Thursday, July 30, 2009

5 Overlooked Stocks Poised for Growth?

These stocks are covered by fewer than 5 analysts, but they have increased both their earnings and sales by 10% or more over the past 12 months.




























































Company Ticker Industry Share
Price
Price
Change
YTD
(%)
Sales
Growth
Past Year
(%)
Forward
P/E
Citi Trends CTRN Clothing stores 60 $23.62 13 17.5
AZZ AZZ Industrial equipment 32.24 28 29 11.3
America's Car-Mart CRMT Used car dealerships 17.66 28 16 12.0
Global Cash Access Holdings GCA Credit services 6.71 202 20 9.0
Milti-FinelineElectronix MFLX Citcuit boardmanufacturing 19.94 71 25 13.0



America’s Car-Mart (CRMT) specializes in low-end, used cars in states like Kentucky,Arkansas, and Oklahoma. Sales were up almost 3% and profits were up 8%, in the most recent quarter. And management used this cash flow to pay down some of their debt, which is a good sign.

Global Cash Access Holdings
(GCA): Global Cash is expected to increase profits 11% and sales 8%, while the likes of MGM and Las Vegas Sands are losing money due to less travel. Global Cash makes the "3-in-1" cash machines that let gamblers get cash from their debit cards, or attempt a cash advance on their credit card once their debit is tapped out. This company is clearly not a buy for the socially conscious investor!

Citi Trends (CTRN) has about 350 stores in 22 states and appeals to the African-American consumers and offering urban apparel products (according to their financial filings). New stores earn the initial startup costs in about a year, and had double-digit earnings percentages recently as well as being debt-free and maintaining $3 per share in cash.

Multi-Fineline Electronix (MFLX) designs and manufactures flexible printed circuit boards for mobile phones, smart mobile devices, consumer products, portable bar code scanners, personal digital assistants, computer/storage devices, and medical devices. It sports a 6.2% Revenue Growth for the last quarter and 106.68M in cash, 10.56M in debt.


AZZ (AZZ) manufactures electrical equipment and components for power generation, transmission and distribution, and industrial markets in the United States and Canada. It has 75.82M in free cash flow and $33 in Revenue Per Share.

Wednesday, July 29, 2009

Investing Around the Blogosphere: July 2009 Roundup.

It's the end of July, and that means it's time for a roundup of investing news, tips and general info from around the blogosphere!

ETFs.




  • 76 ETFs For Foreign Stock Exposure from Bradley Johnson's Personal Finance And Investing blog is an exhaustive listing of foreign ETFs broken down by single country, Region and more!


Investing Tips and Techniques.





Warnings and Reminders.



Tuesday, July 28, 2009

Top Morningstar Bond Funds for July 2009.

Morningstar has released their top 3 Bond Funds for June-July. Here's the list:


High-yield bonds.


T. Rowe Price Spectrum Income (RPSIX)

This is a fund of funds. The management team invests in up to 9 T. Rowe Price funds in order to get exposure to all of the sectors of the bond market. The fund took a 14.7% hit in 2008, due to the high yield aspect, but it's up 6.3% for the year ending May 29.


Intermediate-term bonds.


Metropolitan West Total Return Bond (MWTRX)

The management team of Stephen Kane, Laird Landmann, and Tad Rivelle have been at the helm of this fund since 1997, and with excellent results. The team focus on a selective group of bonds including BB and B rated, higher yielding issues and bank loans. However, they also placed a contrarian bet on commercial and residential mortgages in 2008, so this fund is not for the impatient or conservative investor.


FPA New Income (FPNIX)

Here's a more conservative fund. Manager Bob Rodriguez has maintained a "buyer's strike" against high-yield bonds and U.S. Treasuries, and has a sterling long-term record. One item of note however: Rodriguez plans to take a one year sabbatical starting January 2010, but he is passing control of the fund to Thomas Atteberry, the fund's co-manager.

Monday, July 27, 2009

3 ETFs for the Bear Market Rally.

When bear markets rally, it's often the small caps and technology stocks that lead the way. Here are 3 ETFs that may help you make the most of the current rally.

iShares MSCI Emerging Markets ETF (EEM ).


