All posts by Lawrence Meyers

The 3 Best Stocks to Invest in Right Now

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The best stocks to invest in right now are always a matter of perspective. You should always hold a long-term diversified portfolio that aims to deliver a real rate of return in excess of the real inflation rate of 8% to 10%. That’s the objective of my investment advisory newsletter, TheLiberty Portfolio.

That being said, if you are still building a portfolio, the best stocks to invest in right now are those more likely to outperform the overall market in the long term. By definition, that means value stocks. Because the market has largely been driven by large-cap stocks over the past couple of years, a lot of value stocks and small-cap stocks are being ignored. That helps narrow down the sectors for us to look at for the best stocks to invest in right now.

I prefer to look for stocks that are generally misunderstood, and are overlooked for a variety of reasons. Those are a couple of criteria that the famous fund manager Peter Lynch utilized during his career. They tend to lead to outsized returns.

These criteria alone provide for a very nice selection of the best stocks to invest in right now. However, for the best stocks to buy now, I will narrow my criteria down one further by adding in an area I happen to be an expert in: consumer finance. Now that the Consumer Financial Protection Bureau (CFPB) is being gutted, there are a number of stocks that had been under pressure for a long time that have become hot stocks.

Stock 1: Enova International Inc

Enova International Inc (NASDAQ:ENVA) is probably the top hot stock in this sector. Enova began life as CashNetUSA, the successful state-by-state, licensed short-term consumer lending operation. It was phenomenally successful. It  was purchased by Cash America International, and then spun off.

After several years of gangbuster returns, the CFPB started cracking down on short-term lending, also known as payday lending. This happened simultaneously with a crackdown in the U.K. on consumer lending. ENVA stock fell to about $6 per share. ENVA started developing all kinds of new products that were not subject to the CFPB rules, and worked with U.K. regulators to develop new products.

It took a little while, but ENVA stock is back on track and has been delivering stellar results. Not only that, but with the CFPB reconsidering the payday loan rules, and a big industry lawsuit against the CFPB, I believe Enova will be able to ramp up its single pay products again. The stock trades at $32.50, and I believe it can triple in the next three to four years.

Stock 2: Ezcorp Inc

Ezcorp Inc (NASDAQ:EZPW) was, at one point, a leading provider of single pay products as well, and also had a large presence in pawnshops. However, the single voting shareholder got distracted by other companies moving into Internet lending. He took his eye off the ball, fired senior management that has done so well for so long, and put in new management that had no idea what it was doing. This, coupled with a crash in gold prices, sent EZPW stock to under $3 per share.

Brand-new management, which had a host of expertise in pawnshops, was hired and the company engaged in a turnaround. EZPW sold off all the assets it had, other than pawnshops. It continued its domestic expansion, and started breaking ground on pawn shops in Latin America. Latin America is a massive opportunity for pawnshops, and there remains an enormous amount of expansion that is possible in Latin America. EZPW stock is trading at about $13 per share, but I believe it can double in the next three years.

Stock 3: Encore Capital Group, Inc.


Encore Capital Group, Inc. (NASDAQ:ECPG) is a kind of cousin to these other two stocks. It is an international provider of debt collection services. That’s right, if you’ve ever gotten calls from those infamous debt collectors, now you have a chance to get some back.

By investing in ECPG, you are investing in a company that will buy charged-off debt for pennies on the dollar, and then turn around and try to collect on it. You wouldn’t think that this would be a very successful model. But in fact, it is been extraordinarily successful. That’s because if a company is able to buy a debt for, say, 2 cents on the dollar, and is able to collect 6 cents, it made a 200% return on its money. ECPG stock trades at $44.60, and I see a double within three years.

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7 Stocks to Sell Before It’s Too Late

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Ask not for whom the bell tolls, it tolls for significantly overvalued stocks. I’ve been saying for quite some time that the overall market is overvalued by about 25% and there are a lot of stocks to sell.

The market is at its third most expensive in history. We’ve been starting to see some cracks in the foundation, and volatility is increasing, and we all know that corrections are inevitable.

The problem is that complacency can often be the market’s worst enemy. There are a number of stocks that are ridiculously overvalued. That doesn’t mean they can’t stay that way. In fact, some of them have been ridiculously overvalued for quite some time. The reckoning is coming.

You should consider taking some money off the table if you own any of the following stocks. In fact, it may not be a terrible idea to close the position completely, or at least put a hedge in place.

Stocks to Sell Before It’s Too Late: Tesla Inc (TSLA)

Tesla Inc (NASDAQ:TSLA) is right at the top of my list in terms of stocks to sell. No, I’m not trolling you.

