stock pickers
Pat McKeough responds to many personal questions on stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions. A question this week touched on the well-established trend of overseas outsourcing. Specifically, an Inner Circle member asked about a leading specialist in the field with rising sales and profits and a large store of cash. ...
Almost every investing strategy takes into account well-known signs of risk, such as falling profits, dividend cuts, police or security commission investigations, and so on. But wise investors will also stay alert for more subtle signs of coming problems. Here are 3 hints that could serve as a warning that a company may soon be facing big trouble.
- Strong reactions to outside criticism: When outsiders criticize a company’s accounting and the criticism is unjustified, most corporate insiders simply ignore it. But if insiders have something to hide, they may protest far too loudly — that is, threaten to sue critics of their accounting practices, in hopes of shutting them up.
It’s sound investing strategy to avoid companies that attract accounting criticism, but all the more so when insiders react with outrage and threaten lawsuits. You probably won’t miss much profit by staying out, but you’ll avoid some of the market’s worst disasters. - Too much focus on corporate prestige: When companies pay to name buildings after themselves (including gigantic sports venues), or build excessively costly head offices, it may mean they are pursuing prestige at the expense of profit.
NISSAN MOTOR CO., $18.15, symbol NSANY on Nasdaq, reported record U.S. sales in November. Overall, the company sold 85,182 cars and trucks in the U.S. during the month. That’s up 19.4% from 71,366 vehicles in November 2010. The Nissan division’s sales jumped 21.5% to a record 76,754 vehicles. Sales of Infiniti vehicles rose 3.0%, to 8,428 vehicles. The all-new Versa Sedan sold particularly well. Rising demand for this car lifted overall sales of the Versa subcompact by 38.2%, to a total of 9,291 vehicles. Nissan Altima sales continued to be strong: the company sold 20,613 of these cars in November, up 12.2% over the prior year. As well, sales of the Rogue crossover jumped 27.2% in November, to a record 10,845 vehicles....
L. M. Ericsson Telephone Co. (ADR), $9.71, symbol ERIC on Nasdaq (ADRs outstanding: 3.2 billion; Market cap: $31.1 billion; www.ericsson.com), is a leading maker of systems and products for telecommunications networks. The company’s divisions include Networks (55% of revenue); Global Services (40%); and Multimedia (5%). Ericsson recently closed a money-losing joint venture with Sony to design and market mobile phones. Sony paid Ericsson $1.5 billion for its share of the partnership. However, Ericsson recently joined a consortium that included Sony, Apple, Microsoft, Research in Motion and EMC to buy over 6,000 patents that belonged to bankrupt Nortel Networks for $4.5 billion. These patents cover technology in a number of areas, including Internet, wireless networking, voice applications and computer chips....
You might call it fair-weather investing. Many investors prefer to buy stocks only when economic and financial conditions seem good, if not ideal. When there’s news of rising oil prices or interest rates, for instance, they are inclined to stay out of the market, or get out if they’re already in. Yet when they think conditions are ripe, these “fair-weather” investors can be surprisingly casual about what they buy. They readily accept recommendations from brokers, or they buy stocks that are touted by public-relations firms. They give promoters and insiders the benefit of the doubt....
AMERIGO RESOURCES, $0.53, symbol ARG on Toronto, processes copper and molybdenum from the waste rock from Chile’s El Teniente, the world’s largest copper mine. This contract runs through 2021. Amerigo has a further agreement to process material from the nearby Colihues tailings pond. The company gets 94% of revenue by processing copper. The remaining 6% comes from molybdenum. In the three months ended September 30, 2011, Amerigo’s revenue rose 6.8%, to $42.0 million from $39.3 million a year earlier (all figures except share price in U.S. dollars). Higher copper prices offset lower production and molybdenum prices....
This week, there was a question about the world’s largest maker of generic drugs. While an aging population is good for drug stocks, there are still a number of thorny issues to consider
The fast food industry is notoriously competitive. It can give rise to some powerful growth stocks—but it is not always easy for companies to keep growing. Today we examine the world’s largest pizza takeout chain to see whether it can sustain the success it has had in 2011. DOMINO’S PIZZA $32.21 (New York symbol DPZ; www.dominos.com) is the world’s largest chain of pizza stores that offer takeout and delivery. The company operates 9,541 stores in the U.S. and over 70 other countries. Franchisees run most of these outlets....
INTACT FINANCIAL CORP., $56.68, symbol IFC on Toronto, is Canada’s largest provider of property and casualty insurance, based on premiums. Its brands include Intact Insurance, Canada BrokerLink, belairdirect and Grey Power. The company recently completed its purchase of AXA Canada from Paris-based ASX Group for $2.6 billion. To put that in context, Intact’s market cap is $6.3 billion. Intact plans to look for more casualty and property insurers to buy in Canada. That includes other subsidiaries of European insurers, many of which are struggling. Intact estimates that as much as 30% of the Canadian property and casualty market is controlled by foreign-owned insurers....
Pat McKeough responds to many personal questions on stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on a selection of the most intriguing questions of the past week go out to all Inner Circle members. And every Friday, we offer you one of the highlights from these Q&A sessions. An intriguing question this week concerned one of the world’s best-known technology stocks. Cisco Systems offers leading-edge products in a highly competitive industry. Pat examined just how it plans to maintain its position in the face of rapid change and overseas competition....
