Why Warren Buffett Is Betting Against Warren Buffett

mark yusko 1

Betting against Warren Buffett is usually a bad idea. But that’s exactly what one legendary hedge fund manager is planning to do… and that bet just might be a very good idea.

We wrote last week about the “Buffett Indicator,” which measures the ratio of U.S. stock market capitalization to U.S. GDP.

According to this ratio, U.S. stocks are trading at their highest valuation of the last 68 years. Despite this fact, Warren Buffett is offering to wager that buying U.S. stocks today will produce a better investment result than buying an index of hedge funds.

The man would appear to be betting against the indicator that bears his name… and against history, as shown in today’s chart. Perhaps that’s why the legendary hedge fund manager Mark Yusko jumped at the chance to accept Buffett’s wager.

I expect Yusko to win this one!
From Extremely Expensive to Super Extremely Expensive
Apparently, Buffett now believes that stock valuations will increase from extremely expensive to super extremely expensive.

That is literally the bet he is making… and that bet is dripping in irony.

“Buying low” is a big part of the reason why Warren Buffett is a billionaire. Throughout his career, he has not only identified excellent companies over and over again; he has also identified excellent moments to invest in those excellent companies over and over again.

He invested opportunistically. He “bought low.”

Given that history, and the fact that U.S. stocks are richly priced, Buffett’s newest wager is a bit of a headscratcher… and so is this comment he made on CNBC last week: “[The S&P 500] will absolutely kill every one of the fund of funds [over the next 10 years].”

According to the Buffett Indicator, U.S. stocks have reached their richest valuation level of the last 68 years. Buffett did not invent this valuation gauge, he merely praised it publicly. Back in a 2001 interview in Fortune, Buffet lauded this indicator as the “the best single measure of where valuations stand at any given moment.”

It has been called the Buffet Indicator ever since.

According to this “big picture” valuation gauge, a stock market is relatively cheap whenever its market cap drops well below 100% of GDP. Conversely, a stock market is relatively expensive whenever its market cap climbs well above 100% of GDP.

At the stock market lows of 2009, for example, the market cap of all U.S. stocks plummeted to less than 60% of U.S. GDP. But today, the U.S. market cap totals a whopping 148% of U.S. GDP, which is more than double the average readings of the last 68 years. Today’s 148% reading is also the highest level this metric has ever reached during the last 68 years.

 In other words, stocks ain’t cheap.

When stocks become this pricey, good things rarely happen. That’s a fact, as today’s chart illustrates. Each year on the chart displays two lines:

The Buffett Indicator reading for that year
The S&P 500’s total return during the following 10 years.

For example, in the chart at the top of this article, the blue line …read more

Tales From a Late Stage Bull Market

 

Pro-Growth Occurrences

An endearing quality of a late stage bull market is that it expands the universe of what’s possible.  Somehow, rising stock prices make the impossible, possible.  They also push the limits of the normal into the paranormal.

This happens almost every time Bigfoot is in front of a camera. [PT]

Cartoon by Gary Larson

Last week, for instance, there was a Bigfoot sighting near Avocado Lake in Fresno County, California.  But it wasn’t just one Bigfoot.  According to a local farmer, there was a family of five or six Bigfoot running across his ranch in the middle of the night.  Paranormal expert Jeffery Gonzalez offered the following Bigfoot sighting anecdote:

“One of them, which was extremely tall, had a pig over its shoulder.  And the five scattered and the one with the pig was running so fast it didn’t see an irrigation pipe and it tripped, with the pig flying over.”

What to make of it? Bigfoot sightings, no doubt, are pro-growth.  They’re bullish for stock prices.  So, too, are warnings from North Korea that nuclear war “may break out at any moment.”

How do we know these two unrelated events are bullish?  Because if you plot the S&P 500’s price movement since their occurrences, you’ll find that the market is up.  There is a direct – albeit false – correlation.

And these days a correlation of any kind is what matters.  No one cares that correlation does not imply causation.  Such a pesky detail doesn’t matter to Phillips Curve adherents.  Why should it matter for anything else?

