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

Company

A company is a limited liability legal entity whose purpose is to produce a product or deliver a service to the marketplace for profit. A company is considered to be the next step in the evolution of the sole proprietorship.

 

 

My Top Energy Pick with Market-Defying Momentum

By for Profit Confidential

My Top Energy Stock Pick for This Slow-Growth MarketThe strength in this market is with oil, as both the spot price and oil stocks are holding up very well.

While the broader market has been experiencing a well-deserved price retrenchment, both large- and small-cap oil stocks have been on the comeback trail. The price strength is helpful as speculative fervor continues to come out of equities. The performance illustrates how helpful sectoral portfolio diversification can be when asset prices fall.

ConocoPhillips (COP) is not expensively priced at approximately 9.5 times trailing earnings. The stock sold off significantly at the beginning of the year but has since recovered nicely. Currently yielding just less than four percent, this oil and gas story is similar to the other big integrated energy companies: it isn’t about production growth but more about income for investors.

One company we’ve looked at several times in these pages is Kodiak Oil & Gas Corp. (KOG). This is a Bakken oil play that’s really doing well. This stock was consistently expensive, being a highly liquid favorite of institutional investors, but earnings have caught up to the share price and the story is still intact. This junior energy producer still has a very bright future. The company’s stock chart is featured below:

 Kodiak Oil And Gas Corp ChartChart courtesy of www.StockCharts.com

Energy consistently has a role to play in equity market portfolios, and it doesn’t have to be pure-play production stories. In terms of resource investing, I find it much more attractive over precious metals, particularly for investors looking for some longevity in their holdings.

In an environment that’s likely to remain slow-growing for several years, I like both the income and capital … Read More

Two Big Trends to Emerge This Earnings Season?

By for Profit Confidential

The Two Big Themes This Earnings SeasonLots of companies have broken out of their previous long-term trends on the stock market, and it’s a positive, contributing signal to a secular bull market.

One company that recently beat Wall Street consensus and just broke out of its previous price trend is A. Schulman, Inc. (SHLM) out of Akron, Ohio.

This business deals with resins and plastic compounds. It’s not very exciting, but the company is growing, it pays a dividend, and its corporate guidance is rising.

A. Schulman is one of the few companies that actually file their SEC Form 10-Q commensurate with their earnings press releases. It’s something that’s very much appreciated because this information is typically more in-depth than a plain earnings report. Even if you aren’t interested in the resins and plastics business, what a company like A. Schulman says about its business conditions is helpful in shaping your own market view.

The company just reported solid growth in its second fiscal quarter of 2014 (ended February 28, 2014). Management said that business in Europe is getting better, with noticeable sales gains in the automotive and electronics markets.

Most of the company’s sales come from Europe, the Middle East, and African regions, which is often described by the acronym EMEA. Sales to these countries gained 12% in the most recent quarter to $383 million.

Sales in the Americas grew nine percent to $157 million, but they would have been stronger if not for foreign currency impacts, particularly in Argentina. Management is also de-emphasizing commodity-related sales, which are less profitable. Asia Pacific (APAC) sales grew 67% to $48.4 million, mostly due to an acquisition.

Last … Read More

Top Wealth-Creating Stocks Defying Stock Market Sell-Off?

By for Profit Confidential

What Stocks Are Defying the Near-Term Stock Market TrendWith the broader stock market selling off, it’s amazing to see a company’s share price defy the near-term trend and appreciate in value.

Time and time again, Johnson & Johnson (JNJ) gets bid when the broader market faces convulsion. It’s a powerful signal, and there is still a great deal of angst among institutional investors; they still want those dividends and the relative safety of earnings that are predictable.

Johnson & Johnson has been—and continues to be—an excellent wealth creator. The stock’s been bouncing off $95.00 a share the last while and just recently, it seems to have broken past this price ceiling.

There’s not a lot new with this position. One Wall Street firm recently boosted its earnings expectations for the company in 2015. Sales growth is expected to be in the low single-digits this year, but annual earnings growth combined with dividends should be in the low double-digits once again. The company reports its first-quarter numbers on April 15.

