You would be shocked to know how many accepted “facts” in the financial world are simply not true.  For example, you may have been told that asset allocation — the amount of your portfolio you dedicate to stocks, bonds, etc. — is more important to your future returns than stock selection. This widely cited idea comes from a grossly misinterpreted study that suggests “more than 91.5% of a portfolio’s return is attributable to its mix of asset classes. In this study, individual stock selection and market timing accounted for less than 7% of a diversified portfolio’s return.” The statistic is… Read More

You would be shocked to know how many accepted “facts” in the financial world are simply not true.  For example, you may have been told that asset allocation — the amount of your portfolio you dedicate to stocks, bonds, etc. — is more important to your future returns than stock selection. This widely cited idea comes from a grossly misinterpreted study that suggests “more than 91.5% of a portfolio’s return is attributable to its mix of asset classes. In this study, individual stock selection and market timing accounted for less than 7% of a diversified portfolio’s return.” The statistic is attributed to a 1986 paper published in the Financial Analysts Journal called “Determinants of Portfolio Performance,” written by Gary P. Brinson, CFA, Randolph Hood, and Gilbert L. Beebower. It is commonly referred to as the BHB study. Read that way, the study is basically telling us stock picking is a waste of time since we can only squeeze a small amount of performance out of the stock selection process. If you read the paper closely, however, the authors actually said something different. BHB studied the variation of a portfolio’s quarterly returns. #-ad_banner-# I don’t know where the misinterpretation started, but… Read More

The decimation of oil prices has been a dominant theme for the past eight months. However, while weaker earnings out of the energy complex are weighing on overall market earnings, the collapse in oil prices has yet to really hit earnings outside the sector.  But that could be about to change. While companies like airlines and shipping providers may benefit from lower fuel prices, companies that provide ancillary services to the energy sector may soon surprise the market with lower sales.  One particularly expensive-looking company already warned investors, but no one seemed to notice. Cintas (NASDAQ:… Read More

The decimation of oil prices has been a dominant theme for the past eight months. However, while weaker earnings out of the energy complex are weighing on overall market earnings, the collapse in oil prices has yet to really hit earnings outside the sector.  But that could be about to change. While companies like airlines and shipping providers may benefit from lower fuel prices, companies that provide ancillary services to the energy sector may soon surprise the market with lower sales.  One particularly expensive-looking company already warned investors, but no one seemed to notice. Cintas (NASDAQ: CTAS) is the largest U.S.-based uniform rental provider with more than 7,700 delivery routes and 1 million business clients. Beyond a commanding domestic presence, the company has operations in Asia, Latin America and Europe. #-ad_banner-#​Revenue from the core rental business accounts for 75% of sales and 80% of profitability. While Cintas has been able to carve out a name for itself in the mature market of rental uniforms, it has struggled in its other segments — direct uniform sales and first aid, safety and fire protection services.  The attempt to diversify sales into these… Read More

No one seems to know what is causing the market volatility of late.  Interest rate jitters have been limiting gains for months, but recent economic news doesn’t seem to point to an imminent increase by the Federal Reserve. Geopolitical worries surrounding Greece have not really hit asset values significantly either, and global monetary policy is still supportive of growth. #-ad_banner-#Despite there being no obvious cause, market volatility has jumped since the beginning of March, and the S&P 500 is off its recent high by almost 3%.  We have been here before though. The market dove 9.9% from April through June… Read More

No one seems to know what is causing the market volatility of late.  Interest rate jitters have been limiting gains for months, but recent economic news doesn’t seem to point to an imminent increase by the Federal Reserve. Geopolitical worries surrounding Greece have not really hit asset values significantly either, and global monetary policy is still supportive of growth. #-ad_banner-#Despite there being no obvious cause, market volatility has jumped since the beginning of March, and the S&P 500 is off its recent high by almost 3%.  We have been here before though. The market dove 9.9% from April through June of 2012 before continuing its ascent. Asset prices sold off 7.4% from mid-September through mid-October of last year, as well. Both of these sell-offs started as little more than routine profit-taking and were over within a short period.  This sell-off appears no different than prior ones, with global monetary stimulus and U.S. economic growth promising to support asset prices. Stocks have soared since the end of the recession, but valuations are not nearly as high as prior peaks.  Despite strong gains in stocks since the market’s 2009 low, there’s really little reason to believe that any sell-off will accelerate into… Read More

It’s a simple way to look at trading. But to me, a successful trade is one that makes money. For most investors, this means you see a stock you like, do some research and then decide to pull the trigger. At this point, of course, the hope is that the stock moves up and you book a reasonable return on your investment. #-ad_banner-#But if the stock moves lower or sideways, you’ll break even at best. What if I told you that there is a strategy that makes it possible to profit from owning stocks that aren’t moving at all? This… Read More

