All posts by Laura Hoy

Bear

3 Stocks to Invest In If the Market Nosedives

bear

Source: Chascar via Flickr (Modified)

After nearly a decade of impressive gains across all three major stock indexes, investors are understandably starting to get a little bit nervous about where the market is headed. After all, share prices can’t continue to rise indefinitely … can they? Many analysts are predicting that the bears will have their reckoning next year, but it’s also important to note that pulling out of the market completely comes with its own set of risks — we’ve been wringing our hands about a major pullback for years now and it’s never actually materialized.

However, that doesn’t mean you shouldn’t take analysts’ warnings to heart.

Now is an excellent time to re-evaluate your holdings and take profits in order to stockpile some cash in the event that a pull-back does eventually come. It’s also a good time to load your portfolio with defensive stocks that will still benefit from the market’s bull run, but are unlikely to tank if the market takes a nosedive.

Here’s a look at three stocks to invest in to prepare for the dreaded bear market.

Value Pick: Coca-Cola (KO)

Value Pick: Coca-Cola (KO)

Source: Leo Hidalgo via Flickr (Modified)

In a market that’s soaring to fresh highs, the best thing you can do is look for stocks to invest in that have fallen out of favor among investors, making their valuations much more reasonable. Coca-Cola (NYSE:KO) is one such company whose share price has been stuck in the mid-$40’s for years. While the beverage company isn’t delivering the attractive gains that companies like Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) are, it’s a good pillar to lean on in times of trouble.

For one, KO stock is a relatively stable consumer products company that looks unlikely to go under anytime soon. The company’s name recognition and massive portfolio of brands makes it a relatively safe bet even in the event of a recession.

Another reason you want to have KO in your portfolio should the market take a turn is the company’s reliable 3.5% dividend yield, which will continue to deliver even when the market is down.

Recession Buster: Duke Energy (DUK)

Recession Buster: Duke Energy (DUK)

Source: Shutterstock

Another way to prepare for a market downturn is to arm yourself with companies that can make money no matter what. The bull run has made utility companies unpopular among investors, but it’s utilities will be popular stocks to invest in if things take a turn for the worst. 

Duke Energy (NYSE:DUK) is one of the nation’s top utility companies and the fact that its operations are largely regulated makes it a relatively safe bet in times of trouble. Even though DUK stock has underperformed the market this year, the company’s earnings reports show a sound financial base that won’t be shaken in a recession.

Plus, it’s a great income stock, delivering a 4.6% dividend yield that will help boost your portfolio in the event of a bear market. 

All Around Good stock to Invest In: Kraft Heinz (KHC)

When picking stocks to invest in for a bear market, there are a lot of avenues to take — stocks that have been beaten down, consumer staples stocks whose products will still be in demand come a recession and, of course, dividend stocks that will bolster their earnings with reliable payments. Kraft Heinz (NYSE:KHC) is one such company that pretty much meets all of that criteria. The firm’s share price is down nearly 25% so far this year, making it a bargain even in today’s inflated market.

KHC is the fifth-largest food and beverage company in the world with a brand portfolio that houses some of the most iconic names in the business. That kind of size is a huge asset in times of recession because people are unlikely to make major changes to their normal grocery buying habits. On top of that, the firm offers a 4.3% dividend yield which will help ease the pain in a tumultuous market.

It’s worth noting that KHC has some debt issues that make it a little riskier than some of its peers, however it looks like the firm has a plan in place to turn things around through a strategic acquisition that will help the company get its finances back under control.

As of this writing, Laura Hoy was long AMZN and NFLX.

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Uncategorized

5 Big Tech Stocks to Buy Instead of Facebook

Is Facebook Inc (FB) Stock a Screaming Buy or a Portfolio Destroyer?

Source: Shutterstock

It’s been a rough two days for investors in social media giant Facebook Inc (NASDAQ:FB). The company’s disappointing second-quarter results caused FB stock to make its way more than 20% lower in after-hours trading on Wednesday, the firm’s largest drop since 2012. The FB disaster has also hit big tech stocks hard, with heavy hitters across the industry all suffering from the fallout. 

For those of us who didn’t expect such a steep fall, the FB loss is a tough pill to swallow. However, it’s important to look on the bright side and follow the advice of investment guru Warren Buffett, “Be fearful when the market is greedy and greedy when the market is fearful.” 

Now a great time to snap up big tech stocks you’ve had your eye on because many of them have seen their share price tick down a few percentage points simply because of FB’s shortcomings. While FB’s poor guidance and uncertain future might cause you to back away from the social media firm, there are plenty of other tech names to scoop up while the sector is struggling.

