Your caffeine buzz is about to get a whole lot more expensive.  #-ad_banner-#Coffee prices have been quickly rising, as seen by the iPath Pure Beta Coffee ETN (NYSE: CAFE), which has risen 80% in the past six months. Blame it on poor growing conditions, which have reduced crop yields. The price of coffee should also concern you if own shares of any coffee chains. Some such as Starbucks (Nasdaq: SBUX) have been wise enough to hedge their exposure through long-term hedging contracts, while others such as Dunkin’ Brands (Nasdaq: DNKN) lacked that foresight. Understanding how commodity prices and… Read More

Your caffeine buzz is about to get a whole lot more expensive.  #-ad_banner-#Coffee prices have been quickly rising, as seen by the iPath Pure Beta Coffee ETN (NYSE: CAFE), which has risen 80% in the past six months. Blame it on poor growing conditions, which have reduced crop yields. The price of coffee should also concern you if own shares of any coffee chains. Some such as Starbucks (Nasdaq: SBUX) have been wise enough to hedge their exposure through long-term hedging contracts, while others such as Dunkin’ Brands (Nasdaq: DNKN) lacked that foresight. Understanding how commodity prices and hedging strategies will impact your investment is an underappreciated topic. Indeed commodity prices — and companies’ ability to hedge against sudden spikes — can explain why earnings forecasts steadily rise and fall. For example, consider cotton. That commodity has been on a tear recently, but Hanesbrands (NYSE: HBI), one of the world’s largest buyers of cotton, has locked in more than 95% of its cotton needs for the next year at prices that now look like a bargain. That foresight explains why this stock is at all-time highs — despite surging cotton prices. Other consumers of cotton such as Gap… Read More

It’s more true in this sector than any other… an informed investor is a successful investor. It’s important to know the commodities market backward and forward — what’s going on right now, what’s happened in the past, what the future holds and why. As I mentioned in an earlier issue of StreetAuthority Daily, there’s a trigger ready to be pulled in the gold market, and it could send prices soaring. But rather than just buying physical gold, I’m taking advantage of this opportunity in another way — one that could lead to much greater gains and even pay dividends. You… Read More

It’s more true in this sector than any other… an informed investor is a successful investor. It’s important to know the commodities market backward and forward — what’s going on right now, what’s happened in the past, what the future holds and why. As I mentioned in an earlier issue of StreetAuthority Daily, there’s a trigger ready to be pulled in the gold market, and it could send prices soaring. But rather than just buying physical gold, I’m taking advantage of this opportunity in another way — one that could lead to much greater gains and even pay dividends. You see, copper, gold, silver– these hard resources will never go away. It has to be found, it has to be mined and it typically has to be processed in some way or another. This is where the wealth can really be made from commodities. #-ad_banner-#That’s why I believe with the recent events  going on in China, well-positioned gold producers are one of the best places to have your money in over the next twelve months. Here are a few reasons why. First and foremost, gold miners can do something no other kind of company can do — store the wealth… Read More

One claim that scientists make is that part of what distinguishes humans from animals is that humans have the ability to recognize patterns.  The reason I call it a claim is that my 8-year-old yellow lab knows when things are out of order — mainly at feeding time (especially if the cat’s food dish has been moved) and when it’s time to come in to go to bed. If things are askew, she’ll let you know (as only labs can). In my research for an article on value-priced utility stocks, I recognized an undeniable historical pattern: #-ad_banner-#In every… Read More

One claim that scientists make is that part of what distinguishes humans from animals is that humans have the ability to recognize patterns.  The reason I call it a claim is that my 8-year-old yellow lab knows when things are out of order — mainly at feeding time (especially if the cat’s food dish has been moved) and when it’s time to come in to go to bed. If things are askew, she’ll let you know (as only labs can). In my research for an article on value-priced utility stocks, I recognized an undeniable historical pattern: #-ad_banner-#In every instance, a sideways pattern, or underperformance of that particular group of stocks, in the Dow Jones Utility Average Total Return index occurred during a relatively strong, broader equity market period was followed by a flat broader market or even a correction. Now, in times of uncertainty in the economy and the markets, nervous investors will gravitate toward utility company stocks for their large and reliable dividends. So far this year, that scenario seems to be playing out. Utility stocks are outperforming the S&P 500 Index handily: DJUTR is up 15% compared with a meager 1.8% gain for the broader average. Read More

Frequently, the best road to success for a company is to do one thing really well — preferably something nobody else does but that’s in great demand all the same. #-ad_banner-#This is exactly the approach of one unique energy firm, which refers to itself simply as “the reservoir optimization company.” Its sole job in life is to provide the research, technology and special expertise necessary to optimize extraction from oil and gas reservoirs. This laser focus has certainly led to great success both for the company and its shareholders. Since 2004, the company’s earnings per share (EPS) have risen an… Read More

