Stock Tips Investment: swing trading

Showing posts with label swing trading. Show all posts

Thursday, September 26, 2013

Believe It or Not, the Bulls Still Have Plenty of Muscle

Russell, NYSE Composite still pushing upward

By Sam Collins, InvestorPlace Chief Technical Analyst
New York, Sept.26, stocks to watch .- The S&P 500 closed lower for the fifth consecutive session Wednesday, marking the longest losing streak of the year for the broad-based index. Since it scored a new high last Thursday, the index has fallen 1.9%.

The Dow Jones Industrial Average also fell, suffering from the impact of a 1.45% decline in the shares of Walmart (WMT). Early yesterday the giant retailer was reported to have cut its orders from suppliers, but the report was labeled as “misleading” by a company representative.

A better-than-expected durable goods report for August and an increase in the sale of new homes in August helped to offset wrangling on Capitol Hill. No agreement over the debt ceiling appears near, and funding runs out at midnight on Sept. 30.

At the close, the Dow Jones Industrial Average was off 61 points at 15,273, the S&P 500 fell 5 points to 1,693, and the Nasdaqgave up 7 points to fall to 3,761. The NYSE traded 641 million shares and the Nasdaq crossed 428 million. On the Big Board, advancers and decliners were close to even, and decliners edged out advancers on the Nasdaq by 1.1-to-1.

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The Russell 2000 made a new all-time high yesterday with its intraday high of 1,082. The Russell 2000 — like its cousin, the Nasdaq (see Wednesday’s chart and comment) — is trading within a bull channel, but unlike the Nasdaq, it has no resistance above it to hamper further new highs. MACD is slightly overbought but could become more overbought as the index continues its dogged advance.

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The NYSE Composite is a broad-based index containing all stocks traded on the Big Board. Its chart pattern is much like that of the S&P 500 (see Monday’s chart), which recently made a new all-time high. But the NYSE’s new high at 9,906 — made last Wednesday — was unlike the S&P 500 in that it has not seen a new high since May, and its all-time high at 10,387 was made in October 2007.

Conclusion: Despite yet another down day, the short-, intermediate- and long-term trends still are bullish. The continuing power of the bull market is supported by both the broad-based indices as well as the small- and midcap stocks. The ability to keep trudging along despite the overwhelming negativity coming from Washington is a powerful argument in favor of the bulls. Bearish momentum is absent.

The strongest sectors continue to be industrials, tech & biotech, consumer discretionary, biotech, pharma, housing, materials and financials. Bonds and bond substitutes have been the weakest.

Dollar and Treasuries likely to lift Gold

English: A sample of crude oil from Haenigsen, Germany. Deutsch: Flasche mit Erdöl (Photo credit: Wikipedia)

By Colin Twiggs

Sydney, Sept.26, stock watch .- Spot gold continues to test support at $1300/ounce. Failure of support would visit the primary level at $1200/ounce, while respect would test $1440. Breach of the downward trend channel indicates the primary trend is slowing, but recovery above $1440, and a primary up-trend, seem some way off — as does recovery of 13-week Twiggs Momentum above zero.

Spot Gold

The two-hourly chart shows breakout above resistance at $1330. Retracement that respects the new support level would signal a rally to test $1375, improving the chances of a bottom.
Spot Gold

Dollar Index

The Dollar Index broke primary support at 80.50, warning of a primary down-trend. Follow-through below 80 would confirm. A 13-week Twiggs Momentum peak at zero also suggests a down-trend. A falling dollar would boost gold prices. Recovery above 81 is unlikely, but would warn of a bear trap.

The yield on ten-year Treasury Notes broke support at 2.70 percent, warning of another test of 2.40 percent. Penetration of the rising trendline would strengthen the signal. Falling treasury yields are also likely to lift precious metal prices (because of the lower opportunity cost).
10-Year Treasury Yields

Crude Oil

Nymex light crude broke support at $103/barrel and its rising trendline, warning that the up-trend is slowing. A test of medium-term support at $98/barrel is now likely. The wider spread with Brent Crude is an indication of tensions over Syria which threaten supply.
Brent Crude and Nymex Crude

Commodities

Commodity prices continue to fall, with the Dow Jones-UBS Commodity Index headed for another test of 124 despite a resilient Shanghai Composite Index. Recovery above 130 is unlikely, but would confirm the earlier double-bottom reversal and a primary up-trend.
Dow Jones UBS Commodities Index

* Target calculation: 130 + ( 130 - 125 ) = 135 ...

Tuesday, August 20, 2013

How to Defeat the Hindenburg Omen

The Zeppelin LZ 129 Hindenburg catching fire on May 6, 1937 at Lakehurst Naval Air Station in New Jersey. (Photo credit: Wikipedia)

By Rude Awakening

Baltimore, Aug.20, swing trading .- The stock market is a fiery zeppelin crash waiting to happen.

Well, maybe not. But that's what the financial media coverage of a rather complicated technical indicator would like you to believe.

Everywhere I look, I'm seeing breathless mentions of something called the Hindenburg Omen. Some sources are reporting as many as 11 Hindenburg Omens have materialized just over the past few weeks.

"A Google News search for the term "Hindenburg Omen" returned 6,340 results this weekend, and more than a few dramatic photos of the ill-fated Zeppelin airship," writes my trading buddy Jonas Elmerraji. "Yup, fear is the predominant emotion in stock investors right now – why else would click-hungry media outlets push some obscure market indicator named after a gruesome disaster?"

