William Briat

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Why This Travel Company's Stock Just Keeps Going Up and Up
  • By , 9/4/14
  • tags: BA HTHT
  • Submitted by William Briat as part of our contributors program . Why This Travel Company’s Stock Just Keeps Going Up and Up The travel market in China continues to be strong in spite of the country’s economic growth stalling around 7.4%. Spending has been triggered not only by personal travel, but the country is on the verge of surpassing the United States in the area of business travel. Just take a look at the industry metrics. In 2013, total travel business spending in China came in at $225 billion, based on research by the Global Business Travel Association. In the country, you can witness the explosive growth in travel infrastructure, which includes airlines, high-speed rail transit, cars and car rentals, and hotels. In fact, China is already the world’s largest market for airlines, cars, and rail. The country is spending hundreds of billions of dollars in these areas and it’s only going to get bigger. And with more than 1.3 billion people in China alone, you know the travel market within the country will also expand. You can now travel from Shanghai to Beijing in a few hours by taking a high-speed train and based on the government’s ambitious plans, the high-speed rail network is only going to expand. In the airline sector, just ask Boeing Company (NYSE/BA) about China and you’ll realize it’s becoming the most lucrative global market for airplanes. The vehicle market is also continuing to be the largest in the world, only held back by quota restrictions placed on car sales by the government in an effort to limit pollution. With all of this added travel in the skies, on the roads, across the water, and by rail, you know the demand for hotels is also surging. After all, people need a place to rest once they reach their destination. In the Chinese hotel market, a good domestic value-oriented Chinese hotel chain is Shanghai-based China Lodging Group, Limited (NASDAQ/HTHT), which had more than 20 million members in its loyalty program at the end of June. Initially built in 2005, the reasonably priced hotels, ranging from economy to mid-scale, comprise about 1,669 hotels and 179,186 rooms across 270 cities in China as of June 30. The company had a high occupancy rate of approximately 90% in the second quarter. The chart below shows the stock currently in a sideways channel with a recent breakout, but the stock has retrenched to its old channel. The stock is holding just above its 50- and 200-day moving averages (MAs), based on my technical analysis. We could see another breakout on the horizon, but be careful, as the stock could also falter down to the $24.00 level in the short-term. Chart courtesy of  www.StockCharts.com For this company, the growth has been consistent. China Lodging has reported six straight years of revenue growth, from $37.31 million in 2007 to $688.59 million in 2013. The growth is expected to continue this year at 20.1%, followed by 14.4% in 2015, according to Thomson Financial. So considering the expanding numbers in the business travel area, investors may want to considering riding the travel wave in China with a company like China Lodging.   Read More: http://www.dailygainsletter.com/investment-strategy/why-this-travel-companys-stock-just-keeps-going-up-and-up/3355/
    Alternative Energy the Next Big Play?
  • By , 8/20/14
  • tags: TSLA PLUG BLPD FCEL
  • Submitted by William Briat as part of our contributors program . Alternative Energy the Next Big Play? Alternative energy plays have been around for decades, including Ballard Power Systems Inc. (NASDAQ/BLDP), a maker of hydrogen fuel cells that went public in 1993. The stock traded as high as $100.00 as a speculative investment opportunity in early 2000 but was unable to break into the automotive market. It is currently drifting at the $4.00 level. However, what Ballard was hoping for is now materializing for battery-powered automaker Tesla Motors, Inc. (NASDAQ/TSLA), which has built a superhighway of charging stations across the U.S. and is expanding into Europe and China. Tesla is a great story and a decent possible investment opportunity. Yet it’s not only vehicles that demand alternative sources of energy; we also see demand coming from numerous applications and, in some cases, manufacturing facilities. The demand for alternative energy can be based on wind, solar, or water and has led to the development of a strong solar industry as an investment opportunity. A small-cap that has been exciting the stock market while producing sizzling gains for speculators has been Plug Power Inc. (NASDAQ/PLUG), a developer of hydrogen fuel cells that power forklifts and other devices. The stock traded as low as $0.32 over the past 52 weeks, surging to $6.37 on Thursday morning after reporting strong results. Plug Power has been on my technical analysis screens for some time, as the stock consistently breaks higher. If interested, I would suggest investors look to this stock on weakness for a volatile speculative investment opportunity. Chart courtesy of www.StockCharts.com Another possible investment opportunity that may interest investors in the alternative energy space is FuelCell Energy, Inc. (NASDAQ/FCEL), which has a market cap of $616 million. The stock has traded as low as $1.12 and as high as $4.74 over the past 52 weeks. The current price is halved at $2.37, so there’s a potential aggressive investment opportunity here. Chart courtesy of www.StockCharts.com FuelCell is a developer of fuel cell solutions by way of its stationary “Direct FuelCell” power plants, built to deliver ultra-clean, efficient, and reliable green power. The process involves harnessing the energy of renewable biogas from wastewater treatment and food processing. Clients are varied and include commercial, industrial, government, and utility businesses. Sectors served include the food and beverage, manufacturing, hospital and prison, college and university, hospitality, utilities, and wastewater treatment areas. FuelCell says its energy produced is up to two times more efficient than fossil fuel plants. The company’s plants produce output ranging from 300 kilowatts (kW) to 2.8 megawatts (MW) and are expandable to more than 50 MW. There are currently more than 50 plants worldwide that have generated more than 300 million kilowatt hours (kWh) of electricity. FuelCell is expanding in Southeast Asia, including South Korea, Indonesia, Thailand, Malaysia, and Singapore, which the company sees as an investment opportunity. Revenues are estimated to rise 7.2% to $201.16 million in FY14 followed by 22.6% to an estimated $246.54 million in FY15, according to Thomson Financial. I suggest investors keep an eye on a company like FuelCell, as this volatile investment opportunity has tremendous upside if it can deliver results. http://www.dailygainsletter.com/investment-strategy/alternative-energy-stock-the-next-big-play/3332/
    Top Two Restaurant Stocks to Watch into 2015
  • By , 7/10/14
  • tags: NDAQ CMG MCD YUM RUTH
  • Submitted by William Briat as part of our contributors program . Top Two Restaurant Stocks to Watch into 2015 There’s simply nothing more enjoyable than a fine wine and a great meal. I’m also a beer and wings kind of guy. Over the past decade, we have seen the popularity of food shows gain steam. Triggered by the Iron Chef series, cooking shows have become mainstream reality shows with the likes of widely popular British chef Gordon Ramsey and his Hell’s Kitchen and Master Chef series. Yet the restaurant sector is not always about fine dining. It’s big business and often the most successful restaurant stocks are the fast food and casual dining chains, according to my stock analysis. The chart of the Dow Jones U.S. Restaurants & Bars Index below clearly reflects the advancement in the sector since late 2012, based on my stock analysis. Chart courtesy of www.StockCharts.com The restaurant sector is based largely on income levels and jobs. The more people work and make, the greater likelihood they will eat out. Just look at the emerging wealth levels in China and the associated expansion of restaurants in that country. A couple of my favorite non-fast food restaurant stocks are Chipotle Mexican Grill, Inc. (NYSE/CMG) and Texas Roadhouse, Inc. (NASDAQ/TXRH), based on my stock analysis. Chipotle is one of the top restaurant stocks at this time. My stock analysis indicates that the company has been taking market share away from Taco Bell, which is owned by YUM! Brands, Inc. (NYSE/YUM), and McDonalds Corporation (NYSE/MCD). For Chipotle, there was an excellent buying opportunity in October 2012, when the stock fell to a 52-week low of $233.82 and has since rallied 158%. At the current price, Chipotle is looking top-heavy, but it could be worth a look on weakness, based on my stock analysis. For more of a sit-down casual meal, a restaurant stock I like is Texas Roadhouse. The network includes more than 425 restaurants across 48 states and three countries. Whether it’s burgers, fries, salads, or seafood, there’s something for everyone here. Texas Roadhouse has been a model of consistency, reporting higher sequential revenue growth over the past 12 years, from $159.91 million in 2001 to $1.42 billion in 2013. The growth is estimated by Thomson Financial to continue into 2014 and 2015. Texas Roadhouse has also delivered on the earnings end, reporting higher earnings growth in 11 of the last 12 years, and this is expected to continue into 2014 and 2015, which presents a buying opportunity. Other restaurant stocks that are worth a look, based on my stock analysis, include The Cheesecake Factory Incorporated (NASDAQ/CAKE) and Ruths Hospitality Group, Inc. (NASDAQ/RUTH). Whatever your situation, my stock analysis suggests that there’s money to be made in the restaurant sector, especially if the economy improves and people become more confident in spending some cash. Source: http://www.dailygainsletter.com/stock-market/top-two-restaurant-stocks-to-watch-into-2015/3246/
    China Surpasses U.S. as Largest Corporate Debt Issuer
  • By , 6/18/14
  • tags: BAC FXI TLT
  • Submitted by William Briat as part of our contributors program . China Surpasses U.S. as Largest Corporate Debt Issuer China has officially overtaken United States as the world’s biggest issuer of corporate debt according to a report released on Monday by Standard & Poor’s. Is this the sign of end of America in global domination? China’s nonfinancial companies had total outstanding bank loans and bonds worth $14.2 trillion where else United States had $13.1 trillion at the end of last year. It is estimated that China’s debt level will cross $20 trillion by the end of 2018 which would make it the largest one. Standard & Poor’s estimated that 1/4 to 1/3 of the China’s current corporate debt is sourced from shadow banking sector. “This means that as much as 10 percent of global corporate debt is exposed to the risk of a contraction in China’s informal banking sector,” S.&P .analysts wrote in their report. said, estimating this at $4 trillion to $5 trillion. “With China’s economy likely to grow at a nominal 10 percent per year over the next five years, this amount can only increase.” “China’s large and still-expanding contribution to global corporate debt, the higher financial risk is causing overall corporate risk to increase globally,” the agency said. “As the world’s second-largest national economy, any significant reverse for China’s corporate sector could quickly spread to other countries.” Although China significantly avoided 2008 financial meltdown by going on a tremendous credit binge, signs of wear and tear in Chinese credit market have started and widely noticed: last year one of the largest Chinese steelmakers Shanxi Haixin Iron and Steel Group Co., Ltd. also failed to repay some debt. The S&P analysts write: “Our findings confirm that while China’s corporate companies started 2009 better off than global peers, their cash flow and leverage have worsened in subsequent years.” Conclusion: China’s share of the global corporate debt market grows ever larger.
