Author: Andrew Packer

Commodities

Kitco: Think You Know Gold Stocks?

Posted on by Andrew Packer

Gold has continued to trend higher. It continues to beat the market year-to-date, even with stocks near all-time highs. Investor interest in gold is staring to perk up. But understanding the right reasons to own gold is crucial.

The good news? Gold production is on the rise globally. But that rise is being more than met by demand for central banks. This demand remains robust, and growing. Meanwhile, retail investors have largely been on the sidelines as gold prices continue to rise.

Several short-term factors are helping to push gold higher. One is central bank buying, which provides a massive support for prices above retail buying.

Another is geopolitical risk fears. Global tensions remain high. And that tends to help support gold.

Finally, the trend in commodities has started to look bullish over the long-term, going back to 2020. That suggests that commodities are in the early stages of a bull market. Commodity bull markets tend to last for nearly a decade, with the largest gains occurring near the end.

That suggests that most investors are likely under-allocated to gold right now. As retail investors pile in, there may be a big price spike. But that might be a good sign for today’s investors to take some profits in gold and gold mining stocks off the table.

 

To read the full analysis, click here.

 

Income investing

Dividend Growth Investor: Six Dividend Growth Stocks Rewarding Shareholders With Raises

Posted on by Andrew Packer

Markets have been touching all-time highs. Some see valuations as stretched. Particularly with tech stocks, which have soared over the past two years. Investors increasingly look for short-term wins.

But finding long-term winners can be just as rewarding. And it’s a lot less work to replicate over a shorter timeframe. That’s where dividend growth stocks come into play. These companies provide current growth, but also the promise of future growth.

Companies that can grow their earnings over time have a variety of options with that money. They can expand the business. Or they can buy back shares. Or they can pay a dividend. They usually do a mix of all of those.

Some companies look to pay a growing dividend to reward their bosses, the shareholders.

Among recent dividend increases, Realty Income (O), has been a long-term grower. They’ve raised their annual dividends several times each year since going public in 1994.

They currently pay a 3.6% yield, and raised their payout by 2.9%. The yield has been higher in the past, but shares have performed well ahead of declining interest rates.

Another recent increase has been from U.S. Bancorp (USB). The bank raised its dividend by 2%, and is now in the 14th year of consecutive dividend increases. Shares currently pay a hefty 4.5% dividend.

 

To see the full list of companies increasing their dividends now, click here.

 

Stock market strategies

The Intellectual Investor: The Best and Worst Investment Decisions I’ve Made

Posted on by Andrew Packer

Over a lifetime of investing, the top ideas and the bottom ideas will truly stand out. And as long as investors keep their losses small, overall returns may come down to a few big winners.

Understanding how other investors have made big winners and what they’re looking for can help find similar ideas. That’s true whether your preferred style of investing is value, growth, or a hybrid approach.

For instance, one successful investment is Uber (UBER). The rideshare company has stood out as a technology company, in part because it also has an analog component. The company earns a small fee connecting those with vehicles with those who need rides.

It’s a simple, repeatable process. But Uber doesn’t have to pay for the physical vehicles used.

Another interesting component to its success is that it’s become an industry leader. More importantly, it’s such a leader that it’s become a verb, like Xerox in photocopying.

These characteristics are likely to help the company continue to grow. And to grow its profits over time.

Meanwhile, losing investments often have similar characteristics. They may have low-quality balance sheets. They may use complex financial operations to obscure their safety. And management may be questionable.

Investors who can focus on companies providing a great user experience may find big winners of their own. Especially if they avoid questionable behaviors.

 

To read the full analysis, click here.

Income investing

A Wealth of Common Sense: Talk Your Book: Investing in Free Cash Flow

Posted on by Andrew Packer

Investors have a variety of tools that they can use when evaluating a company’s performance. Typically in markets, investors look at the price to earnings ratio, or PE.

