Sometimes, an insult is actually a compliment. Warren Buffett once quipped that an idiot in the corner office is not necessarily a bad thing. I’ll let the Sage of Omaha say it is his own words: “I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.” #-ad_banner-#It’s actually a brilliant bit of insight. Let me explain. So many companies have floundered once the management baton has been handed from the founders to the next generation of management. The… Read More

Sometimes, an insult is actually a compliment. Warren Buffett once quipped that an idiot in the corner office is not necessarily a bad thing. I’ll let the Sage of Omaha say it is his own words: “I try to buy stock in businesses that are so wonderful that an idiot can run them. Because sooner or later, one will.” #-ad_banner-#It’s actually a brilliant bit of insight. Let me explain. So many companies have floundered once the management baton has been handed from the founders to the next generation of management. The only way such a transition can be successfully handled is by establishing clear and simple principles that are easy to execute. The next CEO just has to keep his hand on the rudder and keep the boat sailing on the right heading. I’m always cognizant of that notion when adding new holdings to my Top 10 Stocks portfolio. I would never want to invest in a company that required a lengthy explanation of its mission statement. “Keep it simple,” is the mantra that we should all heed. Here’s the real problem… Read More

I look over hundreds of financial statements week in and week out, and I’ve come to one important conclusion: There’s a lot of unintentional financial trickery that goes on when corporations report their annual financial performance. #-ad_banner-#It’s a simple result of the fact that financial reporting has become so complex that few people — even those preparing the numbers — truly understand what’s behind the figures. And while on some level that’s concerning, I think it actually creates a major opportunity for investors who are willing to dig into the numbers… Read More

I look over hundreds of financial statements week in and week out, and I’ve come to one important conclusion: There’s a lot of unintentional financial trickery that goes on when corporations report their annual financial performance. #-ad_banner-#It’s a simple result of the fact that financial reporting has become so complex that few people — even those preparing the numbers — truly understand what’s behind the figures. And while on some level that’s concerning, I think it actually creates a major opportunity for investors who are willing to dig into the numbers and find out what they really mean. Let me show you. Most corporate financial announcements usually focus on one number: earnings. They typically compare this figure to the previous quarter or the year-ago period (ex. “profits were down 5% as compared to Q1 2014”). Now don’t get me wrong, it is an important metric, but here’s the problem: earnings are affected by a lot of things that may or may not make a difference to the business, such as non-cash charges for things like stock options or depreciation… Read More

“You can’t time the market.” It’s one of the most often-repeated investment phrases. And it’s wrong. History has shown that a simple ratio delivers impressive market gains. In fact, it appears when most investors have little desire to buy stocks. Let me explain. Every week, the American Association of Individual Investors (AAII) asks its members to answer one simple question in an online survey: Regarding the future direction of the stock market, are you bullish, bearish or neutral? Over the long haul, investors feel bullish about 39% of the time, and at times of maximum optimism, more than… Read More

“You can’t time the market.” It’s one of the most often-repeated investment phrases. And it’s wrong. History has shown that a simple ratio delivers impressive market gains. In fact, it appears when most investors have little desire to buy stocks. Let me explain. Every week, the American Association of Individual Investors (AAII) asks its members to answer one simple question in an online survey: Regarding the future direction of the stock market, are you bullish, bearish or neutral? Over the long haul, investors feel bullish about 39% of the time, and at times of maximum optimism, more than half of respondents will answer with a bullish response.  #-ad_banner-#Yet at rare pressure points in the market, what Sir John Templeton once cited as “the point of maximum pessimism,” the entire crowd can turn bearish. Indeed at various points over the past three decades, the vast majority of respondents in the AAII survey express extreme bearishness. Presumably, such investors are selling stocks at these times and moving to cash.  And that has proven to be a big mistake. I’ve tallied the market performance whenever the crowd turns bearish, and on almost every occasion the market has gone on to post… Read More

While Wall Street analysts focus on how a company will fare in the next quarter, I’m always thinking about what a business will look like in five, 10 or even 20 years down the road. Some companies simply hope that business will be good in future years, while others can speak with a high degree of confidence about their long-term goals. That’s because these firms share one key trait: they have a “sticky” customer base. #-ad_banner-#Let’s take Automatic Data Processing, Inc. (Nasdaq: ADP) as an example. The company provides outsourced payroll… Read More

