Please Note: These stock picks/advice represent my own research and personal opinions and are in no way related to any institution where I have been employed. Investment involves risk and you invest at your OWN risk. As much as this pains me to say, there are occasions when I am/will be wrong. Your investment decisions are yours alone and you need to do your own due diligence.
How The Dow is Calculated
To calculate the DJIA, the sum of the prices of all 30 stocks is divided by a divisor, the Dow Divisor. The divisor is adjusted in case of stock splits, spinoffs or similar structural changes, to ensure that such events do not in themselves alter the numerical value of the DJIA. The current divisor is .1497. In other words add and subtract the movement of the Dow 30 and multiply by 6.68. The averages are named after Charles Dow and his business associates, statistician Edward Jones and Charles Bergstresser.. It is an index that shows how 30 large publicly owned companies based in the United States have traded during a standard trading session in the stock market. It is the second oldest U.S. market index after the Dow Jones Transportation Average, which was also created by Dow in 1884. GE is the only stock that has been on the Dow since it's inception in 1896. You may be wondering why it's not called the Dow Jones Bergstresser average. They didn't like the way Dow Jones & Bergstresser sounded, so they shortened it to Dow Jones & Co., and as a result, poor Charlie Bergstresser lost out on everlasting fame.
Bear Markets a downturn of 20% or more, lasting at least 60 days, in any broad equity index such as the Dow Jones Industrial Average, the S&P 500, or the Nasdaq
Stock Pick/Advice 11-17-2019
By Market capitalization (price of a stock x shares outstanding) the IPO of Aramco is estimated to come in at $1.7 trillion, easily eclipsing Apple and Amazon. Aramco is the state owned, vertically integrated oil giant of Saudi Arabia. The purpose is to raise cash for Saudi Arabia so that it could reduce it's deficit and it is scheduled for next month. Saudi Aramco said in a press statement Sunday morning that it’s hoping to sell a 1.5% stake in the company, or about 3 billion shares. The indicative price range for the shares is 30 Saudi riyals ($8.00) to 32 riyals, valuing the initial public offering (IPO) up to as much as 96 billion riyals ($25.60 billion) — at the top end of the range, according to Reuters. The figure implies that the oil giant is worth between $1.6 trillion to $1.7 trillion. The IPO next month could beat the record $25 billion raised by China’s e-commerce firm Alibaba when it debuted in New York in 2014.Analysts’ valuations of the company have varied from $1.2 trillion to $2.3 trillion. In comparison, Aramco’s closest U.S. rival, Exxon Mobil, has a market cap of nearly $300 billion and Chevron is valued at about $229 billion. (CNBC).
Stock Pick/Advice 10-27-2019
Generac, (GNRC) is up 80% for the year (a 52 week and all time high) and I believe that there is more space to run, even when the P/E is 21. Generac s a designer and manufacturer of power generation equipment and other engine powered products. The Company serves the residential, light commercial, industrial, oil and gas, and construction markets. Its segments include Domestic and International markets. In case you're living under a rock, California, a population of 38 million, is experience power outages as a result of a strained delivery systems and raging wildfires. PG&E is currently going through bankruptcy, and the company doesn’t seem to have an immediate solution for how to keep the power on when the threat of fire is high. So while PG&E falters, there could be much more upside ahead for Generac (CNBC). Generac Holdings CEO Aaron Jagdfeld said Friday on CNBC’s “Squawk Box.” “The (PG&E) CEO came out I think a couple of days ago and said a decade, it could be 10 years, of this kind of activity.” That said, he still likes the longer-term story. “We continue to like this dominant category leader and see several notable secular drivers here,” he added.
Stock Pick/Advice 10-13-2019
Health care stocks have taken a beating this year as a result of the partial gutting of Obamacare and this is one issue that has bi-partisan support in Congress, especially when it comes to the cost of prescription drugs. However, there is one area where the stocks are soaring and these are companies that provide old age housing, specifically assisted living facilities and nursing homes. Speaking from my own experience with my parents, a one bedroom assisted living apartment cost $9000/month and a 2 bed room in a full care nursing facility cost $17,000/month if you are self-pay, about half that if you are on medicaid. One such company is Omega Healthcare Investors, (OHI ticker). OHI is a self-administered real estate investment trust (REIT). The Company maintains a portfolio of long-term healthcare facilities and mortgages on healthcare facilities located in the United States and the United Kingdom. It operates through the segment, which consists of investments in healthcare-related real estate properties. It has been profitable for the past 6 years has a solid balance sheet, is at a 52 week high and approaching a 5 year high (chart). On top of this, it pays a dividend of, wait for it, 6.22%. It currently has an overweight rating by MarketWatch.
Stock Pick/Advice 10-6-2019
Westpac Banking Corporation (WBK) provides a range of banking and financial services in markets, including consumer, business and institutional banking and wealth management services. WBK is the second largest bank in Australia and it is a dividend play with a very healthy payout of 6.5%. please note, this is not a result of a huge price decline, As you can see by the accompanying chart, it has broken a medium downtrend resistance line and is establishing healthy support. Australian housing prices rose in September as the rebound in the country’s housing market continues to build momentum. Housing prices in Sydney and Melbourne rose by 1.7% in each city last month (Jim Jubak). What is particularly interesting in Australia is that they haven't had a recession in 28 years. This is a function of an economy with healthy exports of raw materials, primarily to China. Morgan Stanley has raised their target price to over $27/share which is significant given it's present price of under $20.
Stock Pick/Advice 9-22-2019
This weeks stock pick is going to be a value play that pays a goof dividend, One of the things you have to watch out for when picking a stock that pays a high dividend is the stock price of that stock. For instance, if you have a company that pays a $2 dividend and is selling for $100, the yield is 2%. However, if that stock decreases in price to $50, you now have a 4% dividend which looks like a deal, but if that stock continues its downward trend, your losses can far exceed the dividend. Given that, I like State Street Corporation, ticker, STT. State Street Corporation is a financial holding company. The Company operates through two lines of business: Investment Servicing and Investment Management. The Company, through its subsidiary, State Street Bank and Trust Company (State Street Bank), provides a range of financial products and services to institutional investors across the world. It's current dividend is 3.25%, with a strong balance sheet and a chart that's looks good from a technical standpoint since it broke a long trend resistance line and is establishing a support.
Stock Pick/Advice 9-07-2019
To say that August was tumultuous is an understatement ass consumer sentiment has decreased, the trade war continues and there still remains uncertainty on what the FED will do with interest rates. Typically, investors seek a safe haven which is typically gold, which is trading at $1530/oz or government bonds which investors consider to be risk free (bonds, not gold). However, with investors flocking to bonds, especially long term, that drives the price up and the yield down, with the 10 year yield at 1.49% and the 30 year equally the average dividend of the S&P 500 of 1.92%. So what's an investor to do? My near term fix would be a dividend ETF, Exchange Traded Fund. An ETF is similar to a mutual fund; it is a collection of securities—such as stocks—that tracks an underlying index. It is traded similar to stocks. My recommendation for the current investment climate would be a high yield ETF such as the Vanguard dividend Appreciation ETF, ticker VIG. The fund employs an indexing investment approach designed to track the performance of the Nasdaq US Dividend Achievers Select Index, which consists of common stocks of companies that have a record of increasing dividends over time. YTD (charts below), it has a return over 20% and pays a dividend of over 1.5%. This combines not only a respectable dividend that exceeds the 10 year yield, but a healthy return on investment that the 10 year doesn't.
Stock Pick/Advice 7-28-2019
This weeks stock pick is Vail Resorts, ticker symbol MTN. Vail Resorts, Inc. is a holding company. The Company operates through three segments: Mountain, Lodging and Real Estate. Its Mountain segment operates 11 mountain resort properties and approximately three urban ski areas, as well as ancillary services, primarily including, ski school, dining, and retail/rental operations. You may have read recently that Vail Resorts recently bought Wilcat and Attitash mountains in NH. In addition, they also own Sunapee in NH and Okemo in Vt. which were recently purchased. Vail caters to high end clients with most of it's upscale holdings in the Rockies. To no surprise, skiing is not a sport for the economically challenged given the price of lift tickets (over $100 on weekends at most of its resorts). As a matter of fact, the median household income of a skiing family is $86,000; compared to a median US household income of $61,000. Looking at the 5 year chart, they have had constant growth except for 2018. The reason for this was poor skiing conditions in the west. To combat this, they have diversified and extended their holdings to include eastern mountains. Rarely are ski conditions poor in both the West and the East; incidently, the US, both east and west. They pay a very respectable dividend of 2.85%, well above the yield on the 10 year, and have solid financials.
Stock Pick/Advice 7-21-2019
This week, we're going to look at PPG industries. PPG has two segments: Performance Coatings and Industrial Coatings. The Performance Coatings segment includes the refinish, aerospace, protective and marine, architectural businesses. The Industrial Coatings segment includes the automotive original equipment manufacturer (OEM), industrial coatings, packaging coatings, coatings services and specialty coatings and materials businesses. PPG just beat earnings and has a dividend of 1.75%. An analyst on CNBC, stated that their earnings were indicative of a good economy that will continue. However, Jim Cramer of CNBC see's a downturn because of a downturn in the auto industry. It seems that a number of other analysts agree and they have downgraded the stock, all-be-it from a strong buy to a buy. However, if you look at the 5 year chart of PPG, they have traded in a range from $90-$125. This is a stock that you may want to short and I'm putting it on the back burner for now.
Stock Pick/Advice 6-29-2019
The idea for this weeks stock pick comes from Jim Jubak, a previous vice president of CNBC. Vulcan Materials Company is a supplier of construction aggregates (primarily crushed stone, sand and gravel) and a producer of asphalt mix and ready-mixed concrete. The Company operates through four segments: Aggregates, Asphalt Mix, Concrete and Calcium. Jubak believes that in addition to it's regular business, it will see an uptick as a result of additional spending on seawall construction. He believes that this spending could eclipse over $400 billion over the next 20 years. Looking at the chart below, they have been in a 3 year trading range between $110-$140 and it is nearing the top of that range. Jubak feels that they are about to breakout. They have a strong balance sheet, a current ratio of 1.67 to 1 and a debt to equity of .88, and have been profitable over the past 5 years. Their cash flow is positive with most of the cash coming from operations
Stock Pick/Advice 6-16-2019
In 1956, there was an interesting Supreme Court case that involved DuPont. DuPont owned 100% of the cellophane market and was subsequently taken to court by the Justice department with the intent of breaking it into smaller pieces similar to Standard oil. However, DuPont came up with interesting defense. DuPont lawyers stated that they weren't in the cellophane market but in the flexible wrapping paper market and their competitors are aluminum foil, wax paper to mention a few. The Supreme Court bought the argument and DuPont did not have to diverse its holdings. Fast forward about 50 years to 2008 when Sirius and XM radio merged; there were some anti-competitive concerns that there would be a monopoly in the" pay for play" radio business. However, both companies were quick to point out that they weren't in the pay for radio business, but the entertainment business and their competitors were other radio stations, TV etc. As a result, the merger was allowed. Fast forward to this year and UBER and Lyft and their IPO's. Both companies are down from their IPO prices and both companies are losing money. There little doubt in my mind that these companies will eventually merge and there will be antitrust concerns but they will be quickly brushed aside with the argument that these companies are in the transportation business with their competition being taxi's, buses and RR's to mention a few. At this time I believe they will realize profitability and a higher stock price. The trick will be to anticipate when this will happen. As nothing more than a guess, I'll estimate 1-3 years. As an addendum, to illustrate they they are getting a significant market share, taxi medallions in Boston have decreased in value from a high of $700,000 to a low of $40,000 before settling at $100,000.
Stock Pick/Advice 4-28-2019
I believe it's time to buy Boeing. As a result of two 737 MAX crashes, the entire fleet has been grounded and is expected to come back on line within a month. As a result of the grounding the stock has dropped 15% and despite the negative sentiment, it is holding at the 375-380 level where there is support. Despite the safety problems as a result of deficient software, Boeing still remains viable and actually increased from after its earnings release last week. Boeing said that it expects to lose $1 billion in sales as a result of the MAX being taken offline. However, given last years sales of over $101 billion (that's right billion with a B), the effect is not significant. In addition, as a result of the price drop, it's dividend has increased to over 2% which makes it attractive given a saving rate at most banks at .25-.5%. In addition, 25 analysts polled by MarketWatch give it a 1 year target price of $442 and an overweight rating.
Stock Pick/Advice 4-21-2019
Don't ever confuse brains with stock market movements. It's been a rough month of April for healthcare stocks with democratic hopeful candidates Bernie Sanders, Elizabeth Warren and Kamala Harris advocating medicare for all. What also adds to the fear factor is the house being controlled by democrats with the tail, extreme liberal democrats, occasionally wagging the dog. There are several Medicare for All proposals circulating in Congress, some of which would basically abolish private insurance while others would simply create a public option and leave private plans largely in place. Still, the industry is worried. On Tuesday, UnitedHealth CEO David Wichmann said Medicare for All would “destabilize the nation’s health system (CNN). I simply don't see this happening with a republican Senate and Trump as president. But as usual, the market overreact. United Health Care, UNH ticker, At $221, UNH is 20% off its highs and, to me, represents a screaming buy. However, there may be more pain and if the stock went down to $200 on more panic selling, there is some support at that level and at this point, sanity may prevail. What else makes the stock attractive is a dividend yield of 1.62%
Stock Pick/Advice 3-31-2019
Even tho it's 20% off it's highs, Skyworks Solution has much to gain from a US/China trade deal, since it does much business with Apple and the trade was is adversely affecting sales. Apple represents almost 50% of Skyworks sales. Skyworks builds wireless chips that, today, primarily go into smartphones. Smartphones should continue to play an important part in Skyworks' future, especially as the transition to 5G wireless drives up the value of the chips that Skyworks sells to its smartphone customers, but the company is also looking to diversify into automotive and other Internet of Things (IoT) markets, too. It has an attractive p/e at 13.6 and pays a respectable dividend of 1.85%. Indeed, according to the company, a typical 3G smartphone had about $8 of Skyworks content, a figure that grew to $18 for a 4G smartphone. The company claims that number is set to rise again to $25 for a typical 5G smartphone (CNBC). According to MarketWatch, it is rated a buy from the 30 analysts who cover the stock with a 1 year target price close to $90.
Stock Pick/Advice 3-10-2019
A number of people have asked me what are good cannabis stocks to buy. None comes right to mind. The problem is that even tho 33 states (map below) have legalized some form of marijuana, it is still illegal federally. As a result, most dispensaries will not receive any loans or other considerations from banks and they operate on a mainly cash basis which limits expansion. Friends and students have asked me what about Canada where it is legal on a federal level. That's all well and good, but Canada has only 37 million people (less than California) that are spread out over a country larger than the United States. Generally, if someone wants marijuana in Canada they will grow it themselves so the industry is not thriving. If you must and are gambling on legalization, I would recommend Philip Morris or Molsen-Coors since they are already established sin stocks and could weather any enforcement on a federal level if we were to get a President or US Attorney General who chose to enforce those laws in states that have legalized the substance. However, if you must invest in a Cannabis stock, I would suggest (not recommend) you look at Aurora Cannabis, ticker ACB. It has just shown a profit for the 1st time in 5 years and is a Canadian based company over 1.2 million pounds of cannabis. It has just been recommended by Cowen Investments with a price target of $10.50. According to Cowen, they are expected to generate $305 million Canadian ($227 American) in fiscal 2019 and are located in 23 countries.
Stock Pick/Advice 3-3-2019
Between the NYSE and the NASDAQ, there are over 6000 stocks on those exchanges so it is impossible to cover everything, not to mention the pink sheet penny companies. This weeks stock pick is CDW, a company which isn't on many analysts radar but has had 6 years of steady growth since it went public in 2013. It is a provider of integrated information technology (IT) solutions in the United States, Canada and the United Kingdom. The Company's segments include Corporate, Public and Other. The CDW Advanced Services business consists primarily of customized engineering services delivered by technology specialists and engineers, and managed services that include Infrastructure as a Service (IaaS) offerings (Ameritrade). It has a strong balance sheet with $1 billion in equity and a current ratio of about 1.4. It has also realized a profit since it went public and that profit has increased by 60%. It pays a 1.26% dividend and has a P/E of 22 which is above the S&P 500 average of about 17, but given its growth I feel is well Justified.
