For much of the past five years, many companies have been squarely focused on their own operations, using excess cash to pay dividends, buy back stock, or reduce debt — the three pillars of what we call Total Yield. #-ad_banner-#Look for more of the same in 2014, as companies continue to generate stunning amounts of cash flow.  And also look for a lot more deal-making in the year ahead. The conditions are ripe for a boom in mergers and acquisitions (M&A), and various sectors will really heat up as the deals flow.  On the face of it, companies appear… Read More

For much of the past five years, many companies have been squarely focused on their own operations, using excess cash to pay dividends, buy back stock, or reduce debt — the three pillars of what we call Total Yield. #-ad_banner-#Look for more of the same in 2014, as companies continue to generate stunning amounts of cash flow.  And also look for a lot more deal-making in the year ahead. The conditions are ripe for a boom in mergers and acquisitions (M&A), and various sectors will really heat up as the deals flow.  On the face of it, companies appear to continue shunning major mergers and acquisitions. The economic crisis in 2008 and 2009 left many firms feeling too cautious to make bold moves. But some of that caution was shed in 2013.   According to ThomsonReuters, the total dollar value of all M&A activity in the U.S. rose 11% last year, to more than $1 trillion. The sectors and industries that saw the most action were oil and gas ($227 billion), wireless telecom ($175 billion), commercial real estate ($161 billion), and metals and mining ($93 billion). Looking at the macroeconomic backdrop, a case can be made for even more… Read More

Consumers are becoming more and more accustomed to being completely connected. We want to control our electronics, adjust the thermostat, close the garage, and lower the shades — all from the comforts of our couches.  #-ad_banner-#As a result, our homes are becoming smarter and smarter. Some of the world’s biggest players are looking to get into the home automation space.  Last week, Google (Nasdaq: GOOG) said it would buy Nest Labs, a maker of smart thermostats and smoke detectors, for over $3 billion. The likes of Comcast (Nasdaq: CMCSA) and Microsoft (Nasdaq: MSFT) have already been showing interest… Read More

Consumers are becoming more and more accustomed to being completely connected. We want to control our electronics, adjust the thermostat, close the garage, and lower the shades — all from the comforts of our couches.  #-ad_banner-#As a result, our homes are becoming smarter and smarter. Some of the world’s biggest players are looking to get into the home automation space.  Last week, Google (Nasdaq: GOOG) said it would buy Nest Labs, a maker of smart thermostats and smoke detectors, for over $3 billion. The likes of Comcast (Nasdaq: CMCSA) and Microsoft (Nasdaq: MSFT) have already been showing interest with acquisitions and in-house developments.  There’s a reason there’s suddenly so much interest in home automation. The industry is expected to soar from its current estimated value of $570 million to $2.6 billion in 2017, according to ABI Research.  So what’s the best pure play on this booming market? It appears to be Control4 Corp. (Nasdaq: CTRL).  With nearly three dozen patents, the company is at the forefront of the “connected home” concept, with products for controlling lighting, music, video, temperature, security and communications. Control4’s home automation software automatically finds and adds devices, which cuts down on the time it… Read More

The size and reach of this relatively new industry is astounding. Once written off as just a passing fad for children and teenagers, this sector has become a major economic force — and its growth shows no signs of abating. #-ad_banner-# Consumers spent nearly $21 billion in this sector in 2012, and nearly 60% of Americans actively participate in this form of entertainment. I can’t think of another hobby or sport that involves so many participants.  Although this business is widely thought of as being a pastime for teenagers, the average age of its participants is 30 years old,… Read More

The size and reach of this relatively new industry is astounding. Once written off as just a passing fad for children and teenagers, this sector has become a major economic force — and its growth shows no signs of abating. #-ad_banner-# Consumers spent nearly $21 billion in this sector in 2012, and nearly 60% of Americans actively participate in this form of entertainment. I can’t think of another hobby or sport that involves so many participants.  Although this business is widely thought of as being a pastime for teenagers, the average age of its participants is 30 years old, and 45% of them are female. If you haven’t already guessed, this huge and thriving industry is electronic gaming.   Electronic gaming has grown from the video game parlors of yesterday to a multi-billion-dollar industry that touches an enormous segment of the population. There are plenty of profit opportunities across the industry for savvy investors, but I want to focus on a particular company that’s well positioned to earn long-term profits from the electronic gaming revolution.   The company is GameStop (NYSE: GME), the world’s largest multi-channel video game retailer. In addition to nearly 6,500 stores in 15 countries, GameStop… Read More

There’s nothing like not getting your package delivered in time for Christmas.#-ad_banner-#​ This happened to a number of consumers this holiday season. The online retailers blamed the major shipping companies. The shipping companies blamed the online retailers. Customers were outraged. They took to social media, calling out both online retailers and the major delivery companies. Surprisingly, the market stood by the shipping stocks and none took a major hit on the negative news. Investors should take this as a sign of confidence. FedEx (NYSE: FDX) was one of the companies at the center of the… Read More