The EEM is comprised of 329 stocks from countries that have yet to mature economically. This translates into high potential for growth. The holdings are focused primarily in South Korea, China, Brazil, Taiwan, Russia, South Africa, and Mexico. EEM has gained 29.58% year to date and carries a yield of 1.8% with an expense ratio of 0.72%. But a word of caution: while emerging markets are capable of incredible growth, they can turn on a dime and deliver punishing losses - EEM lost 50% in 2008.

Direxion Daily Small Cap Bull 3x Shares (TNA)


As the name suggests, the Direxion Daily Small Cap Bull aims to triple the performance of its index, in this case the Russell 2000. It uses leverage to accomplish this, so it should be treated as a real live wire. The Russell 2000 follows small cap stocks between $250 million and $3 billion. This is where high growth is often seen earliest.

Because this ETF uses leverage, it is not for the passive or buy-and-hold investor. Rather, it is best for short term speculators who can handle the occasional big loss. TNA is down 9.52% for the past 3 months, but up 35% YTD. It's expense ratio is 0.95%.

Technology Select Sector SPDR (XLK)


The Technology Select Sector SPDR is one of the largest tech ETFs going. It has $2.8 billion in assets, and tracks tech stocks in the S&P 500. Good performance from Apple and Intel have pulled the tech sector higher despite poor performance from other stocks in the index. Microsoft, AT&T and IBM make up the top 3 holdings (out of 79 total).

XLK is up 27% YTD and has a yield of 1.59%, though it was down 41.39% for 2008. It sports an expense ratio of only 0.21%.

It's hard to tell if this has been a sucker's rally that's about to end, or a natural rebound to fair market values (evidence exists to support both sides), but these ETFs should provide you with good diversification and an excellent chance to catch the return to economic growth when it happens.

Thursday, July 23, 2009

The One-Minute Portfolio.

Here's the ultimate in super-simple investment portfolios, for those who don't have the time or inclination to pick and monitor individual stocks.

The One-Minute Portfolio.


The One-Minute Portfolio is comprised of just 3 asset allocations: Domestic Stocks, Foreign Stocks and Bonds. Here's a recommendation for each category:

1. Buy America - The Whole Darn Thing!


Perhaps the cheapest and easiest way to own the entire U.S. Stock market is through the Vanguard Total Stock Market (VTSMX) mutual fund, or Vanguard Total Stock Market ETF (VTI). Both capture all market caps from small to large, growth to value and all sectors - and they have a low expense ratio: 0.16% and 0.07% respectively.

2. Going Abroad.

Here is a mutual fund and an ETF that will let you own the rest of the world, from emerging markets to the more mature European markets. Vanguard Total International Stock Market (VGTSX) Fund or Vanguard FTSE All-World ex-US ETF (VEU). Expense ratios are 0.30% and 0.20% respectively.

3. Bonds.


Bonds often give ballast to your portfolio during time when stocks are tanking, with the rare exceptions (think 2008). The biggest problem most investors have when buying bonds is deciding on what maturity to buy - short, intermediate or long term? You don't have to pick just one. Here's a super simple way to own the bond market - all of it!

Vanguard Total Bond Market (VBMFX) fund, iShares Lehman Aggregate Bond
(AGG) ETF. There is the Vanguard Total Bond Market ETF (BND http://quote.morningstar.com/ETFQuote.html?ticker=BND), but it's less than a year old. The expense ratios are: 0.20%, 0.20%, and 0.10% respectively.

As with any portfolio, you'll have to decide what percentage each category should be in your portfolio, based on your target time and risk tolerance.

Tuesday, July 21, 2009

Bears Make Money, Bulls Make Money, Pigs Get Slaughtered.

I don't mean to get all Animal Farm on you, but have you ever noticed there are a lot of animal metaphors in investing? Most people have heard about bear markets and bull markets, but did you know there are also pigs in the market? Well, yeah, I suppose you did. But do you know what kind of investing animal fits your personality and how to profit from each?

