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Profitable Investing Tips has been a member since April 20th 2008, and has created 155 posts from scratch.

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What Companies Will Do Better for You than Amazon or Netflix?

As an overpriced market shows signs of a correction where can you put your money next? What companies will do better for you than Amazon or Netflix? We recently wrote about if there are any investment bargains these days and looked at small cap stocks, offshore investing and little-followed stocks where you can be ahead of the pack. CNBC looks at life sciences stocks that could make Amazon and Netflix look dull.

The obscure S&P life sciences subsector is up 41 percent this year compared to the less than 36 percent gain in Facebook, Amazon, Netflix and Alphabet, on an equal-weighted basis.

These companies profit from the volume of new-drug investigations and lab tests and favorable demographics without the direct risk of drug-price controls or an Obamacare repeal.

It’s a dream growth-investor sector but valuations are at the very high end of the stocks’ own historical range.

While high tech has the FANG stocks the life sciences sector has TAMP which stands for Thermo Fisher Scientific, Agilent, Mettler-Toledo and PerkinElmer. These stocks as a group have a lot going for them.

More drug investigations and approved treatments, of increasing complexity, are expected. The booming field of immunotherapy development is a growth engine in itself, requiring complex material-handling and storage processes.

It all nets out to a dream growth-investor arrangement: Long-lived demographic forces, resistance to the economic cycle, stable business-to-business supply relationships, global distribution, and a “razors and blades” recurring-sales model.

The Street lists its top 10 life sciences stocks.

  • Thermo Fisher Scientific Inc
  • Waters Corp
  • Charles River Labs Intl Inc
  • Icon PLC
  • VWR Corp
  • Agilent Technologies Inc
  • Mettler-Toledo Intl Inc
  • Cambrex Corp
  • Quintiles IMS Holdings Inc

Life sciences are the sciences concerned with the study of living organisms, including biology, botany, zoology, microbiology, physiology, biochemistry, and related subjects. The field is more than pharmacology and new drugs and includes things like stem cell cloning for organ repair and replacement and the testing and delivery systems needed to make these new technologies work. This branch of science may deliver a way to replace damaged insulin secreting cells of the pancreas and thus cure diabetes or repair damaged heart muscle after heart attacks. Joint replacement could become a thing of the past as stem cell injection causes hips and knees to repair themselves back to the state of a young person.

How Do You Invest in These Companies?

The problem for an investor in the life sciences is that no one knows which discovery will turn into a successful and profitable treatment. To the extent that you possess unique knowledge in this area you may wish to pick and choose individual stocks. The alternative is to invest in an ETF that tracks S&P 500’s life sciences tools & services subsector.

As the 5 year graph of this sector in Google Finance shows these stocks as a group have tripled in value over the last five years. Considering the virtually unlimited promise of new scientific discovery there is no reason to doubt a similar growth in the next five years.

Are You a Passive or Active Investor?

As the stock market rally grows older the time will come when the high tech and large cap stocks that are leading will have problems. Then passive investors who simply put money in a fund that tracks the S&P 500 will be in trouble. Are you a passive or active investor? Do you just let the market do your thinking or do you do intrinsic stock value analysis of the items in your portfolio? According to CNBC active is now outpacing passive investing.

In the perennial race between active and passive investment management, there are signs of a shift. After several years of bringing up the rear, active performance has outpaced passive so far in 2017. Various factors suggest that it could stay out front for a few years.

This year has been the best for active fund performance since the bull market began, as it has bested passive more than half the time. About 54 percent of active managers have beaten their benchmarks overall so far in 2017; about 60 percent did so in July.

The longest bull market since World War II has been driven by these big cap stocks: Facebook, Apple, Amazon, Microsoft, Google and Johnson & Johnson. When the time comes for a correction involving these market leaders investors will look elsewhere for profits and that will be the work of active investing and use of fundamental analysis of individual stocks. Active investing is more work than passive but when passive investing loses money active is your only choice.

Mid Cap Stocks Make Money Too

When the big cap stocks rally they are a great place to be but mid cap stock investing can be profitable too.

We suggest that you think of mid cap stock investing as the Goldilocks approach to investing. To a degree large cap stocks may be too large and done with rapid growth. Small cap stocks may be too risky. And mid cap stock investing may be just right. Before looking more closely at mid-cap stock investing, what is market capitalization and how is this categorization useful to investors? Market capitalization (market cap) is the total value of shares of a publicly traded company. Multiply share value times number of shares and you get the market cap of the company. A mid cap company has a market capitalization of between two and ten billion by most definitions.

Passive investors might consider a fund that tracks the Russell Mid Cap stock index. Alternatively an active investor can invest in a handful of well-chosen mid cap stocks and do just fine. US News lists their 7 best mid-cap stocks. Here are their suggestions.

