There are few sectors that consistently generate high levels of cash flow. Even fewer are reliable about returning that cash to shareholders. #-ad_banner-#Tobacco is one such industry. As much as some investors love to hate the industry, the major tobacco companies are consistent performers regardless of the broader economy. Investors shouldn’t let the broad health concerns around traditional cigarettes deter them from investing in an industry that has substantial barriers to entry and is great at returning cash to shareholders through dividends and buybacks. One of the big three U.S. tobacco companies, Lorillard (NYSE: LO) is giving investors an attractive… Read More

There are few sectors that consistently generate high levels of cash flow. Even fewer are reliable about returning that cash to shareholders. #-ad_banner-#Tobacco is one such industry. As much as some investors love to hate the industry, the major tobacco companies are consistent performers regardless of the broader economy. Investors shouldn’t let the broad health concerns around traditional cigarettes deter them from investing in an industry that has substantial barriers to entry and is great at returning cash to shareholders through dividends and buybacks. One of the big three U.S. tobacco companies, Lorillard (NYSE: LO) is giving investors an attractive entry point after missing fourth-quarter earnings expectations. The stock fell more than 5% posting earnings of $0.82 a share, missing analysts’ expectations by $0.04. However, revenue for the quarter beat consensus estimates, and it looks like the downward move in the stock might be an overreaction. After all, since Lorillard went public in 2008, the company has outperformed the S&P 500 by over 100%. Despite Lorillard’s earnings miss and the fact that wholesale cigarette volume was down 1.6% year over year during the fourth quarter, the company still expanded its U.S. market share for an 11th consecutive year. Read More

Going “short” a company involves selling shares that you have borrowed from another investor (for a fee) with the expectation that you can buy them back at a lower price in the future. #-ad_banner-#People who short shares of a company are betting that those shares are going to drop in price.   Short selling is a much riskier business than owning shares of companies.   If you buy shares of a company, the most you can lose is the full amount you have invested.  If you invest $5,000, the worst thing that can happen is that the stock… Read More

Going “short” a company involves selling shares that you have borrowed from another investor (for a fee) with the expectation that you can buy them back at a lower price in the future. #-ad_banner-#People who short shares of a company are betting that those shares are going to drop in price.   Short selling is a much riskier business than owning shares of companies.   If you buy shares of a company, the most you can lose is the full amount you have invested.  If you invest $5,000, the worst thing that can happen is that the stock goes to zero and you lose your investment. Meanwhile, if you were to short $5,000 worth of shares of the same company, your potential for loss is much greater. A stock price can double, triple — or go up 10 times in price. In fact, there is no limit to what your potential loss could be. Because short selling is such a risky business, the people who practice it are generally some of the smartest people in the market. They have to be, because if they don’t do their homework, they usually get taken to the cleaners — quickly. For… Read More

As young tech companies try to establish themselves in the marketplace, they aren’t just looking to book a sale with a new client. They want that client for life.  #-ad_banner-#That’s because recurring revenues from an established customer base can greatly aid a company’s cash flow, even when it experiences a tough few quarters.  Case in point: Citrix Systems (Nasdaq: CTXS), which has hit a flat spot in terms of new customer wins but remains a solid cash cow, thanks to its lucrative installed base of repeat business. And the stock price, in relation to that cash flow, has become too… Read More

As young tech companies try to establish themselves in the marketplace, they aren’t just looking to book a sale with a new client. They want that client for life.  #-ad_banner-#That’s because recurring revenues from an established customer base can greatly aid a company’s cash flow, even when it experiences a tough few quarters.  Case in point: Citrix Systems (Nasdaq: CTXS), which has hit a flat spot in terms of new customer wins but remains a solid cash cow, thanks to its lucrative installed base of repeat business. And the stock price, in relation to that cash flow, has become too appealing to pass up.  Behind-The-Scenes Support Unless you work in an IT department, you might not be familiar with Citrix. The company sells desktop management software to more than 300,000 global clients. If you’ve ever worked on a corporate desktop that has no local hard drive and instead gets all of its instructions from a central server, than you have probably used Citrix’s software (which has been licensed by Microsoft (Nasdaq: MSFT) and others for roughly two decades). These days, such remote servers form the backbone of cloud computing.  Citrix hit the $1 billion sales mark in 2006, $2… Read More

