What if I told you the best six months for investing in the stock market are drawing to an end? Not good news, is it?
As we enter the second quarter, there is optimism based on the price action of the stock market in 2014. Yet as I mentioned, what is historically recognized as the best six-month period during the year for investing in the stock market, particularly the S&P 500 and Dow Jones Industrial Average, according to the Stock Trader’s Almanac, is coming to a close at the end of April. With the S&P 500 having returned only 0.44% in 2015 (better than the 0.26% decline in the Dow Jones Industrial Average), can we really expect much for the stock market following what was supposedly the historically high period for stock market investing this year?
Stock Market Exceptions
The stars in the stock market so far this year have been the higher-beta stocks, as traders and investors search for potential higher gains. The NASDAQ and Russell 2000 advanced 3.48% and 3.99%, respectively, in the first quarter.
Small-caps were tops in March with the only positive move. The Russell 2000 edged up 1.57% versus a 1.74% decline for the S&P 500.
But while the historical pattern for the stock market doesn’t always play out, as was the case in 2013, the odds are in its favor.
Retracing back to April 2014, the DOW and S&P 500 pushed upward, while the higher-beta NASDAQ and Russell 2000 fell 2.01% and 3.94%, respectively. Yet there was negative sentiment towards higher-beta stocks in the stock market that, so far, hasn’t been the case this … Read More
Oil may be holding above $40.00 per barrel, but investors shouldn’t get too comfortable. The chart foreshadows oil prices could falter and maybe even drop below $40.00.
It’s true that speculation has influenced the direction of oil to some degree, but much of the negative sentiment has to do with a declining global economy that shows some despair. And while gross domestic product (GDP) growth in the U.S. is pretty decent, what we are witnessing in the global economy cannot be saved by what is happening domestically. That suggests weaker oil prices ahead—along with weaker commodity prices overall.
How Stalling in Global Economy, China Will Affect Commodities
The World Bank just cut its outlook for the global economy and the eurozone for this year. The reality is it could get much worse.
What investors have to understand is that the stalling in the global economy will impact not only oil demand and prices, but also other commodities that move in conjunction with the direction of the global economy.
Copper is declining to dangerous support levels not seen since the global economy was pulling out of its recession in 2009. Copper is dependent on GDP growth, which is at a crossroads.
Yet all eyes will be focused on China as the country gets set to deliver its fourth-quarter GDP. Based on what we are seeing in the country, the number could be ugly.
Of course, what we will likely see is a somewhat massaged version of the true GDP reading from Beijing. The government controls the flow of information it wants the world to see, so a steady decline is preferred … Read More
While China is struggling with its gross domestic product (GDP) growth metrics, the country’s main stock market—the Shanghai Composite Index (SCI)—is easily outperforming the S&P 500 and NASDAQ.
China may be stalling, but the Chinese economy is still growing at a rate of more than seven percent—far better than the rest of the G8 countries. Now, of course, that’s if you believe the GDP reading that is put forth by the Chinese government; as with most data coming from China, it is up for debate whether it is real or fictitious.
But going forward on the premise that the GDP reading is accurate, you can understand that the potential for investment growth is significant.
The SCI is up 37% this year, easily outperforming the U.S. domestic stock markets. And now, with access to Chinese stocks traded on the two Chinese exchanges (the Shanghai and Shenzen) made possible from a hub in Hong Kong, the SCI has been edging higher.
Add in the fact that the country’s central bank, the People’s Bank of China, is continuing to pump easy money into the economic system, and you have the potential for more gains.
But to make the real money, you need to gain access to the “A” shares that trade in China, and not simply the American depository receipts (ADRs) that are listed on U.S. exchanges.
Investing in China’s “A” Shares
The iShares China Large-Cap (NYSEArca/FXI) comprises the 25 largest companies in China but its performance has been substandard, moving up a mere three percent this year.
If you want access to the “A” shares listed on China’s exchanges, you can either … Read More
If you are an energy trader, tomorrow will be a big day for you. While it’s also a big day for the rest of the country, which will be celebrating Thanksgiving Day, for many in the oil patch looking for direction on oil prices, it’s also the day the Organization of the Petroleum Exporting Countries (OPEC), aka the “oil cartel,” will decide whether to cut production.
A major cut of at least one million barrels per day could send oil prices for West Texas Intermediate (WTI) and Brent crude gushing higher—or, at the very least, preventing them from falling further towards the threatening $70.00 level. On the other hand, a non-move by OPEC could see oil prices plummet toward $70.00.
Some pundits are even suggesting oil prices could fall to $60.00 per barrel if the status quo is allowed to continue, given the current supply/demand imbalance. The reality is that the massive outputs of oil from the shale formations in North Dakota and Montana have not been met with stronger domestic demand from users. This has led to excess supply and subsequent downward pressure on oil prices.
We also have the massive production ready to flow from the Tar Sands in Alberta, Canada to refineries in Texas and Louisiana. The Keystone pipeline has yet to be approved, however, despite the Republicans recently assuming control of both the House and Senate.
The reality is that the low oil prices may be a boost to companies and consumers, but it’s a financial drain on the oil producers at current prices.
The Situation Among Oil Producers
The feeling is that many OPEC and … Read More
China is dealing with an aging population. By 2030, the number of Chinese citizens 65 years or older is estimated to come in at a whopping 240 million, or about 18% of the current population. (Source: “China Population 2014,” World Population Review web site, October 19, 2014.)