Stock Pick/Advice 2-10-2019
This weeks stock pick is risky, but it could yield great returns and the downside is marginal. Federal National Mortgage Association (Fannie Mae), FNMA, was established in the 1930's to stimulate home growth. They buy mortgages from banks within the first few years (when the interest return is is greatest for the banks), thus freeing up the banks money in order that they may give out more mortgages. Until the financial crisis of 2008, they enjoyed a healthful life trading as high as $80 before the real estate bubble burst and they were placed in receivership after being bailed out by the government for $191 billion. Since that time, they have returned all their profits, $292 billion, to the US government and shareholders have received nothing, hence the low stock price which has fluctuated between $1-$4. Enter the business friendly Trump government that has talked about taking them out of receivership and thus returning profits to shareholders in the form of dividends. Recently, the stock price has jumped from $1 to $3 before pulling back on verbiage from Treasury Secretary Mnuchin and the President indicating they want to unprivatize the mortgage giant. I feel that this will be a matter of time and it will eventually happen which will bode well for stockholders. In the event that this does occur, I see the company easily reaching a stock price in the 20's.
Stock Pick/Advice 2-3-2019
Apple beat earnings by 1 cent/share. That doesn't seem like much, but if you have 4.7 billion shares outstanding, that's $470 million. It did guide lower in expectations, but not as low as anticipated, and if Chinese and American trade negotiators come to an agreement it is off to the races. Apple was up 12 points yesterday and broke to resistance lines. I believe it presents an excellent buying opportunity. Adding to the party was the FED statement after it's 2 day FOMC meeting. FED chair Jerome Powell indicated that the inflation dragon is under control, and given present metrics, he sees, at most, only one rate hike this year. As of Friday, Apple was trading at $168/share and assuming trade differences between the US and China are resolved, I see Apple testing its 52 week highs of 230.
Stock Pick/Advice 1-6-2018
The Dogs of the Dow was 1st popularized my Michael Higgins in 1991. Based on the Theory Companies don’t alter dividends based on trading fluctuations, i.e., the dividend amount remains constant but not yields, therefore, as price decreases, the yield increases. The assumption is that companies have a repeating cycle of good/bad performance and that there is good management which causes the companies to recover. The dogs of the Dow are ten companies that have the highest dividend yields that occurred as a result of falling stock prices. This year’s (2019) dogs are:
During the past 20 years the Dogs have slightly outperformed the Dow; however, another trading strategy is the “small” dogs of the Dow were you purchase the top 5 dividend stocks. This strategy has outperformed the Dow in the past 20 years by yielding a 13% return as opposed to an 11%.
Stock Pick/Advice 12-16-2018
I believe that a hidden gem is the airline industry in particular, and the transportation industry in general for the very simple reason that fuel costs are down 25% in the past quarter. Every 1 cent change in the price of a barrel of oil equates to a $180 million dollar change for the industry. Given that oil has fallen $18/barrel from it's high, well you can do the math for the cost savings, ok I'll do it, $324 billion that the industry has saved. Couple that with a low unemployment rate, 3.7%, equates to people having money to travel. My favorite airlines are Alaska air, Southwest, Jet Blue and Delta. However, if you can't decide, by the transportation ETF , ticker XTN. It is at a year to date low, like the Dow, but I believe, like the Dow, this will recover when trade issues are resolved with China, and it will have the extra impetus of profits.
Stock Pick/Advice 11-18-2018
He is the Oracle of Omaha. Be fearful when others are greedy and Greedy when others are fearful. Great advice from Warren Buffet. When truly great stock buying strategy is to see what Warren Buffet is buying and selling and emulate that. If you look at the financial sector, you will see that they are down 6% in the past 6 months (chart below). This is surprising since bank stocks typically do well in a rising interest rate environment (higher profits). The demand for money (loans) is generally inelastic, so when the cost goes up (higher interest rates), the demand goes down (less loans), but as a result the higher interest rate, revenues/profits increase. I believe, like Buffet (and I'm sure he sleeps better at night knowing that I agree with him) that the sector is oversold as a result of global trade war concerns and a flattening yield curve (interpretation is recession fears). Pro outlooks for the sector include good dividends, the range is 1.6% to 3.25%, an end to the trade war, rising interest rates, the possibility of less regulation prior to dem's taking control of the house and no further regulation in the next 2 years and the distinct possibility of 3% GDP for the year.
Stock Pick/Advice 11-4-2018
About 1 year ago I recommended Apple when it was under$180/share. Since that time it soared to $230/share and became the 1st company to reach a $1 trillion market cap (price of the stock times shares outstanding). During the past month, the FAANG stocks, along wit the tech sector has sunk over 4%, however, Apple has given up almost 13%, in part because of sympathy with the sector, but half of its loss occurred on Friday after it announced that iphone sales last quarter didn't match estimates. It also announced that it expects record holiday sales this year and that, in part, is what I'm basing my recommendation on. The other reasons are that I believe the market will recover greater once a trade deal is worked out with China, and I believe that is inevitable and just basics. We are at a 3.7% unemployment rate, the lowest since 1969, wages have increased by 3.1%, the best since 2009, inflation is in check, 2%, and consumers have money to spend, and as a result, I believe that Apples prediction of better iphone sales will come to fruition.
Stock Pick/Advice 10-21-2018
Given the volatility in the market over the past month, this week's pick is going to be a conservative but profitable pick. A preferred stock is a class of ownership in a corporation that has a higher claim on its assets and earnings than common stock. Preferred shares generally have a dividend that must be paid out before dividends to common shareholders, and the shares usually do not carry voting rights. Dividends are also much higher than dividends on common stocks. This weeks pick is a Bank of America preferred stock, BAC-A that is paying out a close to 6% dividend. It is callable st $25 and is currently trading well off it's 52 week high at $25.45. This is the type of investment that you use to diversify your portfolio and it far exceeds inflation and the opportunity cost of money in a savings or money market account.
Stock Pick/Advice 9-23-2018
If you look at Boeing's stock since June it has been in an up/down trading cycle compliments of a trade war started by this administration. If the trade outlook is pessimistic down it goes and when optimistic, you guessed it up it goes, same as the Dow. However, both the Dow and Boeing are close to all time highs, on, for now, optimism about the trade wars ending. Boeing, along with Caterpillar, are bellwethers for international trade. Currently, Boeing has well over $100 billion in orders to fill and once the war is over, and I suspect trade agreements will be reached prior to elections in November (we already reached one with Mexico and we are close with Canada, it will be off to the races. So the decision is simple, if you think the trade war will continue, wait until Boeing hits the bottom of it's trading channel at $325, if not, I think it's a buy.
Stock Pick/Advice 9-2-2018
It has been out of favor since September or 2008 when it required a government bailout of over $180 billion and its stock dropped by 99%. But, with a stock price of $53, trading well below it's book value of $70, a solid cash position, and a 2.41% dividend, AIG is a diamond in the rough. It is significantly undervalued and I don't see it becoming a darling anytime soon. What I do see is the opportunity for a short term profit. What of the many strategies I employ, is to find stocks that are trading in a channel and buy low and sell high. I'm not the only person who does this, so many times, it becomes a self-fulfilling prophesy. AIG has been trading between 52-56, simply wait for the low and sell at the high, and you may end up with a dividend somewhere in between. In the long run, I believe this stock should be trading well above it's book value, but that may be a while.
Stock Pick/Advice 8-26-2018
Buy low, sell high. It's time to buy Facebook. After it disappointed in earnings it dropped to a low of $166/share down from an all time high of $219. It since recovered to $188 (sucker rally) and it appears that it has stabilized at $174. I like the company and the ad revenue continues in the midst of a strong economy (see updates/advisories 8-24-2018). Of the 48 analysts that follow Facebook on MarketWatch, it has a buy recommendation with an average one year target price of $206. Also according to MarketWatch, Facebook is one of fifteen companies that is investing the most in "Tommorrow's Big Idea's". They also go on to say that each of these companies have strong capital positions and gave invested more than $2.5 billion this year alone in upcoming technology. Reacting to market opportunities is the biggest reason companies invest in R&D, not the cost of capital. But the tax cut might also be accelerating some R&D, because the law will require amortization of R&D beginning in 2022.
Stock Pick Advice 7-29-2018
To say that Hi-Crush Limited Partnership ,HCLP, is on a tear is an understatement. Hi-Crush produces sand that is used in the fracking process, and with US oil production at an all time high, 11 million barrels/day (42 gallons in a barrel), business is booming. HI-Crush is a MLP, Master Limited Partnership. It combines the tax benefits of a limited partnership with the liquidity of publicly traded securities. The vast majority of MLPs are pipeline businesses, which earn very stable income from the transport of oil, gasoline or natural gas. Energy MLPs are defined as those owning energy infrastructure in the United States. Limited partnerships that trade on securities markets like normal stocks. MLPs are not subject to income tax, and shareholders in MLPs are actually "limited partners" in company. Their special tax designation allows MLPs to pass the tax burden onto their shareholders, but they are required to pay the vast majority of their earnings out to their partners. HCLP has broken out of a 4 month trading range dramatically with the impetus being a huge increase in dividends from 22.5 cents/hare to 75 cents per share on a quarterly basis ($3/year/share). What is particularly interesting is that the dividend increase for the 2nd quarter was announced on July 23, BEFORE it announced 2nd quarter earnings which are scheduled to be released on August 1. I suspect, that even to a blind man, if they announced this huge of a dividend increase, earnings should be a blow away figure. The current dividend yield is over 20%.
Stock Pick/Advice 7-15-2018
After being hammered for the past 3 years and poor management from bio-reference labs, and disappointing initial sales from a potential blockbuster drug, Rayaldee, OPK has been up for the past 7 weeks, increasing 100% and is close to a YTD high. The turn around came with an earnings beat for quarter 1 and better than expected sales for Rayaldee. RAYALDEE is a vitamin D3 analog indicated for the treatment of secondary hyperparathyroidism in adult patients with stage 3 or 4 chronic kidney disease. What is particularly significant about this drug is it's low p-value .01, which indicates a statistically significant effect coupled with minimal side effects. From a technical viewpoint, it has broken a long term downward sloping trendline (see 5 year chart) coupled with an increasing trendline. Quarter 2 earnings, are due out in August. Doing a fundamental analysis, I still believe this is a $25 stock. Rayaldee sales are up 730% year over year. One warning sign is a decreasing cash flow which could result in an issuance of stock.
Stock Pick Advice 7-8-2018
As a result of trade concerns and the beginning of a trade war, Boeing has lost 10% of it's value in the past month, but it has been topped by Caterpillar that has lost 15%. Both companies have significant exports to China and stand to lose a fair amount in revenues and profits as a result of higher tariffs. Both companies have dividends in excess of 2% and both companies have very solid balance sheets, and most importantly, both companies will regain the lost stock price within a week if/when the trade war comes to an end and it will, all trade wars do since free trade is highly beneficial. The trick to this will be timing as when to jump in. I'll be watching the news closely and jumping in when I 1st feel that both countries come to their senses. I give it 2 weeks
Stock Pick/Advice 6-26-2018
As Jim Cramer often states, there is always a bull market somewhere. It then begets the question, where do we invest during a trade war? The quick answer is safe haven assets. The most common is US government bonds, however, this generally raises the price of bonds and, in turn, lowers the yields. The current yield on the 10 year is down to 2.87% Gold or gold stocks are generally a safe haven, but gold, surprisingly, is trading at 6 month lows at $1257/oz. The reason for the lower gold prices is that investors seem to believe that the trade war will be short lived in anticipation of higher interest rates from the FED that will keep inflation in check. Probably the best trade is utility stocks that pay high dividends such as Verizon, AT&T, Duke Energy and Consolidated Edison; or quite simply, I would recommend the utility ETF (chart). An ETF, or exchange-traded fund, is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold.
Stock Pick/Advice 4-29-2018
Is it time to buy oil stocks. Over the past 3 years, the energy sector has been be beaten down as has been the price of oil. The sector is down over 16% for the 3 year period, however, the price of oil is currently at 3 year highs, compliments of a worldwide increase in demand and mid-east unrest, and the sector is following as it is up over 6% in the past 6 months. US oil production is up to record levels and is expected to reach 11 million barrels/day by the end of the year. It then begets the question, what stocks to buy. The reason that oil production has doubled since 2005 is fracking technology and there are a number of stocks in that area; High Crush Limited Partnership, which supplies sand for the fracking process (and pays a 7.5% dividend), it has a buy rating from MarketWatch with a 1 year target price of $17 (current price is $12); another stock in this area is Silica holdings that has a MarketWatch rating of overweight, pays a 1% dividend and a 1 year target price of $37 from its current price of $30. A previous high flying stock that barely escaped bankruptcy is Ultra Petroleum. Ultra Petroleum Corp. (Ultra) is an oil and gas company. The Company is engaged in the development, production, operation, exploration and acquisition of oil and natural gas properties. Its principal business activities are developing its natural gas reserves. It is ranked as an overweight by MarketWatch and is at a 1 year low, however, it has surpassed production expectations in the past quarter and has an optimistic outlook, but at under $3/share, it is a risk play but with a lot of upside.
Stock Pick/Advice 4-22-2018
It's the stock that you love to hate, AIG. Harbinger of the fiscal crisis and recipient of a huge government loan. The company/stock is doing well. It was on the brink of Chapter 11 in October of 2008, and by September of 2009, they were rated as the 3rd safest insurance company in the United States. In addition, their government loan was paid off within 3 years with interest. They pay a dividend of 2.3% and theirs book value (Equity/sharesoutstanding) is $72/share, 31% higher than the current stock price of $55. In addition, they have just broken a resistance line and is showing good support.
Stock Pick/Advice 4-8-2018
Based on technical analysis (which judges market psychology) and some common sense, I think it's time to buy Facebook. It is off 19% in a month as a result of member information being obtained and used by Cambridge Analytics. I think the selloff is a huge over-reaction given the 1 billion people worldwide who use the platform, and look at the platform, if you don't want your information disseminated, don't put it out there, but that's the purpose of FB, to stay in touch and re-engage with friends and family. Like everything else and I believe its current price is a buying opportunity. Looking at the chart, it has broken a short term resistance line and is trading sideways (consolidation). I see its next resistance point at 180. Of 45 analysts who cover Facebook on MarketWatch, it is ranked a buy (a higher rating than overweight) with an average 1 year target price of $218. Of the 45 analysts, only 2 rate it as underweight or sell.
Stock Pick/Advice 4-1-2018
In 1985, 45% of the population n the United States smoked cigarettes. After the turn of the century, it was down to 24% and it is currently 16%. However, over 1 billion people worldwide smoke cigarettes and Phillip Morris international, and its sister corporation Altria, formerly Phillip Morris, is a huge international corporation where the top 3 tobacco firms control over 50% of the market. In the past year, the stock has dropped over 20% on an earnings miss and a number of downgrades. However, it remains a cash rich stock with a strong balance sheet with a current dividend of 4.5%. It is a well respected company with a short interest of 1% which indicates that the stock is hugely oversold. It is considered a defensive stock (it will do well in a recession) with a beta of .7. In addition, it just received a buy rating from Deutsche bank and of the 19 analysts that follow Phillip Morris International on MarketWatch.com, it has an average rating of overweight with a 1 year target price of $120.
Stock Pick/Advice 3-18-2018
This is going to hurt, but it may be time to buy Tesla, and it is based purely on technical analysis. There are many trading strategies that traders use, the best is probably Warren Buffets value buy and hold, and my recommendation on Tesla is based on the fact that it has been in a "trading Channel" since last October. If you look at the accompanying chart, Tesla, since last year has been trading in a rang from about $300 to $360. Since I'm not the only one doing this, it often times becomes a self-fulfilling prophecy in lieu of any significant news such as an earning surprise. On the plus side, this is generally a period of consolidation before a higher run; but like everything else, it's not an exact science. So, I will be looking to buy Tesla at $300 and sell it in the $350 range
Stock Pick/Advice 1-21-2018
About 3 years ago, I recommended Hi-Crush Materials when it was in it's 20's. It climbed to the high 60's and fell when the price of oil went down to a low of under $5. Now it is on the rebound and I think it has room to run. Hi-Crush Partners LP is an integrated producer, transporter, marketer and distributor of monocrystalline sand, a specialized mineral that is used to manage the recovery rates of hydrocarbons from oil and natural gas wells (fracking). Its reserves consist of northern white sand, a resource in Wisconsin and limited portions of the upper Midwest region of the United States. With the increase in the price of oil, more fracking wells have re-opened and business has increased. They have re-instated their dividend and increased the disbursement this quarter The current dividend yield is 6.5%. Despite the recent gains, HCLP has fallen 36.2% over the past year. That could make the fracking sand producer a promising MLP for 2018. HCLP is expected to benefit from low leverage and strong earnings growth. The partnership ended the third quarter of 2017 with a net debt-to-EBITDA of 2.4, which is well within the industry standards. About 85.7% of analysts rate HCLP a “buy” as of January 5, 2018, while the remaining 14.3% rate it a “hold.”(marketwatch).
