While at a party several months ago, I was asked: Which stock I would choose for my retirement if I had to pick just one? #-ad_banner-#Initially, I was taken aback by the question. My immediate answer was to never rely on a single stock for any investment portfolio, let alone for a retirement portfolio. I launched into a spiel about the importance of diversification and balance, and simply how dangerous betting something as critical as your retirement on a single stock choice would be. The person continued to push me for an answer, so instinctively I blurted out the SPDR… Read More

While at a party several months ago, I was asked: Which stock I would choose for my retirement if I had to pick just one? #-ad_banner-#Initially, I was taken aback by the question. My immediate answer was to never rely on a single stock for any investment portfolio, let alone for a retirement portfolio. I launched into a spiel about the importance of diversification and balance, and simply how dangerous betting something as critical as your retirement on a single stock choice would be. The person continued to push me for an answer, so instinctively I blurted out the SPDR S&P 500 Index Fund ETF (NYSE: SPY). My new friend wasn’t satisfied at all with this answer. He continued to prod me for a single company. I finally told him that I did not have an answer to his question offhand but I would do some research. After looking into his question, I determined that a company would have to satisfy the following criteria to be considered for this unique honor. 1. Stability Safety and security should be the top goal of any retirement portfolio. The company should operate in a nearly recession-proof business so that it can more easily… Read More

When stocks run up several-fold or more, their valuation metrics typically reflect the gain in a big way. Take the wildly popular automaker Tesla Motors (Nasdaq: TSLA). In the five years since the stock began trading on the Nasdaq, it’s up almost 900%, making it nearly a 10-bagger. The company is still losing money (it’s in the red by $0.62 a share during the past 12 months), so it has no price-to-earnings (P/E) ratio to evaluate. But other commonly used valuation measures are looking quite ugly in Tesla’s case, and I think it’s safe to say the stock is horribly… Read More

When stocks run up several-fold or more, their valuation metrics typically reflect the gain in a big way. Take the wildly popular automaker Tesla Motors (Nasdaq: TSLA). In the five years since the stock began trading on the Nasdaq, it’s up almost 900%, making it nearly a 10-bagger. The company is still losing money (it’s in the red by $0.62 a share during the past 12 months), so it has no price-to-earnings (P/E) ratio to evaluate. But other commonly used valuation measures are looking quite ugly in Tesla’s case, and I think it’s safe to say the stock is horribly overvalued. However, that’s not the case at all for another stock that has matched Tesla’s gain, which has also soared 900% during the past five years. But despite this, shares of the company are still very reasonably valued relative to its industry and the broader market. #-ad_banner-#I’m referring to the well-known insurance and wealth management firm Genworth Financial (NYSE: GNW). Even though Genworth is up as much as Tesla, it’s far from overpriced, and I think it’s a much better investment at this point. Part of the reason the stock was able to post such amazing… Read More

As a long-term investor, I am always on the lookout for megatrends that will drive a sector or industry over the next 10 or 20 years. Few of these possible trends are as strong as the effect of a surging global population and a rising emerging-market middle class on food demand. #-ad_banner-#In fact, looking out over the next few decades, the trend is pretty frightening. I would actually be more than a little scared for the future if I didn’t know that one industry group, and one company in particular, has the capacity to save the world. Malthus: Correct —… Read More

As a long-term investor, I am always on the lookout for megatrends that will drive a sector or industry over the next 10 or 20 years. Few of these possible trends are as strong as the effect of a surging global population and a rising emerging-market middle class on food demand. #-ad_banner-#In fact, looking out over the next few decades, the trend is pretty frightening. I would actually be more than a little scared for the future if I didn’t know that one industry group, and one company in particular, has the capacity to save the world. Malthus: Correct — But 250 Years Off Target “The power of population is so superior to the power of the earth to produce subsistence for man, that premature death must in some shape or other visit the human race.” So wrote economist Thomas Malthus as he predicted a catastrophic famine in the near future on the lack of agriculture to feed the world’s growing masses. Unfortunately for Malthus, he wrote this in 1798 and is best remembered for being wrong. Turns out, he might have just been early. The United Nations projects that food production will need to double by 2050 or… Read More

History has shown us that America was built on the back of positive rivalries. #-ad_banner-#Like the long-standing feud between the New York Yankees and the Boston Red Sox… or the U.S. vs. Russia in the Olympics. That’s to say nothing of more serious rivalries like the political feud between Democrats and Republicans. Nothing can drive competitors to perform their best like a well-matched rivalry. This is particularly true in the world of business. Think of Microsoft (Nasdaq: MSFT) and Apple (Nasdaq: AAPL), Ford (NYSE: F) and General Motors (NYSE: GM), or AT&T (NYSE: T) and Sprint (NYSE: S). All of… Read More