While Wall Street analysts focus on how a company will fare in the next quarter, I’m always thinking about what a business will look like in five, 10 or even 20 years down the road. Some companies simply hope that business will be good in future years, while others can speak with a high degree of confidence about their long-term goals. That’s because these firms share one key trait: they have a “sticky” customer base. #-ad_banner-#Let’s take Automatic Data Processing, Inc. (Nasdaq: ADP) as an example. The company provides outsourced payroll management and other services typically handled by human resources departments. Although ADP provides clear value to its clients, the company boasts of a 91% annual retention rate for another reason: switching costs. You see, once a client has agreed to turn over its business processes to ADP, it becomes awfully hard to take that business back. That means a new customer that ADP signs up today is likely to stick around through the next bear market and the next bull market. We can see proof of this by looking at how ADP fared during… Read More

If you’re a regular reader of StreetAuthority, you know I love getting and reinvesting dividend paychecks. Simply put, my goal is to earn a paycheck every day of the month by owning a basket of solid income securities, then grow the size of those paychecks by harnessing the power of compounding through dividend reinvestment. So far, the results have been very rewarding. From an initial $200,000 investment, I’m earning $18,613 in dividends a year (more than $1,551 a month) using this strategy. And that doesn’t even include a penny from the healthy capital gains I’ve made from… Read More

If you’re a regular reader of StreetAuthority, you know I love getting and reinvesting dividend paychecks. Simply put, my goal is to earn a paycheck every day of the month by owning a basket of solid income securities, then grow the size of those paychecks by harnessing the power of compounding through dividend reinvestment. So far, the results have been very rewarding. From an initial $200,000 investment, I’m earning $18,613 in dividends a year (more than $1,551 a month) using this strategy. And that doesn’t even include a penny from the healthy capital gains I’ve made from most of my holdings. But as I said, you may have already heard this before. My goal today is to show you how to get the most out of your income investments using a simple, yet effective, three-part strategy. I like to think of it as a dividend “trifecta,” and it’s the cornerstone of my Daily Paycheck Retirement Strategy. The great thing about this trifecta is that it’s fully customizable to your own needs. You can use it to multiply your wealth over time, preserve capital, even bring in a second income to fund… Read More

Most major indices finished lower for the second consecutive week. Only the small-cap Russell 2000 managed to eke out a 1.2% gain.  The U.S. markets were pressured by a number of factors. These included sharply rising long-term U.S. interest rates and worries of a debt default in Greece. Generally favorable U.S. economic data had investors concerned the Federal Reserve will begin raising short-term interest rates sooner rather than later. Another negative factor last week was generally declining global equity prices, which I’ll discuss in more detail later in the report.  At the sector level, only financials, consumer discretionary and industrials… Read More

Most major indices finished lower for the second consecutive week. Only the small-cap Russell 2000 managed to eke out a 1.2% gain.  The U.S. markets were pressured by a number of factors. These included sharply rising long-term U.S. interest rates and worries of a debt default in Greece. Generally favorable U.S. economic data had investors concerned the Federal Reserve will begin raising short-term interest rates sooner rather than later. Another negative factor last week was generally declining global equity prices, which I’ll discuss in more detail later in the report.  At the sector level, only financials, consumer discretionary and industrials finished in positive territory last week. Financials were driven by rising interest rates and a steepening yield curve that will help banks become more profitable. The weakest sector last week was utilities as rising interest rates lured yield-seeking investors out of this sector and into safer U.S. Treasuries.  Keep a Close Eye on Technology This Week  In last week’s Market Outlook, I discussed the importance of the 5,133 March 2000 tech bubble high in the Nasdaq Composite. I said, “Historic benchmark highs like this one are seldom appreciably and sustainably broken without at least a multiweek decline first.”  What I… Read More

Investors on the prowl for top-quality holdings typically seek two things: a history of robust dividends and the potential for substantially greater capital gains than the broader market. These qualities can be pretty tough to find in just one investment. Yet the WisdomTree MidCap Dividend ETF (NYSE: DON), an exchange-traded fund with net assets of $1.6 billion, offers both strong dividends and the potential for robust capital gains. Since its launch in June 2006, this ETF is up about 113% versus the S&P 500’s roughly 65% gain. The fund’s annualized dividend of $1.98 a share translates to a solid yield… Read More

Investors on the prowl for top-quality holdings typically seek two things: a history of robust dividends and the potential for substantially greater capital gains than the broader market. These qualities can be pretty tough to find in just one investment. Yet the WisdomTree MidCap Dividend ETF (NYSE: DON), an exchange-traded fund with net assets of $1.6 billion, offers both strong dividends and the potential for robust capital gains. Since its launch in June 2006, this ETF is up about 113% versus the S&P 500’s roughly 65% gain. The fund’s annualized dividend of $1.98 a share translates to a solid yield of 2.4%, compared with the S&P’s current yield of only 1.9%. DON’s track record stems from its bogey, the WisdomTree MidCap Dividend Index. This benchmark is made up of common stocks chosen from the top 75% of the WisdomTree Dividend Index (by market capitalization) after the removal of the 300 largest companies. To be included in the MidCap Dividend Index, a stock must meet certain requirements: Pay regular cash dividends during the 12 months before the index’s annual rebalance each December; have a market capitalization of at least $100 million as of the rebalance date; have an average daily… Read More