The rapid growth in this elderly demographic will clearly present issues for China’s health administrators and will, in the process, place a heavy burden on the country’s healthcare system.
Some estimate spending on the country’s healthcare sector will accelerate from about $357 billion in 2011 to a whopping $1.0 trillion by 2020. (Source: Le Deu, F., et al., “Health care in China: Entering ‘uncharted waters,’” McKinsey & Company web site, November 2012.) While the amount is staggering for China, the spending is still well below the $3.0 trillion or so spent on the U.S. healthcare system.
And we are not even looking at 2030, when some 240 million seniors will emerge.
The sheer growth of the Chinese healthcare system means a vast investment opportunity for companies and investors alike, both at this time and as we move forward.
U.S. healthcare blue-chip heavyweight Johnson & Johnson (NYSE/JNJ) has known about the superlative growth prospects in China for nearly three decades. Johnson & Johnson expanded into China about 28 years ago and has since become a major player in the country.
Operating through Johnson & Johnson China, the company is an excellent way to play the demand for healthcare as the country’s expenditure rises.
Chart courtesy of www.StockCharts.com
Alternatively, for a domestic healthcare play on China, investors may want to take a look at a … Read More
The annual Asia-Pacific Economic Cooperation (APEC) summit started on Monday in Beijing, and I bet there will be a lot of discussion on the state of China and Asia in the global economy.
My readers all know the impact of China on the global economy, as I’ve written on its relevance before. If China fails, so will the global economy, including the United States and the fragile eurozone. Russia is already looking to extend its economic ties beyond the Great Wall.
Yet it’s clear the country that gave us spectacular double-digit gross domestic product (GDP) growth for years is now struggling. The Chinese economy has already seen its growth slow, coming in at 7.3% in the third quarter, the slowest pace since 2008. And it isnow threatening to fall short of the 7.5% target set by the government. At this point, it doesn’t look like the target will be met. In fact, there are whispers that the target could be cut to seven percent in 2015 if the global economy doesn’t experience a stronger recovery.
Pundits and China bears have been calling for the great collapse of China, specifically in the real estate and financial spaces. Yes, there is softness here, but we have yet to see a bigger crack form. You can bet the Chinese government will do whatever is necessary to reinforce its economy’s weak points. And China can definitely do this, given the fact that the country has about $3.0 trillion in reserves.
President Xi Jinping, who is in his second year of his 10-year term, knows the country needs to spread its wings globally. That is … Read More
It’s headline news: America is getting bigger around the waistline and that means that there’s a greater potential for higher healthcare issues down the road—which isn’t a good sign for a healthcare system that is already struggling. (Maybe the government should offer monetary incentives, such as tax credits, for those who join gyms or pursue other healthy alternatives.)
Even though America is struggling with obesity, Americans realize the issues and consequencesthat go along with obesity and an unhealthy lifestyle.
And this is now happening on a worldwide scale. China, for instance, is beginning to see obesity issues surface and rates climb; more alarming is the fact that obesity is occurring withinChina’s youth demographic. While I’m not blaming the problems on the emergence of fast foods in China, you can’t ignore the fact that China currently has thousands of fast food outlets, such as McDonalds Corporation (NYSE/MCD) and the extremely popular Kentucky Fried Chicken (KFC),owned by YUM! Brands, Inc. (NYSE/YUM).
The World Health Organization (WHO) estimates there are more than 500 million people worldwide who are considered obese. (If you count those who are classified as “overweight,” that number skyrockets.)And the numbers in the U.S. are staggering.
Perhaps it’s the rush to have dinner ready and on the table that calls for the need for fast foods, or maybe it’s simply that it’s more convenient. Whatever the reason, obesity is a national and global issue.
But what does this have to do with you, the investor? Well, there may be an investment opportunity or two in it for you.
A small-cap investment opportunity in the weight control area that is worth … Read More
Oil prices are struggling to hold above $80.00 a barrel for West Texas Intermediate (WTI) crude. Even the more widely traded Brent oil prices are hovering around the $80.00 level.
Excess supply—especially from the fracking for oil in the United States and the gush of oil that will come from the tar sands in Canada—is helping to drive oil prices lower. Then add in the slowing in Europe and China, and you have concerns on the demand side.
In Economics 101, when demand declines and supply rises, a downward pressure on prices surfaces and that is exactly what is happening to oil prices.
The oil cartel, the Organization of the Petroleum Exporting Countries (OPEC), from the Middle East has said it will not cut its oil production given the decline in oil prices. You have to wonder how valid this is, though, especially when oil prices fall to below $80.00 a barrel.
The reality is that oil prices will need to be artificially pushed higher by cutting production, as many countries in the Middle East and elsewhere require higher oil prices to break even. So it’s likely OPEC won’t have much of a choice.
Moreover, an escalation of the conflict in Syria and Iraq could also offer oil prices some support.
And oil will move higher on evidence of a recovery in the global economy.
If you believe this premise, then it’s time to look at some of the many downtrodden oil plays that have been sold off on the declining oil prices.
On the small-cap driller side, take a look at battered-down Parker Drilling Company (NYSE/PKD) out of Houston, … Read More
In 2013, when it was announced that the eurozone had emerged from its double-dip recession, the European stock market was optimistic and drove stocks higher.