On top of the perfectly-named Hindenburg Omen, we experienced a 2% drop in the broad market last week. So conditions are ripe for some new worries.

But aside from its catchy (and terrifying) name, what's the deal with the Hindenburg Omen?

For starters, if you've bothered to read any of the articles that cite the indicator, you've probably noticed that none of them really explain what the hell the Hindenburg Omen measures. That's because it's incredibly complicated. Fully grasping the Hindenburg Omen requires more than a rudimentary understanding of simple technical analysis techniques.

I'm not even going to bother wasting my time trying to lay it all out for you. I can't even come up with a simplified explanation beyond the fact that it's bearish and it involves tallying NYSE advances plus declines and new highs vs. new lows. And that doesn't even begin to get into the nuances of what's required to trigger the indicator…

If the Hindenburg Omen had a mundane name, it never would have caught on. Its track record for calling major tops isn't consistent (Hindenburg Omens made similar headlines in 2010, for example). Most people don't even know how it works. It looks good in a bearish market story. But it's not something anyone should use as a trading signal.

It's no secret that the short-term trend for stocks is lower. The S&P 500 has dropped five out of the last six trading days. So far, we've seen a retreat of 3% this month. But if you're prepared for a bigger correction, the big, scary headlines won't ruin what has been a solid year for stocks so far.

Maintain appropriate stop losses and sell when they're triggered. Don't force any new trades while the market is falling. And don't blindly sell out of your positions based solely on fear. Keeping a clear mind during a correction (of any magnitude) will put you eight steps ahead of every other investor on the planet.

Gold Chart of The Week

By INO
Chicago, Aug.20, stocks to watch .- Each Week Lo

ngleaftrading.com will be providing us a chart of the week as analyzed by a member of their team. We hope that you enjoy and learn from this new feature.
Weekly Gold Report (August 19^th through August 23^rd)
Market bulls were dealt a blow last week as stock traders began booking profit on long positions in expectation of a FED taper in their bond purchase program. The selling pushed the stock indexes lower throughout the week until the Dow suffered its largest weekly drop in over a year. Similarly, the US Bond Markets fell under pressure as traders continued to try to anticipate the FED’s next decision regarding Quantitative Easing and Interest Rates.
While the upcoming week is short on economic data from the United States, traders will be looking forward to PMI figures from China and Germany. We will also have an opportunity to review the minutes from the last FOMC Meeting, which should provide decent market movement. Lastly, we will hear from a few FED Members later in the week as they convene for their annual Jackson Hole Symposium.
I anticipate the FED speak will be nothing short of confusing, which has been par for the course over the last several months. When one member is hawkish today, another member is dovish the following day. It makes sense to perpetuate this style of reporting because if every FED member agreed on the scale and timeline of QE, the major financial markets would experience massive directional moves, and a one sided trade. And until the FED actually feels comfortable enough to raise Interest Rates, we should expect this type of reporting and inconsistent FED speak.
The Precious Metals markets seemed to benefit the most from the profit taking selloff from last week. Gold was up 4.60% on the week and Silver was up significantly more. It was obvious that Hedge Funds added to their net long positions in both Precious Metals and speculators also seemed to be along for the rally. It will be interesting to see if the rally continues into this week’s Precious Metals trade. I will be watching the stock markets as my indicator for Metals. If stocks continue to feel pressure this week, I would have to assume that the profit from stocks will continue to spill over into the Metals. If the stocks begin to see some relief from last weeks drop, then I would assume Gold and Silver will consolidate and possibly retrace some of the rally from the prior week.

Gold Futures in the December contract are holding between the 20day and 100day simple moving averages (arrows #1 and #2). Until we hear from the FED members later in the week, I would not be surprised to see Gold Futures continue to consolidate between $1325 and $1375. With the light volume in markets across the board, it is easier for large funds to drive markets with large lot orders, so traders should always be prepared for volatility. But I doubt we will see much until the FED minutes are released later in the week.

Thursday, August 15, 2013

What Do You See in This Chart?

New York Stock Exchange (Photo credit: Mike_fleming)

The bulls see a cup-and-handle formation while the bears see a head-and-shoulders

By Sam Collins, InvestorPlace Chief Technical Analyst

New York, Aug.15, stock watch .- Stocks opened down Wednesday and closed lower as a broad decline pummeled nine of the ten S&P 500 sectors. Technology was the sole winner, and it only gained 0.01%.

The Dow Jones Transportation Average fell 0.81%, with 18 of its 20 stocks posting losses. And the Dow industrials fell 0.73% as two economic reports appeared to have a negative impact on stocks. The weekly MBA Mortgage Index fell 4.7%, its 12th decline in the past 14 reports, and July PPI was unchanged while core PPI ticked up by 0.1% where analysts were looking for better results.

At the close, the Dow Jones Industrial Average was off 113 points to 15,338, the S&P 500 fell 9 points to 1,685, and the Nasdaq lost 15 points at 3,669. On the NYSE, decliners outpaced advancers by 1.8-to-1, and on the Nasdaq, decliners were ahead by 1.4-to-1. Volume was light with the Big Board trading 622 million shares and the Nasdaq crossing just 374 million shares.

