Lombardi: Stock Market Commentary & Forecasts, Financial & Economic Analysis Since 1986

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.

Why I’m More Excited About the Food Sector Than Apple’s Latest Products

By for Profit Confidential

This Food Company More Deserving of Your Attention Than AppleWhile the entire world was waiting for and anticipating the next-generation “iPhone 6” from Apple Inc. (NASDAQ/AAPL) on Tuesday, General Mills, Inc. (NYSE/GIS) announced it was acquiring organic and natural food company Annies, Inc. (NYSE/BNNY).

Okay, the launch of the iPhone 6 was clearly more exciting, but so what? The launch was more hype than substance, unless you consider a new and bigger iPhone earth-shattering.

But I’m not here to talk about Apple. What I will discuss is the food sector, especially the makers of organic and natural food products, which appear to be in play, based on my stock analysis.

If you owned Annie’s before it was acquired by General Mills, congratulations on your 38% jump in stock price on the news! Go treat yourself to some fine wine and a great meal. If you didn’t get to profit from this deal, there are still some stocks in the same sector as Annie’s that have great potential.

One small-cap natural food products company that I like based on my stock analysis, and this is one that I have been covering for a few years now, is Inventure Foods, Inc. (NASDAQ/SNAK). The small company produces and markets specialty food brands, concentrating on the snack food market. Some of its product lines include nutritional and natural snacks.

Inventure Foods sells products under its own brand and other licensed brands, including the following: “Boulder Canyon Natural Foods,” “Jamba,” “Seattle’s Best Coffee,” “Rader Farms,” “T.G.I. Friday’s,” “Nathan’s Famous,” “Vidalia Brands,” “Poore Brothers,” “Tato Skins,” “Willamette Valley Fruit Company,” “Fresh Frozen,” and “Bob’s Texas Style.” The company’s manufacturing plants are located in Arizona, … Read More

Why These Housing Stocks Are Still Attractive

By for Profit Confidential

Why I Still Believe Housing Is AttractiveIn spite of some doom and gloom scenarios for the housing market, so far it has been full steam ahead as the sector continues to blaze along since bouncing out of the Great Recession in 2008.

With interest rates and mortgage rates continuing to be relatively low, and with the jobs market producing more than 200,000 new jobs monthly, the ingredients are there for continued strength in the housing market, which I view as a good buying opportunity.

Yes, while it’s true much of the easy money has been made in the housing market, there are still opportunities to squeeze some profits out from homebuilder stocks.

Housing starts and building permits continue to be fairly strong with more than one billion annualized units for each segment in July.

As I previously said, the low rate environment and jobs growth will continue to provide the catalyst for growing the housing market. And I expect this to hold for at least another year or so until rates move higher to levels that will hurt the housing market.

One of the top housing market stocks is Toll Brothers, Inc. (NYSE/TOL), which just produced an impressive fiscal third quarter (ended July 31) in which revenues grew at 53% year-over-year to $1.06 billion. The company delivered 1,444 units at an average of $732,000. Toll also drove earnings up 110%, more than double the prior year’s same quarter.

The company ended with a strong backlog of $3.1 billion and 4,204 units at an average of $737,000. Currently trading at 15.56X its FY16 earnings per share (EPS) and a price-to-earnings growth (PEG) ratio of 0.42, the … Read More

This Luxury Retailer Now Affordable?

By for Profit Confidential

Should You Take This Opportunity to Buy This Luxury StockThe top one percent are spending and don’t really care about the other 99%. For the retail sector and particularly the luxury-brand stocks, this is welcome news.

High-end jeweler Tiffany & Co. (NYSE/TIF) pleased investors and Wall Street on Wednesday after reporting better-than-expected results and increasing its fiscal 2015 earnings estimate for the second time. Consumers in the Americas, Asia, and Europe are spending in the retail sector.

While Tiffany is now near the top of its 52-week range and near a fair valuation, there are a couple of other luxury-brand stocks that may be worth a look.

In the luxury apparel and accessories area, Coach, Inc. (NYSE/COH), a former darling of Wall Street, is struggling just above its 52-week low. While there could be a speculative contrarian buying opportunity with Coach, the anemic revenue outlook would make me think twice. Fiscal 2015 revenues are estimated to contract 11.4% and rebound a mere 3.3% in fiscal 2016. These are not good metrics; unless you want a speculative trade, I would be looking elsewhere in the retail sector.

For a much better luxury apparel buying opportunity in the retail sector, you could take a look at a stock like Michael Kors Holdings Limited (NYSE/KORS), which is my favorite in this area. The stock is currently struggling and down 18% from its 52-week high of $101.04 on February 25, 2014, which suggests it could be a good buying opportunity

Concerns of slower growth rates have been hurting the stock, but the reality is that the growth continues to be excellent, especially for a company with a market cap of more than $16.0 … Read More

My Poor Italy

By for Profit Confidential

Why This Stock Market Will Fall Like a RockThis morning came the news that Italy, a country very close to my heart (just look at my last name) and the third-biggest economy in the eurozone, is back in recession.

And Germany, the biggest economy in Europe, saw factory orders in June drop by the most since 2011.

While the financial media has taken the focus off the eurozone over the past couple of years, I have continued to tell my readers about how bad conditions are there. I have the pleasure to travel to the eurozone several times a year. I can tell you first-hand how people there are suffering. Outside of Germany and the smaller, rich countries, jobs in the eurozone are extremely hard to find and wages are very soft.

The European Central Bank’s move to bringing its overnight deposit rate to negative is obviously not having its desired effect of getting banks there to lend out more money. Many eurozone banks are in serious financial trouble. You can’t force a bank to lend money to its customers if the bank is concerned about its own financial health.

With about half of the S&P 500 companies deriving revenue from Europe, it is no wonder American corporations are having trouble increasing revenue. Last week, the eurozone introduced wide-ranging sanctions against Russia because of the Ukraine situation. Russia is Germany’s largest trading partner in Europe—obviously, eurozone companies will feel the pain of the sanctions imposed on Russia.

In the U.S., we were already dealing with an overpriced stock market—a market characterized by heaving corporate insider selling, too much bullishness among stock advisors, the VIX Index saying investors … Read More

How It Pays to Play the Momentum Stocks

By for Profit Confidential

Why Making This Mistake Was a Good MoveI have been following social media company Twitter, Inc. (NYSE/TWTR) since the stock debuted to heightened fanfare on November 7, 2013. The hyped-up momentum play spiked to just over $74.00 on superlative enthusiasm and pure insanity, prior to its subsequent sell-off.

I must admit that Twitter intrigued me as a trade but only if the stock price broke below $30.00, as I have suggested in these pages before. Well, on May 7, Twitter declined to a low of $29.51.

For those of you who picked up some shares at this low, it was the correct decision; Twitter surged 25% on Wednesday morning on news that the company had easily beat on revenues and earnings estimates. Revenue growth was impressive at 124%, as the company was able to monetize its user base just as Facebook, Inc. (NASDAQ/FB) has done.

Twitter Inc Chart

Chart courtesy of www.StockCharts.com

Twitter grew its user base at a faster pace than the stock market expected and better yet, it was able to make advertising money from these efforts, which is what you want from social media stocks.

With these results, we are seeing numerous rating and price target upgrades for Twitter from Wall Street, which has been anxious to do something in an otherwise boring stock market.

As a trader in the stock market, I would be looking to buy Twitter on downside weakness—after all of this hoopla has faded. At this time, the valuation continues to be obscene.

The reality is that what happened with Twitter indicates the strong upside potential in Internet stocks that can be achieved for aggressive traders in the stock market. You may make … Read More

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