There’s definitely been a change in investor sentiment regarding speculative positions. Biotechnology stocks, which have been the market’s multiyear winning sector have finally seen investors book profits. It’s been long overdue and from a market perspective, is a healthy development for the primary trend.

The selling migrated to large-cap technology names and the shakedown just might last a while longer. Anything can happen during an earnings season, but a “sell in May and go away” type of scenario is a real possibility again this year.

Other blue chip names that are also defying the market’s recent action include 3M Company (MMM), Union Pacific Corporation (UNP), Kimberly-Clark Corporation (KMB), Microsoft … Read More

Markets Asking a Lot from Blue Chips; Can They Deliver?

By for Profit Confidential

Wall Street Earnings are beginning to roll in and quite a few companies are missing Wall Street consensus.

This doesn’t mean, however, that there isn’t growth out there; only that estimates have so far been a little optimistic.

CarMax, Inc. (KMX) is a well-known used-car dealer. The company’s latest numbers were decent, but they came in below what Wall Street was looking for.

Fiscal fourth-quarter sales grew nine percent to $3.08 billion, which is pretty good. Comparable store unit sales grew seven percent in the fourth quarter and 12% year-over-year.

The company had to correct some accounting procedures related to extended service plans and warranties, and it took a hit on earnings because of this.

CarMax is buying back its own stock and just authorized another $1.0-billion repurchase plan that expires at the end of the 2015 calendar year. The stock only dropped marginally on the news.

Another company that missed consensus but is very much a growing enterprise is AZZ Incorporated (AZZ) out of Fort Worth, Texas. We looked at this company last year. (See “Things Are Looking Up! Let’s Hope They Don’t Wreck It.”)

This is a good business. The company manufactures electrical equipment and components for power generation and transmission. Management recently said that business conditions are improving and new quoting activity is noticeably stronger.

Fiscal 2014 fourth-quarter revenues came in at $180 million, compared to $140 million in the fourth quarter of 2013. Earnings were $10.2 million, or $0.40 per diluted share, compared to earnings of $13.2 million, or $0.52 per diluted share.

While the company actually missed Wall Street consensus earnings by $0.02 a share … Read More

Why These Four Rail Picks Are on My Radar

By for Profit Confidential

The One Stock Market Sector That You Need to Have on Your RadarThere’s a boom going on, and it’s old economy. The railroad business is alive and well. And equally as impressive as the freight and earnings results, railroad services and related businesses are benefitting.

Over the near-term, it’s likely there’s going to be further legislation regarding the safety of oil railcars, meaning the retrofit market will be substantial. I think investors should have the entire sector on their radar. Many of these stocks have already done well.

One company we looked at last year in these pages is The Greenbrier Companies, Inc. (GBX), which has plans this year to double its manufacturing capacity of tank cars, which are in high demand. (See “How to Play the Bakken Oil Boom While Oil & Gas Companies Are at Their Highs.”)

The company’s latest earnings results actually missed consensus, as the business wasn’t quite able to keep up with the hype. But this doesn’t mean that the future isn’t bright for this industry. Greenbrier’s one-year stock chart is featured below:

Greenbrier Cos ChartChart courtesy of www.StockCharts.com

One company that only recently experienced new interest from equity market investors is American Railcar Industries, Inc. (ARII). This firm, out of St. Charles, Missouri, sells hopper and tank railcars.

It’s a mature company, but earnings estimates are going up for 2015. The stock is not expensively priced, and its recent breakout from its previous consolidation is very interesting.

Another company that’s waiting for its stock market breakout to occur is FreightCar America, Inc. (RAIL), which has been trading in a range for the last five-and-a-half years.

This year, Wall Street analysts expect a big resurgence in top-line … Read More

« Older Entries

My Top Energy Pick with Market-Defying Momentum

By for Profit Confidential

My Top Energy Stock Pick for This Slow-Growth MarketThe strength in this market is with oil, as both the spot price and oil stocks are holding up very well.