History has shown us that America was built on the back of positive rivalries. #-ad_banner-#Like the long-standing feud between the New York Yankees and the Boston Red Sox… or the U.S. vs. Russia in the Olympics. That’s to say nothing of more serious rivalries like the political feud between Democrats and Republicans. Nothing can drive competitors to perform their best like a well-matched rivalry. This is particularly true in the world of business. Think of Microsoft (Nasdaq: MSFT) and Apple (Nasdaq: AAPL), Ford (NYSE: F) and General Motors (NYSE: GM), or AT&T (NYSE: T) and Sprint (NYSE: S). All of these (and dozens of others) have resulted in increased innovation, industry growth and — most critically for investors — shareholder value. One rivalry in particular stands out to me in terms of longevity, pure competitive zeal and using nearly every trick in the book for the upper hand: the epic cola war between Coca-Cola (NYSE: KO) and Pepsico (NYSE: PEP).   Both of these companies have made great investments over the years, both offer solid growing dividend yields, and both excel in a particular niche. However, going forward, I think one of these companies has the edge on the other… Read More

If I had to nominate the best-run business of the early 21st century, Netflix (Nasdaq: NFLX), Apple (Nasdaq: AAPL) and Priceline (Nasdaq: PCLN) make the first ballot. Each company took a fresh look at their industry… and introduced revolutionary new approaches that left rivals flat-footed.#-ad_banner-# Priceline, in particular, deserves special mention, not only for its visionary ability to rewrite the rules of the century-old travel industry, but for a knack to acquire any emerging rival that could further boost growth and eliminate competitive threats. Priceline’s purchases of Agoda and Booking.com in 2007 and Kayak.com in 2012 partially explain why this… Read More

If I had to nominate the best-run business of the early 21st century, Netflix (Nasdaq: NFLX), Apple (Nasdaq: AAPL) and Priceline (Nasdaq: PCLN) make the first ballot. Each company took a fresh look at their industry… and introduced revolutionary new approaches that left rivals flat-footed.#-ad_banner-# Priceline, in particular, deserves special mention, not only for its visionary ability to rewrite the rules of the century-old travel industry, but for a knack to acquire any emerging rival that could further boost growth and eliminate competitive threats. Priceline’s purchases of Agoda and Booking.com in 2007 and Kayak.com in 2012 partially explain why this company has boosted sales at least 20% in each of the past seven years, and is expected to do so again in 2014 and 2015. Still, Priceline’s current $67 billion market value, which equates to roughly 35 times trailing earnings, embeds an awful lot of success. And investors, as they have pushed shares into quadruple-digit territory, may have overlooked some serious speed bumps in the road ahead. If you have been fortunate to own this stock all the way up, it may be time to cash in your winnings. Three reasons in particular come to mind. 1. Bumpy Quarters It’s… Read More

Though I tend to generally find the customer service at major companies to be lacking, I give high marks to satellite TV operator DirecTV (NYSE: DTV). The company charges me a lot of money every month, but backs it up with professional customer support and trouble-free service. #-ad_banner-#Yet DirecTV is facing a problem that many companies are experiencing: Growth is slowing, and the company is likely to add few new customers this year. It’s a good thing that management spent heavily to build up its service years ago and has few major new investments to make these days. That enables… Read More

Though I tend to generally find the customer service at major companies to be lacking, I give high marks to satellite TV operator DirecTV (NYSE: DTV). The company charges me a lot of money every month, but backs it up with professional customer support and trouble-free service. #-ad_banner-#Yet DirecTV is facing a problem that many companies are experiencing: Growth is slowing, and the company is likely to add few new customers this year. It’s a good thing that management spent heavily to build up its service years ago and has few major new investments to make these days. That enables DirectTV to generate more than $2 billion free cash flow, year in and year out. Shareholders have directly benefited from the cash production. A look at earnings per share explains why, as I’ll show in a moment. Take a look at the company’s key income statement metrics across the span of five years. Since 2009, sales have grown nearly 50% (largely thanks to growth in Latin America), operating profits have risen 150% and net profits have nearly tripled. Yet the company’s earnings per share have risen more than 400%. Credit goes to a rapidly shrinking share count, thanks… Read More

There are very few guarantees when it comes to stock investing. The ever-changing nature of the stock market can make speaking in absolutes a fool’s errand. However, stock market behavior does repeat itself enough to create some high-probability setups. Recognizing these setups is one of the ways professional investors differentiate themselves — along with the patience to wait for these setups to occur before entering positions.   #-ad_banner-#One of my favorites among these setups is “fading,” or going against, extreme market moves. This can be done with indicators such as the relative strength index (RSI) and Bollinger bands where extreme… Read More

There are very few guarantees when it comes to stock investing. The ever-changing nature of the stock market can make speaking in absolutes a fool’s errand. However, stock market behavior does repeat itself enough to create some high-probability setups. Recognizing these setups is one of the ways professional investors differentiate themselves — along with the patience to wait for these setups to occur before entering positions.   #-ad_banner-#One of my favorites among these setups is “fading,” or going against, extreme market moves. This can be done with indicators such as the relative strength index (RSI) and Bollinger bands where extreme readings often signal a change in trend. My favorite “fade” move is buying the most heavily shorted stocks on the market. These stocks are generally hated by most investors and often have terrible fundamentals that support the heavy short positions. However, not only do many heavily shorted companies possess the potential for a explosive upward move due to a short squeeze, they often outperform the market. A Goldman Sachs research report last October titled “Investors Focused on the Results of High Short Interest Stocks” found that stocks with high short interest were most likely to outperform during the quarter. The… Read More

