Mark Twain understood the mind of an investor. The world-renowned author once proclaimed: “A dollar picked up in the road is more satisfaction to us than the 99 which we had to work for, and the money won in the stock market snuggles into our hearts in the same way.” Twain acknowledged the rush that can accompany earning money without any labor. He understood that the human brain is not wired for clear thinking in regard to money. That’s because the area of the brain that responds to financial reward is the same part that lights up from cocaine. This… Read More

Mark Twain understood the mind of an investor. The world-renowned author once proclaimed: “A dollar picked up in the road is more satisfaction to us than the 99 which we had to work for, and the money won in the stock market snuggles into our hearts in the same way.” Twain acknowledged the rush that can accompany earning money without any labor. He understood that the human brain is not wired for clear thinking in regard to money. That’s because the area of the brain that responds to financial reward is the same part that lights up from cocaine. This presents a major problem. Investors become insatiable, searching high and low for the next “big winners.” What they’re really interested in is a get-rich-quick scheme.  That’s a terrific way to lose money — and quickly. #-ad_banner-#However, if you are a regular reader of my Game-Changing Stocks newsletter, then you know that I have been making the habit of finding stocks with the most “big winner” potential into a science for a while. Take electric car maker Tesla (Nasdaq: TSLA) for example.  On Dec. 20, 2010, I first profiled and recommended the company to my readers. Since then, it has become… Read More

Two of the smartest investors in the business are John Paulson and Stephen Mandel.  #-ad_banner-#Paulson, by far the more famous of the two, is best known for making $15 billion in the financial crisis by shorting the housing market.  In contrast, Mandel started his hedge fund, Lone Pine Capital, in 1997 after studying under Julian Robertson  at Robertson’s investment firm Tiger Management. That makes Mandel a member of the “Tiger Cubs,” a group of Robertson proteges that includes the likes of John Griffin, Lee Ainslie and Chase Coleman. One thing both investors agree on is that… Read More

Two of the smartest investors in the business are John Paulson and Stephen Mandel.  #-ad_banner-#Paulson, by far the more famous of the two, is best known for making $15 billion in the financial crisis by shorting the housing market.  In contrast, Mandel started his hedge fund, Lone Pine Capital, in 1997 after studying under Julian Robertson  at Robertson’s investment firm Tiger Management. That makes Mandel a member of the “Tiger Cubs,” a group of Robertson proteges that includes the likes of John Griffin, Lee Ainslie and Chase Coleman. One thing both investors agree on is that housing won’t stay in the doldrums forever. While housing has been recovering since it bottomed in 2009, housing starts still aren’t where they were before the financial crisis. (My colleague Dorian Davis recently suggested a clever way to profit from this trend.) Paulson and Mandel are investing in the housing recovery with real estate firm Realogy Holdings (NYSE: RLGY). Each has a stake worth over $500 million in Realogy, and together, they own more than a sixth of the company. As the largest owner and franchiser of residential real estate brokerages in the U.S., Realogy owns some of the biggest… Read More

The electric vehicle (EV) market has been hot, to say the least. But at first glance, investors looking to profit from this industry would appear to have few options.  #-ad_banner-#Tesla (Nasdaq: TSLA), of course, has done a lot to bring EVs front and center — but you don’t have to invest in Tesla, which is trading at 13 times sales and 30 times its book value after a run-up of more than 500% over the past three years. There are other, much more underrated plays on the EV industry.  The first one I have in mind… Read More

The electric vehicle (EV) market has been hot, to say the least. But at first glance, investors looking to profit from this industry would appear to have few options.  #-ad_banner-#Tesla (Nasdaq: TSLA), of course, has done a lot to bring EVs front and center — but you don’t have to invest in Tesla, which is trading at 13 times sales and 30 times its book value after a run-up of more than 500% over the past three years. There are other, much more underrated plays on the EV industry.  The first one I have in mind is Kandi Technologies (Nasdaq: KNDI), a Chinese maker of vehicles such as all-terrain vehicles and go-karts.  EVs have yet to really take hold in China given the required infrastructure, not to mention the high cost of EVs. But as contrarian investor Jim Rogers has noted, “China is the next great country in the world.”  Rogers is encouraged by the government’s decision to inject money into various sectors. In addition, the government is giving Chinese makers of EVs a break on sales taxes until 2018 — a break that outside EV manufacturers like Tesla won’t enjoy. In terms of infrastructure, China’s… Read More

One of the most profitable signals for traders to recognize is the break of a major downtrend line.  #-ad_banner-#A major downtrend is defined as one that has been in force a year or more. When this type of trendline is broken, it sends a strong signal that the stock has reversed course — meaning that traders are more interested in buying than selling. If you catch the bullish breakout from the downtrend line, quick profits should be yours. IBM (NYSE: IBM) has been in a major downtrend for the past 16 months but is currently flirting with a… Read More