There’s nothing like not getting your package delivered in time for Christmas.#-ad_banner-#​ This happened to a number of consumers this holiday season. The online retailers blamed the major shipping companies. The shipping companies blamed the online retailers. Customers were outraged. They took to social media, calling out both online retailers and the major delivery companies. Surprisingly, the market stood by the shipping stocks and none took a major hit on the negative news. Investors should take this as a sign of confidence. FedEx (NYSE: FDX) was one of the companies at the center of the ruined package delivery debacle, but investors shouldn’t let their holiday mishaps interfere with their investing. Gearing Up For 2014 The short Thanksgiving-to-Christmas timeframe and an overwhelming number of e-commerce purchases showed just how unprepared the major shippers were. FedEx has been throwing money into its infrastructure and will be more than prepared for the steady rise in e-commerce next holiday season. FedEx will have three to five new hubs available for ground delivery next holiday season. The fact remains that as retailers battle for customers, the one sure winner will be shippers like FedEx.  In the eyes of the… Read More

There are overreactions in the stock market all the time, leading to mispriced securities. This happens as investors tend to overreact to news or earnings. Almost no company is immune.#-ad_banner-#​ Unjustified downward pressure can even happen to companies that offer products that touch every aspect of our lives. One thing that investors should remember is that these are usually near term pressures and can make for great buying opportunities. This is especially true if there is a long-term growth story is intact.  One recent example is blue-chip retailer Target (NYSE: TGT), which said last month… Read More

There are overreactions in the stock market all the time, leading to mispriced securities. This happens as investors tend to overreact to news or earnings. Almost no company is immune.#-ad_banner-#​ Unjustified downward pressure can even happen to companies that offer products that touch every aspect of our lives. One thing that investors should remember is that these are usually near term pressures and can make for great buying opportunities. This is especially true if there is a long-term growth story is intact.  One recent example is blue-chip retailer Target (NYSE: TGT), which said last month that it had sustained a security breach of customer account info. The news continued to get worse for the stock as Target disclosed last week that additional info — including phone numbers and street and email addresses — might have been compromised. As a result, the company lowered its earnings outlook for its fiscal fourth quarter due to notably lower store traffic and sales stemming from news of the data breach. However, the recent headlines are overshadowing the long-term potential for the stock. Yes, some 40 million credit and debit card accounts were breached, but Target doesn’t think PINs were… Read More

What do you call 10,000 baby boomers turning 65 every day for the next 20 years? If you’re a big pharmaceutical company, you might call it an ATM.#-ad_banner-# Investors got a taste of this in the late ’90s when drugmaker Pfizer (NYSE: PFE) introduced the erectile dysfunction wonder drug Viagra. Money was made as competitors came out with “me too” products, and Big Pharma threw itself into R&D for products tailored to serve this huge (65 million-plus) and aging market.  However, after a rally at the end of the 20th century, pharma stocks came back to earth with… Read More

What do you call 10,000 baby boomers turning 65 every day for the next 20 years? If you’re a big pharmaceutical company, you might call it an ATM.#-ad_banner-# Investors got a taste of this in the late ’90s when drugmaker Pfizer (NYSE: PFE) introduced the erectile dysfunction wonder drug Viagra. Money was made as competitors came out with “me too” products, and Big Pharma threw itself into R&D for products tailored to serve this huge (65 million-plus) and aging market.  However, after a rally at the end of the 20th century, pharma stocks came back to earth with the rest of the market and spent almost a decade chugging sideways. But as markets crawled out of the wreckage of the financial crisis, pharma stocks have quietly broken out and moved higher. Five years ago, I began including shares of Eli Lilly (NYSE: LLY) in my clients’ equity portfolios. At the time, the meat-and-potatoes metrics of the stock were impressive: single-digit trailing and forward price-to-earnings (P/E) ratios, a dividend yield over 5%, a mountain of cash, skilled and committed management, and a full, promising new product pipeline — which is the difference between life and death in the pharma… Read More

Who doesn’t love to indulge with a sweet treat every now and then? (Especially when it’s chocolate…) #-ad_banner-#​ The likes of Oreos, Nabisco cookies and Cadbury chocolates are great places to start. To the rest of the world, these decadent goodies are foreign concepts — but rising middle classes in emerging markets means these items are increasingly being made available to the masses. Meanwhile, snacks continue to be a staple in developed markets despite the rise in health consciousness.  The best way to play the expanding emerging market wallet and global snack demand is Mondelez International (Nasdaq: MDLZ). With… Read More

