The move by Burger King Worldwide, Inc. (BKW) to acquire Canada-based Tim Hortons Inc. (NYSE/THI) was a genius move and buying opportunity that surprised many in the stock market. Just look at the reaction of the traders after the news surfaced that Burger King was indeed buying Tim Hortons; Burger King stock surged on the news, which I also believe was a very strategic move by the company and a possible buying opportunity for investors.
The initial speculation was valid as an $11.0-billion deal was announced. Tim Hortons stock closed up more than 31% after the announcement and the initial buying opportunity. For the acquisition, Warren Buffett will provide $3.0 billion in financing, so we know the move makes sense if Buffett is supporting it.
Chart courtesy of www.StockCharts.com
Here’s my thinking: Burger King, like many companies in the fast-food sector, is struggling to find growth around the world. Perennial fast-food leader McDonalds Corporation (NYSE/MCD) is no exception, as the seller of the “Big Mac” faces muted growth in the global economy.
Burger King, with its global exposure encompassing more than 12,000 franchise restaurants in North America, Europe, the Middle East, Africa, Latin America, the Caribbean, and the Asia Pacific, also needed a spark to drive its revenue and earnings growth.
The addition of Tim Hortons makes sense due to the cross-marketing opportunities and the ability to cut overlaying expenses, which makes Burger King a possible buying opportunity for investors. There are approximately 4,500 Tim Hortons stores with about 860 outlets in the United States.
While the two companies will be separate, the buying opportunity potential I see is the … Read More
The housing market continues to show growth and offer a good buying opportunity. While the major upward push in the housing market may be behind us, I still see opportunities.
As long as interest rates and mortgage rates remain relatively low, you can expect the support for the housing market to hold for the next few years.
While housing starts and building permits numbers continue to be fairly strong, the National Association of Homebuilders (NAHB)/Wells Fargo Housing Market Index (HMI), which reflects the confidence of the homebuilders, increased to a healthy reading of 53 in July, up from 49 in June. A reading above 50 indicates positive sentiment in the housing market. It was the first move above 50 since January.
And the key components of the HMI point to optimism. The reading that reflects expectation for future sales jumped to 64. (Source: “NAHB, Builder Confidence Surpasses Key Benchmark in July,” National Association of Homebuilders web site, July 16, 2014.)
The HMI suggests the housing market will continue to show steady growth. As an investor, you may consider buying the homebuilder stocks or the suppliers of building materials to the industry.
A small-cap housing market play on the residential and commercial building markets that I like is Installed Building Products, Inc. (NYSE/IBP), which has a share price of $12.22, a post–initial public offering (IPO) range of $11.75–$15.47, and a market cap of $373 million. The company was recently listed in February at $12.30; so the stock has done little, which in my view, represents a buying opportunity for investors.
Chart courtesy of www.StockCharts.com
While the company is new on the … Read More
There’s simply nothing more enjoyable than a fine wine and a great meal. I’m also a beer and wings kind of guy.
Over the past decade, we have seen the popularity of food shows gain steam. Triggered by the Iron Chef series, cooking shows have become mainstream reality shows with the likes of widely popular British chef Gordon Ramsey and his Hell’s Kitchen and Master Chef series.
Yet the restaurant sector is not always about fine dining. It’s big business and often the most successful restaurant stocks are the fast food and casual dining chains, according to my stock analysis.
The chart of the Dow Jones U.S. Restaurants & Bars Index below clearly reflects the advancement in the sector since late 2012, based on my stock analysis.
Chart courtesy of www.StockCharts.com
The restaurant sector is based largely on income levels and jobs. The more people work and make, the greater likelihood they will eat out. Just look at the emerging wealth levels in China and the associated expansion of restaurants in that country.
A couple of my favorite non-fast food restaurant stocks are Chipotle Mexican Grill, Inc. (NYSE/CMG) and Texas Roadhouse, Inc. (NASDAQ/TXRH), based on my stock analysis.