Yet there was a sense the route to higher gross domestic product (GDP) growth was not clear due to the massive debt still on the books of many of the eurozone’s weakest members, widely known as the PIIGS nations (Portugal, Ireland, Italy, Greece, and Spain). Yes, the countries have shown some recovery, but they continue to be plagued by massive debt and abnormally high unemployment.
Unemployment across the region continues to run in the low double-digits, around 12%. For the youth under the age of 25, it’s much worse, with the unemployment rate around 40% in some of the PIIGS countries.
The problem is that a weak jobs market in the eurozone doesn’t reflect positively for the economies.
We are now seeing growth issues with the two pillars of the Eurozone, Germany and France, which are widely credited with helping to save the eurozone from a financial Armageddon.
The effects of the economic sanctions placed on Russia for its involvement in the Ukraine crisis appear to finally be filtering their way through to the eurozone and Europe, specifically Germany. One of Russia’s biggest trading partners, Germany saw a 5.8% decline in its exports in September alone.
The reality is that a weaker Germany doesn’t bode well for the eurozone.
In addition, with more than 800 million inhabitants in Europe, the market is significant. Slowing in this market will surely have an impact on growth in China and the United States, as well as the global … Read More
A sector that has truly benefited from the low-interest-rate environment over the last several years has been the automobile sector, which could now be an investment opportunity.
Armed with financing rates as low as zero or free money, car buyers have been rushing to the dealers looking for a new set of wheels.
Rising per-capita income levels around the world, especially in the emerging markets in China, Asia, and Latin America, have all combined to drive up demand.
Investment guru Warren Buffett just announced last week that his fund Berkshire Hathaway, Inc. (NYSE/BRK-A) would add a majority stake in Van Tuyl Group, which is the fifth largest auto dealership group in the country. Clearly, Buffett is positive on the auto sector as an investment opportunity.
The price chart of the S&P 500 Automobiles & Components Industry Group Index shows the recovery in the sector from mid-2012 to its peak in mid-2014, prior to the recent bout of selling that drove the index below its 50-day moving average (MA). Despite this, I continue to like the sector as a possible longer-term investment opportunity and would advise buying on weakness.
Chart courtesy of www.StockCharts.com
In addition to the obvious low financing rates, the U.S. auto sector is on much better footing now as an investment opportunity than it was prior to the recession in 2008. After undergoing major structural changes over the past few years since the bankruptcy of General Motors Company (NYSE/GM) in June 2009, the sector has become more efficient and cost-conscious. It’s also more in tune with the needs of its customers, whether it’s through the development of more … Read More
Don’t let the new records by the Dow Jones Industrial Average and S&P 500 trick you into thinking everything is fine in the stock market.
Just take a look…
We have the rising military actions against ISIS in Syria and Iraq that involve five Arab countries, which could really increase the geopolitical risk worldwide.
China is continuing to deliver muted economic results and suggested there would be no additional monetary stimulus at this time. Meanwhile, the slowing in the eurozone and Europe, given the economic sanctions on Russia, will impact the demand for Chinese-made goods.
And while the domestic economy is holding, the Organisation for Economic Co-operation and Development (OECD) recently cut its gross domestic product (GDP) growth estimates for the United States to below two percent this year.
The Federal Reserve is helping to support the stock market via the likely extension of its near-zero interest rate policy into mid- or late 2016, but this will help only so much.
The stock market risk is evident on the charts.
Technology and small-cap stocks are attracting the most selling, with investors dumping high-beta stocks as overall stock market risk rises.
The small-cap Russell 2000 lost 1.6%, moving back below its 50-day and 200-day moving averages (MAs) on Monday. The index is now down nearly four percent in September. Considering the risk, I would be careful when looking at small-cap stocks in the stock market at this time.
Technology is also at risk in the stock market despite the NASDAQ continuing to lead the major indices this year with an advance of close to nine percent. Higher-beta stocks are generally the … Read More
While the S&P 500 and Dow Jones Industrial Average race to new record-highs, there’s still a sense of caution and vulnerability on the side of investors towards the stock markets here in the U.S.
In fact, a study I read in Bloomberg estimated that around 47% of stocks listed on the NASDAQ stock market are currently in a technical bear stock market, down 20% or more from the highs. On the small-cap Russell 2000, the story is even worse with more than 40% in a bear stock market. And the study shows that the S&P 500 had a mere eight percent of stocks in a technical bear stock market.
There’s even talk of the S&P 500 reaching 2,300 by the year’s end, according to some of the optimistic bulls on Wall Street. I feel it’s pure fantasy that the index will rise by another 15% by year-end.
The reality is that the stock market is stalling. Without any fresh and inviting reasons to buy, I sense the stock market risk is quite high.
An alternative would be to invest in a foreign market, and while I like China, Israel is fast becoming the favorite for growth investors. Israel has produced some top companies in the past, especially in the technology and medical devices sectors.
Israeli stocks are the third most listed stocks on the U.S. stock markets. (China is second.) As a country, Israel may be small, but an excellent investment opportunity can usually be found there. Moreover, the risk for fraud is much lower than with U.S.-listed Chinese stocks. I can’t say that I have ever heard of fraudulent … Read More
I’m not sure how many of my Daily Gains Letter readers realize that Chinese stocks, as reflected by the Shanghai Composite Index (SCI), have outperformed the S&P 500 so far this year. After offering up underwhelming performances since 2009, the SCI has rallied 9.98% this year, compared to 8.44% for the S&P 500 and 3.23% for the Dow Jones Industrial Average as of Monday.
