Investing in value stocks often means making counterintuitive decisions. We buy when everyone is selling and staying far away.  #-ad_banner-#Experienced investors know this as a truism, but it seems downright silly if you compare it to other situations. For example, if everyone is running away from a building, it probably makes sense to also keep away. You wouldn’t disregard the possible danger and rush in yourself, right? We have a built-in auto-response to stick with groups when facing the unknown. That crowd mentality is deeply ingrained in our psyche, and for good reason. That natural instinct to group… Read More

Investing in value stocks often means making counterintuitive decisions. We buy when everyone is selling and staying far away.  #-ad_banner-#Experienced investors know this as a truism, but it seems downright silly if you compare it to other situations. For example, if everyone is running away from a building, it probably makes sense to also keep away. You wouldn’t disregard the possible danger and rush in yourself, right? We have a built-in auto-response to stick with groups when facing the unknown. That crowd mentality is deeply ingrained in our psyche, and for good reason. That natural instinct to group together has kept us alive throughout the evolution of our species — those who ignored it aren’t here today. The environment of the financial markets is not the wild savannah, however. If you invest like everyone around you, your performance will match everyone around you as well. You have to break free of the pack and realize that, to quote the movie “Men in Black”: “A person is smart. People are dumb, panicky, dangerous animals.” Following the crowd may give you a little peace of mind in the moment, but it’s unlikely to profit you in the long run. Buying… Read More

In search of new investment ideas, it pays to run through several checklists every month.  #-ad_banner-#What stocks are hitting 52-week lows? Which ones sport low price-to-earnings (P/E) ratios? Which ones are being added to the portfolios of leading hedge funds and mutual funds? The reason for this digging is to see if any companies start to pop up in multiple areas. In my recent scans, the same name kept popping up everywhere… Bed, Bath & Beyond (Nasdaq: BBBY).  It’s a well-respected retailer that’s currently out of favor due to a temporary slowdown in profit growth — and it’s suddenly become… Read More

In search of new investment ideas, it pays to run through several checklists every month.  #-ad_banner-#What stocks are hitting 52-week lows? Which ones sport low price-to-earnings (P/E) ratios? Which ones are being added to the portfolios of leading hedge funds and mutual funds? The reason for this digging is to see if any companies start to pop up in multiple areas. In my recent scans, the same name kept popping up everywhere… Bed, Bath & Beyond (Nasdaq: BBBY).  It’s a well-respected retailer that’s currently out of favor due to a temporary slowdown in profit growth — and it’s suddenly become a favorite of value-oriented gurus. In just the past few weeks, we’ve learned that: •  Investment firm Brown, Brothers Harriman (which will have its 200-year anniversary in four years) just took a 5% stake in the retailer. •  In the first quarter of 2014, Robert Olstein, who runs the Olstein Funds, doubled his stake in Bed, Bath & Beyond by acquiring 78,000 more shares at an average price of $67 a share.  •  Also in the first quarter, Westport Asset Management bought a starter position of 90,000 shares at an average price of $67. Those funds are not happy to… Read More

In a rising stock market, all eyes are on the income statement.  #-ad_banner-#But in a flat or falling market, the balance sheet moves into the spotlight. Investors want to know that their stocks that possess certifiable take-it-to-the-bank value. The recent drubbing among tech and biotech stocks brought this issue right to the fore. Many of these stocks traded for 10 or even 20 times tangible book value and had no floor in place when investors began to head for the exits. As Warren Buffett’s gurus, Benjamin Graham and David Dodd, explained eight decades ago, you can sleep well… Read More

In a rising stock market, all eyes are on the income statement.  #-ad_banner-#But in a flat or falling market, the balance sheet moves into the spotlight. Investors want to know that their stocks that possess certifiable take-it-to-the-bank value. The recent drubbing among tech and biotech stocks brought this issue right to the fore. Many of these stocks traded for 10 or even 20 times tangible book value and had no floor in place when investors began to head for the exits. As Warren Buffett’s gurus, Benjamin Graham and David Dodd, explained eight decades ago, you can sleep well at night only if you own stocks that are valued at a lower price than the net assets on the balance sheet — what’s known as “below book.” Back in Graham and Dodd’s era, you could find many stocks sporting such value. These days, less than 10% of all U.S. stocks with a market value of at least $200 million trade below book. And the pool of stocks that trade at a very deep discount to book value is even smaller. A quick review of such stocks suggests that a few industries are especially cheap in relation to their hard… Read More

Technology changes fast and often. The tech bubble of the early 2000s is one of the greatest examples of this. And with billionaire David Einhorn of Greenlight Capital noting that we might be in the second tech bubble in less than 15 years, it might be a great time to reassess what tech stocks you own.  #-ad_banner-#Despite the sky-high valuations of some stocks, including Amazon.com (Nasdaq: AMZN) and Facebook (NYSE: FB), there are a few stocks in the sector that are trading at enticing valuations. One of those stocks is a… Read More

