It’s become conventional wisdom that the U.S. labor market has an awful lot of embedded slack. Wage growth remains anemic, and millions of Americans are still looking for work, fully six years after the last recession ended. #-ad_banner-#But the conventional wisdom  is wrong. For employees with the right set of skills (and typically a college degree), we have already reached what economists call “full employment.” That was the message that Stanley Fischer, the Vice Chairman of the Federal Reserve, noted in a round of interviews with Bloomberg News, The Wall Street Journal, and others in early August. … Read More

It’s become conventional wisdom that the U.S. labor market has an awful lot of embedded slack. Wage growth remains anemic, and millions of Americans are still looking for work, fully six years after the last recession ended. #-ad_banner-#But the conventional wisdom  is wrong. For employees with the right set of skills (and typically a college degree), we have already reached what economists call “full employment.” That was the message that Stanley Fischer, the Vice Chairman of the Federal Reserve, noted in a round of interviews with Bloomberg News, The Wall Street Journal, and others in early August.  Indeed the job market is far tighter than many might think. The Federal Reserve has found that over long periods, roughly 2.0% of college grads are without work, on average, at any given time. By their measure, that figure is closer to 1.0% right now, indicating a current adjusted unemployment rate in negative territory.  Here’s the remarkable thing about the current employment picture: The construction industry, which is heavily dependent on the housing sector, remains weak, but is finally getting stronger as housing starts begin to build steam. Housing starts have been very strong recently, hitting… Read More

The stock market has been quite choppy in recent weeks, and concerns are growing that the six-year bull market may be at an end. But catalysts for further upside remain: valuations in the energy sector have fallen along with oil prices and many of the world’s largest central banks are still pumping money into their economies to fuel growth. Even in China, where slowing growth is causing chaos in commodity prices, economic growth remains solid, with the government taking steps to boost the economy. #-ad_banner-#This environment creates a perfect stock picker’s market. Instead of a one-way bet on higher prices,… Read More

The stock market has been quite choppy in recent weeks, and concerns are growing that the six-year bull market may be at an end. But catalysts for further upside remain: valuations in the energy sector have fallen along with oil prices and many of the world’s largest central banks are still pumping money into their economies to fuel growth. Even in China, where slowing growth is causing chaos in commodity prices, economic growth remains solid, with the government taking steps to boost the economy. #-ad_banner-#This environment creates a perfect stock picker’s market. Instead of a one-way bet on higher prices, investors will need to hedge market weakness by picking the losers along with the winners. Pairing your long positions against shorts offers the opportunity not only to hedge lower prices but gain on both sides of the trade. And two stocks in the relatively expensive tool and accessories industry may offer the perfect paired trade opportunity. Using The Right Tools For A Long-Short Strategy Within its coverage universe, Morningstar found tools and accessories to be one of the most expensive industries, at 1.47 times its fair value estimate. One company in the group still offers upside, as it is well-positioned… Read More

It’s increasingly obvious that the Federal Reserve Open Market Committee (FOMC) will start to raise short-term interest rates by the end of this year. For banks, insurance companies, and many other financial institutions, higher rates can’t come soon enough, as they will start to generate higher interest income on their vast cash balances. Yet one financial services company in particular has especially strong leverage to rising rates, making it a timely investment. #-ad_banner-# Federated Investors (NYSE: FII) is an asset management firm with a focus on equity, fixed income, and money market accounts. Money market funds are investment… Read More

It’s increasingly obvious that the Federal Reserve Open Market Committee (FOMC) will start to raise short-term interest rates by the end of this year. For banks, insurance companies, and many other financial institutions, higher rates can’t come soon enough, as they will start to generate higher interest income on their vast cash balances. Yet one financial services company in particular has especially strong leverage to rising rates, making it a timely investment. #-ad_banner-# Federated Investors (NYSE: FII) is an asset management firm with a focus on equity, fixed income, and money market accounts. Money market funds are investment vehicles in which the primary focus is protection of principal. Fund managers invest in only very short-term bonds where the risk of loss is nearly zero. In normal interest rate environments, the firm keeps a sliver of the investment profits for itself. But these are not normal interest rate times. With short-term yields at nearly zero, Federated Investors has not been able to cover the costs of running the funds. Instead of charging the cost difference to fund investors, Federated Investors has voluntarily issued “fee waivers” to its clients. The waived fees, which would constitute a significant source of revenue… Read More

#-ad_banner-#When buy and sell decisions are motivated by emotion and then amplified by mindless computer programs, stock movements can become irrational. But after the dust settles and traders gather their wits, we often find prime trading opportunities. The starkest example of this recently is Apple (Nasdaq: AAPL), which has suffered a mini-crash in the past three weeks with shares down as much as 16% from their July 20 high. Ironically, Apple’s violent move lower began after the company reported record Q3 earnings, beating estimates on the top and bottom lines. However, it sold only 47.5… Read More

