A still-slow economy is making it quite hard for companies to grow. As I noted earlier this week, just a few dozen companies in the S&P 500 are expected to boost sales more than 20% in 2014, and many of those firms are doing so only with the aid of… Read More

The cost of energy production isn’t just about money. There are also environment effects.#-ad_banner-# Last year, according to one environmental group, hydraulic fracturing (commonly known as fracking) alone generated an estimated 280 billion gallons of toxic wastewater, enough to flood Washington, D.C., to a depth of 22 feet. It’s no wonder that there’s a strong push to institute cleaner practices. Green initiatives have come to dominate the corporate landscape and are attracting investment flows in record numbers. The performance in alternative energy this year is evidence of this growing trend — the iShares S&P Global Clean… Read More

The cost of energy production isn’t just about money. There are also environment effects.#-ad_banner-# Last year, according to one environmental group, hydraulic fracturing (commonly known as fracking) alone generated an estimated 280 billion gallons of toxic wastewater, enough to flood Washington, D.C., to a depth of 22 feet. It’s no wonder that there’s a strong push to institute cleaner practices. Green initiatives have come to dominate the corporate landscape and are attracting investment flows in record numbers. The performance in alternative energy this year is evidence of this growing trend — the iShares S&P Global Clean Energy Fund (Nasdaq: ICLN) is up more than 50% year to date. While most of the attention has been focused on renewable energy and clean coal, environmentally friendly sectors like pollution and treatment controls have gone relatively unnoticed. Calgon Carbon Corp. (NYSE: CCC) is a small-cap stock involved in the purification and treatment of water, air and food, as well as the poisonous emissions from coal-fired power plants. The company has been making tremendous strides in cost reduction, improving operating margins to around 20% from 13.6% just a year ago. (Calgon’s leaner operation is one reason the research staff at… Read More

When I was in elementary school, we called a student who got good grades, stayed out of trouble and embraced his or her position as teacher’s pet “Goody Two-shoes.” With that in mind, I’d like to introduce you to a company I like to consider the Goody Two-shoes of insurance companies. It takes few risks, performs admirably and is well liked by some of the most upstanding clients around. Founded in 1945 by two Illinois schoolteachers, Horace Mann Educators (NYSE: HMN) is an $8.5 billion national multi-line insurance company. Just about every penny comes from public K-12 teachers, administrators and… Read More

When I was in elementary school, we called a student who got good grades, stayed out of trouble and embraced his or her position as teacher’s pet “Goody Two-shoes.” With that in mind, I’d like to introduce you to a company I like to consider the Goody Two-shoes of insurance companies. It takes few risks, performs admirably and is well liked by some of the most upstanding clients around. Founded in 1945 by two Illinois schoolteachers, Horace Mann Educators (NYSE: HMN) is an $8.5 billion national multi-line insurance company. Just about every penny comes from public K-12 teachers, administrators and their families in the U.S., a market expected to grow 14% by 2020. The auto, property and casualty segment represents 52% of Horace Mann’s business, with commission-generating annuities and life insurance accounting for 39% and 9%, respectively.#-ad_banner-# About 6 million teachers, administrators and support personnel worked in K-12 in the U.S. in 2012. Another 413,000 college students are planning to become teachers, and 1.2 million are retired. That’s a big, loyal, responsible, insurance-buying market that blesses Horace Mann with higher-than-average retention rates, a low rate of paid claims and steady growth of its annuity and life insurance products. The company… Read More

Once upon a time, using an American Express card could be nearly impossible. For some consumers, it may have felt like rejection to hear a cashier say, “Sorry, we don’t take American Express.” However, as an AmEx cardholder myself, I always looked at it as a compliment — as though I and other AmEx cardholders were a member of an exclusive club. However, that club isn’t as exclusive anymore. Yes, American Express (NYSE: AXP) remains the pinnacle of credit cards, signifying success, exclusivity and financial freedom. But while MasterCard (NSYE: MA) and Visa (NYSE: V) have seen their card portfolios… Read More

Once upon a time, using an American Express card could be nearly impossible. For some consumers, it may have felt like rejection to hear a cashier say, “Sorry, we don’t take American Express.” However, as an AmEx cardholder myself, I always looked at it as a compliment — as though I and other AmEx cardholders were a member of an exclusive club. However, that club isn’t as exclusive anymore. Yes, American Express (NYSE: AXP) remains the pinnacle of credit cards, signifying success, exclusivity and financial freedom. But while MasterCard (NSYE: MA) and Visa (NYSE: V) have seen their card portfolios shrink over the past couple of years as many consumers have cut up their cards, American Express has seen its portfolio grow. #-ad_banner-# The number of merchants and venues that accept American Express has grown exponentially over the past half-decade. While some cardholders might consider this a form of brand dilution, investors in AXP should consider it great news. American Express’ merchant fees have been on the decline, narrowing toward what MasterCard and Visa charge and allowing more businesses to accept AmEx. Merchants are becoming increasingly more open to accepting American Express, especially in light of the fact that AmEx… Read More