Technology changes fast and often. The tech bubble of the early 2000s is one of the greatest examples of this. And with billionaire David Einhorn of Greenlight Capital noting that we might be in the second tech bubble in less than 15 years, it might be a great time to reassess what tech stocks you own.  #-ad_banner-#Despite the sky-high valuations of some stocks, including Amazon.com (Nasdaq: AMZN) and Facebook (NYSE: FB), there are a few stocks in the sector that are trading at enticing valuations. One of those stocks is a company that Einhorn owns. Despite being short a basket of tech stocks, Einhorn is still bullish on the tech sector. Apple (Nasdaq: AAPL), Micron Technology (Nasdaq: MU) (which my colleague Erik Epp profiled last week) and Marvell Technology (Nasdaq: MRVL) are three of his hedge fund’s largest positions.  But one of the cheapest tech stocks Einhorn has owned is Seagate Technology (Nasdaq: STX).  Einhorn owned Seagate for nearly two years, with a stake of 5.4 million shares at the end of last year. That’s because the stock is still a very cheap dividend play. It trades at a forward price-to-earnings… Read More

I’m in the process of increasing my life insurance. I’m taking advantage of my firm’s group life benefit to shore up my total face value to a number that will make my wife even happier should I head to the happy hunting ground sooner than expected.  #-ad_banner-#As I’ve been navigating the underwriting odyssey, I’ve realized that I haven’t looked at some of the bigger life insurance stocks in a while. So I set out to correct that — and I was intrigued by what I found.  Many investors have fallen out of love with large insurance company stocks over the… Read More

I’m in the process of increasing my life insurance. I’m taking advantage of my firm’s group life benefit to shore up my total face value to a number that will make my wife even happier should I head to the happy hunting ground sooner than expected.  #-ad_banner-#As I’ve been navigating the underwriting odyssey, I’ve realized that I haven’t looked at some of the bigger life insurance stocks in a while. So I set out to correct that — and I was intrigued by what I found.  Many investors have fallen out of love with large insurance company stocks over the past five years (if they were ever in love to begin with). The two main reasons are the two motivations that drive almost all behavior in financial markets: fear and greed.  From 2008 to 2011, fear drove the bus mainly due to the fallout from the global financial crises in U.S and European markets. Investors worried that the investment portfolios of the big insurers contained huge quantities of securities that were in danger of deep devaluation or even default due to the turmoil and depressive economic environment. The natural reaction was to sell and then avoid. This chart of MetLife… Read More

I’m going to show you a simple strategy that has never lost money in the market. A recent study by mega-investment firm Oppenheimer proved just as much. Don’t worry, it’s not some “too good to be true” story. But there are some caveats. #-ad_banner-#First, I could tell 100 people about this strategy… and I’d guess 99 of them would flat ignore it. That’s despite the evidence I’ll show you backing it up. “That strategy is for suckers.” “Its time has passed.” “You have to be an idiot to think that would work today.” I know some people will say this… Read More

I’m going to show you a simple strategy that has never lost money in the market. A recent study by mega-investment firm Oppenheimer proved just as much. Don’t worry, it’s not some “too good to be true” story. But there are some caveats. #-ad_banner-#First, I could tell 100 people about this strategy… and I’d guess 99 of them would flat ignore it. That’s despite the evidence I’ll show you backing it up. “That strategy is for suckers.” “Its time has passed.” “You have to be an idiot to think that would work today.” I know some people will say this — because they already have. We asked some of our regular readers to give us their thoughts on this strategy. Those were the type of responses I heard from some people. I was shocked. Second, you can’t use this strategy for every stock. Use it on the wrong ideas, and you can still lose money. But across the market as a whole, it hasn’t failed once in the past 60 years. The truth is, you don’t have to trade every day… or every week… or even every year to beat the market. In fact, your success actually increases with the… Read More

If you own stock in Facebook (Nasdaq: FB), you’ve had to reach for the Tums, as shares have tumbled roughly 15% since early March. Yet that pullback is just a minor inconvenience when you consider that a host of other dot-com and social media stocks have plunged by 25%, 50% or more.  #-ad_banner-#No doubt about it, the mania for richly valued tech stocks has come to an end, and the odds of a rapid climb back to their 52-week highs are quite small.  By the time I looked at these stocks two… Read More

If you own stock in Facebook (Nasdaq: FB), you’ve had to reach for the Tums, as shares have tumbled roughly 15% since early March. Yet that pullback is just a minor inconvenience when you consider that a host of other dot-com and social media stocks have plunged by 25%, 50% or more.  #-ad_banner-#No doubt about it, the mania for richly valued tech stocks has come to an end, and the odds of a rapid climb back to their 52-week highs are quite small.  By the time I looked at these stocks two months ago, they had shown signs of a top. (Indeed, a number of these stocks had hit their all-time highs on March 5.) By the time I looked at this group a month later, they were in freefall.  While almost all of these stocks had fallen more than 20% from their peaks by early April, the carnage has continued for some, while others have seen their share prices stabilize.  Has this group hit bottom — and is it primed for a comeback? Not everybody’s convinced. A recent Wall Street Journal article suggests that some of these stocks… Read More