We’re not talking about resurgence in Chinese stocks and a return to the glory days more than five years ago; instead, I’m simply saying there’s finally some buying in an oversold Chinese stock market.
Chart courtesy of www.StockCharts.com
Of course, there’s the high anticipation of China-based Alibaba (NYSE/BABA) joining the U.S. capital markets on September 19; this move will likely stroke the enthusiasm of investors here. The Internet services company is massive and will give U.S. companies a run for their money, further opening the U.S. market to consumers and businesses worldwide. You can wait and pick up shares of Alibaba or you can play the company via Yahoo! Inc. (NASDAQ/YHOO), which holds a 23% stake in Alibaba.
Now, if you’re a regular reader, you may know that I have been, and continue to be, bullish on the Chinese economy and China. Yes, the economy is stalling, but we are still talking about growth of around 7.5% this year, which is far greater than the rest of the G7 countries.
Just like Facebook, Inc. (NASDAQ/FB) in the social media market with its more than one billion users and enormous potential, I feel the same towards China and its 1.3 billion people. When you have a market … Read More
The travel market in China continues to be strong in spite of the country’s economic growth stalling around 7.4%. Spending has been triggered not only by personal travel, but the country is on the verge of surpassing the United States in the area of business travel.
Just take a look at the industry metrics. In 2013, total travel business spending in China came in at $225 billion, based on research by the Global Business Travel Association.
In the country, you can witness the explosive growth in travel infrastructure, which includes airlines, high-speed rail transit, cars and car rentals, and hotels.
In fact, China is already the world’s largest market for airlines, cars, and rail. The country is spending hundreds of billions of dollars in these areas and it’s only going to get bigger. And with more than 1.3 billion people in China alone, you know the travel market within the country will also expand.
You can now travel from Shanghai to Beijing in a few hours by taking a high-speed train and based on the government’s ambitious plans, the high-speed rail network is only going to expand.
In the airline sector, just ask The Boeing Company (NYSE/BA) about China and you’ll realize it’s becoming the most lucrative global market for airplanes.
The vehicle market is also continuing to be the largest in the world, only held back by quota restrictions placed on car sales by the government in an effort to limit pollution.
With all of this added travel in the skies, on the roads, across the water, and by rail, you know the demand for hotels is also surging. … Read More
It began with the battle for Crimea, followed by the shooting down of Malaysian flight ML17 in eastern Ukraine, but for Russia, which was blamed for both, there has been a battle over the strength of its economy, triggered by a multitude of economic sanctions by Europe and the United States.
Russia, under President Vladimir Putin, has been in strong denial to all the blame it has received; but clearly, the world sees a different story, which is the reason for the economic sanctions. Now, these economic sanctions have begun to wreak havoc in the region, based on my economic analysis.
The reality is that Russia, based on my economic analysis, is not strong enough economically to survive on its own domestic consumption and ignore the global economy. Yes, Russia has its alliances with China, but it’s not enough, especially since the Chinese economy is also struggling to avoid a hard crash, as my economic analysis indicates.
Putin has had time to rethink his strategy and I’m sure he has had many phone calls from Russia’s business elite regarding the sanctions and their impact on their wallets. Heck, even Putin, who has major economic interests in Russia, is hurting at the bank.
Now there’s hope with a meeting between Putin and Ukrainian President Petro Poroshenko scheduled to take place in Belarus this week. Russian stocks have closed higher in 10 straight sessions as optimism rises and an end to the conflict could emerge following the meeting.
While the benchmark MICEX Index, which comprises the 50 most liquid Russian stocks that represent the Russian economy, is down 2.59% year-to-date as of … Read More
Alternative energy plays have been around for decades, including Ballard Power Systems Inc. (NASDAQ/BLDP), a maker of hydrogen fuel cells that went public in 1993. The stock traded as high as $100.00 as a speculative investment opportunity in early 2000 but was unable to break into the automotive market. It is currently drifting at the $4.00 level.
However, what Ballard was hoping for is now materializing for battery-powered automaker Tesla Motors, Inc. (NASDAQ/TSLA), which has built a superhighway of charging stations across the U.S. and is expanding into Europe and China. Tesla is a great story and a decent possible investment opportunity.
Yet it’s not only vehicles that demand alternative sources of energy; we also see demand coming from numerous applications and, in some cases, manufacturing facilities.
The demand for alternative energy can be based on wind, solar, or water and has led to the development of a strong solar industry as an investment opportunity.
A small-cap that has been exciting the stock market while producing sizzling gains for speculators has been Plug Power Inc. (NASDAQ/PLUG), a developer of hydrogen fuel cells that power forklifts and other devices. The stock traded as low as $0.32 over the past 52 weeks, surging to $6.37 on Thursday morning after reporting strong results. Plug Power has been on my technical analysis screens for some time, as the stock consistently breaks higher. If interested, I would suggest investors look to this stock on weakness for a volatile speculative investment opportunity.
Chart courtesy of www.StockCharts.com
Another possible investment opportunity that may interest investors in the alternative energy space is FuelCell Energy, Inc. (NASDAQ/FCEL), which has … Read More
The superhighway that Tesla Motors, Inc. (NASDAQ/TSLA) is building across the United States appears to be taking shape with consumers and investors.
