If you missed the news last week, U.S. GDP rose a reported 2.8% in the third quarter instead of the 2% economists expected. This was framed as bad news in many news stories because the jump resulted from businesses holding larger-than-expected inventories. Just over a week earlier, the U.S. Census Bureau released a report on the inventory-to-sales ratio showing inventories weren’t really a problem. When a business sees sales rising, it will often increase its inventory to meet the higher demand. The relationship between inventory and sales can be summarized in a ratio that shows how many days’ worth of… Read More

If you missed the news last week, U.S. GDP rose a reported 2.8% in the third quarter instead of the 2% economists expected. This was framed as bad news in many news stories because the jump resulted from businesses holding larger-than-expected inventories. Just over a week earlier, the U.S. Census Bureau released a report on the inventory-to-sales ratio showing inventories weren’t really a problem. When a business sees sales rising, it will often increase its inventory to meet the higher demand. The relationship between inventory and sales can be summarized in a ratio that shows how many days’ worth of inventory is available based on the amount of sales recorded in a day. The inventory-to-sales ratio was 1.29 in the most recent report, which used data from August, down from 1.3 a year ago. Inventories rose 3.1% from a year ago, while sales increased 4.2% over that time. We would expect to see inventories increase if sales are rising, and the decline in the ratio shows that sales are rising faster than inventories. News reports seem to reflect the mood of the market, and that is the basis for the “magazine cover indicator.” According to this indicator, when the media… Read More

Change is the only constant in the world. This is particularly true when it comes to the Internet. It was only in 1989 when the first commercial dial-up Internet service provider (ISP) was launched. Few realized that this ISP, named The World, would spark a radical global revolution. Visionary companies jumped on board as the public started using the Internet as a means of shopping, information and entertainment. Many companies took to the stock markets to raise capital for a foray into the Internet frontier. If your company name included “dot-com,” investment banks were probably clamoring to take it public. Read More

Change is the only constant in the world. This is particularly true when it comes to the Internet. It was only in 1989 when the first commercial dial-up Internet service provider (ISP) was launched. Few realized that this ISP, named The World, would spark a radical global revolution. Visionary companies jumped on board as the public started using the Internet as a means of shopping, information and entertainment. Many companies took to the stock markets to raise capital for a foray into the Internet frontier. If your company name included “dot-com,” investment banks were probably clamoring to take it public. Companies that were little more than an idea and some rented office space were able to raise millions quickly and easily. Not since the Dutch tulip mania of the 1600s had the world seen such an investment frenzy, but the vast majority of these companies failed to gain traction after the initial hype. Names like Webvan, eToys.com, Flooz.com and Kozmo.com, plus hundreds of others, have been relegated to the dustbin of history despite massive funding and the leadership of aggressive, intelligent entrepreneurs. Many of these firms were simply before their time, as consumers and businesses just weren’t ready to use… Read More

Apocalyptic fears have gripped the minds of Americans over the past few years, and Hollywood has capitalized on them with movies, television series and reality shows. While a zombie virus may be far-fetched, fears of inflation and market volatility are better grounded in reality. #-ad_banner-# Out of Alabama comes a story that underlines what becomes important if inflation really does get out of control. A would-be car buyer whose credit was less than exemplary made an unconventional down payment — a shotgun. While this is certainly more of a lesson in subprime lending standards going beyond real estate, there is… Read More

Apocalyptic fears have gripped the minds of Americans over the past few years, and Hollywood has capitalized on them with movies, television series and reality shows. While a zombie virus may be far-fetched, fears of inflation and market volatility are better grounded in reality. #-ad_banner-# Out of Alabama comes a story that underlines what becomes important if inflation really does get out of control. A would-be car buyer whose credit was less than exemplary made an unconventional down payment — a shotgun. While this is certainly more of a lesson in subprime lending standards going beyond real estate, there is a small sliver of knowledge to take away here. In a highly inflationary environment, gold becomes less important than “real” hard assets — practical items like food, water, shelter and, of course, weapons. Before the survivalists start sending this article to everyone they know, let’s step back and take a look at the gun-making industry from a pragmatic point of view. We know that fear creates opportunities for profit, and this is reflected in the number of gun sales amid the Obama administration’s position on gun control. Shares of gun makers have soared this year: Smith & Wesson (Nasdaq: SWHC)… Read More

Apple (Nasdaq: AAPL) is one of the great high-tech success stories. Led by the visionary, charismatic and sometimes controversial Steve Jobs until his recent untimely death, Apple has become one of the world’s leading companies. After starting out as a personal computer maker, Apple is now best known for its mobile devices, which have catapulted it from a cult brand into the mainstream.#-ad_banner-# In less than five months, AAPL shares have soared from below $400 to about $520 currently. This 30% increase is impressive but well below the stock’s all-time high above $700 last year. Unfortunately for many investors, Apple’s… Read More