    The Only Sector I Believe Will Deliver as Corporate America Struggles
  • By , 6/17/14
  • tags: ETFC SPY TLT
  • Submitted by William Briat as part of our contributors program . The Only Sector I Believe Will Deliver as Corporate America Struggles We are a few weeks away from the second-quarter earnings season and again, there’s a lot of hope and optimism that corporate America will be able to deliver the goods. But we also said that for the first-quarter earnings season—and prior to that, we said the same for the fourth-quarter earnings season. Before, what we saw instead was sluggish revenue growth along with companies having an easier time on the earnings front, as Wall Street does what it usually does—lowering earnings estimates to meet the changing situation, making it easier for companies to meet expectations. In the first-quarter earnings season, it was about the strain placed on companies by the bitter winter. That’s fair, but there really are no more excuses for this quarter. The nation’s jobs numbers are looking better after the country managed to recover all of the 8.7 million or so jobs lost since the start of the Great Recession. If the economy can continue to generate jobs growth at more than 200,000 new jobs monthly, then we would expect consumer spending and confidence levels to improve. Yet having said this, there’s clearly still some trepidation out there, especially with the decline in wealth levels of the middle class and below. Read More: The Only Sector I Believe Will Deliver as Corporate America Struggles
    How to Profit from RadioShack's Coming Demise
  • By , 6/16/14
  • tags: NDAQ RSH BBY WMT COST
  • Submitted by William Briat as part of our contributors program . How to Profit from RadioShack’s Coming Demise Retail is tough, especially the bricks-and-mortar end (i.e. physical stores). Blockbuster and Circuit City are examples of two major companies that plummeted into the abyss after failing to recognize the strong moves long ago towards online shopping with the growing popularity and accessibility of the Internet, based on my stock analysis . Now, it looks like we are seeing clues that yet another major retailer may soon follow suit. My stock analysis indicates that electronic retailer RadioShack Corporation (NYSE/RSH) could be the next big retailer to collapse. I can personally tell you that RadioShack is well past its prime. There’s an outlet near me, and I can honestly say that I have only been there a few times in the 14 years I have lived in the area. Shoppers looking for TVs, gaming consoles, mobile devices, and the like usually venture out to the Best Buy Co., Inc. (NYSE/BBY) that is located within a mile of this RadioShack. However, Best Buy is still not totally safe, based on my stock analysis. Under the leadership of Hubert Joly, the electronic retailer has improved, but the company continues to face massive competition from both other physical stores and online sales especially. I’m not sure I would be running to buy Best Buy at this time, and the stock market appears to be in agreement with my stock analysis, as the company is about 28% off its high. My stock analysis suggests that Best Buy is not dead, as the stores are still popular as a place to physically shop; however, the issue I see is that electronic retailing has become extremely competitive based on price. Even if you happen to find what you are looking for at the local Best Buy or via their online store, many consumers will still shop around for better prices online. Now Best Buy guarantees the lowest price, but I’m not that convinced this can prevent shoppers going elsewhere, based on my stock analysis. And in addition to the online rivals, my stock analysis indicates that Best Buy and RadioShack are also facing competition from the likes of Wal-Mart Stores Inc. (NYSE/WMT) and Amazon.com, Inc. (NASDAQ/AMZN). Wal-Mart, which I refer to as the “Death Star” of retailing, has been aggressively moving into electronics, offering very competitive pricing. If you are a Wal-Mart shopper, you will likely buy your TVs and other gadgets, such as mobile phones, there. Best Buy still has a much better selection of products, but Wal-Mart and other big-box stores, such as Costco Wholesale Corporation (NASDAQ/COST), are real threats, as my stock analysis suggests. On the online side, Best Buy needs to be mindful of the growing presence of Amazon.com, which has become a major online seller of goods, including electronics that go head-to-head with Best Buy. If deciding on whether Best Buy is a good investment at this time, I would be hesitant, given the likely demise of RadioShack. The pending destruction of RadioShack is not simply due to Best Buy, but all of the reasons I discussed above, based on my stock analysis. That means that it will still be a tough battle for Best Buy, even after RadioShack’s demise. As such, aggressive traders may look at shorting the stock on strength, or a less risky venture would be to buy put options on Best Buy and benefit from weakness. This article How to Profit from RadioShack’s Coming Demise was originally posted at Daily Gains Letter
    The Secret Mobile Stocks
  • By , 6/13/14
  • tags: GOOG T VZ CHL
  • Submitted by William Briat as part of our contributors program . The Secret Mobile Stocks Many of you may think AT&T Inc. (NYSE/T) and Verizon Communications Inc. (NYSE/VZ) are some of the best ways in the stock market to play the mobile sector, but there are other choices; it’s just that you need to leave our friendly borders. The biggest growth area for mobile is found in the emerging markets. I’m talking about such countries as Brazil, India and, the biggest one of them all, China. China has the most dominant mobile market in the world. There are over one billion subscribers and counting as the rural population comes on board. Think about it this way: there are more people on the country’s mobile network than in the U.S. and the European Union combined! What a massive market. And I think our readers should get a taste of it. Now, you may think there are dozens of mobile providers—so how will you choose? But the truth is that the Chinese government decides on how many major operators are allowed. The country currently has three major mobile providers with access to the massive market potential. Apple Inc. (NASDAQ/AAPL) has significant potential in the country, especially with its recent alliance with China Mobile Limited (NYSE/CHL). China Mobile is the biggest mobile phone operator in China, with about 785 million subscribers as of April 30. That’s a lot of business. With a market cap of around $199 billion, the company is massive. By comparison, AT&T is the largest mobile provider in the U.S. with a market cap of $181 billion, and Verizon has a market cap of $204 billion. Chart courtesy of www.StockCharts.com China Mobile has been ranked the top brand in BusinessWeek ‘s “20 Best China Brands.” The stock pays an annual dividend of $1.88 for a current dividend yield of 3.8%, based on the prevailing stock price of $49.43 on June 10. And while China Mobile is already king of the mobile space in China, the company is also expanding outside of its borders. The company announced an $880-million purchase for an 18% stake in Thailand-based True Corp. China Mobile already owns Bertrange-Luxembourg-based Millicom International Cellular S.A., a telecom operator with about eight million subscribers in Central America, South America, Africa, Pakistan, Sri Lanka, and Southeast Asia. So while China is clearly the dominant and key focus market, China Mobile is showing that it wants to expand into other emerging mobile markets via acquisitions. I think China Mobile has what it takes; it’s definitely a company to watch. First published in the Daily Gains Letter  
    Three Variables to Consider Before Investing in Gold
  • By , 4/17/14
  • tags: AIG GLD NUGT
