Are these Hedge Fund Darlings Really a Good Buy?

In yesterday’s article, I mentioned the recent study by Goldman Sachs, which listed the most popular stocks held by hedge funds. I’ve already shared with you the names of the 13 stocks that, technically, look the most promising out of the 50 most popular companies held by hedge funds.

Today, I want to talk with you about the 14 stocks that hedge funds can’t get enough of—yet, each one is rated a “strong sell” by my technical parameters.

Company	Symbol	Price ($)	Analyst Reco
Microsoft	MSFT	29.34	2.0
Qualcomm	QCOM	57.45	1.9
Citigroup	C	26	2.3
JP Morgan Chase	JPM	32.96	2.0
BP	BP	37.02	1.6
Anadarko Petroleum	APC	62.24	1.8
Cisco Systems	CSCO	16.39	2.3
Liberty Interactive	LINTA	16.95	1.6
Visteon	VC	41.10	2.4
Valeant Pharmaceuticals	VRX	47.92	3.0
CIT Group	CIT	34.10	2.1
Devon Energy	DVN	59.75	2.0
EMC	EMC	24.03	1.7
Illumina	ILMN	44.33	2.4

13 Top Hedge Fund Holdings that Look Promising!

13 Top Hedge Fund Holdings that Look Promising!

Last week, I discussed the dismal returns that hedge funds have been giving their investors since they last beat the S&P 500 in 2008. And I noted that the returns suffered due, primarily, to high management fees and lots of turnover.

Today, I want to share with you another reason why hedge fund returns may be lagging: Picking the wrong stocks!

Clearly—although certainly still volatile—you can see that the market has been on the rise for the past six months. But hedge funds returns don’t imitate that. And that may be because their most popular holdings are stocks that—on a technical basis—don’t look very attractive at all.

 http://finance.yahoo.com/q/bc?s=%5EDJI&t=6m&l=on&z=l&q=l&c=

Goldman Sachs just revealed the top 50 holdings of hedge funds. I decided to look at each individually and put them through my technical analysis screen. And I have to say that even I was amazed at the results!

Of those top 50 stocks, only 13 were rated Buy or Strong Buy by my indicators. Six were Holds and the rest were rated Sell or Strong Sell. Here are the 13 that look the best:

Company	Symbol	Price ($)	Technical Rating	Analyst Reco
Apple	AAPL	572.27	Buy	1.7
Delphi Automotive	DLPH	29.84	Buy	1.6
Tyco	TYC	54.60	Buy	2.0
Visa	V	120.28	Buy	1.9
Yahoo	YHOO	15.47	Buy	2.6
WellPoint	WLP	68.84	Buy	2.0
Charter Communications	CHTR	64.63	Buy	2.0
eBay	EBAY	41.49	Strong Buy	2.0
Equinix	EQIX	167.32	Strong Buy	1.9
Dollar Thrifty	DTG	81.89	Strong Buy	2.6
Mastercard	MA	416.05	Buy	1.9
News Corp	NWSA	19.69	Buy	2.2
Williams Companies	WMB	31.39	Buy	1.9

Now, I’m not suggesting that you run out and buy these stocks. And please note that technical ratings are pretty short-term in nature. But if you want to start building your own hedge fund, these might be some companies to consider.

Tomorrow, I’ll tell you about all the popular hedge fund holdings that look a lot more like sells than buys to me!

Seller’s Market Returning?

For the past few years, many folks have delayed purchases of their next home because they've had a tough time selling their current one. But those days may be nearing an end.

The National Association of Realtors has reported that inventory—the number of homes for sale across the U.S. has declined to a 6.6 month supply. That's down from 9.1 months in April 2011.

We’ve also seen a similar reduction in my neck of the woods. In my real estate area in Cumberland County, Tennessee, inventory now stands at 5.93 months, and in my smaller resort community, it’s 5.4 months.

As well, existing home sales in April rose to 4.62 million from 4.48 million in March, nationwide. And new home sales increased to 343 thousand from 328 thousand in that same time period.

My 2 Favorite Stocks for This Week

It’s been a mixed week on Wall Street. Weekend news of a new, Socialist president in France and a backlash against austerity in Greece sent the markets falling in the first half of the week.

But good unemployment numbers, import and export prices, gave stocks a firmer footing on Thursday.

The good part about the market weakness is more bargains to be had!

Here are my two favorites this week:

American Capital LTD, (Nasdaq: ACAS) American Capital, Ltd. is a private equity and venture capital firm specializing in management and employee buyouts, mezzanine, acquisition, recapitalization, middle market, and growth capital investments.

Price: $9.82

Market cap: $302 b million
Target: $12

Why I Like It: Institutions are buying; analyst’s earnings estimates are increasing; improving economy means more businesses seeking financing for future growth.

SunCoke Energy Inc. (NYSE: SXC) mines and produces coal in the Americas. It is the largest independent producer of metallurgical coke in the Americas. It offers metallurgical and thermal coal used in steelmaking facilities.

Price: $15.30

Market cap: $1.06 billion
Target: $18.00

Why I Like It: Great earnings growth in cokemaking sector; shares look ready for a technical breakout

It’s not too Late for the Boomerangers!

