I don’t know about you, but I’ve been seeing more Red Lobster commercials than usual over the past few months. While it’s been many years since I’ve stopped in for LobsterFest, the marketing push did pique my curiosity. #-ad_banner-#What was going on at Darden Restaurants (NYSE: DRI), Red Lobster’s parent company? Were they trying to revive the struggling brand? Not exactly. Darden is selling the 46-year-old brand that gave the company its start for a mere $2.1 billion (roughly $1.6 billion net after taxes). Approximately $1 billion from the sale will be used to pay down a portion of its… Read More

I don’t know about you, but I’ve been seeing more Red Lobster commercials than usual over the past few months. While it’s been many years since I’ve stopped in for LobsterFest, the marketing push did pique my curiosity. #-ad_banner-#What was going on at Darden Restaurants (NYSE: DRI), Red Lobster’s parent company? Were they trying to revive the struggling brand? Not exactly. Darden is selling the 46-year-old brand that gave the company its start for a mere $2.1 billion (roughly $1.6 billion net after taxes). Approximately $1 billion from the sale will be used to pay down a portion of its big debt load (total liabilities come in at close to $5 billion), while the remaining $600 million will be allocated to buy back shares in an effort to keep its dividend alive and improve earnings per share (EPS). This deal may be a lifesaver in the short term, but it also opens up many questions about Darden’s growth and stability. Red Lobster was Darden’s second-largest unit (in sales) next to Olive Garden, with Longhorn Steakhouse coming in third. All three units saw traffic decreases in 2013 and collectively saw a year-over-year decrease of 1.3% in 2013 sales. Its specialty niche… Read More

As is often the case with an extended bull market, value is now trumping growth.  #-ad_banner-#Many once-soaring tech stocks have come crashing downward in 2014, even as some once-loathed sectors are heating up. And few sectors were as disliked as the insurers, which have been among the deep value plays in this bull market. Back in April 2013, I noted that Protective Life (NYSE: PL), for example, sported a stunning 23% free cash flow yield.  And a month later, I noted that many insurers, including Protective Life, traded at a considerable discount to book value. This insurer is no longer a deep… Read More

As is often the case with an extended bull market, value is now trumping growth.  #-ad_banner-#Many once-soaring tech stocks have come crashing downward in 2014, even as some once-loathed sectors are heating up. And few sectors were as disliked as the insurers, which have been among the deep value plays in this bull market. Back in April 2013, I noted that Protective Life (NYSE: PL), for example, sported a stunning 23% free cash flow yield.  And a month later, I noted that many insurers, including Protective Life, traded at a considerable discount to book value. This insurer is no longer a deep bargain, now that Japan’s Dai-ichi has announced plans to buy it for $5.7 billion. Notably, Protective Life carries just $4.2 billion in tangible book value, implying a nice premium to book in this purchase price. Why would Dai-ichi pay such a stiff price? Because the Japanese financial services firm realizes that the U.S. insurance market is on the cusp of a cyclical upturn, thanks to rising insurance premiums. Insurers always have pricing power when companies start to feel more optimistic about business conditions. In fact, Dai-ichi intends to use Protective Life as a platform to acquire other, smaller… Read More

Although over-the-counter (OTC) stocks are growing in popularity, most investors avoid them because of their reputation for extreme risk. #-ad_banner-#Among the most common dangers of OTC stocks are poor transparency (since the underlying companies don’t have to file with the SEC), the inability to meet minimum financial and other requirements for listing on a major exchange, and increased susceptibility to “pump and dump” scams. What’s more, OTC stocks often display absolutely sickening price volatility. So once an OTC stock gets to where it can uplist to a major exchange like the Nasdaq or NYSE, many investors may get… Read More