  • Submitted by William Briat as part of our contributors program . Three Variables to Consider Before Investing in Gold While there continue to be many gold bugs out there, I’m not one of them—but I do see gold as a trading opportunity. Given what we have seen so far and looking ahead, I just don’t see gold as a buy-and-hold strategy at this time. Yes, there’s money to be made, but it’s going to be for traders only. The recent break below $1,300 an ounce and the subsequent rally to the current $1,325 level is an example of such a trade, not a new trend that’s developing on the charts, based on my technical analysis. The chart below shows the potential declines in the metal towards $1,200 and $1,100 an ounce. Chart courtesy of www.StockCharts.com Many gold supporters will counter that China is hoarding gold and India will soon pick up its buying. While I don’t argue against this, I just don’t see the yellow metal retaining its luster at this point unless a war breaks out in Ukraine and Russia intensifies its threat. If this should happen, it would drive Russia’s gross domestic product (GDP) growth lower and could result in the fragile eurozone and European economies retrenching back into a recession that just ended. I wrote about gold several weeks back as a trading opportunity on dips below $1,300. I continue to hold on to that belief, but longer-term, the yellow metal could fade and fall back towards $1,200 or less. My thinking is that inflation is nowhere to be seen in the United States, China, or Europe. (In fact, deflation may be more of a concern here.) And unless inflation picks up, the yellow metal isn’t going higher on a sustained move. That’s one of my top reasons why gold may head lower. A second reason is that the Federal Reserve is continuing to cut its quantitative easing via its monthly bond purchases. The move is meant to force yields, interest rates, and the U.S. dollar higher. If it succeeds, the stronger value of the greenback will negatively affect demand for the yellow metal, which is priced in U.S. dollars. My third reason is that, unless economic growth falters in this country, we will likely see capital move into the stock market and equities versus gold. After the strong returns in 2013 coupled with the poor start to 2014, traders are likely to be more inclined to funnel money into stocks than gold at this time. Now, if the economy does weaken and a conflict escalates in Europe, gold would then move higher under these circumstances, but its sustainability would be an issue. So the way I view it is that gold is only for traders and not for buy-and-hold investors at this time. If the three variables I talked about hold true, then investors can expect the yellow metal to inevitably trend lower. But, of course, there will be quick shorter-term trading opportunities that will still surface. This article Three Variables to Consider Before Investing in Gold was originally posted Daily Gains Letter
    The retail sector can return some amazing gains as we have witnessed since the recession ended
  • By , 4/15/14
  • tags: AEO FDO TIF KOR
  • Submitted by William Briat as part of our contributors program . The retail sector can return some amazing gains as we have witnessed since the recession ended The retail sector can return some amazing gains as we have witnessed since the recession ended—but it can also provide periods of anxiety. How the retail sector performs is dependent on many variables, including the economy, jobs, housing, consumer confidence, interest rates, and even the weather, as we witnessed this winter. There is no tried-and-tested rule on what areas of the retail sector do well. For instance, if you think discount and big-box stores always fare the best, while high-end luxury-brand stocks underperform during times of economic uncertainty, then you are likely off the mark. The reality is that the past years of massive wealth creation in the stock market and a rebounding housing market have helped to create wealth, and with this comes the desire to spend. There have been some 300,000 new millionaires created in the country in 2013, and that means a propensity to want to spend specifically on higher-end goods and services. The rationale supports why luxury stocks, such as Michael Kors Holdings Limited (NYSE/KORS) and Tiffany & Co. (NYSE/TIF), have done so well over the past few years. In the luxury retail sector space, Michael Kors continues to be one of my favorite retail sector stocks. Chart courtesy of www.StockCharts.com Meanwhile, the bottom end of the retail sector, which includes the discount and big-box stores, has provided mixed results; albeit, these stocks have made investors a lot of money. One of my favorite discount stocks in the retail sector is Family Dollar Stores, Inc. (NYSE/FDO). But the company recently reported a soft fiscal second quarter, in which same-store sales fell 3.8% in the quarter; year-over-year, sales in the quarter fell by more than six percent. Moreover, the company reported a massive shortfall in earnings after reporting a disappointing $0.80 per diluted share, way below the $1.21 per diluted share recorded in the past year. The weather’s impact accounted for only about $0.05 per diluted share, so you know the numbers are bad. Chart courtesy of www.StockCharts.com For Family Dollar Stores to report such a big miss is worrisome. The company already announced it would close about 370 underperforming stores and slow down its new store expansion. While the results are suggestive of weakness, I continue to like the stock, especially on the current price weakness. Potential investors can accumulate on additional weakness. If the economy and jobs creation continue to grow modestly, we could see the retail sector grow more this year than in 2013. Retail sales (excluding auto and food) could grow 4.1% this year versus the approximate 3.7% in 2013, according to the National Retail Federation. (Source: “NRF Forecasts 4.1% Increase in Retail Sales for 2014,” National Retail Federation web site, February 6, 2014.) The estimate assumes gross domestic product (GDP) growth of between 2.6% and three percent for the year, monthly average jobs growth of 185,000, and improvement in the housing market. If the numbers come close to the NRF’s estimates, we could see a decent year for the retail sector; albeit, you need to be selective in what stocks you add.
    How to Navigate the Ridiculous World of Social Media Stocks
  • By , 4/11/14
  • tags: AIG SOCL FB TWTR LNKD
  • Submitted by William Briat as part of our contributors program . How to Navigate the Ridiculous World of Social Media Stocks The tension in the stock market is clearly evident, especially with the NASDAQ and Russell 2000 breaching their respective 50-day moving average (MA). What we have seen in the stock market is a shift away from higher-beta growth and small-cap stocks to the perceived safety of blue chips and large-cap stocks, which I recently wrote about. Driving much of the current malaise in the stock market has been the selling in the technology groups, specifically the high-momentum stocks that attracted major buying euphoria in 2013, in spite of what were high valuations and overdone optimism. While I continue to like technology for growth investors in the stock market, I have also been quite vocal in not chasing some of the outrageous valuations that were assigned to these stocks by the stock market. With some of the brand-name momentum plays trading at more than 100 times (X) earnings, you have to step back, pause, and consider these metrics are ridiculous and undeserved. There are some analysts in the stock market coming out and advising to buy on this dip, but I’m not as convinced, especially toward the high-beta and high-valuation momentum plays in the stock market. The extreme valuation in the stock market is most evident in the social media space, which saw some impressive gains over the past few years even though many were not even making any money. These stocks are definitely not the kind that investment guru Warren Buffett would buy. Take a look at Twitter, Inc. (NASDAQ/TWTR). This has to be one of the most overvalued stocks in the stock market at this time. The company has a loyal following and is experiencing some strong revenue growth, but having to pay more than 200X its 2015 earnings is ridiculous. The stock would need to drop to below $30.00 before I would even consider giving it a look. Chart courtesy of www.StockCharts.com Social media is about vision and laying out a plan for where you think the space is headed. If you are looking for a social media play, I would stick with Facebook, Inc. (NASDAQ/FB), with its more than one billion subscribers and vast long-term upside price appreciation potential. Facebook appears to have a solid game plan in mind that is focused on the user network and how to better hook up users and make money from this. The company’s current valuation of 34X its 2015 earnings per share (EPS) and price/earnings-to-growth (PEG) ratio of 1.44 is reasonable, given its potential. We are also seeing institutional buying in the stock, which helps to confirm the story. Chart courtesy of www.StockCharts.com In the social media space, I also like LinkedIn Corporation (NYSE/LNKD), which connects people in the business world. The stock has plummeted to $162.00 and is way down from its high of more than $255.00. Yet in spite of the sell-off, I would still be hesitant and would wait for more weakness before jumping in. I would be looking at this play if the stock fell to the $130.00 level, which was last encountered in September 2012. Failure to hold here could see a move towards $100.00. Chart courtesy of www.StockCharts.com My advice to you is to wait for potentially more selling in momentum and social media stocks before you take a closer look. This article How to Navigate the Ridiculous World of Social Media Stocks was originally published at Daily Gains Letter
    The Most Lucrative Investment Opportunity in Old Economy Rail Stocks?