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The S&P 500 chart illustrates the dilemma of this summer’s traders. Some chartists see a cup-and-handle formation in the above chart. This would be a bullish signal with the implication of a broad market breakout with a target of 1,775.

Others see the opposite — a head-and-shoulders top forming with the neckline at 1,676 and a downside target of 1,644.

It’s best not to anticipate either theory, but rather let Mr. Market tell you of his next move.

Conclusion: In the short term, you may be a bull or a bear — there is plenty of evidence on both sides. I’m more in the bear camp short term for reasons I’ve stated ad nauseam for the past week. But all should agree that the long-term trend is still strongly bullish and that a sell-off would be a great opportunity to load up on stocks that will return many-fold over the years. ...

Thursday, August 8, 2013

Mr. Market Needs a Crutch

Dow Jones 2006 (Photo credit: caseorganic)

Dow industrials, transports sit on perilous technical ground

By Sam Collins, InvestorPlace Chief Technical Analyst

New York, Aug.8, swing trading .- On Wednesday, the major U.S. averages fell for the third straight day following declines in both Europe and Asia. Stocks fell 4% in Japan, and stocks fell 1.4% in England following the biggest change in its central bank’s policy in four years.

Banks and other financial stocks took a hit as the impact of Department of Justice lawsuits against Bank of America (BAC) worried investors that the group could be under scrutiny. But in a low-volume session, the biggest surprise was a decline of 0.7% in the Dow Jones Transportation Average, which many consider a gauge of future manufacturing results.

At the close, the Dow Jones Industrial Average was off 48 points at 15471, the S&P 500 fell 6 points to 1691, and theNasdaq closed at 3654, off 12 points.

The NYSE traded just 657 million shares and Nasdaq crossed 398 million shares in one of the lightest trading days of the year. Decliners outpaced advancers on both the Big Board and Nasdaq by more than 2-to-1.

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Although the overall trend is bullish, the near-term is in doubt. Note two inflection points: the May closing high at 15409 and the July low of 15405. Just four sessions ago, the Dow industrials broke to new highs. However, the break was followed by three days down, and yesterday’s low came perilously close to the support line connecting the two highlighted points. A break of the line would likely result in a test of the 50-day moving average at 15,239 (blue line). Also, MACD has flashed a sell signal.

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Like the industrials, the Dow transports broke to a new high and then rolled over in an even deeper correction with four consecutive down days. By penetrating both its near-term bullish support line and 20-day moving average on an opening gap down, its near-term trend must be considered very weak.

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The more income-oriented Dow index — the Dow Jones Utility Average — rose yesterday and flashed a CBR buy signal (our proprietary indicator). And it closed slightly above its 20-day moving average at 504.17.

Conclusion: After six weeks of one of the most aggressive advances on record, the small- and midcap stocks are suffering an inevitable correction. But yesterday’s charts show that the more staid Dow series of indices also appear to be losing strength, and that could spell trouble for the entire market.

Jeff Saut notes that equities appear to be losing strength when gauged by the NYSE Advance/Decline Line, which measures the difference between the number of advancing and declining issues. When the market makes new highs, technicians like to see more stocks make new highs. But the recent A/D line did not show more new highs and instead showed fewer stocks making new highs — this is a non-confirmation of the recent breakout. And, along with our charts of the Dow indices, it makes me wonder whether the August breakout was “false.” If so, we could be in for a serious round of profit taking.

Tomorrow, I’ll provide downside targets for a possible market correction. ...

The Safety Net: Why You Shouldn’t Worry About Earnings

omega (Photo credit: davedehetre)

By Welthy Retirement

Palo Alto, Aug.8, stocks to watch .- In October 2011, I recommended Omega Healthcare Investors Inc (NYSE: OHI) in my former newsletter, The Ultimate Income Letter. The stock remains in The Oxford Club’s Perpetual Income Portfolio (which I am no longer personally tracking). Since it was first recommended, it has returned 86%. During the same period, the S&P 500 has returned 40%.
For the past few weeks, several readers of The Safety Net have requested I take a look at the dividend safety of Omega Healthcare, which operates as a landlord for nursing homes and long-term care facilities.
At the time, the sector was very beaten down due to worries about cuts to Medicare. That enabled us to snag an investment with an 8.9% dividend yield. Because the stock has appreciated so much, it currently offers a yield of 6.2%. But investors who got in on the original recommendation are enjoying a yield of 10.6% now that the dividend has increased from $0.40 per share in late 2011 to $0.47 now. A 17.5% increase in less than two years. That’s why I’m such an advocate of the dividend growth strategy. Most people would be thrilled with a 17.5% raise in less than two years. That doesn’t happen too often in the working world. But in the right dividend stocks, it can happen all the time.