Chipotle is one of the top restaurant stocks at this time. My stock analysis indicates that the company has been taking market share away from Taco Bell, which is owned by YUM! Brands, Inc. (NYSE/YUM), and McDonalds Corporation (NYSE/MCD).
For Chipotle, there was an excellent buying opportunity in October 2012, when the stock fell to a 52-week low of $233.82 and has since rallied 158%. At the current price, Chipotle is looking … Read More
Gold and oil are finally seeing some upward lift, but it has more to do with the geopolitical landscape than inflation and economic growth.
As I said in recent weeks, the price of gold could be headed higher, but only if we see a rise in geopolitical tensions. That’s what we are witnessing at this time, so there could be quick money to be made.
While the Ukraine situation appeared to be settling down, the destruction of a Ukrainian aircraft with soldiers on board will not help the already tense situation. Russia has also halted the flow of oil into Ukraine after failing to reach a compromise on only owing for past oil and the price for future oil. This failure could cause a bottleneck not only in Ukraine, but also in Poland and other European countries that depend on Russian oil. Of course, in the worst-case situation, this could impact growth in the eurozone at this critical time when the region is still fragile, with high unemployment and mixed economic renewal.
We also have the massive uprising in volatile Iraq, where the brutal ISIS (the Islamic State in Iraq and al-Sham) rebel militia is spreading its control in the country, now marching on Baghdad. The negative implications of ISIS increasing its control over the country could wreak havoc not only on the oil production out of Iraq, but it could also create geopolitical instability in this already volatile region that also includes tensions on Syria and Iran.
The two events will likely drive safe haven buying in gold, which has been moving higher after bouncing off some support around … Read More
The current stock market risk continues to be high for technology and small-cap stocks. Yet with the selling, we are beginning to see some decent opportunities coming to the surface.
The small-cap Russell 2000 is down just over seven percent after previously being down by more than 10% in the stock market. And while we are seeing heated stock market selling in higher-beta technology small-cap stocks, there are also opportunities emerging. Think of it as a current sale in the stock market that could inevitably see bigger discounts to buy equities in the stock market on the horizon.
But a small retail stock that I feel could reward speculators if it can strengthen its balance sheet is American Apparel, Inc. (NYSE/APP), which is based out of Los Angeles. What makes the company interesting is that the maker of fashion apparel for women, men, children, and babies manufactures its products within the United States borders, instead of places like China and Asia, which offer cheaper labor.
You could say that American Apparel truly is a “made in America” company producing its fashionable garments from an 800,000-square-foot facility in downtown Los Angeles. There are also other facilities in California.
American Apparel is a vertically integrated manufacturer, distributor, and retailer. The retail stores are located in major U.S. cities, along with outlets in Latin America, Europe, and Asia.
Considering what many of the major retailers and apparel makers in the stock market are doing with their manufacturing in cheap labor markets, American Apparel is quite astonishing—but the problem that arises is the lack of profits.
The financial risk has been hurting the stock. … Read More
We are seeing a rise in the demand for super-light and strong carbon fiber composite, which is used in multiple applications for both commercial and consumer use, based on my stock analysis.
Carbon fiber is known for its high weight-to-strength ratio and as such, it has been increasingly used in the construction of numerous products that demand lighter weight without compromising strength. This is the very reason why carbon fiber composites are a favorite of the airline sector, where we are seeing a move towards building lighter fuel-efficient planes that can fly further for a lower cost while maintaining structural strength.
My stock analysis notes that we are seeing the emergence of carbon fiber in numerous applications, such as sports cars, bikes, golf clubs, and other everyday uses, including sports equipment and electronic items. Sectors employing carbon fiber include aerospace, automotive, offshore drilling, infrastructure, marine, energy storage, and wind turbines.
The industry numbers don’t lie. According to my stock analysis, the global carbon fiber market is estimated to grow 17% annually over the next five years to around 118,600 tons, and it is thought to be worth about $7.3 billion by 2017, according to “The Future of Carbon Fiber to 2017” report produced by Smithers Apex. The report estimates the annual growth for carbon fiber-reinforced plastics for the period from 2012 to 2020 will be 16%. These metrics suggest a buying opportunity for carbon fiber plays that could benefit from the growth, based on my stock analysis.
