One of my favorite times to trade a stock is just as it’s breaking out of a base. If there is a clear, definable stop-loss nearby, so much the better since my risk is limited.  And when the fundamentals support the bullish technicals, the probability that I have found a successful trade is high. Enter Steelcase (NYSE: SCS), a Michigan-based manufacturer that was founded in 1912. Its first patent was granted in 1914 for a steel, fireproof wastebasket, revolutionary for its time. #-ad_banner-#At first glance, the company looks like a maker of conventional office furniture and related products. Read More

One of my favorite times to trade a stock is just as it’s breaking out of a base. If there is a clear, definable stop-loss nearby, so much the better since my risk is limited.  And when the fundamentals support the bullish technicals, the probability that I have found a successful trade is high. Enter Steelcase (NYSE: SCS), a Michigan-based manufacturer that was founded in 1912. Its first patent was granted in 1914 for a steel, fireproof wastebasket, revolutionary for its time. #-ad_banner-#At first glance, the company looks like a maker of conventional office furniture and related products. It makes ergonomic chairs, tables, bookcases and cabinets. It also provides LED desk lamps and presentation technology such as interactive whiteboards that fuse analog and digital content. Its products are delivered through a network of independent dealers with 650 locations around the world. What differentiates Steelcase from its competition, however, is its emphasis on partnering with academic research institutions to find out how individuals “really work.”   Management believes workplace satisfaction is highly correlated with employee engagement and, thus, productivity. They view their office products not just as “furniture,” but as an attempt to create an environment in which individuals… Read More

Normally at StreetAuthority, we focus on the “long” side of the market, but today we’re going to spend some time explaining the other side: shorting stocks. If shorting stocks isn’t already part of your profit strategy, then be prepared to expand your horizons… You see, shorting a stock is as easy as going long a stock — once you understand the basics. And because stocks tend to fall much faster than they rise, there’s a chance to make bigger profits in less time. #-ad_banner-#This is especially true with the types of stocks Dr. Thomas Carr regularly highlights in StreetAuthority’s newest… Read More

Normally at StreetAuthority, we focus on the “long” side of the market, but today we’re going to spend some time explaining the other side: shorting stocks. If shorting stocks isn’t already part of your profit strategy, then be prepared to expand your horizons… You see, shorting a stock is as easy as going long a stock — once you understand the basics. And because stocks tend to fall much faster than they rise, there’s a chance to make bigger profits in less time. #-ad_banner-#This is especially true with the types of stocks Dr. Thomas Carr regularly highlights in StreetAuthority’s newest premium newsletter service, Trader’s Edge. Along with his regular long trades, his system pinpoints the top three stocks in any given week that are poised to fall sharply after achieving unsustainable highs. When you think about it, shorting some stocks, while going long on others, can theoretically double your overall returns. But to be fair, this doesn’t come without risks (more on that in a moment). Plus, shorting can provide a substantial hedge during market downturns. How To Short Stocks When investors go long, it means they’re buying shares of a stock in the belief that the… 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

Whenever you see a stock with a huge short position, you have one of two actions you can take. First, you can pile in with the crowd, as many have done with the high-profile short sale target Herbalife Ltd. (NYSE: HLF).  Or you can buck the tide and go long — if your research suggests the shorts are wrong. If you’re right and they’re wrong, then a massive short covering may push shares sharply higher, even beyond justifiable fair value. The latter is precisely what is happening with software provider Ebix, Inc. (Nasdaq: EBIX), which surged more than 15% last… Read More

Whenever you see a stock with a huge short position, you have one of two actions you can take. First, you can pile in with the crowd, as many have done with the high-profile short sale target Herbalife Ltd. (NYSE: HLF).  Or you can buck the tide and go long — if your research suggests the shorts are wrong. If you’re right and they’re wrong, then a massive short covering may push shares sharply higher, even beyond justifiable fair value. The latter is precisely what is happening with software provider Ebix, Inc. (Nasdaq: EBIX), which surged more than 15% last week on the heels of better-than-expected fourth quarter results. Last summer, I wrote about how Ebix’s growth-through-acquisition strategy created an operational mess, but management was already making progress in streamlining recently-acquired divisions. I figured shares would eventually rise to the mid $20’s, though a short squeeze has pushed it past that mark. Currently, a similar set-up is in place for another heavily-shorted stock: CARBO Ceramics, Inc. (NYSE: CRR). Fully 42% of Carbo’s shares are held by short sellers, equating to roughly 10 days’ worth of trading volume. The stock fell from $156 a year ago to a recent… Read More