Apple (Nasdaq: AAPL) is one of the great high-tech success stories. Led by the visionary, charismatic and sometimes controversial Steve Jobs until his recent untimely death, Apple has become one of the world’s leading companies. After starting out as a personal computer maker, Apple is now best known for its mobile devices, which have catapulted it from a cult brand into the mainstream.#-ad_banner-# In less than five months, AAPL shares have soared from below $400 to about $520 currently. This 30% increase is impressive but well below the stock’s all-time high above $700 last year. Unfortunately for many investors, Apple’s success has made trading its shares difficult. You have to be swinging a big stick to be able to commit $500,000-plus to trade just 1,000 shares. Options can be used as alternative tools to capture profits from Apple’s moves, but there is another, simpler way to profit from its success — and that is to purchase shares in companies that supply products and services to Apple. When these products or services are a critical part of the supply chain for Apple’s products, the company supplying them may ride Apple’s coattails to great success. The key is to identify a supplier… Read More

By many measures, 2013 is shaping up to be the best year for initial public offerings (IPOs) since 2007.#-ad_banner-# The volume of new offerings has surged, and hot new issues such as FireEye (Nasdaq: FEYE), Rally Software (Nasdaq: RALY) and Epizyme (Nasdaq: EPZM) have already bagged triple-digit gains. This week’s well-received IPO from Twitter (NYSE: TWTR) is merely icing on the cake. Yet amid the good news, some IPOs have been duds. Companies with short track records or an open-ended path to operating losses have been tossed in the IPO dust bin. But in the rubble, you can find some… Read More

By many measures, 2013 is shaping up to be the best year for initial public offerings (IPOs) since 2007.#-ad_banner-# The volume of new offerings has surged, and hot new issues such as FireEye (Nasdaq: FEYE), Rally Software (Nasdaq: RALY) and Epizyme (Nasdaq: EPZM) have already bagged triple-digit gains. This week’s well-received IPO from Twitter (NYSE: TWTR) is merely icing on the cake. Yet amid the good news, some IPOs have been duds. Companies with short track records or an open-ended path to operating losses have been tossed in the IPO dust bin. But in the rubble, you can find some deep value plays — and building products firm Ply Gem Holdings (NYSE: PGEM) is one of them. The recent IPO has traded down but now holds considerable upside. What Went Wrong? Ply Gem makes a range of products used in home construction and the repairs and upgrades of existing homes. The company has strong market share in windows, doors, paving stone, vinyl siding, and fencing. And as you’d suspect, sales have been rising for the past few years in tandem with the housing recovery: Sales rose 8% in 2012 to $1.12 billion, and operating income rose 56%… Read More

When I was a kid, I went to a Catholic grade school. And because our school was affiliated with a church, I volunteered to be an altar boy.#-ad_banner-# On the surface, it was a great way to make myself look good. I knew my parents would be happy. But in reality, it was just a good excuse to get out of class. I knew that every week, whether it was sunny, rainy, warm or cold, there were going to be a couple of funeral processions that would need altar boys to help celebrate Mass. Even though being an altar boy… Read More

When I was a kid, I went to a Catholic grade school. And because our school was affiliated with a church, I volunteered to be an altar boy.#-ad_banner-# On the surface, it was a great way to make myself look good. I knew my parents would be happy. But in reality, it was just a good excuse to get out of class. I knew that every week, whether it was sunny, rainy, warm or cold, there were going to be a couple of funeral processions that would need altar boys to help celebrate Mass. Even though being an altar boy at a funeral doesn’t sound like much fun, it was an early lesson about the nature of demand — mortality wasn’t just predictable, it was undeniable. But looking forward, that undeniable trend is accelerating. With more than 10,000 baby boomers retiring every day, the National Funeral Directors Association projects the U.S. death rate will increase from 8 deaths per 10,000 people to 10 by 2045.   That is setting the stage for a wave of demand for “death care” products and services. And there is one company ready to cash in. This little-known market leader is one of the largest… Read More

We’ve all accidently cut ourselves and stuck a bandage on it to stop the bleeding, then gone about our business. Usually the wound heals after a couple of days, and all is good. On occasion, though, a simple cut can turn complicated.#-ad_banner-# Say I’ve cut my finger and it begins to fester. I go to a doctor’s office and have a blood sample drawn and shipped to a lab for analysis. The doctor makes an educated guess as to which antibiotic might clear the infection and prescribes a 10-day supply. By the time your blood has gone through the routine… Read More

We’ve all accidently cut ourselves and stuck a bandage on it to stop the bleeding, then gone about our business. Usually the wound heals after a couple of days, and all is good. On occasion, though, a simple cut can turn complicated.#-ad_banner-# Say I’ve cut my finger and it begins to fester. I go to a doctor’s office and have a blood sample drawn and shipped to a lab for analysis. The doctor makes an educated guess as to which antibiotic might clear the infection and prescribes a 10-day supply. By the time your blood has gone through the routine tests to identify the infection and determine the correct antibiotic, five days have passed. But after a few days — and pills — you feel better. This time the doctor guessed right, averting a possible crisis. However, more than 250,000 people die from sepsis — the spread of bacteria from a point of infection — every year. A simple infection from a cut, or pneumonia, or any number of sources can quickly turn to sepsis — which can be deadly without prompt and proper treatment. Until recently, doctors had to rely on antiquated tests that took days to deliver results… Read More

