There are often two phases in the trajectory of a hot stock. The first phase is when growth prospects are pushing shares higher. The second phase comes when momentum investors take over and keep pushing shares higher still, even if the financial statements are flashing warning signs. That second phase can end quite badly when momentum investors head for the exits. That encapsulates the rapid rise and sudden plunge for 3D Systems (NYSE: DDD), which after a meteoric rise in recent years, has stumbled badly in 2014 and is now below its 100-day moving average. #-ad_banner-#​… Read More

There are often two phases in the trajectory of a hot stock. The first phase is when growth prospects are pushing shares higher. The second phase comes when momentum investors take over and keep pushing shares higher still, even if the financial statements are flashing warning signs. That second phase can end quite badly when momentum investors head for the exits. That encapsulates the rapid rise and sudden plunge for 3D Systems (NYSE: DDD), which after a meteoric rise in recent years, has stumbled badly in 2014 and is now below its 100-day moving average. #-ad_banner-#​After nearly reaching the $100 mark in early January, shares began to lose altitude in ensuing weeks and plunged sharply last week after the company reported disappointing fourth-quarter results.  Investors should not have been caught off-guard. As I noted back in September, the company’s repeated capital raises in prior years were frittered away on questionable acquisitions, and 3D Systems’ accounts receivables and cash-flow metrics were also flashing red.  Shares moved much higher after I raised those concerns — as momentum investors took hold of the stock — and now they are almost back down to levels seen back in… Read More

Turnabout is fair play. Just as Monster Worldwide (NYSE: MWW) took the job recruitment industry by storm a decade ago, catching recruitment firms and newspaper advertisers off guard, LinkedIn (Nasdaq: LNKD) eventually turned Monster into an also-ran. #-ad_banner-#​Back in 2008, LinkedIn had just $79 million in revenue while Monster had $1.3 billion. Fast-forward to 2013, and Monster’s revenues slumped to just $800 million, while LinkedIn’s sales base surpassed $1.5 billion. And look for more of the same in 2014 and 2015, by which time LinkedIn’s sales are expected to approach $3 billion. Monster’s projected 2015 sales: stuck at… Read More

Turnabout is fair play. Just as Monster Worldwide (NYSE: MWW) took the job recruitment industry by storm a decade ago, catching recruitment firms and newspaper advertisers off guard, LinkedIn (Nasdaq: LNKD) eventually turned Monster into an also-ran. #-ad_banner-#​Back in 2008, LinkedIn had just $79 million in revenue while Monster had $1.3 billion. Fast-forward to 2013, and Monster’s revenues slumped to just $800 million, while LinkedIn’s sales base surpassed $1.5 billion. And look for more of the same in 2014 and 2015, by which time LinkedIn’s sales are expected to approach $3 billion. Monster’s projected 2015 sales: stuck at around $800 million. At least that was the consensus view before each of these firms released quarterly results late last week.  LinkedIn is starting to show growing pains, while Monster, for the second straight quarter, showed signs of a growth rebound. That may explain why shares of Monster have soared 50% since mid-October while shares of LinkedIn have tumbled nearly 20%. Despite those divergent stock moves, shares of LinkedIn still trade for more than 11 times projected 2014 sales while Monster is valued at less than one times sales. The question for investors: Is that kind of valuation… Read More

America is an agricultural juggernaut. #-ad_banner-#The United States has more arable land than any other nation on the planet and some of the highest crop yields per acre. However, only 20% of the country’s land area, about 408 million acres, is used for crop production. With this combination of amazing efficiency and the lack of capacity utilization, it’s clear that U.S. agriculture is a growth industry.  Seriously, agriculture has been an American growth industry since Squanto taught the pilgrims how to grow corn. But there’s real money to be made now. Outside of raw farmland — which has actually seen… Read More

America is an agricultural juggernaut. #-ad_banner-#The United States has more arable land than any other nation on the planet and some of the highest crop yields per acre. However, only 20% of the country’s land area, about 408 million acres, is used for crop production. With this combination of amazing efficiency and the lack of capacity utilization, it’s clear that U.S. agriculture is a growth industry.  Seriously, agriculture has been an American growth industry since Squanto taught the pilgrims how to grow corn. But there’s real money to be made now. Outside of raw farmland — which has actually seen some bubble-style price expansion over the past few years — the best way to cash in on the American Renaissance in agriculture is by owning the three D’s of American agriculture: chemical manufacturers Dow Chemical (NYSE: DOW) and DuPont (NYSE: DD), and equipment king Deere & Co. (NYSE: DE). All three names offer exceptional growth and value. Dow: Consistent Growth, With More To Come Since the market bottom of 2009, investors in DOW have been well rewarded. Not including dividends, the stock has produced an average annual return of 160%:  While some observers might think that the stock… Read More

In the corner offices of the nation’s major airlines, industry executives are still beaming about the “great re-rating of 2013.” #-ad_banner-#That was when deeply cyclical airline stocks, which were once tagged with extremely low price-to-earnings (P/E) ratios and EBITDA (earnings before interest, taxes, depreciation and amortization) multiples, started to earn much firmer ratios that were much more in line with the broader market. It’s a move I suspected might happen back in 2011, while Delta Airlines (NYSE: DAL) was trading for less than five times trailing earnings. At the time, I thought investors would eventually award a higher multiple as business… Read More