  • By , 4/8/14
  • tags: GOOG GSH EZA
  • Submitted by William Briat as part of our contributors program . The Most Lucrative Investment Opportunity in Old Economy Rail Stocks? We all know the importance of the railroad in linking the nation from coast to coast in its early beginnings. Railways allow for the transportation of people and goods across an expansive territory; but for businesses, it’s even more vital as an avenue to ship goods, such as oil, chemicals, and other commodities. While the North American rail system is massive, the real major growth in this area right now—and looking forward—is the colossal build-up that’s taking place across China . I’m talking about tens of thousands of miles of rail, and it’s expanding deeper into rural areas. The use of high-speed rail, especially, is gaining in demand and popularity. We are seeing high-speed rail between Beijing and Shanghai that has cut down the travel time for commuting this 800-mile route from the previous 12 hours or so to just four hours. The railroad sector in China is estimated to reach US$65.0 billion by the end of 2016, according to TransWorldNews. The freight area is viewed as lucrative, accounting for about 60% of the total value. Now we are seeing additional capital being pumped into the railroad sector after China announced a stimulus program to inject some life into the stalling economy and infrastructure. About $24.0 billion has been earmarked for adding lines in central and western China. (Source: “China Outlines Measures to Support Growth as Goal Recedes,” Bloomberg, April 3, 2014.) Besides the Chinese hotel sector, which I really like, the railroad expansion in China offers up more opportunities for investors. Considering the country has about 1.3 billion people to move plus freight, you surely understand my bullishness. If you want to try to benefit from the renaissance in China’s rail sector, a company that I like and have been following for a while is U.S.-listed, Shenzhen, China-based Guangshen Railroad Company Limited (NYSE/GSH). Besides being listed on the Hong Kong Exchange with its “A” shares listed on the Shanghai Stock Exchange, the company’s American depositary shares (ADS) are also listed on the New York Stock Exchange (NYSE). Chart courtesy of www.StockCharts.com The company currently provides passenger services, including the Guangzhou—Shenzhen intercity train service in southern China that connects these two economic and manufacturing hubs, and the Hong Kong Through train passenger service, operated in conjunction with MTR Corporation in Hong Kong. Having been to these areas, I can tell you that they are extremely busy passenger hubs, considering Guangzhou has about 15 million inhabitants alone, while Hong Kong has about eight million. Shenzhen is relatively small with just one million people; however, it’s also just a subway ride away from the main areas of Hong Kong, meaning it’s a busy stop-over point. At this time, passenger services produce the most revenue for the company. However, the company’s freight unit can transport full-load cargo, single-load cargo, containers, bulky and overweight cargo, dangerous cargo, fresh and live cargo, and oversized cargo. The fundamentals for Guangshen are attractive with the company reporting 10 straight years of revenue growth, from $409.95 million in 2002 to $2.42 billion in 2012. The growth is expected to continue with an estimated $2.75 billion in revenue in 2013, according to Thomson Financial. Guangshen reported 11 straight years of profits. This article The Most Lucrative Investment Opportunity in Old Economy Rail Stocks? was originally published at Daily Gains Letter
    Double-Digit Gain or 30% Crash: How to Profit from S&P 500 No Matter Where It Goes
  • By , 4/3/14
  • tags: NDAQ SPY SH
  • Submitted by William Briat as part of our contributors program . Double-Digit Gain or 30% Crash: How to Profit from S&P 500 No Matter Where It Goes After a miserable winter of weak economic indicators (which were mostly blamed on the weather), the warmer spring weather will be a godsend for Wall Street. Unless, of course, there’s more holding the U.S. economy back than cold winds and snow. That riddle will be answered in the coming weeks, but the long-term prognosis for the U.S. economy is a little murkier. While the S&P 500 is trading at record-highs, there is mounting evidence to suggest the U.S. economy could slow down, putting the brakes on the bull market. Naturally, it depends on who you ask and what their time frame is. Despite mounting risks, such as ongoing troubles in Ukraine, slower growth in China, and the threat of increasing rates, some predict the S&P 500 will hit 2,075 by the end of the summer. That would represent an 11.5% gain from where it currently trades and a 12.5% gain for the first half of the year. (Source: Levisohn, B., “Don’t Call It a Comeback: Dow Jones Industrials Gain 120 Points, More to Come?” Barron’s, January 7, 2014.) The double-digit growth is expected to come as a result of increased investor sentiment in the U.S. economy. For starters, investors have experienced a relatively easy ride over the last year. And over the last two years, any corrections on the S&P 500 have been shallow, short, and sweet. It’s the perfect recipe for ongoing enthusiasm and confidence for investors to pour more equity into the S&P 500. It doesn’t matter if the S&P 500 is overvalued, some investors only care that it keeps going up. And should first-quarter earnings of S&P 500 companies be even lukewarm, investors will become even more exuberant. The forecasted 12.5% gain for the first half of the year is pretty generous when you consider the S&P 500 closed out the first quarter of 2014 with a “princely” gain of 0.07%. For the exact same reason, others think our faith in an overvalued S&P 500 might be a little misguided—and a little too insular. Not enough attention, it seems, is being paid to the Chinese yuan, which recently tumbled to a one-year low against the U.S. dollar. Fear is mounting whether China, which has seen its growth slow to its weakest point since the crisis began, will pour more stimulus into the economy. In an effort to strengthen its economy, China has indicated it is more concerned with rebalancing its budget, creating jobs, and reducing pollution than meeting its gross domestic product (GDP) targets at any cost. China set a 2014 GDP target of 7.5%. But even that might be a little high. Goldman Sachs lowered its 2014 forecast for China from 7.6% to 7.3%, and cut its 2015 forecast to 7.6% from 7.8%. (Source: Harjani, A., “Goldman Sachs slashes China growth outlook,” CNBC web site, March 19, 2014.) In addition to an economic slowdown in China, there are a number of plausible factors that could pose a serious risk to the U.S. economy, including ongoing geopolitical tensions, the chance that growth will turn negative in Germany (the world’s fourth-largest economy), and European deflation. All of which could, some speculate, send the S&P 500 tumbling 30% in the second half of 2014, with an expected high of between 1,850 and 1,890. (Source: Ashton, M., “China move hints at 30% market correction,” Moneyweb, March 2, 2014.) The diverging opinions show that no one really knows how the U.S. economy is going to react over the coming months. And abject confusion rarely leads to anything positive. So where can investors turn? If you’re bullish on the S&P 500, you could look at the SPDR S&P 500 (NYSEArca/SPY) exchange-traded fund (ETF). If you think the S&P 500 is primed for a major correction, you could consider an ETF like ProShares Short S&P500 (NYSEArca/SH). This article Double-Digit Gain or 30% Crash: How to Profit from S&P 500 No Matter Where It Goes was originally published at Daily Gains Letter
    How to Profit from ECB's Attempts to End Economic Slowdown
  • By , 4/2/14
  • tags: NDAQ FXE TLT
  • Submitted by William Briat as part of our contributors program . How to Profit from ECB’s Attempts to End Economic Slowdown Remember what happened in the U.S. economy when the financial system was about to collapse? The banks weren’t lending to each other, businesses, or even consumers. The U.S. economy was in a deep economic slowdown. Investment banks like the Lehman Brothers had already collapsed and more would follow. Something had to be done or else it would be a disaster situation. When all of this was happening, the Federal Reserve stepped in to save the U.S. economy. It started to use a monetary policy tool called quantitative easing . The idea was simple: print money out of thin air and then buy back bad debt from the banks. As a result of this, the banks would have liquidity, which would eventually create more lending, moving the U.S. economy towards the path of economic growth. You can look at Japan as another example of this. In order to fight the economic slowdown in that country, the Bank of Japan took similar actions to those of the Federal Reserve—I must say, the central bank of Japan has been involved with quantitative easing for a while. The central bank of Japan wanted economic growth, which was what the Federal Reserve had hoped for in the U.S. economy. Japan’s central bank believed that by introducing quantitative easing, the value of the currency would go down and exports from the country would increase. The Bank of Japan also hoped that the quantitative easing would take the country away from the deflationary period it has been experiencing for some time. With this in mind, you will come across various arguments. Some will say that quantitative easing has worked in Japan and the U.S., and others will say it has outright failed. Regardless, as the quantitative easing was taking place in the U.S. and Japan, one phenomenon occurred: the value of their currencies declined. For instance, since March of 2009, the U.S. dollar compared to other world currencies is down roughly 10%. The Bank of Japan took a very strong stance on quantitative easing in 2012; since then, the Japanese yen is down more than 25%. What’s the point of all this? Quantitative easing may not do what it was originally intended to, but it affects the currency. While there are concerns it’s all ending now as the Federal Reserve has started to slow the pace of quantitative easing, there’s another opportunity in the making—the euro. The European Central Bank (ECB) hasn’t outright printed money like the Federal Reserve and Bank of Japan did. The economic slowdown in the common currency region continues to pick up strength. To begin with, the turmoil started in the smaller nations; now the bigger economic hubs are starting to show troubling signs. As a result of all this, it is becoming a likely scenario that the ECB will go ahead with something similar to quantitative easing. Let me explain why that is . . . Germany, the biggest economic hub in the eurozone, was opposed to quantitative easing, but as the economic slowdown continues to take a toll, we are hearing from the central bank of the country, the Bundesbank—it’s changing its tone. The head of the Bundesbank has said quantitative easing “is not out of the question” in the common currency region. (Source: Bini Smaghi, L., “Reasons to favour eurozone quantitative easing,” Financial Times, March 27, 2014.) If the ECB goes ahead with quantitative easing, it will create an opportunity for investors, one similar to the opportunity that developed in the U.S. and Japan—a declining currency. Investors may take advantage of this opportunity that quantitative easing in the eurozone might create by shorting exchange-traded funds (ETFs) like the CurrencyShares Euro Trust (NYSEArca/FXE). If the ECB goes ahead with quantitative easing, this ETF will decline in value, resulting in profits for investors. This article How to Profit from ECB’s Attempts to End Economic Slowdown was originally published at Daily Gains Letter
    How to Turn Disappointing Housing Data into Greater Returns
  • By , 4/1/14
  • tags: NDAQ DHI LEN TOL
  • Submitted by William Briat as part of our contributors program . How to Turn Disappointing Housing Data into Greater Returns Since the beginning of 2012, the U.S. housing market has been considered one of the bright spots in an otherwise uneven economic environment. Between 2007 and the end of 2011, the U.S. housing market fell 33%—since then, it has rebounded, climbing roughly 22%. While the rebound in U.S. housing has been robust, it’s still 18% below the 2007 pre-housing bubble market crash high, meaning there’s still plenty of room for growth. Unfortunately, the so-called silver lining around the U.S. housing market is starting to thin—or rather, some are finally starting to recognize there is a disconnect between the rising values of the U.S. housing market and overall housing market data. For example, existing-home sales, which represent about 90% of housing purchases, fell 0.4% month-over-month in February and 7.1% year-over-year to their lowest level since July 2012. This comes on the heels of disappointing January data, where existing-home sales fell 5.1% month-over-month—the fifth decline in six months. February new-home sales fell 3.3% month-over-month to a seasonally adjusted rate of 440,000, the lowest level in five months. To add insult to injury, the National Association of Home Builders/Wells Fargo index of builder confidence rose less than forecast in March and is close to its lowest level since May 2013. February’s pending U.S. housing market sales data is just as disappointing?though not entirely surprising. Pending home sales (excluding new construction) fell 0.8% month-over-month and an eye watering 10.5% year-over-year, the lowest level since October 2011. (Source: “February Pending Home Sales Continue Slide,” National Association of Realtors web site, March 27, 2014.) In spite of February’s pending home sales data representing the eighth consecutive month of missed forecasts, many seemed to think the decline was “unexpected.” U.S. housing market experts thought pending home sales would climb a modest 0.1%. You have to be quite the spin doctor to turn February’s housing market data into something positive—or at least be good at deflection. The National Association of Realtors said the declines over the last three months were relatively small and placed much of the blame at the feet of Mother Nature. Though, it might be fair to say that rising interest rates, higher housing prices, and a limited supply of homes might also be part of the issue; well, that coupled with high unemployment and high debt levels. If you believe the National Association of Realtors, the U.S. housing market should experience a strong rebound when the weather warms up. If you think economic indicators have something to do with the housing market, then owning a home will continue to be out of reach for many potential homebuyers. Investors who are optimistic about the housing market picking up on improving weather might want to consider some of the larger U.S. homebuilders, including: D.R. Horton, Inc. (NYSE/DHI), Lennar Corporation (NYSE/LEN), and Toll Brothers, Inc. (NYSE/TOL). However, investors dubious of the long-term impact of the weather might want to look into shorting these same housing market stocks. This article How to Turn Disappointing Housing Data into Greater Returns was originally published at Daily gains Letter
    Special Situation Stock a Boon to Carbon Fiber Investors?