Although over-the-counter (OTC) stocks are growing in popularity, most investors avoid them because of their reputation for extreme risk. #-ad_banner-#Among the most common dangers of OTC stocks are poor transparency (since the underlying companies don’t have to file with the SEC), the inability to meet minimum financial and other requirements for listing on a major exchange, and increased susceptibility to “pump and dump” scams. What’s more, OTC stocks often display absolutely sickening price volatility. So once an OTC stock gets to where it can uplist to a major exchange like the Nasdaq or NYSE, many investors may get the impression the stock is now “safe.” And this could be the case with one small stock that’s right in the thick of what may be the Next Big Thing — electronic cigarettes. After trading on the “pink sheets” for years, this tiny e-cigarette maker with a $92 million market capitalization has been trading on the Nasdaq since May 30. Its stock price is up 25% since the uplisting was announced on May 28. So to many investors, the company could be looking more and more like a legitimate and reasonably safe entry point into the emerging e-cigarette industry, especially… Read More

Following the moves of billionaire investors can be a great strategy — if you do it prudently.  #-ad_banner-#Many of the great money managers run concentrated portfolios, with the majority of their fund invested in a small number of stocks. That means these managers usually have a high degree of conviction when it comes to their picks.  One such fund is activist hedge fund Third Point, which Daniel Loeb founded in 1995. His $14 billion flagship fund returned 25% last year, and its success over the past couple of years has been driven by major investments in Yahoo (Nasdaq:… Read More

Following the moves of billionaire investors can be a great strategy — if you do it prudently.  #-ad_banner-#Many of the great money managers run concentrated portfolios, with the majority of their fund invested in a small number of stocks. That means these managers usually have a high degree of conviction when it comes to their picks.  One such fund is activist hedge fund Third Point, which Daniel Loeb founded in 1995. His $14 billion flagship fund returned 25% last year, and its success over the past couple of years has been driven by major investments in Yahoo (Nasdaq: YHOO), AIG (NYSE: AIG) and Delphi Automotive (NYSE: DLPH). During this year’s first quarter, Loeb and Third Point bought 2.5 million shares of drugmaker Actavis (NYSE: ACT), making it the hedge fund’s largest holding.  Actavis develops and manufactures branded and generic drugs, with a focus on urology and women’s health. Its generic drug portfolio should benefit from a shift toward cost-effective health care.  Actavis has been on an acquisition spree, which should help the company deliver an earnings growth rate in the high teens over the next few years. In less than two years, Actavis has already closed two acquisitions… Read More

You can have your $100,000 electric cars or $8 organic burritos…  #-ad_banner-#For my part, “boring” is exciting.  Judging by his portfolio, Warren Buffett would probably agree. Look at some of the top holdings of his Berkshire Hathaway (NYSE: BRK-B), such as Procter & Gamble (NYSE: PG), Coca-Cola (NYSE: KO) or Wells Fargo (NYSE: WFC). Soap, soda and banking… hardly cutting-edge.  Buffett’s portfolio of smaller companies that he’s purchased is also similarly mundane. The Oracle of Omaha likes businesses that are simple to understand, like See’s Candy or Dairy Queen, that are well run and produce consistent results. When… Read More

You can have your $100,000 electric cars or $8 organic burritos…  #-ad_banner-#For my part, “boring” is exciting.  Judging by his portfolio, Warren Buffett would probably agree. Look at some of the top holdings of his Berkshire Hathaway (NYSE: BRK-B), such as Procter & Gamble (NYSE: PG), Coca-Cola (NYSE: KO) or Wells Fargo (NYSE: WFC). Soap, soda and banking… hardly cutting-edge.  Buffett’s portfolio of smaller companies that he’s purchased is also similarly mundane. The Oracle of Omaha likes businesses that are simple to understand, like See’s Candy or Dairy Queen, that are well run and produce consistent results. When I was looking for a story idea to pitch to my editors here at StreetAuthority, I went back to an obscure stock that I look at from time to time: Oil-Dri Corporation of America (NYSE: ODC). As I was doing my research, Oil-Dri struck me as a company Berkshire might like to gobble up. So what does Oil-Dri do? Innovative waterless fracking or maybe some kind of specialized environmental cleanup? Not exactly. Oil-Dri is the world’s largest manufacturer of cat litter.  Oil-Dri makes cat litter under the Johnny Cat and Cat’s Pride brands as well as private-label brands. The company… Read More