I like buying stocks, not selling stocks — unless, of course, I am selling them for a big profit. And while I suspect that this market is headed higher over the next couple of months, and that you should be buying the “air pockets,” I also think there are certain stocks that need to be jettisoned from your holdings due to a lack of upside catalysts in the short and/or intermediate term.#-ad_banner-# One of the stocks I think is headed lower is tech giant Cisco Systems (Nasdaq: CSCO). The network equipment maker has long been a… Read More

I like buying stocks, not selling stocks — unless, of course, I am selling them for a big profit. And while I suspect that this market is headed higher over the next couple of months, and that you should be buying the “air pockets,” I also think there are certain stocks that need to be jettisoned from your holdings due to a lack of upside catalysts in the short and/or intermediate term.#-ad_banner-# One of the stocks I think is headed lower is tech giant Cisco Systems (Nasdaq: CSCO). The network equipment maker has long been a stalwart in the tech space, and I’ve been buying and selling CSCO shares with very good results since the late 1990s. So far this year, Cisco shares are up 20.5%. Unfortunately, over the past three months, the stock has tumbled more than 11%. The trouble with CSCO shares started midway through August, which not coincidentally was when the company reported fiscal fourth-quarter earnings. Although it managed to beat earnings expectations, Cisco’s sales were less than impressive. Perhaps more importantly, Cisco announced plans to slash about 5% of its workforce, presumably in an effort to maintain profit margins in the wake… Read More

The bungled initial public offering (IPO) for Facebook (Nasdaq: FB) was a real eye-opener for any company looking to go public.#-ad_banner-# Facebook’s shares famously plunged soon after they started trading, in large part because the $16 billion offering was so large that it created a great deal of investor confusion as share allocations were misdirected.  Lesson learned. Twitter’s (NYSE: TWTR) IPO valued the company at just $1.8 billion. Sure, that’s far higher than the initial $1 billion planned offering, but still a much smaller fish for the markets to digest. In a sure sign that investors must own this company,… Read More

The bungled initial public offering (IPO) for Facebook (Nasdaq: FB) was a real eye-opener for any company looking to go public.#-ad_banner-# Facebook’s shares famously plunged soon after they started trading, in large part because the $16 billion offering was so large that it created a great deal of investor confusion as share allocations were misdirected.  Lesson learned. Twitter’s (NYSE: TWTR) IPO valued the company at just $1.8 billion. Sure, that’s far higher than the initial $1 billion planned offering, but still a much smaller fish for the markets to digest. In a sure sign that investors must own this company, shares were initially set to be priced at around $20, the deal was eventually bumped to around $26, and opened at an eye-popping $45.10 a share. At that price, Twitter is now valued at more than $25 billion. Most of the company is still in private hands. Look for Twitter to slowly offer more shares in various secondary offerings, but the initial scarcity factor is going to make huge instant profits for some investors. But if you missed out on this morning’s offering, then you should wait. Twitter is now valued at more than 30 times projected 2014 sales, a… Read More

There are few legal monopolies.#-ad_banner-# One commonly cited example in the public markets is Sirius XM (Nasdaq: SIRI). Sure, Sirius is the only satellite operator in the market, but radio listeners have alternatives — including the likes of local broadcast radio. Even other common monopolies have alternatives, such as the U.S. Postal Service, where you can opt to use FedEx (NYSE: FDX) or UPS (NYSE: UPS). However, is there any market in which customers don’t have a choice? But what if there were a legal monopoly that embodied “customer captivity”? Imagine a company that has agreements that give it unrivaled… Read More

There are few legal monopolies.#-ad_banner-# One commonly cited example in the public markets is Sirius XM (Nasdaq: SIRI). Sure, Sirius is the only satellite operator in the market, but radio listeners have alternatives — including the likes of local broadcast radio. Even other common monopolies have alternatives, such as the U.S. Postal Service, where you can opt to use FedEx (NYSE: FDX) or UPS (NYSE: UPS). However, is there any market in which customers don’t have a choice? But what if there were a legal monopoly that embodied “customer captivity”? Imagine a company that has agreements that give it unrivaled power. And imagine that this same company operates in the fastest-growing industry in the world — the Internet. That company is VeriSign (Nasdaq: VRSN), which has a virtual monopoly on Internet domains. This company has a high level of customer captivity, meaning that its customers rely heavily on its services and cannot get said services elsewhere. VeriSign offers domain name registry services. What this means is that VeriSign operates the authoritative directory of dot-com, dot-net, dot-cc, dot-tv and dot-name domains. The company saw a sizable pullback in late 2012, after the Internet Corporation for Assigned Names and Numbers (ICANN) approved… Read More