  • By , 4/1/14
  • tags: NDAQ HXL BA
  • Submitted by William Briat as part of our contributors program . Special Situation Stock a Boon to Carbon Fiber Investors? We are seeing a rise in the demand for super-light and strong carbon fiber composite, which is used in multiple applications for both commercial and consumer use, based on my stock analysis . Carbon fiber is known for its high weight-to-strength ratio and as such, it has been increasingly used in the construction of numerous products that demand lighter weight without compromising strength. This is the very reason why carbon fiber composites are a favorite of the airline sector, where we are seeing a move towards building lighter fuel-efficient planes that can fly further for a lower cost while maintaining structural strength. My stock analysis notes that we are seeing the emergence of carbon fiber in numerous applications, such as sports cars, bikes, golf clubs, and other everyday uses, including sports equipment and electronic items. Sectors employing carbon fiber include aerospace, automotive, offshore drilling, infrastructure, marine, energy storage, and wind turbines. The industry numbers don’t lie. According to my stock analysis, the global carbon fiber market is estimated to grow 17% annually over the next five years to around 118,600 tons, and it is thought to be worth about $7.3 billion by 2017, according to “The Future of Carbon Fiber to 2017″ report produced by Smithers Apex. The report estimates the annual growth for carbon fiber-reinforced plastics for the period from 2012 to 2020 will be 16%. These metrics suggest a buying opportunity for carbon fiber plays that could benefit from the growth, based on my stock analysis. A special situation stock that I like in the carbon fiber market is Hexcel Corporation (NYSE/HXL), a maker of advanced composites that include carbon fibers, reinforcements, prepregs, honeycomb, matrix systems, adhesives, and composite structures. Chart courtesy of www.StockCharts.com The three major areas of focus for the company are commercial aerospace, space and defense, and industrial, as my stock analysis indicates. The biggest market for Hexcel is Commercial Aerospace, with sales of $283.6 million, or 67% of total sales, in the fourth quarter of 2013. Key clients include Airbus Group and The Boeing Company. Space and defense is the second key sector served with sales of $88.8 million or 21% of total sales in the fourth quarter. The industrial sector rounded out the final 12% of sales with clients in the wind turbines sector, based on my stock analysis. Revenues are expected to rise 10.5% to an estimated $1.85 billion in 2014, followed by 9.8% growth to $2.04 billion in 2015, according to Thomson Financial. If Hexcel can reap the benefits from the use of carbon fiber, we could see the share price continuing to edge up to new highs, based on my stock analysis. This article Special Situation Stock a Boon to Carbon Fiber Investors? was originally published at Daily Gains Letter
    Depressed Copper Prices Presenting Perfect Buy-Low, Sell-High Opportunity?
  • By , 3/28/14
  • tags: NDAQ CPER FCX
  • Submitted by William Briat as part of our contributors program . Depressed Copper Prices Presenting Perfect Buy-Low, Sell-High Opportunity? By now, you have probably noticed one phenomenon: the speculations regarding China’s growth are increasing each day. Turning on the TV or flipping through the pages of the newspaper, you’ll likely hear and read all about how the second-biggest economic hub in the global economy will tumble. No doubt, the arguments backing this argument are very credible. The Chinese economy is seeing an economic slowdown and troubles in that country continue to gain strength. For example, the Chinese manufacturing sector is stalling. In March, the HSBC Flash China Manufacturing Purchasing Mangers’ Index (PMI) declined to its lowest level in eight months. The output index declined to an 18-month low. (Source: “HSBC Purchasing Managers’ Index Press Release; Output contract at quickest pace in 18 months during March,” Markit, March 24, 2014.) We have seen a few companies in the Chinese economy default on their bonds, and there are fears that more will soon fall. The widespread speculation is that the government might not come to the aid of those companies that are in trouble. With this, investors are panicking. One of the hardest-hit asset classes due to this panic is copper . Please take a look at the chart of copper prices below. Chart courtesy of www.StockCharts.com Since the beginning of the year, copper prices are down more than 13% and investors believe demand for the red metal will continue to decrease due to the decline in manufacturing. During the past decade, China was building massive infrastructure and a significant amount of copper was needed as a result. This is not the case anymore. Copper prices have broken below a key level—$3.00—and it seems they are having a very hard time getting back to that level. In spite of all of this, I believe copper is presenting a great buying opportunity to long-term investors. Investors too often hear that they should buy low and sell high, but when the prices are low, few really take any action. Instead, investors turn too pessimistic and start to believe that prices will go lower. One of the greatest examples of this was in March of 2009, when key stock indices made their lows. Some of the well-known companies were selling for massive discounts. Those who bought, profited heavily and those who didn’t, missed out. Copper is presenting a very similar opportunity. When I look at copper, I think there’s a global need for the metal in the long run. Investors are reacting on a short-term problem. If they believe China has stopped growing, they need to realize that there are many other countries that need more infrastructure. Mind you, copper is needed in many other industries, as well. You see, due to declining copper prices, investors have sold companies that produce the red metal—companies that may turn out to be a good play in the long run. One of the copper companies I see facing significant bearish pressure is Freeport-McMoRan Copper & Gold Inc. (NYSE/FCX). This company has massive resources and is diversified in other metals, too. On top of all this, Freeport-McMoRan pays a hefty dividend. Having said that, please note that this is not a buy recommendation, but just an example of what kind of company to seek as copper prices are declining and investors show bearish sentiment towards the metal. This article Depressed Copper Prices Presenting Perfect Buy-Low, Sell-High Opportunity? was originally published at Daily Gains Letter
    S&P 500 Approaching Inflection Point; How to “Insure” Your Portfolio
  • By , 3/27/14
  • tags: NDAQ VIX SPY
  • Submitted by William Briat as part of our contributors program . S&P 500 Approaching Inflection Point; How to “Insure” Your Portfolio The winds are changing, my friends. For most of the past year, each time the S&P 500 sold off, it was a buying opportunity. I think we are at an inflection point this year, as we all know nothing lasts forever. I believe it all began to emerge last week with the Federal Reserve meeting. As long-time readers know, over the past couple of months, I’ve been warning that once the Federal Reserve begins to adjust monetary policy, this will have a negative impact on the S&P 500. With the Federal Reserve continuing to reduce its asset purchase program, investors are now calculating the length of time until it’s no longer. The reason for distress in the market is that Federal Reserve Chair Janet Yellen announced a tentative six-month timeframe upon completion of the asset-purchase program that the Federal Reserve will begin increasing short-term interest rates. Why the concern? Taking a quick look from several angles, this transition won’t be smooth. To begin with, there’s the old saying on Wall Street: “Don’t fight the Fed.” It is obvious that the Federal Reserve is dead set on reducing monetary stimulus and raising interest rates. Very rarely does the S&P 500 increase during a period of monetary tightening. This is not to say that the S&P 500 will drop tomorrow; the Federal Reserve is continuing monetary easing for the moment. But investors in the market should be aware that once the Federal Reserve begins changing its monetary stance, the S&P 500 will be affected. Another concern is that economic growth in America isn’t exactly on fire. While it’s true that we aren’t in the depths of a recession, economic growth is far from optimal. Frankly, I can’t recall a time that the Federal Reserve began tightening monetary policy when economic growth was so tepid. Then we can look to economic growth globally, which is even more worrisome. For March, China’s Purchasing Managers’ Index (PMI), tracked by Markit Economics and HSBC Holdings plc (NYSE/HSBC), was 48.1, a drop from 48.5 in February. Remember that a level below 50 signals economic contraction. (Source: “HSBC Flash China Manufacturing PMI,” Markit Economics, March 24, 2014.) Also Read: NYSE holidays 2014 In this PMI report for China, Markit Economics remarked that the slowdown in economic growth was broad-based. The company believes that Chinese leadership will enact new policy measures to try and pump up overall economic growth. What does this tell us? After trillions of dollars pumped into the financial system by central banks around the world, economic growth remains tepid. With this backdrop, can the S&P 500 continue setting all-time highs over the next year, even as global economic growth appears to be slowing and the Federal Reserve will shortly begin tightening monetary policy? I think it will be much more difficult for the S&P 500 going forward. One thing I do consider quite likely is that volatility will begin increasing. Chart courtesy of www.StockCharts.com The above chart shows the S&P 500 (black line) superimposed over the volatility exchange-traded fund (ETF) ProShares VIX Mid-Term Futures ETF (NYSEArca/VIXM). As you can see from the past, when the S&P 500 drops, the volatility index (red candlesticks) rises. This volatility index can be seen as a hedge or insurance policy against extremely fast and sharp declines in the S&P 500. Improving your financial health is all about probabilities. When you combine all of the potential problems for the S&P 500, whether it is tepid global economic growth or shifts in the Federal Reserve’s monetary policy stance, having some insurance makes sense, considering the all-time highs that the market is currently facing. This article S&P 500 Approaching Inflection Point; How to “Insure” Your Portfolio was originally published at Daily Gains Letter