But I digress. Back to whether Omega’s dividend is still safe.
As a real estate investment trust (REIT), Omega Healthcare must pay 90% of its earnings back to shareholders in the form of dividends. As a result, the company, and other REITs, do not pay corporate income tax on those earnings.
But anyone who has read my columns for even just a little while knows that I consider earnings to be just the beginning part of the cash flow equation. I don’t worry about earnings. I look at cash flow because cash flow tells the real story as to the health of the business.
A company could have great earnings, but if it has no cash left over at the end of the quarter or year to reinvest back into the business or pay shareholders their dividends, that’s a problem.
So let’s take a look at Omega’s numbers to determine if the dividend is indeed safe.
For the first half of 2013, Omega earned $0.76 per share but paid out $0.91 per share. Someone who looked at the company’s payout ratio would see an alarming 120%, meaning the company is paying out 120% of its earnings in the form of dividends.
That would scare off most investors because that is typically not sustainable. But this is a perfect example of why I don’t worry about earnings when it comes to dividend safety.
REITs often report cash flow as funds from operations, or FFO. For the first six months of the year, Omega’s FFO was $1.25 per share. That’s a big difference from $0.76 per share, especially when comparing it to $0.91 per share in dividends paid.
The reason for the big difference is non-cash items. When calculating net income, Omega expensed over $64 million in depreciation and amortization. Those are non-cash expenses. In other words, Omega did not actually pay out $64 million in cash for those expenses in the first half of the year. Yet those non-cash expenses lower net income.
Because a non-cash expense does not reflect the actual movement of cash, it is added back into cash flow calculations. A few other smaller adjustments and the company reported FFO of $144.5 million instead of $87 million in net income. That’s a big difference.

Now instead of a 120% payout ratio when using earnings as the basis, we have a payout ratio of 73% when using FFO. Also a big and meaningful difference.
Typically, I like to see a payout ratio of 75% or lower. That gives me the confidence that even if the company hits a rough patch, it will be able to continue to increase the dividend in the near future.
Omega Healthcare Investors has raised the dividend for 11 consecutive years. Last year, it raised the dividend twice during the year.
If Omega was able to increase the dividend even during very difficult periods of Medicare cuts and uncertainty, considering it has plenty of cash flow, I see no reason why it won’t be able to continue to raise the dividend for the foreseeable future.
Dividend Safety Rating: A

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A Reliable Account of the Great Depression

English: Murray Rothbard in the 90's (Photo credit: Wikipedia)