Stock Pick/Advice 1-06/2018
How do you pick a rose from the Garden of Eden. That's how some people feel on what to buy given this incredible bull market. Unless there is a shock to the economy (such as a big bomb going off), I see a continued bull market for 2018 in a slightly rising, FED fueled interest rate environment. What more than makes up for this is the Corporate tax cut from 35% to 21% which has the effect of increasing corporate taxes by 21%, and a president who wants to reduce regulation which generally results in further cost savings. Giving the aforementioned, I like the financial sector, particularly the big banks. My favorites are Bank of America, US Bank corp and of course JPMorgan. The demand for money is inelastic (in other words, as rates rise, revenues to banks increase sine the % increase price is greater than the % decrease in quantity), and in a rising interest rate environment, banks historically benefit, particularly in a healthy demand-pull economy. In addition, with the excess cash from a tax cut, it is a reasonable expectation that these banks will increase their already healthy dividends and have stock buyback programs. If you have difficulty deciding, I would recommend the Vanguard Financial ETF which has a nice upward bias and dividend that I believe will continue.
Stock Pick/Advice 12-24-2017
Since the Republican tax plan has passed, you can expect to see a big increase in M&A (Mergers & Acquisitions) activity. This year there was under 35 M&A's that totaled barely $40 billion. However, the biotech industry stands to gain as a result of favorable tax changes. It's anticipated by a number of the larger drug companies will repatriate money and other assets held overseas and will be better able to compete with their foreign counterparts (in case you've been living under a rock, the US corporate tax rate is dropping from 35% to 25% which will increase after tax profit by over 20%). Among the potential take-out targets singled out by JMP Securities, are Madrigal Pharmaceuticals, Heron Therapeutics, Adamas Pharmaceuticals and Marinus Pharmaceuticals. I particularly like Madrigal Pharma. Madrigal Pharmaceuticals, Inc., formerly Synta Pharmaceuticals Corp., is a clinical-stage biopharmaceutical company. The Company focuses on the development and commercialization of therapeutic candidates for the treatment of cardiovascular-metabolic diseases and nonalcoholic steatohepatitis (NASH). As a result of a number of successful completions (phase 2) of drugs, the companies stock has skyrocketed. Market watch analysts give this a buy recommendation with an average target price of $135.
Stock pick/Advice 11-26-2017
Wait for it. AT some point I think GE will be a buy (all bets are off if Congress doesn't pass a tax plan) but not just yet. The stock is down almost 50% this year and they have cut their dividend in half, the largest since the great depression. To make matters worse, it's the end of the year, and in a market that has gone up over 20%, many investors will be looking to minimize their tax liability by selling off their losers, and GE is at yearly lows. On the plus side, GE has a long history of success and bouncing back and I think this will be no different, but I'm not a buyer until it reaches the $13-$14 range.
Stock Pick/Advice 10-29-2017
With what appears to be an imminent cut on the corporate tax rate, there will be a number of companies that will benefit significantly, however, what many investors are unaware of is that some sectors will benefit more than others. The three main sectors (attached chart) are consumer discretionary, Consumer staples and energy. The next question to come to mind is what would be the best stocks. Well stock picks are like noses, every analyst has one. The best way to play this would be to buy the sector ETF (Exchange Traded Fund). An ETF is a marketable security that tracks an index, a commodity, bonds, or a basket of assets like an index fund. Unlike mutual funds, an ETF trades like a common stock on a stock exchange. ETFs experience price changes throughout the day as they are bought and sold. ETFs typically have higher daily liquidity and lower fees than mutual fund shares, making them an attractive alternative for individual investors. Given the above, I like the following: for consumer discretionary, VCR the Vanguard Consumer Discretionary Index Fund, for Staples, XLP, Consumer Staples Select Sector, the fund employs a replication strategy. It generally invests substantially all, but at least 95%, of its total assets in the securities comprising the index. The index includes securities of companies from the following industries: food and staples retailing; household products; food products; beverages; tobacco; and personal products; and for the energy sector, VDE, Vanguard Energy Index Fund (I generally like anything from Vanguard), the 3 month return is 7% and a 10% one month return.
Stock Pick/Advice 10-15-2017
This week Bank of America beat earnings and advanced close to 52 week highs at $25.83. However, at that price, it is only pennies above its book price (stockholder equity/shares outstanding) of $25.17. In addition, it pays a 1.85% dividend and the average of 32 marketwatch analysts give it a rating of overweight with over half giving it a buy rating. We are in a rising interest rate atmosphere which is a benefit to banks (suggesting an inelastic demand for money if you remember your principles of microeconomics). The bank has been out of favor with investors since the financial crisis, however, it is gaining momentum as metrics and insight replace emotions. The bank is also in the midst of a $12 billion stock buy back program which will increase both its book value and earnings/share which could result in a higher dividend payment. I give this stock a 1 year price target of $32-$35. (full disclosure, I do own shares of BAC)
Stock Pick/Advice 10-8-2017
APPLE 1 YEAR CHART
A study that just came out on how people are watching TV predicted that by 2020, all television programs will be watched on some type of mobile device. As a result, Bank of America re-iterated its buy recommendation on Apple. I couldn't agree more. In addition, if the Trump tax plan is passed, lowering the corporate tax rate, we will probably see a repatriation of the over $200 billion dollars that Apple has in cash in foreign accounts (legally). The Trump tax plan calls for a corporate tax rate reduction to 20 percent from 35 percent and a lower repatriation tax rate for U.S. companies' accumulated foreign earnings. It's almost certain, that this cash, in part, will be used to buy back stock and increase dividends. "We look at two aspects of potential tax law reform and their implications on Apple. … We conclude that: existing deferred tax liability on the balance sheet could allow for substantially all of Apple's foreign cash to be repatriated to the U.S.," analyst Wamsi Mohan wrote in a note to clients Monday (CNBC). Mohan reaffirmed his $180 price target for Apple shares, representing 16 percent upside to Friday's close.
Stock Pick/Advice 9-24-2017
Apple is down over 8% from its highs as a result of lower earnings and sales estimates and at some point, it's going to be a buying opportunity, however, based on technical analysis, I think it has a way to go, quite possibly to $142, and at that point, I will evaluate and consider becoming a buyer. In the meantime, I'll stay on the sidelines and evaluate analysts comments. However, it remains one of the stocks with an unbelievably low short interest, less than 1%, so many investors are buying and holding. Also, from Benzinga's web site, "Apple has a good reputation of being able to convince smartphone users to migrate from lower priced phones to higher priced models, Mohan argued. Specifically, between 2014 and 2016, more consumers bought phones within a higher price brand. Moreover, sales of iPhone devices in the $400 to $499 range declined between 2014 and 2016, but sales of iPhone devices in the $500 to $599 range actually increased."
Stock Pick/Advice 9-17-2017
Unless you've been living under a rock, you've heard at the massive data breach at Equifax that has compromised the information of 143 million people. As a result the stock has dropped from $145/share to $92 share. I have been receiving a number of inquiries if it's time to jump in a buy. My feeling is a resounding no. I think the stock has a longer way to drop, particularly if its CEO goes before Congress (which he will) and does not have a good showing. If you look at the attached long term chart of EFX, it's next support level is in the vicinity of 25-48, so I'm still on the sidelines. I think what is a good buy, particularly in the light of hurricanes Harvey and Irma, is Home Depot. Since the hurricanes it is up 6.5%, but with 25% of the homes totally lost in the Florida keys, and the wide spread devastation along the Gulf coast and both coasts of Florida, I see this stock running well for the next year.
Stock Pick/Advice 9-10-2017
After taking the month of August off, we're back with the stock picks. This week I'm recommending two stocks that I have in the past. Both of these companies have good technical and outlooks from MarketWatch. OPK was first recommended by me when it was around $10, it went to $19, and had some disappointments. The biggest was it's soon to be blockbuster drug Rayaldee. It's approval by the FDA was delayed by 6 months because of concerns over a vendors quality control, it was slow off the mark, and is now gaining momentum. In addition, it has an excellent pipeline of drugs in Phases 1-3. There are 5 analysts who follow this stock on Marketwatch and they have an average recommendation of buy with a price target of $14.50. The chart looks good since it just broke a long term resistance line in addition to breaking its 50 day moving average to the upside. I still believe this is a great "buyout" target for a larger biotech such as Pfizer. My reason for this is the fact that the CEO, Robert Frost, owns over 1/3 of the shares outstanding and the only way to get full value would be to sell the company. In addition, 21% of the shares outstanding are owned by institutions and there is a 20% short interest. Once this stock begins to move, there are only half the shares outstanding available to the market, there is consolidation of the stock (see chart) and it will be compounded by a stock squeeze. HCLP, is a master Ltd. partnership that I first recommended in its teens. It supplies sand to owners of fracking wells. It went as high as $68 and is now trading at $8. It suspended its dividend payments 2 years ago (the stock price went down as the price of oil receded), and has announced earlier this year that it will resume these dividend payments later this year. Oil has just reached its highest price in the past month as a result of geopolitical strife, continued OPEC production cuts and a number of oil rigs in the Gulf being shut down because of Hurricane Harvey. Eleven analysts follow this on MarketWatch with an average rating of a buy and a one year price target of $15.5.
Stock Pick/Advice 7-30-2017
This week is a 2-for. Both Altria (MO) and Amazon stock was pummlled this week but they both represent a buying opportunity. Altrai's stock was down nearly 10%(-$7.02). The reason was a statement by the FDA that it's proposing to cut the level of nicotine in cigarettes to non-addicting levels. One analysts stated the following "We've longed believed the FDA would ultimately take a more comprehensive approach toward regulating nicotine as a natural next step," Wells Fargo analyst Bonnie Herzog said in a note to clients. "Overall, while the market is viewing today's announcement as a 'negative' for cigarette manufacturers, we believe this could prove to be an opportunity over the long term for reduced risk products and, therefore, a positive for Altria/PM as they have a unique competitive advantage." I couldn't agree more and I plan on adding this to my holdings. I envision another down day and then a recovery. What else makes this stock attractive is a near 3.65% dividend. Amazon was down 26 points (2.5%), on an earnings miss but it exceeded sales. Earnings were down 77% from a year earlier while revenue increased by 25%. Why the revenue increase and the drop in profits? The reason is simple, costs. Amazon is undergoing a huge investment in capital equipment to increase efficiency, hence the lower profits. Analyst Michael Olson of PiperJaffray sees Amazon's increased costs "as Amazon investing into strength, not a sign of weakness for Amazon's long-term margin." Investments in Fulfillment By Amazon capabilities will allow the company to host and handle more third-party products, increasing selection and appeal to customers and Jefferies analyst Brian Fitzgerald raised his price target on Amazon's shares from $1,150 to $1,250 and maintained his Buy rating. He argues that Amazon will only grow faster as more people buy goods online. Amazon's "ability to get purchases to consumers fast is a huge differentiator" and as e-commerce grows from the current 10% of consumer spending to 20% and 30% and beyond, Fitzgerald predicts that Amazon will scoop up more of that growth than its competitors. (Barrons)
Stock Picks/Advice 7-16-2017
If you look at the 10 year chart (attached) on Master Card (ticker MA), it has solid growth, over 800%, which is a yearly return of over 20%. Combined with a dividend of 1%, this stock is a keeper (Visa and AXP are acceptable too). Master card is second only to Visa and is accepted by over 40 million merchants world wide. MasterCard's network capacity is able to handle 140 million transactions per hour, giving it ample room to continue to grow without the need for onerous additional costs. Critically, MasterCard is a payment network only. It doesn't actually issue credit or carry any of the other balance sheet risks of a lender. Instead, the firm is more technology company than financial firm -- and it collects a fee in exchange for facilitating millions of transactions per day.(street.com) You will not see explosive growth, but you will see solid growth and a steady return.
Stock Picks/Advice 7-9-2017
As much as I hate to say this, I think an armed conflict with North Korea is inevitable. Their rhetoric has not ceased and they recently had a successful test of a ballistic missile capable of hitting Alaska, and with Trump as President, I don't believe there will be the wait and see approach of the Obama administration. In addition, two U.S. Air Force B-1 bombers on Saturday flew near the Korean Demilitarized Zone in a show of force. The two B-1 bombers flew 2,000 miles from Anderson Air Force Base in Guam to conduct a precision strike training exercise with South Korean fighter jets. The bombers were also joined by Japanese fighters during their flight (Fox News). As a result, there are a number of Defense Contractors will benefit from the conflict. Raytheon has been steadily increasing for more than two years and I see it continuing. At $165, it is somewhat pricey, but I see it continuing and analysts from Market watch are giving it a one year price target of $175. If you combine this with it's 2% dividend, you're looking at a 1 year increase of 8%, other things being equal. But what if other things are not equal, such as conflict with No Korea, I see this travelling in excess of $200. Besides it's Patriot missile, Raytheon, it is engaged in Homeland Security, Precision Engagement ans Intelligence, surveillance and reconnaissance. It is the US's 3rd largest defense contractor and is well run with a strong balance sheet and cash flow.
Stock Picks/Advice 6-25-2017
A few months ago (March 5), we spoke about the efficient market hypothesis and the following comment from Warren Buffet; "If markets were efficient, I'd be a pauper on the streets selling pencils". Obviously, while there are many proponents of this theory, Buffet is not one of them. However, is a proponent of the buy and hold theory of value investing. While many people attribute Buffet with being the founder of value investing, he is not and readily admits it. Essentially, value investing is an investment paradigm that derives from the ideas on investment that Ben Graham and David Dodd began teaching at Columbia Business School in 1928, and subsequently developed in their 1934 text Security Analysis.. Value investing involves buying securities that are underpriced i.e., less than their intrinsic value; and various metrics are used to measure this such as: p/e, book value, management, debt, liquidity and dividend, growth. Buffets company Berkshire Hathaway Inc. is a holding company owning subsidiaries engaged in various business activities. The Company conducts insurance businesses on both a primary basis and a reinsurance basis, a freight rail transportation business and a group of utility and energy generation and distribution businesses. His view is that the stock market is a marathon and not a sprint. As you can see from the 20 year attached chart, he has been highly successful. The reason for the high stock price (no other stock is higher), Buffet does not believe in stock splits and he wants to attract like minded investors. Now, while not everyone can buy a share of BRK.A, Berkshire Hathaway, you can buy some of their holdings which are as follows:
Like Buffet, I like stocks that pay dividends and my favorites from the above list are: Kraft, Apple, US Bankcorp, and American Express.
Stock Picks/Advice 6-4-2017 OPK revisited
To say that OPK's stock performance has been disappointing is an understatement. It is 200% off its highs, and is at 75% of it's price of January 1. They have had a number of setbacks and earnings misses that have hurt the stock, however I am still bullish and I'm keeping my positions on the stock (see stock pick 2-21-2016). I still believe that Rayaldee will be a blockbuster and I also believe that this is a prime buyout target for the simple reason that the billionaire CEO, Robert Frost owns over 1/3 of the 560 billion shares outstanding and he continues to buy on a monthly basis. As I've said previously, the only way that he can maximize his value is by selling the company. In lieu of this, the moment he starts to sell, there will be a mass exodus from this stock and the price will conceivably plummet There was also a 5000 share purchase by insider/health director John Paganelli. What I find interesting, is that in the past 2 trading days, OPK has increased 11% on heavy volume with no significant news release. This is sometimes indicative that insiders know something and they (and friends) are buying prior to the announcement.
Stock Picks/Advice 5-21-2017
Cheniere Energy, is an energy company primarily engaged in liquefied natural gas (LNG)-related businesses. The Company owns and operates the Sabine Pass LNG terminal in Louisiana through its ownership interest in and management agreements with Cheniere Partners. Cheniere Energy (LNG) noted that it has had extensive negotiations with Chinese state-owned companies about increasing shipments of liquefied natural gas (LNG) to China. Cheniere has sold nine cargoes of LNG on the spot market to China since it began exporting liquified natural gas in February 2016. The goal now for the company is moving from sales on the spot market to long-term contracts (Jim Juback). With increased production capacity Cheniere was able to increase sales with 43 cargoes loaded in the first quarter (150 trillion BTUs of liquified natural gas.) with revenue hit $1.1 billion in the first quarter. As you can see from the chart, it has traded in a range for the past 4 months and could be poised for a breakout, especially with the price of oil back above $50/barrel (the price of natural gas and oil generally move in unison). It is well off its all time high of $80/share but I see no problem with the stock increasing 10-20% in the next year.