    Three Stocks to Profit from New and Old Cars Alike
  • By , 3/26/14
  • tags: NDAQ BWA MGA
  • Submitted by William Briat as part of our contributors program . Three Stocks to Profit from New and Old Cars Alike Spring is finally here, but that certainly doesn’t mean corporate America will cease to use the cold weather as an excuse for abysmal corporate earnings. Throw a dart at any sector, and you’ll find CEOs blaming the weather in some capacity—well, save for the utilities companies. One sector that might be able to (on some level) justifiably blame the weather for a weak start to the year is the auto sector. Overall, U.S. auto sales were up eight percent year over year, while Canadian auto sales were up four percent. (Source: Isidore, C., “Car sales make a strong comeback in 2013,” CNN Money web site, January 3, 2014.) In 2013, U.S. auto sales topped 15 million for the first time since 2007. While auto sales of 15.6 million were below the 16.0 million forecast by analysts, it was still an encouraging sign for the auto industry. Ford Motor Company’s U.S. sales were up 11%, while Chrysler Group LLC saw its sales climb by nine percent, and General Motors Company reported a 7.3% increase. Also Read: Income The 2013 auto sales data is encouraging in light of the disappointing December sales numbers; this also happened to coincide with the start of the dastardly winter of 2014. The weak end-of-the-year auto sales sentiment skidded over into 2014. Auto sales missed both their January and February expectations. So far, 2014 has been good for global auto sales. Global sales hit record territory in February, climbing seven percent year-over-year. Auto sales in China climbed 22%, while car sales in Western Europe climbed year-over-year for the sixth consecutive month. Spain led the way with an 18% jump in auto sales. (Source: “Record Global Sales And Production In Early 2014 ? North American Output Schedules Point To Further Gains,” The Bank of Nova Scotia web site, March 20, 2014.) In 2014, both U.S. and North American auto sales are expected to climb three percent year-over-year. Global auto sales are forecast to increase 5.2% year-over-year in 2014. Economists noted that the solid auto sales numbers have come on the heels of an improving economy?though I think it would be a mistake to overlook the car loans the Detroit automakers are dangling from their rearview mirrors. First off, even though the U.S. unemployment rate has dipped to 6.7%, the fact remains that most of the new jobs are in the low-paying retail sector?not a great foundation on which to build sustained economic growth. Car loans on the other hand… Not unlike the pre-bubble U.S. housing industry, credit is easy to get?even for borrowers with…wait for it…low credit scores. Thanks to lower interest rates, borrowers of every ilk have been taking on increasing amounts of auto loan debt for roughly three straight years. At the end of 2013, the average auto loan balance was $16,769; in early 2010, auto loan debt hit a low point of $14,734. (Source: Fontinelle, A., “Americans Are Borrowing More To Buy Cars ? But Should They Be?” Investopedia web site, March 19, 2014.) Aside from 2013 being a record year for North American auto sales, the average age of a North American car still on the road also hit a record-high of 11.4 years. For investors, it might be time to take a second look at auto parts companies. Three great places to start include BorgWarner Inc. (NYSE/BWA), Linamar Corporation (TSX/LNR), and Magna International Inc. (NYSE/MGA, TSX/MG). The following chart includes these three auto parts companies, along with the Dow Jones U.S. Auto Parts index. Chart courtesy of www.StockCharts.com This article Three Stocks to Profit from New and Old Cars Alike was originally published at Daily Gains Letter
    Global Middle-Class Growth Boosting These Stocks Worldwide
  • By , 3/25/14
  • tags: NDAQ BEAV JBLU UAL
  • Submitted by William Briat as part of our contributors program . Global Middle-Class Growth Boosting These Stocks Worldwide The current drama surrounding Malaysia Airlines Flight 370 has been riveting and indicative of how the superlative growth in travel in the airline sector has encompassed Asia along with the world. For years now, since the recession hit in 2008, I have been increasingly bullish on the airline sector across the globe, but especially in the emerging markets like China, India, Eastern Europe, and Asia. Helping to drive up the demand for travel in the airline sector has been the upward push in wealth creation in many of these regions, which has given more people the ability to afford air travel. The industry stats don’t lie. The airline sector is on target for its second straight year of higher profits, according to research by the International Air Transport Association (IATA). Also Read: NYSE holidays 2014 According to the research, North America continues to be the biggest airline sector market with profits estimated at around $8.6 billion in 2014. Asia-Pacific airlines are entrenched in second place with an estimated $3.7 billion in profits, more than the $3.1 billion predicted for Europe. (Source: “Industry on Track for Second Year of Improving Profits — Rising Fuel Costs Largely Offset by Increased Demand,” International Air Transport Association web site, March 12, 2014.) Take a look at the Dow Jones U.S. Airlines Index in the chart below. Notice the beautiful uptrend since November 2012 and the bullish golden cross on the chart, based on my technical analysis. Chart courtesy of www.StockCharts.com To play the airline sector in the United States, I like discount carrier JetBlue Airways Corporation (NASDAQ/JBLU). The company was formed in 1998 and currently serves markets in the United States, Puerto Rico, and Mexico, along with 10 countries in the Caribbean and Latin American regions. In February, the airline’s key revenue per passenger miles reading came in at 2.64 million for an 82.2% load factor, up 5.2% year-over-year. If you are looking for a carrier in the airline sector with more international routes, take a look at a company like United Continental Holdings, Inc. (NYSE/UAL), which was formed from the merger of Continental Airlines and United Airlines in 2010. United Continental offers about 5,341 flights daily to more than 360 airports on six continents. Revenues are predicted to rise 3.9% to $39.75 billion this year, followed by $41.41 billion in 2015, up 4.2% year-over-year, according to Thomson Financial. United Continental is also an excellent domestic airline sector play on China, which has become the fastest-growing air travel market in the world. China’s middle-class capital wealth has been on the superlative growth path, and this is sure to continue, given the upward moves in income levels in China. In addition, as China is now an integral part of the global economy, air travel to China has been exploding upwards and this will continue. There’s news that China is looking at buying a minimum of 150 jets from Airbus Group, with Airbus also looking at building its first final assembly plant located outside of Europe in China. (Source: Hepher, T., “China in talks with Airbus on possible $20 billion aircraft deal ? sources,” Reuters, March 19, 2014.) This is a great strategy from Airbus to attract Chinese business. To play the growth in the airline sector, you can also consider buying parts suppliers, such as B/E Aerospace, Inc. (NASDAQ/BEAV) and Spirit AeroSystems Holdings, Inc. (NYSE/SPR). This article Global Middle-Class Growth Boosting These Stocks Worldwide was originally published at Daily Gains Letter
    Two Underlying Factors You Need to Consider Before Buying Stocks
  • By , 3/24/14
  • tags: NDAQ TIF MCD
  • Submitted by William Briat as part of our contributors program . Two Underlying Factors You Need to Consider Before Buying Stocks When many investors think of blue chip stocks, a common name that pops up is McDonalds Corporation (NYSE/MCD). A blue chip stock is traditionally a well-established company generating stable corporate earnings and usually paying out an attractive dividend yield. McDonald’s certainly hits the bull’s-eye on these blue chip metrics, which is especially attractive in today’s low-interest-rates world with its forward dividend yield of approximately 3.3%. The real question to ask is what is McDonald’s potential for corporate earnings growth over the next few years? There are two underlying factors that I would like to bring to your attention for consideration: 1) the financial health of the company’s primary customers, and 2) the cost of inputs. While McDonald’s may keep its blue chip status, the growth of corporate earnings remains in doubt. As we all know, both the U.S. and global economy are becoming increasingly split between higher income and lower income people. As we know, neither the U.S. nor the global economy is firing on all cylinders, as seen by the still significantly high unemployment levels. Wages remain stagnant, and while companies can increase corporate earnings through share buybacks, at some point, revenues must accelerate. The problem for McDonald’s that could really impact corporate earnings growth is that the costs of inputs, specifically for beef, are rising substantially. The price of beef in February had the largest monthly increase since November of 2003. (Source: “CPI — Item Beef,” United States Department of Labor web site, last accessed March 19, 2014.) McDonald’s is already struggling with its one-dollar menu. The company has begun shifting its marketing strategy away from the “McDouble” cheeseburger to a new burger with just one beef patty, due to the rising beef costs. In fact, many McDonald’s franchisees have moved the price of the McDouble above its intended one-dollar price point, hoping to recoup losses from the higher costs. Chart courtesy of www.StockCharts.com While this is just one factor, as an investor in blue chip stocks, it should be a