While the broader market has been experiencing a well-deserved price retrenchment, both large- and small-cap oil stocks have been on the comeback trail. The price strength is helpful as speculative fervor continues to come out of equities. The performance illustrates how helpful sectoral portfolio diversification can be when asset prices fall.

ConocoPhillips (COP) is not expensively priced at approximately 9.5 times trailing earnings. The stock sold off significantly at the beginning of the year but has since recovered nicely. Currently yielding just less than four percent, this oil and gas story is similar to the other big integrated energy companies: it isn’t about production growth but more about income for investors.

One company we’ve looked at several times in these pages is Kodiak Oil & Gas Corp. (KOG). This is a Bakken oil play that’s really doing well. This stock was consistently expensive, being a highly liquid favorite of institutional investors, but earnings have caught up to the share price and the story is still intact. This junior energy producer still has a very bright future. The company’s stock chart is featured below:

 Kodiak Oil And Gas Corp ChartChart courtesy of www.StockCharts.com

Energy consistently has a role to play in equity market portfolios, and it doesn’t have to be pure-play production stories. In terms of resource investing, I find it much more attractive over precious metals, particularly for investors looking for some longevity in their holdings.

In an environment that’s likely to remain slow-growing for several years, I like both the income and capital … Read More

Two Big Trends to Emerge This Earnings Season?

By for Profit Confidential

The Two Big Themes This Earnings SeasonLots of companies have broken out of their previous long-term trends on the stock market, and it’s a positive, contributing signal to a secular bull market.

One company that recently beat Wall Street consensus and just broke out of its previous price trend is A. Schulman, Inc. (SHLM) out of Akron, Ohio.

This business deals with resins and plastic compounds. It’s not very exciting, but the company is growing, it pays a dividend, and its corporate guidance is rising.

A. Schulman is one of the few companies that actually file their SEC Form 10-Q commensurate with their earnings press releases. It’s something that’s very much appreciated because this information is typically more in-depth than a plain earnings report. Even if you aren’t interested in the resins and plastics business, what a company like A. Schulman says about its business conditions is helpful in shaping your own market view.

The company just reported solid growth in its second fiscal quarter of 2014 (ended February 28, 2014). Management said that business in Europe is getting better, with noticeable sales gains in the automotive and electronics markets.

Most of the company’s sales come from Europe, the Middle East, and African regions, which is often described by the acronym EMEA. Sales to these countries gained 12% in the most recent quarter to $383 million.

Sales in the Americas grew nine percent to $157 million, but they would have been stronger if not for foreign currency impacts, particularly in Argentina. Management is also de-emphasizing commodity-related sales, which are less profitable. Asia Pacific (APAC) sales grew 67% to $48.4 million, mostly due to an acquisition.

Last … Read More

Top Wealth-Creating Stocks Defying Stock Market Sell-Off?

By for Profit Confidential

What Stocks Are Defying the Near-Term Stock Market TrendWith the broader stock market selling off, it’s amazing to see a company’s share price defy the near-term trend and appreciate in value.

Time and time again, Johnson & Johnson (JNJ) gets bid when the broader market faces convulsion. It’s a powerful signal, and there is still a great deal of angst among institutional investors; they still want those dividends and the relative safety of earnings that are predictable.

Johnson & Johnson has been—and continues to be—an excellent wealth creator. The stock’s been bouncing off $95.00 a share the last while and just recently, it seems to have broken past this price ceiling.

There’s not a lot new with this position. One Wall Street firm recently boosted its earnings expectations for the company in 2015. Sales growth is expected to be in the low single-digits this year, but annual earnings growth combined with dividends should be in the low double-digits once again. The company reports its first-quarter numbers on April 15.

There’s definitely been a change in investor sentiment regarding speculative positions. Biotechnology stocks, which have been the market’s multiyear winning sector have finally seen investors book profits. It’s been long overdue and from a market perspective, is a healthy development for the primary trend.

The selling migrated to large-cap technology names and the shakedown just might last a while longer. Anything can happen during an earnings season, but a “sell in May and go away” type of scenario is a real possibility again this year.

