The Three Best Large Cap Stocks for Income Investors

Income investors face two challenges in the current environment – they need to combine high income with safety. Neither challenge is easy in the current environment. With the Federal Reserve holding short-term rates below 0.5% since 2009, the challenge of finding income has left many investors with more risk than they are comfortable holding. One example of this is master limited partnerships (MLPs), an asset class that promised high income but carried hidden risks. The chart below shows Alerian MLP ETF (NYSE: AMLP), an ETF that tracks an MLP index. These were actually investments in the energ...
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How to Design Your Own Relative Strength Trading Strategy

Relative strength (RS) is widely followed by professional investors. Their interest in RS is simple to understand – their job is to beat the market and the stocks with the highest RS are the ones beating the market. Professional investment managers cannot do their job without owning high RS stocks. Using strategies that include RS helps them meet their goal. Despite its widespread acceptance among market professionals, individual investors rarely follow RS. Again, their interest level is simple to understand – RS is difficult to find for individual investors. In the past, this indicator has...
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Four Stocks Warren Buffett Might Buy, If He Could

Once a year, the annual meeting of Berkshire Hathaway (NYSE: BRK.B) generates hundreds of articles about company chairman, Warren Buffett. The coverage is justified because Buffett is truly one of the world’s greatest investors. His success has led to a cult-like following of individual investors trying to be like Buffett. Unfortunately, but realistically, no one is ever likely to duplicate Buffett’s success. Buffett is a great investor who now benefits from his unique position in the investment community. When Goldman Sachs needed money during the financial market meltdown of 2008, they ca...
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How to Really Read Chart Patterns

Last week, I wrote about how CNBC’s guests love to talk about divergences. This week, I want to look into another one of their favorite talking points – chart patterns. After this article I will move on from my critique of CNBC for at least a while. You’ve probably seen guests explain how a head and shoulders pattern or falling wedge is forming and state that this has predictable implications for the stock market. These patterns do exist and are widely followed, but they are generally subjective. I generally prefer objective analysis which is based on numbers and formulas that can be duplic...
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You Could “Sell in May and Go Away” or You Could Use This Time-Tested, Market-Beating Strategy

One of the most popular sayings on Wall Street is “sell in May and go away” because, proponents argue, you could achieve 100% of the market gains and avoid the biggest risks. This was certainly true in years like 1929, 1987 and 2008 when market crashes in the fall led to large losses. But is it always a good idea to sell in May? Rather than looking at a few years when the strategy worked, let’s put the idea to a test using a longer history. We can test the idea using the Dow Jones Industrial Average from January 1900 through the end of April 2016, a 100-year test period.  The idea we are te...
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Putting Divergences to the Test

Divergences are everywhere if you listen to the analysts on CNBC. There’s almost always a chart that shows two lines moving in different directions and viewers are told this is important. Because it’s CNBC, it seems that most of these divergences are bearish, but that might be because it seems most of the analysts on CNBC are bearish. Divergences are an important topic in technical analysis but the question that hasn’t ever really been answered, until now, is whether or not divergences are useful. Before addressing whether or not divergences are useful, we should be clear about what a divergen...
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