The maker of the quick-charge electric-battery vehicle has recovered since taking a hit on growth and valuation concerns. The stock is still not cheap, but based on what is developing and its longer-term prospects, a stock like Tesla may be worth a closer look as an investment opportunity.
Back in April, I suggested picking up some shares of Tesla as an investment opportunity at a price tag of $193.00. The stock closed at $253.00 last Wednesday, representing a hefty quick gain of 28%.
Chart courtesy of www.StockCharts.com
Now after reporting a decent quarter, Tesla has been receiving kudos from Wall Street. Brad Erickson at Pacific Crest issued an Outperform rating and assigned a price target of $316.00. This price is high, given the stock is already trading at 80-times (X) its 2015 earnings per share (EPS) and an extremely high price-to-earnings growth (PEG) ratio of 5.34. For Internet and social media stocks, the valuation likely wouldn’t be given a second look, but for an automaker, there clearly are some heads shaking.
While I continue to like Tesla as an investment opportunity, I would be more likely to accumulate shares on price weakness than to chase the stock price higher.
In my view, Tesla needs to produce more unit sales of its vehicles in order to reduce the fixed overhead charges per vehicle made, thereby pushing up the operating margins.
We are seeing Tesla vehicle sales steadily rise, but the numbers still pale in comparison to the major automakers, … Read More
Apple (NASDAQ/AAPL) may have finally come up with the killer apps that could vault the company ahead in the global race against Google Inc.’s (NASDAQ/GOOG) “Android” phones. Now, Apple could gain mobile supremacy, based on my stock analysis.
In an unexpected move, Apple’s CEO, Tim Cook, inked a valuable partnership with International Business Machines Corporation (NYSE/IBM) to co-develop apps that will focus on the lucrative enterprise segment.
Based on my stock analysis, the deal is gigantic for Apple, as the company has had issues breaking into and advancing in the enterprise market, where BlackBerry Limited (NASDAQ/BBRY) continues to dominate.
As my stock analysis indicates, the venture with IBM makes a whole lot of sense, as IBM is a trusted leader in developing enterprise solutions, and in addition, IBM has extremely strong alliances around the world with top global companies. This means that Apple, with its new enterprise solutions, could accelerate in this space, especially with corporate clients making Apple their mobile and applications provider. Of course, the need to provide a more secure platform, such as BlackBerry’s, is likely the focus of the venture with IBM, as my stock analysis suggests.
Now, that’s not to say that Apple will eventually beat BlackBerry in yet another segment, but it will open up opportunities. My stock analysis is that it could take years for the venture to deliver tangible enterprise solutions, so BlackBerry does have some time to counter and try to strengthen its position under CEO John Chen, who is offering some hope for suffering BlackBerry investors.
For Apple, the enterprise apps will increase the revenue stream from this segment, which … Read More
The stock market is looking higher. The DOW and the S&P 500 closed up for the fifth straight month as we enter into the second half of what has largely been a mixed and cautious year.
For growth investors, the good news is that small-cap stocks came back in June with a 5.15% advance and are easily leading the broader market. Technology also fared well with the NASDAQ up 3.9% in June. Blue chips and large-caps trailed the growth side. In the first half, the S&P 500 leads with a 6.07% gain followed by the 5.54% advance in the NASDAQ.
And while stocks are edging higher towards new records, we are also seeing positive gains in the critical jobs numbers. This is essential for the economy and consumer confidence.
We saw strong non-farm payroll jobs numbers for June last Thursday with the creation of 288,000 new jobs, which easily beat the consensus 215,000 estimate and the 244,000 jobs in May. Better yet, the unemployment rate also fell to 6.1%, the lowest level in nearly six years.
The growth in the jobs numbers will gain more traction in the stock market when the reading can surpass the 300,000 level, which could trigger heightened optimism.
What the higher jobs numbers mean is more business for the jobs placement firms, from the everyday jobs to management and executive positions.
A contrarian and speculative play on the jobs numbers recovery is Monster Worldwide, Inc. (NYSE/MWW), which currently sits around $6.85 per share with a market cap of $623 million.
Monster Worldwide runs the widely known job search web site Monster.com and was the first … Read More
One of the most common traits I find in successful companies is that they often have a multinational presence. That’s not to say that domestic-only companies are not successful, but for real growth, many of the top S&P 500 companies are global, based on my stock analysis.
Whether it’s in the industrial, technology, financial, aerospace, or healthcare sectors, the commonality is the global exposure that many of the world’s top companies all exhibit.
In fact, the failure to capitalize on foreign markets can really limit a company’s growth, according to my stock analysis.
There are only two avenues to drive revenues: A company can increase its price to the consumer, but this doesn’t always come across as being prudent. Or a second and more viable way is to expand outside to foreign markets, as my stock analysis suggests.
Companies can expand nationwide or internationally like many of the world’s multinational companies. Just take a look around and see how many American companies are found outside of our borders and spread across Europe, Asia, and Latin America. China is a perfect example of where companies go to seek added growth, as my stock analysis indicates.
Technology companies like Microsoft Corporation (NASDAQ/MSFT), Google Inc. (NASDAQ/GOOG), Facebook, Inc. (NASDAQ/FB), and Apple Inc. (NASDAQ/AAPL), to name just a few, all have a major global presence.