Stock Picks/Advice 4-30-2017
With a dividend of 3.4%, a solid history of increased sales and earnings and a slight pull back (see chart), Altria (formerly Phillip Morris) is just to good to pass up. For those of you that have been living under a rock, Altria's segments include smokeable products, smokeless products and wine. The Company's subsidiaries include Philip Morris USA Inc. (PM USA), which is engaged in the manufacture and sale of cigarettes in the United States. According to Zacks, Altria is poised to beat earnings because of favorable earnings estimate revision activity as of late, which is generally a precursor to an earnings beat. They also have a history of beating earnings. Of the 16 analysts that follow Altria (from Market Watch), 7 recommend it a strong buy, 8 a hold and 1 a sell, for an overall rating of overweight. The company has strong financials and it is a perennial hold. Looking at the 5 year chart, it has a solid trend upwards and this stock, while you won't see explosive growth, is a long term hold
Stock Picks/Advice 4-16-2017
Given the current geopolitical unrest (see update/advisory for 4-15-2017), the obvious play id defense and defensive stocks. The defensive stocks that have the most to gain are Raytheon, maker of the Tomahawk and Patriot missile system, Lockheed Martin and Northrop Grumman, general aerospace and L3 technologies (command & communication systems). These stocks have all had significant gains in the past 3 months and given the prospect of conflict with North Korea, they stand to continue their gains. All these companies have a strong balance sheet, are making money, and in addition to the rise in stock price, pay dividends. The defensive stocks to buy are all in the gold patch. Their stock price generally follows the price of gold which has been on a tear lately, finishing the week at $1288/oz. Gold represents a flight to safety, and given the stock market malaise and geopolitical instability, it is not surprising. A few companies that have had significant gains have been Kincross Gold corp, ASA gold and precious metals LTD, Barrick gold and there is the gold ETF
Stock Picks/Advice 4-2-2017
I'm back. If you listened to my advice in the past concerning Tesla, and shorted it, you lost money (as did I). Tesla has been all over the news the past 2 weeks since it is up 25% from the beginning of the year. Why, I ask? The company loses money on every car it sells, they have a constant cash drain from operations, and get cash yearly from issuing more stock and debt (from annual cash flow statements). Their technology is available to other car companies (including battery technology) and all the other car companies are working on vehicles that have a 200-300 mile range on 1 charge. In addition, given the advent of low cost oil and gasoline, compliments of fracking technology, the demand for electric cars is diminished. If you look at a long term 5 year chart of Tesla, you will see that for the past 3 years it has been in a trading range from 180-280, and it is currently trading at the top of that range and I see nothing that indicates to me that it will continue it's upward trend. While you may not want to short TSLA (I'm planning on it), you certainly (in my opinion) don't want to be a buyer.
Stock Pick/Advice 3-26-2017
APPLE 5 Year Chart
This weeks stock pick is predicated upon the belief that, unlike Health Care, Congress will be able to pass a tax cut for both individuals and corporations, which could include a border adjustment tax that eliminates taxes on exports. As a result, large multi-nationals would benefit the most. In addition this stock has been on a tear during a tumultuous week for the markets. Apple has reached a new high after releases it's iphone Red and predictions of iphone 8 sales. One analyst featured in Barrons, Johanna Bennett predicts 20% upside in addition to its already respectable dividend of 1.62%. And the news keeps getting better as there is talk of Apple buying back stock (RBC) and given its strong cash position of $68 billion (over $120 billion if you include world wide holdings), there is ample cash for both a dividend increase and stock buyback.
Stock Pick/Advice 3-19-2017
Valero Energy (VLO), is an independent petroleum refiner and ethanol producer. The Company's segments include refining, ethanol and Valero Energy Partners LP (VLP). The refining segment includes its refining operations and the associated marketing activities. The ethanol segment includes its ethanol operations and the associated marketing activities, and logistics assets that support its ethanol operations. The Company owns logistics assets (crude oil pipelines, refined petroleum product pipelines, terminals, tanks, marine docks, truck rack bays and other assets) that support its refining operations (Ameritrade). Unlike oil service companies, cheap oil is good for refineries since that leads to lower gas prices and increased demand, and with oil currently below $50, they are approaching all time highs. The company is in excellent financial shape with a strong cash position, a 2-1 current ratio and strong equity. In addition, it pays a dividend of over 4% which is in no danger. The dividend has had boosts of $0.10 or more in the quarterly per-share dividend in each of the past three years has taken Valero's payout from $0.275 to $0.70 per share. Top dividend stocks combine both high yields and attractive business fundamentals. When you get those two things in one package, it's worth looking more closely at a company to see whether it belongs in your dividend stock portfolio (Motley Fool). One last note, it appears to be in a trading range so a pullback to $65 could happen.
Stock Pick/Advice 3-5-2017
“If markets were efficient, I’d be a pauper on the street selling pencils.” With this statement, Warren Buffet heralded his disbelief in the Efficient Market Hypothesis. The Efficient Market Hypothesis (EMH) is based on rational expectations and asserts that markets are informationally efficient and given the dissemination of information available to investors (particularly in this internet/smart phone age), no one can consistently achieve returns greater than the market.
What did I just say in simpler terms? First and foremost, the theory isn’t saying that you can’t make a profit in the stock market. What it is inferring is that you can’t consistently beat the market return on say some average, such as the Dow Jones Industrial Average or the Wilshire 500. As you can see from the chart at the left, the average returns of 200 mutual funds forms an approximately normal bell shaped curved when compared against the return of the Wilshire 500, which is exactly what the theory predicts. The theory goes on to say that as a result of all available information that is available to the public (i.e. rational expectations), any unexploited profit opportunities will quickly disappear and be reflected in the stock price. There have also been numerous other studies that show the same results; but what of Warren Buffet and other market guru’s equally critical of the EMH. They point to many examples such as the Black Monday Crash in October 1987(the DOW had the greatest 1 day percentage loss, 23%, which was almost double the Black Tuesday of 1929 of 12.8%) and the Flash Crash of May 2010 that detract from EMH.
I believe the simple fact of the matter is both sides have validity. There is no doubt that in the short run markets can be, and have been, highly volatile with huge percentage swings. There are two emotions in the market, greed and panic and they are the culprits. However, I believe that in the long run, markets are efficient. The rub lies in my definition of the long run. I define the long run as the period of time necessary to digest all relevant information and the time it takes for emotion to leave the market.
Information is usually absorbed within hours to a day, however, emotion can take anywhere from 15 minutes (flash crash) to 6 months to leave the market. A good example of greed dominating the market for an extended length of time would be the greed buying of the late 1990’s during the dot com bubble (irrational exuberance) and the more than the 55% decrease in the DJIA from September, 2008 to March, 2009, during the financial crisis. Once emotion left the market, the DOW went on to post a 65% increase for the year.
Given this, in order to mimic a particular index, such as the S&P 500, you need not buy all 500 stocks, but instead, the Vanguard 500 Index Fund. As you can see from the chart below, the ETF buys all 500 stocks and mirrors it exactly (Chart Below), and in the past 60 years, the S&P has shown an average return (with dividends) of 11%. The ETF (bar chart) rises and falls exactly with the S&P 500, purple line.
Stock Pick/Advice 2-26-2017
This weeks pick is defensive and after 11 days of gains, the market is due for a breather. Barrick Gold reported earning during mid-February and they reported a profit of 22 cents a share-- beating forecasts for 20 cents--and boosted its production guidance. Barrick even raised its dividend from 2 cents a share to 3 cents a share. Credit Suisse had the following to report: "Barrick continues to surprise to the upside. We are now modelling Barrick's outlook out to 2021 (although at the lower end of production ranges). Combined with updated reserves, the company is now trading at 1.38x P/NAV, a discount to Goldcorp ( GG) at 1.68x and in-line with Newmont Mining ( NEM) at 1.40x (CS deck). Barrick also continues to trade at a discount to peers on FCF and EV/EBITDA. Commodity price outlook is the key risk to our view. " Barrick posted a profit in 2016 (1st in 5 years) and even tho their cash flow was negative, it was because of retirement of debt but cash flow from operations was over $2 billion positive and they have a strong cash and cash equivalent of over $2.3 billion. Barrick has a good chart and with the prospect of rising gold prices and a near term correction in the stock market, this is a good defensive pick.
Stock pick/Advice 2-19-2017
Pioneer Natural Resources Company is an independent oil and gas exploration and production company which focuses on production of oil, natural gas liquid (NGL) and gas through development drilling, production enhancement activities and acquisitions of producing properties. The Company's properties include Spraberry/Wolfcamp oil field located in West Texas; the Eagle Ford Shale field located in South Texas; Raton gas field located in southern Colorado; the West Panhandle gas and liquids field located in the Texas Panhandle, and the Edwards gas field located in South Texas (info from Ameritrade). It has a strong balance sheet, excellent cash position, and tho they lost money last year, they were income positive in the last quarter of 2016, and with oil above $50/barrel, should remain profitable this year. Remember, the market is forward looking and is considered a leading economic indicator. They are looking to produce 1 million barrels/day by 2026. By today's standards, that is over 10% of US production. Looking at at 1 year chart, it has broken out of a trading range and may have a way to run. Analysts estimates from market watch give it a 1 year target price of $224. This combined with its small dividend, less than 1%, gives it a YOY return of more than 10%. What is crucial, I believe, is that the price of oil remains above $50/barrel since that makes most fracking wells viable.
Stock Pick/Advice 2-12-2017
This week's stock pick is somewhat of a no-brainer, Amazon. After reporting earnings on February 3, the stock dropped 30 points, 3.6% after beating on earnings and missing on the top line, revenue by coming in with $43.74 billion (that's right, billion with a B) as opposed to the consensus of $44.68 billion. Issuing guidance, the company said it expects sales of $33.25 billion to $35.75 billion for the first quarter, up an estimated 14–23 percent. In simple terms, this is a buying opportunity. Amazon keeps gaining market share, while brick and mortar stores continue to decrease. Traffic in Malls an brick & mortar stores are the lowest since 1972. If you look at the 10 year chart, Amazon is continuing it's upward trend, with both higher highs and higher lows. Analyst Lloyd Walmsley noted that Amazon has some of the deepest long-terms moats within the internet space. The analyst said he would use the pullbacks such as these to add to long-term positions. When the investment cycle eventually ends, which the analyst surmises as in the first half, he believes the shares will fare better (Benzinga). Barclays has a Buy rating on Amazon, while it bumped up its price target to $1,050 from $920. At, $827/share, the stock is pricey, but a number of analysts see a possible stock split (Apple had a 7-1 split at $700). Typically, stocks continue their upward trend after a split. Even tho they have no dividends, I still consider this a growth stock and good buy.
Stock Pick/Advice 1-29-2017
ONE Gas (OGS), Inc. is an independent natural gas utility in the United States. The Company is a natural gas distributor in Oklahoma, Kansas and Texas. The Company operates in one segment: regulated public utilities that deliver natural gas to residential, commercial, industrial and transportation customers. The Company provides natural gas distribution services to approximately two million customers through its divisions in Oklahoma, Kansas and Texas. It has a strong balance sheet, has been profitable for the past 5 years and currently pays a dividend of 2.6%. ONE Gas service territory is in an area of population growth. In Texas, ONE Gas serves the high-growth areas of Austin and El Paso and it is the primary gas distributor in both Oklahoma and Kansas and according to Fortune magazine, ONE Gas could be considered a potential acquisition candidate for another entity that wants to enter the business or grow its business. Current multiples are in the high range for ONE Gas. Looking at the chart, after a 2 year upward trend, it is consolidating and could be poised for another upward run.
Stock Pick/Advice 1-22-2017
This weeks stock pick came from a recommendation in Fortune magazine. Grupo Aeroportuario del Centro Norte (OMAB) operates 13 airports in Mexico across nine states. Its locations include tourist locales such as Acapulco and Mazatlan, as well as the business hub of Monterrey. It also operates cargo handling services at two of its airports. It pays a dividend (once a year) of approximately $5/share, which at today's price comes out to over 15%. This high dividend was due in part to a decrease in stock price as a result of loft expectations. It's in excellent financial shape (info from Ameritrade) with a current ratio of over 3 (very high for an airlines), and a strong cash position despite it's strong dividend payment. In December, Grupo Aeroportuario announced a third straight year of record passenger traffic, which grew 14.5% year-over-year at its terminals in 2016. Annual revenues and income have been on the rise for years, and while analysts see a slow 2.3% improvement in the top line for the current year, profits still are expected to expand by 28% (Fortune). Market Watch analysts give the stock a rating of buy (its highest). Looking at the chart, it is off more than 35% since it's high in September with a strong resistance line. However, I am in agreement with the Fortune magazine article recommending that it's been overdone and looking at the 3 year chart, there is some support at the $28-$31 level.
Stock Pick/Advice 1-8-2017
Vector Group Ltd, VGR, is a holding company engaged in the manufacture and sale of cigarettes in the United States through its Liggett Group LLC (Liggett) and Vector Tobacco Inc. (Vector Tobacco) subsidiaries; the sale of electronic cigarettes (e-cigarettes) in the United States through its Zoom E-Cigs LLC (Zoom) subsidiary, and the real estate business through its New Valley LLC subsidiary, which is seeking to acquire or invest in additional real estate properties or projects. It's EPS is .57 and a PE of 39. What justifies its high PE is it's dividend of $1.60/share which represents a yield of over 7%. If you look at the 5 year chart, it has a long term support in addition to a 1 year trading channel it just broke to the upside. In a recent article in Forbes, the magazine called Robert Frost (the CEO of OPK) , the Buffet of Biotech given his impressive holdings (http://www.forbes.com/sites/schifrin/2017/01/03/the-buffett-of-biotechs-portfolio/?utm_source=yahoo&utm_medium=partner&utm_campaign=yahoofeed&partner=yahoomag#6d900012f4b6). The atricle also pointed out that he is the largest shareholder of VGR with a stake of 15%. Looking at fundamentals, it has had positive net income and cash flow for the past 5 years and positive dividend growth for the past 6 years. If you are looking for a value stock with a high dividend, this one's for you.
Stock Pick/Advice 1-1-2017
Without a doubt, this past weeks fall in OPK is a buying opportunity. Shares of Opko Health Inc. (NASDAQ: OPK) slumped after the release of mixed results from a Phase III clinical study of long-acting human growth hormone candidate in adults with growth hormone deficiency. Opko would be meeting with the FDA in Q1 2017 to discuss the results and potential for BLA [Biologics License Application] submission based on a modified statistical plan that excludes outliers. If these outliers are excluded, the drug passes. However, Rayaldee, (see stock pick 2-21-2016) is selling through OPK's distributors and results, which I believe will excede expectations, will be announced in February along with earnings. The CEO, Robert Frost considered this a buying opportunity since he bought another 25,000 shares at $9.42. He currently owns over 1/3 of the shares outstanding which I believe makes this a buy out target since that would be the only way he could get full value for his shares since any large sales by him would in turn generate more selling and depress the stock price. I see a 2017 price target of $15-$20 and a long range target of $30+.
Stock Pick/Advice 12-11-2016
Fannie Mae, Federal National Mortgage Association, FNMA, is a government sponsered enterprise that came to fruition during the depression, as a result of New Deal legislation. It's purpose is to buy mortgages from banks in order to free up the banks money to lend more mortgages. It went public in the 60's, however the government still mandates a great amount of control. Since it was saved from bankruptcy in 2008, it has been in a type of government receivership since then and it has become, once again, profitable. However, all theses profits have been going to the government. Enter incoming Treasury Secretary Mnuchin and his statement that Fannie will no longer be under the governments thumb and profits can be distributed to shareholders. Within 2 days the stock was up 40% after doubling since Trump's election win. The stock has given up some of its gains but is slowly gaining and is currently trading over $4/share. It has over $3.5 billion in assets and is very solvent. As a reulst, I see this as a $6-10 stock within a year and a long term hold. Prior to the Financial Crisis of 2008, it was trading at $60.
Stock Picks/Advice 11-27-2016
CONSOL ENERGY 1 YEAR CHART
Since the Obama administration's inception and his war on coal, electricity generation by coal has fallen from 50% to approximately 35% as a result of new EPA regulations that have closed close to 100 coal fired plants and another 40 scheduled for closing next year. However, the coal industry has a new white (black?) knight in the personna of Donald Trump who has vowed to reverse the war on coal and keep the free-wheeling EPA under his thumb. He has gone so far as to say he would like to abolish the EPA. I don't see this happening by any sense, but I do do see their budget (currently $8.2 billion) being significantly cut and the Obama regulation's on power plants abolished. So is it time to buy coal stocks? Not quite, mainly because of cheap natural gas which is half as polluting as coal. Natural gas became cheap as a result of fracking technology. Whereas the problem with natural gas use to be supply, lack thereof, the problem is now infrastructure, lack thereof. There are currently multiple plans nationwide to build more pipelines, but as you can guess, there are environmentalists everywhere who oppose this. With the Trump administration imminent, I believe that these projects will be expedited. So what to do? Both industries will benefit, but whereas coal will benefit, I don't believe it will be as great as that of natural gas. The best way to play this is Consol Energy, ticker, CNX. Consol energy is an integrated energy company that operates through two divisions: oil and gas exploration and production (E&P) and coal mining. The principal activity of the E&P division is to produce pipeline quality natural gas for sale primarily to natural gas wholesalers. The principal activities of the Coal division are mining, preparation and marketing of thermal coal, sold primarily to power generators, and metallurgical coal, sold to metal and coke producers. The Coal division's segments are Pennsylvania (PA) Operations and Virginia (VA) Operations. If you look at the attached 1 year chart, it has been in a trading range of 16-20 from August. I would buy this on the dip and hold on to it.
