CEFs

Closed End Funds or CEFs are a great way for investors to get easy diversification while avoiding the uncertainty associated with mutual fund valuation between statement periods. However, there is a lot that goes into selecting a good CEF as my article here discusses.

Also as a bonus, here is my article on Monro Muffler.

Enjoy.

 

 

Earnings Season

Quarterly earnings for stocks are about to kick off in earnest and past research has shown that much of the volatility in stocks occurs around this period. From the classic post earnings announcement drift (upward) to the after-hours plunge that can accompany a stock that misses expectations, all investors need to keep a sharp eye on their portfolio’s for the next few weeks. Of course earnings season can also be a great opportunity to add new positions to one’s portfolio and so it is usually worth doing some analysis of firm fundamentals around this time (unless of course you believe in the Strong EMH in which case there is no point in worrying about any of this).

With that in mind, here are my most recent two articles on a pair of companies that may have some unique growth prospects going forward:

Stifel Financial, a firm growing rapidly thorugh acquisitions is detailed here, while distribution company Wesco is discussed here.

 

Welcome Back

Sorry for the hiatus in posting. To get you all caught up with what I have been thinking about, here is a list of my recent articles.

Dr. Pepper Sanpple Group: here

Watts Water Technologies: here 

Closed End Funds Commentary: here 

Fair Isaac Corp: here 

and general Fed Taper commentary is here.

I should be back to a regular posting schedule next week. Until then, have a good weekend.

Happy Fourth of July

There will be limited posting this week due to the Fourth of July holiday, but for those who are interested, here are a couple of my latest articles.

iRobot as a short play is here.

Shell as a dividend pick is here.

Vodafone as a dividend/turn-around pick is here.

And, Lindsay Corp. as a play on the US weather is here.

 

 

More Small Cap Stocks

Just a brief post for those interested, my latest article on small cap stock Tibco Software can be found here. The firm has been a Big Data software company since before that term entered the common lexicon. The stock is appealing both for its predicted returns in the FF4 factor model and for the abnormal returns that past literature has found is associated with turn-around efforts and restructurings.

Fed Tapering and mREITs

Fed Tapering is obviously the primary story in the markets right now, but as several popular press articles in the WSJ, on CNBC, and Bloomberg have all noted, the slow steady rise in interest rates that the Fed seems to have hoped for has instead turned into a stampede with interest rates up 1% in less than a month. Some of this rate rise makes sense, but some of it is surely a result of irrational market volatility in line with the old academic papers on the subject by the likes of Lo and McKinley and others.

In any event here is a recent article of mine related to the topic and dealing with REITs in particular.

Comparing Stocks

One long standing gripe I have with equity research is that analysts rarely rank their relative stock picks. An analyst may have a buy writing on 5 stocks in a sector, a hold rating on 3, and a sell on 2, but that still leaves the average investor trying to decide which of the 5 ‘buy’ stocks he should choose. This is a particular problem because most investors simply don’t have the time or financial capacity to track and invest in 5 different firms within a single sector.

Given that it is too bad that analysts research is usually focused on an individual company rather than comparing across companies. Indeed, this would be a fairer way to track analyst skill since one could compare the performance of analysts’ choices based on their relative rank. Of course that would probably lead to further opportunities for investors to criticize analysts which is perhaps why this practice isn’t done.

Regardless, my most recent article looks at domestic and international firms in the autos space and ranks them based on their relative attractiveness along a set of 6 different metrics. The article is here. Enjoy!

Small Cap Investing & FF 4 Factor Model

I have been doing some work on small cap stocks that are attractive based on the Fama and French Four Factor model. For those who aren’t familiar with the FF4 model, basically the idea is that there are various risk factors that lead to higher returns on stocks when the stock is high in these “risk” factors. The model has enormous traction in financial research circles (you basically can’t publish an asset pricing paper without dealing with the model in some way), but it is controversial because many of the factors don’t really seem like risks.

The four factors that lead to higher returns are: Higher Beta stocks (return increase is statistically insignificant), Smaller Stocks (hence my starting point for looking for companies), lower price to book stocks (often called value stocks), and stocks with higher returns over the last 12 months (called momentum stocks). To be fair, momentum was not a Fama and French contribution, it came from other researchers, but ever since Carhart (1997), it is commonly tacked on as a fourth factor.

In any event, I have been looking at stocks that look attractive based on these factors. My recent articles on three such are stocks are: First Horizon, Arctic Cat, and Macquarie Infrastructure.

New Article

One of my recent articles focuses on a company called Seadrill. The firm’s business centers on renting out the enormous floating oil rigs that are sometimes seen on the news. The company rents these rigs to Exxon, BP, Shell, etc. The business has turned out to be extremely lucrative over the last few years as my article here details.

Fed Tapering

Alot the financial news in the last few weeks has focused on the Fed and the prospects for it tapering future QE/bond purchases. This has probably created some irrationality in the markets consistent with various research papers on market sentiment (e.g. Baker and Wurgler, 2006). My article on the topic is here.