Even as the market rally was building a solid head of steam in the years following the Great Recession of 2008, two key sectors remained sharply out of favor. Both insurance stocks and banking stocks traded far below book value, which created a rare opening for deep value investors. The price-to-book disconnect was especially profound with banking giant Citigroup (NYSE: C). As I noted nearly two years ago, shares had traded down to just 53% of book value by the summer of 2011, and with the passage of time, investors seized on that gap, eventually pushing shares up to $55.  Yet… Read More

Even as the market rally was building a solid head of steam in the years following the Great Recession of 2008, two key sectors remained sharply out of favor. Both insurance stocks and banking stocks traded far below book value, which created a rare opening for deep value investors. The price-to-book disconnect was especially profound with banking giant Citigroup (NYSE: C). As I noted nearly two years ago, shares had traded down to just 53% of book value by the summer of 2011, and with the passage of time, investors seized on that gap, eventually pushing shares up to $55.  Yet a recent pullback has widened the price-book gap again: #-ad_banner-#At the end of 2013, shares of Citigroup had nearly moved all the way up to book value, though shares, at a recent $47, are again nearly 15% below book value. The pullback is attributable to concerns about the bank’s emerging-markets operations; those concerns are increasingly looking overblown. To be sure, Citigroup has aggressively pursued emerging-markets exposure while most other U.S. banks have avoided expanding into those markets. That should really pay off over the longer term, as emerging markets still represent the most dynamic long-term growth opportunities. Read More

Five years after the economy spiraled into recession, U.S. consumers are in a very different place.#-ad_banner-# Chastened by the hangover from their borrowing binges of 2006 and 2007, they’ve spent the subsequent years paying off bills, and building up equity in their homes. The Federal Reserve notes that consumers’ debt-to income ratio, which peaked at 122% five years ago, is now back below 100%. Yet even as consumers are now more capable of spending money, they still don’t want to. Wal-Mart (NYSE: WMT) is just the latest retailer to tell investors that sales trends are lousy. Read More

Five years after the economy spiraled into recession, U.S. consumers are in a very different place.#-ad_banner-# Chastened by the hangover from their borrowing binges of 2006 and 2007, they’ve spent the subsequent years paying off bills, and building up equity in their homes. The Federal Reserve notes that consumers’ debt-to income ratio, which peaked at 122% five years ago, is now back below 100%. Yet even as consumers are now more capable of spending money, they still don’t want to. Wal-Mart (NYSE: WMT) is just the latest retailer to tell investors that sales trends are lousy. Spending by lower-income Americans is really anemic, judging by comments from Wal-Mart and others. Dozens of other retailers already told us of the tough spending environment, which has triggered an investor exodus from the sector over the past three months. The Biggest Laggards In A Lagging Sector* *This table only includes retailers in the S&P 400, 500 and 600.  Beyond these three-month laggards, many other retailers are trading far from their 52-week highs, so this table doesn’t fully reflect the sector’s woes. For investors looking to enhance exposure to this out-of-favor, group, there are two… Read More

The start of a new year is a time of reckoning for retailers. A quick reassessment of the post-holiday landscape can reveal bloated inventories, unsustainably weak profit margins and a need to radically alter the business model.#-ad_banner-# Indeed, J.C. Penney (NYSE: JCP) has already started the process of shrinking its store base, and other retailers are likely to make similar moves in coming months. In the face of the Amazon.com (Nasdaq: AMZN) juggernaut and still-weak consumer spending, the nation simply has too many brick-and-mortar stores. But there is a contrarian case to be made for the nation’s retail sector. Many retail… Read More

The start of a new year is a time of reckoning for retailers. A quick reassessment of the post-holiday landscape can reveal bloated inventories, unsustainably weak profit margins and a need to radically alter the business model.#-ad_banner-# Indeed, J.C. Penney (NYSE: JCP) has already started the process of shrinking its store base, and other retailers are likely to make similar moves in coming months. In the face of the Amazon.com (Nasdaq: AMZN) juggernaut and still-weak consumer spending, the nation simply has too many brick-and-mortar stores. But there is a contrarian case to be made for the nation’s retail sector. Many retail stocks have stumbled badly and now sport solid value. More importantly, the slowing improving employment picture should help lift retail spending, perhaps moderately in 2014, and more robustly in 2015, when economists think the national unemployment rate may fall towards 6%. With that in mind, I’ve been tracking the retail stocks I’ve covered in the past six to 12 months. Here’s an update for those picks that are on my radar for the quarters ahead. 1. Best Buy (NYSE: BBY )​ I profiled this fallen retailer nearly two years ago, noting that it still generated impressive cash flow, even it had to… 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