This month, the bull market officially celebrated its five-year “anniversary.”  For some reason people think that’s a big deal. It’s almost as if the rally’s birthday has led analysts to believe it’s finally old enough to get in trouble.  How ridiculous.  There have been 25 major bull markets throughout U.S. history. Each of those runs has lasted about 900 days (2.5 years) on average — with the longest spanning almost 14 years (1987 to 2000). The S&P 500 gained an average of 103% during each of those periods.  #-ad_banner-#The current bull market period ranks fifth on that list in terms… Read More

This month, the bull market officially celebrated its five-year “anniversary.”  For some reason people think that’s a big deal. It’s almost as if the rally’s birthday has led analysts to believe it’s finally old enough to get in trouble.  How ridiculous.  There have been 25 major bull markets throughout U.S. history. Each of those runs has lasted about 900 days (2.5 years) on average — with the longest spanning almost 14 years (1987 to 2000). The S&P 500 gained an average of 103% during each of those periods.  #-ad_banner-#The current bull market period ranks fifth on that list in terms of length, coming in just short of the index’s 5-year rally from 1982 to 1987 — which ran longer than the current rally by a matter of days. But if someone tells you that means something about the market’s future price action, they’re just blowing smoke. Yes, this rally has lasted a long time. But that’s because it’s had to.  Remember, the 2008 financial crisis was the biggest market catastrophe since the Great Depression. It was so bad that people thought asset prices may fall to zero (No joke). While things never reached that point, once it was all said… Read More

Not many public companies ever attain blue-chip status, where they become the types of top-tier investments that can basically be held forever. That’s because blue-chip stocks have high standards to meet, such as a history of market dominance, outstanding financial strength, competitive margins, and reliable dividends. #-ad_banner-#After many years of success — sometimes over a century or more — they’re usually among the biggest, best-known names in their industries… firms like General Electric (NYSE: GE), Procter & Gamble (NYSE: PG), and Coca-Cola (NYSE: KO). While blue-chip stocks are relatively rare, it might be even less common to find a company… Read More

Not many public companies ever attain blue-chip status, where they become the types of top-tier investments that can basically be held forever. That’s because blue-chip stocks have high standards to meet, such as a history of market dominance, outstanding financial strength, competitive margins, and reliable dividends. #-ad_banner-#After many years of success — sometimes over a century or more — they’re usually among the biggest, best-known names in their industries… firms like General Electric (NYSE: GE), Procter & Gamble (NYSE: PG), and Coca-Cola (NYSE: KO). While blue-chip stocks are relatively rare, it might be even less common to find a company that could be on its way to becoming one — but I think I’ve found exactly such a stock. This company can trace its roots back to World War II, when the firm’s founder and some colleagues developed a uranium filtration process crucial for the construction of the first atomic weapons. In the ensuing seven decades, the company has become the world’s largest manufacturer of filtration/purification products. But with a market capitalization just under $10 billion, it hasn’t yet grown into a full-fledged blue chip. (For example, GE is worth around $257 billion.) But I do consider it an excellent… Read More

These days, investors are constantly looking for the next Chipotle Mexican Grill (NYSE: CMG) or McDonald’s (NYSE: MCD). #-ad_banner-#Well, the good news is that most won’t have to look too far. It’s not often that investors find a company that owns over 20% of its market, especially in the quick-service restaurant space. It’s even more surprising when that company has only a billion-dollar market cap. A large part of this reason is that before January of this year, Popeyes Louisiana Kitchen (Nasdaq: PLKI) was known to investors as AFC Enterprises. With the name change, investors now have a better idea… Read More

These days, investors are constantly looking for the next Chipotle Mexican Grill (NYSE: CMG) or McDonald’s (NYSE: MCD). #-ad_banner-#Well, the good news is that most won’t have to look too far. It’s not often that investors find a company that owns over 20% of its market, especially in the quick-service restaurant space. It’s even more surprising when that company has only a billion-dollar market cap. A large part of this reason is that before January of this year, Popeyes Louisiana Kitchen (Nasdaq: PLKI) was known to investors as AFC Enterprises. With the name change, investors now have a better idea of what they are buying. An Impressive Turnaround In 5 Years Over the past five years, Popeyes has undergo an impressive restructuring at the hands of CEO Cheryl Bachelder. For 2007 and 2008, same-store sales declined 2% each year. Same-store sales went positive in 2009 and have been positive every year since. As a matter of fact, the most recent quarter marked the 15th consecutive quarter of positive same-store sales. To accomplish this turnaround, the company implemented a number of initiatives that should continue driving growth. The three main aspects have been improved service, increased advertising, and menu innovations. Read More