John Maynard Keynes famously said that “The market can remain irrational longer than you can stay solvent.”  Short sellers are also aware of that painful axiom, and many of them lost money in 2013 betting against some of the market’s most popular stocks. And perhaps no single stock defied the logic and reason of short sellers as much as 3D Systems (NYSE: DDD). Back in September, I took note of emerging concerns about the health of this company’s financial statements and suggested that aggressive accounting would be this stock’s undoing. Still, shares of this and other 3-D printers rose ever higher,… Read More

John Maynard Keynes famously said that “The market can remain irrational longer than you can stay solvent.”  Short sellers are also aware of that painful axiom, and many of them lost money in 2013 betting against some of the market’s most popular stocks. And perhaps no single stock defied the logic and reason of short sellers as much as 3D Systems (NYSE: DDD). Back in September, I took note of emerging concerns about the health of this company’s financial statements and suggested that aggressive accounting would be this stock’s undoing. Still, shares of this and other 3-D printers rose ever higher, and 3D Systems was valued at roughly 125 times trailing earnings. That’s what happens when a stock surges 4,000% in five years. #-ad_banner-#​Of course, when momentum investors lose interest, stocks such as 3D Systems can’t fall back on any sort of intrinsic value, and a nearly 50% plunge thus far in 2014 has been equally sobering. The question now is: Should you buy it? The short answer: More boulders may lie ahead, and you should wait for an even better entry price. Organic Vs. Inorganic Growth 3D Systems has been dogged by its… Read More

One claim that scientists make is that part of what distinguishes humans from animals is that humans have the ability to recognize patterns.  The reason I call it a claim is that my 8-year-old yellow lab knows when things are out of order — mainly at feeding time (especially if the cat’s food dish has been moved) and when it’s time to come in to go to bed. If things are askew, she’ll let you know (as only labs can). In my research for an article on value-priced utility stocks, I recognized an undeniable historical pattern: #-ad_banner-#In every… Read More

One claim that scientists make is that part of what distinguishes humans from animals is that humans have the ability to recognize patterns.  The reason I call it a claim is that my 8-year-old yellow lab knows when things are out of order — mainly at feeding time (especially if the cat’s food dish has been moved) and when it’s time to come in to go to bed. If things are askew, she’ll let you know (as only labs can). In my research for an article on value-priced utility stocks, I recognized an undeniable historical pattern: #-ad_banner-#In every instance, a sideways pattern, or underperformance of that particular group of stocks, in the Dow Jones Utility Average Total Return index occurred during a relatively strong, broader equity market period was followed by a flat broader market or even a correction. Now, in times of uncertainty in the economy and the markets, nervous investors will gravitate toward utility company stocks for their large and reliable dividends. So far this year, that scenario seems to be playing out. Utility stocks are outperforming the S&P 500 Index handily: DJUTR is up 15% compared with a meager 1.8% gain for the broader average. Read More

When it comes to the stock market, we’re all sheep quietly marching to get slaughtered… At least that’s what the alarmists are saying when it comes to Michael Lewis’ new book, “Flash Boys: A Wall Street Revolt.” His analysis has roiled commentators the world over by shedding light on the unsung world of high-frequency trading (HFT). You’re probably familiar with Michael Lewis, even if you aren’t readily aware of it. Lewis, a former bond trader with Salomon Brothers in the 1980s, used his experiences to write the best-selling book Liar’s Poker and has since written multiple best-sellers such as Moneyball,… Read More

When it comes to the stock market, we’re all sheep quietly marching to get slaughtered… At least that’s what the alarmists are saying when it comes to Michael Lewis’ new book, “Flash Boys: A Wall Street Revolt.” His analysis has roiled commentators the world over by shedding light on the unsung world of high-frequency trading (HFT). You’re probably familiar with Michael Lewis, even if you aren’t readily aware of it. Lewis, a former bond trader with Salomon Brothers in the 1980s, used his experiences to write the best-selling book Liar’s Poker and has since written multiple best-sellers such as Moneyball, The Blind Side and The Big Short. In Flash Boys, Lewis paints a picture of Wall Street’s dark underbelly, where complex computer algorithms make lightning-fast investment decisions normal humans are simply incapable of. #-ad_banner-#In the simplest of explanations, this sensitive information allows traders to work about two to three nanoseconds ahead of the rest of the market (to give you an idea of how fast that is, it takes roughly 100 nanoseconds to blink your eye). Most experts have no idea what’s in these algorithms, but they do know that Wall Street traders can profit from them by executing buy… Read More