Like many cash-strapped investors just starting out, I was convinced I could “maximize” my tiny investment account by dipping my toes into the micro-cap end of the stock market pool. Did it make me a millionaire overnight? Put gently: not even close. #-ad_banner-#​I was left with a dwindling account balance and worthless shares of companies that had long-since imploded. In the investing world, we call the sacrifice of those beginner funds a “grudge” account.  I prefer to think of it as tuition paid into an investing career that would live on much… Read More

Like many cash-strapped investors just starting out, I was convinced I could “maximize” my tiny investment account by dipping my toes into the micro-cap end of the stock market pool. Did it make me a millionaire overnight? Put gently: not even close. #-ad_banner-#​I was left with a dwindling account balance and worthless shares of companies that had long-since imploded. In the investing world, we call the sacrifice of those beginner funds a “grudge” account.  I prefer to think of it as tuition paid into an investing career that would live on much longer than most of the stocks I traded back then. Although my initial investments were long-gone, one thing that did remain was a passion for finding healthy companies with smaller capitalizations and real business plans.   Fortunately, there are some real gurus in this space — one, in particular, reigns as king. Chuck Royce, of Royce & Associates, has over four decades of experience in capital markets, making a name for himself in primarily small-cap investing. His methodology seems simple: find stocks that are relatively undervalued with low debt and above-average returns. Read More

For some shareholders, Christmas came a few months early this year. With every earnings season comes announcements of success, failure and future projections.  The outperformers are often rewarded with better analyst ratings, boosted price targets and perhaps an increased stock price.  For shareholders, it can mean increased dividends and some extra percentage points tacked on to their portfolios. #-ad_banner-#​But what about those companies that had blowout quarters and now sit on piles of cash? Those focused on boosting shareholder value often turn toward a one-time event to spread the wealth around, known as… Read More

For some shareholders, Christmas came a few months early this year. With every earnings season comes announcements of success, failure and future projections.  The outperformers are often rewarded with better analyst ratings, boosted price targets and perhaps an increased stock price.  For shareholders, it can mean increased dividends and some extra percentage points tacked on to their portfolios. #-ad_banner-#​But what about those companies that had blowout quarters and now sit on piles of cash? Those focused on boosting shareholder value often turn toward a one-time event to spread the wealth around, known as a special dividend. There are a few things about special dividends that make them… special. First, they are usually issued in addition to the company’s existing dividend. Second, the nature of these one-time payments can catch investors, traders, and algorithms off guard, which can result in a burst of buying to push the stock price up once the stock goes ex-dividend. This creates an opportunity to both collect the dividend and squeeze a small gain out of the stock price at the same time. While shorter-term trades like this… Read More

Hedge fund managers are known to risk some of their own cash alongside investor’s money to show they have “skin in the game.” But big-name investors running what are known as family offices, or firms that manage investments for a particular family, take that idea to a whole new level. Billionaire Steve Cohen is a newly-added member to the family office crowd, joining the likes of fellow billionaires George Soros and Carl Icahn. #-ad_banner-#​Best known for his long-tenured hedge fund SAC Capital Advisors, Cohen has been running rings around the market… Read More

Hedge fund managers are known to risk some of their own cash alongside investor’s money to show they have “skin in the game.” But big-name investors running what are known as family offices, or firms that manage investments for a particular family, take that idea to a whole new level. Billionaire Steve Cohen is a newly-added member to the family office crowd, joining the likes of fellow billionaires George Soros and Carl Icahn. #-ad_banner-#​Best known for his long-tenured hedge fund SAC Capital Advisors, Cohen has been running rings around the market for decades. SAC Capital has averaged 30% annual returns for 18 years, according to Bloomberg.com. Cohen’s new gig, Point72, groups and invests more than $9 billion of his own assets together with assets from a handful of former SAC employees. And in the first half of 2014, the fund has already profited nearly $1 billion, according to The New York Times. Although Point72 is a private firm, it is subject to certain SEC guidelines. One of the most insightful rules requires Cohen to report… Read More

Are you familiar with Fairfax Financial’s CEO Prem Watsa? If you aren’t, you really should be. Following Watsa’s lead over the last twenty years could have helped you not only avoid several disasters but actually profit from them. #-ad_banner-#With the S&P 500 having nearly tripled from the March 2009 lows, now is a great time to pay attention to a man famous for spotting bubbles. First a bit of a background on how Mr. Watsa gained my trust. It all goes back to the housing bubble and financial crisis that Watsa was miles ahead of the curve… Read More

