“I think this company is going to make a killing…” My brother, an acute businessman and owner of a construction firm, recently told me he was thinking of putting a few grand into a small, relatively unknown company. It trades over-the-counter and sells workout powders, like whey protein. #-ad_banner-#His comment wasn’t a comment at all, though. It was a veiled question: should I proceed with the investment? He was looking for validation. I was familiar with the company and its products. My brother and I even knew one of the founders. Read More

“I think this company is going to make a killing…” My brother, an acute businessman and owner of a construction firm, recently told me he was thinking of putting a few grand into a small, relatively unknown company. It trades over-the-counter and sells workout powders, like whey protein. #-ad_banner-#His comment wasn’t a comment at all, though. It was a veiled question: should I proceed with the investment? He was looking for validation. I was familiar with the company and its products. My brother and I even knew one of the founders. But it didn’t take me long to prove that this was a bad investment. I asked my brother, “Would you go into business with this guy on a housing project?” “Absolutely not,” he said, almost immediately. “The guy was sued by the Food and Drug Administration in his previous endeavor, and he isn’t someone that I would want to partner with… ever.” It’s a funny thing. My brother understands real estate, construction — business, in general. But throw him a ticker symbol, and his judgment is clouded. Instantly,… Read More

I grew up on a family farm in North Central Kansas. And though I moved away to the big city long ago, the farm has always been home. It’s among my favorite places. Farming is tough work and ridiculously capital-intensive. It takes millions of dollars’ worth of land and millions more in equipment to launch even a modest agricultural operation. There are no guarantees, and all of the critical success factors are completely out of the farmer’s control. #-ad_banner-#Last year, we intended to harvest the wheat that we planted in half the county. In… Read More

I grew up on a family farm in North Central Kansas. And though I moved away to the big city long ago, the farm has always been home. It’s among my favorite places. Farming is tough work and ridiculously capital-intensive. It takes millions of dollars’ worth of land and millions more in equipment to launch even a modest agricultural operation. There are no guarantees, and all of the critical success factors are completely out of the farmer’s control. #-ad_banner-#Last year, we intended to harvest the wheat that we planted in half the county. In a good year, our ground yields roughly $200 profit per acre, leaving enough to pay for some equipment, make a little progress on any land debt and put a few bucks in the bank. Now, the trouble with that paragraph is the phrase “in a good year.” I hate to be the bearer of bad news, but “good” years have been rare of late, primarily because of a persistent drought that has put a relentless stranglehold on the Bread Basket. Conditions were so poor last year that we didn’t have a crop to cut. Read More

#-ad_banner-#When investing in out-of-favor companies, timing is crucial. Get in too soon and you could fall victim to a failed turnaround. Procrastinate and you could miss out on big gains when word about a successful comeback gets out. The key is finding the sweet spot, where the odds favor a successful turnaround, but the herd hasn’t taken much notice yet. The beleaguered luxury goods retailer Coach Inc. (NYSE: COH) is finally approaching such a sweet spot three years after hitting a rough patch. Based on a recent share price of about $33, Coach’s stock is down by more than 50%… Read More

#-ad_banner-#When investing in out-of-favor companies, timing is crucial. Get in too soon and you could fall victim to a failed turnaround. Procrastinate and you could miss out on big gains when word about a successful comeback gets out. The key is finding the sweet spot, where the odds favor a successful turnaround, but the herd hasn’t taken much notice yet. The beleaguered luxury goods retailer Coach Inc. (NYSE: COH) is finally approaching such a sweet spot three years after hitting a rough patch. Based on a recent share price of about $33, Coach’s stock is down by more than 50% from its peak in March 2012. Back then, the company was at the top of its game, thanks to the popularity of its lines of designer handbags and accessories such as scarves, fragrances and jewelry. But soon after, it began to wobble in the face of stiffer competition from Kate Spade & Co. (NYSE: KATE), Michael Kors Holdings Ltd. (NYSE: KORS) and others. Management fought back by opening more discount outlets and increasing promotions, but these measures only ended up hurting the business further by encouraging customers to wait for lower prices. The resulting toll on performance: annual revenue has… Read More

#-ad_banner-#Although the city of Detroit’s $18 billion bankruptcy declaration in 2013 was taken in stride by the stock market, bond insurance companies lost billions and saw their stocks slide in subsequent month. This time around, Puerto Rico’s current financial struggles might not be so easily digested by the markets. The island’s $72 billion debt burden is so vast that the  governor says it is “just not payable.” In response, investors are fleeing shares of the municipal bond insurers, with losses exceeding 35% for one of the stocks.   Yet demand for insurance in the $3.6 trillion… Read More