#-ad_banner-#When buy and sell decisions are motivated by emotion and then amplified by mindless computer programs, stock movements can become irrational. But after the dust settles and traders gather their wits, we often find prime trading opportunities. The starkest example of this recently is Apple (Nasdaq: AAPL), which has suffered a mini-crash in the past three weeks with shares down as much as 16% from their July 20 high. Ironically, Apple’s violent move lower began after the company reported record Q3 earnings, beating estimates on the top and bottom lines. However, it sold only 47.5 million iPhones, less than the 48.8 million analysts had expected. Shares immediately plummeted 6.7%, which was a gross overreaction in my opinion. But the selling continued and Apple dipped below its 200-day moving average on Aug. 3. Many consider the 200-day to be an important trend indicator. Stocks trading above this average are said to be in an uptrend, while stocks trading below it are considered to be in a downtrend. More importantly, a downside penetration of the 200-day moving average triggers sell orders. So… Read More

While the broader stock market has been in a recent mini-slump, a group of social media stocks have stumbled very badly. Shares of Twitter (NYSE: TWTR) and LinkedIn Corporation (NYSE: LNKD), for example, have slipped 15% to 20% in just a few months — in sharp contrast to Facebook (Nasdaq: FB), which remain near all-time highs. The contrasting moves should come as no surprise to careful watchers of key digital advertising trends. #-ad_banner-# How Do Advertisers See Social Media? To see the social media as advertisers do, investors only need to put themselves in marketers’ shoes. Which sites offer… Read More

While the broader stock market has been in a recent mini-slump, a group of social media stocks have stumbled very badly. Shares of Twitter (NYSE: TWTR) and LinkedIn Corporation (NYSE: LNKD), for example, have slipped 15% to 20% in just a few months — in sharp contrast to Facebook (Nasdaq: FB), which remain near all-time highs. The contrasting moves should come as no surprise to careful watchers of key digital advertising trends. #-ad_banner-# How Do Advertisers See Social Media? To see the social media as advertisers do, investors only need to put themselves in marketers’ shoes. Which sites offer the audience I want and can drive appreciable traffic back to the product?   Research firm Shareaholic found that 31% of traffic to websites originated from social media in the fourth quarter of 2014, up from 23% the year before. Of that traffic, Facebook accounted for 25% of traffic (79% of all social media referrals) followed by Pinterest, which originated 5% of the traffic. Twitter and LinkedIn originated just 0.8% and 0.03% of website social referral traffic. Worse still for the two lagging networks, their share of traffic origination has continuously fallen over the last three years.   Social Media… Read More

An inexpensively-priced stock isn’t always a bargain. A thorough fundamental analysis is essential to spot the chance that overlooked problems will make it a perilous value trap. As an example, take the venerable property & casualty (P&C) insurer and long-time Dow component The Travelers Companies Inc. (NYSE: TRV). A price-to-earnings (P/E) ratio of just under 10 was low enough to make it the cheapest stock in the Dow Jones Industrial Average until very recently. (Faltering oil and gas giant Chevron Corp. (NYSE: CVX) now holds that distinction, with a P/E of a little over 9.) #-ad_banner-# But you can’t interpret… Read More

An inexpensively-priced stock isn’t always a bargain. A thorough fundamental analysis is essential to spot the chance that overlooked problems will make it a perilous value trap. As an example, take the venerable property & casualty (P&C) insurer and long-time Dow component The Travelers Companies Inc. (NYSE: TRV). A price-to-earnings (P/E) ratio of just under 10 was low enough to make it the cheapest stock in the Dow Jones Industrial Average until very recently. (Faltering oil and gas giant Chevron Corp. (NYSE: CVX) now holds that distinction, with a P/E of a little over 9.) #-ad_banner-# But you can’t interpret TRV’s low valuation as a buying opportunity without confirmation. After all, revenue growth has been below-average for several years and profit margins have stagnated in the face of a persistently soft market for P&C policies. The key question now: is TRV withering under tough industry conditions, or is it still a fundamentally robust enterprise that’s substantially underpriced? Market sentiment suggests the former. TRV’s stock is up solidly in the past few years, but not nearly as much as those of major rivals such as Markel Corporation (NYSE: MKL), The Hanover Insurance Group Inc. (NYSE: THG) and HCC Insurance Holdings Inc. Read More

Too often, companies are painted with a broad brush, and are mistakenly lumped in with seemingly comparable businesses that don’t quite measure up. Case in point: a misreading of the core business model of Ameriprise Financial Inc. (NYSE: AMP). The market still thinks of this company as an old-line insurer. But a business model transformation suggests it’s time for a fresh look. No longer a traditional insurance company, this company is now a money management juggernaut, with about 9,700 financial advisors and more than $800 billion in assets under management (AUM). But the market is ignoring this transformation. Today Ameriprise… Read More

