Investors have a tendency to fixate on the negative instead of seeing the bigger bullish picture. Because of this, they often overreact to the slightest bad news and rush for the exits.  For the more level-headed traders out there, this can lead to great opportunities. #-ad_banner-# Gilead Sciences (Nasdaq: GILD) is a prime example of this. Due in part to investor overreactions, this biopharmaceutical company may be one of the most undervalued stocks in its sector. Gilead offers consistent earnings growth, and analysts… Read More

Investors have a tendency to fixate on the negative instead of seeing the bigger bullish picture. Because of this, they often overreact to the slightest bad news and rush for the exits.  For the more level-headed traders out there, this can lead to great opportunities. #-ad_banner-# Gilead Sciences (Nasdaq: GILD) is a prime example of this. Due in part to investor overreactions, this biopharmaceutical company may be one of the most undervalued stocks in its sector. Gilead offers consistent earnings growth, and analysts expect it to earn $12.08 per share this year and $12.42 per share next year. With shares trading at $82.70, GILD has a forward price-to-earnings (P/E) ratio of less than 7, which is a bargain considering that the average forward valuation in the biotech industry is 25. Other large drug companies with stable earnings — like Merck (NYSE: MRK) and Pfizer (NYSE: PFE) — often trade with forward multiples above the industry average. If GILD were valued at just half the industry average (which I believe is a fair assumption), shares would trade around $150 — more than 80% above… Read More

The story was picked up by major news sources a few years ago as a “cute” human interest feature. You might have seen the headlines, like “How a Secretary Made and Gave Away $7 Million.” But for me, this wasn’t some light news piece. This was a story that resonated deeply with me. I didn’t know Grace Groner, from Lake Forest, Illinois. From the stories, she was a woman who lived frugally. Her passing was of interest because her three shares of Abbott Laboratories (NYSE: ABT) grew into more than 100,000 shares through decades… Read More

The story was picked up by major news sources a few years ago as a “cute” human interest feature. You might have seen the headlines, like “How a Secretary Made and Gave Away $7 Million.” But for me, this wasn’t some light news piece. This was a story that resonated deeply with me. I didn’t know Grace Groner, from Lake Forest, Illinois. From the stories, she was a woman who lived frugally. Her passing was of interest because her three shares of Abbott Laboratories (NYSE: ABT) grew into more than 100,000 shares through decades of dividend reinvestment. In total, her estate came in at roughly $7 million. #-ad_banner-#And while I didn’t know Grace Groner, I did know Lillian Calistri. The last time I saw Aunt Lillian was in 1990. I remember that a nephew had the misfortune of addressing her as “Lillian.” She promptly looked us all in the eye and said, “You will continue to call me Aunt Lillian.” We were all over 25 years old at the time, but in Lillian’s world, adulthood was no excuse for bad manners. Read More

Short seller Carson Block of Muddy Waters Capital sparked fears of banking weakness when he spoke negatively about Bank of the Ozarks (Nasdaq: OZRK) at the 2016 Sohn Investment Conference last week. Block announced a short position in the stock, warning that its portfolio of real estate construction loans were overextended in markets that may have already peaked.  OZRK plummeted following Block’s remarks, leading to the worst weekly performance in the SPDR S&P Bank ETF (NYSE: KBE) since early January. #-ad_banner-#Investors have turned increasingly cautious on banking stocks lately, but despite a weak April jobs report, economic and lending data… Read More

Short seller Carson Block of Muddy Waters Capital sparked fears of banking weakness when he spoke negatively about Bank of the Ozarks (Nasdaq: OZRK) at the 2016 Sohn Investment Conference last week. Block announced a short position in the stock, warning that its portfolio of real estate construction loans were overextended in markets that may have already peaked.  OZRK plummeted following Block’s remarks, leading to the worst weekly performance in the SPDR S&P Bank ETF (NYSE: KBE) since early January. #-ad_banner-#Investors have turned increasingly cautious on banking stocks lately, but despite a weak April jobs report, economic and lending data favors a bullish outlook on banks. And the increased volatility is presenting a rare opportunity for income investors. Real Estate Market Looks Strong While Block hasn’t been able to recreate the success he found shorting Chinese firms, the market still gives him plenty of attention. Shares of OZRK plunged as much as 15% on the day of his presentation, but managed to close with just a 4% loss, suggesting investors didn’t completely buy his logic. ​ Upon closer inspection, Block’s negative outlook on commercial real estate and banking just doesn’t pan out. The U.S. economy is one of the strongest… Read More