Bulls.


A Bull Market occurs when the economy is stable and growing. Unemployment is low, the GDP is growing and the stock market is rising. Bull markets are great because even a monkey can make money in a bull market. Optimism abounds.

A Bullish investor is someone who thinks, or feels, that a bull market is present or very near to happening.

Bulls make money because stock prices are rising.

Bears.


A Bear Market is the opposite of a Bull Market. Unemployment is rising, the GDP is receding, and stocks are falling. Pessimism abounds. It seems like no one can make money in the stock market.

Bear investors are those who are pessimistic on the stock market or economy as a whole. Bears expect the stock market to fall.

Bear do make money though. They make money by investing in businesses that do well when times are tough, or by shorting the market, sectors or individual stocks.

Pigs.


Pigs is  a term only applied to investors, and not the market as a whole. A pig is an investor who has become greedy and blind to the possibility of a loss.

Pigs can be investors who buy high risk investments, or a bear or bull who has simply become blinded by greed. Pigs buy stocks based on hot tips. Pigs become convinced that we are living in a "new economy" and that the market can only go up, or down indefinitely. When the direction turns, they get slaughtered.

Don't be a pig.


Pigs are an essential part of the investing ecosystem - just don't become one. Bears and bulls can capitalize on pigs. Often times it is the pigs that drive the market to extremes and create conditions whereby bulls and bears can profit.

Thursday, July 16, 2009

The simple 7 investment portfolio.

Looking for an easy, diversified portfolio of stock funds that will grow your money over time, but won't take over your life with demands on your time? ladies, gentlemen and undeclared's, I present the simple 7 portfolio..

Each recommendation is either an ETF, or a no-load mutual fund. Some people prefer mutual funds, and others ETFs, but there is little difference here. Most are also index tracking funds, so they are relatively low maintenance - for the set it and forget it, long term buy and hold investor. Most expense ratios are under 1%

The Simple 7 Portfolio.


1. A blue-chip U.S.-stock fund.

  • iShares S&P 500 Index (IVV )



  • Selected American Shares (SLASX)



  • Fidelity Spartan 500 Index (FSMKX)


2. A blue-chip foreign-stock fund.

  • Vanguard Total International Stock Index (VGTSX )



  • Vanguard FTSE All World Ex-U.S. ETF (VEU)



  • Dodge & Cox Intl. Stock (DODFX ) .


3. A small-company fund.

  • Vanguard Small-Cap ETF (VB ).



  • T. Rowe Price New Horizons (PRNHX)



  • Vanguard Small-Cap Index (NAESX)


4. A value fund.

  • iShares S&P 500 Value Index (IVE)



  • Vanguard Value Index (VIVAX)



  • T. Rowe Price Equity Income (PRFDX)


5. A high-quality bond fund.

  • Vanguard Total Bond Market ETF (BND)



  • Vanguard Total Bond Market Index (VBMFX)



6. An inflation-protected bond fund.

  • Vanguard Inflation-Protected Securities Fund (VIPSX)



  • T. Rowe Price Infl.-Protected Bond (PRIPX)



  • iShares Lehman TIPS Bond (TIP)



7. A money-market fund.


  • Fidelity Cash Reserves (FDRXX)



  • Vanguard Prime Money Market (VMMXX)



  • Schwab Value Advantage Money (SWVXX)


I leave the actual asset allocation to you, since that will depend on your time horizon, risk tolerance and so forth.

Tuesday, July 14, 2009

Why you Should Keep a Close Watch On Your Stops.

Aaron Task at Yahoo! Tech Ticker has a post of the 5 Keys to the Market, from Todd Harrison, CEO of Minyanville.com.

The money quote is near the bottom:
"Given these crosscurrents, Harrison's advice for traders is to keep a tight leash on stops and be extra focused on risk management."

Here's why Harrison thinks you should keep a close eye on your stops:

Treasury yields.


