Investment Contrarians


What the NASDAQ Above 4,000 for First Time Since Its Collapse Means for Investors

By for Investment Contrarians | Nov 27, 2013

 stock marketTechnology and growth stocks have been the go-to stocks this year, as the NASDAQ broke above 4,000 on Monday for the first time since September 2000.

But recall that 2000 was also the year the tech sector and NASDAQ collapsed after the index traded above 5,000 in March of that year.

Now, another 25% or so, and the NASDAQ will be at a record-high once again. Years ago, when the NASDAQ was down 75% from its high in 2000, I never thought we would be at 4,000 this soon, but this is the age of technology and the NASDAQ.

The 4,000 level is a milestone, in my view, since the previous moves to 4,000 and 5,000 were unjustified and driven by lofty ambition and major euphoria. This time is different.

We are not seeing the kind of excessive buying now that we did back in late 1999 and 2000. Yes, there’s some froth now, especially in the initial public offering (IPO) market, but I can tell you it’s nowhere near what I saw back then. I’m not saying the NASDAQ and stock market are justified at their current levels; I’m just saying the advance in technology and growth has been steadier now than it was over a decade ago.

Take a look at the long-term chart of the NASDAQ below. Note the record peak in March 2000 when stocks spiked, followed by the subsequent sell-off that was dramatic and destroyed wealth.

As I said, the NASDAQ has been on a steady rise since bottoming out in 2009, following the Great Recession. Notice the upward trend from 2009 to now, as … Read More

Why China’s Reforms Could Mean Big Business for U.S. Investors

By for Investment Contrarians | Nov 19, 2013

Big Business for U.S. InvestorsI’m calling it; that’s enough talk about Janet Yellen and the Federal Reserve’s likely strategy to continue printing money until the economic renewal picks up steam.

America has spent trillions to save its housing, financial, and auto sectors, and in the process, it has likely crippled the future generations with its massive build-up of national debt.

Yet at the same time, across the Pacific Ocean, China has seen decades of economic growth that has driven the country to surpass Germany and Japan to become the second-largest economy in the world, trailing only the United States. But unlike good old America, the Chinese have also managed to build up reserves of over $3.5 trillion.

And while there are still many in the United States who dish on China, I’m not in that camp. Having traveled to China, I can tell you the growth there has been staggering and it is reflected in the building of massive super cities that make New York City look small.

The money and wealth creation in China from the rural areas to the urban centers has driven the domestic consumption, and I expect this trend to continue.

And while the focus here was on the Federal Reserve and its suspect quantitative easing strategy, the Communist Party in China was meeting to discuss the future of the country.

At the core of the massive reforms in China will be major changes to its current policies as the country gets set for what will likely be another 20 years of growth superior to the United States and other Western countries. China doesn’t want its economic engine to stall…. Read More

Why Google Is Still a Bargain at a Grand a Share

By for Investment Contrarians | Nov 15, 2013

Google Is Still a Bargain1 In spite of its $1,000-plus share price, there’s a reason why Google Inc. (NASDAQ/GOOG) is a buying opportunity.

Now one of the most valuable companies in the world, Google did not start trading until 2004 and in less than a decade, the upstart Internet services company has a market cap bigger than that of General Electric Company (NYSE/GE), which was formed in 1892 and has been trading since 1962.

In the technology area, Google has become a heavyweight and long-term buying opportunity.

The company essentially pummeled Yahoo! Inc. (NASDAQ/YHOO) after offering up the idea of display advertising via its own network of ad solutions. Yahoo! didn’t jump on this concept, and look where it is now, with a market cap nearly ten-times smaller than Google’s.

Now Google is spreading its wings to hardware, or more specifically, the mobile market, with its “Android” operating system. I see a buying opportunity here.

The demand for Android-powered smartphones has grown to the point that these devices are a dominant player in the global economy.

Market leader Samsung Electronics Co. Ltd. used the Android platform to build a world-class smartphone, which also signals a buying opportunity.

Through its acquisition of Motorola, Google is working hard to capture global market share with the pending introduction of a cheaper smartphone that still offers power and functionality. The company will offer to the world its “Moto G” smartphone, which will come with eight gigabytes of memory. The estimated cost is $179.00 with no contract. The 16-gigabyte version is $199.00.

Clearly, Google is less worried about margins at this point, and is more focused on expanding its market … Read More

Why Did Institutions Sell 29 Million Apple Shares?

By for Investment Contrarians | Nov 8, 2013

29 Million Apple SharesApple, Inc. (NASDAQ/AAPL) is maintaining its position as the top seller of smartphones in the U.S., but in the more important global market, Apple is trailing behind its competitors. Unless Apple gains traction in China and the emerging markets, the stock is going nowhere—and that is exactly what institutional money is saying. In the last six months, institutions sold a net 29.14 million shares of Apple, cutting institutional ownership by 5.5%, according to Thomson Financial. The takeaway point in this scenario? When institutions sell, you need to take note and follow the pro money.

Simply put, by looking at where the institutional money is flowing, you can get a better sense of the market. Institutional investors are the money guys who have better access to important information and know when it’s time to jump ship. When a top-ranked analyst says jump, it’s usually wise to jump.

Take a look at the high momentum Internet services stocks. Institutional ownership is declining here, and I’m not surprised, given the massive run-up in prices this year.

Netflix, Inc. (NASDAQ/NFLX) has been the current target of heavy selling by institutions, as the share price surged above $300.00 and the valuation got out of whack at 86 times (X) its estimated 2014 earnings per share (EPS) and a massive price-to-earnings growth ratio at 8.62. Talk about overvalued! Institutions realize this, and over the past six months, 16.13 million shares were dumped, representing a decline of 4.5% in institutional ownership, according to data from Thomson Financial.

Even insiders at Netflix are selling, with 1.06 million shares sold via 26 transactions. On November 4, Neil Hunt, Netflix’s … Read More

The One Factor You Don’t Want to Overlook When It Comes to Buying Stocks

By for Investment Contrarians | Aug 27, 2013

Overlook When It Comes to Buying StocksWhen it comes to buying stocks, one question I am often asked is: what is one of the most overlooked factors that investors miss?

While some people might create an investment strategy for buying stocks based on valuation or growth levels, one common variable that is crucial for long-term success for any investment strategy is missed: the management team of the company.

This sounds obvious, but you would be surprised at how few investors actually research the people who are running the company before buying stocks in that company.

Why does this matter when it comes to buying stocks?

Management is extremely important for a company, since these people set out the investment strategy for the future of the company. When you think of Apple Inc. (NASDAQ/AAPL), you naturally think of Steve Jobs and the innovation he helped bring to the company.

In fact, when he passed away, a common concern amongst analysts was how to value the stock with the key component of the management team then missing.

In contrast, a recent example of an ineffective leader and his impact on a company’s success (or lack thereof) is Steve Ballmer, CEO of Microsoft Corporation (NASDAQ/MSFT).

Upon announcing that he will retire as CEO, the share price of Microsoft shot up. Obviously, this tells us that investor confidence in Ballmer was extremely low. The investment strategy that he laid out over the past decade has led to Microsoft continuing to fall behind its competitors.

Buying stocks for the long term is about being a part owner of the company. As such, your investment strategy should be to look for companies … Read More