One of the secrets to getting rich in the stock market is to look where no one else is looking.  While Apple (Nasdaq: AAPL) gets an inordinate amount of attention from investors, three billionaire gurus have been focused on buying shares of a small-cap company that makes products for Apple’s popular iPhone.  It’s much easier for a company with $1 billion in revenue to grow than it is for a company with $176 billion in revenue (as Apple had last year). While the iPhone 6 will likely boost Apple’s revenues, the increase won’t be nearly as great in percentage terms… Read More

One of the secrets to getting rich in the stock market is to look where no one else is looking.  While Apple (Nasdaq: AAPL) gets an inordinate amount of attention from investors, three billionaire gurus have been focused on buying shares of a small-cap company that makes products for Apple’s popular iPhone.  It’s much easier for a company with $1 billion in revenue to grow than it is for a company with $176 billion in revenue (as Apple had last year). While the iPhone 6 will likely boost Apple’s revenues, the increase won’t be nearly as great in percentage terms as it would be for a smaller company that’s supplying a key component. Billionaires George Soros, Ken Griffin and Seth Klarman all know this. That’s why they own a combined 12% stake in Apple supplier RF Micro Devices (Nasdaq: RFMD), which provides radio frequency (RF) chips to Apple, Samsung Electronics (OTC: SSNLF) and BlackBerry (Nasdaq: BBRY).  Earlier this year, RF Micro Devices agreed to merge with TriQuint Semiconductor (Nasdaq: TQNT). The merger combines the RF market’s third- and fourth-largest players, giving them a 35% share of the market.  Big Benefits The merger is one of equals. Each company’s shareholders will… Read More

Originally found in the ancient Greek play “The Birds” by Aristophanes, the phrase “cloud cuckoo land” refers to an unrealistically idealistic state where everything is perfect. The term was used to describe the state of stock market before the crash of 1929 by U.S. Agriculture Secretary Henry Wallace, who would later serve as vice president under Franklin D. Roosevelt. When I look at the current market conditions, I think we should be dusting off that term again. U.S. equity markets are making new highs. Yet many pundits don’t view the market as overvalued — but is it? #-ad_banner-#In… Read More

Originally found in the ancient Greek play “The Birds” by Aristophanes, the phrase “cloud cuckoo land” refers to an unrealistically idealistic state where everything is perfect. The term was used to describe the state of stock market before the crash of 1929 by U.S. Agriculture Secretary Henry Wallace, who would later serve as vice president under Franklin D. Roosevelt. When I look at the current market conditions, I think we should be dusting off that term again. U.S. equity markets are making new highs. Yet many pundits don’t view the market as overvalued — but is it? #-ad_banner-#In search of an answer, I looked at the market’s peak price-to-earnings (P/E) ratios since the early ’80s. What I found was that the average peak P/E prior to a significant market correction was 23.5. If you’ve read my work here at StreetAuthority, you’ll know I firmly believe that valuations always matter with stocks. Now is no different. This chart concerns me… but something else concerns me even more. Again, if you’re familiar with my work, you’ve found that I tend to rely on a stock’s forward P/E as an important valuation metric. The current forward P/E for the S&P 500… Read More

As Amazon.com (Nasdaq: AMZN) ventures into a few new categories every year, it foots the bill by redeploying cash flow from other, more mature divisions. #-ad_banner-#As a result, the company typically ekes out only $2 billion in annual free cash flow (defined as operating cash flow minus capital expenditures). For a company with nearly $75 billion in revenue last year, $2 billion isn’t much. Investors presume that Amazon’s free cash flow profile will be a lot more impressive — once it stops its breakneck pace of new product and service launches. At the other end of the spectrum, you have… Read More

As Amazon.com (Nasdaq: AMZN) ventures into a few new categories every year, it foots the bill by redeploying cash flow from other, more mature divisions. #-ad_banner-#As a result, the company typically ekes out only $2 billion in annual free cash flow (defined as operating cash flow minus capital expenditures). For a company with nearly $75 billion in revenue last year, $2 billion isn’t much. Investors presume that Amazon’s free cash flow profile will be a lot more impressive — once it stops its breakneck pace of new product and service launches. At the other end of the spectrum, you have companies that are already quite mature. They have few growth initiatives to pursue, and much of their operating cash flow is converted right into free cash flow. Such stocks tend to be shunned by growth investors, but for the value crowd, they hold great appeal. Their robust free cash flow can be used to pay down debt, boost the dividend or induce share buybacks — the three pillars of what we call Total Yield. I scanned all of the companies in the S&P 400 (mid-cap) and S&P 500, looking for companies that generate impressive levels of free cash flow. I… Read More

Americans will never forget the real estate market crash. After 50-plus years of appreciating real estate assets, the bottom finally fell out, surprising nearly everyone. Foreclosures were rampant as homeowners were unable or unwilling to make payments as home prices rapidly depreciated.   #-ad_banner-#The plunging housing prices forced the entire economy into a deep recessionary period. However, no sectors were more damaged than the businesses that depend on a thriving housing market to survive. I am talking about builders, contractors, landscapers and a host of other businesses that provide services, products and create value for homeowners. These businesses… Read More