The 10-year yield has been in a range of 2.7% - 3.78% from Jan - June 2009. This is a reflection on how some traders view the risk of future inflation. The sentiment seems to swing daily between high risk of inflation and high risk of deflation.

New Supply of Stock.


Some investors are worried that the rally from March lows was synthetic and manufactured. I personally believe it was a rebound from over sold to the "new normal", but what do I know? ;-)

Valuations.


Harrison points out that despite the talk of how "cheap" the market is, forward P/E ratios are now close to the October 2007 highs.

Volatility.


And my own bonus reason for keeping an eye on your stops - the S&P 500 has been in a fairly narrow range over the past 6 months, as evidenced by this chart:


Note: This chart represents the value of the iShares S&P 500 Growth Index ETF (IVW), but it tracks very closely to the S&P 500.

SO, as you can see, there are number of mixed signals and contradictory information about the markets now. Because of this, it's important to watch your stops and make sure you're not to tight or too lose, or you risk losing more than you should or missing out on any bull rushes.

Thursday, July 9, 2009

Make Your Grandchild a TAX-FREE Millionaire!

I just got a Bottom Line Magazine offer in the mail, and thought I needed to blog about this one of the "smart money tip" inside.

The tip is titled "Make Your Grandchild a TAX-FREE Millionaire!" and they include this nice chart showing a lump sum investment growing skyward to $2 million.

How it works.


The basis of this tip is the Roth IRA, which allows the gains to be taken out tax free after a certain age. Here's how it goes...

Once your teenage grand child is gainfully employed, they contribute $4,000 between the years of 16 and 21 and that's it. The investments in the Roth IRA earn 10% a year (average over 49 or so years) and, voila at the age of 65 they grandchild has over $2 million tax-free.

Why it's bunk.


First, let me say that the theory is sound and would work. The problem is that over the 49 years that the money is accumulating, inflation will be eroding the value of the dollar.

Assuming 3% inflation (average) and 10% return over 49 years, I entered these values into the inflation calculator at Forbes and that $2,000,000 will be worth approximately $449,619 in 49 years.

Don't get me wrong, I'm not saying $449,619 is chump change, but it's a far cry from $2,000,000!

As I said, the theory is sound and it's not a bad idea, but don't think you're setting your grandchild up to be the next Gates or Rockefeller.

Wednesday, July 8, 2009

5 Reasons U.S. Utilities Look Good Right Now.

Utilities have a long history of being a safe haven - especially for yield hungry income investors. This is sill true today with weaker consumer spending in the U.S. and lower global output depressing stock prices, and the government debt snowballing to historic amounts pushing the yield on treasuries downward.

Here's 5 quick reasons utilities look really good right now:

  1. Regulated utilities have built-in profit margins.

  2. They have predictable dividends.

  3. They usually reduce a portfolio's beta.

  4. The current utility ETF's are yielding more than long-term treasuries, which suggests that they are oversold relative to treasuries.

  5. You can own a diversified basket of utilities in the Utilities Sector SPDR ( XLU) and Vanguard's Utilities ( VPU) ETF's.


Here's a chart showing the divergence of the XLU ETF from treasuries (IEF) and equities (SPY):

5 Reasons U.S. Utilities look good right now_XLU_SPY_IEF92

... And some stats on the ETF's;

XLU.


yield: 4.66%
P/E: 10.64
Total Expense Ratio: 0.22%
Annual Holdings Turnover: 4%
Total Net Assets: 1.94B

VPU.


Yield: 4.33%
P/E: 10.62
Total Expense Ratio: 0.2%
Annual Holdings Turnover: 23%
Total Net Assets: 320.65M

Tuesday, July 7, 2009

How to Tell When the Stock Market is at the Bottom.

When bubbles burst, markets tumble. Sometimes the tumble is long and pervasive. Other times it's a fast a furious free fall. Whatever form a market crash takes, it will eventually end and the market bottoms.

What follows is a set of common indicators that the market may be at or near a bottom.

Extremely pessimistic market sentiment.


