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As Nasdaq soars, bubble fears grow

Everyone can agree on this much. The Nasdaq Composite Index is within striking distance of blowing through its all-time closing high of 5,048 set back on March 10, 2000.

Bubbly

Beyond that, the consensus breaks down about whether tech stocks are heading for the same spectacular fall that took place 15 years ago when the dot.com bubble went poof. Here’s a breakdown of the arguments on both sides of the ledger.

Optimists

Tech bulls say that there are huge differences between 2000 and 2015. For one thing, valuations haven’t gone completely off the rails as they did back then. The price-to-earnings ratio for the Nasdaq was 175 back at the bubble’s bubbliest peak. Now, it is just under about 23.

Glam Stocks

Also, the tech glamour stocks of this era--Google (GOOG), Facebook (FB), Apple (AAPL) and Amazon (AMZN)--actually make money. That’s a world of difference from the fabled dot.com flameouts like Webvan and Pets.com. David Kotok, chairman and chief investment officer of Cumberland Advisors, called the tech bubble back in the late-’90s. He isn’t worried this time around. He recently noted on his company’s website that “we are overweight the technology sector in our US exchange-traded fund (ETF) managed accounts.” He thinks the tech earnings surge is real and sustainable.

Skeptics

While skeptics concede valuations aren’t at 2000 levels, there’s definitely signs of froth among tech stocks. Twitter (TWTR) is up more than 35% this year, while the popular biotech exchange-traded fund -- the iShares Nasdaq Biotechnology ETF (IBB) -- has advanced 20%. If there’s a canary in the coal mine, it might be Chinese Internet stocks. The share price of Alibaba Group Holdings (BABA), which raised $25 billion in the world’s biggest initial public offering last year, is down 28% from its recent high in November.

China Slump

Half of the 14 Chinese dot-coms that debuted in the U.S. last year, according to Bloomberg, are now trading below their initial sale prices. Meanwhile, billionaire investor and Dallas Mavericks owner Mark Cuban thinks there is a tech bubble--and it could be worse than the last one. In a recent blog post, he claimed there are all manner of angel investors, private equity funds and venture capitalists trying to get their money out of their start-up investments, but can’t. That suggests a liquidity squeeze, Cuban says. “The only thing worse than a market with collapsing valuations is a market with no valuations and no liquidity,” according to Cuban.

Takeaway

So far, tech investors aren’t partying like it’s 1999. But there is reason for caution. Start-up valuations are sky-high and a sell-off in Chinese net stocks is already underway. The Nasdaq milestone is important and will get plenty of attention when it happens. Yet when it comes to your portfolio, best to keep a cool head amid the celebration. Photo Credit: Photo Clinique via Flickr Creative Commons

How Sony Got its Groove Back

Sony (SNE) has taken it share of hits in recent years. Under CEO Kazuo Hirai, Sony has racked up losses in its core television business and has been surpassed by Samsung Electric (SSNLF) in market share and brand buzz. The recent hack at Sony Pictures Entertainment of sensitive corporate e-mails and film properties caused much embarrassment for top executives.

Hot stock

Yet now things are looking up for the bellwether Asia tech stock. Earlier this week, the company reported its best quarterly profit in seven years and upped its projection for annual sales. True, Sony is still on course to lose $1.5 billion in its fiscal year that ends in March. Yet that reflects restructuring charges and a big writedown on its Xperia mobile phone business and analysts are looking ahead to renewed profits in 2015 and 2016. On Feb. 5, Sony shares shot up as much as 18% reflecting a new investor enthusiasm for the stock. Actually, Sony shares have been on a tear the last year. Over the past year, the shares have increased 63% on par with (wait for it) Apple (APPL). Here are 4 factors driving the investor enthusiasm for Sony.

Tough CFO

Sony is a sprawling conglomerate that sells everything from wide-screen televisions to life insurance policies. The company has finally become more open to dumping loss-making businesses and restructuring under Chief Financial Officer, Kenichiro Yoshida, who is very popular with investors. Last year, the Japanese company sold off its Vaio computer division and spun off its low-margin television business into a wholly-owned subsidiary to better identify costs savings. The company has cut jobs and lower costs.

PS4

Sony’s PlayStation 4 console game, launched in late 2013, has cumulatively sold more than 18.5 million units worldwide through January 4, 2015. PS4 software sales also remain strong, the company reported, with more than 81.8 million copies sold in retail stores globally and through digital downloads.

Sensors

Sony makes image sensors that can capture high-resolution images even in dark conditions. They’re sophisticated and popular with other smartphone makers that compete with Sony. Beyond that that there is a huge new market emerging from the auto industry. Car cameras used automated auto safety systems is a growing market.

Earnings

Analysts like what they are seeing. Some 65 percent of the Sony analysts tracked by Bloomberg continue to have buy ratings on the stock. Exiting non-core businesses and commodity consumer electronics could position Sony to earn 450 billion yen or more in operating profit, something it hasn’t achieved in the last decade.

Takeaway

Sony has a long way to go before regains its glory days. That said, the pieces are falling into place for a sustained recovery powered by its PlayStation franchise, image sensors and high-end cameras. Cost-cutting is playing a big role, too, in the profit rebound. The day is approaching when Sony may actually get some of its swagger back.

Smartphones: The race to the bottom

On March 1, Samsung Electronics (SSNLF) is expected to unveil the latest installment to its flagship smartphone lineup, the Galaxy S6, at the Mobile World Congress trade show in Barcelona. Technology writers have speculated about the design (will it have a tapered edge?) and functionality of the new Samsung offering in recent weeks. Step back from pre-launch, hype and bigger story emerges: The heyday of the $400 to $600 smartphone may be coming to an end, a trend that may have ramifications for Samsung and Apple (AAPL).

Cloud era

The fastest-growing segments of IT spending are software, services and storage powered by demand for cloud computing, information security and data analytics, according to data by IDC and research by Bloomberg Intelligence analyst Jitendra Waral. Sales of smartphones, which represent about 20% of total IT spending, is expected to nearly halve in 2015, according to IDC.

Chinese rivals

Two trends suggest that growth in high-end handsets will continue to wane in the years ahead. In emerging markets, Chinese tech companies such as Xiaomi, Huawei and ZTE (ZTCOY) are winning market share with significantly lower priced handsets than competitors such as Apple. Xiaomi, the world’s most valuable technology startup, recently reported that it solde 61.1 million smartphones in 2014, up from 18.7 million in 2013.