Emotion is the bane of traders. It causes us to act rashly instead of rationally, and typically at times when it’s most costly.  It has been shown that investors are most bullish at or near tops and most bearish at or near capitulation bottoms. Just look at the mania right before the dot-com bubble burst or the despair during early 2009 following the credit crisis meltdown. In both instances, the trend was turning as emotions peaked. #-ad_banner-#There’s only one way I know of to remove emotions from investing: following a rules-based… Read More

Emotion is the bane of traders. It causes us to act rashly instead of rationally, and typically at times when it’s most costly.  It has been shown that investors are most bullish at or near tops and most bearish at or near capitulation bottoms. Just look at the mania right before the dot-com bubble burst or the despair during early 2009 following the credit crisis meltdown. In both instances, the trend was turning as emotions peaked. #-ad_banner-#There’s only one way I know of to remove emotions from investing: following a rules-based system built on a measurable, repeatable process. And the system I follow in my premium newsletter, Alpha Trader, has worked very well for me and my readers. We’ve detailed numerous times how our proprietary indicator, the Alpha Score, goes about selecting stocks poised to make huge runs based on a relative strength (RS) score above 70 and a fundamental trigger. (For more on how the Alpha Score works, you can read this recent article.) But today, I want to talk about how our rules-based system… Read More

Six years after the collapse of global financial markets, it seems most countries missed their invitation to the economic growth party. Massive monetary stimulus was supposed to jumpstart economies, but it seems the United States is dancing by itself.  China is still growing impressively, but mostly by state-led investment spending, and growth is slowing every year. Japan has yet to really benefit from its own monetary stimulus, as Prime Minister Shinzo Abe’s arrows seem to have missed their mark.  Europe is really the place to watch. Acting the old codger, Europe completely shunned the monetary stimulus party in… Read More

Six years after the collapse of global financial markets, it seems most countries missed their invitation to the economic growth party. Massive monetary stimulus was supposed to jumpstart economies, but it seems the United States is dancing by itself.  China is still growing impressively, but mostly by state-led investment spending, and growth is slowing every year. Japan has yet to really benefit from its own monetary stimulus, as Prime Minister Shinzo Abe’s arrows seem to have missed their mark.  Europe is really the place to watch. Acting the old codger, Europe completely shunned the monetary stimulus party in favor of restrictive fiscal cuts. The European Central Bank (ECB) only recently, and grudgingly, accepted the invitation. But there are signs that its stimulus program may be the economic story of 2015. #-ad_banner-#Taken together, the euro zone is the largest economic region on the planet at $18.45 trillion. If the region meets its expected 1.5% growth rate for 2015 it would be the fastest growth since 2010. This should help boost investor confidence as the region finally digs itself out of five years of economic stagnation. The central bank just started its 19-month program to pump… Read More

All major U.S. stock indices closed lower last week with the exception of the small-cap Russell 2000, which gained 1.2%. Recent market weakness has left the Russell and tech-heavy Nasdaq 100 as the only two in positive territory for 2015. This is actually a subtle positive for the overall market heading into the second quarter, because technology and small-cap issues typically lead. As I said last week: “As long as technology and small-cap issues continue to outperform the broader market, as has been the case thus far this year, I view the recent weakness as a temporary countertrend correction rather… Read More

All major U.S. stock indices closed lower last week with the exception of the small-cap Russell 2000, which gained 1.2%. Recent market weakness has left the Russell and tech-heavy Nasdaq 100 as the only two in positive territory for 2015. This is actually a subtle positive for the overall market heading into the second quarter, because technology and small-cap issues typically lead. As I said last week: “As long as technology and small-cap issues continue to outperform the broader market, as has been the case thus far this year, I view the recent weakness as a temporary countertrend correction rather than a sustainable decline.” #-ad_banner-#From a sector standpoint, only health care and financials posted gains last week. Two of the weakest sectors were energy and materials, both of which have been adversely affected by recent strength in the U.S. dollar. It appears that the greenback has been influencing a lot more than just these two sectors though. My work shows that the currency is currently inversely correlated to a number of commodity prices, including crude oil, copper and the CRB Index, and positively correlated to the U.S. stock market. Influential U.S. Dollar at a Critical Level This week’s first chart… Read More