Stock Picks/Advice 11-20-2016
Stocks have been on a tear since the election and financials have led the charge with many of the major banks having double digit increases. However, a number of bank stocks were downgraded this past week, not because of performance but because of a high valuation. Since banks are trading a top dollar, I would hold off right now but definitely buy on any dip. The 3 banks I like the best are JPM, BAC and WFC, particularly Wells Fargo since it had been previously beaten down as a result of the scandal involving the opening of accounts without the account holders approval. What else that will help the banks is a rising interest environment. With it all but a certainty that the FED will raise the federal funds rate next month (which affects all short term loans), the yield on the 10 year government bond has increased to 2.3% which affects long term mortgage rates. The rate on the 30 fixed rate mortgage is up to 4.1%, this is the highest its been since November of 2015.
Stock Picks/Advice 11-13-2016
In early February this year, Hillary Clinton proclaimed a war (I'm paraphrasing) on drug makers and the cost of prescription drugs. As a result (see chart), the entire sector(s) biotechs and pharmaceuticals went into a downward spiral. Now that we have a Trump presidency, I seriously doubt if we will see any price controls on prescription drugs. As a result, the entire sector rallied sharply beginning on Wednesday. What to buy? The simple answer is pick one, but that's where an ETF come in. An ETF, Exchange Traded Fund, is an investment fund traded on stock exchanges, much like stocks. Holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day, investors get the diversification of an index fund as well as the ability to sell short, buy on margin and purchase as little as one share. One such ETF is, iShares Nasdaq Biotech, IBB. The investment seeks to track the investment results of the NASDAQ Biotechnology Index, which contains securities of NASDAQ® listed companies that are classified according to the Industry Classification Benchmark as either biotechnology or pharmaceuticals and that also meet other eligibility criteria determined by Nasdaq, Inc.The fund generally invests at least 90% of its assets in securities of the index and in depositary receipts representing securities of the index. And like OPKO (see below), I feel that this fund is off to the races.
Stock Picks/Advice 11-6-2016
First, a disclaimer, between options and stocks, I control 11,000 shares of OPKO health (OPK). It's going to release 3rd quarter earnings tomorrow after the market close and I strongly feel that this stock is going into the stratosphere. At under $10, I feel that this stocks is screaming buy me. It's profitable, somewhat vertically integrated, has a strong pipeline and its new drug that was recently approved by the FDA, Rayaldee, has a huge multi-billion dollar market. It's balance sheet is exceptionally strong with a current ratio of over 2-1, a debt to equity ratio well under 1 and a strong sales force. What I find most convincing is the fact that of the approximately 550 million shares outstanding, the CEO, Robert Frost, owns 160 million shares. The stock, at under $10 is off its $19 highs but this is a result of, in part, the entire biotech industry suffering from results of talks of price controls from Hillary Clinton. If you read the above articles, not only are my feelings shared, but there is particular attention to the possibility that this company will be sold.
Stock Picks/Advice 10-30-2016
Warren Buffet said it best, "Be fearful when others are Greedy and Greedy when others are fearful." The idea is to sell high and buy low and that's what you should do with Amazon (AMZN). Amazon came out with earnings after the bell on Thursday and while earnings went up to $252 million, up from $79 million a year earlier, it was an earnings miss and the stock was pummeled after hours as it dropped $52 or close to 7%. The cause was greater than expected investment expenses in shipping and infrastructure. This type of investment generally pays off in spades in the future and this is classic fear selling and represents a buying opportunity. Earnings were 52 cents/share and it pays no dividends with short interest under 2%, a very low number considering from a random sample of 50 stocks i took is 20%. Cash flow is positive and the balance sheet is excellent. I believe that there was a huge over-reaction and that under $800 this represents a buying opportunity, however, looking at the chart, there is support at $700 and it wouldn't surprise me if it went that low because of investors wanting to lock in profits.
Stock Picks/Advice 10-16-2016
As I mentioned earlier this week, Apple is about to benefit for Samsung's recall of its Galaxy 7. As a result of exploding batteries, even in some of the new designs that were suppose to rectify the problem, Samsung has had a complete recall of all its Galaxy 7 cellphones, some 2.5 million which is estimated to cost Samsung over $5 billion. If you're a Samsung user what next? You need to get substitute and chance are theat twill be the iphone 7. Lets keep this simple, according to a number of websites I have visited, Apple make anywhere from $300 to $550/iphone, and let's be conservative, let's say that of the 2.5 million Galaxy's being recalled 1.5 million buy an iphone at a profit of $400/each, Apple is now looking at more than $600 million in profit and if you divide this by the 5.4 billion shares outstanding, you're looking at an increase in earnings of .11/share. On the high side, it could be twice that. If you look at the accompanying chart, Apple has been on a tear since the recall was announced in September, and especially from the beginning of last week.
Stock Picks/Advice 9-25-2016
Last week we looked at what stocks/sectors would/may do well if Trump won the presidency, but what sectors would benefit given a democratic/Clinton victory. As with Obama, given a Clinton win, alternative energy stocks would do well. Well republicans adhere to "drill baby drill" the dem's are EPA and alternative energy friendly. While alternative energy tends to be very expensive, you would probably see more tax credits, deductions and subsidies. And while this bodes well for those companies, plan on a larger deficit and debt (already at $20 trillion). Renewable/alternative energy includes solar, wind, geothermal and, to a lesser extent, hydropower. Most analysts like Sun Edison and this could start to rise even prior to the elections if Hillary has a commanding lead in the polls. Healthcare stocks would continue their upward trend compliments of Obamacare. Democrats will attempt to double down on the Affordable Care Act by making sure that funding supports full delivery of care – to the benefit of hospitals and managed care companies, but even if republicans control congress, there won't be a change, which means the upward trend on healthcare costs will continue at an accelerated rate. Pick anyone of the top 4 insurance companies and they will continue heir upward trend. Also Jim Kramer likes Envision Healthcare Holdings (EVHC), an ambulance and emergency care provider company. The company beat Wall Street's second earnings forecasts with an adjusted earnings per share of 37 cents. What will suffer conceivably is the pharmaceutical and biotech sectors. Hillary has been outspoken on prescription drug prices and she may find bi-partisan report. Price controls, while they wouldn't be disastrous to the industry, there would be significant damage.
Stock picks/Advice 9-18-2016
With election day around the corner, the question arises, are there certain stocks are sectors that will benefit from either republicans or democrats getting into office? The answer is most definitely. This week we'll look at what sectors/stocks will benefit from a Republican in the White House. First, Defense stocks; defense spending was a low priority for the Obama administration and Trump has vowed to reverse this and rebuild the military. Top defense picks would be Raytheon (Patriot, Sparrow and Sidewinder missiles), GE (jet engines), and gun makers. With a Republican administration, don't worry about your 2nd amendment rights being abridged. Also the energy sector. With Obama, over 100 coal plants have gone out of business because of an EPA allowed a free hand. This will not only be reversed with the Trump administration, plan on see oil and gas companies, in addition to support companies tracking up. In this sector, any of the major companies, Exxon, Conoco etc. In addition support companies such as Apache, Halliburton and Schlumberger and your intermediate gas companies such as Chesapeake, and Consol energy. I would also look at Southwestern Energy that is a strong buy rating amongst many firms. Lastly, look at financials and expect some of the ruinous regulation from Dodd-Frank and Sarbanes Oxley to be repealed. As a result any of the major banks, JPM, C, WFC and BAC will benefit.
Stock Picks/Advice 9-5-2016
Hi-Crush Partners LP is a producer and supplier of monocrystalline sand. The Company is a limited partnership formed to acquire selected sand reserves and related processing and transportation facilities of Hi-Crush Proppants LLC. It operates in Frac Sand Sales segment. Its reserves consist of northern white sand, a resource in Wisconsin and limited portions of the upper Midwest region of the United States. The oil market downturn crushed demand for frack sand, which decimated silica stocks. However, despite that abysmal recent past, silica stocks appear poised for a bright future. Not only is the oil market starting to show signs that activity has bottomed, but producers are using a lot more sand per well, which suggests that sand volumes could surge once oil and gas activity rebounds. This future potential already fueled an enormous rally this year: where Hi Crush Limited Partnership (HCLP) has advanced to 15 from 5. Hi-Crush Partners is a bit different from its diversified rivals. Not only is it a pure-play frack sand producer, but it is an MLP. A Master Limited Partnership is a cooperation that combines the tax benefits of a limited partnership with the liquidity of publicly traded securities. Limited partnerships that trade on securities markets like normal stocks. MLPs are not subject to income tax, and shareholders in MLPs are actually "limited partners" in company. HCLP was far more exposed to the oil market downturn, which resulted in the suspension of its distribution so it could use that cash to bolster its balance sheet. That move is paying off, with the company securing its financial position to the point where it had the financial flexibility to acquire another frack sand facility, which boosted its processing capacity by 60%. As a result, the company boasts a significant low-cost position in the market, which gives it plenty of upside when oil and gas activities improve (Motley Fool). HCLP has just broken out of a trading range, is at a 52 week high and I believe it is on its way to 20 from it's current price of 15.
Stock Pick/Advice 8-14-2016
As I said in today's update/advisory, a 5-10% profit taking correction wouldn't surprise me which makes stock picking difficult. But as Jim Cramer would say, "there's always a bull market somewhere." As reported by CNBC, VanEck Gold miners ETF (GDX) is at a 3 year high partly as a result of low interest rates and many analysts having a more short term negative outlook on the economy and market (we're in a 5 quarter earnings recession). When interest rates are high, gold looks worse in comparison, since the metal doesn't yield anything. But when rates are negative, a nonyielding asset actually looks like a more reasonable investment (CNBC). Also, literally all gold stocks tend to have a low, or negative beta, in other word, if the overall market declines, theses stocks tend to increase and historically, September and October tend to be volatile months (Chart Below). So this week, I'm being defensive and the God ETF, VanEck is a defensive pay and it has the additional benefit of paying about 1/2 % dividend.
Stock Pick/Advice 8-7-2016
Disclaimer:Between shares of stocks and options, I control 9000 shares of OPK stock. This is a follow up from my stock pick of 2-21-2016. If you were one of my students in my Investment Analysis class you know my favorite stock is OPKO Health (OPK). I feel that the newest drug Rayaldee (see above) is going to be a block buster and they have a deep pipeline, and distribution network as a result of acquisitions they've made. I also feel that this is very easily a $30-$40 stock. But even more so, I feel it is a prime buyout candidate. The CEO, Robert Frost, owns over 150 million shares of this stock and he buys more on almost a monthly/bi-monthly basis. There are 548 million shares outstanding which comes to a 27% ownership of the company by Frost. At some point, he will be selling these shares, which may lead to more selling which will adversely affect the stock price. How then, does he get full value for his stock? The answer is simple; it gets bought out by a larger pharma company and now, he gets full value for his investment. If I had to guess which company I would guess Pfizer since Pfizer is already in partnership with OPK. They are coming out with earnings this Monday, Aug 8, after the market closes, and they are expected to break even. What will be closely watched is future guidance on OPK and the ensuing conference call. As you can see, I'm pretty much all in.
Stock Pick/Advice 7-24-2016
NINTENDO STOCK CHART
Some people just need to get a life. Maybe you've seen those zombies in a car staring at their cell phones in search of an imaginary character in an imaginary hiding place. Yes, I'm talking about Pokemon go that is being played by 26 million people nationwide and increasing daily. You may think I'm going to recommend Nintendo stock that has increased, at one point, more than 85% (chart left). However, that shipped may have sailed. What many Pokemon users are getting a rude awakening to is their monthly cell phone bills; because, unknown to many, Pokemon Go uses large amounts of cell phone data and there goes your bill. As a result I expect your major cell providers, such as Verizon, and AT&T, and T-Mobile to experience windfall profits for the 3rd quarter. We are in earnings season now for the 2nd quarter, and if I should see any of these companies tank as a result of a missed earning report, I'm jumping in. A clue as to what that characteristic is came yesterday from T-Mobile (TMUS) CEO John Legere revealed that Pokemon go had caused downloads to double over the weekend, and data usage to increase fourfold.
Stock Pick/Advice 7-17-2016
Even tho the Dow is at record levels, I'm still skeptical about the economy and question whether fundamentals justify the run. As a result I'm going to recommend a number of dividend stocks that more than cover your opportunity cost of money. McDonald's has had a good run lately, it has a beta of.5 which makes it a defensive stock (i.e., it holds it's own during a recession), and has a dividend of close to 3%. It has successfully exercised it's turn around plan and has a strong history of increasing dividend distributions. Altria (formerly Phillip Morris) remains strong and being a sin stock usually doe's well regardless of the economy (people want their smokes and liquor). It's dividend is currently 3.4%, and has done nothing but climb since 2009. Lastly, I going to borrow a recommendation from Kipplinger, and that would be Spectra Energy Partners, MLP (ticker, SEP). It is a Master Limited Partnership that pays a dividend of 5.4% (MLP's must distribute most of their profits). Spectra is one of the largest owners of natural gas pipelines and has the benefit of servicing the Northeast and Gulf Coast, two regions that are rich with frackers who continue to produce LNG at brisk volumes. Even with low oil and natural gas prices, it continues to realize a profit and have positive cash flow.
Stock Pick/Advice 6-26-2016
I still don't have much faith in this economy and I'm sticking with defensive stocks. This weeks pick is Altria, ticker, MO. Altria Group, Inc. is a holding company. The Company's subsidiaries include Philip Morris USA Inc. (PM USA), which is engaged in the manufacture and sale of cigarettes in the United States; John Middleton Co., which is engaged in the manufacture and sale of machine-made large cigars and pipe tobacco, and UST, which through its subsidiaries, including U.S. Smokeless Tobacco Company, is engaged in the manufacture and sale of smokeless tobacco products and wine. Its segments include smokeable products, smokeless products and wine. If you look at the 10 year chart, it has had a 400% increase since 2009 (post recession), and it maintained price during the recession (people want their smokes and booze). It is pretty much a recession proof stock with a beta of .5 and to add to its 6 year return, it pays a dividend that is over 3%. If this stock is not in your portfolio, it should be.
Stock Pick/Advice 6-12-2016
Bristol-Myers Squibb Company (BMY), incorporated on August 11, 1933, is engaged in the discovery, development, manufacturing, distribution and sale of biopharmaceutical products. The Company's late-stage investigational compounds that are in Phase III clinical trials include Beclabuvir. Beclabuvir isbeing studied in HIV-1, which has shown antiviral activity in HIV-1 infected individuals. Daklinza is an oral small molecule nonstructural protein 5A (NS5A) replication complex inhibitor for the treatment of hepatitis C virus infection and is approved by the FDA for use with Gilead Sciences, Inc.'s (Gilead) sofosbuvir for genotype 3. The Company's Empliciti is a humanized monoclonal antibody, which is approved by the FDA as a treatment for multiple myeloma. Empliciti is approved for the treatment of multiple myeloma as combination therapy with Revlimid and dexamethasone in patients having received one to three prior therapies (Reuters). The above are but a few, BMY has a long pipeline of drugs with an excellent track record. If you look at the 3 year chart, it has broken out of a trading range to the upside. It has a strong balance sheet and Income statement, it is currently at 72 and I see, easily, a 10% upside. It has a beta of .5, which makes it a fairly defensive stock and it's dividend is over 2%.
Stock Pick/Advice 6-5-2016
A Master Limited Partnership, MLP, combines the tax benefits of a limited partnership with the liquidity of publicly traded securities. In 1981, Apache Corporation formed the United States' first MLP, Apache Petroleum Company (APC) and the vast majority of MLPs are pipeline businesses, which earn very stable income from the transport of oil, gasoline or natural gas. Energy MLPs are defined as those owning energy infrastructure in the United States. MLP's trade on securities markets like normal stocks, are not subject to income tax, and shareholders in MLPs are actually "limited partners" in the company. Their special tax designation allows MLPs to pass the tax burden onto their shareholders, but they are required to pay the vast majority of their earnings out to their partners and when they pay dividends, it is similar to REIT's that must pay 90% of their profits. One such company is Hi Crush Partner's LP which supplies fracking sand to oil drillers. I recommended this company about 2 years ago when it was at $35, it subsequently went to $63 and fell back to $5 when oil crashed. HCLP, has current broken 2 resistance lines (attached 3 year chart) and is back to positive cash flow with the recovery in oil prices and more fracking wells being reopened. If oil stabilizes in the $50-$60 range, what I believe to be the sweet spot, I see this company advancing to $20-$30 range and this coupled with a close to double digit dividend makes it and attractive prospect.