#-ad_banner-#Although the city of Detroit’s $18 billion bankruptcy declaration in 2013 was taken in stride by the stock market, bond insurance companies lost billions and saw their stocks slide in subsequent month. This time around, Puerto Rico’s current financial struggles might not be so easily digested by the markets. The island’s $72 billion debt burden is so vast that the  governor says it is “just not payable.” In response, investors are fleeing shares of the municipal bond insurers, with losses exceeding 35% for one of the stocks.   Yet demand for insurance in the $3.6 trillion municipal bond market won’t be drying up, and the recent selloff maybe a buying opportunity, at least for investors that can handle higher volatility and wait for the best of breed to emerge stronger. Bond Apocalypse Puerto Rico’s woes come as no surprise. The popular tax haven collects no capital gains tax and levies only a 4% tax on its residents’ income. Nearly a decade of economic stagnation has precipitated an historic migration of residents to the United States mainland. A third of those born in Puerto Rico now live on the mainland, and the… Read More

Warning: Major Correction Could Begin July 8th One of our colleagues just showed us an urgent video warning of a major market correction. It features a millionaire trading prodigy who predicted and profited from the dot-com bubble and the 2008 crash, and he says hundreds of the most popular stocks could be in danger of plunging 10%-30%… overnight. To watch this free short video, click here. Sincerely, Brad Briggs Executive Editor, StreetAuthority… Read More

Warning: Major Correction Could Begin July 8th One of our colleagues just showed us an urgent video warning of a major market correction. It features a millionaire trading prodigy who predicted and profited from the dot-com bubble and the 2008 crash, and he says hundreds of the most popular stocks could be in danger of plunging 10%-30%… overnight. To watch this free short video, click here. Sincerely, Brad Briggs Executive Editor, StreetAuthority If one division is sabotaging an otherwise profitable firm, it’s often best to simply eliminate the lagging segment. When the odds of improvement are questionable, management probably won’t be doing shareholders any favors by attempting a costly turnaround. Such moves may seem difficult, but in the end, management will have much more latitude to invest resources in segments with higher returns.   It’s a strategy that New York City-based Assurant, Inc. (NYSE: AIZ) is wisely pursuing with its struggling health insurance division. In April, the broad-based insurer announced plans to sell or close the division,… Read More

#-ad_banner-#It’s tough out there for a value investor. The market has shrugged off worries of a Greek bond default, and the major stock market indices remain near peak levels.  A clear sign of robust markets:  The S&P trades for more than 20 times trailing earnings. Luckily, the market aphorism, “It’s not a stock market, it’s a market of stocks” holds true. There are bargains out there waiting to be found, especially in one key sector. The uncertainty about interest rates has pushed the prices of real estate down, but one of the most consistently profitable real estate companies has fallen… Read More

#-ad_banner-#It’s tough out there for a value investor. The market has shrugged off worries of a Greek bond default, and the major stock market indices remain near peak levels.  A clear sign of robust markets:  The S&P trades for more than 20 times trailing earnings. Luckily, the market aphorism, “It’s not a stock market, it’s a market of stocks” holds true. There are bargains out there waiting to be found, especially in one key sector. The uncertainty about interest rates has pushed the prices of real estate down, but one of the most consistently profitable real estate companies has fallen too far, and a golden opportunity for long-term investors has emerged. A True Blue-Chip Company Ventas, Inc. (NYSE: VTR) is a large healthcare-focused real estate investment trust (REIT), and with a market value of $21 billion, it is one of the largest REITs in the healthcare industry. The company is extremely well diversified, owning a broad portfolio of senior housing facilities, medical office buildings and hospitals. This company’s funds from operations (FFO) have  grown 10% annually since 2004, and that has made shareholders rich along the way. Despite the announcement of a strong 8% increase in FFO… Read More

Let’s make a wager. You have five days to drive across the country. If you make it in less than five days, you will win $20,000. If you don’t, then you owe me $10,000. There are some caveats to this deal: First, you have no map, compass, GPS unit or directions — nothing that will assist you on your journey. Second, there are no road signs; only mile markers. #-ad_banner-#Are you still willing to blindly drive across the country risking $10,000 at the chance you’ll make $20,000? In this scenario, it’s… Read More

Let’s make a wager. You have five days to drive across the country. If you make it in less than five days, you will win $20,000. If you don’t, then you owe me $10,000. There are some caveats to this deal: First, you have no map, compass, GPS unit or directions — nothing that will assist you on your journey. Second, there are no road signs; only mile markers. #-ad_banner-#Are you still willing to blindly drive across the country risking $10,000 at the chance you’ll make $20,000? In this scenario, it’s easy to tell that taking this bet is a bad idea, but this sort of blind gambling is indicative of how many average investors navigate the markets. Most investors buy a stock and hope that it goes up. When it doesn’t and the stock plummets 20%, 30% even 50%, they continue to hold on… clinging to that hope that it will soon rebound. Well I’m here to tell you: hope isn’t a strategy. If there’s one thing you need to learn when it comes to investing, it’s how to invest with… Read More