Emerging markets

Smartphone sales in Eastern Europe, the Middle East and Africa grew at about 50% year-over-year in the third quarter of 2014, the latest data from tech research firm Gartner shows. In the U.S., the comparable growth in the third quarter of last year was 18.9%. Western Europe reported a 5.2% decline in sales. Secondly, at the high end of mobile devices, the battleground has moved on to “phablets” not smartphones, according to a recent forecast from the International Data Corporation (IDC). IDC sees worldwide phablet shipments (devices with screens from 5.5 to 7 inches) hitting 175 million units worldwide in 2014, passing the 170 million portable PCs expected to ship during the same period. This year, predicts IDC, total phablet volumes will top 318 million units, surpassing the 233 million tablets forecast to ship in 2015.

Takeaway

The smartphone industry led by Samsung and Apple has had a great run, but the fastest future growth will be in emerging markets where lower-priced gadgets reign. Chinese competitors have established a firm foothold in the smartphone arena, a fact that may make the segment less profitable going forward. In the fast moving world of mobile technology, rapid change is a constant.

An updated look at Chipotle's spin-off, ShopHouse

McDonald’s (MCD) President and CEO Don Thompson recently stepped down after a string of disappointing sales and lackluster menu items. Meanwhile, Shake Shack, known for its hand-spun, creamy milkshakes, Yukon french fries and hormone-free burgers, is attracting huge interest for its upcoming initial public offering.

ShopHouse

In the casual dining world, quality food and splashy menu offerings win. And few do it better than Chipotle Mexican Grill (CMG). Its core Mexican food chain continues to thrive as does ShopHouse, a Southeast Asian restaurant concept chain launched in 2011 by the company.. ShopHouse has 9 restaurants in California, Washington D.C. and Maryland, where a new restaurant is planned to open in Rockville, a suburb just outside the nation’s capital. It is following the same script as its parent Chipotle: source responsibly raised ingredients, cook food in front of the customer in an interactive format and offer a unique dining experience.

Hot streak

Chipotle's revenue is clocking in with 30% growth and the company plans to open 190 to 205 new restaurants next year--including a small and undisclosed number of ShopHouse outlets. The company’s stock performance has outperformed that of McDonald’s over the past five years. ShopHouse serves Southeast Asian-style rice bowls and authentic dishes from Thailand, Malaysia and Indonesia. The concept works because customers now seek healthier fare and the option to customize their meals.

Marketing savvy

Beyond that, Chipotle CEO Steve Ells and his executive team are very savvy marketers. They are trying to associate their restaurant concepts with the whole foodie movement. For example, ShopHouse is part of the Chipotle Cultivate Festival series, one day events around the country that celebrate responsibly sourced food with demonstrations by celebrity chefs, live music, and local food artisans. Brands like Chipotle, ShopHouse and Shake Shack are growing because they offer fun, responsibly sourced food that consumers want. They’re the future. McDonald’s isn’t.

Super Bowl: Why they're a Hail Mary pass

The Super Bowl ad economy continues to test the bounds of sanity. As you prepare to enjoy this year’s battle between the New England Patriots and Seattle Seahawks, take a moment to spare a charitable thought for brand managers rolling the dice on their multi-million dollar Super Bowl ads.

111 million fans

This year, the average price of a 30-second spot is a record-setting $4.5 million. That’s a half a million more than last year's broadcast on Fox. Super Bowl XLIX advertising will be amusing to watch and there are always a couple of ads that shock and awe. Kim Kardashian will satirize herself in an ad for T-Mobile (TMUS). Here’s a link to this year’s lineup that includes the usual suspects such as Anheuser-Busch InBev (BUD) and Mercedes-Benz (DDAIF). It’s no shocker that Super Bowl spots sell at a premium, given the opportunity to reach a worldwide, captive audience. Last year’s game drew 111 million viewers. [caption id="attachment_42659" align="aligncenter" width="450"] Source: Statista[/caption]

Super Bowl halo?

This year’s championship matchup, which features Katy Perry and guest Lenny Kravitz for its halftime show, may well approach 120 million worldwide. But are these astronomical ad rates really worth it? They may not be, according to Kenneth Kim, Chief Financial Strategist of EQIS Capital. Back in 2009, Kim published a study that showed publicly-listed firms that aired popular Super Bowl commercials, based on a survey compiled by USA Today, on average received a stock price boost the day after the big game. The Super Bowl effect has lost its punch, according to an update of that study by Kim that looked at the last 10 years. Admired ads for Budweiser and Doritos did nothing for these brands’ corporate parents.

Long-term impact

Even if there’s a short-term pop in the stock price. What about longer term? There’s no question that a smash hit Super Bowl ad can be a zeitgeist changing even for young companies. Apple’s (AAPL) Orwellian 1984 ad is the stuff of business school case studies. Charles Tomkovick, a marketing professor at the University of Wisconsin, Eau Claire, has studied companies that advertise during the big game. According to his research, 75% of them enjoy a boost in sales and brand awareness shortly after the game. Then it wears off for most companies. That’s great for movie trailers. Not so good for venerable corporate brands fans are already familiar with.

What the "foodie" revolution means for consumer goods

We’ve come a long way from frozen tv dinners and meat loaf. Americans it turns out have become pretty sophisticated in their tastes for food, what with the popularity these days of luxury items like truffles, kobe beef, foie gras, and sushi.

Farm-to-table

Then there’s the whole “farm-to-table” and organic revolutions. As consumers have educated themselves about the health trade offs that come from eating processed foods, sales of natural and organic products has evolved into a $50 billion business. Not only have these movements transformed food retailing, they are also having an impact on residential real estate and the home appliance industry. If you want to invest where you eat, there are plenty of foodie stock plays out there for the discerning investor. Here are 13 of them.

Organic plays

Whole Foods (WFM) has been called the Apple (APPL) of the organic food industry. It’s the world's leading natural and organic foods supermarket and America's first national certified organic grocer, boasting a $19 billion market value and nearly 360 stores in North America and Europe. Not surprisingly, it’s success has attracted plenty of imitators that also offer investors a way to get exposure to the foodie uprising. They include Sprouts Farmers Market (SFM) and Fresh Market Inc. (TFM). Then there are mainstream food retailers that are investing aggressively in organic products and enjoy economies of scale over their smaller “green” rivals.