At many companies, a key window is about to close…#-ad_banner-# Several weeks before a quarter ends, insiders are blocked from conducting any more transactions in company stock. It’s a smart move that helps reduce the chance that an insider will profit (by buying or selling) in the face of quarterly results that are better (or worse) than outsiders are expecting.  Yet before the insider trading activity slows sharply, these folks have sure been busy: The past 30 days has seen a tremendous amount of selling, as you’d expect in a stock market hitting all-time highs, but also a large amount… Read More

At many companies, a key window is about to close…#-ad_banner-# Several weeks before a quarter ends, insiders are blocked from conducting any more transactions in company stock. It’s a smart move that helps reduce the chance that an insider will profit (by buying or selling) in the face of quarterly results that are better (or worse) than outsiders are expecting.  Yet before the insider trading activity slows sharply, these folks have sure been busy: The past 30 days has seen a tremendous amount of selling, as you’d expect in a stock market hitting all-time highs, but also a large amount of insider buying. Here are the recent buys that have caught my eye. (All data supplied by InsiderInsights.com.) 1. Clean Energy Fuels (Nasdaq: CLNE ) In early March, three directors bought a combined $250,000 of this stock, and in early June, director Warren Mitchell followed that up with another $180,000 purchase. This has been a vexing story for investors, as the company’s base of natural gas filling stations is not yet large enough to push the company into profitability. Shares have slid from the mid-$20s two years ago to a recent $10.  The good news: The business is… Read More

Whenever a stock is in the middle of a short squeeze, you can hop on board for quick gains. It’s certainly unwise to short such a stock while in this trading phase. But once the dust settles, and shorts have bought back a lot of stock, fresh opportunities may emerge to capture renewed downside. That appears to be the very straightforward setup for struggling retailer J.C. Penney (NYSE: JCP). Back in February, while shares were halfway through a rebound move from $5 to $9, I suggested you could profit from the short squeeze.  Three months later, this trading window has now… Read More

Whenever a stock is in the middle of a short squeeze, you can hop on board for quick gains. It’s certainly unwise to short such a stock while in this trading phase. But once the dust settles, and shorts have bought back a lot of stock, fresh opportunities may emerge to capture renewed downside. That appears to be the very straightforward setup for struggling retailer J.C. Penney (NYSE: JCP). Back in February, while shares were halfway through a rebound move from $5 to $9, I suggested you could profit from the short squeeze.  Three months later, this trading window has now closed. The size of the short position has shrunk from 128.5 million shares back then, to 91 million by the end of April, to 78 million by the middle of May — but don’t look for the short position to fall much further. A fresh view of quarterly results suggests there are ample reasons to suspect that the remaining shorts will stand their ground. Downside exists toward the all-time low of $4.90 a share. To see why that is, I should first make clear that J.C. Penney is no longer a candidate for bankruptcy, as many… Read More

For those that don’t know, in addition to being the Chief Strategist behind StreetAuthority’s Stock of the Month newsletter, I’m also an avid poker player. I first picked up poker more than a decade ago, well before it was all over television. But I wasn’t after the big jackpot like most of the people who’ve taken up the game. I simply thought poker could make me a better investor. Poker has a lot in common with investing — and no, I’m not talking about luck. In poker, you don’t get the luxury of making your moves in a vacuum or… Read More