Indeed, there are plenty of things that used to matter, which no longer matter.  For example, stock valuations don’t matter.  Profits don’t matter.  Most of all, deficits don’t matter.

Occasionally, Bigfoot will allow people to make photographs of him, but there are certain conditions: for instance, the camera used for taking the picture has to be the absolutely crappiest camera in use on the entire planet at that moment. Leave your Hasselblad at home – it’s not going to work. [PT]

The Greatest Fools of All

The point is an eight-year run of rising stock market indexes has suspended, if not eradicated, the natural laws of the universe.  What was once considered rash or ridiculous is now shrewd and savvy.  Conversely, tried and true investment principles, including evaluating business fundamentals, are for losers who lack imagination.

The proof of the pudding is in the eating, goes the maxim.  Certainly, investors are lapping up this market like boysenberry funnel cakes at the county fair.  They can’t get enough of it.

They will stand in line in the hot sun for hours to buy Amazon stock at $1,000 per share at a price-to-earnings ratio above 250.  Because in this late stage bull market, growth and revenue are where it’s at.  That’s what today’s savvy market participants want.  They don’t care if, like farming, the attainment of growth and revenue comes at a loss.

To be fair, Amazon no longer operates at a loss.  Last …read more

Whatever GOLD HAPPENS in China STAYS in China | David Morgan

Renowned Gold & Silver guru David Morgan returns to Reluctant Preppers to dispel the raging rumor that the Chinese government is issuing GOLD-BACKED OIL CONTRACTS denominated in Yuan, reputed to embody an emerging threat to the US Petro Dollar. Morgan goes on to illuminate the twisted illogic behind money flows that are seeking safety, and why you should be looking in a DIFFERENT place. Finally, Morgan shares some key insights from recent editions of The Morgan Report, and even the most recent PERSONAL ACTION STEP​ has taken to increase preparedness!

Join Our Free
E-Newsletter Today!
Get All Our Free Reports Below

Special Report: Silver Price Forecast: How high will the price of silver be this year? How about next year? Grab Your Silver Price Forecast Free Report Right Now! In this report you will discover Silver might surprise everybody by the end of this year.

Is There A Silver Shortage Webinar: Join me in the free webinar where we’ll discuss, Is a silver deficit a silver shortage? What year did the deficit turn to a surplus? Are the above ground silver stocks increasing or decreasing How well does price track supply?

Special Report: Riches In Resources: The RIR report was written by myself. Often I rely on my team to help with research and trips to various companies, annual meetings, quarterly updates, conference calls, investor seminars, and all that we do to keep our members at the cutting edge of the Wealth building/Wealth preservation sector.
There is so much information in this report. So be sure to watch the movie, understand the times we are living in, and please share with your friends, family, social media or anyone that you care about. These times are changing rapidly.

Because there is a 100% failure rate of ALL fiat money throughout history, you will learn what to do by obtaining our Free Reports. Just enter your first name, your primary email address and click the Get Special Report button below.

Are you prepared for what lies ahead? Our Free E-Letter will keep YOU in the top 3% of the Informed, the Awake, and the Aware.

(function(d, s, id) {
var js, fjs = d.getElementsByTagName(s)[0];
if (d.getElementById(id)) return;
js = d.createElement(s); js.id = id;
js.src = “//forms.aweber.com/form/99/1281419199.js”;
fjs.parentNode.insertBefore(js, fjs);
}(document, “script”, “aweber-wjs-jc8lzhdt3”));

Our mission statement reads…

“To teach and empower people to understand the benefits of an honest monetary system.”

Today’s monetary system is based upon a lie. The lie is that you can get something for nothing, or perhaps more simply stated, wealth can be printed. History has shown throughout 5000 years that whenever a country has tried to maintain this illusion (lie), failure has been the result. We invite you to learn more about what The Morgan Report can do for you. Click on the Learn More About The Morgan Report button now!
Learn More About The Morgan Report *

The …read more

Time for Caution in Gold Miners

Last week we noted the likely negative impact of a sustained rebound in the US Dollar on Gold. Recent weakness in precious metals has not been much of a surprise considering the sector’s relative weakness months ago amid a weak US Dollar. While the greenback has bottomed, it has yet to push above resistance at 94. Nevertheless, Gold and in particular the gold stocks are threatening more losses even before a push higher in the greenback. It is time to be defensive and cautious.   