Over the past few decades, we’ve seen many advances in how the stock market functions. Today, exchanges and brokerage houses exist almost entirely online, and everyone is competing for microseconds of speed. We’ve also seen the idea of “investing” evolve into something much more advanced and complicated than it was in the early days. I’ve spent my entire 18-year career immersed in the finance world. And in my experience, no matter what data, methods, techniques, witchcraft, mojo or voodoo you choose to use for your investments, it is absolutely critical that you understand what… Read More

Over the past few decades, we’ve seen many advances in how the stock market functions. Today, exchanges and brokerage houses exist almost entirely online, and everyone is competing for microseconds of speed. We’ve also seen the idea of “investing” evolve into something much more advanced and complicated than it was in the early days. I’ve spent my entire 18-year career immersed in the finance world. And in my experience, no matter what data, methods, techniques, witchcraft, mojo or voodoo you choose to use for your investments, it is absolutely critical that you understand what you’re doing. If not, you’re just another amateur grasping for success. The truth is, today’s “game” requires an increased arsenal of tactics and methods to prosper. And for the average investor, a powerful options strategy is one of those tools that should be used. #-ad_banner-#I realize some of you may have never considered using options in your own portfolio. That’s OK. I want to use today’s essay to explain some of the basics and demystify options so that you can use them to amplify your profit potential and limit the downside. Read More

Great companies typically have two things in common:  One is a clearly defined, best-in-class portfolio of products or services that’s leveraged into industry-leading market share and profits. The other is the ability to know when it’s time to begin re-inventing the business model to avoid stagnation. By this definition, the management consulting, IT services and outsourcing giant Accenture Plc (NYSE: ACN) is a great company. Founded in 1989 (after a name change from Arthur Anderson Consulting), Accenture has evolved into an industry leader. Thanks to proven expertise in dozens of industries, the firm does business with three-quarters of the domestically-focused… Read More

Great companies typically have two things in common:  One is a clearly defined, best-in-class portfolio of products or services that’s leveraged into industry-leading market share and profits. The other is the ability to know when it’s time to begin re-inventing the business model to avoid stagnation. By this definition, the management consulting, IT services and outsourcing giant Accenture Plc (NYSE: ACN) is a great company. Founded in 1989 (after a name change from Arthur Anderson Consulting), Accenture has evolved into an industry leader. Thanks to proven expertise in dozens of industries, the firm does business with three-quarters of the domestically-focused companies in the S&P 500. It has a large global footprint, too, with operations in 120 countries. Since 2010, annual revenues have risen by more than 40% to almost $33 billion and earnings are up nearly 80% to $4.71 per share. In the nine years since it initiated a dividend, Accenture increased its payout nearly seven-fold, to $2.04 a share. Shareholders have also enjoyed outsized capital gains. However, Accenture’s traditional businesses are fairly mature, portending  a substantially slower pace of expansion in coming years. Accenture is already adapting, though, by moving aggressively into one of the highest-growth… Read More

If you’re like me, then you never want to worry about money again… whether that means merely being financially independent or becoming filthy rich is beside the point. And while blue-chip stocks, index funds and dividend payers can keep the income flowing, the truth is these securities will take decades to amass real wealth. You’ll need something else if you’re after a seven-figure bank account: a “swing for the fences” strategy. So today I’m going to show you how to position yourself for “out-of-the-park” gains without jeopardizing your safer investments. I… Read More

If you’re like me, then you never want to worry about money again… whether that means merely being financially independent or becoming filthy rich is beside the point. And while blue-chip stocks, index funds and dividend payers can keep the income flowing, the truth is these securities will take decades to amass real wealth. You’ll need something else if you’re after a seven-figure bank account: a “swing for the fences” strategy. So today I’m going to show you how to position yourself for “out-of-the-park” gains without jeopardizing your safer investments. I call it the “20% solution.” The idea behind it is simple: dedicate a portion of your portfolio to aggressive growth stocks. Let me explain. My daughter is in private school. In a few years she may go to college. Eventually she’ll need a car, an apartment and someday a wedding. All of which cost money. For her and the rest of my family, I’ve allocated 80% of my portfolio to safe, reliable assets. These are securities that I know will allow me to keep living comfortably and adequately provide for my family. We want this money to grow hands-free. So… Read More