An example of moving to the global sphere too late is Target Corporation (NYSE/TGT), with its first foreign foray into Canada. It has been a bust so far, given that rival Wal-Mart Stores Inc. (NYSE/WMT) has been in Canada since 1994, being the market leader in the country and … Read More
The recent selling in small-cap stocks has provided numerous investment opportunities to accumulate on price weakness, albeit the stock market could see more weakness.
A high-potential region that I have discussed in the past is Israel, which has turned into the technology incubator of the Middle East and is an investment opportunity.
I have been following Israeli companies for years, and in that time, I have come across numerous high-growth and rewarding technology and healthcare companies that make the country an excellent investment opportunity.
Israel ranks third as far as foreign companies on the NASDAQ, trailing only China and Canada.
What makes Israeli companies intriguing as an investment opportunity is the strong trust from this region. You actually never hear about financial irregularities out of Israel, which makes the country a solid investment opportunity.
A small-cap technology Israeli company that I’d watch as an investment opportunity for the speculative investor is EZchip Semiconductor Ltd. (NASDAQ/EZCH), which has a share price of $25.44 and a market capitalization of $745 million.
The company is a fabless semiconductor company, meaning it doesn’t manufacture anything; rather, it simply develops the chip and produces it via a third party. EZchip designs ethernet network processors for networking equipment companies, such as carriers, along with cloud, data center, and enterprise network equipment. The company will soon be launching its newest and most powerful network processors that will drive revenues higher.
The risk with EZchip has been with the mounting concerns that some of its clients are developing their own in-house chips. So far, it has not been a factor, but it could be if EZchip began to … Read More
It’s amazing how analysts try to spin numbers that are horrible. For instance, retail sales edged up 0.3% in May, which is not something to get excited about; however, analysts have been spinning this news, saying that the poor May reading is simply a result of the upward revision in the April reading to 0.5%.
Now, I’m not sure what your thinking is, but my view is that both numbers stink and they foreshadow an economy in which consumer spending is scarce.
My excitement lies 10,000 miles across the Pacific Ocean in China, where the country’s government, under President Xi Jinping, is aggressively trying to encourage consumers to spend. This is contrary to what has happened in past decades, when the massive Chinese economic engine was fueled by manufacturing and foreign investment. Both are still prevalent, but the government also understands that it must drive up domestic consumer spending in order to lessen the impact of slower growth around the world, which has a direct impact on China.
In other words, China wants its consumers to spend the country out of the current stalling, which, at around 7.5% gross domestic product (GDP) growth, is still way ahead of the U.S. and other Western countries. The reality is that with a population of 1.3 billion people and a middle class of approximately 300 million, the potential is significant. Plus, the middle class in China has money to spend, unlike here in America, where people are struggling, just making ends meet.
In May, China’s retail sales surged 12.5% year-over-year to $349 billion, according to the National Bureau of Statistics. This followed growth … Read More
Many of you may think AT&T Inc. (NYSE/T) and Verizon Communications Inc. (NYSE/VZ) are some of the best ways in the stock market to play the mobile sector, but there are other choices; it’s just that you need to leave our friendly borders.
The biggest growth area for mobile is found in the emerging markets. I’m talking about such countries as Brazil, India and, the biggest one of them all, China.
China has the most dominant mobile market in the world. There are over one billion subscribers and counting as the rural population comes on board. Think about it this way: there are more people on the country’s mobile network than in the U.S. and the European Union combined! What a massive market. And I think our readers should get a taste of it.
Now, you may think there are dozens of mobile providers—so how will you choose? But the truth is that the Chinese government decides on how many major operators are allowed. The country currently has three major mobile providers with access to the massive market potential.
Apple Inc. (NASDAQ/AAPL) has significant potential in the country, especially with its recent alliance with China Mobile Limited (NYSE/CHL). China Mobile is the biggest mobile phone operator in China, with about 785 million subscribers as of April 30. That’s a lot of business.
With a market cap of around $199 billion, the company is massive. By comparison, AT&T is the largest mobile provider in the U.S. with a market cap of $181 billion, and Verizon has a market cap of $204 billion.
Chart courtesy of www.StockCharts.com
China Mobile has been ranked … Read More
The stock market staged a minor rally last week, but don’t get too excited yet; the buying support was largely triggered by a technically oversold market, rather than solid fundamentals or a fresh catalyst.
What I can say is that investors need to be careful with the high-beta stocks that are extremely volatile at this time and vulnerable to downside selling.
Just because momentum surfaces, it doesn’t mean the risk is dissipating. It’s simply an oversold bounce that could continue or falter again.
The fact that the Dow Jones Industrial Average and S&P 500 recovered their 50-day moving averages (MAs) last Tuesday is positive, but it doesn’t mean the worst is over.
I see the NASDAQ and Russell 2000 were still down more than seven percent as of last Wednesday and below their respective 50-day MAs. In fact, the Russell 2000 is within reach of testing support at its 200-day MA. This time around, we could see a bigger stock market correction, based on my technical analysis.
Until we see some sustained calm return, there could be continued selling pressure in the stock market, especially with the smaller high-beta stocks and large-cap momentum plays.
The most critical point to understand is that you need to preserve your capital base. The reality is that avoiding a loss is just as good as making profits. Imagine letting a losing trade run and before you realize it, the position is down 20%, 30%, or more.
This is especially true with the small-cap stocks. Making up ground following a major downside move is not easy. For instance, say you have a $10.00 stock and … Read More
We all know the importance of the railroad in linking the nation from coast to coast in its early beginnings. Railways allow for the transportation of people and goods across an expansive territory; but for businesses, it’s even more vital as an avenue to ship goods, such as oil, chemicals, and other commodities.