Although GDX is holding its 200-day moving average and has yet to pierce its October low, GDXJ already has. The juniors (GDXJ) closed below their October low and broke their uptrend line from May. This, after failing twice at the 200-day moving average. The break below $33.50 projects down to $32.00. The juniors lack strong support until $30 while GDX’s initial support levels are $22 and $21.

Gold, which traded as high as $1308 early last week, closed the week at $1280. Its initial support is at $1255-$1260. If GDXJ joins GDXJ and breaks its October low then we would anticipate Gold does the same. In that case, the next strong support level is around $1215-$1220. Gold’s net speculative position of 41.9% of open interest remains relatively high and suggests potential selling power should traders turn bearish.

The big picture view on miners is they remain in a complex bottoming pattern that began over four years ago. While the multi year outlook favors a break of the 2016 highs and a massive move higher, the near-term outlook is clearly bearish. GDX and GDXJ appear very likely to test their July lows and there is a risk they could even retest their December 2016 lows at $18 (GDX) and $27 (GDXJ).

The near-term outlook for precious metals and gold miners especially is negative and traders and investors should therefore stand aside and wait for more favorable conditions. Readers who follow our work are not surprised as we’ve written about the possibility of a weak fourth quarter since the middle of September. That is the bad news. The good news is those who buy weakness in the months ahead could position themselves for a strong 2018. Find the best companies and wait for the sector to get oversold and test strong support. To follow our guidance and learn our favorite juniors for 2018, consider learning more about our premium service.

Jordan Roy-Byrne CMT, MFTA

Jordan@TheDailyGold.com

…read more

Cryptocurrencies Could Be Worth $200 Trillion One Day

This post Cryptocurrencies Could Be Worth $200 Trillion One Day appeared first on Daily Reckoning.

I’m not exaggerating when I say cryptocurrencies are the biggest innovation since the internet. We’re on the ground floor of an enormous trend that’s going to change the world.

Cryptocurrencies are currencies with no government in the middle. No bank in the middle. No organizations in the middle keeping track of all your payments, or taking advantage of your spending so they can invade your privacy, and on and on.

Cryptocurrencies solve trillions of dollars’ worth of problems, which is why they will be worth trillions of dollars one day.

Consider the potential:

There is currently $200 trillion in cash, money and precious metals used as currencies in the world. Meanwhile, there’s only $200 billion in cryptocurrencies. Cryptocurrencies are eventually replacing traditional currencies.

So that $200 billion will eventually rise to the level of currencies. And probably sooner than we can imagine.

Fortunes have been made in cryptocurrencies and many more will be made in the future. But just like the Internet boom in the 90s, there will be a lot of scams. Let me say it right now: 95% of cryptocurrencies are scams.

But with the total number of cryptocurrencies now exceeding 1,000, that means at least 50 legitimate cryptos out there right now. That’s a lot more than one or two or three.

My job is to research, study, and use my connections to avoid the scams. I’m dedicated to finding the tiny portion of cryptocurrencies, that remaining 5% that will turn that $200 billion into $200 trillion.

I hate to use big numbers like that. But those numbers are facts.

If, and only if you avoid the scams, you’ll find the cryptocurrencies that actually solve major problems of prior currencies. Also, avoiding the scams lets you closely follow closely the people who are doing the research and have the credibility in this space.

What qualifies me for this role?

Basically, I’ve been here before. I started one of the first Internet companies back in 1995. I created the first websites for AmericanExpress. com, HBO.com, TimeWarner.com, etc etc.

I was there. I did it. I rode the boom. I also rode the bust. So I’ve been here before and know what to avoid and I trust my ability to predict. The next time I was “here” was when Facebook was getting bigger.

