It’s time to consider a new paradigm for interest rates – a paradigm where treasury rates remain ultra low and riskier investments are priced by a decentralized market instead of a central bank.
Recently, we ran through the various flaws in the price to earnings ratio and explained why investors need to be paying more attention to return on invested capital (ROIC). This week, we’re tackling another of the market’s favorite metrics, return on equity (ROE). Return on equity has a very simple formula: It’s tempting to think…
Last month, Fortune released its list of the top 50 businesspeople of the year. The recognition these CEO’s are receiving shows that the market cares about ROIC, even if many investors aren’t explicitly talking about it.
New Constructs CEO David Trainer appeared on CNBC’s Closing Bell this afternoon to talk about the future potential of Apple.
MSFT currently earns our Neutral rating, but if new CEO Satya Nadella can halt the company’s declining return on invested capital (ROIC), the stock’s valuation is cheap enough to make it intriguing.
A high quality smartphone from Amazon that undercuts higher-priced competitors could mean more serious trouble for Apple’s iPhone and the company’s declining profit margins.
Apple cannot have pricing power and market share at the same time. No one can for an extended period of time. The problem with AAPL is that it is priced for the company to achieve market share penetration and growth at high prices. The reality is that the quality of Apple products versus competitors is declining. Prices will have to come down just to maintain market share.
The “value” in Apple is an illusion. Astute investors need to look at Apple through the lens of what is a reasonable ROIC in the future.
Most companies hold some cash—or cash equivalents in the form of investments—above this required amount. Companies hold excess cash in order to cushion against economic downturns, prepare for acquisitions, or any number of other reasons. Sometimes, past profits pile up on balance sheets and are a form of excess cash. Excess cash is not needed for the operations of a company. It is removed from our calculation of invested capital.
As the market bulls continue to look to rising interest rates as a sign of future strength for Citi, they ignore the fundamentals of the market and of Citi’s weak profit history.
Passive investors are in the Danger Zone for not recognizing that they are actually active investors.
Too many investors are looking at AAPL through the rear view mirror and assume that its sky-high profits and return on invested capital (ROIC) are sustainable. As I detail in my CNBC interview, Apple is not cheap and investors should not underestimate the impact of losing Steve Jobs.
Picking from the multitude of style ETFs is a daunting task. We are here to make it simpler and smarter.
The Energy sector ranks fifth out of the ten sectors as detailed in my Sector Rankings for ETFs and Mutual Funds report. It gets my Neutral rating, which is based on aggregation of ratings of 20 ETFs and 73 mutual funds in the Energy sector as of January 25th, 2013.
JPMorgan Trust II: JPMorgan Large Cap Growth Fund (OLGAX) is in the Danger Zone this week.
The focus of this article is investing risk or the relative investment potential of the ETF. This risk is much more difficult to asses because it requires researching the investment potential of the ETFs holdings.
In my recent interview, Fox Business’ David Asman digs into the details of what makes a good stock in the current market environment.
Seldom do value investors get a chance to have their cake and eat it too. And that is exactly what we have with Cisco (CSCO) stock.
As I wrote in “Don’t Be Fooled: Get Short Now”, the euro is not that different from Enron, WorldCom or the Madoff fund. All of these organizations were able to pretend they were profitable or solvent long after they were insolvent.
Now markets are finally acknowledging the intractability of the Euro debacle.
I have a pair trade (i.e. long/short) ETF strategy for investors who want to maximize upside potential and minimize downside risk in Technology stocks.
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