It’s a simple way to look at trading. But to me, a successful trade is one that makes money. For most investors, this means you see a stock you like, do some research and then decide to pull the trigger. At this point, of course, the hope is that the stock moves up and you book a reasonable return on your investment. #-ad_banner-#But if the stock moves lower or sideways, you’ll break even at best. What if I told you that there is a strategy that makes it possible to profit from owning stocks that aren’t moving at all? This isn’t just theory. In my premium newsletter we’ve been able to earn market-beating returns time and again using what we call the Maximum Income strategy. For example, MasterCard (NYSE: MA) was one of the first positions we opened back in February 2014. The trade closed in July, about five months later. Over that period, the S&P 500 gained about 6%, while MasterCard only gained 1.3%. But by using my Maximum Income strategy, my subscribers pocketed a 10% gain. How is this possible? While traditional stock investors sit back and hope… Read More

Last week, I shared some research with you that I submitted to the Market Technicians Association (MTA). My paper, “Fixing the VIX: An Indicator to Beat Fear,” earned me the 2015 Charles H. Dow Award, and I’m headed to New York City this week to accept that great honor. In my paper, I presented research on a metric you may have heard me mention before, the Income Trader Volatility (ITV) indicator. Between Sept. 20, 2013 and Sept. 26, 2014, the period covered in the research I submitted to the MTA, I recommended 183 trades based on… Read More

Last week, I shared some research with you that I submitted to the Market Technicians Association (MTA). My paper, “Fixing the VIX: An Indicator to Beat Fear,” earned me the 2015 Charles H. Dow Award, and I’m headed to New York City this week to accept that great honor. In my paper, I presented research on a metric you may have heard me mention before, the Income Trader Volatility (ITV) indicator. Between Sept. 20, 2013 and Sept. 26, 2014, the period covered in the research I submitted to the MTA, I recommended 183 trades based on ITV and 93% of those trades were winners. #-ad_banner-#This week, I want to show you exactly how I use this indicator to recommend trades to my subscribers. But before I do, let me do a quick recap. Most traders are familiar with the Volatility S&P 500 Index (VIX), which is helpful in finding turning points in the S&P 500 index. In general, traders look for high VIX levels as a sign of a market bottom and low levels as a sign of a potential top. But VIX is not useful in finding turning points in specific stocks. ITV is similar… Read More

“Cord-cutter” has become the new buzzword. From Sony (NYSE: SNE) to Apple (NASDAQ: AAPL), major entertainment names are throwing their hat into the on-demand video streaming ring. The arrival of the big players has renewed fears that consumers would cut their cable cords en masse and send shares of cable content providers plummeting. While uncertainty has weighed on these stocks, the fears are overblown and have led to extremely cheap valuations on some really good assets.  Against the hype of the imminent demise of cable content companies is the fact that 85% of households still subscribe to cable. While Netflix… Read More

“Cord-cutter” has become the new buzzword. From Sony (NYSE: SNE) to Apple (NASDAQ: AAPL), major entertainment names are throwing their hat into the on-demand video streaming ring. The arrival of the big players has renewed fears that consumers would cut their cable cords en masse and send shares of cable content providers plummeting. While uncertainty has weighed on these stocks, the fears are overblown and have led to extremely cheap valuations on some really good assets.  Against the hype of the imminent demise of cable content companies is the fact that 85% of households still subscribe to cable. While Netflix (NASDAQ: NFLX) carved out a niche in this area, other providers have had a harder time convincing consumers to make the switch. Even the upcoming launch of the Apple TV subscription service is being met with some indifference. More likely than the death of cable providers will be consolidation in the industry. Companies will merge to gain negotiating leverage over the streaming service providers, allowing them to regain some control in both forms of distribution. #-ad_banner-# In fact, rumors are already building around… Read More

Dear StreetAuthority readers, Next week, I’m headed to the 2015 Market Technicians Association’s (MTA) Gala Awards Dinner in New York City. The event is hosted by the MTA, a global organization of 4,500 professional investment analysts. I’m going because Amber was awarded the 2015 Charles H. Dow Award. This award was established in 1994 by the MTA to highlight outstanding research in technical analysis. This is an incredible achievement and recognition of Amber’s expertise in the field. As StreetAuthority readers, you’ve likely heard of Amber Hestla or maybe even profited from her research. Her award-winning paper… Read More