A special situation stock that I like in the carbon fiber market is Hexcel Corporation (NYSE/HXL), a maker of advanced composites that include … Read More
Earlier in the year, gold bullion prices were going higher, and we heard the skeptics say, “They will decline. Don’t buy the precious metal; it’s useless.” They turned out to be very wrong. Now, gold bullion prices are seeing a minute pullback. With this, we are once again hearing the same thing: ditch gold and buy something else has become the mantra.
Sadly, those who say don’t buy the precious metal are too focused on the short-term fluctuations and are completely forgetting the long-term picture.
I am bullish on the yellow metal. My reasons are very simple. We see demand for gold bullion increasing—it will come from the central banks and individuals and it will eventually cause disruption in the supply.
Those who are saying gold bullion is useless so don’t buy it are the same cynics who said buyers will eventually run out. Instead, we continue to see an increasing number of buyers.
Consider this: Iraq’s central bank bought 36 metric tons of gold bullion in March. This was the biggest purchase by the country in three years. The gold bullion was worth $1.5 billion. (Source: Salman, R. and Harvey, J., “Iraq’s central bank bought 36 T of gold in March,” Reuters, March 25, 2014.)
Certainly, the purchase made by the central bank of Iraq isn’t huge, but it shows that the demand for gold bullion by central banks is still present. It is also very interesting to note that the reason the gold bullion was purchased was due to the bank’s attempt to stabilize the country’s currency, the dinar.
Going back a little further, in 2013, central banks … Read More
While the stock market has been struggling this year, under the radar, gold has been moving higher.
The tense stand-off in Crimea is clearly adding some support to gold, as an outbreak there could drive the precious metal much higher in the short term.
The geopolitical risk also includes the tensions between Israel and Iran in the Middle East.
On the fundamental side, we have China continuing to amass significant positions in physical gold, as the country looks to diversify its massive $3.0 trillion in reserves away from U.S. bonds. Buying in India has stalled, but the country continues to be the world’s largest market for the precious metal.
The one major supportive variable that’s missing is inflation, which is a proven driver of gold prices. The reality is that inflation is benign in the United States, along with much of Europe and Asia.
With gold currently holding just above $1,300 an ounce, the precious metal is at a crux. Stabilization in Crimea would remove some of the risk discounted into the price, but I doubt this will happen in the immediate future, as Russia has set the process to annex Crimea from Ukraine.
We know that the contested move by Russia doesn’t sit well with the United States or the United Nations, yet I really do not see Russia backing away for now. That is unless the economic sanctions put forth on Russia intensify and begin to send the Russian economy into a downward spiral.
But until we see a resolution in the stand-off, I expect gold prices will continue to incorporate some risk discounted into the price.
In … Read More
By now, you have probably noticed one phenomenon: the speculations regarding China’s growth are increasing each day. Turning on the TV or flipping through the pages of the newspaper, you’ll likely hear and read all about how the second-biggest economic hub in the global economy will tumble.
No doubt, the arguments backing this argument are very credible. The Chinese economy is seeing an economic slowdown and troubles in that country continue to gain strength. For example, the Chinese manufacturing sector is stalling. In March, the HSBC Flash China Manufacturing Purchasing Mangers’ Index (PMI) declined to its lowest level in eight months. The output index declined to an 18-month low. (Source: “HSBC Purchasing Managers’ Index Press Release; Output contract at quickest pace in 18 months during March,” Markit, March 24, 2014.)
We have seen a few companies in the Chinese economy default on their bonds, and there are fears that more will soon fall. The widespread speculation is that the government might not come to the aid of those companies that are in trouble.
With this, investors are panicking. One of the hardest-hit asset classes due to this panic is copper. Please take a look at the chart of copper prices below.
Chart courtesy of www.StockCharts.com
Since the beginning of the year, copper prices are down more than 13% and investors believe demand for the red metal will continue to decrease due to the decline in manufacturing. During the past decade, China was building massive infrastructure and a significant amount of copper was needed as a result. This is not the case anymore.