Stock Pick/Advice 5-29-2016
In finance, the efficient-market hypothesis (EMH) asserts that financial markets are "informationally efficient". That is, one cannot consistently achieve returns in excess of average market returns given the information publicly available at the time the investment is made. Essentially what this says is on the average, you can't beat the market and you would be better off investing in the market. In 2014, only 14% of actively managed funds (chart) beat the S&P 500. A passive fund, is a fund that mirrors some index, such as the S&P 500, and buys all the stocks in that index. On such fund is the Vanguard 500 Index (ticker VIFNX) fund that mirrors both the performance of the Dow and the S&P perfectly (chart). The main reason for this recommendation is during the last 60 years, the average yearly return of the the S&P 500 (with dividends) is 11%. Given that, you money will double every 6-7 years and that makes for as good investment. PS, I am still extremely bullish on OPK.
Stock Pick/Advice 5-15-2016
It just may be time to jump back into the oil patch, but I would be cautious. If you look at the recent trend, oil has broken a long term resistance line and is trending upwards (chart bottom right). However if I invest, I would step softly and minimize my risk; that means don't invest in fracking, but one of the integrated oil companies that also owns refineries, exploration land, and stations is the way to go, and if it pays a dividend even better. One such stick is Conoco Phillips, ticker COP. Like most stocks in the oil patch, it has been beaten down along with the price of oiland is starting to trend upwards and has peaked above a long term resistance line. It pays a dividend of 2.3% and has decreased its loss from over $7 billion dollars last year to a little over $1 billion in quarter 1. With the price of oil increasing, a number of analysts are predicting its return to profitability this year. Jumping in now is somewhat risky, but with approximately 50 bankruptcies in the oil patch of publicly traded companies, competition has decreased and Conoco is well poised to take advantage.
Stock Pick Advice 4-17-2016
A number of people have been asking me is it time to jump back into energy stocks? I still think it's too early since we are entering into a traditionally slow season for energy before the heavy demand summer cooling season (close to 30% of all electricity is generated by natural gas). However, if you must, I would recommend Chesapeake Energy (CHK). They have just re-entered into new debt financing which is not due until 2019, and the great preponderance of energy analysts (myself included) are predicting a recovery between 2017-2018. The Company owns interests in approximately 45,100 oil and natural gas wells that produced an average of approximately 729 thousand barrels of oil equivalent (mboe). The Company also own oil and natural gas marketing and natural gas gathering and compression businesses. The balance sheet while not great is acceptable, current ratio slightly below 1, good cash position (over 1 billion with pre-paid expenses), and debt to equity of about 6. While high compared to most companies, it is one of the better ones in the industry. It has a market watch rating of hold and it is in the area of it's average target price. I don't own this stock, but if I do jump into the energy sector this summer, I suspect this is the one I will buy.
Stock Pick/Advice 4-10-2016
I've said it before, I'll say it again. It simply slays me when I hear some from the White House say that the Obama Administration is business friendly. This administration is business friendly in the same way that a coyote is bunny friendly. Allegan has lost close to 20% of its value this past week as a result of its deal to be bought by Pfizer fell thru. The headwind was the Obama Administration that seems to think all profits of businesses should be taxed and redistributed. The scuttling of the Pfizer-Allergan deal means President Barack Obama’s team of regulators have now killed some $370 billion worth of deals during their tenure – an unprecedented amount, according to the Financial Times. The deal fell thru as a result of newly proposed rule changes by the U.S. Treasury Department targeting corporate tax inversion deals, Pfizer’s board of directors voted on Tuesday to scuttle the $160 billion deal. Enough ranting, the investors overeacted and the stock is oversold Quite simply Allegan is a steal and I expect this stock to recoup about 10% of it's losses and easily hit $250-$260.
The new Treasury regulations are as follows and are from https://www.treasury.gov/press-center/press-releases/Pages/jl0405.aspx Today, Treasury is taking action to: ·Limit inversions by disregarding foreign parent stock attributable to recent inversions or acquisitions of U.S. companies. This will prevent a foreign company (including a recent inverter) that acquires multiple American companies in stock-based transactions from using the resulting increase in size to avoid the current inversion thresholds for a subsequent U.S. acquisition. ·Address earnings stripping by: oTargeting transactions that generate large interest deductions by simply increasing related-party debt without financing new investment in the United States. oAllowing the IRS on audit to divide debt instruments into part debt and part equity, rather than the current system that generally treats them as wholly one or the other. oFacilitating improved due diligence and compliance by requiring certain large corporations to do up-front due diligence and documentation with respect to the characterization of related-party financial instruments as debt. If these requirements are not met, instruments will be treated as equity for tax purposes.
Stock Pick/Advice 3-27-2016
It is one of the biggest corporations in the United States/World (market cap of close to $300 billion)and is the only stock on the Dow since it's inception in 1896, and after trading sideways for two years, it has broken out to the upside. It has an annual dividend of 2.96% and it has an overweight rating from analysts at market watch in addition to being a large holding in Warren Buffet's Berkshire Hathaway portfolio. Don't expect explosive capital gains growth but you will get steady growth combined with a dividend that more than covers the opportunity cost of money and/or the risk free rate. Last June, Immelt (CEO) said in an email to employees that he asked a team to examine the company's options to relocate headquarters to a state with a more "pro-business environment." and they are moving from NY to Boston, Ma (actually, I prefer NH). It is a huge conglomerate with 6 different businesses and the one that has given them the most problems, Finance, they have cut "hundreds of billions in exposure over the past 2 years"(CNBC), and their two growing businesses are aerospace and healthcare. A CNBC analyst, Josh Brown, sees this going to 40 and I agree. Link below: http://finance.yahoo.com/video/stealth-stock-movers-165700305.html
Stock Pick Advice 3-20-2016
This week's stock pick/advice will be an update on OPK. OPKO Health is up 37.5% in the past two months (after falling 50% in the past 9 months) and is set to surge higher or crash on March 29th when the FDA will approve/disapprove it's new Drug Rayaldee. All indications are that this drug will get approval (exceptionally high efficacy) and will enter a potentially $26 billion market where it will have a significant market share assuming it's priced correctly. Let's also make the following assumptions and I will be conservative: if the drug is approved, it will have potential competition from Amgen which has a similar drug, but is not due for FDA approval until August. According to the Motley Fool, analysts are expecting OPKO to capture $12 billion or nearly half the market. What does this mean for OPKO and it's stock price. The net profit margin for the pharmaceutical industry is high since the research has already been completed on the drug and the marginal cost of producing each pill is low. As evidenced by the chart below, it can be as high as close to 60%. I'll be conservative, and assume a 10% net margin. Given the aforementioned, potential profit is $1.2 billion, divided by 545 million shares outstanding gives an EPS of $2.20. Given it's current price of $11, that gives OPK a PE ratio of 5 whereas the average PE ration in this industry is 25. Assuming that OPK will have a similar ratio, we are looking at a potential stock price above $50; to be more conservative, lets take the historical average S&P 500 PE ratio of 16.7, that gives OPK a potential price of over $35. In either case the outcome is favorable in the long run. In the short run (chart below), I see a pull back to possibly $10-10:50 (current support line) since I believe profit taking is inevitable in the short run.
Stock Pick/Advice 3-6-2016
Prepare for higher prices at Disney theme parks and it appears people are willing to to pay them. The giant entertainment company Sunday launched "demand pricing" where one-day ticket prices rise if you visit during seasons the park is most crowded. Shares of Disney rose 21 cents to $95.52 Monday - the first day of trading after the changes were instituted. Analysts think the move is bullish for the profitability of the parks. "Given a high fixed cost base, I think it’s obviously something that should foster continued margin expansion for the domestic parks – which also depends on the how long those price increases might be sustainable," (CNBC). Plan on spending upwards of $120/day for US Disney parks on peak days, up from it's current price of $95. Disney theme parks are now over 1/3 of their revenue and are expected to eclipse ESPN within 10 years and also expect Star Wars revenue and profits to continue to flow. If you look at the attached chart, they have broken a long term support line and are on path to test their precious highs of $120
Stock Pick/Advice 2-28-2016
Warren Buffet, the Oracle of Omaha, states that you should be looking for a 5-8%/year return on your financial portfolio. Given that, an investor would be remiss if he/she not have any high yield dividend preferred stocks in their portfolio. One such stock is Bank of America's preferred series D stock, ticker BAC-D, that is callable at $25/share and pays a yearly dividend of 6.02% ($1.55). The stock is currently trading at a premium, at $25.38/share which brings the dividend yield down to 6.11%. From the prospectus, "each depositary share entitles the holder, through the depository, to a proportional fractional interest in all rights and preferences of the Preferred Stock represented by the depositary share. We may redeem the Preferred Stock on any dividend payment date on or after September 14, 2011, in whole or in part, at a redemption price equal to $25,000 per share (equivalent to $25 per depositary share), plus any declared and unpaid dividends."
Stock Pick/Advice 2-21-2016
OPKO Health, Inc. (OPKO) is a biopharmaceutical and diagnostics company. The Company is involved in developing a range of solutions to diagnose, treat and prevent various conditions, including point-of-care tests, laboratory developed tests (LDTs), molecular diagnostics tests, and pharmaceuticals and vaccines and I believe that this stock is about to go exponential. At its peak valuation in 2015, the company traded for just shy of $20 a share. At last close, it traded for 8.82. Q3 was the first time Opko reported a net gain. At the end of the quarter, the company had $212 million in cash on its books. For the final quarter of 2015, which is to be reported on February 26, analysts expect $286.5 million, a mean calculation across six analysts - a more than 90% quarter over quarter gain. Shortly after the earnings release, the FDA is set to report its decision on Rayaldee, a secondary hyperparathyroidism (SHPT) drug that met all its primary endpoints in a 105 center study that concluded early last year. There's no current treatment available in this indication, and it's a 20-million US patient population, so approval could be a real upside catalyst for Opko. PDUFA is set for March 26, 2016, and keep an eye out for an advisory panel review over the next few weeks. (Yahoo finance). If the FDA gives a go-ahead, Rayaldee, a vitamin D prohormone that may be more effective and safer to use in chronic kidney disease patients than current approaches, will compete in a market worth as much as $12 billion annually. I feel that OPKO has been beat down as a result of the entire decline in the bio-tech sector. From the accompanying chart, OPKO has already broke 1 resistance line and is moving towards the 2nd. I'm very optimistic about this stock and I would not be surprised if by September this stock is not trading in the $20-$30 range.
Disclaimer: I do own OPKO stock and call options.
Stock Pick/Advice 2-7-2016
Bank of America (BAC), is simply screaming "buy me"; but I would hold off for the moment. The stock is currently trading at $12.29/share and is paying a dividend of about 1.6%. On top of this, its book value (equity/shares outstanding) is twice that at about $25/share. However, all bank stock are down 20.3% and are officially in a bear market. Investors have changed their behavior and they are no longer buying on the dip. As a matter of fact BAC is trading at a 3 year low while most other stocks are trading at 1-2 year lows. I believe that we are already in a recession and it will be a relatively mild one (5-8 months). Stocks are a leading economic indicator and they will recover before the recession is over (usually). What will bring us out of the recession is an accomodative FED policy (no rate increases and possible some QE), and a recovery in the oil patch. Ultimately, the best thing for low oil prices is low oil prices (this winter I'm using more oil and burning less wood because of the low price of heating oil. If you look at the 5 year chart for BAC, there is support at $10. When it reaches that price, I'm going to buy.
Stock Pick/Advice 1-31-2016
This week's stock pick is a purely defensive play which has the advantage of a good dividend payout and from a technical analysis point, may appears to be breaking out to the upside. Entergy corp (ETR), Entergy owns and operates power plants with approximately 30,000 megawatts of aggregate electric generating capacity, including approximately 10,000 megawatts of nuclear-fueled capacity. It has a good financial position with current assets of 1.2 and 80 million in cash. It has a dividend of 4.8% and from the accompanying chart, it appears poised for an upside breakout as it just broke out of its trading range (chart). Its Beta of .3 signifies little volatility which is what you want in a bear or slowing market. The average consensus amongst market watch analysts is a one year target with a 5-10% gain. What I find encouraging is that of 24 analysts, only one rates this stock as a sell.
Stock Pick/Advice 1-19-2016
A stocks Beta is a measure of risk. It indicates how the price of a security responds in relation to a market index (S&P 500. The beta for the market is 1.0 and stocks with betas greater than 1.0 are more risky than the overall market and stocks with betas less than 1.0 are less risky than the overall market. For instance, a beta of 1.2 suggests a security is 20% riskier than the market and will have greater move swings than the market. Bet'as can also be negative. A negative beta indicates that these stocks will go up as the market decreases and vice versa. If you feel, like I do, that we are headed for a bear market and recession, it would behoove you to invest in a negative Beta stock. One such stock is Agnico Eagle Mines Ltd NYSE: AEM. This is a gold mining stock. Gold and other precious-metals producers often move against the market, because gold often attracts safe-haven money when stocks start to decline. Gold is oftentimes viewed as a safe haven in times of economic and/or geopolitical stress. AEM has a beta of -.6, and if you look at the attached chart, the performance of AEM does just this compared to the S&P (purple line). This stock also has the added bonus of a dividend of 1.4%.
Stock Pick/Advice 1-10-2016
If you remember your principles of economics, an inferior good is any good whose demand curve shifts to the right (i.e., demand increases) as income decreases; and since the market has come off its worst opening week ever and since I've been predicting a recession for 2016, I have a number of stocks that generally do well during a recession. First and foremost, Wal-Mart which was the only stock in the DOW to increase this week, 3.7%, while every other stock tanked. During the recession encompassing 2008, Wal-Mart sales actually increased 2.8%. When people are unemployed during a recession, and overtime is at a minimum, aggregate income decreases and hence the flight to inferior goods. Another inferior good is Hormel Foods, the maker of canned meat (which cost less than fresh meats). This is also a company whose sales also increase during a recession. Through war and recession, Americans have turned to the glistening canned product from Hormel as a way to save money while still putting something that resembles meat on the table. Now, in a sign of the times, it is happening again, and Hormel is cranking out as much Spam as its workers can produce. In a factory that abuts Interstate 90, two shifts of workers have been making Spam seven days a week since July, and they have been told that the relentless work schedule will continue indefinitely (NY Times). Finally, lets not forget the sin goods, cigarettes and liquor. These goods tend to be very inelastic (chap 6, Principles of Micro-economics), and people will buy these products good times or bad. In this category is Philip Morris, MO, and BUD, Budweiser, DEO, Diego and STZ, Constellation Brands.
Stock Pick/Advice 1-3-2016
Given my beliefs that the DOW is going to continue to trade sideways and we are in a traders market, I am going to recommend another stock that is channeling sideways with the DOW. Even though I am not recommending jumping back in to the oil patch, there is one stock that is trading sideways and I believe that it will continue to do so in the near future, and that is Exxon-Mobile. XOM has the 3rd largest market cap (behind AAPL and MSFT) and like the DOW, has been trading sideways. It has a BETA of .9 (there is less than average volatility compared to the DOW) and I believe it will be in a trading range from 72-78. The stock price is very closely correlated to the price of oil, a Pearson r of .6 in a recent study by myself, and while I believe that there may be a little more downside to oil, I believe it is limited. But what also makes this stock very attractive is its impressive 3.75% dividend which is nearly twice that of the inflation rate. In other words, given present market conditions, I believe this stock gives a very good return for a moderate to low amount of risk.
Stock Pick/Advice 12-27-2015
There are many oil stocks that have been beaten down and are at all time lows; and many of these companies are very financially sound. So, is it time to jump into oil stocks with both feet. To keep it simple not yet, and here's why. If you look at the 2 year oil chart to the left (click to enlarge), you will see that after obtaining a high of $110/barrel in 2014, gold has been downtrending because of a supply gut (as a result of fracking technology), and diminished demand because of slowing world wide economies with some countries, like Russia and Brazil, experiencing recessions. I think you will see a slight January effect bounce, but until the downward trending resistance line is broken, I'm going to remain on the sideline; how ever, some stocks in the sector that I'm watching are: XON, COP, HAL, SLB and HCLP. I think that once the drought is over, HCLP, Hi-Crush Ltd. Partnership, a supplier of frack sand, has the most potential for explosive growth.