Mega bottoms include everyone of the following, but more standard bottoms can exist with some, but not of these conditions having been met:

Market woes are all over the non-business headlines.
Market woes are always on the cover of the financial papers, you're looking for the USA today and local/regional news. When you cannot escape the economic gloom, you've met this indicator.

The "Investors intelligence survey of money managers" is decidedly bearish.
The "Investors intelligence survey of money managers" is a survey given by Investors Intelligence, and it often acts as a counter-sign. Meaning, when the survey turns bearish, the end may be near. You're looking for less than 40% bulls. It can usually be found in Thursday papers or at the Market Harmonics web site.

Mutual fund withdrawals increasing.
When investors are steadily withdrawing their money from mutual funds for at least 2 months, then consider this indicator met. You can check out this data at  AMG every Friday.

An increase in the VIX.

The ^VIX (CBOE VOLATILITY  ) is a measure of stress in the financial system. If the VIX is over 40, then panic is present in the investment community and usually accompanies a bottom. The trick is knowing how high it will go. For example, the 2008 crash saw a spike in the VIX of 80 in the fall of 2008, yet the bottom was still months away.

The Meisler Oscillator indicator.

I know, it sounds a lot like the flux capacitor that powered the time machine in Back to the Future, but this indicator is actually a measure of how over-bought or over-sold the market is. When this indicator reaches -5 or lower, more people have sold than are willing to buy and a bottom may be near. This is the only indicator on this list that isn't free, but you can get some info on it at The Street.com and Investopedia.

Capitulation.


Once investors become pessimistic and see little hope, capitulation follows. This is seen as a crescendo sell off. Psychologically, it's the final purging of those who are willing to sell and it is required fro stocks to start rising again. It brings out the bears and bottom feeders looking for a bargain. Crescendo sell offs present themselves as an increased ratio of new lows to new highs. You're looking for something in the ballpark of 500 or 600 new lows and only a handful of new highs.

Catalyst.


Once the pessimism has set in, and the purging has taken place you need a catalyst to start the process again. Without a catalyst, you'd have stagnation at the bottom. It makes sense, right? All the people sick of investing have taken their money off the table, and there's no reason to get back in.

At this point, you're looking for what will make the market rise again, and you may not know it until it's happened. Meaning - don't try to time the catalyst! Work on recognizing the bottom, and get back in to be ready when the catalyst appears and the market recovers.

During more normal times, the catalyst is often the Federal Reserve cutting rates. But these are not normal times, and who knows what the catalyst will be this time.

Bottoms are a natural part of the stock market, just as are peeks. But if you can learn to recognize each, and use the right techniques and discipline, they can become your best friend.

Thursday, July 2, 2009

Tips on Speculating in the Stock Market.

I usually feel more in line with value investor Ben Graham's line of thinking, but after reading Jim Cramer's Real Money, I have come to see that there is a time and place for some of the speculator's techniques.

Just because favor one school of thought, doesn't mean another doesn't have techniques that prove useful in certain situations. To that end, I'd like to share some tips on speculating that I've learned from Cramer and others.

Tip #1. Time and inclination.


Handle your investment portfolio only if you have the time and inclination to do the work required to be successful. If you'd rather be fishing, get a professional planner to handle your investments. Cramer's rule of thumb for the time required is 1 hour/week for each stock in your portfolio. This seems reasonable.

Tip #2. Focus on your strengths.


You can't be an expert on every industry or sector. Pick a few that interest you most, and master them. Maybe you're employed in the health care industry or technology industry. In those cases the health care and tech sectors might allow you to be successful with less effort. If you have a good understanding of what makes or breaks businesses in your industry, then you are likely ahead of the game when it comes to analyzing similar companies.

Warren Buffet is famous for saying he only invests in businesses he can understand. Buffet's a smart man when it comes to investing - learn from his example.

I'm not saying you can't invest in different industries, but just recognize that you won't have an innate advantage in those sectors. This also piggy backs on Tip #1. Time and inclination, in that it will most likely take you less time to keep up to date on companies in your industry. You'll also know with less effort when a company's earnings take a hit from sector-wide downturns vs. problems specific to that company.