By Daily Reckoning

Washington, Aug.8, stock watch .- For his U.S. economic history class at UNLV, Murray Rothbard gave us the assignment to write a 10-page paper. The paper could be on anything we wanted it to be. However, we had to clear the topic with him. When I proposed writing about the Great Depression, Murray was thrilled and rattled off a number of sources. Near the top of his list was a book he described as "fantastic, except it has a terrible title." That book was a Laissez Faire Club featured selection -- Economics and the Public Welfare: A Financial and Economic History of the United States, 1914-1946 by Benjamin M. Anderson. As you can imagine, this is a book I have very fond memories of. My copy still has paper clips marking several pages. The text is underlined throughout. Anderson was one of the first economists to provide a systematic account of the causes of the Great Depression. It remains the most reliable documentary guide to precisely what happened, before, during, and after. That is the essence of this book. Anderson had feet both in academia and banking. He was on the faculty at Columbia and later at Harvard, and then joined National Bank of Commerce in 1918. Two years later, he moved to Chase National Bank to serve as economist and editor of the Chase Economic Bulletin. He was also a world-class chess player and wrote what's been described as a brilliant preface to Jose Capablanca's book A Primer of Chess. Sadly, Anderson never saw Economics and the Public Welfare in print. He died of a heart attack just prior to its publication. The years between the forming of the Federal Reserve and the end of World War II are some of the most interesting and formative years in U.S. economic history. Of course, the common narrative we constantly hear is the "monetarist" version parroted by Ben Bernanke that the central bank erred on the side of tightness and the money supply plunged, lengthening the Great Depression, and it was ultimately only fixed with a massive government works program known as WWII. Instead, imagine having a correspondent on the ground keeping a rich, informed diary of the day-to-day, week-to-week, and year-to-year events as seen through the eyes of an Austrian economist, from the creation of the Federal Reserve through the Great Depression to Bretton Woods. That is what Economics and the Public Welfare is. Anderson provides some theory along the way, but what this great book primarily does is chronicle monetary and economic events from the beginning of the Fed's operation to after the war. Politics, stock prices, and banking and trade data, plus a fast-paced narrative combine to make the reader feel like he or she is there. As you would expect a bank economist would, Anderson provides a blizzard of numbers to provide emphasis for his story. For instance, Anderson provides the principal resource and liability items of the Federal Reserve during the war. Total resources ballooned from $637 million in 1915 to $5.2 billion in 1918. On the liabilities side, Federal Reserve notes in circulation exploded as well, from $165 million to $2.5 billion, as did member banks' reserve deposits, which increased from $398 million to $1.7 billion. As measured by percentage growth, this is greater balance sheet growth than the Bernanke Fed post '08 crash. Seeing these astonishing numbers triggers a realization: The years from 2008-13 amount to our own World War I. One hundred years ago, this sort of thing led to the post-boom crash of 1920 and unleashed the distortions of the roaring '20s that led to the second major crash of 1929. Back in these days, the banking system also found itself flush with reserves. With bank reserves held at the Fed and not being lent out, the money market tightened and rates increased, despite bank credit expanding. After dropping to 1% in 1915, the bank call rate rose sharply to 7% in 1917. Bond yields also went up. "The pressure of firm money rates undoubtedly did a great deal to retard bank expansion and to hold it down to necessary things," Anderson wrote. Of course, in similar fashion, bank reserves are also piling up at today's Fed, and money is, indeed, tight for the average person. Even so, the Fed of those days was not nearly as reckless as ours is today. The Bernanke Fed works overtime to keep money tight but rates uber-low in aid of the government, big banks, and speculators on Wall Street.
If you haven't ever heard of Benjamin Anderson and wonder about his hard money, anti-Keynesian bona fides (after all, he did work for a bank), this quote from Chapter 1 gives you an idea: "The very inelasticity of our prewar (World War I) system made it safer than the extreme ductility of mismanaged credit under the Federal Reserve System in the period since early 1924. The whole world was, moreover, far safer financially when each of the main countries stood on its own feet and carried its own gold." More than once, the reader will stumble upon a sentence that will make him smile. What's old is new again. We've taken note that Iowa farmland is looking bubblelike in 2012 and 2013. Sure enough, in his chapter on the 1920-21 crisis (what, you've never heard of that one?), Anderson offers a small section "Land Speculation -- Iowa." In a footnote, the author remembers what an Iowa City banker told him. "I know that you economists say that land is only worth what it will produce, but it does look like some of this land around here is worth a thousand dollars an acre." Plugging that $1,000 into the inflation calculator turns up a number of $11,100 per acre in 2011. It's almost eerie that the average price of land in O'Brien County, Iowa, last year was $12,862 per acre, a 35% increase over the 2011 average. Not so famously, the government didn't intervene in those unenlightened dark ages. Wages and wholesale price levels crashed. The result, says Anderson: "In 1920-21, we took our losses, we readjusted our financial structure, we endured our depression, and in August 1921, we started up again. By the spring of 1923, we had reached new highs in industrial production and we had labor shortages in many lines." The chapter I have bookmarked with the most passages highlighted is "Digression on Keynes." For nearly 20 pages, Anderson takes on Lord Keynes, whom he describes as "a dangerously unsound thinker." Anderson points out that Keynes heavily influenced Roosevelt and all economists who worked for the government. In The General Theory, Keynes targets a passage from J.S. Mill out of context to challenge the idea that aggregate supply and aggregate demand grow together. The author points out that Keynes and his followers think in aggregates. He provides an aggregate supply function and an aggregate demand function. While human action is economics, there is no discussion of interrelationships. "Nowhere is there a recognition that different elements in the aggregate supply give rise to demand for other elements in the aggregate supply." Our governments, corporations, and individuals pile up debt seemingly with impunity. The ideas of balanced budgets and living within our means are thought to be quaint. Modern Keynesians like Paul Krugman pooh-pooh the notion of balanced budgets and fiscal restraint. Where could he get such a notion? Anderson explains: "Where economists generally have held that saving and avoiding unnecessary debt and paying off debt where possible are good things, Keynes holds that they are bad things. He disparages depreciation reserves for business corporations. He disparages amortization of public debt by municipalities. He disparages additions to corporate surpluses out of earnings." There are entire books devoted to challenging Lord Keynes and The General Theory. But, Anderson's short chapter will provide you all the ammunition you need. Near the end, the author reprints a memo he penned for private circulation that eventually found its way throughout government. The contents of the memo are considerable. However, one small snippet speaks to current Fed policy: "Inflation is not something that you can turn off and on like water at a faucet. Inflation and deflation are not simple terms and they are not simple opposites. There is no financial Westinghouse air brake by means of which an inflationary movement can be tapered off and brought gently to an end without shock. Rather, inflationary forces engendered in defiance of sound financial policy may seem harmless for a long time and then suddenly break force into great violence." There is an enormous amount of wisdom in this book. Everyone trying to understand monetary and economic policy during the Depression or today and the subsequent effects should have Economics and the Public Welfare loaded and ready to read cover to cover, or to refer to often. Anderson is an indispensable guide to government monetary policy, as it happened, that still haunts us today. Being the kind of guy he was, Rothbard recommended Anderson's great book before recommending his own America's Great Depression. Both are amazing. But Murray had the benefit of Anderson's work in writing his. He cites him no fewer than 15 times.

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Wednesday, July 31, 2013

Why $100 Crude Could Send This 8.4% Yielder Soaring

Diamond Offshore Drilling (Photo credit: Wikipedia)

By StreetAuthority

Austin, Jul.31, swing trading .- Despite the markets' push to record levels, energy stocks have been locked into a bearish slump for the past two years.

With natural gas plummeting to an all-time low in the summer of 2012 and crude contained by slow economic growth, energy stocks have been big underperformers. That shows up in the sector's 3% gain in the past five years, 12% gain in the past three and just 7% gain in 2013 against the S&P 500's 20%.

But with natural gas trading well above its multi-year low and crude recently breaking above $100, the stage could be set for a rebound.

One of my favorite ways to cash in on the energy trade is with offshore drillers. I'm bullish on the offshore drilling industry because that's where most of the new oil is being found. In the past decade, more than 40% of all newly discovered oil was found in ultra-deep water, bypassing both onshore and near-shore discoveries. Big finds in the Gulf of Mexico and off the coasts of Brazil and Africa will also continue to drive demand for offshore drilling services.

There are plenty of great offshore drillers to choose from, including Transocean (NYSE: RIG), Diamond Offshore Drilling (NYSE: DO) and Noble Energy (NYSE: NBL). But my favorite pick from the group is SeaDrill (Nasdaq: SDRL), one of the largest offshore drillers in the world with a fleet of 66 drill ships and a market cap of $20 billion. With crude surging above $100, Seadrill is up 20% in the past two months. Take a look:

But looking forward, Seadrill stands out from its peers because of its unique combination of growth, value and income.