Stock Pick/Advice 12-20-2015
This weeks stock pick is remaining consistent with my feeling that it is not only a traders market, but that we are in for a mild recession. The pick is DDD, 3D printing company. The Company is a provider of three-dimensional (3D) printing centric solutions. It provides 3D design-to-manufacturing solutions, including 3D printers, print materials and cloud sourced custom parts. Its healthcare solutions include end-to-end simulation, training and planning and printing of surgical instruments and devices for personalized surgery and patient specific medical and dental devices; it has been a public company since the early 90's, has a strong balance sheet with little debt, has just broken a long term resistance line and has broken to the upside of its 50 day moving average. It was recently upgraded to overweight from equal weight by Stephens & Co. Peer and market watch analysts have an average target price of $12. I think that the 3D printing sector has been overly beaten down and is due for a relief rally. Given a favorable set of circumstance, I see this easily hitting $15. It is down from its all time high of more than $90.
Stock Pick/Advice 12-6-2015
As you can see from the above chart, the Dow has gone no where this year, and so have many stocks. Essentially, it has been more of a traders market than an investors market. One successful trading strategy I have used over the years is to find stocks that trade in a channel (a trading range), and buy on the low part of the range and sell at the high or close to the high. One such stock is Fannie Mae, FNMA, the Federal National Mortgage Association. This is a government sponsored enterprise (GSE) chartered by the United States Congress. The Company supports liquidity and stability in the secondary mortgage market where mortgage related assets are purchased and sold. The Company's activities include providing market liquidity by securitizing mortgage loans originated by lenders in the primary mortgage market into Fannie Mae mortgage backed securities and purchasing mortgage loans and mortgage related securities in the secondary market for its mortgage portfolio. This is also a company that is "too big too fail". At some point in the future, the government, will relinquish its hold of the company and the dividends will be channeled to the stockholders which would bode well for shareholders.
Stock Pick/Advice 11-8-2015
With an interest hike from the FED almost a certainty in December, the following stock picks are a no-brainer, banks. Banks benefit from higher interest rates since they make more money on their loans and only a .25% hike will hardly deter people from taking a loan. But when you realize the volume that the largest banks do (the largest 5 banks have about 50% of all US deposits), this becomes significant. The banks that I particularly like are 4 of the 5 big banks (I'm not crazy about Citigroup). I see an easy 5-10% increase in price over the next 3-4 months and what I also like is that, the dividends are in the 2.5% range (except BAC which pays 1.1%), which covers the opportunity cost of money. On Friday, all of them were up at least 2.5%. According to CNBC, U.S. financials are down 1.5 percent so far in 2015, and the theory is that, among other things, investors got tired of waiting for the Fed to raise rates and decided that the rate hike they had already baked into bank stocks needed to be taken out of the bank stocks' prices. But that also means when the Fed finally does raise rates, bank stocks will have the premium placed right back in and it would make sense to be ahead of that. So even if bank stocks trade down on earnings this quarter, investors should consider if the Fed-rate hike that still hasn't happened will be priced back into bank stocks again.
Stock Pick/Advice 10-4-2015
If you've been following my daily blogs, I feel that we're in for a recession, and yes there's money to make during a recession. First, a little economics theory. During a recession, unemployment goes up and aggregate income goes down. When income decreases, consumers buy more of an inferior good. By definition, an inferior good is a good where consumption increases as income goes down. A normal good is a good is a good whose consumption decreases when income decreases. If you look at the two charts below, the one of the left is Ambercrombie & Fitch during the recession of 2008. As you can see, the stock went down over 60%. This shouldn't be surprising, since their clothes are expensive and people will buy a cheaper brand; enter, Wal Mart, below right. As you can see from the chart. their stock price remained relatively stable and combine this with the 3% dividend, you're making money.Actually, during 2008, there sales actually increased by over 2%, and I see this happening over the next year.
Stock Pick/Advice 9-6-2015
I've been talking a lot about Warren Buffet lately and might as well stay on the roll. Here are his top 5 dividend paying stocks in Berkshire Hathaway's portfolio (Compliments of www.thestreet.com). 1 General Motors boasts an attractive 4.6% dividend yield. The automaker's current distribution is 36 cents, recently increased from 30 cents. I'm not a big fan of GM since it's down 25% from January highs. I'll buy this stock when the company starts to regain US market share that it has lost to Toyota. 2 Proctor & Gamble Consumer goods company Procter & Gamble (PG) has a 3.5% dividend yield. It increased its quarterly payout to 66.29 cents from 64.36 cents this year; comprising 3.9% of his portfolio. Buffett owns 52.8 million shares as of June 30. 3 IBM has a 3.4% dividend yield. Its current quarterly payout is $1.30, increased from $1.10 earlier this year. However, it is off 10% from this years highs. 4 Coca Cola Its 33-cent dividend gives it a 3.2% dividend yield. The company last upped its quarterly payout in late 2014. As of June 30, Buffett owns 400 million shares of Coke, which comprises 14.7% of the Berkshire Hathaway portfolio and is its second-largest holding. 5 Wal Mart It has a 49 cent dividend, which is a 2.7% yield. It has increased it's dividend during the last 25 years (it's sales actually increased during the last recession
Stock Pick/Advice 8-30-2015
With the Obama administrations war on coal and the tumbling price of oil, energy stocks have been out of favor and it has been the worst performing sector in the S&P 500. One such stock is Peabody Energy, ticker, BTU. The company has 5 segments that are engaged in the mining, preparation and sale of thermal coal, which is typically supplied to United States electricity generators and industrial customers for power generation, with a portion sold into seaborne export markets. Australian Mining segment consists of the Company’s mines in Queensland and New South Wales, Australia. With the change in demand for coal (coal now supplies 38% of electric generation compared to 50%), BTU has gone from $25 to a low of 90 cents. Revenue growth is down over 1000% and the company has not realized a profit since 2011. However, there are some bright area's on the horizon. The company has undergone significant cost cutting measures and the Obama administration has lost one law suit on coal, and there are 6 more pending. These can be serious setbacks for the EPA which would bode well for energy. If you look at a one year chart, a long term resistance line has been broken and the stock is trending upwards which shows a reversal of investor sentiment. This is a risky play, but as Warren Buffet said, the time to be greedy is when others are fearful Disclaimer: I have a modest investment in this equity.
Stock Pick 8-23-2015
With the recent downturn, there have been a number of stocks that are the baby being thrown out with the bathwater. One such stock is OPKO Health, ticker, OPK. To me this stock is a screaming buy. After reaching a high of $19, they went down to $16 after they bought Bio-Reference Labs, and down further after a miss in earnings and finally pummeled with the recent selloff. In regards to the purchase of bio-reference labs, according to the CEO, Dr Frost, “The acquisition is part of our plan of continuously moving forward with our proprietary therapeutics drug-discovery and diagnostics services strategy,” says Dr. Philip Frost, OPKO’s chairman and CEO. It will transform the company in important ways and greatly improve its financials, including the generation of strong cash flow, he adds. I feel the recent selloff was a combination of profit taking and risk adverse panic selling. They have a contract with Pfizer on a drug that should get FDA approval in September. This is a multi billion dollar deal. In addition, they have another drug in March that is scheduled to complete Phase 3 testing which is also a potential billion dollar revenue producer. To me this stock is a $20-30 stock all day long Full disclaimer: I am highly invested in this stock owning both the equity and options.
Stock Pick/Advice 8-3-2015
Whereas energy has been the worst sector for the past year, healthcare has been the best with a 26% increase (compliments of Obamacare which lead to higher prices and more coverage) and this is about to continue. The healthcare industry is an Oligopoly with a few major firms controlling 90% plus of the industry. This companies are Aetna, United Healthcare, Cigna and Anthem, but it's about to get smaller since Anthem is about to pay $54 billion to buy Cigna. This will reduce competition which generally leads to higher prices. Before the acquisition occurs, it must 1st receive the approval of the FTC (Federal Trade Commission) and US Justice Department. This is a long way from a done deal. However, whichever way the deal goes, United Health Care, (UNH) will continue to benefit from the current healthcare climate. UnitedHealth Group Incorporated is a health and well-being company. The Company's business platforms include UnitedHealthcare and Optum. UnitedHealthcare provides health care benefits to various customers and markets. Optum is a health services business serving the health care marketplace, including payers, care providers, employers, Governments, life sciences companies and consumers. It has a market cap of 115 billion, a PE of 19 and pays a dividend of 1.65%. The company has increased by 50% in the past year, has been in a trading range for the past 2 months which I think is a consolidation period before it climbs once again. Of the 23 analysts who cover this stock (marketwatch.com), they have an average price target of $144 and I believe this is on the mark.
Stock Pick/Advice 7-20-2015
Valero 1 year Chart
With oil down to $50/barrel and gas still trading relatively high at $2.76/gallon, is there money to be made in the oil sector? Most definitely, and the answer is the refiners. I like Valero oil, ticker, VLO. The Company's refineries can produce conventional gasolines, premium gasolines, gasoline, diesel fuel, low-sulfur diesel fuel, ultra-low-sulfur diesel fuel, CARB diesel fuel, other distillates, jet fuel, asphalt, petrochemicals, lubricants, and other refined products. The Company markets branded and unbranded refined products through approximately 7,400 outlets. It has a capacity of 3 million barrels/day in its 15 refineries, and while the price of oil is going down because of supply, that is not the case with gasoline since the number of refineries has decreased since the 1970's compliments of the EPA. According to Zack's, Currently, Valero is evaluating options for two new crude oil topping units, which could be commissioned by the end of 2015. The company also intends to bring other projects online to unlock light crude capacity at Port Arthur and Meraux. An expansion of 25 thousand barrels per day (mbpd) McKee crude unit is expected in the first half of 2015. These projects are expected to drive significant improvement in earnings in the future. The continued weakness in crude prices is likely to result in higher gasoline demand, especially during the upcoming summer driving season. Growth in refined product sales should therefore support earnings at Valero Energy.
Stock Pick/Advice 6-28-2015
With the imminent default of Greece and its possible departure from the Euro, I hesitate to recommend anything this week however, given the fact that the Dow, and many stocks have been trading in a channel, there are some picks out there; and Kincross Gold is one such stock. Since March, KGC has been trading in a range from $2.25 to $2.6, which has coincided with gold's fluctuation. In addition at. $2.30/share, it is trading well below its book value (assets-Liabilities divided by shares outstanding) of $3.50. It is not uncommon for mining stocks to trade at twice their book value. KGC and gold are both currently at the low end of their trading range and with Greeks possible default, there will be a flight to gold (there is security in hard assets) and I believe that KGC will follow.
Stock Pick/Advice 6-21-2015
Hi-Crush Partners LP is a producer and supplier of monocrystalline sand. The Company is a limited partnership formed to acquire selected sand reserves and related processing and transportation facilities of Hi-Crush Proppants LLC. Its reserves consist of northern white sand, a resource in Wisconsin and limited portions of the upper Midwest region of the United States. This sand is used extensively in the fracking of oil and gas wells. I recommended this stock over a year ago when it was in the mid 30's and it rose to over $70, since then it has retraced and is now trading in a $30-$40 range (chart below). As you can see it has broken a downward resistance line, found support at 30, and is trending back towards the $40 resistance line. I have bought this stock with the anticipation of selling in the $38-$40 range.
If you bout Alexion, my 5/24 stock pick, it has increased by $20. In the past 10 years, the biotech sector has increased by an average of 7.6% during the summer.
Stock Pick/Advice 6-7-2015
OPKO health has been a previous stock pick of mine and I believe that this weeks pull back is a buying opportunity, especially with Cramer talking about it on Monday 6/8 on his Mad Money show (CNBC, 6 PM). OPKO Health Inc. is a multi-national biopharmaceutical and diagnostics company. The Company is involved in developing a range of solutions to diagnose, treat and prevent various conditions, including point-of-care tests, laboratory developed tests (LDTs), molecular diagnostics tests, and proprietary pharmaceuticals and vaccines. There stock began to spike up after a contract with Pfiezer and increased revenues. What caused the stock to tank last week was the purchase of Bio-Reference Labs by OPKO. "GeneDx (Bio-Reference's genetic sequencing lab) was the first commercial laboratory to offer next-generation sequencing for rare disorders, and almost a quarter of a million patients have benefited from these services, including almost 20,000 patients who have undergone exome analysis," said Opko CEO Phillip Frost in a statement. "Their newly introduced sequencing services for use in oncology are both innovative and impressive." As part of the all-stock deal, Bio-Reference shareholders will get 2.75 shares of Opko for every share they own. The two companies expect the deal to be completed during the second half of 2015. Opko said it will use the marketing, sales and distribution resources of Bio-Reference Labs to push sales. I can't help but see this as a plus and I have increased my holdings in OPK and I think Cramer is going to like it too.
ADDENDUM 6-10-2015 In regards to Opko Health's (OPK - Get Report) acquisition of Bio-Reference (BRLI), Cramer explained that shares of Opko aren't down on the company's fundamentals -- they're off because the company is issuing a lot of stock. He stressed that he has total faith in Opko Chairman and CEO Phillip Frost, whom he said is building a "soup-to-nuts" pharmaceutical company. That said, Cramer warned that the stock is likely to be under pressure until the deal closes.
Stock Pick/Advice 5-24-2015
Alexion 10 year chart
Who comes up with these statistics at CNBC. As reported on Friday, there has been only one company has had an average gain of 20% every summer. That company is Alexion (ticker ALXN). Alexion Pharmaceuticals, Inc. (Alexion), is a biopharmaceutic.al company focused on serving patients with severe and ultra-rare disorders through the development and commercialization of life-transforming therapeutic products. Its marketed product Soliris (eculizumab) is the first and only therapeutic approved for patients with Paroxysmal Nocturnal Hemoglobinuria. This is a rare, progressive, and sometimes life-threatening disease characterized by excessive destruction of red blood cells (hemolysis) and excessive blood clotting. Eculizumab also is the first agent approved for the treatment of atypical hemolytic uremic syndrome (aHUS), an ultra-rare genetic disease that causes abnormal blood clots to form in small blood vessels throughout the body, leading to kidney failure, damage to other vital organs and premature death. The cost is close to $500,000 for a one year treatment. It is approved both in the states and the European Union. It has net income in excess or 1/2 billion dollars, and has a current ratio of 6 to 1 and a debt to equity ratio of .02; in other words, no debt, but surprisingly it pays no dividends. Analysts estimates (21 of them) from Marketwatch.com give this stock an overweight (strong buy) with an average price target of $213. My question is why the huge increase every summer? Does the sun trigger the disease? I'm not sure but after looking at it, I like it and it's going to be part of my holdings. Addendum: Monday 8 AM, Bio-Reference just reported earnings that are higher than expectations which is giving OPK a pre-market boost.
Stock Pick/Advise 5-17-2015
Interest rates are going up. That's no surprise and for most businesses that represents a drag since the borrowing money for capital projects becomes more expensive. However, there are some companies that benefit from rising interest rates; most noteworthy, online brokers. A group of companies, namely the discount brokers like Charles Schwab (SCHW), E-Trade (ETFC) and TD Ameritrade (AMTD), actually stand to win when interest rates move higher – because much of their business is tied to collecting interest on cash that’s highly sensitive to short-term rates, according to a USA TODAY analysis of data from S&P Capital IQ and RBC Capital Markets. If you look at the charts below over 40% of the income for Schwab and E-trade are form interest and dividends. This is substantial. Also if you look at the chart at the bottom right, a half point increase in interest rates spells more than a 30% increase in income for Schwab, 20% for e-trade and 9% for Ameritrade. Bring on the rate hikes
Stock Pick/Advice 5-10-2015
Bank of America is the second largest bank in the US with over 2 trillion dollars in assets. Bank of America provides a range of banking and nonbanking financial services and products through five business segments: Consumer & Business Banking , Consumer Real Estate Services, Global Wealth & Investment Management, Global Banking and Global Markets and remaining operations are included in All Others. The Company’s franchise network includes approximately 5,100 banking centers, 16,300 ATMs, nationwide call centers, and online and mobile platforms. The bank has done very well since the financial crisis but it's stock price hasn't reflected its performance while most of the other big banks have. Of the 34 analysts on marketwatch.com that follow BAC, they give it an overweight rating with an average target price in the high teens. If you look at the above chart, after a 2 yearsteady rise in price, it has been in a trading range between $15-$17.50. The chart is going through a consolidation period and I see it breaking out on the upside. It doesn't seem like it would be much of a move from it's current $16 plus price, but it represents a more than 10% return in addition to it's dividend of 1.25%. Prior to the Financial crisis, its stock price was above $50. While I don't see this happening in the near future (next 2 years), a thirty dollar price is certainly attainable, particularly, in an environment of rising interest rates which generally bodes well for banks. "Rising rates tend to point to a strengthening economy. And that health usually means that borrowers have an easier time making loan payments and banks have fewer non-performing assets. It also means that banks can earn more from the spread between what they pay savers for savings accounts and certificates of deposit and what they can earn from highly-rated debt." http://www.investopedia.com/articles/investing/052814/
Stock Pick/Advice 4-26-2015
United Technologies (UTX) is the biggest company you have never heard anything about. It has been on the Dow Jones Industrial Average since 1976 and has a market cap in excess of $105 billion. UTX provides high technology products and services to the building systems and aerospace industries across the world. Some of its more easily identifiable subsidiaries are Pratt & Whitney and Sikorsky. Pratt & Whitney segment supplies aircraft engines for the commercial, military, business jet and general aviation markets. UTC Aerospace Systems is a global provider of technologically advanced aerospace products and aftermarket service solutions. Its Sikorsky segment manufactures military and commercial helicopters and also provides aftermarket helicopter and aircraft parts and services. UTX boasts some impressive statistics: it has paid dividends consistently since 1936 and current boasts a dividend yield of 2.2%; over the past 5 years, UTX has grown its dividend at an average of 8.5% and over 10 years at an average of 11.3%; As a member of the S&P 500, UTX is on track to become an S&P Dividend Aristocrat in 2018. The balance sheet is solid with a current ratio above 1 and a debt/equity level less than 1. It is an overwhelming favorite of analysts with a market watch target price of 133, and I like it.
