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...

1 2 Politics is one of those topics many of us avoid discussing at family meals. We know it can lead to disagreements and ruin a perfectly enjoyable evening. Another topic usually avoided in polite company is money, a subject that can also lead to disagreements. But, there are many times these two topics merge into professional discussions since political decisions can affect financial markets and determine how much money investors earn. Politics and money also come together in disclosure statements that reveal what might be the richest group of Americans own. Members of Congress, senior ...

1 2 Last month, we applied a simple seasonal strategy to find potential buys for January. Now, we can review the results of this strategy. Of the 8 stocks, six moved up, a win rate of 75%. Half of the stocks beat the market, delivering a gain larger than the gain of the S&P 500 index. Results are summarized in the table below. This strategy outperformed because of the large gain in Illumina, Inc. (Nasdaq: ILMN). This demonstrates the value of trading a strategy. We never know whether a trade will be a winner or loser and we never know which stocks will deliver the biggest gains. That ...

1 2 Value investors are familiar with a problem most experienced investors have faced. Identifying value stocks to buy is relatively easy to do but the problem is that stocks can remain undervalued for extended periods of time, years in some cases. That means they buy an undervalued stock and then wait for it to move higher. Sometimes, they wait for months or even years before other investors discover their undervalued gem. There are a number of ways to deal with this problem but one of the simplest could be to combine value investing with relative strength analysis. This is the approach ...

1 2 In a recent article, we looked at the traditional approach to a trading strategy known as the Dogs of the Dow. Several readers have questioned how a simple strategy like the Dogs can work. In this article, we will explain why the Dogs of the Dow can work and look at a variation of the strategy that can be implemented at a relatively low cost. A common question among investors is how a strategy can work when a large number of investors already know about it. Researchers have shown that if a strategy is based on sound investing principles, it can work no matter how well known it is. Thi...