Buying Opportunity
A buying opportunity in a stock occurs when a short-term fluctuation allows for the security to be mispriced. Value is relative to an investor’s own criteria. An example is a one-time problem, such as a strike at a mine, which results in the shares of the firm being sold off. This selloff might offer a long-term investor the opportunity to buy shares of the mining company at a favorable value. Buying opportunities occur for various reasons, but the goal of any investor is to accumulate assets at favorable levels. If an asset is selling at below market value and an investor believed that the business would recover, this would be a great example of a buying opportunity.
Denny’s Serves Up Grand-Slam Returns
By George Leong, B.Comm. for Profit Confidential
We all know that McDonalds Corporation (NYSE/MCD) is the reigning king of the fast food sector and one of the top performers over the past decade, based on my stock analysis.
In fact, my stock analysis suggests that McDonalds’ rivals are trying to emulate what is working at the company rather than compete against the seller of the iconic “Big Mac.”
Burger King Worldwide, Inc. (NYSE/BKW) may be pursuing a similar strategy to McDonalds’ by diversifying its menu offering with new items and value-conscious options, based on my stock analysis.
Yet while Wall Street focuses on McDonalds and its burger-oriented rivals, my stock analysis reveals that a stock that I feel offers better valuation and potential upside is Denny’s Corporation (NASDAQ/DENN). With a market-cap of $552 million, Denny’s is dwarfed by the $102-billion market cap of McDonalds, but that doesn’t mean there isn’t a buying opportunity with Denny’s, based on my stock analysis.
In fact, Denny’s is up 50% over the past 52 weeks and has easily outperformed the S&P 500’s advance of 26.8% and McDonalds’ 11.8% gain, according to my technical analysis.
Chart courtesy of www.StockCharts.com
Denny’s is best known for its “Grand Slam” breakfast offerings. The company has gone through a major structural reorganization in which it sold many of its stores to franchisors, thereby reducing its own operating costs and collecting fees instead. As of March 27, 2013, 1,525 of the company’s 1,689 restaurants were franchised. The end results have been stronger operating numbers and a steady rise in the company’s share price, according to my stock analysis.
About 98 restaurants are situated in Canada, Costa … Read More
A Real “Made in the USA” Retail Stock That Supports Your Portfolio, Not Sweatshops
By George Leong, B.Comm. for Profit Confidential
The recent devastation of the garment building collapse in Bangladesh was both horrific and a reminder that many of these sweatshop operations that make your clothing are not operating according to American standards. But the fact is that many of these operations in Bangladesh and other low-cost labor markets in Asia produce the clothes you buy; this is what allows prices to be cheap for American buyers and others. The low cost of production also allows companies to reap more earnings.
Yet while the collapse of the factory building was a total shock, the underlying issues of major apparel makers using cheap labor in these poor countries have been going on for decades as a way of improving earnings.
In the pursuit of earnings growth, The Gap, Inc. (NYSE/GPS) and Wal-Mart Stores, Inc. (NYSE/WMT) have long been accused of turning a blind eye to the extremely poor working conditions of the third-party factory workers who produce cheap goods for consumers here and abroad. The reason is the need to deliver earnings.
The reason why the conditions are largely ignored is simply a matter of cutting costs and increasing earnings. Consumers in the richer countries want cheaper clothing and goods. Companies want lower costs and higher earnings. The demand for low costs places immense pressure on the third-party manufacturers to run a very tight operation, which is why the incident in Bangladesh was allowed to happen and why similar incidents will continue to occur as long as earnings are key. (Read “Market Near Record High, but Where’s the Revenue?”)
For those who want to support the local manufacturing … Read More
Why Greed Is Not Your Friend When It Comes to Investing
By George Leong, B.Comm. for Profit Confidential
I just had lunch with a friend who previously was an active investor. He was there right in the thick of it during the Black Monday crash in 1987 and the Internet bubble in 2000.