The Elon Musk con is starting to enter its endgame. The company continues to burn through cash like nobody’s business and will need to do a capital raise before the end of the year, despite what Elon Musk says. What’s more, Tesla is far behind in its manufacturing and delivery schedule, which leaves an opportunity open for rival car manufacturers to get their own electric vehicles to the market first.

Tesla’s valuation is absurd to the extreme. If you can find shares to short, in fact, and have the stomach for it, that could be an interesting play.

Stocks to Sell Before It’s Too Late: Netflix (NFLX)

netflix stock

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Netflix Inc. (NASDAQ:NFLX) is a terrific company, and it is producing some wonderful original content. The problem is that Netflix just continues to borrow billions and billions of dollars to produce this content while producing very little in the way of net profit, although that situation is starting to improve.

Still, $670 million of trailing 12-month net income is knotted enough to justify a $143 billion valuation. Netflix cannot possibly justify selling for 200 times net income.

Sure, Walt Disney Co (NYSE:DIS) has a valuation of $151 billion. Despite Stranger Things and other hits such as Godless, Netflix is no Disney.

Stocks to Sell Before It’s Too Late: (JD) (NASDAQ:JD) is another of the top stocks to sell. Let me tell you why I think that …

…  because it literally makes no money! Its operating expenses almost exactly offset total net revenues. For instance, management burned through $1.4 billion in the past quarter alone.

While I think this is a business that has potential, considering it has nearly 7,000 delivery stations and 250 warehouses in China, it is a long way to go before it can justify its $52 billion valuation.

JD stock is 30% off of its high, meaning its valuation was closer to $70 billion in the not-too-distant past. I see no reason to hold the stock now, and in a major correction, it’s possible that the stock might fall to a level that might make sense.

Stocks to Sell Before It’s Too Late: Shake Shack (SHAK)

Shake Shack Inc. (NASDAQ:SHAK) is also a stock that has been perpetually overvalued, even at its present valuation of $2.15 billion. Last year’s entire operating income came to just under $34 million, meaning the stock trades at 63x operating income. That alone makes it a candidate for stocks to sell.

I know that it is supposedly in its growth phase, but it is also seeing some substantial expense growth. Legacy burger joints like McDonald’s Corporation (NYSE:MCD) and The Wendy’s Company (NYSE:WEN) both trade for around 13 times operating income.

Shake Shack’s same-store sales only rose 1.7% in the most recent quarter. I’m not sure why I’m supposed to be impressed by that.

Stocks to Sell Before It’s Too Late: GoDaddy (GDDY)

High Multiples and Lack of Moat Make Godaddy Inc (GDDY) a Stock to Avoid

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GoDaddy Inc. (NYSE:GDDY) has a great brand and a pretty decent business, but it’s definitely one of the top stocks to sell.

Its revenues are growing at a pretty nice clip, although expenses are eating that revenue down pretty significantly. The company had $67 million in operating income last year, an improvement over the $31 million operating loss of 2015.

Nevertheless, I see a company trading with the valuation of $11.7 billion, which is about 18 times operating income. Yet it is also trading at about 85 times its net income of $136 million.

That is a substantial improvement from the previous year $16 million loss, but again, I see no way the company’s valuation is justified.

Stocks to Sell Before It’s Too Late: Etsy  (ETSY)

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We have a similar situation with Etsy, Inc. (NASDAQ:ETSY). The online specialty storefront marketplace is also seeing decent revenue growth, however, it is also seeing its expenses grow along with it.

Backing out a $50 million income tax benefit, the company only made $32 million last year! Yet ETSY stock trades at a valuation of $3.5 billion — more than 100 times that income. Does that make sense to you? If it does, we must be living in different realities.

The good news is that 10% of that valuation can be pulled out and reduced because of its cash position. The other piece of good news is that it did generate decent free cash flow last year, just about $64 million worth. That, however, doesn’t make ETSY shares worth holding onto.

Stocks to Sell Before It’s Too Late: Yelp (YELP)

YELP Stock Will Continue to Drop Thanks to Amazon, Facebook and Google

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Yelp Inc. (NASDAQ:YELP) has become a dominant player as far as business reviews are concerned.

Despite a lot of unhappy vendors who claim that Yelp tries to extort them into advertising, the company is enjoying a $3.1 billion market valuation after you back out its $800 million or so in cash. What isn’t so impressive is its operating income was only $15 million last year, following two years of losses.

There are better stocks out there to buy that aren’t experience prolonged losses.