Frequently, the best road to success for a company is to do one thing really well — preferably something nobody else does but that’s in great demand all the same. #-ad_banner-#This is exactly the approach of one unique energy firm, which refers to itself simply as “the reservoir optimization company.” Its sole job in life is to provide the research, technology and special expertise necessary to optimize extraction from oil and gas reservoirs. This laser focus has certainly led to great success both for the company and its shareholders. Since 2004, the company’s earnings per share (EPS) have risen an astounding 2,364%, from $0.22 to $5.41. During the past 10 years, its stock has delivered total returns averaging nearly 33% a year. I see Core Laboratories (NYSE: CLB) as a safer way to play the energy sector because it’s not an oil and gas producer. Producers, even the largest ones, can be highly risky because their profits and stocks often fluctuate wildly in response to any number of things such as energy prices, the economy, or unexpected delays, costs or disasters. Core shields itself from these sorts of risks primarily by maintaining a diverse, global customer base of dozens of… Read More

When it comes to investing, “the best house in a bad neighborhood” is not the right approach. You want to focus on “good neighborhoods” (meaning good industries) and then proceed to find the best (or at least best-priced) homes in that neighborhood. U.S. oil refiners are great example.  A confluence of factors, which I discussed last summer, was leading to rising and industry profits. In effect, the whole neighborhood held (and still holds) appeal. Some of the industry’s bigger players have really surged in price since my look at the group last August. The appeal of the… Read More

When it comes to investing, “the best house in a bad neighborhood” is not the right approach. You want to focus on “good neighborhoods” (meaning good industries) and then proceed to find the best (or at least best-priced) homes in that neighborhood. U.S. oil refiners are great example.  A confluence of factors, which I discussed last summer, was leading to rising and industry profits. In effect, the whole neighborhood held (and still holds) appeal. Some of the industry’s bigger players have really surged in price since my look at the group last August. The appeal of the biggest refiners becomes evident when you start to focus on their solid cash flow, which is fueling rising dividends and share buyback plans.   #-ad_banner-#These companies’ current dividend yields may seem skimpy, but the stage is set for fast dividend growth in coming years as well, as cash flow surges. Also, share buybacks have been especially impressive in recent years at three of these four major refiners.  But most smaller refiners are not yet witnessing such share price strength. Back in November, I noted that both Alon USA Partners (Nasdaq: ALDW) and CVR Refining (Nasdaq: CVRR) had been forced to… Read More

The vision of American energy independence has been bouncing around political and economic circles for decades. The widespread embrace of hydraulic fracturing (aka fracking) has brought this vision many steps closer to reality. #-ad_banner-#About five years ago, I worked with a niche hedge fund on developing alternative long-term investment ideas. One of the ideas we looked at was the massive supplies of natural gas that fracking was beginning to produce. We projected that an overabundance of natural gas would keep prices low for some time. This prediction held true until a spike during this year’s first… Read More

The vision of American energy independence has been bouncing around political and economic circles for decades. The widespread embrace of hydraulic fracturing (aka fracking) has brought this vision many steps closer to reality. #-ad_banner-#About five years ago, I worked with a niche hedge fund on developing alternative long-term investment ideas. One of the ideas we looked at was the massive supplies of natural gas that fracking was beginning to produce. We projected that an overabundance of natural gas would keep prices low for some time. This prediction held true until a spike during this year’s first quarter, but long-term projections for the next two decades call for an average price of $4 to $5 per million BTUs — which would make U.S. natural gas the cheapest in the world. Huge profits could be made by selling this resource to regions around the world that need the fuel — but the problem lies in exporting it in a cost-effective way. If U.S. producers can solve this problem, America could become energy-independent and an exporter rather than an importer of energy. Part of the technical solution to this problem requires immense investments in infrastructure, representing one potentially lucrative… Read More

When it comes to successful investing, the key is not how you perceive an issue, but how you think the crowd will perceive it. Your analysis may be more accurate, but you can’t buck the tide. That was a key concern I raised six months ago in my negative view of LED company Cree (Nasdaq: CREE). At the time, I thought analysts and fund managers were off the mark when it came to this company’s gross margin profile: “Analysts have been continually forecasting margin gains as Cree more fully utilizes its manufacturing capacity, but so far, that’s just not happening.” And analysts’… Read More

When it comes to successful investing, the key is not how you perceive an issue, but how you think the crowd will perceive it. Your analysis may be more accurate, but you can’t buck the tide. That was a key concern I raised six months ago in my negative view of LED company Cree (Nasdaq: CREE). At the time, I thought analysts and fund managers were off the mark when it came to this company’s gross margin profile: “Analysts have been continually forecasting margin gains as Cree more fully utilizes its manufacturing capacity, but so far, that’s just not happening.” And analysts’ eventual move to lower their gross margin forecast stood as a key negative catalyst for this stock. That fear has come home to roost. Cree recently reported fiscal third-quarter results highlighting a further decline in gross margins, and shares are now paying the price. #-ad_banner-#To be clear, the concern isn’t the gross margins themselves, but instead the market’s perception and anticipation of higher gross margins. Those perceptions have evaporated, and it’s time to look at this stock from a different perspective. Now that’s it is clear to investors that this company’s move into the mass market… Read More