Are you familiar with Fairfax Financial’s CEO Prem Watsa? If you aren’t, you really should be. Following Watsa’s lead over the last twenty years could have helped you not only avoid several disasters but actually profit from them. #-ad_banner-#With the S&P 500 having nearly tripled from the March 2009 lows, now is a great time to pay attention to a man famous for spotting bubbles. First a bit of a background on how Mr. Watsa gained my trust. It all goes back to the housing bubble and financial crisis that Watsa was miles ahead of the curve on. Incredibly, as far back as 2004, Watsa warned about the impending disaster in the housing market. And he didn’t just warn about it, he positioned his company Fairfax to profit massively from it by owning credit default swaps on the most vulnerable financial institutions (like AIG).  It was contrarian moves like these that made him known as the Canadian Warren Buffett.   Here is a bit of what Watsa said in his 2005 letter to shareholders foreshadowing the impending bubble burst: As we have mentioned ad nauseam, the risks in the U.S. are many and varied. They emanate from… Read More

Although Canadian bank stocks fared extremely well after the 2008-2009 financial meltdown, their current outlook is far less sanguine. One stock that seems particularly ripe for a sell-off is Canada’s fourth largest bank by market capitalization Bank of Montreal (NYSE: BMO). The shares are inter-listed on the New York and Toronto (TSX) stock exchanges and can be easily shorted by U.S. investors. BMO recently formed a bearish evening star candlestick pattern on the weekly chart and subsequently broke an important intermediate uptrend line. Both technical events imply the stock should correct substantially. In addition, the fundamental… Read More

Although Canadian bank stocks fared extremely well after the 2008-2009 financial meltdown, their current outlook is far less sanguine. One stock that seems particularly ripe for a sell-off is Canada’s fourth largest bank by market capitalization Bank of Montreal (NYSE: BMO). The shares are inter-listed on the New York and Toronto (TSX) stock exchanges and can be easily shorted by U.S. investors. BMO recently formed a bearish evening star candlestick pattern on the weekly chart and subsequently broke an important intermediate uptrend line. Both technical events imply the stock should correct substantially. In addition, the fundamental outlook for BMO is cloudy at best. Earlier this summer, Moody’s Investors Service lowered the outlook for Canadian banks as a whole on the assumption that the Canadian government would pass legislation that would restrict government support to banks in a future financial crisis.   #-ad_banner-#Under the legislation, senior bank debt would have to be convertible to equity if the bank were facing insolvency. According to Canadian Finance Minister Joe Oliver, the proposed legislation would help insure “bank shareholders and creditors bear losses, rather than taxpayers.”  On Aug. 8, S&P echoed Moody’s move, downgrading its ratings outlook to negative on… Read More

Shares of NVIDIA Corporation (NASDAQ: NVDA) surged 9% Friday on a huge spike in volume, putting the stock back in the bulls’ favor and setting up a follow-through buying trade for active investors.  On Thursday after the close, the three-dimensional graphics processor manufacturer reported better-than-expected earnings for its fiscal second quarter and upped its guidance. Non-GAAP earnings per diluted share rose 30% year over year to $0.30, above the consensus estimate of $0.20. Revenues increased 13% to $1.1 billion, matching analysts’ estimates. #-ad_banner-#​For the current… Read More

Shares of NVIDIA Corporation (NASDAQ: NVDA) surged 9% Friday on a huge spike in volume, putting the stock back in the bulls’ favor and setting up a follow-through buying trade for active investors.  On Thursday after the close, the three-dimensional graphics processor manufacturer reported better-than-expected earnings for its fiscal second quarter and upped its guidance. Non-GAAP earnings per diluted share rose 30% year over year to $0.30, above the consensus estimate of $0.20. Revenues increased 13% to $1.1 billion, matching analysts’ estimates. #-ad_banner-#​For the current quarter, the company said it expects revenue of $1.2 billion, while analysts were expecting $1.16 billion. All in all, these numbers were nothing to snicker at, and in reaction to the outlook some Wall Street analysts issued positive comments, further fueling the rally.  A number of analysts currently consider the stock to be fully valued. But just as a day trader has a different time frame than a growth investor, so too does a swing trader have a different time frame than a fundamental-based value investor. And there is a… Read More

There’s a group of stocks currently trouncing the S&P 500. In just a few months, they’ve generated 44.8%, 58.1%, 74.8% and even 137.7%. And I expect this elite club of stocks to continue moving higher for two reasons. For one, each of these stocks sports an abnormally high Alpha Score. #-ad_banner-#Every stock has an Alpha Score, and it can range from 0 to 200. It is derived by combining two of the market’s most effective triggers — relative strength (RS), our technical trigger, and a fundamental trigger. The higher the… Read More