While that’s a common tool, it’s one that may not always work in every situation. That’s because accounting  tools can allow earnings to look very different from the money that comes in the first place.

Looking at different tools can help investors find alternative opportunities.

For instance, free cash flow is a metric that can give a sense of a company’s profitability. Unlike earnings, accounting changes can’t lead to wild swings that turn profits into losses.

Free cash flow is different from net income, which looks at a company’s gross income after expenses.

When investors focus on companies with free cash flow, they can find opportunities that trade at a discount relative to looking at a company based on earnings.

Investors can even look at companies with high free cash flow and then look for ones that have strong growth. That provides a value metric and a growth metric that combine for better returns.

Companies with high free cash flow also have the ability to pay dividends or make big share buybacks. Those tools can also help push shares higher over time. That makes free cash flow a valuable metric for evaluating a stock investment.

 

To view the full interview, click here.

Stock market strategies

FX Evolution: You Won’t Believe What Tom Lee Thinks Will Happen Next!

Posted on by Andrew Packer

Markets have recovered from some of their August and early September selloff, and once again pushed to make new all-time highs. Markets view the Fed’s rate cut as bullish, at least going into the cut.

However, the back end of September is historically the worst two-week period of the year. And, at least so far, markets have a 100% track record for a negative September when the first four days of the month are down.

That trend may not hold. But if it does, it suggests that stocks may have some further – and steep – declines over the coming few weeks.

And the market’s shift in the first two weeks of September indicate that markets are more likely to range trade. That’s the view of Tom Lee, the analyst who has had some accurate readings on recent market moves.

Rather than a bull market or bear, it’s more of a kangaroo market. A market that bounces up and down without a strong direction either way.

Plus, as the election nears, investors may want to hold back until there’s some certainty.

So, looking at all these factors, signals point to markets remaining volatile for the next few weeks. The good news? After the election, markets should see a year-end rally.

That gives investors and traders some short-term trading opportunities both long and short. And for a chance for an uptrend to emerge into year-end.

 

To view the full analysis, click here.

Income investing

A Wealth of Common Sense: Dividend Stocks Are Cheap

Posted on by Andrew Packer

With the stock market trading near all-time highs, it’s easy to forget that just a handful of stocks powered most of that move. That’s especially true given the high market concentration in the Magnificent Seven tech stocks.

However, other parts of the market have started to perk up. That’s a healthy sign for stocks. It could mean that other companies could take over market leadership in the months ahead.

Outside of the big cap tech stocks, dividend-paying stocks are still unloved by the market. These companies tend to trade more slowly, but can deliver steadier returns. Especially when invested in for the long-term.

Remember, companies pay a dividend when their earnings exceed what is needed to reinvest in the company. Since shareholders are owners of the business, they get some of the excess capital involved.

Over time, several studies have shown that earning and reinvesting dividends can account for more than half of a portfolio’s total return.

Plus, with interest rates set to decline, dividend-paying stocks will look more attractive for risk-averse investors. That’s particularly true for higher payers such as real estate investment trusts (REITS) or partnerships (LPs). These types of high-yielding stocks also carry different tax considerations.

Even with the overall market near all-time highs, plenty of dividend stocks offer investors a relative value today.

 

To read the full analysis, click here.

Economy

Tom Bilyeu: “My Biggest Fear Is a Reverse Market Crash”

Posted on by Andrew Packer

Many investors expect some kind of market crisis. Interest rates soared to a 15-year high, and have now stayed there for over a year. That higher cost to borrow has led to some struggling companies file for bankruptcy.

The last time interest rates were this high, the housing bubble was being fueled. Loan officers found creative ways to ensure that even those with zero income could buy a home. The end result? A massive crash.

Over the subsequent decade, ultra-low interest rates made homeownership more affordable. Lending standards were tighter for a home. But for consumer and business borrowing, rates were near historic lows.

And low interest rates meant that savers were punished, earning little, if any, interest on cash in the bank. The result is now rising total debt, at a time when personal savings have been depleted.