As one of the largest offshore drillers in the world, Seadrill operates in the shallow, mid- and deepwater markets, providing the company with a diversified revenue stream. But the ultra-deepwater market is the fastest growing, and that's where Seadrill is making targeted investments to capitalize on the bullish trend.

On July 15, Seadrill announced it had placed an order for four new ultra-deepwater drilling rigs scheduled for delivery in 2015. Seadrill capitalized on weakness in the Asian shipbuilding market, negotiating a unit cost of less than $600 million. Each new rig is projected to produce $100 million a year in earnings before interest, taxes, depreciation and amortization (EBITDA) and expected to add 10% to total EBITDA by 2016.



	As one of the largest offshore drillers in the world, Seadrill operates in the shallow, mid- and deepwater markets. But the ultra-deepwater market is the fastest growing, and that's where Seadrill is looking to capitalize.

Seadrill will also continue to capitalize on rising day rates as it renegotiates existing contracts and enters new ones. On July 11, Seadrill announced it had secured a 30-month $214 million contract for its West Freedom jack-up rig. That equates to a day rate of $234,000, which is a huge premium to its current day rate of $155,000, a great example of the cyclical nature of the drilling industry and the impact that a bullish trend can have on earnings.

Seadrill also boasts a dividend yield of 8.4%, more than three times the current return on the 10-year Treasury. That has led to speculation about the sustainability of Seadrill's dividend. For the time being, higher day rates are driving the company's cash flow to support a high dividend yield. But Seadrill is a leveraged play, with $8.8 billion in long-term debt and $816 million in cash and equivalents, increasing its vulnerability to economic cycles.

With Seadrill investing in future growth and capitalizing on rising day rates, analysts are bullish, projecting earnings growth of 29% in 2013 and 30% in 2014. Seadrill's earnings are expected to grow 22% a year over the next five years, a huge premium to the industry average of 12%.

Risks to Consider: The energy industry is particularly sensitive to global economic growth. Seadrill is also a leveraged play in the offshore drilling industry, making the company more vulnerable to economic cycles.

Action to Take --> Energy stocks have been out of favor for the past two years, with many leading names trading near record-low valuations. But with natural gas trading well above its multi-year low and crude breaking above $100 for the first time in two years, this could be a long-term turn in the market. Seadrill is a great way to play that trend. In spite of the company's bullish outlook, Seadrill's forward price-to-earnings ratio of 15 is in line with its peer average of 14 and just a small premium to its 10-year average of 12. When you add its impressive 8.4% dividend yield, Seadrill makes for a compelling combination of growth and income.

P.S. -- Last year, Seadrill Partners (NYSE: SDLP) went public after splitting from its parent company, Seadrill. Since then, the stock has risen more than 20% and offers a generous yield of 5%. These "Rich Parent" stocks are one of our favorite ways to profit in the market right now. One is a low-risk play that has already returned 333% since going public in 2008, while another yields nearly 10%.

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Benjamin Graham Was A Crappy Hedge Fund Manager

Jack Bogle, the outspoken godfather of index funds and passive investing strategies, didn't approve of a recent Wall Street Journal article defending hedge funds.

In particular, he took issue with the author's reference to Benjamin Graham, the legendary Columbia finance professor who literally wrote the book on Security Analysis and mentored Warren Buffett.

Bogle wrote a letter to the editor. Here's an excerpt: Citing Benjamin Graham as the first "hedged fund" operator is an especially unfortunate example. "The trick," Mr. Rice writes, was Graham's "clever way to make money . . . whether it [the market] continued to rise, or started to fall." ...

Proposal for New Hedge Fund Fee Structure: 1% + 33% of Alpha

By The Big Picture

One of my pet peeves is the way that insiders -- whether corporate CEOs, hedge fund managers, or elected politicos -- capture compensation (or credit) for normal cyclical gains they had little or nothing to do with.

This is the approach favored by the Crony Capitalists — those people pretending to be free market participants, and who merely pretend to be creating value. They are taking credit for structural successes that would have occurred with or without them. What they are actually doing is capturing value, not creating it — and then transferring it from its true owners (shareholders/investors) to themselves.

This is wrong; it is legalized theft.

If you want to see a good example of how CEOs transfer shareholder wealth to themselves, a good place to start is Roger Lowenstein’s 2004 book, Origins of the Crash: The Great Bubble and Its Undoing. The section on CEO compensation is astounding; these guys were essentially getting wildly overcompensated for being CEOs during a bull market. The prime example was the CEO of Heinz, who gave himself (with the tacit approval of his Board of~~Crony~~ Directors) a $90 million bonus. And this was back in the early 1990s, when $90 million was real money.

Why Do You Want To Be A Hedge Fund Investor?

www.ritholtz.com

Earlier this year, Goldman Sachs Asset Management announced that it would launch a new mutual fund that — apparently — will bring the joy of hedge fund investing to the masses. For as little as $1,000, the Multi-Manager Alternatives Fund (GMAMX) allows mom-and-pop investors to put their life savings into some of Wall Street’s riskiest and most expensive products. This “fund of funds” will, according to its prospectus, let investors gain exposure to the trading strategies of hedge funds...

Public pensions fare well with hedge funds

Big public pension funds reaped strong returns from their hedge fund portfolios in 2012, with most of them handily surpassing their own benchmarks and well-used industry indexes. The hedge fund portfolios, for the most part, achieved close to what chief investment officers wanted, despite a 1,500-basis-point difference between the best and worst performers, according toPensions & Investments' analysis of the returns of 19 hedge fund portfolios from 17 U.S. public retirement plans with aggregate hedge fund assets of $60.7 billion.