consideration. We know that many Americans in the lower income bracket (who are key consumers for the fast food giant) are struggling; can McDonald’s push through higher prices to continue increasing corporate earnings? I think there is a definite limit to what the typical McDonald’s consumer will spend, and corporate earnings growth is not assured over the next few years. This is not to say that McDonald’s will do anything drastic, such as cutting its dividend yield, but if you are focused on capital appreciation, you do need to be worried that the company is being squeezed by higher input costs and a lack of ability to raise prices to customers. In comparison, I think this is why a stock such as Tiffany & Co. (NYSE/TIF) continues to outperform, since its primary customer is experiencing an increase in wealth and is beginning to spend. Corporate profits are also rising since many of Tiffany’s costs are from precious metals, which have dropped in price over the past year. This is a favorable scenario for corporate earnings growth—a customer who is becoming wealthier and input costs that are not rising substantially. When it comes to investing in blue chip stocks, make sure you know what your real goal is and your risk tolerance. Don’t simply assume or extrapolate what we’ve seen over the past couple of years will continue forever. McDonald’s has had a very strong move over the past decade, much better than many other blue chip stocks, and I would certainly look to take some profits ahead of potential corporate earnings headwinds and move into areas that offer greater possibilities for growth. This article Two Underlying Factors You Need to Consider Before Buying Stocks was originally published at Daily Gains Letter
    Why Consumers Have Been Increasing Spending in This Sector Since 1994
  • By , 3/24/14
  • tags: NDAQ WOOF PETM MWIV IDXX
  • Submitted by William Briat as part of our contributors program . Why Consumers Have Been Increasing Spending in This Sector Since 1994 The U.S. economy is weak. Everyone knows it. We just don’t know where to lay the blame. Businesses on the S&P 500 have been using the weather as an economic scapegoat. And not a small number, either. Between January 1 and March 12, 2014, 195 companies on the S&P 500 used the term “weather” at least once in their conference calls. This represents an 81% increase over the 108 companies that mentioned the weather in their conference calls in the same period last year. (Source: “How many S&P 500 companies have commented on the weather?” FactSet, March 14, 2014.) And if you want to not-so-subtly warn investors things aren’t looking too good, just blame the weather. The estimated earnings growth rate for the S&P 500 this week is an anemic 0.3%. That’s down slightly from a growth rate for the S&P 500 stocks of 0.4% last week, but it’s like night and day when compared to the December 31, 2013 Q1 earnings growth rate forecast of 4.4%. Not a big surprise when you consider 84% of all companies on the S&P 500 that have issued earnings-per-share (EPS) guidance have revised it lower. That’s well above the five-year average of 64%. And, for comparison’s sake, during the first quarter of 2013, 78% of companies on the S&P 500 did so. Also Read: NYSE holidays 2014 Weather aside, it’s quite possible S&P 500 companies aren’t doing that well because the U.S. economy just isn’t gaining traction. Unemployment remains high, wages are stagnant, consumer confidence levels are down, personal debt levels are up, and housing and auto sales have been disappointing. Even though February retail sales were up 1.5% year-over-year, it was the fourth straight year of declining February sales and the second-worst reading since February 2009, when the U.S. economy was in the midst of the economic meltdown. Yet, in spite of the bleak economic outlook, disappointing first-quarter results, and a financially tapped consumer, Americans are not willing to cut corners when it comes to their pets. According to the 2013—2014 APPA National Pet Owners Survey, 68% of U.S. households own a pet, which translates into roughly 82.5 million homes. The first time the survey was conducted in 1988, 56% of U.S. households owned a pet. (Source: “Pet Industry Market Size & Ownership Statistics,” American Pet Products Association web site, March 2014.) Today, there are an estimated 95.6 million cats and 83.3 million dogs currently being pampered in the U.S. There are also 158.6 million fish, 20.6 million birds, 18.1 million small animals, 11.6 million reptiles, and 8.3 million horses. According to the American Pet Products Association, we spent a record $55.7 billion on the pet industry in 2013; that represents a roughly four-percent annual increase every year since 1994, when the data was first tracked. And pet industry spending is expected to continue to rise five percent to $58.51 billion in 2015. Food accounted for the biggest part of spending in 2013—$21.57 billion. Other pet industry service spending includes $14.37 billion for veterinary care, $13.14 billion for supplies and over-the-counter medicines, $2.23 billion for live animals, and $4.41 billion for other services. Those “other services”—including grooming, boarding, training, and pet-sitting?showed the largest annual gain of 6.1%. Where should investors wanting to take advantage of the U.S. pet industry turn? S&P 500-listed PetSmart, Inc. (NASDAQ/PETM) is the top specialty retailer of pet food and supplies in the U.S. Another leader in the U.S. pet industry is VCA Antech, Inc. (NASDAQ/WOOF); the company runs more than 600 veterinary hospitals and diagnostic labs in 41 states and three Canadian provinces. Finally, two big pet industry leaders that should perform even better when the economy gains traction are MWI Veterinary Supply, Inc. (NASDAQ/MWIV) and IDEXX Laboratories, Inc. (NASDAQ/IDXX). This article Why Consumers Have Been Increasing Spending in This Sector Since 1994 was originally published at Daily Gains Letter
    The Chart That Will Make You Bullish on Gold
  • By , 3/21/14
  • tags: NDAQ GLD NUGT GDX RIO
  • Submitted by William Briat as part of our contributors program . The Chart That Will Make You Bullish on Gold Since the beginning of the year, gold bullion has gained a significant amount of attention. The precious metal has increased about 14% in value and has become one of the best-performing asset classes. Key stock indices, on the other hand, are down. With this rise in gold bullion prices, we see an increasing amount of pessimism. In 2013, we heard the metal was a slam-dunk sale. Now, the warnings are a little tamer, but we are told $1,200-an-ounce gold bullion is very possible. The mining companies that have increased in value will see a pullback. Before going into further detail, please look at the chart of daily gold bullion prices below. Chart courtesy of www.StockCharts.com As I have written about in these pages before, I am bullish on gold mainly because of one fundamental reason: the demand for the yellow metal is much higher and constraints to its supply are increasing. But this isn’t all. When I look at the charts, my bullish convictions for higher gold bullion prices become stronger. Also Read: NYSE holidays 2014 Ask any technical analyst; they will tell you to treat the trend as your friend, follow it until it breaks. Since late 2012, gold bullion prices were trending in a downtrend (black line on the chart above). This changed. In June of 2013, we saw the precious metal’s prices decline below $1,200, and then in December, they tested those levels again. As this happened, there was one phenomenon no one talked about: there was no follow-through—meaning gold bullion prices never declined below their lows. Instead, there was a formation of the chart pattern called the “double bottom.” In February of this year, that trend was broken. At the same time, we saw gold bullion prices break above their 50- and 200-day moving averages. This is very bullish for the precious metal. It tells us that the long-term and short-term trends are changing directions. In addition to all this, we see the momentum is in the hands of the bulls. This is confirmed by the moving average convergence/divergence (MACD) indicator. As gold bullion prices were making a double bottom, we saw the MACD trend higher—this was another bullish case in the making. Going forward, I expect a few things to happen: with increasing pessimism, the price might decline a little, but there’s a significant amount of support available around the $1,350 and $1,300 levels. Gold bullion prices still have quite some way to go to the upside; investors who are looking to profit should act accordingly. The choices are many. If they plan to attain leveraged gains by buying into mining companies, know that not every company is the same. Look for companies that have reserves and resources in stable countries with declining production costs. This article The Chart That Will Make You Bullish on Gold was originally published at Daily Gains Letter
    Geopolitical Events Boosting These American Stocks
  • By , 3/20/14
  • tags: NDAQ SWC SPPP
