Many technologies and economies function best due to a network effect. The larger the number of users in a network, the stronger and more robust it is. It’s less likely to have a single point of failure. For investors, finding companies with a strong network effect can earn great returns. Especially when investors take advantage of a weak market to buy companies with a strong network. One type of network is in shipping and logistics. A small company may only be able to serve a small town. But dominant players that can operate globally are likely to continue to be able to do so indefi...

As an investment, companies with few competitors are better than companies with many competitors. That’s because competition tends to keep prices low and innovation high. That’s good for consumers, but not healthy for companies – or their shareholders. That’s why companies with a handful of competitors tend to be more consistently profitable. That can keep share prices generally rising over time, and with lower volatility. These companies also tend to make for attractive income plays. When it comes to the oligopoly space, it’s tough to beat out the credit card providers. In that spac...

A great company can overcome any economic challenge. To be a great company, it’s necessary to have pricing power. That means avoiding having to cut prices during a slow period. And it means when inflation is running hot, prices can be raised over and above. Such companies are few and far between. But harnessing the power of a brand during a slow or sideways market can help lead to great returns over time, both from capital gains, and from growing dividend income. It’s no surprise thatCoca-Cola (KO) has been able to hike prices on consumers yet again. That helped the company’s earning...

While we’re coming up on the next Fed meeting, which could give a sign that the central bank’s interest rate hikes are finally over, we’re not out of the woods yet. Inflation has slowed over the past year, but it’s still running at 5 percent. That’s one of its highest levels in decades, and more than twice the central bank’s inflation target. Investors should still look for companies that can handle inflation by passing on the costs to their customers via higher prices. One place offering safety in that regard is consumer goods companies. We’ve seen that in the past week, with the ea...

Investors often take a current trend and extrapolate it to extremes. That’s why the end of a bull market has a lot of valuations that seem ridiculous in hindsight. And why there are many bargains at the end of a bear market. That trend can also play out with quarterly earnings. A company’s growth may slow or stall out in a quarter, but markets may try and extend that trend out indefinitely. That can create short and long-term opportunities. For instance, last week telecom giantAT&T (T) reported a slowdown in the rate of subscriber growth compared to the same quarter last year. ...

Consumer spending may be slowing… but it’s also a huge chunk of the economy. And no matter how bad things slow down, there are still many goods that people will need to buy. That may be bad news for those who make higher-end goods. Ultra-wealthy consumer unaffected by the economy can only buy so much for themselves. That leaves companies that offer the best bargains for consumers as the top way to play current economic trends. For the apparel space, off-price retailers offering quality fashions at a discount could continue to increase market share. That’s good news for companies like...

There are many ways to earn a great return in the stock market. One way is to look at special situations, such as a merger announcement. There’s also a less-well-known way to profit by buying up a company about to split into multiple companies. Such moves happen with less fanfare than an acquisition. But it can be a way for a company to unlock the value of a line of business that may not fit into the stock market’s perception of the company. For instance,Johnson & Johnson (JNJ) is looking to spin off its consumer health division as a separately-traded company. The move will take ...

Following the market’s big drop last year and bounce so far this year, it’s likely that markets will continue to bounce around as economic data points a mixed picture. That’s a good trading environment—and it can also be a good one for long-term investors. The way to take advantage is to look for stocks that are cheap, ignored or even hated by the market in general, and capable of moving higher thanks to strong financial performance. The life insurance industry is cheap right now, as insurance stocks have dropped following the increase in interest rates over the past year. And the ma...

Most economic activity is driven by consumer spending. That’s why changes in consumer spending can cause stocks to rise or fall. Some areas can hold up well, particularly those consumer goods or services that offer reasonable quality at a reasonable price. That’s because a slowing economy will cause consumers to shift to lower-price options rather than stop spending entirely. That may not be good news for upscale brands or services, but for some companies, it may indicate higher share prices ahead.Darden Restaurants (DRI) fits the bill for this phenomenon. The owner of Olive Garden, Cap...

Many things in life have a first-mover advantage. However, in investing, the first company to come to the marketplace with a product isn’t always the winner. A company that follows up with a better product or a far lower price point can end up grabbing the most market share. That’s particularly true in the tech space. Today’s successful tech companies prefer to either buy a company on its way to winning, or wait until they can overtake the early movers. That makesAmazon’s (AMZN) move into artificial intelligence (AI) so compelling. The company has managed to become a tech conglomerat...