In most instances, it no longer pays to retain the services of a sophisticated stock broker. Many self-directed investors are now perfectly capable of building their own portfolios, or at least well-served by a lower-cost independent financial advisor.#-ad_banner-# But stock brokers still hold one clear virtue: They can get you a piece of a hot new IPO, right at the offering price, if the broker’s firm helped underwrite the deal. The rest of us have had to wait until these IPOs have already begun trading. Often times, these stocks open for trading far above the offering price, which makes it… Read More

In most instances, it no longer pays to retain the services of a sophisticated stock broker. Many self-directed investors are now perfectly capable of building their own portfolios, or at least well-served by a lower-cost independent financial advisor.#-ad_banner-# But stock brokers still hold one clear virtue: They can get you a piece of a hot new IPO, right at the offering price, if the broker’s firm helped underwrite the deal. The rest of us have had to wait until these IPOs have already begun trading. Often times, these stocks open for trading far above the offering price, which makes it hard to spot a good entry point. A few months ago, I suggested that most of the time, “you should wait for these stocks to come back into earth before giving them a fresh look.” Roughly a month later, I gave an example of how to patiently wait for IPOs, highlighting the deep value in busted IPO Ply Gem Holdings (Nasdaq: PGEM). That turned out to be a timely suggestion as shares have begun to rebound. Frankly, it’s hard to find such scenarios where good companies have been deeply oversold. Most of the stocks that plunge after IPO (such as Violin… Read More

The Federal Reserve is trapped and bluffing.#-ad_banner-# While the market worries about the Fed reducing the size of its monthly bond purchases, I predict the exact opposite will continue to happen for at least through next December after the midterm elections. The most powerful central bank in the world will actually increase spending. And because of that, two companies in one forgotten sector could see triple-digit gains in coming months, and they’re already sporting rare yields as high as 7.1%. I’ll share specific details on these investments in a moment. First, here’s why I think the Fed is… Read More

The Federal Reserve is trapped and bluffing.#-ad_banner-# While the market worries about the Fed reducing the size of its monthly bond purchases, I predict the exact opposite will continue to happen for at least through next December after the midterm elections. The most powerful central bank in the world will actually increase spending. And because of that, two companies in one forgotten sector could see triple-digit gains in coming months, and they’re already sporting rare yields as high as 7.1%. I’ll share specific details on these investments in a moment. First, here’s why I think the Fed is trapped and bluffing: As the Fed continues to threaten the market with its stated desire to taper, global economic growth projections continue to decline. Just last week, the Organization for Economic Cooperation and Development (OECD) downgraded its global growth projection for 2014 from 3.1% to 2.7%. It raises the question: If the Fed was unable to pull the trigger on a taper when the global economy was projected to grow 3.1%, how is it going to taper now that the global economy is showing signs of weakness? The answer is, it can’t. The Fed has to keep the money spigot… Read More

For developers of campus housing, the corks are going back on the champagne bottles.​ Shares of EdR (NYSE: EDR) (formerly known as Educational Realty Trust), Campus Crest Communities (NYSE: CCG) and American Campus Communities (NYSE: ACC) have fallen 15% to 40% this year, at a time when the S&P 500 Index has risen more than 20%.#-ad_banner-# What went wrong? Slowing college enrollment trends, sector overbuilding, and an escalation in transaction prices for new properties that has led to lower returns on investment. Investors are now questioning whether it’s smart to buy these stocks. And if… Read More

For developers of campus housing, the corks are going back on the champagne bottles.​ Shares of EdR (NYSE: EDR) (formerly known as Educational Realty Trust), Campus Crest Communities (NYSE: CCG) and American Campus Communities (NYSE: ACC) have fallen 15% to 40% this year, at a time when the S&P 500 Index has risen more than 20%.#-ad_banner-# What went wrong? Slowing college enrollment trends, sector overbuilding, and an escalation in transaction prices for new properties that has led to lower returns on investment. Investors are now questioning whether it’s smart to buy these stocks. And if so, which one stands out? To answer that question, we can look at a range of financial metrics. The Enrollment Reversal This had been something of a “no-brainer” asset class. Many colleges have chronic housing shortages and are increasingly look to private developers to help fill the gap. That trend remains in place.  But another factor, an expectation of ever-rising enrollment trends, isn’t panning out.  “While most industry estimates have enrollment growing by 1% through 2020, growth has been more flat and we expect a slight decrease through 2017 based on demographics. We note though that there is a… Read More