Insiders at many companies tend to take a simplistic view to their own company’s stock. If the business outlook is bright but the company’s shares lose value, they tend to become knee-jerk buyers. #-ad_banner-#Indeed in any solid market pullback, you’ll see insider buying activity surge. The problem with such a response: The market can grind even lower, pushing share prices lower than the prices paid by insiders. For the rest of us, such pullbacks are a gift. They point the way towards bullish insider sentiment and allow us to buy in at a discount to what the insiders paid. Here’s… Read More

Insiders at many companies tend to take a simplistic view to their own company’s stock. If the business outlook is bright but the company’s shares lose value, they tend to become knee-jerk buyers. #-ad_banner-#Indeed in any solid market pullback, you’ll see insider buying activity surge. The problem with such a response: The market can grind even lower, pushing share prices lower than the prices paid by insiders. For the rest of us, such pullbacks are a gift. They point the way towards bullish insider sentiment and allow us to buy in at a discount to what the insiders paid. Here’s a look at three stocks that can now be bought at an even better price than insiders recently paid. Terex Corp. (NYSE: TEX) A range of insiders began acquiring stock in early August, when shares stood at $42. The pace of buying activity picked up in recent days, as shares drift down to a 52-week low of $32. Frankly, the earlier insider buying was premature, as Terex lowered Q3 guidance in mid-September. The company is seeing a slowdown in demand for its cranes and construction equipment in various emerging market economies. Terex is known as a “late cycle play,” as… Read More

As investors scan the business news each morning, they often gloss past major acquisition announcements. Most deals don’t involve and don’t have much impact on stocks in your portfolio. But such news can be a fertile source of investment ideas. You can look at these deals, including the valuations, and start to gain an idea of what it means for rival stocks. Sometimes, you’ll find a sharply undervalued rival, simply by connecting the dots. Let me give you an example. Two years ago, I noted that ad agency MDC Partners, Inc. (Nasdaq: MDCA) may soon rally because French advertising and… Read More

As investors scan the business news each morning, they often gloss past major acquisition announcements. Most deals don’t involve and don’t have much impact on stocks in your portfolio. But such news can be a fertile source of investment ideas. You can look at these deals, including the valuations, and start to gain an idea of what it means for rival stocks. Sometimes, you’ll find a sharply undervalued rival, simply by connecting the dots. Let me give you an example. Two years ago, I noted that ad agency MDC Partners, Inc. (Nasdaq: MDCA) may soon rally because French advertising and marketing agency, WPP Plc (Nasdaq: WPPGY), spent $540 million to acquire a rival digital-focused ad firm. On an apples-to-apples basis, MDCA, which became a key player in digital marketing strategies, would be worth more than $30 a share. At the time, shares traded for just $11. I thought the $30 price target seemed too rich: “Frankly, I don’t see this stock going much past $20,” I concluded.  Shares eventually surged to $26 before a recent pullback to $20. In this very same industry (digital advertising), the connect-the-dots trade has just happened again. And it all starts with the September 12,… Read More

Wonder why the U.S. economic recovery feels so tenuous? Blame the housing construction industry, which typically accounts for 4%-to-5% of GDP, but represents just 2% of the economy these days. Though home prices in many markets have moved up from their 2008-2010 lows, the pace of new home construction has remained extremely low. According to the St. Louis branch of the Federal Reserve, residential construction permits are at roughly half the levels seen from 1995 through 2007. The impact: Simply returning to the long-term average would likely add around 1.5 million jobs to the… Read More

Wonder why the U.S. economic recovery feels so tenuous? Blame the housing construction industry, which typically accounts for 4%-to-5% of GDP, but represents just 2% of the economy these days. Though home prices in many markets have moved up from their 2008-2010 lows, the pace of new home construction has remained extremely low. According to the St. Louis branch of the Federal Reserve, residential construction permits are at roughly half the levels seen from 1995 through 2007. The impact: Simply returning to the long-term average would likely add around 1.5 million jobs to the economy, shaving the unemployment rate by roughly a percentage point.   Note: not all permit applications lead to actual construction, and actual new home builds are lower. What makes the housing slump especially remarkable is that borrowing costs are quite low and bank lending standards have been gradually easing.  And if you are wondering about supply and demand, know that the U.S. population has grown by roughly 20 million since 2006. Potential first-time homebuyers are still traumatized by the last economic downturn — many of them remain at home with their parents or… Read More