In the corner offices of the nation’s major airlines, industry executives are still beaming about the “great re-rating of 2013.” #-ad_banner-#That was when deeply cyclical airline stocks, which were once tagged with extremely low price-to-earnings (P/E) ratios and EBITDA (earnings before interest, taxes, depreciation and amortization) multiples, started to earn much firmer ratios that were much more in line with the broader market. It’s a move I suspected might happen back in 2011, while Delta Airlines (NYSE: DAL) was trading for less than five times trailing earnings. At the time, I thought investors would eventually award a higher multiple as business grew more predictable. If shares simply traded up to eight times projected 2012 profits, then DAL would double in value to $16, I figured. Shares now trade for around $30, or around 11.5 times forward earnings and around seven times projected 2014 EBITDA. In effect, the whole airline group has benefited from a trend toward higher P/E multiples — to a much greater extent than I had anticipated. Investors no longer fear a deep downturn for airline industry profits. In a similar vein, investors can stop worrying about the nation’s top automakers. Like the airlines, automakers now sport… Read More

Some stocks just never allow you to gain an edge through fundamental research — even by the most rigorous analytical minds. #-ad_banner-#These stocks become so popular that they become disconnected from any sort of fundamental valuation, and you can simply hold your nose and buy along with the crowd. Or you can be gutsy and look to sell shares short. Score one for the fundamental analysts. Heading into quarterly results, Twitter (NYSE: TWTR) was a major focus for short sellers, as I noted three weeks ago. The short interest has risen further since that article was published, to 32.7 million shares… Read More

Some stocks just never allow you to gain an edge through fundamental research — even by the most rigorous analytical minds. #-ad_banner-#These stocks become so popular that they become disconnected from any sort of fundamental valuation, and you can simply hold your nose and buy along with the crowd. Or you can be gutsy and look to sell shares short. Score one for the fundamental analysts. Heading into quarterly results, Twitter (NYSE: TWTR) was a major focus for short sellers, as I noted three weeks ago. The short interest has risen further since that article was published, to 32.7 million shares by mid-January. And these short sellers may be tempted to lock in gains after shares plunged more than 20% this week.  But they shouldn’t close out those short positions just yet — Twitter has an additional 20% to 25% downside from here. Twitter faces two challenges: It needs to sharply boost its audience, and it needs to figure out how to make much more money off of that audience. These are concerns I spelled out late last month on our sister site ProfitableTrading.com. Among the reasons why this stock may be headed to just $40 (or… Read More

The past few years have been a great time to be an investor. Federal Reserve Chairman Ben Bernanke’s zero interest rate policy has fueled large gains in just about every market sector since 2009. There’s little question that his policies are bullish in the short term, but what happens when the Fed’s easy money stops? #-ad_banner-#For an answer to this, we can take a page out of baseball history.  In 1998, Mark McGwire set a record by hitting 70 home runs during the season, while Sammy Sosa hit 66. The previous record of 61 home runs had been set in… Read More

The past few years have been a great time to be an investor. Federal Reserve Chairman Ben Bernanke’s zero interest rate policy has fueled large gains in just about every market sector since 2009. There’s little question that his policies are bullish in the short term, but what happens when the Fed’s easy money stops? #-ad_banner-#For an answer to this, we can take a page out of baseball history.  In 1998, Mark McGwire set a record by hitting 70 home runs during the season, while Sammy Sosa hit 66. The previous record of 61 home runs had been set in 1961 by Roger Maris. In 2001, Barry Bonds broke McGwire’s record by hitting 73 home runs.  At the time, baseball was an exciting sport to watch as home run records captured headlines. Later, fans learned that the hitters were abusing steroids. Home run outputs returned to normal after league-wide steroid testing became the norm in 2003.  Fed policy is acting like a performance-enhancing drug for the market. When it stops easing, I believe the markets will be unable to continue climbing at the frantic pace seen during the past year. Returns will be below average for some time, and stock… Read More

I love stories about regular people who have excelled in their chosen profession. The hedge fund and financial world is rife with tales of individuals who have built vast fortunes despite starting from modest beginnings. #-ad_banner-#To me, the most inspiring stories are about people who have fought their way to top, been knocked down, and then regained their top-dog status. These people are generally mavericks who go against the grain –and, in the financial realm, can find value in overlooked stocks that most of the investment world can’t readily see.  One of my favorite consistently successful money managers… Read More