Americans will never forget the real estate market crash. After 50-plus years of appreciating real estate assets, the bottom finally fell out, surprising nearly everyone. Foreclosures were rampant as homeowners were unable or unwilling to make payments as home prices rapidly depreciated.   #-ad_banner-#The plunging housing prices forced the entire economy into a deep recessionary period. However, no sectors were more damaged than the businesses that depend on a thriving housing market to survive. I am talking about builders, contractors, landscapers and a host of other businesses that provide services, products and create value for homeowners. These businesses depend directly upon rising or at least steady home prices. One such company is the Dixie Group (NYSE: DXYN). This company specializes in manufacturing and selling rugs and carpets to residential and commercial customers. Dixie sells under the brand names Fabrica International, Masland Carpets and Dixie Home. The real estate crash decimated Dixie’s stock, sending shares of DXYN plunging below $2 during the real estate crash. Price has slowly worked its way back to as high as $18 at the start of 2014 as the real estate market improved. However, DXYN has fallen from… Read More

When satellite radio provider Sirius XM (Nasdaq: SIRI) delivered first-quarter results in late April, it was business as usual. An 11% gain in revenue led to a sharper 28% surge in earnings before interest, taxes, depreciation and amortization (EBITDA), as the company reaps the benefit of incremental new revenues across its largely fixed cost base. That operating leverage has been in place for quite a while, as EBITDA margins expanded from 23% in 2009 to 34% at the end of 2013. Equally impressive, Sirius has become a free cash flow machine and appears on track to generate nearly $1 billion… Read More

When satellite radio provider Sirius XM (Nasdaq: SIRI) delivered first-quarter results in late April, it was business as usual. An 11% gain in revenue led to a sharper 28% surge in earnings before interest, taxes, depreciation and amortization (EBITDA), as the company reaps the benefit of incremental new revenues across its largely fixed cost base. That operating leverage has been in place for quite a while, as EBITDA margins expanded from 23% in 2009 to 34% at the end of 2013. Equally impressive, Sirius has become a free cash flow machine and appears on track to generate nearly $1 billion in free cash flow for the second straight year. Such robust free cash flow has enabled Sirius to restructure its debt (at lower interest rates) while also buying back a large chunk of stock from investor John Malone. (In fact, the total share buyback plan is an impressive $2 billion.)  Also, the fact that Sirius now has 26 million paying subscribers is a feat that few would have expected the company to accomplish a half decade ago. Sirius’ service is resold by 70% of the major automakers and 25% of all cars (new and used) on the road today have the… Read More

You’ve probably heard breakfast is the most important meal of the day. #-ad_banner-#But did you know people who regularly eat breakfast are more productive and have better mental performance? Numerous studies also show regular breakfast eaters have significantly lower risk of obesity, high blood pressure and diabetes. As Americans become more aware of breakfast’s importance, breakfast foods are on the rise. According to consumer research firm Mintel, the breakfast sector grew 20% between 2007 and 2011. By 2017, it’s expected to expand 26% more. While coffee and donuts may sound like a tempting choice, a survey on What… Read More

You’ve probably heard breakfast is the most important meal of the day. #-ad_banner-#But did you know people who regularly eat breakfast are more productive and have better mental performance? Numerous studies also show regular breakfast eaters have significantly lower risk of obesity, high blood pressure and diabetes. As Americans become more aware of breakfast’s importance, breakfast foods are on the rise. According to consumer research firm Mintel, the breakfast sector grew 20% between 2007 and 2011. By 2017, it’s expected to expand 26% more. While coffee and donuts may sound like a tempting choice, a survey on What America Eats found 73% of us actually prefer savory breakfast foods over sweet. Eggs and breakfast sandwiches are some of our most common choices, according to market research firm NDP Group. No wonder. A study from the University of Missouri found breakfasts high in protein — like eggs — help you stay full longer. With many fast-food chains now offering egg-based breakfast items, egg demand is soaring. In fact, egg consumption is at its highest in seven years, according to the U.S. Department of Agriculture. And it’s expected to keep increasing. In the U.S., there are currently about 175 U.S. Read More

The consumer discretionary sector has seen amazing gains in recent years as the economy emerged from the depths of the financial crisis. Judging from the fundamental environment, as well as through a technical lens, the sector’s run in this cyclical bull market doesn’t appear to be over quite yet.  #-ad_banner-#And one stock within the sector that looks to have plenty more upside is California-based shoe company Deckers Outdoor (NYSE: DECK). Just as the broader market’s steep uptrend over the past five years has been met with investor disbelief, many market watchers have long called for the end to… Read More