Stock picking is an art and a science. The art of stock picking relies on the skill to choose the right stock at the right time. It’s possible to do this in a more consistent manner through the technical analysis of a stock chart. The science in stock picking is in analyzing the fundamental picture of a company in an effort to forecast future performance. The good balance between art and science breeds the most successful investments.  One easy-to-use and underutilized metric for making… Read More

Stock picking is an art and a science. The art of stock picking relies on the skill to choose the right stock at the right time. It’s possible to do this in a more consistent manner through the technical analysis of a stock chart. The science in stock picking is in analyzing the fundamental picture of a company in an effort to forecast future performance. The good balance between art and science breeds the most successful investments.  One easy-to-use and underutilized metric for making wise investment decisions is return on equity (ROE). This metric can tell investors whether a company is a cash creator or a cash destroyer relative to its competitors. The ROE measures a company’s profitability by determining how much profit is being generated from the money invested by shareholders. So knowing this figure enables investors to compare multiple stocks and isolate the most… Read More

Value investors look for stocks that offer low risk. The idea is to buy a stock at a price level that should be near a low as measured by the fundamentals. Some value investors look for stocks with sound business models that are selling at a low price-to-earnings (P/E) ratio, for example.#-ad_banner-# There are a number of other factors that they can screen for and many long-term investors have found success with this model. From a trader’s perspective, the idea of buying and waiting… Read More

Value investors look for stocks that offer low risk. The idea is to buy a stock at a price level that should be near a low as measured by the fundamentals. Some value investors look for stocks with sound business models that are selling at a low price-to-earnings (P/E) ratio, for example.#-ad_banner-# There are a number of other factors that they can screen for and many long-term investors have found success with this model. From a trader’s perspective, the idea of buying and waiting usually seems unappealing because it often means having to hold stocks that don’t perform well for years. In order to be successful, value investors need to be patient. An undervalued stock might remain undervalued for some time, and will usually only go up in price when other investors discover the stock. It might take years for other investors to spot a company, and ideally, a value stock offers a… Read More

It’s always important to keep an eye on where the big money is headed, namely Warren Buffett’s Bershire Hathaway, Inc. After all, Buffett is one of the wealthiest people on Earth. Since the SEC requires institutional money managers who oversee more than $100 million to disclose certain transactions each quarter, following firms like Berkshire is made easy. And Buffett’s firm easily makes the mark, managing more than $180 billion.  That includes Berkshire’s record $55 billion in cash piling up in the bank, which my colleague David Sterman wrote about recently. Berkshire’s 13F filing from the second… Read More

It’s always important to keep an eye on where the big money is headed, namely Warren Buffett’s Bershire Hathaway, Inc. After all, Buffett is one of the wealthiest people on Earth. Since the SEC requires institutional money managers who oversee more than $100 million to disclose certain transactions each quarter, following firms like Berkshire is made easy. And Buffett’s firm easily makes the mark, managing more than $180 billion.  That includes Berkshire’s record $55 billion in cash piling up in the bank, which my colleague David Sterman wrote about recently. Berkshire’s 13F filing from the second quarter of 2014 is now available, and there are two big additions. See below for a quick glance at each. That’s over $430 million worth of capital dumped into just two companies last quarter, which is quite the vote of confidence, even when you’re playing with billions.   Looking a bit closer, however, we can see that the $66 million worth of DNOW was the product of a spin-off versus an outright purchase.   The oil and gas parts distributor used to be a part of National Oilwell Varco, Inc. (NYSE: NOV) but was split-off at the start… Read More

You wouldn’t know it looking at the market, but income investors are in a tough spot. While prices for stocks keep reaching higher, yields on bonds and other safety investments keep falling lower. Nearly half (45%) of all government bonds globally are yielding less than 1% and just 14 of the 54 companies in the S&P 500 Dividend Aristocrats Index pay a 3% yield or higher. #-ad_banner-#Not only are yields lower but the potential return awaiting investors in stocks may not offer the kind of appreciation required to meet your spending needs. Research shows that at… Read More

You wouldn’t know it looking at the market, but income investors are in a tough spot. While prices for stocks keep reaching higher, yields on bonds and other safety investments keep falling lower. Nearly half (45%) of all government bonds globally are yielding less than 1% and just 14 of the 54 companies in the S&P 500 Dividend Aristocrats Index pay a 3% yield or higher. #-ad_banner-#Not only are yields lower but the potential return awaiting investors in stocks may not offer the kind of appreciation required to meet your spending needs. Research shows that at its current price of 18.97 times trailing earnings, the S&P 500 has gone on to post nominal returns of just 2.3% over the subsequent 10 years. What is an income investor to do when traditional investments fail to live up to their promise of cash returns or price appreciation? My best bet: follow the lead of one of the world’s richest men. Death, taxes and waste removal They say that the only certainty in life is death and taxes. To this short list, I would also add waste removal. No matter how much people try,… Read More