Here are 5 big tech stocks to start with:

Big Tech Stocks to Buy Instead of Facebook: Micron (MU)

It Is Time to Buy MU Stock on Weakness

Source: Shutterstock

One stock that has come back down to earth recently and should definitely be on your buy list is Micron Technology (NYSE:MU). The memory chip maker has been consistently delivering on quarterly reports and yet investors have kept their cool and remained cautious on the stock because of worries about the overall industry and trade tension with China.

Historically, chipmakers have had to battle against the drawbacks of operating in a cyclical industry. However, with explosive growth in technology, the slow periods that chipmakers used to deal with are shrinking. Tech’s hottest emerging trends like cloud computing, the internet of things, artificial intelligence and self-driving vehicles all require bigger, better, faster memory chips. That means that for the foreseeable future, demand for the chips that Micron produces should be relatively strong.

These worries, which appear to be overdone, have kept MU stock from becoming overly expensive. The stock trades at just 4.5 times its forecasted earnings — a huge discount to the rest of the tech sector. The stock won’t be this cheap for long, so it’s worth putting on your buy list. 

Big Tech Stocks to Buy Instead of Facebook: Intel (INTC)

Source: Shutterstock

Another underestimated tech stock that should be on your watchlist is Intel Corporation(NASDAQ:INTC). While INTC stock didn’t feel much of a burn following FB’s poor results, the company’s share price has been languishing in the mid to low 50’s for the past few months as investors weigh up whether or not the firm has enough momentum to compete in the semiconductor space. 

It’s true that INTC’s shift into becoming a more data-centric firm has put it in direct competition with Advanced Micro Devices (NASDAQ:AMD), but that doesn’t meant there’s not enough room for two semiconductor businesses in the industry. Growth in the tech space over the next decade is likely to produce enough demand to go around, so although it’s worth acknowledging AMD as a threat, Intel looks financially and strategically prepared to cope in a competitive environment. 

INTC has several catalysts coming up that could push its share price higher — one being the firm’s second quarter results, due out on Thursday afternoon. Despite worries about AMD’s advances, Intel looks likely to deliver which will likely send the share price higher. Plus the company has yet to announce it’s new CEO, something that will likely drive the stock higher.

Big Tech Stocks to Buy Instead of Facebook: Alphabet (GOOGL) 

What Ad Revenue Will Tell You About the Future of GOOGL Stock

Facebook’s failure to deliver with its earnings hit FANG stocks hard, which explains why Google parent Alphabet Inc (NASDAQ:GOOGL) lost nearly 2% of its value overnight. Those losses have very little to do with the company’s growth prospects, though.

GOOGL delivered impressive Q2 results earlier, however, with revenue coming in higher than expectations and traffic-acquisition costs significantly lower. The firm was able to grow both its advertising business as well as it’s hardware, cloud-computing and mobile app arm, a good sign for future gains. 

What’s more, the European General Data Protection Regulation, the privacy protection law that weighed on FB’s results, could actually become an ally for Google according to the firm’s management. The law may actually strengthen Google’s position as a market leader, which could help GOOGL continue to grow its business. 

Big Tech Stocks to Buy Instead of Facebook: Garmin (GRMN)

Source: Shutterstock

Wearables are a segment tech investors should be considering and while the obvious choice in this industry might be Apple, Garmin (NASDAQ:GRMN) is worth your attention as well. The firm surprised investors by successfully transitioning from being a navigation systems maker to being a competitive force in the smartwatch space, and the company ranks second to Apple in the wearables market.

Garmin has a loyal following and has kept its offerings focused on what its consumers are interested in- GPS. The company has proven that it can roll with the punches and its devices are classed as some of the most reliable on the market. 

Plus, Garmin offers shareholders something a lot of tech stocks don’t: a respectable dividend. GRMN stock currently pays out a 3.3% dividend yield that investors can rely on for the foreseeable future. Garmin’s payout ratio is just 65%, meaning the firm has plenty of cash to cover its dividend payments even if it goes through a rough patch.

Big Tech Stocks to Buy Instead of Facebook: PayPal (PYPL)

How Paypal Just Upended Square's Growth Plans

Source: Shutterstock

PayPal (NASDAQ:PYPL) has had a bumpy year as investors tried to determine whether the payment processor’s separation from eBay (NASDAQ:EBAY) will have a sizable impact on the firm’s future growth prospects. The stock lost more than 3% overnight, which has brought the stock back below $90 per share.

