As we’ve noted on many occasions over the past few years, investors have shown a clear preference for companies that issue steadily rising dividends and super-sized share buyback plans. Such stocks not only produce solid income streams, but also tend to show above-average growth in earnings per share, thanks to steadily falling share counts. Of course, in StreetAuthority’s Total Yield newsletter, we’ve been clearly focused on this theme. (We define Total Yield as the net dollar value of dividend payments and share buybacks, divided by a company’s market value.)  #-ad_banner-#The newsletter has reaped big gains since it began in 2014. Read More

As we’ve noted on many occasions over the past few years, investors have shown a clear preference for companies that issue steadily rising dividends and super-sized share buyback plans. Such stocks not only produce solid income streams, but also tend to show above-average growth in earnings per share, thanks to steadily falling share counts. Of course, in StreetAuthority’s Total Yield newsletter, we’ve been clearly focused on this theme. (We define Total Yield as the net dollar value of dividend payments and share buybacks, divided by a company’s market value.)  #-ad_banner-#The newsletter has reaped big gains since it began in 2014. Southwest Airlines Co. (NYSE: LUV) is up 114% in 15 months; Anthem, Inc. (NYSE: ANTM) is up 29% in seven months; and Flextronics International Ltd. (Nasdaq: FLEX) is up 15% in just five months. Looking for a way to augment your gains using this approach? Keep a watchful eye for companies that have not yet embraced a Total Yield strategy, but likely soon will. The key is to spot companies that already have robust free cash flow yields. As we’ve seen in recent years, companies with strong free cash flow have focused on dividends and buybacks, rather than the traditional… Read More

For more than a decade, the business of making memory chips was a lousy one. The industry had ample excess capacity and pricing power was non-existent. And then the management team at Micron Technology, Inc. (Nasdaq: MU) decided to change all that. They correctly understood that by acquiring rivals — and then closing down excess manufacturing capacity — they could drive up prices and profits. I looked at this issue in 2012 and shares of Micron eventually soared to $36 from around $6. #-ad_banner-#A healthy supply/demand environment similarly created robust gains for rival chip-maker SanDisk Corp. (Nasdaq: SNDK). Not only… Read More

For more than a decade, the business of making memory chips was a lousy one. The industry had ample excess capacity and pricing power was non-existent. And then the management team at Micron Technology, Inc. (Nasdaq: MU) decided to change all that. They correctly understood that by acquiring rivals — and then closing down excess manufacturing capacity — they could drive up prices and profits. I looked at this issue in 2012 and shares of Micron eventually soared to $36 from around $6. #-ad_banner-#A healthy supply/demand environment similarly created robust gains for rival chip-maker SanDisk Corp. (Nasdaq: SNDK). Not only have these firms benefited from more rational supply trends, they are also benefiting from a powerful growth driver: surging demand, as solid state memory (also known as “flash memory”) is used in a proliferating number of electronic devices. Even personal computer manufacturers are making the switch from disk drive storage to solid state storage in many high-end machines. Yet even the best industries experience temporary headwinds. A recent modest pullback in demand and pricing has led to sharp share price pullbacks for both Micron and SanDisk. In my mind, only one of these two firms is poised for a solid… Read More

The first Saturday in May this year will herald an extraordinary annual event — one that we will likely not have the chance to witness on many more occasions in our lifetime. The event is widely celebrated in the financial press, marking a time where investors come together to celebrate, speculate about and witness one of the great masters of investing in the flesh. #-ad_banner-#I’m talking, of course, about Warren Buffett and the annual Berkshire Hathaway shareholder meeting. At 84 years old, this will be one of the remaining few times we’ll have the chance to hear straight from the… Read More