Imagine you open a savings account and deposit $10,000. The interest rate is 2.5%, which isn’t tremendous — but you’ll take it in this low-interest-rate environment. Now imagine that every year, the interest rate rises by 0.25 percentage points: 2.75% in year two, 3% in year three, and so on. Pretty good, right? After 10 years, your account would pay you 4.75%. After 20, the interest rate is 7.25%. Lots of folks would sign up for that. #-ad_banner-#Now imagine an even better deal: instead of rising by 0.25 percentage points a year, rate goes up 10% each year — that… Read More

Imagine you open a savings account and deposit $10,000. The interest rate is 2.5%, which isn’t tremendous — but you’ll take it in this low-interest-rate environment. Now imagine that every year, the interest rate rises by 0.25 percentage points: 2.75% in year two, 3% in year three, and so on. Pretty good, right? After 10 years, your account would pay you 4.75%. After 20, the interest rate is 7.25%. Lots of folks would sign up for that. #-ad_banner-#Now imagine an even better deal: instead of rising by 0.25 percentage points a year, rate goes up 10% each year — that is, 0.25 percentage points in year one, 0.275 percentage points in year two, then0 .3025 in year three, and so on. After 10 years of this type of increase, your account would pay you 6.48%. After 20 years, you’d earn 16.8% on your deposit! This exercise is worth thinking about whenever you contemplate the value of dividend-growth stocks to a long-term portfolio. Because the latter deal — regular increases of the payout over time — is pretty much what you can expect from a high-quality company that increases its dividend year in and year out. Of course, in a savings… Read More

Part of investing is taking advantage of temporary opportunities while they last. For the past several years, corporations have been able to issue debt at super-low rates to fund share buybacks, which in turn, boosts earnings per share.  Along with dividends, buybacks have contributed to a huge amount of cash being returned to shareholders, helping make up for a sluggish global economy and anemic sales growth. With low interest rates likely to persist, we still have a chance to play this theme.  However, buybacks and dividends aren’t enough to keep investors… Read More

Part of investing is taking advantage of temporary opportunities while they last. For the past several years, corporations have been able to issue debt at super-low rates to fund share buybacks, which in turn, boosts earnings per share.  Along with dividends, buybacks have contributed to a huge amount of cash being returned to shareholders, helping make up for a sluggish global economy and anemic sales growth. With low interest rates likely to persist, we still have a chance to play this theme.  However, buybacks and dividends aren’t enough to keep investors from losing money in the long run if a company offers nothing more than financial parlor tricks. That’s why I look for companies with strong brand leadership and attractive valuations, which should help me capture capital gains in addition to consistent income. #-ad_banner-# And I’ve found just such an opportunity in the recent retail sales meltdown. Williams-Sonoma (NYSE: WSM) is a leader in the $100 billion home furnishings market with more than 600 retail locations and a solid online… Read More

On April 13, 2015, the S&P 500 closed at 2,081. On April 13, 2016, it closed at 2,082. Of course, there have been innumerable up and down gyrations since then. But in the end, the benchmark index is right back where it started. In essence, we’ve gone nowhere over the past year. #-ad_banner-#There are more than a few pros, including top strategists at Goldman Sachs, who think the most likely trend for future stock prices isn’t up or down, but sideways. Given the macroeconomic cross-currents, you can understand why the market has no clear… Read More

On April 13, 2015, the S&P 500 closed at 2,081. On April 13, 2016, it closed at 2,082. Of course, there have been innumerable up and down gyrations since then. But in the end, the benchmark index is right back where it started. In essence, we’ve gone nowhere over the past year. #-ad_banner-#There are more than a few pros, including top strategists at Goldman Sachs, who think the most likely trend for future stock prices isn’t up or down, but sideways. Given the macroeconomic cross-currents, you can understand why the market has no clear direction. There are several compelling reasons to sell stocks… crumbling commodity prices, ongoing terrorist threats, rising interest rates, excessive valuations, stalling global economic growth. Yet, there are just as many strong arguments in favor of buying… robust job creation, strong consumer spending, cheap and available capital, heated M&A activity. You can see why the bulls and bears are in a tug-of-war right now. It’s quite possible that neither will gain the upper hand, leaving the broader market drifting. There will certainly be volatile day-to-day price swings, but the larger trend could… Read More

Pension funds are in the news again… and the news isn’t very good. Many plans are underfunded, which means they don’t have enough money to pay the benefits they’ve promised. Among those many underfunded plans are funds managed by the city of Chicago, which were recently blocked… Read More