My parents worked incredibly hard so that their children would have better, more prosperous lives than they had. And we baby boomers largely exceeded their wildest expectations.

We’ve had the mini-mansions and two luxury cars. We’ve taken exotic vacations. We don’t do our own housework. And we’ve sent our kids to private schools and the best colleges our money can buy. We had no reason to expect that our children would not live even more comfy financial lives, did we?

That is, until the recession and near-collapse of the world financial markets drastically reduced that dream.

Young people who’ve worked hard for their diplomas in the last few years have entered a dramatically different work force than the one that greeted me as a proud college graduate.

A study by Georgetown University’s Center on Education and the Workforce found that 8.9% of recent college graduates are unemployed. And if your children do not have a college degree, that rate goes up to a whopping 22.9%.

And to further poke a stick in their eye, students emerging with their degrees have accumulated more than $1 trillion in student loans, according to the Consumer Financial Protection Bureau. The Project on Student Debt says those loans average $25,250 per person.

My 2 Favorite Stocks for Next Week

Over the Easter holiday, I had a discussion with Don’s 92-year-old dad about the pitiful rates he’s earning on his certificates of deposit at the banks. For $25,000, he’s getting about 1% per year. That’s certainly not making him any money!
We talked him into his first stock market investments a while back, and he’s game for more, so I did a little research to see what I could find that might give him a much better return.

Now, as you might imagine, he has most of his money in really safe, conservative investments. But at this juncture in his life, he’s feeling a little more speculative and wants to have some fun with his money.

And if you have a little bit set aside—funds that you don’t need right away—and want to take a bit of a risk for a whopping large return, take a look at these two Real Estate Investment Trusts (REIT), both of which are paying very generous dividends right now:

American Capital Agency Corp. (Nasdaq: AGNC) is a REIT that invests in residential mortgage pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by government-sponsored entities or by the United States government agency.

Price: $30.11

Market cap: $6.75 billion
Target: $31.00

Why I Like It: Fabulous dividend, great potential to also grow capital appreciation in the near-term

Invesco Mortgage Capital (NYSE: IVR) is a REIT that invests in both residential and government-backed mortgages.

Price: $17.26
Market cap: $1.97 billion
Target: $19.00
Why I Like It: Fabulous dividend, recent uptick in institutional buying of its shares

Both of these stocks are very high-yielding REITs, and when interest rates begin to creep up, you will want to vacate your shares. But, in the interim, their dividend yields can certainly supplement your income needs, at a very healthy level.

But please be conservative and invest only a small portion of your portfolio in these shares, as they are considered fairly speculative, in terms of repayment risk.

Note: I intend to establish a portfolio of similar picks, some 25-30 stocks that I’ll update on a regular basis. I will discuss them from time-to-time in my blog and on this web site, but a full analysis of each stock—as well as detailed updates—will be available only via subscription. If you’d like more information, just contact me directly, at nzambell@frontiernet.net

Attention: Tax Procrastinators!

Ok. Some of us (me included!) just hate doing our taxes, and we are perennially late filers, seeking extensions each year. Although the IRS has given us two extra days to file this year (until April 17), many taxpayers still need more time to gather their papers together, or to muster their courage, and just can’t make the deadline.

Fortunately, the IRS has made provisions for us procrastinators!

The IRS provides three ways to request an automatic extension of time to file your tax return.

http://www.irs.gov/pub/irs-pdf/f4868.pdf1.

1.     Electronically. You can file Form 4868 (Application For Automatic Extension of Time To File U.S. Individual Tax Return) on your computer by accessing IRS e-file, or you can have your accountant do it for you. If you file this way, you will receive an acknowledgement or confirmation number from the I.R.S. and you do not need to mail in Form 4868.  If you owe additional taxes, you can pay through an outside service provider or through e-file. 

You can also use the IRS’ Free File program to file electronicallyhttp://www.irs.gov/freefile. But make sure you have a copy of last year's tax return, as you’ll need your Adjusted Gross Income for taxpayer verification.

2.     Use your credit or debit card to pay your estimated income tax due, by using the Electronic Federal Tax Payment System (EFTPS). The IRS has contracted with several outside payment companies to assist you. Pay Taxes by Credit or Debit Card, but note that you will be charged a convenience fee.

3.     File a paper Form 4868. Extension of Time To File Your Tax Return

One last caveat: An extension of time to file is NOT an extension of time to pay, so if you don’t pay what you think you owe, you will be charged a penalty.

Just make sure you file something, or you’ll be sorry!

My 2 Favorite Stocks for Next Week

The markets lost a little ground this week, taking a bit of a breather, although most economic reports were pretty good. I think there’s some concern over the increasing cacophony of “Sell in May, and go away”, but I also believe wise investors should ignore that advice.

I’ll spend a little time next week, commenting on that—as well as some other adages—that are mostly outdated, in a column next week. But today, I want to reiterate that the economy is improving and there is no reason why the markets cannot continue to rise.