Thanks to this trend, consumers have effectively leveraged up their balance sheet. As people run out of money, they will start to cut back on spending. Some may even look to sell their homes or otherwise free up cash.

While interest rates are set to come down, it’s now clear that economic data may start to decline at a faster pace. Historically, a recession tends to start within a year of a final interest rate hike, about where markets are now.

Given the current climate, however, markets may first deliver one last major push higher to end the year.

 

To listen to the full explanation on the economy, click here.

Stock market

The Maverick of Wall Street: We Are Entering a Time of Economic & Market Chaos

Posted on by Andrew Packer

Stocks are off to an ugly start for September. The S&P 500’s 4% drop represented over $2.2 trillion. Yes, the second week of September gave a partial rebound. However, markets are usually weaker in the second half of the month.

In the meantime, some of the market narratives are starting to shift. The biggest trend in markets for nearly two years has been the rise of AI. However, many are starting to question that trend.

ChatGPT user time is dropping substantially. That could indicate that users are moving to other, proprietary AI tools. Or it could be a sign that the initial hype of AI has played out.

That doesn’t mean the AI boom is over. The internet was just getting started when the tech bubble burst in 2000, after all.

But it does mean that markets may no longer trend up in a straight line. They have so far this year and in 2023. If the trend is shifting, stocks may be more volatile.

That means investors might have more opportunity to trade market swings, rather than buy and hold. And that traders who can hedge or even short the market before a big swing lower can rack up quick profits.

With markets likely to be more volatile ahead, the game has changed. And investors need to be prepared.

 

To watch the full analysis, click here.

 

Commodities

Daniel Lacalle: How Government Debt Is Killing the US Dollar

Posted on by Andrew Packer

In the span of a year, the federal debt has risen by nearly $2 trillion, and is now topping $35 trillion. This represents a hefty deficit in what government spends versus what it brings in from taxes.

Meanwhile, whether the economy drifts up or down, there could be an additional $16 trillion added to the debt by 2034. That’s a baseline that does not include some potential changes that could result following the presidential election.

Crunching the numbers, the total accumulated debt over the past three years, measured against growth, paints an ugly picture. The United States has increased its debt significantly and only gotten slow growth. By one measure, it’s the worst such performance in 90 years.

In order to operate, governments need money. Besides taxing, they can borrow. Taxing imposes a cost on those who have to pay the tax, whatever form it takes. Borrowing means the government has an additional spending obligation to pay back that debt.

Either way, rising debt and continued government spending over tax revenues point to a worsening balance sheet.

Eventually, things could reach a tipping point. And taxes will either need to rise, or government spending will need to shift to paying down debt. Either of those events could have a negative impact on the economy.

This weakening of the dollar may suggest why commodities such as gold and silver have been trending higher this year, and why that trend may continue.

 

To read the full analysis, click here.

 

Stock market

Swordfish Trading: We’re Getting Close

Posted on by Andrew Packer

Stocks moved to recover this week after stumbling in the first week of September. While markets tend to be weak in September and October, that weakness usually doesn’t appear until later in the month. More importantly, in an election year, that volatility can carry through the election in early November.

2024 is shaping up for some extra volatility. We’re on the cusp of an interest rate cut, which will likely kick off a trend in interest rates declining over the next year.

While lower interest rates mean a lower cost of capital, stocks will likely remain choppy. The recent economic data has led some to believe that the rate cuts are coming too late. It will take a few more months of data to determine if that’s the case.

For now, investors should expect markets to trade sideways. Big down days could be used to buy shares of companies for long-term holdings. Traders can look to trade the swings.

That includes a variety of asset classes, including both stocks and bonds.

On the plus side, market volatility is starting to come down after some wild swings in August and again last week. That suggests that while markets will trade sideways, some of the biggest moves may be over for the coming weeks.

 

To watch the full analysis, click here.