  • Take Two Interactive Software (TTWO)
  • National Beverage Corp. (FIZZ)
  • PRA Health Sciences (PRAH)
  • (STMP)
  • Dave & Buster’s Entertainment (PLAY)
  • J2 Global (JCOM)
  • Match Group (MTCH)

Few analysts cover these stocks than cover the high tech large cap darlings. That gives you the active investor the opportunity to spot bargains before the rest of the market and profit before everyone else catches on.

Weakening Dollar Makes Some Investments Attractive

The US dollar is on a persistent downward slide. Investopedia notes that the greenback has broken a technical support level and could fall a lot more. The dollar’s plunge is, however, good for other investment opportunities.

The U.S. dollar Index has broken a critical technical support level that could lead to a sharp decline, according to a technical analysis, falling as much as 13 percent from current levels. That retreat promises to boost stocks, oil, gold and affect other asset classes.

This is a dramatic turnaround from a few months ago when U.S. Treasury yields and the dollar jumped following the election of Donald Trump as President on November 8. Back then, investors anticipated an accelerated expansion of the economy at a pace of 3-to-4 percent yearly. But optimism has faded that Trump can achieve this goal anytime soon, if at all. [You can] couple that with the Fed’s plans to scale back the pace and size of rate hikes, which has caused yields, and therefore the dollar, to reverse.

Investments that go up in dollar value in this case are ADRs (American Depositary Receipts), gold and other precious metals, oil and oil stocks and US multinationals who gain much of their income from sales offshore. And for those with the capital and know how foreign direct investment becomes attractive.

Follow the money is age old advice for knowing why something is happening. In this case we would like to follow the money that goes into foreign direct investment. Foreign direct investment is done by folks with lots of money and the intention to stay a course and make a profit. If you are looking for offshore investment ideas, take a look at where foreign direct investment goes year after year after year.

The article is from 2014 but the World Bank has a current version.

Foreign direct investment, net inflows (BoP, current US$)

International Monetary Fund, Balance of Payments database, supplemented by data from the United Nations Conference on Trade and Development and official national sources.

You can invest offshore and simply take advantage of business opportunities in a growing economy or you can take advantage of exchange rates. Years ago we suggested that one might invest in Colombia and the peso. What we wrote then is still true today as the dollar weakens.

If ever the famous Baron Rothschild “blood in the streets” quotation about investing were to apply in the later 20 th and early 21 st century, it would apply in Colombia. Colombia is emerging from a three generation long period of civil strife. The civil war in Colombia began in the 1950’s. Rebels demanded land reform and the return of confiscated property to poor farmers. In more recent years surviving rebel groups had been linked to cocaine trafficking and kidnapping. In the last decade or so rebels have been largely driven from the cities and peace talks have started. It could be that the time has come to invest in Colombia and the peso.

Since we wrote this article in 2012 two things have happened. First, and most important for the people of Colombia, peace between the government and rebel groups has been achieved. Secondly the price of oil has fallen. The Colombian peso is closely tied to the price of oil. Thus the peso trades at about 60% of its usual value versus the dollar. If you invest in a country like Colombia when its currency is weak you can sell your investment when the currency is strong and profit first and foremost on the improved exchange rate!

Nothing Seems to Scare Investors These Days

The market has been going up and many stocks seem overpriced. Then back to back hurricanes hit Texas and Florida as the crazy dictator in North Korea develops nuclear weapons and threatens his neighbors. One might expect one of more of these issues to be the straw that breaks the camel’s back and sends the market into correction. But nothing seems to scare investors these days. The Guardian notes that markets hit record highs after short lived concern about hurricanes and nukes. All of the details of damage from storms and potential war on the Korean peninsula do not seem to stack up to continued earnings progress. Business Insider writes that Goldman Sacks offers two reasons why the market is safe from a correction.

Goldman says fear not, for a couple of key factors are still working in favor of a prolonged stock market expansion.

The first is a lack of investor euphoria – the type of unabashed confidence that has historically left bull markets vulnerable to sharp downturns. Goldman cites cash positions of 3.2% for mutual funds, which is in line with the historical average. If there were an overabundance of confidence, this measure would be far lower, with more capital in play.

A second factor that should keep the stock market afloat is persistent US economic expansion, Goldman says. The firm specifically cites strong monthly job growth, rising wages, confidence at its highest level since 2001, and household balance sheets that are their strongest since 1980.

In addition earnings are expected to go up again next year and companies themselves don’t see their stocks as overvalued as they are busy repurchasing shares.

How about Offshore?