One of the most profitable signals for traders to recognize is the break of a major downtrend line.  #-ad_banner-#A major downtrend is defined as one that has been in force a year or more. When this type of trendline is broken, it sends a strong signal that the stock has reversed course — meaning that traders are more interested in buying than selling. If you catch the bullish breakout from the downtrend line, quick profits should be yours. IBM (NYSE: IBM) has been in a major downtrend for the past 16 months but is currently flirting with a breakout at $195. The blue-chip stock reached an intraday peak of $195.95 last week, but fell with the overall market as concerns over a Gaza ground war and a Russian-Ukrainian escalation weighed on the major averages. In the midst of this anxiety, the company released mixed earnings results. After the close on Thursday, IBM beat second-quarter estimates with earnings per share (EPS) of $4.12, up from $2.91 in the year-ago period. However, the bulls were not happy that earnings growth resulted mainly from cost-cutting initiatives and share buybacks. While Big Blue didn’t blow anyone’s socks off with its earnings report,… Read More

The housing sector, which seems to have been saddled with the responsibility for the entire economic recovery, may be about to let it down.  #-ad_banner-#Last week, when homebuilding supplier Lumber Liquidators (NYSE: LL) collapsed after projecting second-quarter earnings would be well below analyst estimates, shares of homebuilders stumbled too. It did not look like much, but it signaled a change in fortunes for the group as a whole. One of the larger and better-performing stocks in the group, D.R. Horton (NYSE: DHI), now looks like a sell.  Shares hit a price ceiling, and unlike many of its peers,… Read More

The housing sector, which seems to have been saddled with the responsibility for the entire economic recovery, may be about to let it down.  #-ad_banner-#Last week, when homebuilding supplier Lumber Liquidators (NYSE: LL) collapsed after projecting second-quarter earnings would be well below analyst estimates, shares of homebuilders stumbled too. It did not look like much, but it signaled a change in fortunes for the group as a whole. One of the larger and better-performing stocks in the group, D.R. Horton (NYSE: DHI), now looks like a sell.  Shares hit a price ceiling, and unlike many of its peers, DHI has room to fall before we have to worry about a long-term breakdown.    DHI sold off between February and March, along with the rest of the sector, but managed to stabilize shortly thereafter. In May, it began its march back to previous highs and got there on July 1. That day, it closed at a new high for the year in what seemed to be a technical breakout. Unfortunately, that was not the case. The next day it scored an outside-day reversal to the downside by notching a new intraday high but closing… Read More

Talk about history repeating itself…  #-ad_banner-#The term “banksters” originated in the 1930s, and it was used to describe dishonest or greedy bankers at the height of the Great Depression. Fast-forward more than eight decades, and the term has been dusted off to describe the executives at some of American’s biggest banks who helped precipitate the 2008 financial meltdown by using impossibly large amounts of debt leverage and creating worthless synthetic derivatives that turned customer dollars into casino chips. Some of the abuses by reviled modern-day banksters have been curbed. But the largest U.S. banks have few friends remaining, and their… Read More

Talk about history repeating itself…  #-ad_banner-#The term “banksters” originated in the 1930s, and it was used to describe dishonest or greedy bankers at the height of the Great Depression. Fast-forward more than eight decades, and the term has been dusted off to describe the executives at some of American’s biggest banks who helped precipitate the 2008 financial meltdown by using impossibly large amounts of debt leverage and creating worthless synthetic derivatives that turned customer dollars into casino chips. Some of the abuses by reviled modern-day banksters have been curbed. But the largest U.S. banks have few friends remaining, and their business models are under assault at nearly every level by regulation and digital innovations. Today, one of the few things worse than being a victim of banksters is being a long-term shareholder of three of the biggest U.S. banks — Bank of America (NYSE: BAC), JPMorgan Chase (NYSE: JPM) and Citigroup (NYSE: C).  Their businesses are likely facing an accelerating decline… and possibly, the point of no return. In fact, big banks seem to have woken up lately with targets on their backs — perhaps they are going from “too big to fail” to “too big to miss.”  It’s not… Read More

Sometimes the markets just make no sense. Fortunately, those are also the times when a perceptive investor can make the best returns.  #-ad_banner-#Case in point: The most recent minutes of the Federal Open Market Committee (FOMC) contain an explicit call for the central bank to end its bond-purchase program by October of this year. Like most market opportunities, this may mean little on its own — but when paired with other facts and testimonies, it gives investors a clear view of how things could play out over the next year.  The market plunged 1.2% in March when Fed… Read More

Sometimes the markets just make no sense. Fortunately, those are also the times when a perceptive investor can make the best returns.  #-ad_banner-#Case in point: The most recent minutes of the Federal Open Market Committee (FOMC) contain an explicit call for the central bank to end its bond-purchase program by October of this year. Like most market opportunities, this may mean little on its own — but when paired with other facts and testimonies, it gives investors a clear view of how things could play out over the next year.  The market plunged 1.2% in March when Fed Chairman Janet Yellen, pressed by Congress for a timetable for raising rates after the end of the purchase program, said that Fed language “probably means something on the order of around six months.”  Pair this with remarks by several Fed presidents lately, and you might get the impression that interest rates would start creeping higher in advance of an eventual Fed exit from its easy-money policies.  But the market just doesn’t see it that way. And why should the market see anything but easy money and blue skies ahead? Evidenced in the chart below, the Fed has been extremely accommodative… Read More