He made tons of money in the stock market in a short period of time, but his actions were driven solely by excess greed, refusing any advice to lighten his positions. He had a sense of invincibility and felt the stock market was heading much higher.
In 2000, when the NASDAQ traded above 5,000, my overconfident friend was so extremely bullish on the stock market that he decided to take out a reverse mortgage on his parent’s home to play stocks. He promised great returns, early retirement, and a new lifestyle.
The problem was he was investing in speculative issues that had minimal history and financial success. He thought the NASDAQ could rise another 30%.
At that level, he was thinking he would make over a million dollars, pay back the mortgage, and quit his day job to become a day trader.
Luckily, he did not quit his day job, as it’s the only thing he had left after the stock market imploded in early 2000.
New bubbles come and go. Each one is different and driven by different factors—the only commonality is greed.
We are hearing some whispers that this current stock market is bubble-like. While I’m not fully in agreement, I do feel the rally in the stock market to record highs has largely been driven by the Federal Reserve’s easy monetary policy, as is the case with stock markets around the … Read More
Why There’s No Stopping the Internet Sector
By George Leong, B.Comm. for Profit Confidential
The stock market is attracting some serious buying euphoria toward Internet stocks, especially social media and Internet information providers.
The key to success for these companies that provide information and services online is the viewership and ability of the site to generate revenues and drive profits.
Other than Google Inc. (NASDAQ/GOOG),one of the most widely followed Internet stocks is Facebook, Inc. (NASDAQ/FB), which just announced it had 1.1 billion subscribers and is beginning to garnish revenues from the high-potential mobile advertising business. (Read “Facebook Does an About-Face: Set to Move Higher?”)
Facebook is attracting buyers, as its stock price may be on the verge of breaking $30.00, a level not achieved since February 1, 2013. Facebook is one of those Internet stocks that are an excellent investment, especially if it can continue to take advantage and monetize its massive subscriber base.
In the travel sector, one of the top Internet stocks is online travel operator priceline.com Incorporated (NASDAQ/PCLN). But with its share price above $700.00, the stock is out of reach for many.
In the online restaurant area, one of the leading Internet stocks is OpenTable, Inc. (NASDAQ/OPEN), which is still classified as a small-cap that I believe has excellent price appreciation potential.
One of the newer Internet stocks is Yelp, Inc. (NASDAQ/YELP), which operates local business sites across many cities and countries and links consumers to local businesses. Since debuting on March 2, 2012 at $22.00, the stock has gained 50%, including a 25% spike on Thursday after reporting an excellent quarter that displayed superlative growth.
In the first quarter, Yelp generated revenues of $46.1 million, up … Read More
Buyer Beware: Stocks May Be Signaling More Weakness to Come
By George Leong, B.Comm. for Profit Confidential
There are growing whispers a market correction is on the horizon. Guess what: it’s already happening, and it could worsen to the point that we see a major decline, based on my technical analysis.
Over the past five sessions to April 18, some profit-taking has emerged, which is what I was expecting and hoping for. My technical analysis was that the previous rate of the advance was not sustainable.
And as expected, the higher-risk assets, including small-cap and technology stocks, are being dumped in favor of blue chips and S&P 500 stocks.
Just take a look at the chart of the S&P 500. The index is facing tough resistance to move higher and could retrench lower if a sustained upside break is not achievable, based on my technical analysis.
The blue ovals on the chart below also suggest a possible retrenchment in the coming months due to the seasonal effect that stocks deliver the best results from November to April, according to the Stock Trader’s Almanac.
If this also turns out to be the case this year, you will need to be careful and plan for this. In other words, look at taking some profits off the table or using put options as a hedge.
Chart courtesy of www.StockCharts.com
A look at the higher risk shows carnage. The Russell 2000 is down a whopping 5.3% in April, while the NASDAQ has contracted by 3.1%. The Dow is holding tight, down just 0.3%.
My technical analysis indicates that while investors have predominately been bullish since the start of the year, investor sentiment is pausing with neutral readings in four … Read More
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