Dear StreetAuthority readers, Next week, I’m headed to the 2015 Market Technicians Association’s (MTA) Gala Awards Dinner in New York City. The event is hosted by the MTA, a global organization of 4,500 professional investment analysts. I’m going because Amber was awarded the 2015 Charles H. Dow Award. This award was established in 1994 by the MTA to highlight outstanding research in technical analysis. This is an incredible achievement and recognition of Amber’s expertise in the field. As StreetAuthority readers, you’ve likely heard of Amber Hestla or maybe even profited from her research. Her award-winning paper detailed and tested the strategies she uses to select trades in her premium newsletter, Income Trader. She’s closed 86 straight winners selling put options, but the results of her research can be applied to other trading strategies. So in today’s issue, we’re doing something a little different. Amber will be revealing the results of her research. I hope you find this information — which is not available anywhere else — as extraordinary as I have.  Congratulations, Amber! Frank Bermea  Publisher, Profitable Trading I spend a great… Read More

There’s a huge disconnect in the market right now… and it has created an even bigger opportunity. So far in 2015, oil prices have plunged 16%. Yet, during that same time period, fuel prices have jumped 6%. History shows we can make a 69% gain in the coming months thanks to this anomaly if you know where to invest. Let me explain… There’s a huge supply of oil in the market. The most recent EIA Petroleum Status Report showed an inventory build of 10.3 million barrels of oil, more than double analysts’ expectations for an increase of four million. As… Read More

There’s a huge disconnect in the market right now… and it has created an even bigger opportunity. So far in 2015, oil prices have plunged 16%. Yet, during that same time period, fuel prices have jumped 6%. History shows we can make a 69% gain in the coming months thanks to this anomaly if you know where to invest. Let me explain… There’s a huge supply of oil in the market. The most recent EIA Petroleum Status Report showed an inventory build of 10.3 million barrels of oil, more than double analysts’ expectations for an increase of four million. As you can see from the chart below, inventories (blue) have not just been growing… they’ve been consistently exceeding expectations (orange line) for most of 2015. Generally, oil producers slow production if they see a glut of supply, but that hasn’t been the case here. With nowhere for the crude to go, storage prices are at a premium, and one of the only ways to move that oil out of storage is for oil prices to fall. Well-respected analysts at both JP Morgan (NYSE: JPM) and Goldman Sachs (NYSE: GS) believe oil is likely to stay below $50 for… Read More

One of the best ways to lose money in the markets is to be a perma-bear. We all know that there will be another bear market in stocks one day — nothing goes up forever — but we have no way of knowing when that decline will begin. So while the bears will eventually be proven right, those who heed their growls too early will, at best, miss out on gains and, at worst, lose a significant amount of money. As investment guru Peter Lynch noted, “Far more money has been lost by investors preparing for corrections or trying to… Read More

One of the best ways to lose money in the markets is to be a perma-bear. We all know that there will be another bear market in stocks one day — nothing goes up forever — but we have no way of knowing when that decline will begin. So while the bears will eventually be proven right, those who heed their growls too early will, at best, miss out on gains and, at worst, lose a significant amount of money. As investment guru Peter Lynch noted, “Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in corrections themselves.” Lynch was the manager of Fidelity Magellan Fund from 1977 to 1990 and delivered an average annual return of 29.2%, nearly double that of the S&P 500 during that time. This time frame included Black Monday, the largest one-day crash in market history in October 1987 and three separate declines of 20%. Below is a chart that illustrates how listening to perma-bears could be hazardous to your wealth. It shows some highly publicized market calls following the 2009 market bottom. Nouriel Roubini is an economist who earned the nickname “Dr. Read More

The market is overvalued and most near-term catalysts are bearish. Last week, I told you we could be weeks away from a 10%-plus correction. But there’s an easy way to profit when the correction arrives. The secret is buying puts. It’s a type of option that goes up in value when the underlying security drops. Some of the best opportunities I’m seeing right now involve buying puts on stocks likely to be hit the hardest in a correction.  High earnings multiples, slowing growth and a cyclical business model are all traits that make a… Read More

The market is overvalued and most near-term catalysts are bearish. Last week, I told you we could be weeks away from a 10%-plus correction. But there’s an easy way to profit when the correction arrives. The secret is buying puts. It’s a type of option that goes up in value when the underlying security drops. Some of the best opportunities I’m seeing right now involve buying puts on stocks likely to be hit the hardest in a correction.  High earnings multiples, slowing growth and a cyclical business model are all traits that make a stock especially susceptible to corrections. To that end, there is one popular stock in particular that’s looking frothy and ripe for a pullback. The best part is that no one seems to see it that way… yet. #-ad_banner-# You may be familiar with Keurig Green Mountain (NASDAQ: GMCR) and may even own one of its products. Keurig produces and sells single-serving countertop coffee brewers and beverage makers. Keurig also sells K-Cups — individual servings of coffee and tea that can be brewed with… Read More