and industrials hit hardest. The energy sector held up relatively well. #-ad_banner-# My own asset-flow-based metric continues to indicate that this beleaguered sector is historically under-invested. This suggests an emerging opportunity to overweight the sector in upcoming months and look for buying opportunities in undervalued energy assets. Dow Theory Non-Confirmation Remains in Force In the March 2 Market Outlook, I pointed out that the new closing high in the Dow Jones Industrial Average on Feb. 20 had not yet been confirmed by a corresponding new closing high in the Dow Jones Transportation Average. I said… Read More

While biotech has been the clear market leader recently, there is another leading sector that is flying under the radar. Defense stocks have quietly outperformed the market since summer, and corrective pauses for many appear ready to resolve to the upside. When we talk about defense, the first thing most investors think of is aerospace and high-tech communications. However, there is a member of the group that serves the military in a different capacity. Huntington Ingalls Industries (NYSE: HII) builds and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard. The stock has been a… Read More

While biotech has been the clear market leader recently, there is another leading sector that is flying under the radar. Defense stocks have quietly outperformed the market since summer, and corrective pauses for many appear ready to resolve to the upside. When we talk about defense, the first thing most investors think of is aerospace and high-tech communications. However, there is a member of the group that serves the military in a different capacity. Huntington Ingalls Industries (NYSE: HII) builds and maintains nuclear and non-nuclear ships for the U.S. Navy and Coast Guard. The stock has been a top performer with a 60%-plus gain since August and a nearly 30% gain year to date. Compare that with the S&P 500’s 2.6% gain in 2015. Normally, I am less enthusiastic about chasing top performers after they have already had big gains. For example, many biotech stocks are soaring at ever increasing speeds. The sector is overbought, which is not necessarily bad, but no stock moves straight up forever, and corrections could be severe. So when I find a strong stock in a strong sector that is already in the midst of an orderly correction, my interest is… Read More