The first Saturday in May this year will herald an extraordinary annual event — one that we will likely not have the chance to witness on many more occasions in our lifetime. The event is widely celebrated in the financial press, marking a time where investors come together to celebrate, speculate about and witness one of the great masters of investing in the flesh. #-ad_banner-#I’m talking, of course, about Warren Buffett and the annual Berkshire Hathaway shareholder meeting. At 84 years old, this will be one of the remaining few times we’ll have the chance to hear straight from the famous “Oracle of Omaha” about his thoughts on the market, where the U.S. economy is headed, and what it means to be a successful investor. Many of our analysts here at StreetAuthority have had the chance to attend Berkshire meetings over the years. I’ve had conversations with many of them about the spectacle, which seems to grow with each passing year. But one thing has always stuck with me that I think is worth mentioning, and it’s that while the event always makes for good television, what often seems to be lost is what Buffett actually says… or more importantly,… Read More

Although ‘wide moat’ isn’t a term often applied to small cap investments, this unusual combination does exist. Take US Ecology, Inc. (Nasdaq: ECOL), a relatively small waste-management firm that handles hazardous, non-hazardous and radioactive waste. With only about $1 billion in market value and sales of $447 million last year, US Ecology is dwarfed by industry giant Waste Management, Inc. (NYSE: WM). That firm is worth nearly $25 billion and boasts annual revenue of $14 billion. Yet US Ecology displays consistency more often associated with much larger companies. Indeed, revenue and net income grew every year during the past decade… Read More

Although ‘wide moat’ isn’t a term often applied to small cap investments, this unusual combination does exist. Take US Ecology, Inc. (Nasdaq: ECOL), a relatively small waste-management firm that handles hazardous, non-hazardous and radioactive waste. With only about $1 billion in market value and sales of $447 million last year, US Ecology is dwarfed by industry giant Waste Management, Inc. (NYSE: WM). That firm is worth nearly $25 billion and boasts annual revenue of $14 billion. Yet US Ecology displays consistency more often associated with much larger companies. Indeed, revenue and net income grew every year during the past decade (except 2009 and 2010 when the economy was in bad shape). Plus, this year will be the firm’s eleventh straight with a dividend. Free cash flow, now $43 million annually, is at an all-time high, which bodes well for dividend growth. And despite large acquisition costs last year, US Ecology is in solid financial shape, with debt levels not much greater than the industry average. Such results would be impossible to achieve without a formidable moat, a term coined by investing legend Warren Buffett to describe hard-to-penetrate economic defenses typically surrounding the strongest companies. US Ecology boasts several. Recurring Revenue… Read More

Warren Buffett’s investing strategy is simple: find companies worth investing in forever. Buffett has been quoted as saying he likes to buy stock in businesses that are, “so wonderful an idiot can run them.”  On paper it seems like a simple enough strategy. But for value investors, trying to imitate the world’s third-richest man (with a net worth of $72.7 billion) can lead to a pretty steep price tag.  Let me explain. Take a look at the top five stocks in Warren Buffett’s portfolio through his holding company Berkshire Hathaway, Inc. (NYSE: BRK-A). Each company, and the industry… Read More

Warren Buffett’s investing strategy is simple: find companies worth investing in forever. Buffett has been quoted as saying he likes to buy stock in businesses that are, “so wonderful an idiot can run them.”  On paper it seems like a simple enough strategy. But for value investors, trying to imitate the world’s third-richest man (with a net worth of $72.7 billion) can lead to a pretty steep price tag.  Let me explain. Take a look at the top five stocks in Warren Buffett’s portfolio through his holding company Berkshire Hathaway, Inc. (NYSE: BRK-A). Each company, and the industry they operate it, is easily recognizable. Here’s the problem though: Buffett’s popularity and well-known admiration for each of these stocks has led to fairly high valuations. I came to this conclusion by looking at the five-year price/earnings-to-growth, or PEG, ratio of each of these stocks. A PEG ratio takes into account a company’s current price-to-earnings ratio in relation to its projected earnings growth over the next five years. A ratio near or below one is considered fair value and greater than one is overvalued. Buffett’s top five holdings generated a ratio of 2.5. That… Read More