  • Submitted by William Briat as part of our contributors program . Geopolitical Events Boosting These American Stocks When it comes to Wall Street, oil isn’t the only commodity investors are seeking stable supplies of—you can add platinum to the list. Besides being home to great beaches, South Africa is also home to the vast majority of platinum. South Africa produces roughly 80% of the world’s total demand for platinum. Together South Africa and Russia (both geopolitical hotspots) mine 90% of the world’s annual supply of the precious metal, which is around 130 tonnes per year, equivalent to six percent of the world’s annual gold production. Labor strife that has gripped South Africa over the last two years at the country’s three biggest platinum mines has brought the industry to its knees, with the global output dropping by more than 40% in just a few weeks. Also Read: Wealth Creation Rising production costs (South African platinum is located in deep subterranean seams) and wage demands have led to a number of labor strikes. The first one to make us sit up and take notice occurred in August 2012, when South African police shot and killed 34 miners. More recently, wage strikes at some of South Africa’s biggest platinum mines are almost into their second month. With no end to the labor disputes in sight, many are calling on the government to step in and usher miners back to work. The sense of urgency comes with stockpiles of platinum at the largest producers expected to last only until the end of March., after which, platinum prices could move significantly to the upside—or rather, much more than they already have. Platinum prices are up 6.6% since the beginning of February and are currently hovering around $1,470 per ounce. Now granted, the strikes in South Africa will end and the platinum will once again be freed from the ground. But it could take some time to get everything up and running. Not only will South African platinum mining companies see their earnings get hammered after weeks of downtime, but it will also take time to get operations back on track. And just because they’ll start mining again doesn’t mean the cash will start flowing. That’s because it can take up to six months of processing to produce a single troy ounce of platinum. Whereas gold and silver are in demand by investors and for luxury goods like jewelry, platinum and the platinum group of metals (PGM, including ruthenium, rhodium, palladium, osmium, and iridium) are also used in a wide variety of industries. The automotive industry uses platinum in catalytic converters and fuel cells. It’s also used in hard disks, anti-cancer drugs, fiber-optic cables, LCD screens, fiberglass, eyeglasses, fertilizers, paints, pacemakers, petroleum, glass, and electronic components. Jewelry and watches account for roughly 40% of all platinum demand. With buyers losing faith in South Africa and remaining dubious of Russia, many are turning to Canada and other geopolitically stable countries in search of platinum. Stillwater Mining Company (NYSE/SWC) is the only U.S. producer of palladium and platinum, and the only significant primary palladium producer in the world. Wellgreen Platinum Ltd. (TSX/NKL) is a Canadian exploration and development company. The company’s Wellgreen project (in the Yukon territory) is the third-largest undeveloped PGM resource outside South Africa or Russia. For many buyers, aside from the sheer volume of platinum available, South Africa was desirable because the low wages kept prices down. That may no longer be the case. And even when the striking miners head back to work in South Africa, global attention will still be focused on safer sources of platinum, which includes those U.S.- and Canada-based companies listed above. This article Geopolitical Events Boosting These American Stocks was originally published at Daily Gains Letter
    How a Giant Chinese Tech IPO Will Benefit These Other Top Stocks
  • By , 3/20/14
  • tags: NDAQ GOOG YHOO FB TWTR
  • Submitted by William Briat as part of our contributors program . How a Giant Chinese Tech IPO Will Benefit These Other Top Stocks As many people know, one of the hottest areas in the market right now is technology stocks . Investor sentiment has continued piling into this sector—with good reason in some cases. The danger for investors is when investor sentiment becomes too bullish—technology stocks might be entering this territory. The latest of the technology stocks that has announced it is going public is the Chinese powerhouse Alibaba Group. Started in 1999 by a former English teacher, the company has now grown to be the largest e-commerce company in China and will soon be a public firm with a valuation of more than $140 billion. Also Read: Wealth Creation While it can be said that investor sentiment has become too enamored by recent technology stocks such as SnapChat, which doesn’t generate any revenue or earnings, Alibaba is a real business producing billions of dollars in revenue. For American investors, the biggest beneficiary of Alibaba has been Yahoo! Inc. (NASDAQ/YHOO). Over the past year, as rumors continued to circulate that Alibaba would go public, investor sentiment has become ever more bullish on Yahoo!, since the firm owns 24% of Alibaba. This could be a “buy on rumor, sell on fact” event, as investor sentiment has pushed Yahoo! to multiyear highs amid a backdrop of both positive investor sentiment towards technology stocks and a buildup in anticipation for the initial public offering (IPO) of Alibaba. If investor sentiment continues to be overly bullish for technology stocks in general and Alibaba specifically, what will happen is that the IPO price and the subsequent trading activity will capture a huge premium to the current business environment. This is great for Yahoo! at the moment, but if the current share price already incorporates the high valuation of Alibaba, what’s the next catalyst for Yahoo! itself? I think it’s questionable, considering the firm’s actual business model is having trouble growing revenue at all and competition continues to increase. With a forward price-to-earnings (P/E) ratio of almost 22 and trading at over eight-times its sales, I think these are pricey metrics considering that the fundamental business is not exactly on fire. Looking at other technology stocks, there appear to be several favorable comparisons where I would think about taking profits in Yahoo! and reallocating these funds into firms that are actually increasing revenue at a significant pace. Domestically, an obvious competitor is Google Inc. (NASDAQ/GOOG), which has a forward P/E ratio of over 19 and trades at 6.5X sales. While revenue has decelerated, it’s certainly growing at a faster rate than Yahoo! An international opportunity that has recently emerged is in Yandex N.V. (NASDAQ/YNDX). This is a leading search engine in Russia that has seen its shares drop due to the crisis in Ukraine. However, the company is growing revenue at almost 40% year over year, and it trades at a lower multiple than Yahoo! An important point to consider is where investor sentiment is for various technology stocks, and try to find opportunities when a stock becomes too bullish or too bearish. By taking advantage of investor sentiment moving to the extremes, one can look to take profits from technology stocks that have moved up rapidly and reallocate their capital to technology stocks that are experiencing short-term downdrafts. As long as the long-term fundamentals remain sound, short-term aberrations can become great long-term opportunities. While I believe Alibaba will be a great IPO success story for Yahoo! over the short term, once people begin to look at the underlying business again, it is possible that investor sentiment might begin to weaken from the lofty highs currently placed on that stock. This article How a Giant Chinese Tech IPO Will Benefit These Other Top Stocks was originally published at Daily Gains Letter
    How to Profit from the Two Things Consumers Can't Do Without
  • By , 3/19/14
  • tags: NDAQ XLU VDC
  • Submitted by William Briat as part of our contributors program . How to Profit from the Two Things Consumers Can’t Do Without Another month of cold weather is being blamed for the most recent weak consumer confidence numbers. Consumer confidence levels for the Thomson Reuters/University of Michigan preliminary index fell from 81.6 in February to 79.9 in March—the lowest level in four months. (Source: Lange, J., “U.S. consumer sentiment slips; bad weather eyed,” Reuters, March 14, 2014.) Economists had forecast March consumer confidence levels to climb to 82. Instead of celebrating a barely there increase, economists are waxing eloquence on the two-percent decline and two-point gulf between expectations and reality. In spite of living in North America and having to deal with the cold winter weather that affects most of us, analysts still expected consumer confidence to improve in March . . .  and they seem surprised that it didn’t. Analysts basically think consumers are too depressed by the weather to shop. This would, of course, bolster their opinion that the U.S. economy is only temporarily stuck and sunnier skies will prevail. Also Read: NYSE holidays 2014 But who can say, really? March’s weak consumer confidence numbers mark the eighth miss in the last 10 months. In all of 2013, consumer confidence numbers beat forecasts only three times. Maybe the weather can’t take all the blame. In spite of the winter storms, the average U.S. temperature for January was normal, with the warmer West Coast weather offsetting the cooler East Coast weather. The average was 30.3 degrees Fahrenheit, which is only 1/10 of a degree below normal for the month. Things weren’t much different in February and consumer confidence levels actually increased to 81.2 from a projected 80.6. (Source: “National US temperature for January normal despite winter storms,” The Guardian, February 13, 2014.) I think the depressed consumer confidence levels are more connected to weak economic indicators and tensions along the Ukraine/Russia border. Even though the U.S. unemployment rate has improved over the last year—currently sitting at 6.7%—it comes as a result of an increase in low-wage-paying, part-time retail jobs. The underemployment rate is still sitting near 13% and the long-term unemployed rate is at 2.3%. Retail sales, which account for about 30% of consumer spending, rose 0.2% in February after two straight months of declines and a 0.4% drop in January. Retail sales are expected to increase in April and May as warmer temperatures roll in. (Source: “U.S. retail sales rise a bit more then expected in February,” Reuters, March 13, 2014.) But with a rough jobs market and stagnant wages, it’s tough to see how sunny skies will translate into strong retail sales. That is, unless Americans do so at the expense of falling further into debt—but that’s not real economic growth. As a result, it’s not a real surprise to see consumer confidence levels on the decline. Where does that leave investors? Whether it’s cold or hot outside, there are two things Americans can’t do without—utilities and consumer staples. The best way to decrease risk and diversify your holdings in either sector is through exchange-traded funds (ETFs) like Utilities Select Sector SPDRA (NYSEArca/XLU) and the Vanguard Consumer Staples ETF (NYSEArca/VDC). This article How to Profit from the Two Things Consumers Can’t Do Without was originally published at Daily Gains Letter

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