Facebook was private at the time and hard to invest in. So I invested in every Facebook ad agency I could find. Then Microsoft offered to buy Facebook for a billion dollars. I went on CNBC and said Facebook was worth at least $100 billion. I also wrote it in The Financial Times. CNBC laughed at me. Nobody took me seriously. The day Facebook went public they had me on again.

It’s first value after it went public: $101 billion. Now it’s worth well over $400 billion.

I was a seed investor in one of those ad agencies I mentioned, Buddy Media, when it was worth just $4 million. It was later sold to …read more

Gandhi, Bitcoin and Russia

This post Gandhi, Bitcoin and Russia appeared first on Daily Reckoning.

“First they ignore you,” began Gandhi.

“Then they laugh at you, then they fight you, then you win.”

If “you” happen to be cryptocurrencies, old Gandhi may have been a prophet…

Russia, for example, ignored cryptocurrencies for years.

Then it laughed at them…

In August, the Russian deputy finance minister chuckled:

“[It is] hard to argue cryptocurrency is not a pyramid scheme.”

“We are very skeptical,” snickered the first deputy governor of the Russian central bank.

“Gold fever” was the Russian central bank governor’s mocking term for the cryptocurrency moment.

Then Russia fought cryptocurrencies…

The Russian central bank:

Concerning the use of cryptocurrency… the official currency of the Russian Federation is the ruble. The issue of monetary surrogates in the territory of the Russian Federation is not allowed.

The first deputy governor of the central bank:

“We cannot give direct and easy access to such dubious instruments for retail [investors].”

Vladimir Putin himself said cryptocurrencies were the coin of crime, of vice, of terrorism; a cutthroat’s money.

Then cryptocurrencies won…

Russia’s finance minister conceded last week that “cryptocurrencies are a fact of life.”

Better to join them if you can’t beat them, says the Russian communications minister:

We will run [a cryptocurrency] for one simple reason: If we do not, then in two months, our neighbors in the Eurasian Economic Community will do it.

Now Vladimir Putin has officially called for a Russian cryptocurrency — the “cryptoruble.”

Ignored, ridiculed, resisted, at last embraced… Gandhi’s cycle of victory appears complete.

As we noted last week, we’ve been keeping two sets of books on cryptocurrencies.

The first set of books reveals a vision of 17th-century tulips. The second a vision of 21st-century gold.

Does Russia’s surrender mean we heave the first set into the fire?

Or maybe Russia’s “surrender” isn’t a surrender at all, but a feint… a flanking maneuver so cunning you could stick a tail on it… and call it a weasel.

Chess is the Russian national sport, after all.

Cryptocurrencies’ distinguishing birthmark is their decentralized, borderless nature.

They put out their tongues at centralized control… and spit defiance in the face of authority.

Cryptocurrencies war against the largest monopoly in the world — the state monopoly on money.

Why would Russia sign on that dotted line?

Jim Rickards whiffs a rat:

Governments have been patiently watching blockchain technology (the technology behind cryptocurrencies) develop and grow outside their control for the past eight years. Libertarian supporters of blockchain celebrate this lack of government control. Yet I believe their celebration is premature and their belief in the sustainability of powerful systems outside government control is naïve.

Governments don’t like competition, especially when it comes to money. Governments know they cannot stop blockchain — in fact, they don’t want to. What they want is to control it using powers of regulation, taxation and investigation and ultimately more coercive powers, including arrest and imprisonment of individuals who refuse to obey government mandates.

Maybe Russia’s launching its own cryptocurrency to clear the field of competitors.

Jim Rickards is not the only one to suspect a deep game of chess …read more

On the Marc Faber Controversy

 

Il n’y a rien à defender – by Vidocq

 

Dr. Marc Faber, author of the Gloom, Boom and Doom Report

Photo credit: Michael Wildi / RDB

Il n’y a rien à defender – There is nothing to defend

Personne n’a lu ce qui a été écrit. – Nobody read what was written.

Personne n’a pensé avant d’agir, comme la plupart des gens de nos jours. – No one thought before acting, like most people nowadays.

L’homme que tu pends est l’homme que tu as fait, pas l’homme que tu tiens. – The man you hang is the man you made, not the man you hang.