Too often, companies are painted with a broad brush, and are mistakenly lumped in with seemingly comparable businesses that don’t quite measure up. Case in point: a misreading of the core business model of Ameriprise Financial Inc. (NYSE: AMP). The market still thinks of this company as an old-line insurer. But a business model transformation suggests it’s time for a fresh look. No longer a traditional insurance company, this company is now a money management juggernaut, with about 9,700 financial advisors and more than $800 billion in assets under management (AUM). But the market is ignoring this transformation. Today Ameriprise sports a price-to-earnings (P/E) ratio of 14.5, which is nearly 24% below the industry average of 19. #-ad_banner-# Why the discrepancy? Ameriprise is still widely compared with insurers because life insurance and annuities were the firm’s core offerings when it was spun off from American Express Co. (NYSE: AXP) a decade ago. On average, companies focusing on such products are only trading for around 13 times earnings, thanks to growth-stifling headwinds such as low interest rates and poor pricing power. But in this case, misperception is the mother of opportunity. At some point, the market will realize its mistake and… Read More

#-ad_banner-#Famed value investor Benjamin Graham once quipped: “When you can buy a dollar for 40 cents, you don’t have to worry about what the stock market is doing.”  That simple credo perfectly sums up the theory of modern value investing — only purchase stocks that are trading at a sizeable discount to their intrinsic value. Graham’s mantra is similar to that age-old Wall Street mantra to “buy low and sell high.” It sounds simple enough, but it is deceptively complex in practice.  The truth is value investing can often require leaning against the consensus view and looking for pockets of… Read More

#-ad_banner-#Famed value investor Benjamin Graham once quipped: “When you can buy a dollar for 40 cents, you don’t have to worry about what the stock market is doing.”  That simple credo perfectly sums up the theory of modern value investing — only purchase stocks that are trading at a sizeable discount to their intrinsic value. Graham’s mantra is similar to that age-old Wall Street mantra to “buy low and sell high.” It sounds simple enough, but it is deceptively complex in practice.  The truth is value investing can often require leaning against the consensus view and looking for pockets of value in less glamorous sectors and not-so-obvious stocks. Other times they’re right in front of your face the whole time.  Below, I profile two companies that I think they may just be the most undervalued stocks in America. Cisco Systems, Inc. (Nasdaq: CSCO) Cisco is among the market’s best-known stocks. It’s a dominant firm in a high-margin business. During the past five fiscal years, Cisco’s revenue rose from $36 billion in 2009 to $47 billion in fiscal 2014 — an increase of 31%. Despite the rise in sales, earnings have held steady. Under normal… Read More

#-ad_banner-#What separates a successful value investor from the pack? Experience. The world’s top value investors will tell you that they all began their careers by buying value stocks too early. With time, they learned to avoid such a mistake. They all have war stories about such “value traps.” But how can you identify — and avoid — such stocks? And when do these stocks morph into compelling opportunities? The signposts are quite simple. Let me cite large mining equipment provider Joy Global, Inc. (NYSE: JOY) as an example. At the start of 2015, this company’s stock had already seen a… Read More

#-ad_banner-#What separates a successful value investor from the pack? Experience. The world’s top value investors will tell you that they all began their careers by buying value stocks too early. With time, they learned to avoid such a mistake. They all have war stories about such “value traps.” But how can you identify — and avoid — such stocks? And when do these stocks morph into compelling opportunities? The signposts are quite simple. Let me cite large mining equipment provider Joy Global, Inc. (NYSE: JOY) as an example. At the start of 2015, this company’s stock had already seen a 30% pullback from its 52-week-high, and was trading for less than six times cyclical peak earnings (of $7.18 a share, earned back in fiscal (October) 2012). Such low multiples on deep cycle stocks often bring out the value investors, who begin to accumulate shares in anticipation of an eventual cyclical upturn. Not this time. Buying shares in early 2015 would have been disastrous. Why was this a stock to avoid? First, because commodity prices have remained in freefall. As long as prices for iron ore, gold and other metals are falling, demand for mining equipment is bound to continue… Read More

As the stock market spews volatility in the face of a Chinese rout, continued Greek uncertainty and economic reports that may change the Federal Reserve’s plans, it is getting difficult to sleep at night.  However, as per their unofficial mandate, consumer staples stocks are acting like a welcome island of calm in the storm. This sector has been outperforming the broader market all summer and has even made an arguable technical breakout. #-ad_banner-# As commodities in general remain weak, it was interesting to find cocoa of all things ending a rebound with a downside trend break. While I… Read More

As the stock market spews volatility in the face of a Chinese rout, continued Greek uncertainty and economic reports that may change the Federal Reserve’s plans, it is getting difficult to sleep at night.  However, as per their unofficial mandate, consumer staples stocks are acting like a welcome island of calm in the storm. This sector has been outperforming the broader market all summer and has even made an arguable technical breakout. #-ad_banner-# As commodities in general remain weak, it was interesting to find cocoa of all things ending a rebound with a downside trend break. While I cannot offer statistically sound proof that companies using cocoa as an input, namely chocolate makers, perform better as the commodity falls it certainly could not hurt. What I see now in Hershey (NYSE: HSY) is an upside trend break that occurred three days after the breakdown in cocoa. And I see a chance for traders to pick up a double-digit profit over the next few weeks. Hershey is indeed a member of the consumer staples group, where companies’ fortunes are not closely tied to the ups and downs of the economy. People will continue to buy products such as soap,… Read More