#-ad_banner-#Since the 1950’s, computer data has been stored on spinning platters, known as hard disk drives. These drives consume a lot of energy and give off a lot of heat. A half century later, hard disk drives met their match in solid-state storage drives, which are much faster, have no moving parts and are available in DRAM and NAND flash memory (I’ll talk about the difference between the two shortly). But adoption of solid-state technology has been slow due to their relatively high price points. Yet the cost to build solid-state devices is slowly dropping, and over an extended time period, it… Read More

#-ad_banner-#Since the 1950’s, computer data has been stored on spinning platters, known as hard disk drives. These drives consume a lot of energy and give off a lot of heat. A half century later, hard disk drives met their match in solid-state storage drives, which are much faster, have no moving parts and are available in DRAM and NAND flash memory (I’ll talk about the difference between the two shortly). But adoption of solid-state technology has been slow due to their relatively high price points. Yet the cost to build solid-state devices is slowly dropping, and over an extended time period, it is increasingly the better choice. The Storage Networking Industry Association calculated the total cost of ownership for hard disk and solid-state storage. As the chart below illustrates, the cost to operate solid-state storage over five years is nearly a third that of hard disk drives. Hard disk drives still represent the majority of memory, but they are experiencing annualized unit sales declines in excess of 15% due to the new price advantage of solid state. Unit volume for solid-state drives is expected to grow at an annual pace of 59% to 3.9 million units over the three years… Read More

There are only two ways to score huge gains. Find a stock that is relatively unknown, and build a position before the crowd arrives. Or find a stock that is widely known, but widely loathed. In the case of Melco Crown Entertainment Ltd. (Nasdaq: MPEL), the first scenario has already played out, and the second scenario is just coming into play. When I first looked at this Macau-focused casino operator, shares were trading under $5. I looked at this stock a few years later when shares traded at $18 and noted considerable remaining upside. Shares eventually moved above $35. This… Read More

There are only two ways to score huge gains. Find a stock that is relatively unknown, and build a position before the crowd arrives. Or find a stock that is widely known, but widely loathed. In the case of Melco Crown Entertainment Ltd. (Nasdaq: MPEL), the first scenario has already played out, and the second scenario is just coming into play. When I first looked at this Macau-focused casino operator, shares were trading under $5. I looked at this stock a few years later when shares traded at $18 and noted considerable remaining upside. Shares eventually moved above $35. This stock’s meteoric rise was due to the fact that few investors knew about the company in 2010. Even as it gained adherents in subsequent years, many investors underestimated the powerful cash flow potential on Melco’s business model. Back in 2010, Melco Crown generated around $90 million in operating profits. By 2014, that figure had grown to $685 million. Yet Melco Crown, along with other Macau-focused casino operators, is now making headlines for different reasons. A sharp crackdown on corruption in China has led many Chinese high rollers to stay close to home, avoiding any appearance of conspicuous consumption. And as… Read More

I recently learned that hot water can freeze faster than cold water. Perhaps you already knew this but it was news to me. It’s a phenomenon known as the Mpemba Effect. This Mpemba Effect seems counterintuitive. Water freezes at 32 degrees. Since cold water is closer to 32 degrees than hot water, most would assume that cold water freezes first. Yet it has been studied extensively by scientists and experiments have shown hot water can freeze first. This isn’t true 100% of the time, but it does happen when the conditions are right. There are a number of theories about… Read More

I recently learned that hot water can freeze faster than cold water. Perhaps you already knew this but it was news to me. It’s a phenomenon known as the Mpemba Effect. This Mpemba Effect seems counterintuitive. Water freezes at 32 degrees. Since cold water is closer to 32 degrees than hot water, most would assume that cold water freezes first. Yet it has been studied extensively by scientists and experiments have shown hot water can freeze first. This isn’t true 100% of the time, but it does happen when the conditions are right. There are a number of theories about why this occurs. The leading explanation is that hot water evaporates more than cold water, leaving less water to freeze. It could also be due to convection currents, which are stronger in warmer water, allowing for ice crystals to spread faster. Others believe it may be related to the chemical structure of water. In all likelihood, it is the interplay of various factors. #-ad_banner-# You might be asking what this has to do with investing. To me, the Mpemba Effect illustrates that logic alone may not be enough to find the right answer. You have to dig… Read More