Mainstream

Wal-Mart Stores (WMT) recently signed a deal with Wild Oats to launch 100 mostly organic products that will be priced 25% cheaper than national brands. Campbell Soup Company (CPB) has developed a deep lineup of organic soups, while J.M. Smucker Company (SJM) now offers an organic or natural food alternative for many of its popular products. Keurig Green Mountain Coffee Roasters (GMCR) has won a loyalfollowing for its coffees, popular single-cup brewing technology, and socially responsible business practices. Last year, Coca-Cola (KO) bought 10 percent of Keurig and announced plans toSFM work together to make a system for producing single-serve cold drinks.

Wholesalers

Or consider the boutique distributors, wholesalers, distributors and certification specialists riding the organic wave. Hain Celestial Group (HAIN) sells organic brands such as Arrowhead Mills, DeBoles, Garden of Eatin', Health Valley and Spectrum. Sun Opta (STKL) is another distributor in the field. United Natural Foods (UNFI) distributes natural, organic, and specialty foods throughout the United States and 40-plus other countries worldwide. Then there’s third-party food auditor Where Food Comes From (WFCF) that has developed a thriving business make sure organic companies really have adopted sustainable-practices and are producing truly organic products. Also, don’t forget the appliance makers. Brands like Cuisinart, a unit of Conair Corp. (CNGA), make the kind of high-end gadgetry--from espresso makers to industrial strength blenders--that are very popular among the foodie set.

Takeaway

In sum, Americans are no longer barbarians when it comes to their diets. There’s big and thriving industry out there consisting of companies that are riding the consumer demand for higher quality food and that is produced in a socially responsible way. It might pay to spend some time studying the sector for tasty morsels that might belong in your portfolio. Bon appétit

What billionaires do with money that you don't

Billionaires may seem different than the rest of us. And the financial media certainly have a tendency to treat the super-wealthy as an elite species with skill sets the rest of us don’t have.

It’s true that the Warren Buffetts and Mark Zuckerbergs of the world make decisions that affect thousands of workers and billions of dollars of capital.

Yet the way they make decisions is the key thing. And that’s where investing lesson from billionaires can apply to the rest of us as we face big financial and investment decisions.

Salary negotiations

Billionaires often transact deals worth, well, billions. But best of them employ tactics that work just as well in salary negotiations. Dealmakers such as Oracle’s Executive Chairman (ORCL) Larry Ellison and Google’s (GOOG) Larry Page carefully analyze the current and future value of the companies they acquire.

You should have an accurate sense of your market value is by checking out websites such as payscale.com and glassdoor.com to find out the salary ranges of a position you are considering.

Having an accurate read on your worth will give you a big edge in salary talks. Also, keep in mind what unique skills you bring to the role. That could bolster your argument for a compensation package at the top of the range.

Home purchases

Berkshire Hathaway (BRK/A) founder Buffett does exhaustive research when it comes to the stocks that he buys. You should take the same approach when it comes to buying a home, perhaps the biggest financial decision you’ll ever make.

Luckily, there are plenty of online sites such as Trulia (TRLA) and Zillow (Z) that can help you analyze historical sales trends in the neighborhood you are considering. Make sure you get an independent appraisal and thorough inspection as well.

Shop around for the best loan and get pre-approved by a bank. Having your financing locked down will give you the flexibility to move quickly if need be. Finally, try to keep your emotions in check. Your dream house will turn into a nightmare if you overreach or fail to do your homework.

Maximizing your investments

It’s true: Billionaires have more zeroes on their bank account balances than the rest of us. However, spectacularly successful investors like George Soros and Carl Icahn didn’t reach the top of their profession by some secret method incomprehensible to mere mortals

They size up investments analytically and make fact-based decisions devoid of emotion. Not every billionaire adopts the same strategy. Buffett likes to seek out a firm's intrinsic value and waits for the market to adjust accordingly over time.

Soros looks for short-term volatility plays and makes highly leveraged transactions when he sees an opening such as his fabled run on the British pound back in 1992. The point is they have a clearly articulated strategy that informs their decision-making and keeps them from following the investing herd and making ill-timed market calls.

Vision

The billionaires at the top of the business magazine lists aren’t driven exclusively by a desire to live a rarified and luxurious lifestyle, though some live flashier lives than others They are passionate about their businesses, focused and competitive. But they are also often motivated by a desire to make a lasting impact on the world.

Microsoft (MSFT) founder Bill Gates changed the way we used personal computers and is now doing philanthropic work with vaccines that have saved millions of lives in the developing world. On a smaller scale, the rest of us can pursue careers and investment strategies for something greater than ourselves as well.

Making a meaningful contribution to a company’s strategy or charity work can been fulfilling. So can a properly managed investment portfolio that hits its targets and provides you and your family a measure of financial security.

Takeaway

Better to learn from billionaires than to worship them. By studying how the very wealthy analyze deals and manage portfolios, we can identify best practices that are relevant to our investing lives. The rich are different from the rest of us. But not that different.

The changing market landscape for luxury autos

These are flush times for luxury automakers in the U.S. A confluence of cheap gas prices, low interest rates and a American robust economy have set the stage for a multi-year run of strong sales generally in the industry.

Cheap gas

U.S. auto sales should reach 16.4 million in 2014 when the final numbers are tallied and climb to 17.4 million by 2017, according to industry consultant IHS Automotive. All of this spells better times for luxury automakers that can turn out new products that capture the imagination of consumers. And, in the U.S., German and Japanese companies dominate the high-end. Eco-friendly cars, hybrids and plug-in electrics, are a smaller category in terms of volumes, but generating a lot of interest in the luxury segment. These low-emission cars are popular among well-heeled drivers who care about the environment or at least want to give the appearance of doing so. Here’s a rundown of the companies (and cars) investors need to know about heading into 2015.

BMW and Mercedes

BMW (BYMOF) outpaced Daimler AG’s (DDAIF) Mercedes-Benz to grab the luxury-auto sales crown in the U.S. for 2014. Among the best-sellers, BMW AG’s namesake brand had a great year, especially the 3 and 4 Series gas-powered and hybrid sedans and the X5 sport-utility vehicle. Mercedes didn’t have a shabby year, either, thanks to its redesigned C-Class and GL-Class SUV. Both stocks have delivered solid returns over the last year with BMW, up nearly 5%, and Daimler advancing about 13%.