Other blue chip names that are also defying the market’s recent action include 3M Company (MMM), Union Pacific Corporation (UNP), Kimberly-Clark Corporation (KMB), Microsoft … Read More

Markets Asking a Lot from Blue Chips; Can They Deliver?

By for Profit Confidential

Wall Street Earnings are beginning to roll in and quite a few companies are missing Wall Street consensus.

This doesn’t mean, however, that there isn’t growth out there; only that estimates have so far been a little optimistic.

CarMax, Inc. (KMX) is a well-known used-car dealer. The company’s latest numbers were decent, but they came in below what Wall Street was looking for.

Fiscal fourth-quarter sales grew nine percent to $3.08 billion, which is pretty good. Comparable store unit sales grew seven percent in the fourth quarter and 12% year-over-year.

The company had to correct some accounting procedures related to extended service plans and warranties, and it took a hit on earnings because of this.

CarMax is buying back its own stock and just authorized another $1.0-billion repurchase plan that expires at the end of the 2015 calendar year. The stock only dropped marginally on the news.

Another company that missed consensus but is very much a growing enterprise is AZZ Incorporated (AZZ) out of Fort Worth, Texas. We looked at this company last year. (See “Things Are Looking Up! Let’s Hope They Don’t Wreck It.”)

This is a good business. The company manufactures electrical equipment and components for power generation and transmission. Management recently said that business conditions are improving and new quoting activity is noticeably stronger.

Fiscal 2014 fourth-quarter revenues came in at $180 million, compared to $140 million in the fourth quarter of 2013. Earnings were $10.2 million, or $0.40 per diluted share, compared to earnings of $13.2 million, or $0.52 per diluted share.

While the company actually missed Wall Street consensus earnings by $0.02 a share … Read More

Why These Four Rail Picks Are on My Radar

By for Profit Confidential

The One Stock Market Sector That You Need to Have on Your RadarThere’s a boom going on, and it’s old economy. The railroad business is alive and well. And equally as impressive as the freight and earnings results, railroad services and related businesses are benefitting.

Over the near-term, it’s likely there’s going to be further legislation regarding the safety of oil railcars, meaning the retrofit market will be substantial. I think investors should have the entire sector on their radar. Many of these stocks have already done well.

One company we looked at last year in these pages is The Greenbrier Companies, Inc. (GBX), which has plans this year to double its manufacturing capacity of tank cars, which are in high demand. (See “How to Play the Bakken Oil Boom While Oil & Gas Companies Are at Their Highs.”)

The company’s latest earnings results actually missed consensus, as the business wasn’t quite able to keep up with the hype. But this doesn’t mean that the future isn’t bright for this industry. Greenbrier’s one-year stock chart is featured below:

Greenbrier Cos ChartChart courtesy of www.StockCharts.com

One company that only recently experienced new interest from equity market investors is American Railcar Industries, Inc. (ARII). This firm, out of St. Charles, Missouri, sells hopper and tank railcars.

It’s a mature company, but earnings estimates are going up for 2015. The stock is not expensively priced, and its recent breakout from its previous consolidation is very interesting.

Another company that’s waiting for its stock market breakout to occur is FreightCar America, Inc. (RAIL), which has been trading in a range for the last five-and-a-half years.

This year, Wall Street analysts expect a big resurgence in top-line … Read More

The Only Company That Will Have a Really Good Year in 2014

By for Profit Confidential

Future Expectations Trump Valuations as Stocks Drive HigherThere’s one company that is likely to have a very good year in 2014.

As my readers will know, the most valuable information going as an equity investor (businessperson) is what an enterprise says about its business conditions. And according to this company, business conditions are looking up.

Acuity Brands, Inc. (AYI) is a well-known lighting company out of Atlanta that serves mostly commercial and industrial markets. The company operates a number of brands, selling through independent agents, electrical wholesalers, and sales reps.

Total sales for the company’s fiscal second quarter (ended February 28, 2014) grew a solid 12% over the comparable quarter to $546 million.