The consumer discretionary sector has seen amazing gains in recent years as the economy emerged from the depths of the financial crisis. Judging from the fundamental environment, as well as through a technical lens, the sector’s run in this cyclical bull market doesn’t appear to be over quite yet.  #-ad_banner-#And one stock within the sector that looks to have plenty more upside is California-based shoe company Deckers Outdoor (NYSE: DECK). Just as the broader market’s steep uptrend over the past five years has been met with investor disbelief, many market watchers have long called for the end to the rise in consumer discretionary stocks. They rationalized their bearish stance with hand-picked economic statistics, but price is the ultimate arbiter, and they couldn’t have been more wrong. The Consumer Discretionary Select Sector SPDR ETF (NYSE: XLY) has risen more than 300% since the double bottom in late 2008 and early 2009. The trend is up, and until that changes, there’s no sense in going against it and no money to be made fighting it. With the strong uptrend in the consumer discretionary sector intact, I combed through the charts of a hundred consumer discretionary stocks, looking for… Read More

If a firm that has earned the title of “Baby Berkshire” actually outperforms Warren Buffett’s legendary Berkshire Hathaway (NYSE: BRK-B), what should it be called then?  It’s just a hypothetical question, but I ask because the stock of one pretty well-known Baby Berkshire has been soundly beating the real Berkshire for quite some time. #-ad_banner-#As you can see, this Baby Berkshire is substantially ahead at just about every time, and it has led by nearly 2 full percentage points a year for the past decade and a half.  The firm takes after Buffett’s… Read More

If a firm that has earned the title of “Baby Berkshire” actually outperforms Warren Buffett’s legendary Berkshire Hathaway (NYSE: BRK-B), what should it be called then?  It’s just a hypothetical question, but I ask because the stock of one pretty well-known Baby Berkshire has been soundly beating the real Berkshire for quite some time. #-ad_banner-#As you can see, this Baby Berkshire is substantially ahead at just about every time, and it has led by nearly 2 full percentage points a year for the past decade and a half.  The firm takes after Buffett’s Berkshire in a couple key ways, including its business model — a diverse and profitable insurance business supplemented by an adeptly managed stock portfolio. Also, the firm refuses to let the constant din of notoriously shortsighted Wall Street distract it from its goal of delivering excellent long-term results. I’m referring to specialty insurer Markel (NYSE: MKL), which currently only has a market capitalization of $9.1 billion (Berkshire’s Class A shares alone are worth more than $310 billion). But I don’t think it’ll be long until Markel achieves large-cap status — thanks to fast-rising revenues, which have more than doubled since… Read More

When I think of investing in the auto sector, the first names that come to mind are the big automobile companies: General Motors (NYSE: GM), Ford (NYSE: F) or Toyota (NYSE: TM). For investors with a higher risk profile, there is Tesla Motors (Nasdaq: TSLA). #-ad_banner-#However, there’s one automaker that’s an even better company to own… one that’s undervalued and whose revenues are growing at a much faster rate than many of its better-known competitors. That automaker is Tata Motors (NYSE: TTM).  Tata is India’s largest automaker, but it may… Read More

When I think of investing in the auto sector, the first names that come to mind are the big automobile companies: General Motors (NYSE: GM), Ford (NYSE: F) or Toyota (NYSE: TM). For investors with a higher risk profile, there is Tesla Motors (Nasdaq: TSLA). #-ad_banner-#However, there’s one automaker that’s an even better company to own… one that’s undervalued and whose revenues are growing at a much faster rate than many of its better-known competitors. That automaker is Tata Motors (NYSE: TTM).  Tata is India’s largest automaker, but it may be better known in the U.S. for buying Jaguar and Land Rover from Ford for only $2.3 billion in 2008.  In October, my colleague Dave Goodboy talked about Tata as a play on the global auto sales boom. Tata has hit his price target of $40 (which represented upside of about 25% at the time), but based on Tata’s earnings and revenue growth, there is even more upside ahead. Tata Motors is the largest automobile company in India. The company is also the world’s fourth-largest bus manufacturer and fifth-largest truck manufacturer. Since Tata Motors is an important part of India’s… Read More

Although most of the financial media is focused on large, public companies with billions of dollars in annual sales, it’s actually the little guy that deserves more ink.  Small to medium-size businesses (SMB), often privately held with less than a thousand employees, play a huge role in terms of job creation and capital spending. According to the U.S. Small Business Administration, SMBs provide 45% of all non-farm economic activity, 40% of all private sector payrolls and employ nearly half of all non-government employees.  So you should consider it to be a big deal when the National Federation of Independent Business… Read More

Although most of the financial media is focused on large, public companies with billions of dollars in annual sales, it’s actually the little guy that deserves more ink.  Small to medium-size businesses (SMB), often privately held with less than a thousand employees, play a huge role in terms of job creation and capital spending. According to the U.S. Small Business Administration, SMBs provide 45% of all non-farm economic activity, 40% of all private sector payrolls and employ nearly half of all non-government employees.  So you should consider it to be a big deal when the National Federation of Independent Business (NFIB), which represents these firms, speaks of a noticeable boost in the outlook for such businesses. The NFIB polls its membership base once a month, and in the most recent reading, found that its NFIB Optimism survey rose last month to 96.6, the highest reading in nearly seven years. Yes, SMB confidence is back to pre-crisis levels.  To be sure, the NFIB survey didn’t note any major change in business activity. Instead, the key boost to the gauge came from an expectation of steadily improving sales and business conditions in the future, which is typically a… Read More