While the eBay separation is going to hurt PYPL’s business, the damage isn’t going to be as catastrophic as some are predicting and the firm’s other initiatives will more than offset any eBay losses. PayPal has become a force to be reckoned with in the fintech space with 237 million active consumer accounts and 19 million merchant relationships. That huge reach is what makes PYPL so valuable. There’s a compelling case for both merchants and consumers to sign up because everyone is already using the service. 

Plus, there’s a lot of untapped potential in PYPL’s peer-to-peer platform Venmo. Right now the service is still in the early stages and has been eating up a lot of PYPL’s cash, but once it has been fully developed it will allow PayPal to keep a larger percentage of transaction fees and should be a real asset to PYPL stock.

As of this writing, Laura Hoy was long PYPL and FB. 

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Energy

10 Energy Stocks That Are Leaking

Source: Shutterstock

There are two phrases that can make investing seem a bit easier than it actually is: “The trend is your friend” and “A rising tide raises all boats.”

A perfect example to how these can distort your successful investing is the energy sector.

Energy prices are rising for a variety of reasons. One is OPEC nations are reducing supply to raise prices — remember, Saudi Arabia is funding a war in Yemen and Iran is trying to keep its economy going.

Two, the global economy is recovering, so the engines of growth are cranking up, so demand is growing. Crude oil — including West Texas Intermediate (WTI) — is sitting around $68 a barrel, with Brent around $73. Those are healthy levels compared to the sub-$50 level it was at for years.

But this trend isn’t necessarily your friend. And this rising tide won’t lift all boats in the energy patch; some are taking on water fast.

Below are 10 energy stocks that are leaking rather than sailing to open water.

Energy Stocks to Sell: Williams Partners (WPZ)

Energy Stocks to Sell: Williams Partners (WPZ)

Source: Andy Arthur via Flickr

Williams Partners LP (NYSE:WPZ) is a master limited partnership that operates in the U.S. natural gas business. It operates natural gas — and natural gas liquids (NGLs) — pipelines and fracking in the Utica and Marcellus shales as well as around the Gulf of Mexico (Texas, Louisiana, Mississippi, Alabama).

It has been a tough business for a while now, as NGL pricing is very cyclical, and operations are also tied closely with economic growth. But as that trouble gets put behind WPZ, it faces a new challenge — the debt it has racked up in the meantime.

Also, in March the Federal Energy Regulatory Committee has taken away MLPs’ income tax break for cost of service rates. Part of MLPs’ attraction has been their tax-favored status.

WPZ recently sold off an NGL subsidiary to free up cash to pay down some of its debt, but that may not be enough.

There’s no reason to hold and hope — things could get ugly here.

Energy Stocks to Sell: Energy XXI Gulf Coast (EGC)

Energy Stocks to Sell: Energy XXI Gulf Coast (EGC)

Source: Shutterstock

Energy XXI Gulf Coast Inc (NYSE:EGC) is a small exploration and production (E&P) company that operates offshore and onshore in the Gulf Coast.

Low prices forced the company into restructuring, which took all its shareholders down with it. That left them with a bad taste in their mouths as EGC has now reemerged and is trying to make up for lost time as prices for oil and natural gas begin to rise.

But EGC stock has been volatile and year to date is merely keeping its head above water.

EGC remains in a tenuous position and there’s no guarantee that a rebounding energy market will save it. What’s more, if the market reverses, EGC will be one of the first to suffer.

Energy Stocks to Sell: Advantage Oil & Gas (AAV)

Energy Stocks to Sell: Advantage Oil & Gas (AAV)

Source: Shutterstock

Advantage Oil and Gas Ltd. (NYSE:AAV) is a Canadian E&P firm from Alberta, Canada that focuses on natural gas and NGLs.

At this point, AAV stock is off 24% year to date because gas prices remain low, which has meant AAV has had to reduce production. It also has tried to ramp up NGL production to compensate, but this isn’t as easy as flipping a switch.

Earlier this month, it updated it 2018 guidance and it wasn’t good. Because it’s fiddling with production, costs are rising, which will mean margins will be shrinking. That’s never a good thing.

The only real hope is rising gas prices or a huge upturn in NGL demand. And that’s not worth betting on.

Energy Stocks to Sell: NuStar Energy (NS)

Energy Stocks to Sell: NuStar Energy (NS)

Source: Shutterstock

NuStar Energy L.P. (NYSE:NS) is off more than 56% in the past year. It’s a pipeline and storage company based out of San Antonio.

The best news for NS, as it noted in its Q1 earnings statement released earlier this week, was that insurance will pay for a majority of damage done to its facilities by hurricanes last year.