Earnings grew substantially, up 32% in the quarter to $32.7 million. Earnings per share also grew 32% over the comparable quarter to $0.75.

Sales in the most recent quarter actually grew 13%, but this growth was reduced by one percent due to unfavorable currency translation.

Company management cited an improving marketplace for retrofit and renovation lighting applications. Fiscal 2014 should experience mid- to high-single-digit growth over the last fiscal year, with March order rates showing solid improvement.

Acuity Brands actually missed Wall Street consensus on both revenues and earnings, but the stock went up anyway after management said its order trend was improving. The company’s one-year stock chart is featured below:

Acuity Brands ChartChart courtesy of www.StockCharts.com

But even with the relative good news and positive market reaction to the company’s latest results, Acuity Brands remains one expensive stock. And this is the dilemma for a good portion of this market.

Stocks have already gone up. Many good businesses have seen their valuations and share prices … Read More

Blue Chip Stocks Expensive at This Point

By for Profit Confidential

With These Two Blue Chips Pushing HighsThere are a whole bunch of brand-name stocks that recently appreciated back close to their highs, many of which will soon be reporting their earnings.

Despite this fact, however, it still seems like a very difficult environment in which to be a buyer. Stocks just aren’t that attractively priced; in fact, many brand-name companies are priced for perfection. It’s still slow growth out there, and with equity prices at their all-time highs, this year’s returns may only be the dividends, which would just return the rate of inflation at best.

Colgate-Palmolive Company (CL) is a top-performing blue chip with an excellent track record of generating wealth for investors. The stock hit an all-time record-high last fall, and then backed off just like everything else did in January. It has since recovered.

The position boasts a forward price-to-earnings ratio of around 19.5, which makes it fully priced in my books. Sales growth in the first quarter of 2014 is expected to be minimal, and so are comparative earnings.

This year’s revenue consensus averages two percent among Wall Street analysts, rising to 5.4% in 2015.

Great companies like this tend to command higher multiples, as institutional investors pay for the certainty. But comparatively, Colgate-Palmolive commands a much higher valuation than Microsoft Corporation (MSFT), which is a technology company growing at a faster rate.

All things being equal, it makes me think that a blue chip like Microsoft can actually run a lot further than it has recently, playing catch-up to the rest of the market.

It’s interesting how stocks go through their own cycles, both operationally and in terms of favor among … Read More

What These Two Companies Suggest About the Trend in Employment Payrolls

By for Profit Confidential

These Two Companies Suggest Trend in Employment Payrolls RisingEarnings season is here and a number of companies have already reported. Some offer more useful information about the general economy and their earnings are a decent barometer.

Paychex, Inc. (PAYX) is the second-largest U.S. payroll company. It just beat Wall Street consensus on revenues and earnings.

The company said its fiscal third quarter of 2014 (ended February 28, 2014) saw revenues climb seven percent to $636.5 million, which is a very healthy comparable gain.

Payroll service revenues grew five percent to $413.9 million, based on growth in checks per payroll and revenues per check. Human resource service revenues improved 12% to $212.1 million due to client-based growth.

This produced a gain in bottom-line earnings of 11% to $160.1 million comparatively. Diluted earnings per share grew 10% to $0.44, up from the comparable figure of $0.40. Paychex reiterated existing revenue guidance for fiscal 2014. Earnings are expected to be higher than previously forecast.

Decent growth at payroll companies is a positive sign. With an attractive dividend yield of approximately 3.3% currently, this stock has room to tick higher if the broader market doesn’t come apart.

Paychex’s one-year stock chart is featured below:

PAYX Paychex ChartChart courtesy of www.StockCharts.com

Automatic Data Processing, Inc. (ADP) is slightly more than double Paychex’s market capitalization.

This large-cap is trading only a few points from its all-time record-high, and it currently has a 2.5% dividend yield.