Daniel Loeb surfing to the top of the hedge fund charts again

Something must be in the water over at 399 Park Avenue, where Daniel Loeb's hedge fund Third Point is headquartered. His Third Point Ultra fund has already gained 12.42 percent this year through the 13th of March, according to data from HSBC’s Private Bank.

The portfolio added 3.3 percent alone between March 1 and March 13. By comparison, hedge funds have returned about 4 percent year-to-date, according to HSBC.

The roughly $1.7 billion Ultra portfolio is a levered version of the firm’s flagship Offshore fund, which manages about $5.7 billion and has gained 8.5 percent over the same period. ...

CHART: Hedge Fund Gold Allocation Falls

After taking a cursory look at the recent 13-Fs filed by hedge funds, it became apparent that hedge funds were scaling back their exposures to gold. George Soros was among the big names that unloaded his position. According to Goldman Sachs' new Hedge Fund Trend Monitor report, hedge funds in aggregate scaled back big time.

Despite low turnover, hedge funds notably reduced holdings of underperforming long-time favorites Apple and gold while raising allocations to rallying Financials. For the first time in three years AAPL was not the top stock in our VIP list, instead ranking as the third most frequent top-10 holding... Continue to read.

10 Publicly Traded Hedge Funds That Pay a Dividend
Investing in publicly traded hedge funds is a great way for an investor to see returns through capital appreciation and dividend payments in the financial sector. When it comes to investing, many think of the process as a choice between growth and value stocks; you’re either taking on risk in search of capital appreciation, or you’re seeking out stable sources of current income through dividend payments. Luckily, Wall Street has many investment options and investors don’t have to make a clear-cut choice between capital gains and dividends. There are a lot of misunderstandings about dividend stocks out there; make sure you’re investing for the right reasons, check out 5 Common Misconceptions About Dividend Investing. ... Continue.

Hedge Funds Love These 3 Outperforming Semiconductor Stocks ...
Do you like to follow the buying trends of smart money investors? We ran a screen to find semiconductor stocks currently in favor by hedge fund managers. We began by screening the semiconductor industry for stocks that are rallying above their 20-day, 50-day, and 200-day moving averages, indicating that these stocks have strong upward momentum.
We then screened for those with bullish sentiment from institutional investors, with significant net institutional purchases over the last quarter representing at least 5% of share float. ... Continue.

10 REITs Absolutely Adored By Hedge Funds
After identifying the most popular stocks among hedge funds (see our full Top 10 here) according to their third-quarter 13F filings, we have decided to break down the top 10 REIT stocks that hedge funds love. The REIT industry, notably specialized REITs in hospitality and healthcare, should see positive growth from a rise in job growth and expansion due to freeing up of the credit markets. Our list includes 400 hedge funds and prominent investors that are required by the SEC to disclose their public equity holdings quarterly. In descending order, we have outlined the most-loved REIT stocks based on the aggregate number of funds owning each. ...Continue.

Apple Stock Hit by Panic Selling: 'Someone Yelled Fire'(Yahoo) Forget the "fiscal cliff." The real panic on Wall Street is over Apple's stock. Nearly every mutual and hedge fund has piled into Apple Inc. (NASDAQ:AAPL) during its spectacular rise over the past few years. Now, these same funds are scrambling for the exits as the stock goes through an equally spectacular decline. Apple plunged to a six-month low Thursday as funds rushed to take profits on the stock before it's too late. Shares are now off 25 percent since late September-shortly after the iPhone 5 launch and a month before the iPad Mini introduction. The stock, once up 74 percent on the year, is still up 30 percent for 2012. That's why Wall Street is getting out while it can. ...

Billionaire George Soros’s Latest Stock Picks (InsiderMonkey) George Soros is best known for the fortune he made shorting the British pound in 1992, but he currently invests a considerable amount of money in equities and so is required to report many of his long positions in 13F filings. We’ve gone through the 13F for the third quarter of the year and compared Soros’s holdings at the end of September to three months earlier. Read on for our impression of his moves and compare them to what he's bought and sold before. AIG. American International Group, Inc. (NYSE::AIG) became Soros’s largest 13F equity holding during the third quarter with a position of over 15 million shares being reported in the filing. A number of value investors have been getting into the insurer over the course of the year, and at a P/B ratio of 0.5 it certainly looks cheap compared to the book value of its equity. We also like its earnings multiples- it trades at 9 times forward earnings estimates- and revenue was up strongly in the third quarter compared to the same period in 2011. Fellow billionaire Dan Loeb had initiated a position during the second quarter of 2012 and we think that it still looks like a good buy for investors. ...

Duke Energy CEO Jim Rogers still facing issues as tough year nears an end (BizJournals) In late 2011, Jim Rogers seemed almost golden. He was about to close his last big merger deal. He was poised to take a corporate chairmanship tailored to his penchants for energy policy and reshaping the utility-business model. He was ready to bask in the spotlight of a national convention he’d helped bring to Charlotte. But by late 2012, it’s evident things have not gone so well. “It has been a year of challenges,” the Duke Energy Corp. chief executive concedes. “Nothing in life is perfect.” Dan Fogel, associate director of the Wake Forest University Business School’s Center for Energy, ...