Lexus

The Toyota (TM) luxury brand saw a 15% pop in December sales, thanks to its IS Sedan and RX SUV. Later in 2015, Toyota will roll out a fuel-cell car called the Mirai (the Japanese word for future) that runs on hydrogen and emits only water and heat. In the U.S., Toyota will charge $57,500 for the Mirai. Federal and state incentives could reduce the price as much as $13,000, and Toyota plans to provide free fuel to early buyers. Customers can also lease the car for three years, at $499 a month.

Audi

The Volkswagen (VLKAY) luxury unit is in a tear. It reported its best December sales month ever and a fifth straight year of record annual sales in the U.S. Sales of Audi SUV models remained strong as did the Audi Q5 and all-new Audi Q3.

Tesla

Tesla (TSLA), which makes the Model S plug-in electrics, is a cross between luxury and eco-friendly automaker and gets a ton of media coverage. It still isn’t profitable yet despite a sky-high stock valuation. The company’s shares took a beating this week after founder and Chief Executive Officer Elon Musk cited slowing sales inChina as one reason why the electric-car maker won’t become profitable until 2020. Meanwhile, General Motors is readying an affordable $30,000 electric vehicle called the Chevrolet Bolt expected to hit the market in two years. That didn’t help Tesla shares, either.

Takeaway

Unless there’s an unexpected shock to the U.S. economy, the outlook for the auto industry in general and luxury automakers look sound. It’s rarely been a better time to finance a new car purchase lease. $2 per gallon gas prices aren’t hurting either. Time to trade up?

Your investing portfolio and...football?

What could the NFL possibly teach investors? It’s not as crazy as it seems. There are some common threads between running a championship-caliber football team and managing a high-performing portfolio.

So ahead of the NFL’s Championship Sunday (Packers Vs. Seahawks; Patriots Vs. Colts) let’s draw some inspiration from the most popular U.S. sports league for 30 years running.

Stats Matter

The most successful franchises size up their team’s and individual player’s performance with rigorous data analysis. You should expect no less from your financial adviser.

Don’t just look at the overall return of your portfolio and how it compares with a particular benchmark. That’s just the beginning. If you really want to know how your portfolio is performing, ask your manager about its alpha.

This is a measure of an investment’s risk-adjusted performance compared to a benchmark, such as the S&P 500. It will give you a better true indication of what a portfolio manager actually brings to the party.

In a rising market, it shows whether your financial adviser is outperforming the broader market or just going along for the ride. How much risk did he or she use to get there?

Other statistical measures worth familiarizing yourself with include the Sharpe Ratio and standard deviation. If you don’t study the game films, it’s hard to spot the weak performers.

Transparency

The best NFL team general managers, who recruit and negotiate player’s contracts, demand transparency. Performance goals and expectations are clearly defined. Players and coaching staff know exactly what marks they need to hit to land those big bonuses.

You miss agreed-upon targets and there are consequences. Ever wonder why the average tenure of an NFL coach is about 4 years (it’s even worse for the NBA and Major League Baseball) compared to 10 years for your typical CEO? A A financial adviser should be no different. If he or she, has a record of underperformance or is less than open about fees and commissions it’s time for a serious talk.

Audibles

The best quarterbacks can walk up to the line of scrimmage, read the defense and adjust their play nimbly for maximum yardage gain. That doesn’t mean you dump the entire game plan of course. It does mean that as conditions change, so should your short-term strategy.

Actively managed portfolios have long-term strategic aims tied to economic assumptions, risk tolerance and asset allocation. Yet when opportunities (or risks) arise, managers aren’t shy about taking losses, or doubling down, if that is where their analysis takes them.

Player trades

When the season is over, the top management at NFL teams size up their talent and try to make dispassionate personnel decisions. Weaker performers are let go. Mid-career players are evaluated and sometimes traded for more promising alternatives.

Franchise players are valued. The stocks, bonds and investment vehicles in your portfolio should be treated the same way. Think of portfolio rebalancing as your opportunity improve the lineup, bring in fresh legs and build a strong team in the long run.

Takeaway

Successful investing requires a long-term view and a certain amount of discipline. These are the same traits that define a NFL Super Bowl champ as well. Investing, like football, can be a game of inches.

The most successful portfolios are built on best practices and a clear strategic vision even in the face of changing market conditions and uncertainty. And the winners are often in it for the love of the game.

7 ways to prosper from the Chinese slowdown

The great China economic slowdown is one of the big global investing wild cards this year. China averaged growth of about 10% annually from 1980 to 2012.

Now, it’s more like 7%, the slowest pace since 1990. The International Monetary Fund predicts the Chinese economy will decline even further over the next five years, from about 7.4% this year to 6.3% by 2020.

China plays

Of course, slower economic growth doesn’t mean there aren’t smart investments to be had in the Middle Kingdom. What it does mean is that investors will need to be even more more discriminating than normal when it comes to picking Chinese stocks.

The challenge is finding companies well-positioned to grow even as China’s export sector cools, state banks restrict lending and clean up their balance sheets and the country gradually shifts to a more mature model of consumer-led growth.

Here are 7 companies (not all of them Chinese) that may benefit from the China downshift.

Alibaba

Alibaba’s (BABA) $25 billion IPO last September on the New York Stock Exchange was the biggest in history, and the e-commerce giant’s stock has performed well since then.

Founded by Jack Ma, a former English teacher from the eastern Chinese city of Hangzhou, the company is kind of a Chinese mashup of eBay (EBAY) and Amazon (AMZN), offering everything from business-to-business web portals, online retail, shopping search engines, and cloud computing.

Alibaba analysts tracked by Bloomberg remain bullish and have an average 12-month target of $120, up 16.5% from current trading levels as of Jan. 5

Tencent

Another promising Chinese tech play is Tencent (TCTZF), which manages online gaming, e-commerce and payment system platforms as well as the popular instant messaging service WeChat.

Traded in Hong Kong, Tencent’s stock currently trade around HK$122 per share. However, Goldman Sachs (GS), which has a buy on the stock, has set a price target of HK$150, thanks to the outlook for its internet and messaging services.