The company doesn’t report its next set of earnings until April 30, but in its second fiscal quarter of 2014 (ended December 31, 2013), total sales climbed nine percent to $3.0 billion. (See “Stocks: Why I’m Starting to Favor the Read More

Have I Got a Deal for You! The Stock Selling at 573 Times Earnings That Just Keeps Rising

By for Profit Confidential

Have Stock Market Investors Lost Their MindsStock market valuations are severely stretched by historical standards. Earnings multiples and other financial ratios no longer make sense. But despite this, investors are still buying.

I continue to preach: the days left in the stock market’s rise are numbered.

As I see it, excessive speculation rules the stock market right now. And that is dangerous because investors are making decisions that they shouldn’t be making. Irrationality is growing. Those who say the stock market will decline, like me, are few and far between.

Investors are putting big money into companies that are nowhere near being profitable.

Just look at Amazon.com, Inc. (NASDAQ/AMZN), a component of the S&P 500. According to bigcharts.com, Amazon.com stock is selling at 573 times its earnings! Since the stock market rally that began in 2009, the stock price of this online retailer has climbed more than 800%.

The price-to-book ratio of Amazon.com (that is the ratio of market value of the company compared to its book value) stands at 17.38. (Source: Yahoo! Finance, last accessed March 24, 2014.) The price-to-book ratio for Amazon.com’s sector—online retailers—is 11.0. (Source: New York University Stern School of Business web site, last accessed March 24, 2014.) By this measure, Amazon.com is overvalued by almost 60% compared to its sector average.

But Amazon.com is just one example of an overpriced stock; there are many other companies in the S&P 500 that don’t make sense as an investment, unless you are playing the “greater fool” theory. That’s when you buy a stock not because it pays a good dividend or because it makes a lot of money, but because the next guy … Read More

Old Economy Strikes Again: Why Investors Need to Keep a Close Eye on This Rail Stock

By for Profit Confidential

This Old Economy Stocks the Best Indicator for the EconomyIt’s kind of odd to think about the railroad business providing such great returns to investors, but that’s what they’ve been doing. The old economy strikes again.

Union Pacific Corporation (UNP) just bounced off a record-high (again) on the stock market and the company reports April 17.

This company’s earnings are material, even if you have no interest whatsoever in the business of freight by rail. For the most part, Wall Street estimates have been going up for the company, for this year and next.

I don’t see the U.S. economy coming apart without some sign from Union Pacific. The company’s declining shipments of coal have been usurped by solid growth in oil railcars, construction materials, and automobiles.

If you’re inclined, check out the statistical data released by the Association of American Railroads (www.aar.org); it’s a treasure trove of economic conditions related to goods transported by rail and more useful than a lot of other data or commentary.

According to the association, for the first three months of 2014, U.S. railroads had cumulative volume of 3,301,422 carloads, up 0.4% over the first quarter of last year, and 2,937,811 intermodal units, up three percent comparatively.

Total combined U.S. traffic for the first quarter of 2014 was 6,239,233 carloads and intermodal units, for a gain of 1.6% over last year.

Now it’s not too difficult these days to find statistics to support any case. For investors, what corporations report is key.

I think the railroads are poised to deliver another solid quarterly performance. Union Pacific has defied the rest of the stock market and the position is up another … Read More

This Energy Stock to Be Major Beneficiary of LNG Build-Out?

By for Profit Confidential

Why This Energy Stock Is So Attractive in a Value-Driven MarketIn a nervous market trading right near its high, it’s worth looking for value. But there’s not a lot of it around, as stocks are fully priced and expectations for earnings are modest.

One company we’ve looked at before is Chart Industries, Inc. (GTLS) out of Garfield Heights, Ohio. This business manufactures specialized equipment for the production and storage of hydrocarbons and industrial gases. It’s a good business to be in these days and should make for a decent long-term investment.

This is a $2.0-billion company whose share price is down substantially from its all-time record-high set last October. It’s not that this business isn’t growing, but only that the position sold off after not quite meeting consensus.

I like this business and its long-term fundamentals. Energy end-products represent about 53% of the company’s total sales.