Pour ceux qui n’ont pas entièrement lu la lettre de Faber, Nous vous confrontons, Vous qui suspendez quelqu’un sans jugement, sans contexte, et parce que vous êtes égoïste et paresseux, vous, une auto-émeute.

–  To those who have not fully read the Faber letter, We confront you, you who hang someone without judgment, without context, and because you are selfish and lazy, you, a self made irrational mob.

By this time anyone reading this particular article on Acting Man will know about the controversy surrounding Marc Faber these last days, when a single paragraph of many from his October 2017 newsletter was published out of context. Of the now many many comments that have been written or spoken by various people in a wide variety of media, we have found none who have actually read the entire report out of which a single paragraph was published beyond the original sent to subscribers of the Gloom Doom Boom Report.

However, what was not published, was the entire letter.  We offer it here, in its entirety,  which you may download now from the link further below. We urge you to read it from beginning to end.

History is factually replete with the rise and decline of lucky nations. That the  favored nations of our time are now threatened by their own bad choices does not change the past, nor does it change the repeating of that past.  Saying it is not so is not factual, but is wishful thinking. It is clearly debatable what of history should be remembered and serve as a useful lesson.

The October issue of the Gloom Boom Doom report was an in depth look at some of the more important economic and social questions of our day, placed in the broader framework of history. We suggest strongly that you read the full Gloom Doom Boom letter which we provide here and then decide for yourself what was really said by Marc Faber.

Equal Opportunity Offenders  – What Is One “Allowed” To Say? By PT 

Is Dr. Faber a racist? Perhaps one should ask his Thai wife if she thinks he hates her or considers her inferior. Or maybe one should ask his mixed-race daughter what she thinks about it. We actually happen to know her personally and although we only met her on one occasion, our educated guess is that her reaction to anyone posing such an absurd …read more

Here’s What’s Next for Retail

This post Here’s What’s Next for Retail appeared first on Daily Reckoning.

Let me offer a quick scenario.

You walk into a store at your local mall. They’re holding a 40%-off sale.

You have questions but there’s not a salesperson in sight. The clothing displays are a mess and you can’t tell what’s 40% off and what isn’t.

You look around for assistance, but after two laps and no help, you’re too frustrated and leave.

Sounds like a normal shopping experience right?

That scenario may be true today, but in all likelihood, it won’t be true for long.

Now imagine in the near future, you’re interacting with a personal shopping assistant, an AI powered automaton, rather than leaving a store in frustration.

The notion is hardly far-fetched.

The artificial intelligence revolution has already taken hold of industries like manufacturing, transportation and finance.

Now AI tech is being applied to brick-and-mortar retail operations. The impact it will have is mind blowing.

“We Are Braindead”

Last week the retail conference Shoptalk, a veritable “who’s who” list of retail execs and industry experts, was held in Copenhagen, Sweden.

The hands-down dominating consensus coming out of the conference was that artificial intelligence will play an integral role in traditional retail’s future success.

“The clear takeaway is adapt or die….”, remarked one Shoptalk attendee.

That point is not to be taken lightly.

A recent Gartner industry report projects that by 2020, 85% of all customer interactions will be managed with AI software and 30% of all companies will employ AI in at least one sales process.

The writing’s on the wall and retailers refusing to adapt will suffer the consequences.

EBay’s chief product officer put it like this…

“It’s bigger than the web and the mobile revolution combined. By 2020 if we’re not engaged with this technology and making it a meaningful part of our businesses – we are braindead.”

Many traditional retailers are already investing heavily in AI. Companies like Levi, Burberry, Neiman Marcus, North Face, and Urban Outfitters (to name a few) all know how high the stakes are. To compete with a thriving ecommerce market, AI is a “must have” for traditional retailers.

Three Ways AI Will Change The Face of Retail

Big data needs are a huge driving force behind the recent AI push. Today’s brick-and-mortar retailers are inundated with information.

They have tons of actionable customer data at their fingertips, and no idea how to use it!

AI solves this problem by making sense of all that info, offering a cheaper, faster way to conduct complex analytics.

