Investment Contrarians

Small-cap Stocks

While the exact definition of small-cap stocks can vary from brokerage house to brokerage house, small-cap stocks usually have stock market capitalization of less than $1.0 billion, but more than $400 million. Small-cap stocks sometimes see their stock market capitalization eventually exceed $1.0 billion, at which point they become large-cap stocks.

Did You Give Thanks this Weekend for the Fed’s Easy Money Policy?

By for Investment Contrarians | Aug 6, 2014

021213_IC_leongStock Market Crash August 2014.

Reflecting on this past Thanksgiving weekend, there was a lot to be thankful for, especially if you have been long in the stock market for the past four years. Now is a time for reflection.

The advance in the stock market has been stellar following the bottom in March 2009. The S&P 500 is up 171% since March 6, 2009 for a four-year annualized gain of about 38%.

In Japan, the Nikkei 225 is at a six-year high and over in Germany, the benchmark DAX is also at a record high.

However, the records in the stock markets are falling, not just in good old America, but worldwide. Of course, there are the exceptions, such as China, which I still consider to be undervalued and worth a look for investors searching for growth in foreign stock markets. In China, you can play almost anything due to the country’s insatiable appetite for goods and services. Some of the top areas for growth in China are the technology, health care, travel, and financial services sectors.

Yet while all of the stock market records are being set, I wonder if this is simply the new reality for stocks, or are we just setting ourselves up for a massive hangover when stocks fall? stock market crash 2014.

The Russell 2000, for instance, is a play on the economy. The idea is that small companies tend to fare better when the economy recovers, as these companies tend to be more flexible. The index is up over 35% this year and more than 40% year-to-date. That’s a great advance, but the … Read More

A Safe Way to Profit from China’s 700 IPOs to List in 2014

By for Investment Contrarians | Dec 5, 2013

China’s 700 IPOs to List in 2014I pushed the “go” button on China a long time ago now, and I’m certainly not set to press “stop” yet, as I continue to feel the country is one of the top growth areas for investors worldwide. My contentions are contrary to those of many other analysts in the stock market, but I’m holding onto my bullish views.

The Goldman Sachs Group, Inc. (NYSE/GS) is now telling the market that next year (2014) will not only be the “Year of the Horse” in the Chinese Zodiac, but it will also be a buying opportunity in Chinese stocks. Goldman Sachs is predicting that the Hong Kong-based Hang Seng China Enterprises Index, which is available for investment by foreign investors, will surge 19% in 2014. (Source: He, L., “Goldman Sachs sees 19% gain for Chinese stocks in Hong Kong during 2014,” MarketWatch, December 3, 2013.) The index tracks the performance of Hong Kong-listed Chinese companies.

Goldman Sachs also predicts that the Chinese economy will advance by 7.8% in 2014, while the Organization for Economic Co-operation and Development (OECD) is even more optimistic, estimating 8.2% growth next year. (Source: Organization for Economic Co-operation and Development web site, last accessed December 3, 2013.) The OECD’s optimism is based on the rise in domestic consumer spending in China, which remains a clear focus in the mandate of the Chinese government.

Of course, there will continue to be some hesitancy due to the numerous frauds found in Chinese reporting in U.S.-listed companies a few years back. However, many of these issues have already been, or are currently being, dealt with by the U.S. Securities Exchange … Read More

How Investors Can Play the “Losers” in Blue Chips

By for Investment Contrarians | Oct 23, 2013

Blue ChipsThe key to buying stocks and stock market success is to always be on top of your outstanding positions, especially with any major changes in the underlying fundamentals.

If you ignore the warning signs, you may as well go to Las Vegas and gamble away your capital. Buying stocks is not like going to the grocer’s and looking for the cheapest deals. If stocks are getting thrown around and are steadily moving lower on the chart on higher volume, clearly, something is wrong or the company has experienced some dramatic change. This is what you want to avoid.

When I trade, I don’t care about the company’s fundamentals. I simply look out for reversals, whether I’m buying stocks or shorting them. The key is to be on top of things.

For the majority of investors, you don’t need to be constantly staring at the chart on the screen. What you need to do is be on the lookout for any major changes in the sector, a company rival, or the company itself. Failure to recognize changes and heed red flags could result in major losses.

The risk of buying stocks is intensified even more when it comes to smaller companies. If you buy a blue chip stock, one bad quarter or weakness in just one area is no big deal, since the company is usually big enough to absorb any short-term shocks and bounce back. This principle doesn’t apply to small-caps.

For instance, buying the “dog of the Dow” is a strategy often used by traders and institutions to invest in out-of-favor stocks that are paying the highest dividend yields … Read More

Why I Think You Can Still Ride the Market Higher

By for Investment Contrarians | Jul 10, 2013

Why I Think You Can Still Ride the Market HigherI have to admit that my hat’s off to the U.S. economy. Outcomes in the first half of the year were far better than I expected. And the second half seems to have started where the first half ended—on a high note.

I’m not complaining. There have been nice trading profits made in the upswing, and—like any smart investor—I have taken some profits off the table, especially in cases where the advance has been too big not to cash in on it.

And as we move into the second half of the year, the trading and direction will continue to be focused on the Federal Reserve and whether the central bank will indeed begin to taper its bond buying stimulus, as it has indicated.

The creation of 195,000 new jobs in June was more than expected, and that number clearly gave the stock market some confidence. But what really made traders happy was that the unemployment rate stabilized at 7.6%. The feeling among many is that as long as the jobless rate holds above 7.2%, the Federal Reserve will hold off on tapering until 2014, continuing to boost stocks.

The Federal Reserve has done a great job in driving up the overinflated housing and stock markets by supplying easy money. As I have said on numerous occasions, while the economy looks strong at first glance, cracks will begin to show when the massive buildup of the national debt and the burdensome consumer debt become more evident as interest rates ratchet higher.

The mountain of debt created by the Federal Reserve will become a major issue—count on that.

Of course, we’ll … Read More

Dow at Record Highs, but U.S. Economy Continues to Worsen

By for Investment Contrarians | Mar 12, 2013

U.S. Economy Continues to WorsenThe Dow Jones Industrial Average is firing on all cylinders, trading at a record high. The S&P 500 is also close to its all-time record. Technology and small-cap stocks are blazing along. The amount of new stock market wealth created in the first week of March and in 2013 has been great. Add in the better-than-expected jobs numbers and a decline in the unemployment rate to 7.7%, and you would think that the U.S. economy is back, loaded and ready to go. But we may be closer to a financial crisis than most think.

Here’s the problem: the creation of stock market wealth is heavily weighted with the institutional money and the top one to five percent of the wealthiest Americans. (I use the wider range of the top earners, since you have to be doing fairly well to be in this group.)

There’s an old saying—“Money makes money.” But let me put it another way: making money on $1.0 million is a lot easier than making money on $1,000. Earn two percent on $1.0 million, and you’d have an extra $20,000. Make two percent on $1,000, and you only have $20.00, just enough for a dinner for two at McDonald’s Corporation (NYSE/MCD). All I’m saying is don’t be fooled by the new headlines talking about how well America is doing, as a financial crisis is still possible.

The housing market is booming, but we all know that the rally in prices is partially due to rich investors and institutions buying cheap properties from those who had to sell or be foreclosed on due to a lack of funds to … Read More