The company has also developed specialized expertise in cryogenic storage, which is equipment that can produce temperatures close to absolute zero (-459 degrees Fahrenheit).

Most of Chart Industries’ customers are large, multinational producers of hydrocarbons and gases. The company’s top-ten customers account for 37% of total revenues.

Biomedical customers are 23% of total sales, including respiratory products, cold storage systems, and commercial oxygen generation systems. As a global manufacturer and seller, just less than 60% of total sales are generated by international customers.

You can learn a lot about this business by reading its Form 10-K annual report for 2013. Chart Industries’ share price appreciated 550% from October 2010 to October of last year. It’s now more fairly priced. The company’s stock chart is featured below:

GTLS ChartChart courtesy of www.StockCharts.com

This is a very … Read More

Does Risk Trump Returns in This Stock Market Environment?

By for Profit Confidential

Why Risk Now Trumps Stock Market ReturnsGoing by the choppy trading action this year, investment risk with equities is going up.

Recent shocks to the system include events in Ukraine and Crimea, Chinese economic data, and Citigroup Inc.’s (C) failed stress test.

This is a very uneasy stock market, and because the main indices are right around their highs, any shock has the potential to deliver a serious haircut to asset prices. The choppy, trendless action combined with full valuations is the reason why I’ve been advocating taking profits from speculative positions. This stock market is just plain tired out.

First-quarter earnings season is just around the corner, and while it’s looking like we’ll get more of the same from corporations (a meet-or-beat on only one financial metric, revenues or earnings) the stock market needs more than dividends and share buybacks in order for share prices to keep appreciating.

Blue chips, especially, have been coasting along, providing single-digit earnings growth on modest sales. The icing on the cake has been the rising dividends and share repurchases, which the stock market has eaten up over the last two years.

But sentiment is slowly changing regarding share repurchases. Big investors want to see more than these financial tools in the businesses they own. Rising dividends are always great, but you need underlying revenue and earnings growth to sustain the case. And in order to do so, corporations have to make new investments. They’ve been very reticent to date.

Healthy balance sheets are always desirable, but new business investment and innovation is what creates wealth over the long-term. Everything’s been short-term thinking the last few years, and companies … Read More

My Top Stocks in the Mobile Gaming Sector

By for Profit Confidential

Why I Believe There Are Better Mobile Gaming Investments Than King Digital If you have ever played the Candy Crush Saga game on your mobile device, you’d realize that the game, along with others like Flappy Birds, are merely a mobile phenomenon that could easily fade away over time once the addiction washes away, based on my stock analysis.

Yet for King Digital Entertainment plc (NYSE/KING), the maker of Candy Crush Saga, the company is clearly jumping with glee that it’s valued at more than $6.0 billion. The stock debuted with its initial public offering (IPO) on Wednesday priced at $22.50 per share, but it quickly fell to $19.17 after the open.

Make no mistake about it: my stock analysis is that King Digital is not worth $6.0 billion—or even half of that. The company generates about three-quarters of its revenues via the Candy Crush game. There are other games, but none have taken off to the degree Candy Crush has. While King Digital says it will look hard at developing another major game, there’s no guarantee that this will happen before interest in Candy Crush fades, based on my stock analysis.

What I suggest you do is look at more established developers of mobile games and applications that are much cheaper and not pumped up like King Digital, as my stock analysis suggests.

Based out of San Francisco, Glu Mobile Inc. (NASDAQ/GLUU) is an interesting small-cap gaming play that holds promise in the growing area of mobile gaming on smartphones and tablets, as my stock analysis indicates. Spending on mobile applications is estimated at around $56.0 billion by 2016, according to Forrester Research. With a market cap of … Read More

New Transportation Growth Story Worth Following

By for Profit Confidential

These Stocks a Kink in Bearish SentimentIf there’s one industry sector that’s volatile, cyclical, often unprofitable, and typically attracts poor consumer ratings, it’s the airline sector.

But this group of transportation stocks is a powerful indicator. Airline stocks move at the beginning of bull markets and new business cycles. The airline sector has been on fire lately.