AI allows retailers to understand their customer data more intelligently. It’s used to predict consumer style preferences and changes to those preferences instantaneously, saving you time and money.

The predictive powers of AI are also a unique way traditional retailers can use cutting-edge tech to stay ahead of consumer preferences.

Some retailers are using AI to trawl thousands of e-commerce sites to pinpoint exactly which products are being viewed most, day in and day out.

This allows them to get in front of the consumer wants and needs, and ensures you have the latest and greatest product …read more

The Rich Life Part II: Confessions of a sixth-grade stock picker

This post The Rich Life Part II: Confessions of a sixth-grade stock picker appeared first on Daily Reckoning.

When your name is Nilus Lawrence Mattive III, people automatically expect you to have a silver spoon in your mouth.

But I never did. Nobody in my family ever started a company, patented an invention, or wrote a movie script.

My odd first name was the ONLY thing handed down from generation to generation in my family. No inheritances or trust funds to speak of here.

As I explained in Part I, I was just a lower-middle-class sixth grader living in northeastern Pennsylvania.

My dad was the first person to go to college on either side of the family. He worked in the human resources department at a state mental health facility. He also had a second gig at the YMCA. And my mom? After spending a few years taking care of me, she got a part-time job at a small credit union.

My parents’ investments were limited to passbook savings accounts and maybe a CD or two.

That’s why they were so surprised when I said I wanted to start investing in stocks on my own.

Sure, I had always been interested in money – coin collecting, piling up cash in my dresser drawer, even looking at stock market quotes in our local newspaper.

But this was a whole new deal!

Luckily, my parents encouraged me. They allowed me to take several hundred dollars from my savings and put it into the market.

I searched under “stock broker” in the yellow pages, and made a few phone calls. When I found one who took me seriously, my dad helped me set up an account.

That was around 1987. The movie Wall Street had just come out. I was watching shows like “Family Ties,” where the young Alex Keaton character was carrying his briefcase to school and talking about investing in blue chips. Meanwhile, I picked up a personal computer from my local Sears, an antique by today’s standards.

I knew what I wanted to do…

I decided to buy five shares of IBM.

I didn’t make a killing but it was great experience. I also ended up with some Disney stock that performed nicely.

Later, in high school, I started putting more money into the market.

And that’s when I learned my first real lesson.

Up to that point, my broker had merely followed the instructions I gave him.

But then he told me he had a great investment I should consider – a small mining company his research department said was ready to soar.

As I quickly discovered, it’s possible to have a high IQ and still be a complete idiot…

That trade was a disaster. I lost my shirt.

I also learned that “boring” stocks like IBM and Disney could outperform smaller, more exciting plays.

Of course, that didn’t prevent me from some spectacular wins as the ensuing …read more

How to Prepare for the Next Market Crash

This week is the 30-year anniversary of the stock market crash of 1987.

Anniversaries generally mean celebrations. But it’s unlikely that anyone other than the rare short seller reached for the good champagne this week – or savors any particularly fond recollections.

On October 19, 1987 – Black Monday – the Dow plunged 508 points, or 22.6%. As my friend and colleague Mark Skousen pointed out here yesterday, it was the market’s single worst day, before or since.

I was a stockbroker at the time and remember it well.

The market had peaked two months earlier and had since been acting a bit hinky, with wild single-day rides up and down.

Still, no one knew what we were about to experience that fateful Monday morning.

The market averages gapped down at the opening bell. Many stocks didn’t open at all for several minutes, as specialists on the floor struggled to match buyers with the tsunami of sell orders.

My Quotron – there’s a term you don’t hear much anymore – lit up in a sea of red as the downdraft quickly turned into a rout.

Investors and traders treated even the bluest of blue chip stocks like cigarette butts. The phone lines lit up with calls from panicky clients.

Some of the brokers and analysts in my office – first nervous, then spooked and finally horrified – eventually broke into a manic laughter.

This wasn’t supposed to happen. Yet it was.

We stared at our screens transfixed, like motorists passing a gruesome highway collision.