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My 7 Must-Own Stocks to Build Up Your Retirement

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I have a completely different philosophy for retirement stocks than virtually anybody else in the financial markets.

The prevailing wisdom is to overweight in bonds in order to generate income and to allegedly reduce volatility in the overall portfolio. That’s horrible advice, mostly because bonds and bond funds are actually more volatile than stocks are.

The other terrible advice that is given to current and pending retirees is that retirement investors should plow money into blue-chip stocks that pay dividends of 2% to 3%.

That is also terrible advice because ever since the Federal Reserve reduced yields, a lot of retirement investors have moved further out on the risk curve into exactly these stocks, bidding them up to levels that are unsustainable.

The stocks are more likely to fall in the next few years by substantial amounts, more than enough to wipe out whatever dividends are being paid. That’s why I chose a particular set of stocks, ones that go against the standard retirement grain, but that should be in your portfolio.

Must-Own Retirement Stocks: United Parcel Service (UPS)

Source: UPS

United Parcel Service (NYSE:UPS) is about as close to a no-brainer in the category of retirement stocks as you can get. It’s always great to have stocks that are part of an oligopoly in your portfolio, especially if they been around a very long time, and have a very good track record.

UPS represents a core business of the human experience. People will always need to send things around the globe, and are only so many companies with a broad enough reach to do that. It pays a very respectable 3 BA stock should continue to do well for quite some time .44% yield.

Must-Own Retirement Stocks: Boeing (BA)

The Boeing Company (NYSE:BA) is another company that falls into the oligopoly category for retirement stocks. There are a limited number of companies that actually manufacture airplanes to begin with, and very few companies that have the breadth of experience in defense contracting.

BA has been in business for 100 years and its expertise in defense, space, security, and airlines is unparalleled.

With an administration that places a high value on defense, Boeing will do well for quite some time, and the $5.68 in dividend payments every year as an added bonus.

Must-Own Retirement Stocks: Visa (V)

Visa, Inc. (NYSE:V) is yet another company in the same theme of oligopolies for retirement stocks. There are very few credit card processing companies in the world, and Visa has the largest market share out of any of them.

With financial services becoming more and more impactful in the global economy, and consumers needing an increasing number of payment solutions, Visa will be at the top of the class for a very long time.

It generates a tremendous amount of free cash flow and, in fact, has so much that he could afford to raise its dividend significantly.

Must-Own Retirement Stocks: Exxon (XOM)

Exxon Mobil Stock's Big Profit-Growth Target Fails to Impress Investors

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Exxon Mobil Corporation (NYSE:XOM) belongs to a category of retirement stocks that I also considered to be core holdings for just about any portfolio. You must have fossil fuel energy companies represented in some way in your portfolio.

Energy is a central component of the human experience. Look around you every single thing has been brought to your location by a vehicle that required fossil fuels to transport them.

Not to mention whatever was needed to create the products in the first place, such as plastics. Beyond that, of course, energy is what makes the world move.

Exxon Mobil happens to be substantially undervalued at this time.

Must-Own Retirement Stocks: AT&T (T)

AT&T Inc. (NYSE:T) might not have made my list several years ago, despite the fact that it is a dividend aristocrat that has been increasing dividends every year for more than 25 years.

That’s mostly because organic growth is a telecom company had been slowing. But then it purchased DirecTV, and is now becoming a content play with its proposed Time Warner Inc. (NYSE:TWX) merger.

I do believe the merger will go through is I don’t believe the Department of Justice has a viable case.

Must-Own Retirement Stocks: Disney (DIS)

Walt Disney Co Stock Is Due for a Magical Run Higher

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The Walt Disney Company (NYSE:DIS) is the premier media and entertainment company in the world. As it is, it owns three extraordinary properties in Marvel Studios, Lucasfilm and Pixar films.

That says nothing about its own incredibly successful studio. Put all this together with the assets it hopes to acquire in the buyout of Twenty-First Century Fox Inc. (NASDAQ:FOXA), and Disney will have enough content that will literally last a generation and probably longer.

The theme parks and resorts have become a staple of tourism, and one that is constantly innovating and redefining itself.

Must-Own Retirement Stocks: Duke (DUK)

Duke Energy Corp (NYSE:DUK)

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Duke Energy (NYSE:DUK) is a massive utility that stretches through the Southeast and Midwest. The wonderful thing about utility stocks is that they are regulated.

That means that the utility has a very clear idea of how much revenue it will generate every year, and therefore what kind of costs it can generate in order to not only remain profitable but pay a regular dividend.

Speaking of that dividend, Duke has been paying it every quarter for 91 years.

As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities.

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Source: Investor Place