Aside from that (and a whopping current dividend), there’s more risk than attraction here — the new FERC ruling getting rid of an important tax break for the industry; NS high level of debt; and increasing competition from other players are all making recovery difficult.

It has also delivered half the return on equity of the industry average (10%) in the past year. That’s a long road back, and there’s no point in joining its journey until its further along.

Energy Stocks to Sell: Contango (MCF)

Energy Stocks to Sell: Contango (MCF)

Source: Shutterstock

Contango Oil & Gas Co (NYSEAMERICAN:MCF) had one piece of good news in its Q4 earnings released in early March — it lost less money in the quarter than it had the year before.

But aside from that, there wasn’t much to cheer about for the E&P player that works offshore in the Gulf off of Texas as well as in the Rocky Mountains.

MCF stock is off more than 50% over the past year, and this knife my still be falling. Onshore fracking is cheaper than offshore drilling and natural gas prices aren’t moving.

MCF isn’t a big enough operation to shunt production of one resource for another. So, while it’s true NGL prices are rising, it won’t do much for MCF’s bottom line.

Energy Stocks to Sell: Westmoreland Resource Partners (WMLP)

Energy Stocks to Sell: Westmoreland Resource Partners (WMLP)

Source: Shutterstock

Westmoreland Resource Partners LP(NYSE:WMLP) is an MLP not in the oil and gas space, but in the coal sector. It is a surface miner that produces thermal coal.

While there remains demand for coal as an energy resource, this isn’t exactly a growth industry. And when you add to that the FERC ruling to limit tax advantages of MLPs, you start with two strikes for this stock.

So, what did its Q4 numbers reveal earlier this month? Strike three. Earnings were off 25% for the quarter and 13% for the year. While coal demand was up 18% in the U.S., it was off 41% for Canada.

There’s no doubt that coal will be a valuable resource for years to come, but it’s not the core energy source at this point. And betting on this niche in transition when there are so many better choices it far more risk than your likely reward is worth.

Energy Stocks to Sell: Hess Midstream Partners (HESM)

Energy Stocks to Sell: Hess Midstream Partners (HESM)

Source: Mike Mozart via Flickr

Hess Midstream Partners LP (NYSE:HESM) is a midstream player in the integrated Hess petroleum organization. It’s not unusual for integrated energy companies to spin off various upstream and downstream units to leverage performance in good times and deflect trouble in bad.

HESM is set up as an MLP, which means stockholders (technically called “unitholders”) are essentially business partners that receive their profits in the form of dividends. Right now, HESM stock is delivering a 6.3% dividend.

That may sound tantalizing, but when you realize HESM stock is trading nearly 20% off for the last year, it sounds less interesting, hopefully.

It released Q1 earnings this week and they weren’t bad … but they also weren’t good enough to have your money sit on the fence. Not even 6% is worth the risk at this point.

Energy Stocks to Sell: Ultrapar Participacoes (UGP)

Energy Stocks to Sell: Ultrapar Participacoes (UGP)

Source: Maciek Lulko (Modified)

Ultrapar Participacoes SA (ADR) (NYSE:UGP) is a Brazilian energy firm that focuses on storage, distribution and chemicals.

Basically the firm uses these imported energy products and sells them to the various markets that use oil, liquified petroleum gas (LPG) and NGLs for their products.

It’s a solid business but UGP stock is off 18% in the past year.

There are two key issues here. First, as energy prices rise, so will its inputs for selling NGLs and other variants. That means lower margins since not all the price increases will be distributed to vendors and customers.

Second, Brazil is an emerging economy that runs faster in both directions than developed nations. If the broader economy stumbles, it will hit Brazil’s economy much harder.

Given the volatility that’s already in place, there’s no reason to look for even more.

Energy Stocks to Sell: Camber Energy (CEI)

Energy Stocks to Sell: Camber Energy (CEI)

Source: SarahTz Via Flickr

Camber Energy Inc (NYSE:CEI) is a small E&P that works mainly out of Texas and Oklahoma.

At this point the stock is off about 95% in the past year, so there isn’t much left of this company, at least unless it gets more oil out of the ground and to market.

Last month, it received another $1 million in funding from its sixth funding tranche. Basically that means it’s looking for more money to fund operations but isn’t in a position to go to a bank for funding. It’s going through investors.

The problem with this way of funding the company is, it dilutes the shares that current shareholders are holding. There’s nothing wrong with this kind of funding; small firms do it all the time.

The problem is, if you’re an investor while CEI is raising capital, there’s no guarantee your stock will be fully valued.