“There’s no shame in holding cash.” It’s a refrain you hear from many fund managers these days after witnessing the market grind ever higher. And no hedge fund manager has uttered that phrase more than Baupost Capital’s Seth Klarman. The legendary value investor has actually started returning money to clients, finding few real bargains in this market.#-ad_banner-# But when Klarman does spot an investment opportunity, he goes big. Lately, he’s been building sizable stakes in a pair of young companies that few would consider to be deep value plays. They are contrarian plays from a contrarian investor. Idenix: A Blockbuster… Read More

“There’s no shame in holding cash.” It’s a refrain you hear from many fund managers these days after witnessing the market grind ever higher. And no hedge fund manager has uttered that phrase more than Baupost Capital’s Seth Klarman. The legendary value investor has actually started returning money to clients, finding few real bargains in this market.#-ad_banner-# But when Klarman does spot an investment opportunity, he goes big. Lately, he’s been building sizable stakes in a pair of young companies that few would consider to be deep value plays. They are contrarian plays from a contrarian investor. Idenix: A Blockbuster Or A Blowup? An estimated 150 million people are infected with hepatitis C, making it one of the most widespread diseases in the world for which current treatments are considered to be inadequate. Though there are current treatments such as Interferon, a recent Wall Street Journal article noted that “a growing number of people infected with hepatitis C are putting off therapy, choosing instead to roll the dice and wait for a new generation of drugs to become available.” First out of the gate is Gilead Sciences (Nasdaq: GILD) and its sofosbuvir drug, which got… Read More

Having been born and raised outside of Pittsburgh, I know firsthand of the ravages of factory pollution. My grandfather told me stories about the streetlights coming on midday because of the amount of smog in the downtown area. Many of the region’s streams and rivers were void of life back in the 1960s due to industrial waste deliberately and inadvertently seeping into the waterways. Things have improved greatly since those dark days. I have fond memories of fishing local streams for pollution-resistant fish like carp and catfish. Those same streams had been void of life just a decade or so… Read More

Having been born and raised outside of Pittsburgh, I know firsthand of the ravages of factory pollution. My grandfather told me stories about the streetlights coming on midday because of the amount of smog in the downtown area. Many of the region’s streams and rivers were void of life back in the 1960s due to industrial waste deliberately and inadvertently seeping into the waterways. Things have improved greatly since those dark days. I have fond memories of fishing local streams for pollution-resistant fish like carp and catfish. Those same streams had been void of life just a decade or so prior. Today, many of these Pittsburgh streams hold healthy populations of clean water fish like smallmouth bass and trout. This is a great testament to the success of the U.S. environmental movement, as well as commercial firms dedicated to pollution reduction. Personally, I like it when the free market helps improve the environment. It’s a great feeling to be able to earn a profit by doing a good thing for the environment. The free market has spawned firms like Illinois-based Fuel-Tech (NASDAQ: FTEK), which specializes in pollution reduction technology. Not only do the company’s products help mitigate the negative effects… Read More

Any time a company exceeds or lags quarterly profit forecasts by a big margin, the resulting share price action is quite predictable. Indeed, the list of stocks making recent 52-week highs are dominated by companies that posted stellar third-quarter results.#-ad_banner-# But the market action doesn’t always play out that way. On occasion, a company will handily surpass consensus profit forecasts, analysts will boost their outlook for the next year, and yet the stock price falls in value. How do you explain such a disconnect? Perhaps some investors were looking for even greater upside than the company delivered. Or perhaps investors… Read More

Any time a company exceeds or lags quarterly profit forecasts by a big margin, the resulting share price action is quite predictable. Indeed, the list of stocks making recent 52-week highs are dominated by companies that posted stellar third-quarter results.#-ad_banner-# But the market action doesn’t always play out that way. On occasion, a company will handily surpass consensus profit forecasts, analysts will boost their outlook for the next year, and yet the stock price falls in value. How do you explain such a disconnect? Perhaps some investors were looking for even greater upside than the company delivered. Or perhaps investors have begun rotating out of the company’s industry, selling off all stocks in the group on an indiscriminate basis. Whatever the reason, a combination of surging profits and falling share prices is a nearly perfect setup. I reviewed several hundred stocks that topped third-quarter profit estimates by at least 20%. Predictably, the vast majority surged higher in response. But I was able to come across three dozen companies that fit the backdrop of “good earnings/bad share response.” From there, I tossed out any stocks in which analysts lowered their 2014 profit forecasts after the quarterly conference call. If a company… Read More