There’s a group of stocks currently trouncing the S&P 500. In just a few months, they’ve generated 44.8%, 58.1%, 74.8% and even 137.7%. And I expect this elite club of stocks to continue moving higher for two reasons. For one, each of these stocks sports an abnormally high Alpha Score. #-ad_banner-#Every stock has an Alpha Score, and it can range from 0 to 200. It is derived by combining two of the market’s most effective triggers — relative strength (RS), our technical trigger, and a fundamental trigger. The higher the score, the more likely a stock is to move higher in the coming weeks and months. On top of having high Alpha Scores, these stocks are also deeply undervalued. In our experience, undervalued stocks with high Alpha Scores outperform the market in a big way. In my premium newsletter, Alpha Trader, we have a section dedicated to finding the market’s most undervalued stocks with high Alpha Scores. It’s called the Half-Priced Stocks Portfolio, and below is snapshot of its performance. (To be fair to my subscribers, I can’t reveal the… Read More

All major U.S. indices closed higher last week, led by the downtrodden small-cap Russell 2000, which was up 1.5% but is still down 2.8% year to date. In comparison, the tech-heavy Nasdaq 100 and broad market S&P 500 are up 8.2% and 4.5%, respectively, so far in 2014.  From a sector standpoint, last week’s rebound was led by consumer discretionary and materials. My own metric shows that the largest inflow of sector-related investor assets over the past one-week, one-month and three-month periods was, not surprisingly, into consumer discretionary. This not only explains last week’s strength… Read More

All major U.S. indices closed higher last week, led by the downtrodden small-cap Russell 2000, which was up 1.5% but is still down 2.8% year to date. In comparison, the tech-heavy Nasdaq 100 and broad market S&P 500 are up 8.2% and 4.5%, respectively, so far in 2014.  From a sector standpoint, last week’s rebound was led by consumer discretionary and materials. My own metric shows that the largest inflow of sector-related investor assets over the past one-week, one-month and three-month periods was, not surprisingly, into consumer discretionary. This not only explains last week’s strength in the sector, but also portends continued strength and relative outperformance versus the S&P 500 in the weeks and potentially months ahead. #-ad_banner-#​In last week’s Market Outlook, I said that a corrective decline appeared to be getting under way in the broader market due to a significant increase in investor fear, recent weakness in small-cap stocks, and an overextended technology sector, all of which remain intact heading into this week. Although Friday’s sharp rally may have given some new hope to the bulls,… Read More

After a multi-year bull market, the S&P 500 looks ripe for an important correction. During the July 21 trading week, the index hit an all-time high just above 1,991. Now, two trading weeks later, it has dropped almost 4.3% to 1,909. More importantly, it has broken a three-year major uptrend line in the process. The break of this major uptrend line — which dates back to October 2011 — is highly significant and is potentially a very profitable signal for you as a trader to recognize. A broken major trendline… Read More

After a multi-year bull market, the S&P 500 looks ripe for an important correction. During the July 21 trading week, the index hit an all-time high just above 1,991. Now, two trading weeks later, it has dropped almost 4.3% to 1,909. More importantly, it has broken a three-year major uptrend line in the process. The break of this major uptrend line — which dates back to October 2011 — is highly significant and is potentially a very profitable signal for you as a trader to recognize. A broken major trendline shows a reversal in trading psychology and illustrates investors are more interested in selling than buying. #-ad_banner-#​Choose your short trades carefully… and there could be a lot of money to be made. One stock that looks like it could be particularly vulnerable is America’s largest tire manufacturer, Goodyear Tire (NASDAQ: GT). Within the past two weeks, GT has broken a major uptrend line dating back to April 2013, and it has the weak fundamental outlook to back it up. On July 30, the… Read More

July marked another perfect month for Income Trader’s Amber Hestla… Amber closed two more winners in her Income Trader newsletter. The recent victories bring Amber’s perfect track record to 63 for 63. She’s yet to close an unprofitable trade since launching her premium service over 17 months ago. (You can view her first 52 winners here.) #-ad_banner-#​Some of you are probably already familiar with Amber’s Income Trader service. If you’re not, the premise is simple: by selling put options on stocks she thinks are undervalued, Amber’s… Read More

July marked another perfect month for Income Trader’s Amber Hestla… Amber closed two more winners in her Income Trader newsletter. The recent victories bring Amber’s perfect track record to 63 for 63. She’s yet to close an unprofitable trade since launching her premium service over 17 months ago. (You can view her first 52 winners here.) #-ad_banner-#​Some of you are probably already familiar with Amber’s Income Trader service. If you’re not, the premise is simple: by selling put options on stocks she thinks are undervalued, Amber’s subscribers collect “Instant Income” checks that can range from $50 to $5,000. The value of the check depends on how many put contracts the investor wants to sell. These trades can yield some big annual returns, too. For example, Amber’s recommendations that expired worthless in July paid an average annualized return of 57%. The crazy thing about this story is that she’s done this in today’s calm, low-volatility environment. This is a big deal, because for options sellers like Amber, volatility is crucial… If you’ve got a… Read More