Daily Posts Archive
The two strategies that I use to find consistent winning stocks involve evaluating sales and book value. I prefer sales and book value rather than earnings, because earnings fluctuate wildly and are often engineered, using an endless system of “adjustments.” Valuations based on sales or book values are more reliable when assessing the past, present and future prospects for companies.
I was at a cocktail party recently, and a friend who’s a hotel manager asked what stocks I was recommending now. In return, I asked, “What kind do you want—big and undervalued, that will appreciate in the long term, or smaller and faster-growing, that are likely to bring you more action, and more risk, now?” He chose the former, bigger and slower with low risk, so I suggested these two stocks.
Decades ago, we came up with a phrase to describe a growth stock’s long-term growth cycle, describing the three phases a stock will go through during its life: Romance, Transition and Reality. The Romance phase is when the stock makes its biggest gains; it’s when investors fall in love with the story and potential, as well as the initial rapid growth. Then comes the Transition phase, when the stock often stagnates or declines for many months or even years, as investors start to see the warts of the story and the stock’s nosebleed valuations come back into line. Then, finally, you get the Reality phase, when the company is more mature and the stock is judged based on cold, hard facts. If the firm is successful, the stock will head up (though at a more measured pace than in the Romance phase), and if it’s not, it will remain in the doghouse.
Gold is hot right now, that’s for sure. It’s in the headlines and has been contributing to beautiful stock charts since the beginning of the year, which is nice for the diehards who have been predicting its resurgence for years (through gritted teeth). Suddenly, everyone wants to invest in gold. But there’s an even bigger opportunity in silver.
Construction stocks, especially those tied to infrastructure (whether it’s residential, commercial or municipal), have been thriving since the market put in its early February low. Here are three names I like the most.
Our overall investment barometer moved a bit more bearish this month, but our select group of advisors maintains a cautious but bullish stance, as you’ll see in our Market Views section.
Many traders and large hedge funds trade strictly in merger arbitrage. These traders look at deals that have already been announced, and examine the deal terms and the levels the stocks are trading. If they think the chances of the merger going through are great, but the stock being acquired is trading below where it “should,” they see opportunity and will often buy shares (or call options or take some other bullish position). In the case of Pfizer-Allergan, there was plenty of “opportunity.”
The focus of today’s column is gold, particularly the environment that makes gold stocks, gold ETFs and even gold bullion attractive to investors. For some readers, the highlight will be the 10 gold stocks I’ll discuss.