We’re told as children (and even as adults) that you can’t have your cake and eat it too. You can’t turn a hobby into a paying job, and if an activity is fun, there’s probably no money in it.  Good news: You can — and there is.#-ad_banner-# It’s true that the economy has changed our way of life over the past five years. We’re more conscious of saving and downsizing to match our spending habits. The proliferation of fuel-efficient automobiles has crossed into a market that was once thought purely recreational.  Winnebago Industries (NYSE: WGO) and Harley-Davidson (NYSE: HOG) are… Read More

We’re told as children (and even as adults) that you can’t have your cake and eat it too. You can’t turn a hobby into a paying job, and if an activity is fun, there’s probably no money in it.  Good news: You can — and there is.#-ad_banner-# It’s true that the economy has changed our way of life over the past five years. We’re more conscious of saving and downsizing to match our spending habits. The proliferation of fuel-efficient automobiles has crossed into a market that was once thought purely recreational.  Winnebago Industries (NYSE: WGO) and Harley-Davidson (NYSE: HOG) are up nearly 75% and 35%, respectively, as baby boomers take to America’s roads. Clearly, recreational vehicles are in full swing, but there’s yet another type of vehicle that hasn’t gotten the attention it deserves: all-terrain vehicles (ATVs).  This category includes snowmobiles, ATVs and utility task vehicles (UTVs). Sales of UTVs have exploded in the past year: The two leading UTV manufacturers have posted quarterly earnings growth of 217% and 185% year over year. Polaris Industries (NYSE: PII) has been the undisputed leader in UTV, ATV and snowmobile sales, while an upstart competitor has been taking market share away from its… Read More

Many investors look to buy and sell stocks based solely on near-term business conditions. If management raises guidance for the next quarter, shares rally. And if management takes note of some near-term headwinds, investors flee. A great example: Shares of insurance giant American International Group (NYSE: AIG) fell 6.5% on the day of its earnings release in late October when CEO Robert Benmosche noted that the company’s property and casualty insurance businesses were far healthier than a few years ago but still not generating the returns that they should. Investors were also disappointed that a planned asset sale of its… Read More

Many investors look to buy and sell stocks based solely on near-term business conditions. If management raises guidance for the next quarter, shares rally. And if management takes note of some near-term headwinds, investors flee. A great example: Shares of insurance giant American International Group (NYSE: AIG) fell 6.5% on the day of its earnings release in late October when CEO Robert Benmosche noted that the company’s property and casualty insurance businesses were far healthier than a few years ago but still not generating the returns that they should. Investors were also disappointed that a planned asset sale of its aircraft lease finance business may not happen. AIG could instead sell part of that business in an IPO and retain a majority stake. As a result, shares have now fallen below their 100-day moving average for the first time this year. Yet there is a simple reason to expect AIG to resume its upward move. The upside from here: a 40% gain over the next 12 months, and a lot more than that down the road. That reason: Shares still trade at a sharp discount to tangible book value. Over the past few years, this stock has posted… Read More

There are two major concerns facing investors right now. First, the global economy is not yet showing signs of a long-awaited upturn. Indeed, the U.S. is shaping up to be on much more solid footing than its peers (at least as evidenced by U.S. corporate profit growth in the current earnings season). That argues for companies that more squarely focused on the U.S., which usually means small-cap stocks.#-ad_banner-# Second, the rising market tide has lifted many boats, and it’s getting harder to find true bargains. But they still exist. I went scanning for GARP (growth at a reasonable… Read More

There are two major concerns facing investors right now. First, the global economy is not yet showing signs of a long-awaited upturn. Indeed, the U.S. is shaping up to be on much more solid footing than its peers (at least as evidenced by U.S. corporate profit growth in the current earnings season). That argues for companies that more squarely focused on the U.S., which usually means small-cap stocks.#-ad_banner-# Second, the rising market tide has lifted many boats, and it’s getting harder to find true bargains. But they still exist. I went scanning for GARP (growth at a reasonable price) stocks among the S&P 600 (small-cap index) and found more than a dozen stocks that are poised for robust profit growth in 2014, while trading at reasonable earnings multiples. (I only included companies with a market value between $250 million and $1 billion to exclude micro-caps or mid-caps that may be hiding in this small-cap index). A quick review of the list reveals no clear themes. We don’t find a cluster of stocks in any given industry, and instead need to look at these companies on a case-by-case basis. Here’s the select group. GARP Small Caps… Read More