Tip #3. The Forest, not the Trees.


Focusing on your sectors of strength is essential, but don't lose sight of the world beyond. It is just as important to step back and see the big picture, so that you can understand what factors beyond the company fundamentals can move the price up or down. For example: Pay attention to the Federal reserve and interest rates!

Certain sectors of the economy do well when interest rates rise, and others do better when rates falls. You should know which group your stock(s) fall into. This also plays into sector rotation theory . Similarly, some companies actually thrive in a recessionary environment, while most do not. Knowing the difference can mean the difference between prospering and falling behind.

Tip #4. You need less than you think to be diversified.


Studies have shown that diversification can be attained with as few as 5 stocks. Cramer himself recommends between 5 and 10, while more than 15 and you are your own mutual fund. The key isn't the number, but the sector. For example, don't pick a blue chip tech stock and a small cap tech stock - if you only hold 5 stocks in your portfolio, this would put you at 40% in technology.

Tip #5. DON'T speculate on retirement.


Your retirement savings are too important to risk on speculation. Besides, you have many years to amass enough savings for retirement income. Speculation should be done with discretionary income. Only after you've set aside some money for retirement each month and you have an emergency fund and paid all your bills can you safely use what's left to speculate.

Many people will say they don't have anything left over at the end of the month, but I say it's all a matter of priorities. You may have to decide for yourself whether you'd rather spend money on  stocks with the potential of earning more with that money or spend it on the movies, going out to dinner or any one of the other distractions on which people often fritter their incomes away.

Tip #6. Speculation is best left to the young.


Remember tip #5: DON'T speculate on retirement? That's because retirement is too important to risk on speculating. Hand in hand with this line of thinking is that you should do more of your speculating when you're younger because you have more time to make up for losses and mistakes. Much of that time is (hopefully) time that you will be gainfully employed and thus still be able to earn more money. If you speculate too close to retirement and make a wrong move, you're in trouble. You won't be able to increase your income in retirement!

Tip #7. You don't have to be a millionaire to speculate!


Jim Cramer states in his book, Real Money, that $2,500 is enough for a speculation portfolio of 5 stocks. This is provided that you add to it over time with new money. He recommends  $500 for each stock. If your stocks are from different sectors, then this would provide you with an equal weighting and ensure that you don't put too many eggs in one sector...er, basket. :)

Tip #8. Do your due diligence (homework).


Your work doesn't stop with picking stocks for your portfolio. Once you've selected your stocks, you need to keep up on your homework.

Homework includes:

  • Keeping up on news that's relevant to your stock or sector.



  • Read all SEC filings



  • Read analysts reports



  • Listen to conference calls (you can get these on yahoo! finance)



  • Keep up with news that affects your stocks


So what are you looking for on a conference call? I know, a lot of cynics out there will laugh this idea off. Who's naive enough to think a company is going to come right out in an open conference call and say, "we're in big trouble here!" The point is that your really looking to take the temperature, so to speak. You're trying to get a feel for how things are going at the company.

You'll want to know how the earnings and revenue growth are proceeding. You'll want to know if the company is experiencing unexpected problems. Often times, management may try to push earnings problems off on greater economic conditions, but  keeping up with relevant news will allow you to know when the problems are systemic or local. For instance, if you owned a bank stock at the end of 2008, you would know that the financial sector as a whole was experiencing rough times, whereas if you held that stock in 2005 you would be suspicious of such claims.

Wednesday, July 1, 2009

Buy Stock in Facebook, Twitter Before They Go Public!

The economy is taking its toll on IPO's, and like any good entrepreneur, Scott Painter is adapting. He's had a hand in 29 startups throughout his career, but with the latest recession, he's found that initial public offerings and acquisitions are a thing of the past.

That doesn't stop Scott. He's getting behind SharesPost, which is a private stock exchanges that aims to let stakeholders get around the venture capitalist liquidity crisis. SharesPost lets Scott and others trade shares in not-yet-public companies like Twitter, Facebook and LinkedIn before they go IPO.

SharesPost launched publicly this June.

Read more about it here.