Posts Tagged ‘Europe’
This Stock’s 24% Year-to-Date Gain Signaling a Buy Opportunity?
By Mitchell Clark, B.Comm. for Profit Confidential
“Opportunity cost”—it’s a phrase used in microeconomic theory to denote the costs that are forgone by not having your resources in the highest returning assets.
It is a phrase that’s pertinent to the stock market.
Without question, I remain completely taken aback by what has transpired with the stock market since the beginning of the year.
Looking at the numbers, not being invested in many corporations has been costly.
Excluding the reasons why, the simple fact is that the Dow Jones Industrial Average is up 16% since the beginning of the year (not including dividends).
The S&P 500 is up 15.7%. The NASDAQ Composite is up 14.8% and the Russell 2000, an index of small-caps, is up 16.6% (not including dividends).
I think this stock market can smell the end of quantitative easing.
More meaningful, however, is the Federal Reserve’s policy regarding interest rates, which are going to continue to be low for the near future, as it has been made very clear.
This is a huge, perhaps neglected, certainty for the stock market and corporations.
Making the case for being a buyer in this market is extremely difficult. Institutional investors have already placed their bets and a lot of corporations—good companies with real staying power and solid prospects for earnings growth going forward—are fully priced.
Johnson & Johnson (NYSE/JNJ) is a benchmark stock. Like many large corporations, Johnson & Johnson does everything it can to squeeze every penny out of its bottom line. The company lays off employees, closes plants, and does everything to minimize taxes. Johnson & Johnson’s 10-year stock chart is featured below:
Chart courtesy … 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
How Five Hundred Bucks and a Handshake Created a Colossal Stock Market Winner
By Mitchell Clark, B.Comm. for Profit Confidential
One company that always reports early is NIKE, Inc. (NYSE/NKE).
The company has doubled on the stock market since 2010, and it has more than tripled since 2006.
This kind of stock market performance really is amazing. In just three years, a $12.5-billion company has become a $25.0-billion company.
From Oregon, Bill Bowerman and Phil Night created Blue Ribbon Sports with $500.00 each and a handshake.
In January of 1964, Bowerman and Night ordered 300 pairs of Tiger brand shoes from Onitsuka Inc. of Kobe, Japan for distribution in the U.S. market. Night began selling the shoes out of his Plymouth “Reliant,” and Bowerman began tearing them apart.
Bowerman took an idea from his wife’s waffle iron and created a new running shoe.
Jeff Johnson (a friend and the company’s first employee) came up with the NIKE name in 1971. Shoes were successfully tested and Carolyn Davidson, a graphic design student at Portland State University, created the “swoosh” logo. The company’s first shoes were sold at the U.S. Track & Field Trials held in Eugene, Oregon. The rest, as they say, is history.
As a stock market investment, NIKE has mostly been excellent. The position was flat between 1997 and 2004. The company signed Eldrick “Tiger” Woods in 1996.
In its latest quarter (ended February 28), the company’s comparable sales grew nine percent to $6.2 billion, up solidly from $5.7 billion. Comparable earnings grew from $560 million to $866 million, for a gain of 55%, while earnings from continuing operations were $662 million, up 16% from $569 million.
Sales growth was strongest in North America (18%), followed by Central and … Read More
Why Buffett Might Be Wrong When It Comes to Stocks
By George Leong, B.Comm. for Profit Confidential
Warren Buffett amassed his incredible fortune not by timing the stock market, but rather by careful fundamental analysis and the buying of businesses he felt had excellent upside.
So when Buffett speaks on the stock market, you have to listen.
He doesn’t have the same market clout he once had in the 90s, when investors tuned into every word that came out of his mouth, but you still have to listen to what he says.
In an interview on CNBC Squawk Box, Buffett expressed his negativity toward bonds and said he would not buy them. (Source: “Warren Buffett: Stocks Will Go ‘Far Higher’ Over Time,” CNBC, May 6, 2013.) This is no big surprise, given the extremely low yields offered in bonds versus the stock market, where the prevailing dividend yields are much more attractive and also offer better tax treatment. And in addition to dividends, you can make money via the price appreciation of a stock.
Buffett suggested that the stock market would inevitably go a “lot higher” over the longer term and advised investors to ignore the short-term fluctuations. Buffett remains a buyer and scours for long-term investment opportunities in the stock market.
His Berkshire Hathaway, Inc. (NYSE/BRK.A) stock is a diversified holding of over 50 companies that represent a broad range of corporate America. Its businesses include financial services, industrial, medical, apparel, media, homes, jewelry, furniture, steel, and others.
Berkshire Hathaway’s broad businesses make the fund ideal for the investor looking for a highly diversified company in the stock market that would provide an excellent alternative to a mutual fund and, best of all, … Read More
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