You have to be impressed with the recent 30% six-month rally for chipmaker Intel (Nasdaq: INTC). #-ad_banner-#For a company that was already worth more than $130 billion this past winter, such rapid upside is a rare feat. Credit goes to improving demand for its chips — but this stock is also getting a nice lift from a move to add another $20 billion to an ongoing share buyback programs. Intel has already shrunk its share count by more than 10% over the past three years, and this move could deliver another 10% reduction in shares outstanding. (It would have been… Read More

You have to be impressed with the recent 30% six-month rally for chipmaker Intel (Nasdaq: INTC). #-ad_banner-#For a company that was already worth more than $130 billion this past winter, such rapid upside is a rare feat. Credit goes to improving demand for its chips — but this stock is also getting a nice lift from a move to add another $20 billion to an ongoing share buyback programs. Intel has already shrunk its share count by more than 10% over the past three years, and this move could deliver another 10% reduction in shares outstanding. (It would have been wiser to be more aggressive when shares were really washed out a year ago, but that’s a discussion for another day.) In a similar vein, shares of Cisco Systems (Nasdaq: CSCO) are up an impressive 60% over the past two years, and Cisco has also been a bold acquirer of its own shares: The networking giant has shrunk it share count by more than 1.3 billion over the past eight years, and investors have to come to appreciate the profound impact such a move has on per-share profits. These buyback kings will soon have company. Three major firms are on… Read More

After six months of investors sitting on the edge of their seats, watching tobacco stock prices climb, it’s finally here…  #-ad_banner-#The Big Tobacco merger. The second-largest U.S. tobacco company, Reynolds American (NYSE: RAI), has agreed to buy Lorillard (NYSE: LO), the third-largest U.S. tobacco company, in a deal valued at more than $27 billion. Assuming it passes regulatory scrutiny, the deal is expected to close in the first half of next year. The combined company would dominate the U.S. tobacco market, producing two of the three leading U.S. brands of cigarettes: Camel and Newport. (The top-selling brand, Marlboro, is produced… Read More

After six months of investors sitting on the edge of their seats, watching tobacco stock prices climb, it’s finally here…  #-ad_banner-#The Big Tobacco merger. The second-largest U.S. tobacco company, Reynolds American (NYSE: RAI), has agreed to buy Lorillard (NYSE: LO), the third-largest U.S. tobacco company, in a deal valued at more than $27 billion. Assuming it passes regulatory scrutiny, the deal is expected to close in the first half of next year. The combined company would dominate the U.S. tobacco market, producing two of the three leading U.S. brands of cigarettes: Camel and Newport. (The top-selling brand, Marlboro, is produced by Altria Group (NYSE: MO).) It’s one of the more complicated buyout offers in recent memory, involving four of the five biggest U.S. purveyors of tobacco products. To minimize antitrust issues, Reynolds and Lorillard both will sell assets to Imperial Tobacco Group (OTC: ITYBY). Concurrently, British American Tobacco (NYSE: BTI) plans to purchase a large amount of Reynolds shares. Reynolds American  Key to the acquisition is Reynolds’ reach for Lorillard’s leading menthol brand, Newport, giving it 62% of the menthol market. At a time when traditional cigarette sales are consistently trending downward, menthol cigarettes are both profitable and gaining… Read More

With the market at or near its all-time highs, a number of renowned investors and market commentators have been questioning the market’s valuation over the past month or so.  #-ad_banner-#Billionaire Carl Icahn is the latest to grow wary of the market. “In my mind, it is time to be cautious about the U.S. stock markets,” he said last week. So how do investors prepare for a pullback? The first group of stocks to avoid is the momentum names, which trade on investor optimism, not on the strength of their fundamentals. Stocks that trade at… Read More

With the market at or near its all-time highs, a number of renowned investors and market commentators have been questioning the market’s valuation over the past month or so.  #-ad_banner-#Billionaire Carl Icahn is the latest to grow wary of the market. “In my mind, it is time to be cautious about the U.S. stock markets,” he said last week. So how do investors prepare for a pullback? The first group of stocks to avoid is the momentum names, which trade on investor optimism, not on the strength of their fundamentals. Stocks that trade at outrageous valuations are often the first to be sold if the market takes a turn downward.  Icahn isn’t alone in his caution. Fellow billionaire David Einhorn is short a basket of stocks that trade at outsize valuations. In a Bloomberg interview earlier this year, Einhorn hinted that his targets to short include tech stocks with negligible earnings that are trading above 10 times sales.  Among the stocks that fit this bill are Twitter (NYSE: TWTR), TripAdvisor (Nasdaq: TRIP) and Zillow (Nasdaq: Z).  All three have price-to-sales (P/S) ratios above 15, and all three appear to be… Read More