For those that don’t know, in addition to being the Chief Strategist behind StreetAuthority’s Stock of the Month newsletter, I’m also an avid poker player. I first picked up poker more than a decade ago, well before it was all over television. But I wasn’t after the big jackpot like most of the people who’ve taken up the game. I simply thought poker could make me a better investor. Poker has a lot in common with investing — and no, I’m not talking about luck. In poker, you don’t get the luxury of making your moves in a vacuum or without consideration for the dynamics other players bring to the game. It also takes patience and foresight to win consistently. And sometimes, it’s not about winning, but simply knowing when to cut your losses. #-ad_banner-#When put in those terms, it’s easy to see how playing poker can make you a better investor. It’s easy to spot an inexperienced player at a poker table. He’ll be the guy who plays nearly every hand. He’s probably grown up watching televised poker, where folded hands are edited out to highlight the relatively few contested hands. In his limited view, he believes by playing… Read More

From a financial perspective, 2013 was a banner year for many investors. #-ad_banner-#Increased economic confidence, recovering housing markets and super-sized returns from the major indices made the recession of 2008 all but a distant memory. The S&P 500 delivered a gain of nearly 30%, propping up retirement accounts and prompting even greater inflows into funds of all kinds: index, mutual and hedge. As is typical after the end of each year, we’re inundated with rankings and commentary to see just how these asset managers actually performed — a tough comparison when passive investments gave such outsized returns with little to… Read More

From a financial perspective, 2013 was a banner year for many investors. #-ad_banner-#Increased economic confidence, recovering housing markets and super-sized returns from the major indices made the recession of 2008 all but a distant memory. The S&P 500 delivered a gain of nearly 30%, propping up retirement accounts and prompting even greater inflows into funds of all kinds: index, mutual and hedge. As is typical after the end of each year, we’re inundated with rankings and commentary to see just how these asset managers actually performed — a tough comparison when passive investments gave such outsized returns with little to no fees. Exceptional stock-picking, properly managed risk, and a long-only bias separated the gurus from the rest of the pack — and one manager stood out handily from his peers, grabbing the top spot as the best-performing large hedge fund, according to Bloomberg. Larry Robbins of Glenview Capital Management delivered an astounding 84% return with his Capital Opportunity Fund. How’d he do it? By going long the health care industry, betting it would get a boost from the passing of the Affordable Care Act. Fortunately for Robbins and his investors, it did just that. His latest Form 13F shows that… Read More

Whenever there is a bidding war on Wall Street, one company emerges as the victor, with the loser forced to regroup. Typically, the loser will then look for a consolation prize: another company in the same industry. #-ad_banner-#This could be what happens next as Pilgrim’s Pride (Nasdaq: PPC) and Tyson Foods (NYSE: TSN) battle over Hillshire Brands (NYSE: HSH).  Only one company can win the bidding war for Hillshire Brands. Whichever company loses will likely then go looking for its next acquisition target — but there are very few publicly traded meat producers. I expect the next target for Pilgrim’s… Read More

Whenever there is a bidding war on Wall Street, one company emerges as the victor, with the loser forced to regroup. Typically, the loser will then look for a consolation prize: another company in the same industry. #-ad_banner-#This could be what happens next as Pilgrim’s Pride (Nasdaq: PPC) and Tyson Foods (NYSE: TSN) battle over Hillshire Brands (NYSE: HSH).  Only one company can win the bidding war for Hillshire Brands. Whichever company loses will likely then go looking for its next acquisition target — but there are very few publicly traded meat producers. I expect the next target for Pilgrim’s Pride or Tyson (one of my favorite stocks) could well be Sanderson Farms (Nasdaq: SAFM), a $2.2 billion company that makes and sells chicken products in the U.S. What makes Sanderson Farms an attractive target is that in the wake of rapid consolidation in the meat producer industry, there aren’t many companies left to buy. For instance, pork producer Smithfield Farms was acquired last year by a Chinese firm for $7.1 billion to feed the growing demand for pork in China, the world’s largest consumer of pork.  One of Sanderson’s main competitors is Perdue Farms. Perdue is privately held, and… Read More