Stock Pick/Advice 4-19-2015
It appears that the United States will see its first large scale desalination plant(s), courtesy of California's extended drought (see Thursday's update). Seventeen plants are in planning stages along the coast to convert salt water from the ocean or bays, including one near Concord that would serve every major water agency in the Bay Area. That plant is tentatively targeted to open in 2020, but could be kick-started earlier in an emergency, officials say - and once online, would gush at least 20 million gallons a day of drinkable water. The $1 billion plant will tap the biggest water tank around, the Pacific Ocean. It will produce 50 million gallons of potable water daily, supplying more than 110,000 customers throughout San Diego County. A company that will benefit from this is Badger Meter Inc., ticker symbol, BMI. Badger Meter, Inc. is a manufacturer and marketer of products incorporating flow measurement and control technologies serving markets around the world. The Company’s product lines are sales of water meters and related technologies to municipal water utilities (municipal water), sales of meters to various industries for water and other fluids (industrial flow), and sales of gas meter radios and concrete vibrators to markets (specialty products). As a result there should be an uptick in sales. Fourth-quarter 2014 earnings per share of $0.43, up 9% year over year. Sales were a record $89 million, a 10% increase year over year led by higher sales of meter-reading technology and flow instrumentation products. Badger Meter will continue to benefit from the introduction of new products and acquisitions. According to Zacks, Municipal water meters are their largest sector by sales volume. It involves sales of meters, and related technologies and services used by water utilities as the basis for generating water and waste water revenues. The key market is North America, primarily the United States, as the meters are designed and manufactured to conform to standards promulgated by the American Water Works Association. Sales of water meters and related technologies and services are commonly categorized as residential or commercial water meter. If yo look at the chart below, they have broken out of a 5 month trading range, and are trending upwards and I believe this will continue.
Stock Pick/Advice 4-12-2015
Altria Group, Inc. is a holding company that includes smokeable products, smokeless products and wine. Altria Group, Inc.'s tobacco operating companies, including Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Company LLC (USSTC) and other subsidiaries of UST LLC (UST), and John Middleton Co. (Middleton), offer tobacco products, such as cigarettes. Black & Mild is the principal cigar brand of Middleton. The Company’s tobacco subsidiaries sell tobacco products principally to wholesalers (including distributors), and retail organizations, including chain stores and the armed services. Whereas the companies American sales in cigarettes are relatively stagnant, international sales are growing significantly and indications are that it will continue to do so. It's financials are solid and it pays a very impressive 4% dividend in addition to an increase in stock price of 250% in the past 5 years (chart). Most analysts give this stock a buy or strong buy weighting and I continue to see this stock maintain it's dividend while increasing stock price 5 to 10%/year
Stock Picks/Advice 3-29-2015
CHK 1 YEAR CHART
Chesapeake Energy Corporation (CHK) is a producer of natural gas and liquids. The Company’s exploration and production segment is responsible for finding and producing natural gas, oil and natural gas liquids (NGL). The marketing, gathering and compression segment is responsible for marketing, gathering and compression of natural gas, oil and NGL. It owns interests in approximately 47,400 natural gas and oil wells. The past year hasn't been good to CHK, it is more than 50% of it's high and the stock price has fallen in line with the decline of oil and Liquid Natural Gas (LNG). However, the company remains in excellent financial position. It has a 2.5% dividend and this is not jepordized by the decline in oil prices. Both it's revenue and net income has continued to increase as a result of acquisitions. The company has over $4 billion in cash, a current ratio of 1.3 and a debt to equity ratio of 1.4. The debt to equity ratio is a little high but not uncommon for that industry. What I find to be very bullish about CHK is earlier this week, the company announced that it was cutting another $500 million out of its 2015 capital budget. Then, around the same time as the capex cut announcement, it was revealed that activist investor Carl Icahn had boosted his stake in the company from 9.98% to 10.98%. While the disclosures are likely not related, both suggest the company is doing the right things to position itself to create value for investors over the long term.What this new capex rate will do is enable the company to invest within its cash flow in 2015. That should put an end to analysts' criticisms that the company was overspending on growth at a time when growth simply isn't needed due to the currently oversupplied oil and gas market. Furthermore, it preserves the company's liquidity, which is expected to be $6 billion at the end of this year. I see CHK recovering and have a 1 year price target in the low to middle 20's.
Stock Picks/Advice 3-8-2015
On its website, the NASDAQ defines an ETF (Exchange Traded Fund). In the simplest terms, Exchange Traded Funds (ETFs) are funds that track indexes like the NASDAQ-100 Index, S&P 500, Dow Jones, etc. When you buy shares of an ETF, you are buying shares of a portfolio that tracks the yield and return of its native index. The main difference between ETFs and other types of index funds is that ETFs don't try to outperform their corresponding index, but simply replicate its performance. ETFs combine the range of a diversified portfolio with the simplicity of trading a single stock. Investors can purchase ETF shares on margin, short sell shares, or hold for the long term. Let's assume you believe that a particular industry or market is posed for a bull run but you don't what stock to buy, you can buy an industry ETF and there are numerous ETF's for each industry. For Instance,I believe that the price of oil has stabilized in the $50 range and I see it reaching $60/barrel some time this year for 2 simple reasons ( I like simple). The 1st is that since last June when oil was $106/barrel, the number of oil rigs in the US has decreased by 1/3 since many oil rigs that utilize fracking are not profitable below $50; secondly, the world rarely goes more than 3-6 months without some form of supply disruption whether it is an OPEC production cut or a civil war in Libya, and when that happens, price increases. There are a number of stocks that would benefit in addition to a number of oil related ETF's. One such fund is BNO.United States Brent Oil Fund, LP. This investment seeks to replicate, net of expenses, the daily changes in percentage terms, of the spot price of crude oil as measured by the changes in the price of the futures contract l as traded on the ICE Futures Exchange. The portfolio consists primarily of investments in futures contracts for crude oil, heating oil, gasoline, natural gas and other petroleum-based fuels that are traded on the ICE Futures Exchange, the NYMEX and other U.S. and foreign exchanges, and as you can see, the fund mirrors the price of oil.
Stock Picks/Advice 3-1-2015
A number of my friends have asked to me why I don't recommend cheaper stocks (under $5) in my weekly picks. It's simple, these are considered penny stocks and they're penny stocks for a reason, they're in danger of going bankrupt. However, money can be made from cheaper stocks and 5-10% of your portfolio should be in high risk, i.e., my pick for the week is Warren Resources Inc.that is trading at $1.21/share, down from $7, 6 months ago. Warren Resources Inc. is an energy company engaged in the exploration, development and production of domestic onshore crude oil and gas reserves. The Company focuses on the exploration and development of its waterflood oil recovery properties in the Wilmington field within the Los Angeles Basin of California, and its coalbed methane, natural gas properties located in the Rocky Mountain region. Along with the rest of the energy sector, Warren has decreased in price as the the price of oil decreased. I'm actually surprised as why this company is trading so low. They don't have a great current ratio at a little less 1, but they don't have a lot of debt with a debt to equity ratio of less than 1. There cash position is good and they have been getting their cash thru operations, not financing activities (issuance of bonds or more stock which dilutes ownership). There has also been moderate to heavy insider buying in the past 4 months. What is also surprising given their stock price is that they have been profitable since 2010 and it appears they will realize a profit in 2014. As I said previously, I'm surprised the price is this low and I think it will increase in price
Stock Picks Advice 2-22 2015
"Hey kid, if you're not inside, you're outside." With these words, Michael Douglas, aka Gordon Gecko, in the movie Wall Street, led Charlie Sheen down the path of greed and illegal insider trading. Insider trading includes both legal and illegal conduct. Legal insider trading is when corporate officers, directors and high level employees, trade in their own stocks and report this to the SEC. Insiders sell their own stock for a variety of reasons, they may need money for a vacation, college tuition, a new house etc., or they think the stock will go down. However, they buy stock for only one reason, they believe it is going to go up. According to the SEC web site, "Illegal insider trading refers generally to buying or selling a security, in breach of a fiduciary duty or other relationship of trust and confidence, while in possession of material, nonpublic information about the security." For example, if a vice president of a biotech company bus stock in the company, knowing that a particular experimental drug is about to be prematurely approved by the FDA, and this information hasn't been disseminated to the public, then it is illegal. However, there is an abundance of evidence indicating the relationship between "legal" insider trading, and stock price movement int the same direction of that trading. I don't trade stock solely on insider trading,but it was one of the tools that I use and there are a number of e=websites available. One such website is http://www.insider-monitor.com/. This web site lists the ten top insider trades, buys and sells, for the week and month. Over the years I have found that insider buying/selling is much more of a tell if there are a number (3 or more) insiders who are doing the buying or selling. What I have also found to be the case is that it is not uncommon for insiders to buy a stock after analysts sour on a stock and it appears to be oversold. For instance, just recently (past month) there had been a spate of insider buying in Southwestern Energy, SWN. Since then, the stock has advanced 20% and broken a long term resistance line. Earnings are scheduled to be released the 26th of this month and it should be interesting to see if earnings beat expectations.
Stock Picks/Advice 1-26-2015
I'm going to buy when the resistance line is broken
There's is at least one analyst/day on CNBC who is stating that when oil turns around there will be money to make because of so many beaten oil stocks have been beaten down. One such stock is Oneok Partners, ticker OKS. ONEOK Partners, L.P. (Partnership) is engaged in gathering, processing, storage and transportation of natural gas in the United States. In addition, the Company owns natural gas liquids (NGL) systems, connecting NGL supply in the Mid-Continent and Rocky Mountain regions. With the price of energy decreasing, so has their stock price decreasing from $59 to $42/share. In addition there dividend yield has increased for two reasons. The 1st is as the stock price decreases the dividend yield increases and in the latest quarter, the board of directors voted to increase the dividend from $3.00/share for the year to $3.16/share. The current yield is now 7.4%. ONEOK has two big advantages during the current energy rout. First, about 70% of the revenue from the MLP's pipeline network comes from fee-based contracts. In the near-term, at least that gives the MLP's revenue stream significant shelter from shifts in the price of oil, natural gas, and natural gas liquids. Second, ONEOK's network of pipelines and processing plants reaches deep into underserved shale geologies such as North Dakota's Bakken. Analysts estimate that because of the high productivity in these areas, all-in break-even costs for production companies are around $45 a barrel for oil. These producers will be among the last in the shale sector to cut production. The high cost for some other fracking companies is as high as $60/barrel. I see a 10 point rise in the price of the stock as very obtainable. I am going to go on record now as saying that oil will not fall below $40/barrel during the next two months.
2014 Dogs of the Dow Performance
The Dogs of the Dow are the 10 stocks on the Dow Jones Industrial Average that have the highest dividend yield. This stock strategy was 1st popularized by Michael Higgins in 1991. It is based on the theory that blue chip companies don't alter dividends based on the price of the stock, i.e., if the price of the stock declines, the dividend amount remains constant however, the dividend yield increases. The higher yield suggests that the stock price is oversold and other things remaining equal (ceteris paribus for all my econ students), good management will eventually lead to the stock price recovering. As a result not only does the investor realize money from the higher dividend yield, but also from the increase in stock price. It's a conservative stock strategy that generally outperforms the market; but like all strategies, there are no sure things. The Dogs outperformed the market in 2013, but not 2014, however for a new investor, its a good strategy
Stock Picks Advice 11-16-2014
SANTA CLAUS RALLY
Oil is at 4 year lows, GDP for quarter 3 beat estimates coming in at 3.5% and 75% of companies exceeded profits; oh yea the market is at an all time high. Is it time for a correction? I don't think so for 2 reasons low oil and a Republican Congress. Low oil speaks for itself. Consumers have more money in their pockets after filling up their gas or oil tank (and over 70% of households heat by oil in the Northeast and it is the xmas season) and this equates to lower costs and more profits for businesses. Republicans tend to be more friendly than democrats toward businesses and what many democrats don't get, if businesses are doing well and expanding production, they need more labor and that bode wells for consumers. Simply put, when wall street is doing well so is main street. What stocks can benefit the most from low oil and republicans? Easy answer, defense and transportation intensive stocks. Raytheon, Lockheed Martin and Boeing are at 52 or near 52 week highs, and ditto with UPS, Delta and Southwest; and all indicators are pointing to a good 4th quarter. These are all stocks that I like and I think there's going to be a great Santa Claus rally.
Stock Pick/Advice 8-11-2014
Whenever I make a decision to buy or sell a stock, I always check to see what the insiders are doing. Are they buying or selling and are there multiple insiders doing the same thing. It is not illegal for insiders (generally VP level and above) to buy or sell stock of their own company, they just can't do it on proprietary information (info not yet made public). Whenever insiders trade stock in their own company, they must file a form with the SEC, and this is made public. Insiders, and most people, sell stock for a number of reasons; they may need money for a vacation, a new home or tuition money for a son or daughter. Also, they may believe that a stock is going down in price. This may be the case if a number of insiders are selling. However, people buy stock for essentially one reason, they believe it is going to up in price. Just recently, CNBC published 5 stocks that have had heavy CEO insider buying. The companies are: OPKO health,OPK; the GEO group, GEO; Kinder Moregan, KMI; Continental Resources, CLR, Intexon, Xon, and American Apparel, APP. In the past 6 months, each CEO of the above named companies has bought more than $5 million of their companies stock.
OPKO Health YTD
OPKO Health, Inc. (OPKO) is a multi-national biopharmaceutical and diagnostics company. OPKO is developing a range of solutions to diagnose, treat and prevent various conditions, including molecular diagnostics tests, laboratory developed tests (LTDs), point-of-care tests and pharmaceuticals and vaccines. From Ameritrade, "This Miami-based health care company has a market cap of about $3.7 billion, and short interest is more than 21 percent of its float. Shares are down about three percent in the past month but still up more than six percent year to date. Over the past six months, the stock has narrowly underperformed larger competitors Abbot Labs and Medtronic."
GEO Group 1 Year Chart
The GEO Group, Inc. is a real estate investment trust (REIT) specializing in the ownership, leasing and management of correctional, detention and re-entry facilities and the provision of community-based services and youth services in the United States, Australia, South Africa, the United Kingdom and Canada. As of December 31, 2013, its worldwide operations included the management and/or ownership of approximately 77,000 beds at 98 correctional, detention and community based facilities, including idle faclities and projects under development, and also included the provision of monitoring of more than 70,000 offenders in a community-based environment on behalf of approximately 900 federal, state and local correctional agencies located in all 50 states (Ameritrade). They have a PE of 22 and a very respectable dividend of 6.6%. From the chart, the stock has just had a breakout as they announced earnings and exceeded expectations.
Continental Resources 5 year chart
Continental Resources, Inc. (Continental Resources) is an independent crude oil and natural gas exploration and production company with operations in the North, South and East regions of the United States. Their earnings were in line with expectations and they have benefited greatly from the Shale boom. From the chart, they have been in a trading range since early 2013. They pay no dividends, their earnings are in line and they have respectable financials (current ratio slightly under 1 but an excellent debt to equity ratio of under .5) Before I buy this stock, I may wait until it trades near its lower range.