Like my dad, Anthony Ralys was from Massachusetts, joined the Army Air Corp during World War II and served on a B-24 bomber. Also like my dad, Ralys was a first-generation American. Ralys’ parents emigrated from Lithuania, while my dad’s parents emigrated from Armenia. #-ad_banner-#Recently, I learned they had something else in common: investing. After the war, Ralys returned home, married, and ran the local barbershop for 38 years. He died on June 16, 2014, at age 89. This month, it was discovered that Ralys left $1.4 million to his hometown library in Athol, Massachusetts. Everyone who knew him was… Read More

Like my dad, Anthony Ralys was from Massachusetts, joined the Army Air Corp during World War II and served on a B-24 bomber. Also like my dad, Ralys was a first-generation American. Ralys’ parents emigrated from Lithuania, while my dad’s parents emigrated from Armenia. #-ad_banner-#Recently, I learned they had something else in common: investing. After the war, Ralys returned home, married, and ran the local barbershop for 38 years. He died on June 16, 2014, at age 89. This month, it was discovered that Ralys left $1.4 million to his hometown library in Athol, Massachusetts. Everyone who knew him was stunned to learn he had an investment account — let alone one that was worth seven figures. According to a local newspaper, Anthony and his wife started investing in municipal bonds early on in their lives. It was unusual for people like my dad and Anthony Ralys to invest when they were young. According to a census conducted by the New York Stock Exchange in 1952, only about 4.2% of Americans owned stock. But even that small group was mostly made up of well-heeled individuals. The wealthiest 10% of families owned 83.2% of stocks (based on value) in the 1950s. Read More

Utility stocks performed relatively well in the early weeks of 2016. As classic “widow and orphan” investments, these safe havens attracted money from investors spooked by the overall market selloff. But in April utilities lagged the market, perhaps because of concerns that the Fed will again raise short-term interest rates. Rising rates tend to hurt utility stocks because it makes their above-average dividend yields less compelling versus bond yields.   Income investors should take note of this pause in utilities’ bull run and look to pick up shares of the best utilities at attractive prices. It’s unlikely that… Read More

Utility stocks performed relatively well in the early weeks of 2016. As classic “widow and orphan” investments, these safe havens attracted money from investors spooked by the overall market selloff. But in April utilities lagged the market, perhaps because of concerns that the Fed will again raise short-term interest rates. Rising rates tend to hurt utility stocks because it makes their above-average dividend yields less compelling versus bond yields.   Income investors should take note of this pause in utilities’ bull run and look to pick up shares of the best utilities at attractive prices. It’s unlikely that the Fed will hike short-term rates more than once in the coming months, given the uncertain global economic outlook and the upcoming presidential election (the Fed historically has been loath to influence elections in a campaign’s final months). #-ad_banner-#Utilities remain one of the best sources of investment income among U.S. stocks. As regulated providers of essential products and services — often as the monopoly provider in a certain area — utilities are virtually guaranteed a steady stream of cash from their customers. But the regulations also mean some utilities are restricted from investing in high-growth businesses. So rather than enticing… Read More

If you’re anything like the average StreetAuthority reader, you worked hard, put food on the table, own a home, put kids through college — and still managed to put something away for your golden years. And now most of you are probably hoping that between your savings, investments and either a pension or Social Security, you’ll have what you need. #-ad_banner-#But you’re just not sure. It doesn’t take a PhD in economics to understand why you should be concerned, either. Central banks around the world are devaluing their currencies and pushing… Read More

If you’re anything like the average StreetAuthority reader, you worked hard, put food on the table, own a home, put kids through college — and still managed to put something away for your golden years. And now most of you are probably hoping that between your savings, investments and either a pension or Social Security, you’ll have what you need. #-ad_banner-#But you’re just not sure. It doesn’t take a PhD in economics to understand why you should be concerned, either. Central banks around the world are devaluing their currencies and pushing interest rates through the floor. As I write this, the 10-year German “bund” (or bond) yields just 0.13%. Shorter durations (ranging from one year to nine) actually have negative yields. And that’s from one of the stronger members of the Eurozone. On the other hand, a 10-year Swiss bond will get you just -0.37%. And Japan, meanwhile, offers a 10-year at about -0.1%. The list goes on and on…   Global Bond Yields At A Glance Bond Name and Duration Yield U.S. 1-Year Treasury 0.51% U.S. 10-Year Treasury 1.75% German 1-Year -0.51% German 10-Year 0.13% Japan… Read More