It’s not every day that four words have the potential to upend an entire industry, but that’s exactly the implication of the Supreme Court case King v. Burwell, which began on March 4.  #-ad_banner-#The fate of The Affordable Care Act, and potentially the country’s entire healthcare industry, lies in the court’s final interpretation of the words “established by the state,” which are buried in one line of a 906-page document. In order to make the Affordable Care Act “affordable,” the federal government offers subsidies that make insurance accessible to even the lowest income brackets. But according… Read More

It’s not every day that four words have the potential to upend an entire industry, but that’s exactly the implication of the Supreme Court case King v. Burwell, which began on March 4.  #-ad_banner-#The fate of The Affordable Care Act, and potentially the country’s entire healthcare industry, lies in the court’s final interpretation of the words “established by the state,” which are buried in one line of a 906-page document. In order to make the Affordable Care Act “affordable,” the federal government offers subsidies that make insurance accessible to even the lowest income brackets. But according to the strict letter of the law, only people who signed up through an insurance marketplace that was “established by the state” qualify for a federal subsidy.  The federal government says the language should be interpreted within the context of the law as a whole. They argue that if you consider the document in its entirety, then the law clearly intends for all Americans — not just those who signed up under-state exchanges — to be eligible to qualify for subsidies. This is where King v. Burwell comes in. Only 13 states elected to create their own exchanges, while the… Read More

Companies that take radical steps in pursuit of growth are often accorded very rich valuations. Case in point: Amazon.com, Inc. (Nasdaq: AMZN), which as I recently wrote, has a valuation that bears no relation to it’s financial measures, such as free cash flow. #-ad_banner-#In one respect, such companies are fortunate. In the absence of traditional valuation measurements, they are often given a free pass from a fundamental analysis perspective. Of course, when a once-hot growth company starts to mature, such valuations start to matter a lot. A deep look at grocer Whole Foods Market, Inc. (NYSE: WFM) provides an example… Read More

Companies that take radical steps in pursuit of growth are often accorded very rich valuations. Case in point: Amazon.com, Inc. (Nasdaq: AMZN), which as I recently wrote, has a valuation that bears no relation to it’s financial measures, such as free cash flow. #-ad_banner-#In one respect, such companies are fortunate. In the absence of traditional valuation measurements, they are often given a free pass from a fundamental analysis perspective. Of course, when a once-hot growth company starts to mature, such valuations start to matter a lot. A deep look at grocer Whole Foods Market, Inc. (NYSE: WFM) provides an example of an absurdly overvalued stock — one you should avoid or outright short. The Air Pocket Becomes Permanent Roughly a year ago, shares of Whole Foods hit an air pocket as heightened competition from firms such as The Fresh Market, Inc. (Nasdaq: TFM) and Sprouts Farmers Market, Inc. (Nasdaq: SFM) led to slowing growth. Yet, in recent months, shares of Whole Foods have staged a remarkable rebound. The explanation for this stock’s sudden renaissance is quite simple: Whole Foods has delivered 8% same stores sales growth and 23% annual profit growth since 1994, and investors have recently… Read More

I have been in the investment business for more than two decades. In that time, I’ve heard many debates about the relative importance of high levels of insider ownership. The arguments against it are indeed compelling. #-ad_banner-#First, management may own so much stock that they feel compelled to aggressively talk up a company’s prospects, solely to boost the value of shares. Second, when management controls a lot of stock, they may start to ignore the wishes of outside investors and take steps that enrich themselves ahead of other shareholders (such as board-approved excessive compensation levels). Lastly, a high concentration of… Read More

I have been in the investment business for more than two decades. In that time, I’ve heard many debates about the relative importance of high levels of insider ownership. The arguments against it are indeed compelling. #-ad_banner-#First, management may own so much stock that they feel compelled to aggressively talk up a company’s prospects, solely to boost the value of shares. Second, when management controls a lot of stock, they may start to ignore the wishes of outside investors and take steps that enrich themselves ahead of other shareholders (such as board-approved excessive compensation levels). Lastly, a high concentration of shares in the hands of a few may lead to thin trading floats, which boost volatility and bid-ask spreads. My view: high levels of insider ownership are mostly a good thing, because you want management to have the same goal as you: a higher stock price. But I was never fully convinced of that view, until I came across a landmark study on the topic. A pair of finance professors (hailing from Sweden and Germany) found that “investing in firms in which the CEO owns a substantial fraction of shares (for example more than 10% of outstanding… Read More