When I first heard this I was shocked. During a recent trip to Asia, I received one of the most startling tips I’ve ever heard. I met up with a long-time colleague of mine named Andrew, who runs an investment firm in Singapore. This is a man who’s made millions of dollars trading gold and other commodities. He told me that right now, Chinese officials are quietly building the world’s largest national reserves of gold bullion… and within the next year, the Chinese government wants to shock the markets with a surprise announcement of their pumped up holdings. Sudden word… Read More

When I first heard this I was shocked. During a recent trip to Asia, I received one of the most startling tips I’ve ever heard. I met up with a long-time colleague of mine named Andrew, who runs an investment firm in Singapore. This is a man who’s made millions of dollars trading gold and other commodities. He told me that right now, Chinese officials are quietly building the world’s largest national reserves of gold bullion… and within the next year, the Chinese government wants to shock the markets with a surprise announcement of their pumped up holdings. Sudden word of a buyer like China having tied up so much supply would almost certainly be a hair trigger for gold prices moving up — and send share prices of a handful of gold producers through the roof. #-ad_banner-#And because several of these producers pay dividends, it would also give income investors a chance to take advantage of this big growth opportunity, too. I immediately started looking into this “Gold Rush” story… and it turns out that it’s really happening. Over the past 12 months the Chinese government has been stockpiling gold, with unprecedented quantities being bought and sold through markets… Read More

It’s been nearly a decade since the shale revolution began. Suddenly, the U.S. was being referred to as the “Saudi Arabia of natural gas,” and hundreds of companies decided to spend massive sums of money to explore shale formations. #-ad_banner-#It was a heady time, with dreams of future riches. Yet, as they’ll tell you in business school, you should only invest money in your business to the extent that future cash flows will benefit. Otherwise, you’ll go bankrupt.  That’s the sad lesson now being learned by executives at Forest Oil (NYSE: FST). The company has been on a spending bender… Read More

It’s been nearly a decade since the shale revolution began. Suddenly, the U.S. was being referred to as the “Saudi Arabia of natural gas,” and hundreds of companies decided to spend massive sums of money to explore shale formations. #-ad_banner-#It was a heady time, with dreams of future riches. Yet, as they’ll tell you in business school, you should only invest money in your business to the extent that future cash flows will benefit. Otherwise, you’ll go bankrupt.  That’s the sad lesson now being learned by executives at Forest Oil (NYSE: FST). The company has been on a spending bender for quite some time — with little to show for it.  Blame goes a series of once-promising wells that never really produced the oil and gas as expected. As a result, Forest Oil’s cash flow statement can make you wince. If you are wondering how a company that already carried nearly $3 billion in net debt at the end of 2008 has managed to stay afloat despite massive annual negative free cash flow, the answer lies in asset sales — many of them. Forest Oil has sold off many of its most promising oil fields to pay… Read More

Science — it’s responsible for everything we take for granted these days.  #-ad_banner-#We trade on global platforms made possible by scientific innovations. Companies constantly look for new ways to stay competitive by taking advantage of new technologies and more efficient processes. From telecommunications to green energy to agriculture, scientific breakthroughs have advanced human knowledge, increased workers’ productivity and allowed us to create a world that until recently would’ve seemed the stuff of fiction. Before the technological revolution, though, there was another branch of science dedicated to the idea of making money from nothing. It was called alchemy. Using… Read More

Science — it’s responsible for everything we take for granted these days.  #-ad_banner-#We trade on global platforms made possible by scientific innovations. Companies constantly look for new ways to stay competitive by taking advantage of new technologies and more efficient processes. From telecommunications to green energy to agriculture, scientific breakthroughs have advanced human knowledge, increased workers’ productivity and allowed us to create a world that until recently would’ve seemed the stuff of fiction. Before the technological revolution, though, there was another branch of science dedicated to the idea of making money from nothing. It was called alchemy. Using a legendary substance known as the philosopher’s stone, alchemists believed they could transform lead into gold.  As farfetched as it might sound, the idea turned out to have some valid scientific basis. Lead has an atomic number of 82 while gold’s is 79. Before you dismiss the idea as pure quackery, the same transformation occurs naturally in nature in the form of radioactive decay.  In fact, just recently, a team of scientists were actually able to accomplish the alchemists’ dream of turning lead into gold. Before you think about creating a lead portfolio, it took the use of a particle… Read More