While the North American rail system is massive, the real major growth in this area right now—and looking forward—is the colossal build-up that’s taking place across China.
I’m talking about tens of thousands of miles of rail, and it’s expanding deeper into rural areas. The use of high-speed rail, especially, is gaining in demand and popularity. We are seeing high-speed rail between Beijing and Shanghai that has cut down the travel time for commuting this 800-mile route from the previous 12 hours or so to just four hours.
The railroad sector in China is estimated to reach US$65.0 billion by the end of 2016, according to TransWorldNews. The freight area is viewed as lucrative, accounting for about 60% of the total value.
Now we are seeing additional capital being pumped into the railroad sector after China announced a stimulus program to inject some life into the stalling economy and infrastructure.
About $24.0 billion has been earmarked for adding lines in central and western China. (Source: “China Outlines Measures to Support Growth as Goal Recedes,” Bloomberg, April 3, 2014.)
Besides the Chinese hotel sector, which I really like, the railroad expansion in China offers up more opportunities for investors. Considering the country has about 1.3 billion people to move plus freight, you surely understand my bullishness.
If you … Read More
After a miserable winter of weak economic indicators (which were mostly blamed on the weather), the warmer spring weather will be a godsend for Wall Street. Unless, of course, there’s more holding the U.S. economy back than cold winds and snow.
That riddle will be answered in the coming weeks, but the long-term prognosis for the U.S. economy is a little murkier. While the S&P 500 is trading at record-highs, there is mounting evidence to suggest the U.S. economy could slow down, putting the brakes on the bull market.
Naturally, it depends on who you ask and what their time frame is. Despite mounting risks, such as ongoing troubles in Ukraine, slower growth in China, and the threat of increasing rates, some predict the S&P 500 will hit 2,075 by the end of the summer. That would represent an 11.5% gain from where it currently trades and a 12.5% gain for the first half of the year. (Source: Levisohn, B., “Don’t Call It a Comeback: Dow Jones Industrials Gain 120 Points, More to Come?” Barron’s, January 7, 2014.)
The double-digit growth is expected to come as a result of increased investor sentiment in the U.S. economy. For starters, investors have experienced a relatively easy ride over the last year. And over the last two years, any corrections on the S&P 500 have been shallow, short, and sweet. It’s the perfect recipe for ongoing enthusiasm and confidence for investors to pour more equity into the S&P 500.
It doesn’t matter if the S&P 500 is overvalued, some investors only care that it keeps going up. And should first-quarter earnings of S&P … Read More
The current drama surrounding Malaysia Airlines Flight 370 has been riveting and indicative of how the superlative growth in travel in the airline sector has encompassed Asia along with the world.
For years now, since the recession hit in 2008, I have been increasingly bullish on the airline sector across the globe, but especially in the emerging markets like China, India, Eastern Europe, and Asia. Helping to drive up the demand for travel in the airline sector has been the upward push in wealth creation in many of these regions, which has given more people the ability to afford air travel.
The industry stats don’t lie. The airline sector is on target for its second straight year of higher profits, according to research by the International Air Transport Association (IATA).
According to the research, North America continues to be the biggest airline sector market with profits estimated at around $8.6 billion in 2014. Asia-Pacific airlines are entrenched in second place with an estimated $3.7 billion in profits, more than the $3.1 billion predicted for Europe. (Source: “Industry on Track for Second Year of Improving Profits – Rising Fuel Costs Largely Offset by Increased Demand,” International Air Transport Association web site, March 12, 2014.)
Take a look at the Dow Jones U.S. Airlines Index in the chart below. Notice the beautiful uptrend since November 2012 and the bullish golden cross on the chart, based on my technical analysis.
Chart courtesy of www.StockCharts.com
To play the airline sector in the United States, I like discount carrier JetBlue Airways Corporation (NASDAQ/JBLU). The company was formed in 1998 and currently serves markets in the … Read More
Investors are asking one question these days: should you be buying emerging market stocks or will they decline further?
In the long run, I am bullish on the emerging markets. The reason for this is very simple: the emerging market economies have a significant amount of room to grow. For example, in some emerging countries, a massive portion of the population still lives without electricity; there are not enough homes; roads aren’t there to sustain the population; industries aren’t developed; and the list goes on…
Understanding what’s happening in emerging market stocks now is very important for those who are looking to invest. When the Federal Reserve started to implement its easy monetary policies, investors rushed to the emerging markets; they could get better returns there. Now that the Federal Reserve is threatening the prospects of easy money, investors are worried and selling.
Since we started to hear speculations that the Federal Reserve would taper its quantitative easing, investors have been rushing out of the emerging markets. No matter where you look in the emerging markets, you will see key stock indices facing a sell-off.
Look at the chart of Turkey’s stock market below. It’s down more than 30% since June of 2013.
Chart courtesy of www.StockCharts.com
Turkey’s stock market is just one example; other emerging markets stocks are sliding lower as well. For example, China’s stock market is down more than 12% since June of last year. The Brazilian stock market is down about 20% for the same period.
According to my analysis, it shouldn’t be a surprise to see the stocks in emerging markets slide even lower. You … Read More
By Sasha Cekerevac for Daily Gains Letter | Mar 19, 2014
As many people know, one of the hottest areas in the market right now is technology stocks. Investor sentiment has continued piling into this sector—with good reason in some cases.