Expedia

At first blush, Expedia (EXPE), the internet-based travel website company based in Bellevue, Washington, wouldn’t seem an obvious choice. However, Expedia has expanded in Asian markets such as India, Japan, Singapore, Thailand, Malaysia, Hong Kong and Korea that receive outbound mainland Chinese tourists.

China’s tourism market has enjoyed growth rates of 26.2% between 2009 and 2012. Even as the economy has slowed, the industry has still grown by a brisk 14% in 2013 and 2014, and most forecasters see double digit growth through the end of the decade. On top of that, the company has an extensive partnership with eLong, a leading travel service provider in China.

Ping An and China Life

Chinese insurers such as Ping An (PNGAY) and China Life (CILJF) saw explosive growth in their share prices in late 2014. Chinese insurers’ fundamentals are improving this year, thanks to strong premium growth in a society whose populace is aging and needs life insurance.

Lower interest rates have helped Chinese insurers raise debt more cheaply, and regulators have allowed them to sell shares more easily on the Chinese stock exchanges.

At the same time, investors have more faith in Chinese insurers’ balance sheets than state-owned banks that have lent big sums for speculative real estate deals.

The China Insurance Regulatory Commission recently imposed stricter solvency rules on insurers in a confidence-building move that was well-received by investors.

GM & Ford

Chinese auto sales are are expected to finish 2014 up roughly 7%, well below the double-digit pace of past years and 14% in 2013. However, China is still home to world’s biggest and fastest growing auto market and both General Motors (GM) and Ford (F) are thriving there.

General Motors aims to double its sales from 2013 levels to 5 million units a year by 2018. Ford, meanwhile, is in the process of spending $1.5 billion to expand production in China and boost its market share. The company enjoyed double digit growth in China last year. By the end of 2015, Ford aims to have total production capacity of 1.5 million vehicles in the country.

Takeaway

China may be slowing but it is still home to fast-growth companies that will benefit as the world’s second biggest economy evolves. Slower GDP growth doesn’t mean there aren’t handsome returns to be had.

The challenge is identifying the industries and companies that will continue prosper as a broad and wealthier Chinese middle class emerges. Here’s to prosperity in the Chinese Lunar Year of the Sheep that kicks off on February 19!

Investing outlook for 2015: What will be big

Finding undervalued investment opportunities in the U.S. stock market is getting ever more challenging. Major U.S. stock indexes continue to flirt with all-time highs and the bull market is now heading into its sixth calendar year.

In this kind of market environment, it may be worth looking at the sectors and companies that were beaten down in 2014 for potential turnaround plays.

Investors who find the comeback stories before they appear on the covers of business magazines are sometimes rewarded.

In that spirit, here are some unloved stocks and exchange traded funds that, though risky, could surprise on the upside in 2015.

India

This emerging market has long been overshadowed by faster-growing China. Maybe not in 2015. India’s growth rate should rise from a projected 5.6% this year to 6.4% in 2015 according to the IMF and the World Bank.

China, meanwhile, has been downshifting from 10% growth rates to around 7%, and may heading lower in coming years. If India looks attractive to you, India-focused funds such as the WisdomTree India Earnings Fund (EPI) and the iShares MSCI India ETF (INDA) might be worth a look.

Thanks to the economic policies of Indian Prime Minister Narendra Modi, some analysts argue that India currently has the best economic prospects compared to that of Brazil, Russia and China, the other three so-called BRIC emerging markets.

Energy

The sell-off in energy stocks was fast and furious in the last quarter of 2014. And few expect a rebound in oil prices this year. Goldman Sachs (GS) is forecasting long-term crude price of $75 a barrel.

And OPEC’s recent decision not to cut production to eliminate an oil-supply glut may push prices to $60 a barrel short-term, according to firms including Nomura Holdings and Deutsche Bank AG.

That outlook has battered energy and production stocks such as Exxon Mobil (XOM), Chevron (CVX), Halcon Resources (HK) and Chesapeake Energy (CHK).

However, as Covestor manager Ben Dickey, who oversees the Pure Growth and Growth Plus Income portfolios, recently pointed out in a post, not all energy stocks are necessarily facing a tough short-term outlook.

The midstream sector, companies deriving income from fee-based revenue through their pipelines and natural liquid gas (NGL) processing, are shielded from price swings in hydrocarbons.

Dickey likes Enterprise Products Partners (EPD), which owns pipelines, processing plants, NGL fractionators, and condensate processors. Another holding is Kinder Morgan (KMI), which has completed its acquisition of all their MLP units and now is operating as a C Corporation.

Sony

That’s right, Sony (SNE). The diminished Japanese tech icon has been pounded in the business press for its poor performance and its handling of a recent hack of the company’s sensitive emails and films such as The Interview.

Yet while Sony is forecasting to lose 230 billion yen ($1.9 billion) for the fiscal year that ends in March 2015, its shares have been on a tear, and finished up 43 percent in 2014.

Sony has delivered a one-year return that’s on par with that of Apple (AAPL) and is one of the top performing stocks in Japan in 2014, easily beating gains of about 9 percent in Japan’s Nikkei 225 and Topix benchmark indexes.

The majority of Sony analysts tracked by Bloomberg continue to have buy ratings on the stock and their average 12-month share outlook suggests a 10% upside from current levels.

These Sony bulls are betting that but a restructuring push by Sony Chief Executive Officer Kazuo Hirai and his new Chief Financial Officer, Kenichiro Yoshida, will return the company to profitable growth in 2015 and 2016.

Tesco

The British retailer’s stock tumbled almost 50% in 2014 thanks to a messy accounting scandal that led to the ouster of top executives. Last October, Covestor manager Felix Tong, who oversees the Concentrated Risk portfolio, started accumulating Tesco (TSCDY) shares.

Tong argued in a post the sell-off is overdone. Tesco still holds the largest market share of the U.K. grocery market and economy of scale its competitors cannot match.

Others see value in Tesco as well despite the accounting issues at the company. Recently private equity firm TPG has offered $3.2 billion for Tesco’s clubcard subsidiary.

Nobody can be sure the worst is over at Tesco and other analyst opinions vary widely. Still, if Tong is right, the upside from the company’s stock depressed levels could be substantial.

Finance

Banks and brokerages have been scandal-prone since the end of the financial crisis back in 2009. Yet Wall Street CEOs have done an admirable job fixing their balance sheets and improving risk management.