Tech stocks have been on a strong run for the past few quarters, and many of them now look pricey. Yet the sector still offers attractive bargains. Right now, Western Digital Corp. (Nasdaq: WDC) is arguably the best value around. Western Digital makes one of tech’s least glamorous products: hard disk drives. These data storage units are found in devices such as PCs, laptops, tablets and video cameras. It’s a huge market and for Western Digital, a highly profitable one. During the past three fiscal years, sales rose at nearly a 17% pace to $15.1 billion, while earnings more than… Read More

Tech stocks have been on a strong run for the past few quarters, and many of them now look pricey. Yet the sector still offers attractive bargains. Right now, Western Digital Corp. (Nasdaq: WDC) is arguably the best value around. Western Digital makes one of tech’s least glamorous products: hard disk drives. These data storage units are found in devices such as PCs, laptops, tablets and video cameras. It’s a huge market and for Western Digital, a highly profitable one. During the past three fiscal years, sales rose at nearly a 17% pace to $15.1 billion, while earnings more than doubled to $6.68 per share. Western Digital’s stock has been trouncing the S&P 500, as the chart below shows. Yet in spite of big stock gains, Western Digital is not fully-valued. Shares of the firm still only trade for about 14 times trailing 12-month earnings, and the forward price-to-earnings (P/E) ratio isn’t much above 10. Those are exceptionally cheap numbers next to the Nasdaq’s trailing and forward P/E ratios of 24 and 19, respectively. Oftentimes, stocks are underpriced because the market just doesn’t see all that much future growth potential. In Western Digital’s case, the long-term concern may… Read More

Sears Holdings Corp. (Nasdaq: SHLD) is dying and its largest shareholder, chairman and CEO, Eddie Lampert, is dismantling the retail giant and selling it for parts. However, investors who have held on despite a 52% share price drop from April 2010 highs could be in for a nice reward; that is, if Lampert gets his way and if those same investors can see past the bad. #-ad_banner-#Since 2007, revenue at Sears Holdings has steadily declined, while earnings per share have been negative for the previous 16 consecutive quarters. The company shuttered 56% of its stores since 2010. It spun off Sears Hometown… Read More

Sears Holdings Corp. (Nasdaq: SHLD) is dying and its largest shareholder, chairman and CEO, Eddie Lampert, is dismantling the retail giant and selling it for parts. However, investors who have held on despite a 52% share price drop from April 2010 highs could be in for a nice reward; that is, if Lampert gets his way and if those same investors can see past the bad. #-ad_banner-#Since 2007, revenue at Sears Holdings has steadily declined, while earnings per share have been negative for the previous 16 consecutive quarters. The company shuttered 56% of its stores since 2010. It spun off Sears Hometown and Outlet in October 2012, the clothing brand Land’s End in April 2014 and Sears Canada in October 2014. These asset sales provided SHLD with desperately needed cash, which has kept its remaining 1,725 stores stocked with merchandise. Of that, SHLD owns 183 Kmart stores and 501 Sears locations, and it leases 796 Kmart and 245 Sears stores. Nonetheless, the numbers clearly show a dying retailer in dire need of more capital. In its most recent filing, Sears Holdings had $3.8 billion in debt, but only $250 million cash on hand; 76% less cash than the fiscal year prior. Last November,… Read More

The housing market is currently giving mixed signals. New Home sales are rising, but sales of existing homes have been disappointing. One of the key headwinds is the issue of affordability. #-ad_banner-#There are only 1.9 million homes for sale, as many potential sellers decide to keep their house off the market for now. That lack of availability is driving prices, up 7.5% over the last year. The National Association of Realtors’ Chief Economist Lawrence Yun called this an “unhealthy” price increase. Perhaps the housing recovery will merely be slow-and-steady, rather than the more robust rebound that many have been anticipating. Read More