Energy Stocks to Sell: Ultra Petroleum (UPL)

Energy Stocks to Sell: Ultra Petroleum (UPL)

Source: SMelindo via Flickr (Modified)

Ultra Petroleum Corp (NADSAQ:UPL) is an independent E&P that owns properties in Wyoming and Utah.

In the past three years the stock is off a fulsome 82%. The fact that it has only two properties to seek its fortune is certainly a hindrance.

However, the one thing it has going for it is, UPL has been around since 1979, so it has seen its share of boom and bust cycles and has endured, if not thrived. It also has a $1.4 billion line of credit it can tap into, which is better than diluting shareholders’ positions by raising money through issuing more stock.

But that is little reason to invest.

If the big industrial firms are cautious on economic growth in coming quarters, then looking to buy beaten-down small-cap energy companies isn’t a good choice right now.

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Source: Investor Place

Technology

Why Facebook, Inc. Stock Is Still a Long-Term Buy

Social media giant Facebook, Inc. (NASDAQ:FB) has been an investor favorite for years due to its exponential growth and dominance within the industry. However, in recent weeks, investors have been spooked by the company’s changing strategy and worries about user numbers.

While its true that some big changes are on the horizon, big opportunities await as well, which make FB stock a buy for long-term investors.

User Number Decline?

A new study by eMarketer showed that Facebook is struggling to hold on to American users under the age of 25. The firm’s research concluded that the number of FB users between 12 and 17 years old declined by 9.9% last year — a far cry from the 3.4% that the firm had initially predicted. This year, eMarketer sees the company losing some 2.1 million users under 25.

On the surface, that looks very worrying. No one wants to be losing clout with the upcoming generation, especially not a social media company like Facebook. However, it’s important to note that these numbers don’t include Instagram, which is also owned by Facebook.

In fact, eMarketer predicted that Instagram’s U.S. user base will see a 13% rise this year, higher than rival Snapchat from Snap Inc (NYSE:SNAP), which is seen growing its U.S. user base by 9% this year. So, although it’s not great that FB’s flagship platform is losing touch with the younger generation, it’s losing users to itself which isn’t so bad.

Big Changes Ahead for FB

Another factor that has been weighing on FB stock is the company’s decision to pivot its strategy to focus on security and engagement over profits. In the tech space, it’s a reality that security spending will rise as new scams emerge.

That’s especially true for a social media company like Facebook, which has had to deal with complaints about fake news reports and extremist propaganda. CEO Mark Zuckerberg cautioned that security spending would take precedence over profits, and most agreed that was a wise move in order to keep the company at the top of the industry.

However, during the firm’s most recent earnings call, Zuckerberg dropped another bomb — engagement would also come before profits. Unfortunately, investors didn’t take quite so kindly to that sentiment.

Facebook has been reworking its platform to make sure that users are seeing more valuable content. That means fewer ads from businesses and viral videos and more posts from actual friends that they care about.

The problem for investors is that taking away ad space will likely cut in to profits. While that is definitely a concern, engagement is the only way FB works, so it’s important that the company change with the times and keep its users happy.

Big Opportunities

While Facebook’s shifting strategy does add some uncertainty, it’s important to note that the company also has quite a few opportunities ahead as well.

The firm has been working to develop a video content option on its site that could eventually rival YouTube from Alphabet Inc’s (NASDAQ:GOOGL, NASDAQ:GOOG).

Facebook’s Watch tab is still in the early stages, but the company is planning to build it out with user-created content through an ad revenue-sharing scheme. The benefit for Watch is the fact that Facebook already has so much data on its users and what they like to see that it will make it easy for the firm to create curated content geared toward individuals.

The firm is also planning to allow companies to select the kind of content their brand wants to be associated with in order to ensure that ad placement is relevant.

While it still has a long way to go before catching up to YouTube, Watch offers a ton of potential for Facebook once it gets rolling.

Facebook has the potential to monetize its grip on the messaging space in the coming year as well. FB currently owns the two most popular messaging services on the planet — WhatsApp and Facebook messenger. So far, the firm has done very little to monetize those assets, but once it does, we will likely see a huge boost to the Facebook’s profits.

The Bottom Line on FB Stock

FB stock could have a bumpy road ahead over the next few months as it works to pivot its business and address concerns. While it’s true that will add some uncertainty, I’d be more worried if the firm were to ignore it and continue with business as usual.

Facebook has 1.4 billion daily active users; with that kind of reach, it’s hard to imagine a scenario in which the company fails miserably. It’s smart to rework the site in order to keep users engaged, and the firm has plenty of other revenue opportunities to build out in order to keep shareholders of FB stock happy.

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Source: Investor Place