A top performer and recent new listing is Spirit Airlines, Inc. (SAVE). Based out of Miramar, Florida, Spirit Airlines is a low-fare operator flying to 50 destinations in the U.S., Latin America, and the Caribbean with some 250 flights per day. The stock was listed May 26, 2011.

This is a growth story that could not have been timed more perfectly. The stock is soaring based on strong growth in revenue passenger miles and improving load factors. It’s a momentum stock you should have on your radar now.

Airline stocks are very good at losing money, but not at the beginning of a new business cycle, which I believe is where we are at this time.

The fact that most airline stocks have been appreciating strongly on the stock market based on real, underlying economic growth is a big positive. If airlines are making money, the bears face another big obstacle.

As mentioned, Spirit Airlines is a growth story. The company is generating the kind of numbers you might associate with a fast-growing technology stock. This is a story of the right business in the right place at the right time. The company’s stock chart is featured below:

Spirit Airlines ChartChart courtesy of www.StockCharts.com

Spirit Airlines generated fourth-quarter 2013 revenues of $420 million, representing a gain of 28% over the same … Read More

Increasing Stock Buybacks a Signal to Cash Out?

By for Profit Confidential

What the Increase in Share Buybacks Means for InvestorsStocks are churning without any notable trend, influenced by geopolitical events, the lack of corporate reporting, and a recent change in investor sentiment regarding valuations. The fact is that a lot of stocks are ahead of themselves, and this is why we may very well get a lot of profit-taking over the next couple of months.

Aside from monetary policy, the most valuable information in the marketplace is what corporations report about their business. While the calendar first quarter will soon be over, a number of companies are now reporting their numbers.

Sonic Corp. (SONC) operates the largest chain of drive-in restaurants and the company’s results for its fiscal second quarter (ended February 28, 2014) weren’t that bad.

Same-store sales for the company grew 1.4%, but total revenues dropped slightly to $109.7 million, down from $111.1 million in the same quarter of last year.

Earnings were $4.1 million, or $0.07 per diluted share, compared to $3.6 million, or $0.06 per diluted share.

In a trend that’s so prevalent these days, the company repurchased $51.0 million of its own shares during the most recent fiscal quarter at an average price of $19.14 per share. This represents approximately five percent of the company’s total shares outstanding. Since the beginning of fiscal 2012, the company has bought back $125 million of its own stock, or 17% of total shares outstanding.

Management anticipates earnings will grow 14% to 15% this fiscal year (compared to adjusted non-GAAP earnings). They also expect to buy back another $80.0 million of the company’s shares this fiscal year. Sonic’s five-year stock chart is featured below:

Sonic Corp ChartChart courtesy of Read More

The Great Crash of 2014

A stock market crash bigger than what happened in 2008 and early 2009 is headed our way.

In fact, we are predicting this crash will be even more devastating than the 1929 crash…

…the ramifications of which will hit the economy and Americans deeper than anything we’ve ever seen.

Our 27-year-old research firm feels so strongly about this, we’ve just produced a video to warn investors called, “The Great Crash of 2014.”

In case you are not familiar with our research work on the stock market:

In late 2001, in the aftermath of 9/11, we told our clients to buy small-cap stocks. They rose about 100% after we made that call.

We were one of the first major advisors to turn bullish on gold.

Throughout 2002, we urged our readers to buy gold stocks; many of which doubled and even tripled in price.

In November of 2007, we started begging our customers to get out of the stock market. Shortly afterwards, it was widely recognized that October 2007 was the top for stocks.

We correctly predicted the crash in the stock market of 2008 and early 2009.

And in March of 2009, we started telling our readers to jump into small caps. The Russell 2000 gained about 175% from when we made that call in 2009 to today.

Many investors will find our next prediction hard to believe until they see all the proof we have to back it up.

Even if you don’t own stocks, what’s about to happen will affect you!

I urge you to be among the first to get our next major prediction.
See it here now in this just-released alarming video.

This is an entirely free service. No credit card required.

We hate spam as much as you do.
Check out our privacy policy.