Who doesn’t love to indulge with a sweet treat every now and then? (Especially when it’s chocolate…) #-ad_banner-#​ The likes of Oreos, Nabisco cookies and Cadbury chocolates are great places to start. To the rest of the world, these decadent goodies are foreign concepts — but rising middle classes in emerging markets means these items are increasingly being made available to the masses. Meanwhile, snacks continue to be a staple in developed markets despite the rise in health consciousness.  The best way to play the expanding emerging market wallet and global snack demand is Mondelez International (Nasdaq: MDLZ). With revenue of more than $35 billion last year, Mondelez is the maker of those Oreos, Nabisco cookies and Cadbury chocolates that U.S. consumers love so much — but it also makes various other snacks and beverages, including Lu biscuits, Trident gums, Jacobs coffee and Tang drink powder. Mondelez is the international business that was left after Kraft Foods (Nasdaq: KRFT) spun off its North American grocery business in 2012. The company sells nearly 60 brands in more than 165 countries. According to Forbes, the Mondelez brand is among the 50 most powerful in the world.  The rapid rise of China’s… Read More

One of the most overlooked aspects of the market is the fact that as the economy rebounds, consumers aren’t alone in loosening their purse strings — businesses do, too.#-ad_banner-#​ Specifically, 2014 should see a higher level of securities trading and companies looking to make strategic investments. That means companies will increasingly be looking for advice and to raise money and buy up competitors.  Thus, investment banks should perform fairly well in 2014. On the other side, there should be a higher level of trading this year, which is good news for brokerage firms.  One of the best growth… Read More

One of the most overlooked aspects of the market is the fact that as the economy rebounds, consumers aren’t alone in loosening their purse strings — businesses do, too.#-ad_banner-#​ Specifically, 2014 should see a higher level of securities trading and companies looking to make strategic investments. That means companies will increasingly be looking for advice and to raise money and buy up competitors.  Thus, investment banks should perform fairly well in 2014. On the other side, there should be a higher level of trading this year, which is good news for brokerage firms.  One of the best growth plays for 2014 is a company that has exposure to both the brokerage and investment banking industries. Stifel Financial (NYSE: SF) is just that, and it appears to be one of the best plays in this highly fragmented industry.  Stifel is also playing its part in consolidating the industry. The company has spent upwards of $2 billion on acquisitions since 1997, and now has total client assets under management of $154 billion and 5,800 employees. Acquisitions and mergers should continue to be a great way for Stifel to snatch up market share, as well as gaining market share through organic… Read More

Many people don’t believe that disconnects like the one I’m about to tell you about can happen. They believe that with all of the eyeballs on Wall Street, someone (and likely many people) would surely spot a rising star like this. But that’s not at all true. And I can prove it to you. #-ad_banner-#Just look at the stats on a stock I’ve uncovered earlier this month in my premium advisory, Top 10 Stocks. This firm is one of the most established companies in the metals business. But it’s not resting on its laurels. In 2009, management set out a… Read More

Many people don’t believe that disconnects like the one I’m about to tell you about can happen. They believe that with all of the eyeballs on Wall Street, someone (and likely many people) would surely spot a rising star like this. But that’s not at all true. And I can prove it to you. #-ad_banner-#Just look at the stats on a stock I’ve uncovered earlier this month in my premium advisory, Top 10 Stocks. This firm is one of the most established companies in the metals business. But it’s not resting on its laurels. In 2009, management set out a program of cost-cutting and efficiency improvements designed to boost this company’s profitability. Since that time, margins have jumped to a projected 21.9% for 2013, up an astonishing 65% from 2009 levels. Growth like this should send stock buyers scrambling to call their brokers. But here’s the incredible thing: Today, you can buy this firm for 45% less than when it started its relentless margin improvements. This sounds too good to be true. Surely there must be something wrong. Perhaps there’s a hidden defect that’s causing investors to drop the stock? The reason for this disconnect has nothing to do with… Read More

Shares of T-Mobile US (NYSE: TMUS) popped almost 9% last month on news that Sprint (NYSE: S) would seek a buyout of the wireless carrier. Coming less than a year after Japanese giant Softbank (OTC: SFTBF) acquired Sprint, the move heats up the battle for telecom supremacy.#-ad_banner-#​ Investors are cheering on both sides of the potential deal, but they may be in for a rude awakening when the Federal Communications Commission (FCC) weighs in.  Four has always been a magic number for telecom carriers. The idea is that if the industry consolidated… Read More

Shares of T-Mobile US (NYSE: TMUS) popped almost 9% last month on news that Sprint (NYSE: S) would seek a buyout of the wireless carrier. Coming less than a year after Japanese giant Softbank (OTC: SFTBF) acquired Sprint, the move heats up the battle for telecom supremacy.#-ad_banner-#​ Investors are cheering on both sides of the potential deal, but they may be in for a rude awakening when the Federal Communications Commission (FCC) weighs in.  Four has always been a magic number for telecom carriers. The idea is that if the industry consolidated to fewer than four carriers, an oligopoly would form and prices would go up. That’s part of the reason regulators jumped in when AT&T (NYSE: T) tried to buy T-Mobile in 2011. While a Sprint/T-Mobile combination would still be smaller than either AT&T or Verizon (NYSE: VZ), it would still put considerable pricing power in the hands of just three companies. I alerted investors in October to T-Mobile’s great turnaround story and the success in its Uncarrier program. TMUS is up more than 25% since that article — but the valuation looks stretched, especially if regulators put the kibosh on an… Read More