The most unsettling aspect of the ’87 crash is that no particular event sparked it.

Nobody got shot. No currency collapsed. No government failed. Nor were equities particularly overvalued.

[iu-adbox]

It was just a sudden rush for the exits, compounded by computer-driven program trading.

These programs were supposed to reduce losses through the use of futures and options. Instead they compounded losses, as wave upon wave of selling created a vicious cycle.

Regulators have made changes since then, of course. But so-called flash crashes still occur.

On August 24, 2015, for instance, the Dow plunged nearly 1,100 points during the first five minutes of trading. The sell-off was spurred by a drop in China’s market that echoed in Europe before the U.S. market opened.

Bonds are not immune to flash crashes either. On October 15, 2014, 10-Year Treasurys suddenly skyrocketed, causing yields to plummet 35 basis points in just a few minutes.

The SEC blamed it on automated high-frequency algorithms, the same algorithms that are in place today.

Yet another flash crash on May 6, 2010, caused the SEC to revise its circuit-breaker rules. A drop of as little as 7% in the S&P 500 can now trigger a halt. A tumble of 20% stops trading for the day.

What should we learn from these incidents?

For starters, the preternatural calm we have seen in the markets recently is not the norm. Stock market bolts often come out of the blue.

And, in my experience, the best investors don’t react to bear markets. (Reactions tend to be emotional rather than rational.) They anticipate them.

That means today – while the …read more

Why Weyerhaeuser Stock Is Rated a "Buy With Caution" Before Earnings

weyerhaeuser stock weyerhaeuser earnings 2

Weyerhaeuser (NYSE: WY) is a large cap company that operates within the REIT industry. Its market cap is $27 billion today, and the total one-year return is 15.92% for shareholders.

Weyerhaeuser stock is underperforming the market. It’s beaten down, but it reports earnings next week. So is it a good time to buy? To answer this question, we’ve turned to the Investment U Stock Grader. Our Research Team built this system to diagnose the financial health of a company.

Our system looks at six key metrics…

[iu-adbox]

✗ Earnings-per-Share (EPS) Growth: Weyerhaeuser reported a recent EPS growth rate of -81.25%. That’s below the REIT industry average of -13.39%. That’s not a good sign. We like to see companies that have higher earnings growth.

✓ Price-to-Earnings (P/E): The average price-to-earnings ratio of the REIT industry is 42.09. And Weyerhaeuser’s ratio comes in at 40.8. It’s trading at a better value than many of its competitors.

✓ Debt-to-Equity: The debt-to-equity ratio for Weyerhaeuser stock is 78.27%. That’s below the REIT industry average of 92.04%. The company is less leveraged.

✓ Free Cash Flow per Share Growth: Weyerhaeuser’s FCF has been higher than that of its competitors over the last year. That’s good for investors. In general, if a company is growing its FCF, it will be able to pay down debt, buy back stock, pay out more in dividends and/or invest money back into the business to help boost growth. It’s one of our most important fundamental factors.

✗ Profit Margins: The profit margin of Weyerhaeuser comes in at 1.33% today. And generally, the higher, the better. We also like to see this margin above that of its competitors. Weyerhaeuser’s profit margin is below the REIT average of 63.32%. So that’s a negative indicator for investors.

✓ Return on Equity: Return on equity gives us a look at the amount of net income returned to shareholders. The ROE for Weyerhaeuser is 10.75%, and that’s above its industry average ROE of 10.36%.

Weyerhaeuser stock passes four of our six key metrics today. That’s why our Investment U Stock Grader rates it as a Buy With Caution.

Please note that our fundamental factor checklist is just the first step in performing your own due diligence. There are many other factors you should consider before investing. That’s why The Oxford Club offers more than a dozen newsletters and trading advisories all aimed at helping investors grow and maintain their wealth.

If you’re interested in finding Strong Buy stocks yourself, check out 3 Powerful Technical Indicators for Smarter Investing. We’ll show you how to eliminate emotional bias from your trading process with three powerful technical tools you can start using to boost your trading profits immediately. Click here to learn more.  …read more