This week’s economic reports included a rise in factory orders, fewer job cuts, declining unemployment claims (although I’ll concede they weren’t as good as estimated), and an unemployment rate that has fallen to 8.2%.

So let’s forget about the naysayers for now. I don’t believe that every single stock is going to jump through the stratosphere, but I do think it’s a good time to be a stock picker, searching for companies that have fabulous potential. This week, I even narrowed my criteria a bit more, and still came up with 22 companies who look very enticing.

Here are my two favorites:

What will you do with your Tax Refund?

My parents were working people, with five children (deductions!), which meant they received a nice little check each year after filing their taxes. They didn’t have the benefit of a good tax adviser and didn’t understand that it was their money that Uncle Sam was returning to them, year-after-year. In fact, they were giving the U.S. government a tax-free loan!

Imagine what that $1,000 or so they received, annually, could have turned into had they been putting it away, instead of being so generous to Uncle Sam.

But that was then, and my folks weren’t any different than most people on our block, who didn’t benefit from a good tax advisor. But in today’s world, with so much good (and often free!) advice, there’s almost no excuse for letting Uncle Sam have free use of your money. All it takes is a little calculation to determine how much less you should be paying in throughout the year so that you just about break-even by December 31.

For many people, it’s this simple: Let’s say you are receiving about $1,000 back every year from your tax refund. Divide that by 12, and you get $83.33—the amount you should reduce your paid-in taxes by each month. Just call your payroll department and they’ll give you the right form. Wouldn’t it be better to have that $83.33 in your own pocket, instead of lending it to the government each month?

That’s a great strategy for 2012. But if you are expecting a refund this year, from your 2011 taxes, let’s look at the worst and best ways to spend that windfall:

The 5 Worst Things to do with your Tax Refund

Is Franchising for You?

You know the economy is getting better when you begin hearing “buy a franchise” ads every day on the radio!

I’ve been taking notes. So far—just this week—I’ve heard spiels for these franchise types: Smoothies, men’s fitness, yogurt shops, men’s hair salons, and hamburger joints.

So I thought I’d do a little research to find out the current state of the franchise industry.

First of all, let’s define franchising as essentially adopting someone else’s successful (or at least hyped as successful) business model. Franchising has grown tremendously—especially in good economies—as it is promoted as easier and less costly than building your own business.

You may be surprised to know—according to Wikipedia—that Isaac Singer, the fellow who improved sewing machines, began one of the first franchises in the U.S. in the 1850s. But it is said that franchising goes much further back—maybe as far as 200 B.C. in China.

As of 2011, Statista.com says there were some 735,571 franchises operating in the U.S. That’s pretty amazing, isn’t it? It sounds like a great idea—walking right into an already-successful business strategy. And you only have to look at the multi-millionaire franchisees who were smart enough to sign on with McDonalds (whose franchises currently cost from $1.07M - $1.89M ) when they began franchising, back in 1953—or the many who joined in with the following Top 5 American franchises—to see that, indeed, franchising can be the ticket to riches.

FRANCHISE	START-UP COSTS
Hampton Hotels	$3.75M - $13.11M
Subway	$84.8K - $258.8K
7-Eleven, Inc.	$30.8K - $611.1K
Servpro	$132.05K - $180.45K
Days Inn	$202.17K - $6.76M

Source: http://www.entrepreneur.com/franchise500/index.html

And since the economy—as I’ve been saying for months—is definitely on the upswing, it’s no surprise to see new momentum in both business start-ups as well as the franchise world.

So far in 2012, here are the most popular new franchises:

The IRS has a Deal for You!

Normally, when the government says, “I’m here to help you”, I would advise you to run like heck! But the IRS’ Fresh Start initiative looks like it may actually bring some needed relief to unemployed folks, as well as those who have hit upon hard times.

If you meet these criteria, you can get a little extra time to pay, and can eliminate some of the more heinous penalties the government usually docks you if you file late:

·         If you’ve been unemployed for at least 30 consecutive days during 2011 (or during 2012, up to the April 17 tax deadline)
·         If you are self-employed and have experienced a reduction in business income of 25% or more in 2011 (primarily as a result of the economy)
·         Your adjusted gross income must be less than or equal to $100,000 ($200,000 if married filing jointly). Your 2011 balance due must be less than or equal to $50,000

If you meet these parameters, the IRS will give you an extra 6-months (to October 15) to pay your taxes, and…while you will be charged interest on your unpaid taxes, Uncle Sam will not charge you a “failure-to-pay penalty), if you pay your tax debt in full by October 15, 2012.

As well, the IRS is giving taxpayers several options for payment, including:

·         Short-Term Extension of Time to Pay, if you can pay within 120 days
·         Installment Plan Agreement, for taxpayers who owe $50,000 or less (note, there are some provisions for those who owe more than $50,000)
·         Offer in Compromise, for taxpayers who have endured significant financial upsets, who seek a settlement (a compromise) on the tax debt they owe

The most important thing for you to know: Don’t let April 17 go by without contacting your tax preparer or the IRS to make arrangements for payment. If you ignore the deadline, you will find yourself steeped in penalties that will make a bad situation worse. My advice: Take advantage of this unusual generosity of the IRS