With interest rates set to start rising in 2015 and 2016, and the U.S. economy on solid footing, the sector’s earnings and dividend payout outlook look good, according to research firm Zacks.

As a result, suggests Zacks’ analysts, ETFs focused on finance such as the SPDR Financials ETF (XLF) and Vanguard Financials Index Fund (VFH) may be worth consideration in 2015. Here’s a useful list of other financial sector ETFs.

Takeaway

None of these investments are a sure thing of course. But in a market that’s getting a little on the pricey side, investors need to work harder at finding the turnaround plays before they fully surface.

Such is the current market environment. Good hunting.

5 resolutions to keep your investment portfolio healthy

Smart investors spend a lot of time valuing stocks, divining big macroeconomic trends and looking for fresh and innovative strategies that hold up to analytical rigor.

However, getting the basics right matters, too. And you’d be surprised how many investors trip up over the simple stuff. So, as 2014 draws to an end, here are five resolutions for 2015 worth considering.

Truth Test your Portfolio

Take a hard look at your portfolio performance, financial adviser’s strategy and individual holdings. Did the portfolio outperform and with a tolerable level of risk? If not, why not?

Some portfolio’s lag the broader market because a handful of investments fell out of favor. Sometimes, this is only a temporary speed bump if those depressed holdings still have solid fundamentals driving them.

Other times, the problems run deeper and point to the need for a serious rethink about investment goals, strategies and risk appetite. Does the asset allocation in your portfolio still make sense given the economic facts on the ground? Does your adviser have a workable game plan for improvement? Is it time to make a change

Retirement contributions

Some 41% to 43% percent of U.S. households may not have enough set aside to fund their retirement, according to the Employment Benefit Research Institute's Retirement Readiness Ratings.

So if you can afford to make the maximum contribution to your 401(k) plan this year, do so. You can save on a pre-tax basis and employers often match a certain percentage of your contributions.

Starting on January 1, employees will be able to contribute up to $18,000 annually to their 401(k) plans.

Automatic savings

Saving consistently takes a certain amount of discipline and not everyone is able to put aside cash for retirement once the paycheck hits your bank account.

That’s why a smart way to save with discipline is to set up an automatic deduction from your paycheck to your 401(k), IRA or other long-term savings account.

About that bonus

There’s nothing wrong with splurging a little after a year of hard work. But, really, before buying that Maserati, take a realistic look at your personal financial situation.

If your retirement savings aren’t adequate, divert some or all of that windfall into your investment portfolio. Another option: Build up an emergency fund that can cover expenses for six months or so in the event of a crisis. Bonuses and other financial windfalls aren’t a sure thing.

So don’t comfort yourself with the thought that you will salt away the bonus next year and books those tickets to Las Vegas this year.

Fees

It goes without saying that investing isn’t free. Investment products and services come with costs and fees.

And if you’re not vigilant, these costs can take a big bite out of your nest egg over the long term.

Consider the findings of a recent SEC investment advisory: If you invested $100,000 and assumed 4% annual growth, your portfolio would take a $10,000 hit from a 0.50% annual fee and a $30,000 haircut if the fee burden was 1%.

If your fees are too high, don’t be afraid to shop around. Online platforms that cater to “do-it-yourself” or semi-involved investors ready to take control over their financial decisions offer low fees. Just be sure the solution you choose is upfront about fees, and you can understand how and when you’ll be charged.

Takeaway

All of these are sensible steps that don’t require an advanced degree in portfolio management. Once you have these bases covered, you can consider bigger strategic questions about the management of your portfolio. So why not head into 2015 with your finances on sound footing?

What PetSmart's buyout means for investors

The pet supplies business normally isn’t considered a bellwether for corporate America.

However, the recent $8.2 billion deal by a consortium of private equity firms led by BC partners to take PetSmart (PETM) private may be a transaction with a very long tail.

Unloved stock

In recent years, the share price and earnings of American’s largest pet supply chain (which is held by the Covestor Focus Growth and Sustained Momentum portfolios and two others) have struggled in the face of online rivals such as Amazon.com (AMZN).

So how did this unloved stock become the center of a bidding war? Here are four potential takeaway lessons.

Hidden value

Sometimes investors miss the picture. Yes, PetSmart has lost business to Amazon.com and other online rivals. That said, the pet food business has doubled in overall sales to more than $20 billion in the U.S. since 2000.

That’s pretty robust growth. BC partners is paying a 16% premium to the average U.S. retail LBO over the last five years, according to data tracked by Bloomberg.

Yet the group could make back its investment and then some if they can sharpen PetSmart’s operations and profitability and then later engineer a sale, perhaps with its key rival, privately-held rival Petco. Combined, the two chains could enjoy economies of scale and thrive.

Buyout comeback?

Buyout firms have had a tough time finding deals during the bull market that started back in March of 2009. When stocks go up, deals get overpriced.

If the stock market tumbles in 2015, or treads water, there could be a big upswing in buyouts. In my opinion, private-equity firms, including Apollo (APOL) and KKR, have a ton of cash at their disposal to do deals.

Activist investors

The PetSmart LBO is a huge victory for activist investor Jana Partners. The pet supply company said in August that it was exploring a sale after Jana emerged as a major shareholder.

The private equity group by PetSmart will pay $83 a share, according to a statement yesterday. That's about 39 percent more than the company's price on July 2 before Jana showed up. Not a bad payday.

Investing implications

If mergers and leveraged buyouts take off in 2015 that could be potentially good news for investors with stakes in companies that are in demand.

Another way to gain exposure to the deal economy is through ETFs that replicate the performance of a globally listed private equity index.

ETFs such as the PowerShares Global Listed Private Equity Portfolio (PSP)and the ProShares Global Listed Private Equity ETF (PEX) invest in both private equity firms and business development companies like Ares Capital (ARCC) and Apollo Investment (AINV).

Upshot?

So the PetSmart buyout isn’t just a routine deal about dog foods and pet grooming products. It could be a signal of some bigger changes in the corporate world and deal-making in 2015.

And that could spell opportunities for investors that adjust their portfolios to this new reality.

The smart investor's gift guide

Tis the season of scented candles and argyle socks and countless other unimaginative gifts. Let’s face it, when time is short and the shopping list is long, it’s all too easy to stick take the path of least resistance.

The same holds true when it comes to choosing investments. There’s nothing wrong with traditional investment vehicles (stocks, bonds and ETFs) when it comes to building your portfolio.

