1 2 It is often said that cash is king. This phrase has many meanings to different people. For investors, it can mean maintain a large cash balance so they have buying power ready when they find bargains in the stock market trading. Or, investors may apply the phrase as a screening tool to identify companies with large cash balances that allow the companies to take advantage of opportunities as they become available. In this article, we look at why companies with large cash balances can make good investments and we identify some companies that could be good Investment Opportunities right now...

1 2 In recent months, traders have seen news stories move stock markets. They have always known this. We often see stock prices make sharp moves after earnings announcements. But, in the past year we have seen widely anticipated events move markets in unexpected ways. Let’s consider the US Presidential election as an example. Heading into election day, it was widely believed that Hillary Clinton would win while a surprise victory by Donald Trump would set off a bear market. As the election results became clear, the overnight markets seemed to validate these opinions. Futures on the S&...

1 2 We’ve all seen it happen dozens of time. A stock sells off sharply after missing analysts’ expectations. Sometimes, earnings per share (EPS) come in just a penny below expectations. But that small miss can cost investors hundreds of millions of dollars. Of course, we’ve also seen the opposite happen. A stock soars after the company delivers EPS that beat expectations. It seems that beating expectations is all it takes for some stocks to end up on the list of the market’s biggest gainers on the day after they report earnings. As we look at these news stories, we noticed a common the...

1 2 In a recent blog post, we described how to create a screen to spot stocks using indicators that appear to be important to Warren Buffett. Our screen focused on a few fundamental indicators and targeted companies with high return on equity, strong cash flow and management teams that maximize the return on assets investors have entrusted to them. We used the free screening tool at the FinViz web site and applied the setting shown below. As we noted, our screen serves as a reasonable starting point for additional research. One avenue for research is in stocks Buffett cannot buy. He...

1 2 In the never ending search for a potential market top, some analysts use sentiment analysis. This type of analysis relies on sentiment indicators which are tools that are designed to identify how investors feel about a market. Sentiment is independent of fundamental information and price data and is based solely on feelings, which can provide significant information not factored into the fundamental or technical picture. Sentiment analysis is based on logic. The general idea is that when everyone is bullish, everyone is fully invested in the stock market and the market is unlikely to ...

1 2 Over the long run, the biotechnology sector has been a consistent winner in the stock market. The chart below shows the biggest winners among sectors over the past five years and biotech is near the top of the list. This has often been the case for most of the past twenty years or so. As a group, biotechs have done well. There are always winners and losers within the group but the winners have usually done so well that the sector is consistently on the list of best performing sectors over the long run. Recently, that has not been the case. The next chart shows the worst performing ...

1 2 Last week we reviewed the failed bid for Unilever that had Warren Buffett’s backing. As the world’s greatest investor, we find it useful to study not just what Buffett says but also what he does. His actions are, of course, more important than his words. Buffett’s actions are usually only known when a deal is announced. With Unilever, we had an opportunity to study a failed deal. The deal failed because Buffett was true to his word. In interviews, he has explained that combining the consumer brands of Unilever with those of Kraft Heinz looked like a good deal. A representative of Kraf...

1 2 Finding winners in the retail sector can be challenging. Target (NYSE: TGT) demonstrated this recently. The stock plunged more than 12% after the company reported sales and earnings that missed Wall Street's expectations. Missing earnings is usually bearish but it’s especially bad for a retailer to miss fourth quarter earnings since that is traditionally the strongest quarter for companies in the sector. Target compounded traders’ concerns by lowering its outlook for this year. Target’s CEO explained the problem, noting "Our fourth-quarter results reflect the impact of rapidly changin...

1 2 Hedge funds appear to be a secretive world and, to some degree, they are. Only high net worth individuals who meet the requirements defined by the Securities and Exchange Commission (SEC) and large institutions have access to these investments. Some funds set minimum investments of $25 million or more which limits the pool of potential investors even more. If you can get into a fund, there is no guarantee you will make money. Some funds are very successful but, as a group, hedge funds tend to deliver average or even below average returns. One reason for the poor performance could be t...

1 2 In recent days, the Dow Jones Industrial Average, the S&P 500 index and the Nasdaq Composite index have all hit all-time highs for at least five consecutive days. This was the first time a winning streak like that unfolded since January 1992. The Russell 2000, a benchmark index for small cap stocks, made a new high four days in a row. The last time these four major market indexes made new highs on four consecutive days was in June 1995. New highs generate emotional responses for many investors. Some enjoy seeing new highs, believing rising prices are bullish and that means a stret...