Argo unveils emerging markets hedge fund (InvestmentWeek) Argo Group has launched an emerging markets hedge fund investing in bonds and currencies from a universe of over 40 emerging market countries. The Argo Local Markets fund aims to hold between 20 and 30 positions and has been launched with an initial $7m of seed capital. It will offer investors weekly liquidity and has a mandate to take on moderate leverage. Argo chief executive Kyriakos Rialas said: "The case for investing in emerging markets is compelling. ...

Argentina's President Is Making Great Political Theater Out Of Paul Singer Seizing The Country's Naval Ship(BusinessInsider) Cristina Fernandez de Kirchner is turning her feud with hedge fund manager Paul Singer into a political rallying cry in Argentina. The President has refused to pay Singer's firm Elliott Management the $1.3 billion it owes the fund after it defaulted in 2010. de Kirchner says it's because Singer was given multiple chances (in 2005 and 2010) to restructure, like other hedge funds did, and take a haircut to recoup at least a portion of their losses. Singer, needless to say, did not. Instead, he decided to capture one of Argentina's naval vessels as collateral, and got Ghana to give him an order to detain the ARA Libertad last month. ...

Tom Steyer New Investments
FARALLON CAPITAL Hedge fund billionaire into politics (DailyDemocrat) Hedge-fund billionaire Tom Steyer staked millions of his own money to take on big oil and then to close a corporate-tax loophole costing California $1 billion a year -- and won both times. Ever heard of him? Don't worry, you will. With his latest behind-the-scenes win at the polls as the man who stared down big business by standing up for Proposition 39, this Stanford MBA and top Obama fundraiser has become an out-of-nowhere big-time political player in California. So what does Tom Steyer want now? "I am an enormous lover of California and to the extent that I see something wrong, I will be involved in trying to fix it," Steyer, 55, said Monday. "What form that takes, I don't have a fixed idea." ...

This Hedge Fund Returned Nearly 25% Last Quarter
Artis Capital Management was a top performing hedge fund during the third quarter. Coming in with the fourth best Q3 performance, the fund’s picks had a weighted average return of 25.5% during the first half of the year, and returned 24.6% for the third quarter, boosting the fund’s year to date performance to 56.4%. Artis Capital was founded in 2001 and is a San Francisco-based hedge fund with a focus on public technology companies. ... Read more.

More ETFs Play Hedge Fund Copycat
What if you could emulate the actions of the most successful hedge fund managers for a fraction of what they cost? Two ETFs that debuted this summer are trying to do that by using public filings to replicate their portfolios. And a third, which launched early this month, promises to add another hedge fund dimension to ETF copycats by adopting what its sponsor calls the only true market-neutral strategy in the lot. Researchers have been trying to emulate hedge fund strategies since the 1990s ... Read more

BMW Pininfarina Gran Lusso Coupé.

BMW and Pininfarina are two of the most tradition-swathed names in the motoring world. Each is a byword for cutting-edge technology, style, dynamics and aesthetics. With the BMW Pininfarina Gran Lusso Coupé, the two

time-honoured companies are unveiling the outcome of their first collaboration at the Concorso d’Eleganza Villa d’Este 2013. The BMW Pininfarina Gran Lusso Coupé is a one-off and represents the exclusive interpretation of a luxurious BMW Coupé as seen through the eyes of Pininfarina.

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All Time Record Gold Transactions Reported By LBMA

The precious metals have been weak again in May with gold falling 4.4% despite this weeks’ recovery. Silver is down 7% and platinum by 2.6%. Palladium has recovered from recent weakness and those who accumulated on weakness are set for the best month since November after it surged 6.6% in May.

Weakness in gold and silver is leading to robust demand internationally as store of value buyers accumulate gold and silver on this dip. This is particularly the case in Asia where premiums remain robust and supply demand imbalances remain. ...

6 Tips to Work From Home Successfully

The future of work is the work itself, not where and when the work takes place. Workplace flexibility programs are already catching on and will soon become standardized as more millennials enter the workplace. All workers, not just millennials,want freedom and flexibility and some are even quitting their jobs to becoming freelancers in order to gain that freedom. oDesk.com has 3.3 million registered freelancers, and Intuit predicts that by 2020, 40% of Americans will be freelancers. When it comes to working from home, 13.4 million people (9.4% of all American workers) work from home at least one day per week compared to just 9.2 million in 1997 according to one Census Bureau.

Today's top Green Energy Good News

Russia is funding research into powering its airplanes with solar energy. The airline industry is being hurt by high fuel prices, and solar-powered planes would not only be cheaper but also would remove a major source of carbon pollution that contributes to global warming.

Texas is set to double its wind energy generation from 60 gigawatts to 120 gigawatts in 2013.

Britain has made substantial investments in wind energy and its technology. British PM David Cameron is touting his country’s green expertise on his trip to India to promote trade with that country. ... Continue.

High-Dividend ETFs with Reasonable Valuations

Investors have picked over the ETF universe in search of any kind of yield in an extremely low-rate market for bonds. As a result, ETFs tracking many traditional high-yield sectors have been bid up to expensive levels, but there are still places investors can go for income without paying nosebleed valuations. “Unfortunately, valuations [for dividends, high-yield junk bonds, MLPs, and REITs] are approaching sky high levels in many instances as more investors fall in love with these products ... Continue.