Yet sometimes non-traditional investments are worth a look. Some asset classes like collectibles (wine, books, antiques, you name it) can fuel intellectual passions. Other investments may be more about giving than taking.

Here are 4 non-traditional asset classes that don’t fit the cookie-cutter mold.

Rare books

If you’re someone with a literary bent, investing in rare first editions books can be intellectually rewarding and a good financial hedge against losses in other parts of your portfolio.

First edition fiction works by well-known authors have appreciated 140% on average over the past decade, according to the British firm Paul Fraser Collectibles.

Serious book collectors in search of bargains and new finds attend major book fairs and keep track of rare book auctions by Sotheby’s and other houses.

The best rare book advisers are in it for the love of the game. But the rewards can be sizable. In 2013, a first edition of Harry Potter and the Philosopher's Stone, with annotations and drawings by author JK Rowling, sold for $235,000.

Whiskey

It’s the ultimate liquid asset. Believe it or not, the market for top single malts is a sophisticated one with indexes that track valuation trends. Over the last six years, top single malts have risen in value by more than 660% far higher than global stock markets over the same period.

At an auction in Hong Kong back in January, a single bottle of Macallan "M" scotch sold for a record $628,205 at auction. The market is being driven by growing international demand for high-end spirits and a decreasing supply of rare and aged single malts, according to the experts.

Peer-to-peer lending

You’ve probably never heard of lenders such as Zopa, RateSetter and Funding Circle. But they represent a new breed of online sites that match borrowers and lenders directly, usually via online auctions.

To reduce risk, the loans issued often comprise many tiny slivers from different lenders. By eliminating banks out of the equation, lenders can get a higher interest rate from the borrowers depending on creditworthiness.

Lending always involves risk, but the returns can be substantial is this era of near-zero interest rates on savings. According to the Economist, Zopa, a British P2P platform, offers 4.9% to lenders.

That beats most bank accounts that pay zilch these days. On the flip side, it 5.6% on a personal loan, pretty close to what most banks offer.

Micro-loans

If you are more interested in social good than the profit motive, there are micro-finance sites like Kiva that allow you to lend money at no interest rate for a good cause.

At Kiva, you can browse through hundreds of borrower stories of people looking for loans to grow businesses or go to school. The site works with NGOs around the world to find qualified buyers.

Since its launch in 2005, Kiva has facilitated $550m in loans and helped a million people – many from the agriculture sector and three out of four of whom are women.

The borrowers are vetted by the site, but you there’s always the risk of a dud loan. If things go well, you will get back your principal on demand. You won’t get rich investing in sites like Kiva, but you sure will feel like you made a difference in someone’s life.

The upshot?

The investor world is a varied one. With a little bit of imagination and determination, your next investment could be the start of a life-long passion or give you a different sense of satisfaction than a killer return.

Swiping right on credit cards

About a year ago, criminals hacked Target’s (TGT) computer systems and installed malware designed to gain access to sensitive credit and debit card information.

It was an epic security breach and the biggest hack in U.S. retailing history.

But in a weird way, the mother of all hacks was just the wake up call the retail and finance industries needed to raise their security game to protect the privacy of consumers.

As 2014 draws to a close, there are several innovative and supposedly more secure mobile payment systems in the works that may make it harder for criminals to penetrate.

Here are four interesting approaches:

Apple Pay

Apple (AAPL) recently launched a new payment system that consumers can use with a touch of their finger on iPhone 6 smartphones.

Apple Pay, as the service is called, doesn’t collect any transaction information that can be tied back to a user or previous payment transactions revealing sensitive data.

Actual card numbers are not stored on the device. Rather, Apple generates a unique Device Account Number that is encrypted and stored on the device. This special number is walled off from iOS and not backed up to iCloud, so it’s tough for cyberthieves to access.

While it’s early days, Apple Pay has lined up an impressive array of finance and retail partners that will support the service. They include Visa (V), American Express (AXP), Bank of America (BAC), Macy’s (M), Walgreens (WAG), and Whole Foods (WFM).

Merchant Customer Exchange

A consortium of retailers, including Wal-Mart (WMT), Target (TGT), 7-Eleven, and CVS/pharmacy (CVS), have launched their own secure payment system that uses a mobile app called CurrentC.

A shopper at a check out line opens the app on their mobile device and then scans a QR code on a cashier’s screen. Then, a special payment a code will appear on the shopper’s phone or mobile device that can be scanned by the cashier.

CurrentC stores sensitive financial data in a cloud vault managed by the consortium. The app generates a temporary placeholder code for individual transactions rather than constantly passing sensitive data between the user, retailer and financial institution.

Visa checkout

Not to be outdone, credit card giant Visa (V) earlier this year launched a simplified digital payment service called Visa Checkout. Visa claims the service is a big improvement over the time-consuming and risky procedure of typing in your credit card information into the checkout field on many e-commerce sites.

Once you have set up an account and shared your payment information with Visa, you are all set. With your credentials securely stored with Visa, you can approve online transaction with a click of an image, username and password. Since sensitive data isn’t transmitted wirelessly for every purchase, the odds of getting hacked are much lower.

Google wallet

This Google (GOOG) app lets users consolidate credit and debt data, as well as gift cards, loyalty programs and offers, in one secure place. Users can then shop online or purchase products on Google Play. In addition, you can send or request money to anyone in the U.S. with an email account through Gmail or the Google Wallet app.

Finally, you can track your online purchases, get shipping notifications, and view detailed order history using the Google Wallet app. Whether this new generation of payment systems will be hack-proof is uncertain. After all, hackers have worked around other defenses in the past.

Yet the arms race between companies and cyber criminals is turning out to benefit consumers in one respect: A lot of time and effort is going into making payment systems both secure and convenient to use.

Investing sectors to watch in 2015

Heading into 2015, the U.S. economy is moving along at a brisk pace, generating jobs and empowering consumers to spend. Yet risks loom as well. The global economy outside the U.S. is weak.

The U.S. Federal Reserve may raise rates next year. And there are always the unforeseen geopolitical risks.

Here’s a look at four sectors worth keeping tabs on as we move into the new year.

Energy

How low will oil prices go? Goldman Sachs is forecasting long-term crude price of $75 a barrel. And OPEC’s recent decision not to cut production to eliminate an oil-supply glut may push prices to $60 a barrel short-term, according to firms including Nomura Holdings and Deutsche Bank AG.