The danger for investors is when investor sentiment becomes too bullish—technology stocks might be entering this territory.
The latest of the technology stocks that has announced it is going public is the Chinese powerhouse Alibaba Group. Started in 1999 by a former English teacher, the company has now grown to be the largest e-commerce company in China and will soon be a public firm with a valuation of more than $140 billion.
While it can be said that investor sentiment has become too enamored by recent technology stocks such as SnapChat, which doesn’t generate any revenue or earnings, Alibaba is a real business producing billions of dollars in revenue.
For American investors, the biggest beneficiary of Alibaba has been Yahoo! Inc. (NASDAQ/YHOO). Over the past year, as rumors continued to circulate that Alibaba would go public, investor sentiment has become ever more bullish on Yahoo!, since the firm owns 24% of Alibaba.
This could be a “buy on rumor, sell on fact” event, as investor sentiment has pushed Yahoo! to multiyear highs amid a backdrop of both positive investor sentiment towards technology stocks and a buildup in anticipation for the initial public offering (IPO) of Alibaba.
If investor sentiment continues to be overly bullish for technology stocks in general and Alibaba specifically, what will happen is that the IPO price and the subsequent trading activity will capture a huge premium to the current business environment.
This is great for Yahoo! … Read More
By Sasha Cekerevac for Daily Gains Letter | Mar 14, 2014
There is something going on right now in the copper market that should alarm you. Over the past week, the price of copper has plunged, recently hitting a four-year low.
Why should this matter?
Most investors and analysts are placing bets that economic growth is about to re-accelerate globally. Never before has the world been so interlinked, so we must pay attention to what is occurring internationally.
Copper is an important part of the potential for economic growth, not just because it is used in building and construction, but because it is also a major factor in the Chinese lending market, which is now showing severe strain leading to a potential debt crisis.
Remember, the last financial emergency was led by a debt crisis brought on by a housing bubble that eventually popped. High levels of debt creating a bubble are always dangerous, as the hangover is quite severe.
How does this impact economic growth for us here in America?
To begin with, we all know that the U.S. is doing relatively better than other parts of the world, but we are not exactly running at full speed. Any slowdown in economic growth—especially with a country as large as China—that is brought on by a debt crisis in that nation could severely impact our economy.
In China, the lending market is quite different than in North America, and firms have to rely on what’s called shadow banking.
Many firms in China have trouble borrowing, so they buy copper and use it as collateral. We are not talking about a small amount of money, as a shadow banking system in China … Read More
There’s a significant amount of pessimism towards the Chinese economy these days, and the reasons behind this are very understandable. The economic data suggests the country is headed toward an economic slowdown.
In 2013, China’s gross domestic product (GDP) grew by 7.7%—barely better than the previous year and the estimates that were calling for the lowest growth rate since 1999. (Source: Yao, K. and Wang, A., “China’s 2013 economic growth dodges 14-year low but further slowing seen,” Reuters, January 20, 2014.) Keep in mind that despite beating the estimates, this GDP growth rate is much lower than the country’s historical average.
This isn’t all. A credit crunch is also in the making. We are now hearing how companies in China will have troubles paying their interest on the bonds they have issued. So far, we have seen one default on payment by Shanghai Chaori Solar Energy Science & Technology Co. This solar company, based in China, defaulted on a $14.7-million interest payment on bonds it issued two years ago. (Source: Wei, L., McMahon, D. and Ma, W., “Chinese Firm’s Bond Default May Not Be the Last,” The Wall Street Journal, March 9, 2014.)
Before this default, there was a slight hope that the government would come in and bail out the troubled companies—something that happened in the U.S. economy during the financial crisis in 2008. Now, with this default, there are speculations that we will see more of the same.
Furthermore, there are concerns that property values in the Chinese economy are going to see a correction. Over the past few years, there has been the mass development of ghost … Read More
By Sasha Cekerevac for Daily Gains Letter | Feb 28, 2014
When you are looking at your portfolio and considering making adjustments, it’s important to take into account not only the current environment, but what potential changes could occur in the future that can alter your investment strategy.
Here’s a perfect example of what I’m talking about:
We all know that Japan has been trying to lower its currency in an attempt to stimulate its economy.
What’s a side effect of a weaker economy? Higher import prices, and since Japan relies almost entirely on imported energy, costs are rising significantly, which is hurting the average Japanese citizen since wages are not increasing.
Just recently, Japan announced that it is now drafting a plan that will reopen nuclear power plants, allowing the country to rely on nuclear power for their core power production once again. (Source: Iwata, M., “Japan sees key role for nuclear power,” Wall Street Journal, February 25, 2014.)
We all know about the horrible disaster that occurred at the Fukushima Daiichi plant, but as much as Japan doesn’t want nuclear power, the country is finding that it has no alternative.
This is a significantly bullish scenario for uranium stocks. Obviously, following the disaster, corporate earnings for uranium stocks fell sharply along with the price of the commodity. The natural investment strategy was to avoid this sector until there was some clarity about the potential for a renewed interest in uranium, which should help drive corporate earnings.
It appears we are certainly turning the corner, as 17 nuclear power plants are currently being screened to be restarted by the Nuclear Regulation Authority. In total, Japan has 48 nuclear reactors, which … Read More