The housing market is currently giving mixed signals. New Home sales are rising, but sales of existing homes have been disappointing. One of the key headwinds is the issue of affordability. #-ad_banner-#There are only 1.9 million homes for sale, as many potential sellers decide to keep their house off the market for now. That lack of availability is driving prices, up 7.5% over the last year. The National Association of Realtors’ Chief Economist Lawrence Yun called this an “unhealthy” price increase. Perhaps the housing recovery will merely be slow-and-steady, rather than the more robust rebound that many have been anticipating. Millennials have yet to embrace home ownership in the same way as prior generations, and weak wage growth is an impediment for buyers seeking to move to bigger homes. Rising prices and weak availability of homes for sale may mean that people decide to stay in their current home and remodel instead of looking for other options in the market. This is contributing to an aging stock of homes with roughly two-thirds of U.S. houses more than 27 years old. This could all turn out to be good news for home improvement retailers. Sales for these firms are… Read More

#-ad_banner-#Although the market action was a bit choppy in the first quarter of 2015, one fact is inescapable: the major indices are all within a few percentage points of their all-time highs. Yet, for hundreds of stocks in those indices, there is little reason for good cheer. Share prices are far from the 52-week high and aren’t  on many investor’s “buy list” right now. For contrarian investors, an unloved status can spell opportunity. Today’s out-of-favor stocks often become tomorrow’s in-favor stocks. They just need headwinds to morph into tailwinds. With that in mind, I’ve spent the past… Read More

#-ad_banner-#Although the market action was a bit choppy in the first quarter of 2015, one fact is inescapable: the major indices are all within a few percentage points of their all-time highs. Yet, for hundreds of stocks in those indices, there is little reason for good cheer. Share prices are far from the 52-week high and aren’t  on many investor’s “buy list” right now. For contrarian investors, an unloved status can spell opportunity. Today’s out-of-favor stocks often become tomorrow’s in-favor stocks. They just need headwinds to morph into tailwinds. With that in mind, I’ve spent the past week analyzing the market’s laggards. Many of them toil in the beleaguered energy sector, and even though oil prices have staged an impressive recent mini-rally, I remain concerned about what will happen when our nation’s oil storage tanks finally hit capacity in coming months. So, I focused my research on companies outside this sector. Here are three stocks that appear to have hit bottom and have catalysts for a rebound. Rayonier Advanced Materials, Inc. (NYSE: RYAM) Investors love to hear about spin-offs. Shares of the parent company typically post nice gains after spin-off plans are announced, and shares of… Read More

The search for yield in a world where the benchmark 10-year U.S. Treasury note offers less than 2% is a tough task. Fortunately, there are stocks that still offer attractive income and the potential for trading gains.  By nature, stocks are risker than bonds, especially default-risk-free Treasuries, but with that risk comes the potential for greater reward. #-ad_banner-#Not all stocks offering high dividend yields are good investments. Yields rise as share prices fall. If a company is in trouble, it is unlikely it will be able to sustain its dividend payout. One way to predict whether… Read More

The search for yield in a world where the benchmark 10-year U.S. Treasury note offers less than 2% is a tough task. Fortunately, there are stocks that still offer attractive income and the potential for trading gains.  By nature, stocks are risker than bonds, especially default-risk-free Treasuries, but with that risk comes the potential for greater reward. #-ad_banner-#Not all stocks offering high dividend yields are good investments. Yields rise as share prices fall. If a company is in trouble, it is unlikely it will be able to sustain its dividend payout. One way to predict whether a stock’s high yield is a potential sign that the dividend may be cut is to look at the chart. A falling price trend is a red flag, as the market often seems to know what lies ahead before analysts figure it out. But if a stock with a big yield has a positive chart, it could wind up rewarding investors with both high income and capital gains. One of my favorite dividend stocks right now that is showing a turnaround on its chart is Kimberly-Clark (NYSE: KMB).  Shares of the personal products maker have had… Read More