That outlook has battered energy and production stocks such as Exxon Mobil (XOM), Chevron (CVX), Halcon Resources (HP) and Chesapeake Energy (CHK). The big question next year is whether this is a buying opportunity for quality energy stocks or the beginning of a multi-year slump.

One potentially positive sign: Energy insiders see a fire sale, according to Bloomberg, and are buying shares are a rapid pace. Also, it’s worth remembering that the oil markets can be self-correcting: lower gas prices boosts growth which in turn raises demand for energy.

Internet of things

Companies are lining up to dominate the rapidly expanding market for smart homes and appliance, heating, entertainment and security systems that can communicate with each other.

The automated home and appliance market could reach by $71 billion by 2018 — up from $33 billion in 2013, according to a recent study by Juniper Research. Rival corporate alliances are vying to control the communication protocols and software standards to allow different home systems to talk to each other.

The big winner will be the company that come up with the platform to allow various gadgets and software standards to work seamlessly together. Google’s (GOOG) Nest recently purchased Revolv, a hub that let’s consumers control all of their automated home devices from one master app on their smartphones.

Apple (AAPL)is working on a new software platform dubbed HomeKit that centers around the iPhone that would work with with security systems, lights and household appliances that might enhance demand for its franchise smartphone.

Then there is Samsung. Its working on its Smart Home platform that would sync with its Galaxy line-up. Amazon (AMZN) and Microsoft (MSFT) are also in hot pursuit with investments and acquisitions of their own.

Consumer finance

The rebound in consumer spending is a plus for credit and debit card companies. So is the longer term shift from cash to cards, MasterCard (MA), the second-largest U.S. payments network, recently raised its quarterly dividend and announced a $3.75 billion stock buyback plan.

Its stock is up about 15% over the past year. Visa (V), a beneficiary of the same trends, has seen its stock advance more than 30% over the past year.

Healthcare

Medical care providers should have a healthy 2015 as the economy strengthens and more patients join Obamacare. PricewaterhouseCoopers’sHealth Research Institute forecasts medical cost growth of 6.8 percent overall in 2015, compared with the institute’s estimate of 6.5 percent for this year.

As America continues to age, demand for healthcare services seems sure to rise. Some of the best-performing healthcare stocks this year outperforming the S&P 500 Index include Medtronic (MDT), Teva Pharmaceuticals (TEVA), UnitedHealth Group (UNH) and Zimmer Holdings (ZMH).

Outlook

Of course, just how 2015 will unfold for investors is unknown and will be until 2016. Yet these four sectors probably will be part of the story and are worth a serious look in the months ahead.

Should you be shopping for retail stocks

U.S. consumers are finally getting a boost and that could be upbeat news for major American retailers. Household sentiment has climbed to the highest level since July 2007 and consumer spending in the third quarter advanced at a 2.2% annualized rate.

The plunge in gas prices, plus an economy that generated more than 300,000 jobs in November, help explain the festive move.

That, in turn, has lit a fire under some retail and consumer discretionary stocks. Here’s an overview of the sector:

Macy’s

Macy’s (M) is the largest department store chain in the U.S. and has been cutting expenses and buying back shares aggressively. This may suggest the retail is well-positioned to capture an increase in consumer spending in the fourth quarter and 2015.

Earnings per share up is 15 percent year-to-date. Macy’s earnings have started to benefit from the integration of its acquisitions, including Federated Department Stores, back in 2010.

Some 71% of analysts tracked by Bloomberg have a buy recommendation on Macy’s, compared with just 38% for Nordstrom (JWN).

The Gap

This portfolio of brands that includes the Gap (GPS), Old Navy, Banana Republic, Piperlime, Athleta and Intermix names is getting a second look with the arrival of new CEO Art Peck. Its third quarter earnings topped Wall Street expectations on lower operational expenses.

Another surprise: the retailer reported a 6% rise in November same-store sales, besting the 1.4% decline expected by analysts surveyed by Thomson Reuters.

True, this company has a long way to go to win back its cachet and consumers it lost during the mid-2000s as its brands faded. Yet a number of analysts have shifted their outlooks for the company after Peck’s arrival.

The stock hasn’t done much over the last year, but that could change if the retailer keeps delivering on sales growth.

Costco

In the U.S., the warehouse retail has been a steady performer over the last four years with average annual revenue growth of 5%. Costco (COST) should benefit even more from the rebound in American consumer spending.

On top of that, Costco is also a promising global retail play. Its international revenue is growth 15% annually. Costco’s biggest overseas market is Mexico.

But it’s also expanding into Asia and Australia. Five years ago between 75 percent and 80 percent of the company’s new stores were in the U.S. Over the next three or four years, 60% of new openings will be overseas, the company has said.

Bed Bath & Beyond

In recent years, the company’s (BBBY)namesake flagship chain, as well as other brands such as Buybuy Baby and Cost Plus World Market, has not been investor favorite.

E-commerce competition from Amazon.com (AMZN) has been brutal. However, a $2 billion share buyback plan has changed sentiment somewhat.

The stock has bounced back from mid-year lows. However, it will take a sustained outperformance in earnings and revenue to really mark a comeback.

Wal-Mart

The world’s largest retailer (WMT) was the the biggest gainer in the blue-chip Dow Jones Average index in November, up 15%. The company’s third quarter earnings topped Wall Street expectations.

And few retailers can match the retailer’s scale, which means Wal-Mart can command big discounts from suppliers. If there’s a sustained recovery in U.S. consumer spending, Wal-Mart is going to benefit.

High risk plays

Of course, some retailers face headwinds so severe that it’s hard to see better days even as the U.S. economy improves.

That said, the upside is potentially pretty big. Most analysts suggest steering clear of Sears Holdings (SHLD) and RadioShack (RSH). J.C. Penney (JCP) is also considered a risky bet.

However, back in May, Covestor manager Libardo Lambrano, who oversees the Dividend Paying Large Caps portfolio, sketched out an interesting contrarian case for J.C. Penney.

The retailer is working toward recovery, according to Lambrano, that have historically been successful for other companies in similar situations.

He likes the way management is renegotiating debt, cutting expenses, stopping dividends, and increasing productivity. He continues to hold a position in the retailer.

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