Copper prices have broken below a key level—$3.00—and … Read More
By Sasha Cekerevac for Daily Gains Letter | Mar 26, 2014
The winds are changing, my friends. For most of the past year, each time the S&P 500 sold off, it was a buying opportunity. I think we are at an inflection point this year, as we all know nothing lasts forever.
I believe it all began to emerge last week with the Federal Reserve meeting. As long-time readers know, over the past couple of months, I’ve been warning that once the Federal Reserve begins to adjust monetary policy, this will have a negative impact on the S&P 500.
With the Federal Reserve continuing to reduce its asset purchase program, investors are now calculating the length of time until it’s no longer. The reason for distress in the market is that Federal Reserve Chair Janet Yellen announced a tentative six-month timeframe upon completion of the asset-purchase program that the Federal Reserve will begin increasing short-term interest rates.
Why the concern?
Taking a quick look from several angles, this transition won’t be smooth. To begin with, there’s the old saying on Wall Street: “Don’t fight the Fed.” It is obvious that the Federal Reserve is dead set on reducing monetary stimulus and raising interest rates.
Very rarely does the S&P 500 increase during a period of monetary tightening. This is not to say that the S&P 500 will drop tomorrow; the Federal Reserve is continuing monetary easing for the moment. But investors in the market should be aware that once the Federal Reserve begins changing its monetary stance, the S&P 500 will be affected.
Another concern is that economic growth in America isn’t exactly on fire. While it’s true that we aren’t … Read More
If you own some of the large-cap blue chip stocks on the Dow, it has not been a great year so far. Now, some of you may have thought that after the strong year for technology and small-cap stocks in 2013, the stock market may have been ready to pause in the pursuit of higher-risk assets this year. So far, that has not been the case.
Technology and small-cap stocks are again leading the broader stock market this year.
The small-cap Russell 2000 is up 1.18% in March and 2.87% this year as of Tuesday, easily outperforming both the S&P 500 and Dow. Blue chips are taking it on the chin with a 1.39% decline to date this year and only a 0.15% rise in March. Only the 3.31% advance by the tech-laden NASDAQ is beating the Russell 2000.
Chart courtesy of www.StockCharts.com
What the results in the first quarter suggest is that the appetite for risk that was prevalent in 2013 is continuing to hold as stock market participants seek out the potential for higher returns.
At this point, I continue to favor small-cap stocks and technology growth plays, as long as the economic renewal remains in play and the broader stock market advances higher.
There’s also a sense that we are seeing some new money coming into the stock market this year that may have been on the sidelines in 2013 and missing out on great returns. The trading volume is higher, which suggests more money is coming into the stock market and much of that is chasing the potential of higher returns with growth stocks.
Now while … Read More
With a long-term portfolio, the goal is to earn a constant rate of return over a long period. Sadly, even with this in mind, investors end up making decisions that jeopardize their long-term objectives.
They make mistakes, but luckily, the effects of these mistakes can be easily controlled, saving their portfolio from disaster—it all comes down to these three principles of smart long-term investing that every investor needs to know when building their long-term portfolio.
When There’s Rising Optimism, Go into Protective Mode
Too often investors try to predict when the exact bottom or the top will occur. It is dangerous for their portfolio, and long-term investors should certainly avoid doing this. Investors have to know that they can be very wrong and face massive losses if their predictions don’t come true.
With this said, there are certain things an investor can look out for when predicting if a top or bottom is near, allowing them to then act accordingly. For example, there’s a saying: “Buy when there’s blood on the streets.” Investors should follow this saying as a guideline of when the bottom is nearing. This essentially means to buy when no one wants to buy. Those who remember will recall that in March of 2009, we had a very similar situation to this.