I love stories about regular people who have excelled in their chosen profession. The hedge fund and financial world is rife with tales of individuals who have built vast fortunes despite starting from modest beginnings. #-ad_banner-#To me, the most inspiring stories are about people who have fought their way to top, been knocked down, and then regained their top-dog status. These people are generally mavericks who go against the grain –and, in the financial realm, can find value in overlooked stocks that most of the investment world can’t readily see.  One of my favorite consistently successful money managers is Ken Griffin of hedge fund Citadel LLC. Griffin started trading out of his college dorm room in 1986. He was so successful that he was quickly able to raise a million dollars from investors. By 1990, Griffin launched the Citadel Investment Group with a little over $4 million. This fund has grown to one of the largest hedge funds in the world with over $17 billion under management.  Griffin’s trip to the top has not been without its tribulations. One example is that during the financial crisis, Citadel sustained a drawdown of nearly 50%. During this time, many hedge… Read More

A key theme for the current five-year bull market: Bigger is not always better.#-ad_banner-# GE (NYSE: GE) is the nation’s largest industrial firm, yet its shares continue to lag behind the broader market by a wide margin. IBM (NYSE: IBM) has one of the largest revenue bases in the tech sector, but it’s trading at two-year lows. And in the agricultural sector, Archer Daniels Midland (NYSE: ADM), has underperformed the S&P 500 by nearly 60 percentage points over the past five years.  Yet it’s unwise to lump these three firms together. IBM and GE must make major changes to their… Read More

A key theme for the current five-year bull market: Bigger is not always better.#-ad_banner-# GE (NYSE: GE) is the nation’s largest industrial firm, yet its shares continue to lag behind the broader market by a wide margin. IBM (NYSE: IBM) has one of the largest revenue bases in the tech sector, but it’s trading at two-year lows. And in the agricultural sector, Archer Daniels Midland (NYSE: ADM), has underperformed the S&P 500 by nearly 60 percentage points over the past five years.  Yet it’s unwise to lump these three firms together. IBM and GE must make major changes to their business models to reinvigorate growth. ADM, in contrast, just needs to wait for industry dynamics to strengthen — and such a change may already be at hand.  Analysts at Citigroup expect “2014 will be a big recovery year in Archer’s major operations.” They recently upgraded shares to “buy” with a $45 price target.  The key factor driving ADM’s business is storage: The more crops that farmers grow, the more that ADM will prosper. A drought in the U.S. Midwest hampered business in the 2012-13 growing season, but according to the U.S. Department of Agriculture, the 2013-14 growing season has produced… Read More

Over the past few weeks, I’ve been chatting with my colleague and StreetAuthority’s Managing Editor, Bob Bogda, about the potential for home run stocks. These are the kinds that can deliver gains in one year that many other stocks take a decade to achieve. #-ad_banner-# No area is as ripe for such upside as micro-cap stocks, which typically have market caps between $50 million and $200 million. Micro-caps tend to toil in anonymity — right up until the time they deliver great news. Caught off guard, investors can push such stocks up by 50% or even 100%. Of course, with such… Read More

Over the past few weeks, I’ve been chatting with my colleague and StreetAuthority’s Managing Editor, Bob Bogda, about the potential for home run stocks. These are the kinds that can deliver gains in one year that many other stocks take a decade to achieve. #-ad_banner-# No area is as ripe for such upside as micro-cap stocks, which typically have market caps between $50 million and $200 million. Micro-caps tend to toil in anonymity — right up until the time they deliver great news. Caught off guard, investors can push such stocks up by 50% or even 100%. Of course, with such potential reward comes risk. Micro-caps can also shed value at a rapid pace, especially if the market loses steam. Case in point: I suggested back in September that Merge Healthcare (Nasdaq: MRGE) could double in value, but MRGE has fallen 27% since then. I still think Merge is an intriguing health care opportunity, but clearly my enthusiasm was premature. That’s why you need to take a basket approach to micro-caps. Placing too many funds in just one micro-cap stock is too risky. The other two stocks in that September article bear out that premise: Novavax (Nasdaq: NVAX) is up 77% since… Read More

Someone needs to take the microphone away from Google (Nasdaq: GOOG).#-ad_banner-# The company has been courting the press with its autonomous (aka driverless) car of the future, even though such a vehicle may never find mainstream demand from consumers. You would think that only Google has an eye on the road ahead. Yet behind the scenes, a handful of other companies are developing leading-edge technologies that surely will be in your car in the years to come. And far-sighted investors still have a chance to build positions in these firms before these technologies hit showrooms. From Outside To Inside… Read More

Someone needs to take the microphone away from Google (Nasdaq: GOOG).#-ad_banner-# The company has been courting the press with its autonomous (aka driverless) car of the future, even though such a vehicle may never find mainstream demand from consumers. You would think that only Google has an eye on the road ahead. Yet behind the scenes, a handful of other companies are developing leading-edge technologies that surely will be in your car in the years to come. And far-sighted investors still have a chance to build positions in these firms before these technologies hit showrooms. From Outside To Inside In recent years, consumers have seen a series of profound enhancements in terms of vehicle control. Sensors and cameras can help a car stay in its lane, signal when an adjacent car is in a blind spot, maintain a fixed distance from cars ahead through adaptive cruise control, and even place a car perfectly in a parking space. Look for the number of fatalities on U.S. roads to drop as more cars adopt these technologies. Yet it’s the car’s interior that represents the next frontier of technology. And it all comes from a niche known as telematics, which is the… Read More