It’s not often that investors witness a large and stable stock tumble over 10% in a single day. When this happens, it can be a great buying opportunity. We saw this with the oil refiners, which took a beating, back in June. This proved to be an over-reaction and the major refiners have since outperformed the broader market handsomely. The market is serving up another huge overreaction. Walgreen Co. (NYSE: WAG) tumbled 13% in a single day earlier this month. Shares are still down 10% since the start of August. #-ad_banner-#The cause… Read More

It’s not often that investors witness a large and stable stock tumble over 10% in a single day. When this happens, it can be a great buying opportunity. We saw this with the oil refiners, which took a beating, back in June. This proved to be an over-reaction and the major refiners have since outperformed the broader market handsomely. The market is serving up another huge overreaction. Walgreen Co. (NYSE: WAG) tumbled 13% in a single day earlier this month. Shares are still down 10% since the start of August. #-ad_banner-#The cause of this huge selloff has been twofold. One, Walgreen offered fiscal 2016 guidance that was lower than expected. Two, Walgreen will spend $5.3 billion in cash and stock to buy the remaining 55% of the pharmacy chain, Alliance Boots, that it doesn’t’ already own. In 2012, Walgreen took a 45% stake in Alliance Boots. Sometimes the market makes a serious mistake. However, what disappointed investors most was Walgreen’s announcement to not attempt a tax inversion and that it… Read More

You can always tell when Warren Buffett gets anxious. At the end of 2007, his firm, Berkshire Hathaway (NYSE: BRK-A), was sitting on $44 billion in cash and investments. And that was too much money lying around, as far as he was concerned. So in 2008, he spent billions to acquire partial stakes in several blue chips firms such as General Electric  and Goldman Sachs. Those buys pushed Berkshire’s cash balance down to a more reasonable $25 billion by the end of 2008. As Bloomberg News noted in October 2013, Buffett “likes to keep… Read More

You can always tell when Warren Buffett gets anxious. At the end of 2007, his firm, Berkshire Hathaway (NYSE: BRK-A), was sitting on $44 billion in cash and investments. And that was too much money lying around, as far as he was concerned. So in 2008, he spent billions to acquire partial stakes in several blue chips firms such as General Electric  and Goldman Sachs. Those buys pushed Berkshire’s cash balance down to a more reasonable $25 billion by the end of 2008. As Bloomberg News noted in October 2013, Buffett “likes to keep $20 billion on hand should the reinsurance operations need to pay large claims.” If Buffett thought he was sitting on too much cash seven years ago, his troubles have grown larger. At the end of Q2 2014, Berkshire Hathaway held $55 billion in cash and investments — a company record. Now, chatter is rising that Buffett is ready to plow that cash into another major acquisition. At the end of the day, the main point is not which companies Buffett buys. Instead, it’s what constitutes a great acquisition. In effect, if such companies are good enough for Buffett, then they… Read More

There is a phenomenon known as the “Icahn Lift.” This is the term used when the stock price of a company rises after Carl Icahn acquires shares —  sometimes even when there’s only speculation that he will invest. The latest company to get the “Icahn Lift” is Whole Foods Market (Nasdaq: WFM). While there’s serious doubt he actually owns shares of Whole Foods, shareholders could use a little of Carl Icahn’s magic. Shares of the company are down almost 34% year-to-date. On a trailing basis, Whole Foods’ stock trades… Read More

There is a phenomenon known as the “Icahn Lift.” This is the term used when the stock price of a company rises after Carl Icahn acquires shares —  sometimes even when there’s only speculation that he will invest. The latest company to get the “Icahn Lift” is Whole Foods Market (Nasdaq: WFM). While there’s serious doubt he actually owns shares of Whole Foods, shareholders could use a little of Carl Icahn’s magic. Shares of the company are down almost 34% year-to-date. On a trailing basis, Whole Foods’ stock trades at a price-to-earnings ratio of 25, which is well below its five-year average P/E ratio of 37. The problem is that Whole Foods is not growing as fast as it once was. There are only so many affluent neighborhoods in the United States. As Whole Foods expanded into lower income markets, it found that its new clientele can’t afford to load up their carts and as a result, the newer stores are not doing as well. But slow growth is still growth nonetheless. In the third quarter, total revenues at Whole Foods increased 10.5%… Read More