If there’s increasing optimism, such as we see these days, investors should be worried and go into protective mode; rising optimism is an indicator of a top. Raise cash in your portfolio, and wait to see where the markets go. Aggressively buying new stock to add to your portfolio as the optimism is increasing can … Read More
When it comes to gold bullion prices, despite their mere 10% climb since the beginning of 2012, I wouldn’t be at all surprised to see gold bullion prices increase even further. With this, companies producing or looking for the precious metal are still presenting a great buying opportunity.
Let me explain…
We see demand for gold bullion continues to increase, and at the same time, supply constraints are slowly starting to show. This is something I have been talking about for some time now and at the very core, it is the perfect recipe for higher gold bullion prices ahead.
In 2013, we learned that the Indian government and the central banks have been working together to curb the demand for gold bullion in that country. This was a concern to many because India was the biggest consumer of the precious metal at that time. As a result of this, emotions took over, and we saw massive selling. A little-known fact that never made the mainstream: though the official demand for gold bullion declined, smuggling the precious metal into the country became the next big thing.
According to the World Gold Council (WGC), smuggled gold bullion in the country amounted to 150–200 tonnes in 2013. The WGC also predicts that if the restrictions imposed by India’s government remain in place, then it wouldn’t be a surprise to see an increase in the amount of gold bullion smuggled into the country. (Source: “UPDATE 1-Gold smuggling in India likely to rise if curbs stay-WGC,” Reuters, February 18, 2014.)
But this is just the tip of the iceberg.
We see uncertainty in the … Read More
The 3D-printing sector may be currently in an impasse but trust me folks, when I say the sector will be significant going forward and a buying opportunity as the price of the 3D-printing machines fall. My stock analysis is that 3D printers will become a common sight on the desk of many homes.
Recall what happened when the laser printer first debuted in May 1984 with Hewlett-Packard Company’s (NYSE/HPQ) desktop laser printer. The initial cost was staggeringly high at more than $3,000, but now a laser printer sells for less than $100.00. The same thing will happen for the 3D printer as prices start to decline, based on my stock analysis.
As my stock analysis indicates, 3D-printing technology will be a big winner going forward in nearly every area, from manufacturing to medical devices and technology.
The size of the 3D-printing and associated services market could jump to more than $6.0 billion by 2018, according to Citibank analyst Kenneth Wong. (Source: “3D Printing Market to Triple by 2018,” Business Wire, August 27, 2013.) As Wong notes, the catalyst for the growth will begin with the expiration of key patents in 2014 that will drive prices lower.
Even athletic shoemaker New Balance is using the 3D-printing technology to produce customized shoes for elite athletes. (Source: “New Balance Pushes the Limits of Innovation with 3D Printing,” New Balance web site, March 7, 2013.) I expect the 3D service will eventually be available for everyday purchases once 3D-printing machines become more readily available.
At this point into the race, my stock analysis suggests that the leaders in this sector are Stratasys Ltd. (NASDAQ/SSYS), … Read More
Since the beginning of the year, key stock indices have provided investors with hefty gains; with the S&P 500 having increased more than 23% from January to October. Other key stock indices, like the Dow Jones Industrial Average and the NASDAQ composite index, have provided similar returns.
Where are they heading next?
Looking from a historical point of view, from 1970 to 2012, key stock indices aren’t as volatile for November when compared to September and October. For example, the average return on the S&P 500 for the month has been 0.95%; the highest return achieved in the time period examined was 8.9% and the lowest return was -11.38%. If we take out the highest and lowest returns, the average return on the S&P 500 for November increases to 1.06%. (Source: “Historical Price Data,” StockCharts.com, last accessed November 1, 2013.)
Looking at the data from the last 43 years, the probability of the S&P 500 providing a positive return in November is 65.11% (increased in 28 years), and the probability of the month providing a negative return is 34.88% (decreased in 15 years).
Investors have to keep in mind that the above statistics are just that: statistics. They should provide only a general idea about what to expect from a historic point of view. They need to be informed about the fundamentals of key stock indices as well. The stock markets are forward-looking animals, and past information actually may not matter.
Here’s what investors also need to know on the fundamental side.
Companies on the key stock indices have developed a dangerous trend; their corporate earnings are coming in line … Read More
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