CNBC reports that there are buying opportunities in European stocks after a 10% rise in the value of the euro.

A recent correction in European stocks due to the strength of the euro is a buying opportunity for investors, according to a new report from Barclays.

The research states that the 5 percent decline in European stocks driven by the 10 percent appreciation in the euro may appear justified. The pan-European Stoxx 600 hit a two-year high in May but saw losses as risk sentiment turned sour on geopolitical tensions. The index is down nearly 5 percent over the last three months.

So, if you still have doubts about the strength of the US market you may want to gaze across the pond and take advantage of stocks in Europe that have fallen 5% or more due to a stronger euro.

Asian markets are closer to the threat of North Korea and respond more strongly to threats from the crazy dictator than markets in North America or Europe. Nevertheless Southeast Asian stocks were mostly higher as North Korea was quiet according to Reuters.

Most Southeast Asian stock markets ended higher on Monday on relief that North Korea did not conduct further missile tests when it celebrated its founding anniversary on Saturday.

The United States and its allies had been bracing for another long-range missile launch following multiple such launches in recent weeks that heightened tensions globally.

“With North Korea seemingly holding back on its ICBM test for now, there is a small degree of risk relief in the market, resulting in the paring of long positions in safe havens,” Mizuho Bank said in a note.

Despite various threats to the markets stocks are still going up as the economy moves forward and earnings support valuations.

Nothing Seems to Scare Investors These Days DOC

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What Should You Invest in After Hurricanes Harvey and Irma?

As hurricane Irma bears down on the Caribbean with Florida in its sights are there stocks you should be selling and are there stocks you should buy? The Washington Post writes that Korea and back to back major hurricanes have driven the market down. As stocks skid over worries what should you invest in after hurricanes Harvey and Irma?

Major stock indices closed down more than 1 percent Tuesday as traders worldwide reacted to a rapid escalation of the North Korean nuclear crisis, a second powerful hurricane barreling toward U.S. shores in as many weeks and a looming political fight over the increase in the national debt ceiling.

Financial stocks and insurance companies whose balance sheet could be bludgeoned by another hurricane were among the hardest hit.  Conglomerate Berkshire Hathaway, which is heavily bent toward insurance revenues, was down nearly 2 percent. Goldman Sachs Group and JPMorgan were down 3 percent and 2 percent respectively. Bank of America was down more than 3 percent as well.

Many investors are investing in gold as a hedge against risk but US treasuries are also up as others flee the stock market. Regarding the hurricanes many stocks will do well because of rebuilding and reinvestment related to hurricane damage. Those in the path of the storms who suffer damage are exceptions. CNBC and Cramer’s Mad Money notes that as Texas rebuilds after Harvey certain stocks will do well.

Cramer expects potentially tens of billions of federal dollars to flood Texas as the waters recede, especially because it is such a largely Republican state.

The massive reclamation project in Houston will likely deliver a boost to an array of companies related to rebuilding, the “Mad Money” host said.

From companies dealing in homebuilding materials – think Weyerhaeuser, Louisiana-Pacific and USG – to road aggregates – Martin Marietta Materials’ wheelhouse – to roofing – the specialty of Owens Corning and Beacon Roofing – Cramer is anticipating a lift across the board.

While large construction and supply companies will benefit across the board so will the likes of Home Depot and Lowe’s for do it yourselfers who are fixing up lesser damage. Also Houston the flooding damaged as many as half a million cars and trucks. That will be a lot of sales for local dealers and for the auto industry.

Big Oil

How about oil stocks? After all it was Houston that got hit by Harvey. The Motley Fool speculates on what hurricane Harvey means for oil stocks.

As Harvey approached the Gulf Coast, companies were forced to take immediate preventative measures. These included shutting down refineries on the Texas Gulf Coast, where more than 25% of the nation’s refining capacity is located.

Overall, Harvey knocked out more than 10% of the country’s refining capacity.

Besides refineries, many offshore oil platforms in the Gulf of Mexico had to be evacuated to ensure worker safety or shut down due to pipeline issues. Anadarko, for example, had to evacuate four of its 10 Gulf platforms and shut down four more. As of Friday, the U.S. Bureau of Safety and Environmental Enforcement said workers had been removed from 86 of the 737 manned oil and gas platforms in the Gulf. Onshore operations were also affected: ConocoPhillips ceased all of its operations in the inland Eagle Ford Shale.

Many companies will lose revenue on a temporary basis but will recover. Refiners will see better profits during the temporary rise in the price of gasoline.

What Should You Invest in After Hurricanes Harvey and Irma? DOC

What Should You Invest in After Hurricanes Harvey and Irma? PDF

What Should You Invest in After Hurricanes Harvey and Irma? PPT

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