The Top 12 Best Biotech Stocks of 2013 and 2014

Biotech stocks can be unpredictable, but there are few that seem to have the consistency and growth to be worth the investment. Here’s my take on the top 12 Biotech Stocks on the market to date.

Biotech stocks can be unpredictable, but there are few that seem to have the consistency and growth to be worth the investment. Recent acquisitions, new products, and increased competition have every biotech company fighting to stay on top. Here are what we view as the top 12 Biotech Stocks:

Gilead Sciences, Inc. (NASDAQ:GILD)

Gilead Sciences is a research-based bio-pharmaceutical company that discovers, develops, manufacturers, and commercializes various prescription drugs. Their primary areas of pharmaceuticals include human immunodeficiency virus (HIV), AIDS, cardiovascular, metabolic and respiratory conditions, as well as liver diseases like hepatitis B and C. Gilead Sciences has operations in Asia, Europe, and North America and their product line includes AmBisome, Atripla, Cayston, Truvada, Viread, Eviplera, Emtriva, Hepsera, Letairis, Ranexa, Rapiscan, Macugen, Tamiflu, and Vistide. In January 2012, the Company acquired Pharmasset, Inc. and on February 8, 2013, its subsidiary, acquired YM BioSciences Inc. YTD: +63%

Amgen, Inc. (NASDAQ:AMGN)

Amgen creates, manufactures, and delivers innovative human therapeutics for a variety of uses. When it started in 1980, Amgen was one of the first biotech companies to develop safer and more effective medications using the latest technology. Amgen provided their investors with sizable gains last year, but a repeat performance this year is not as likely. Their first-quarter revenue fell short of their forecasts, but it is important to keep in mind that this is the first time in the last eleven quarters that Amgen failed to reach expected targets. YTD: +23%

Novo Nordisk (NYSE:NVO)

Novo Nordisk is a global healthcare company with more than 90 years of experience. The company focuses on new treatment for diabetes, as well as bio-pharmaceuticals and therapeutics for disorders associated with haemostasis, inflammation, and pancreatic cancer. They also manufacture protein delivery devices and systems for diabetes patients. Novo Nordisk joined forces with collaborating partners, CAT, CP Kelco, Novozymes, DONG Energy, the Danish Technical University (DTU) and the University of Copenhagen in February with the common goal of reducing energy consumption and the amount of raw materials used in biotechnological production. Novo Nordisk increased operating profit by 18% in the first quarter of 2013. YTD: +1.4%

AbbVie Inc. (NYSE:ABBV)

AbbVie is a research-based pharmaceuticals company that discovers, develops, and markets advanced therapies for a variety of common diseases like Parkinson’s disease, thyroid disease, kidney disease, Crohn’s disease, and human immunodeficiency virus (HIV). AbbVie’s extensive array of products includes Lupron, HUMIRA, Simdax, Vicodin, and Zemplar. So far, AbbVie biotech stock has experienced slow, but steady growth. However, this biotech stock has high-potential for significant growth in 2013. Last October, the company initiated a comprehensive Phase III program for hepatitis C virus genotype one that is sure to increase revenue. AbbVie and Alvine Pharmaceuticals (a leader in celiac disease therapeutics development) also announced they have entered into a global collaboration to develop a new oral treatment for patients with celiac disease. YTD: +28%

AstraZeneca (NYSE:AZN)

AstraZeneca focuses on six primary areas of therapeutics; cardiovascular, neuroscience, gastrointestinal, oncology, respiratory, and infectious. They create, manufacture, and distribute over 50 different prescription products including Brilinta, Diprivan, Nexium, Sensorcaine, Xylocaine, and Zomig nasal spray. AstraZeneca experienced a big boost at the end of the last quarter for 2012 when the demand for the new heart drug Brilinta skyrocketed from $38 million to $51 million. Their revenue and stock recently dropped in the first quarter of 2013, but the right acquisition could quickly turn things around. YTD: +6.9%

Celgene Corporation (NASDAQ:CELG)

Celgene is a global bio-pharmaceutical company focused on the discovery, development, and distribution of products used for the treatment of various immune and inflammatory disorders, as well as several types of cancers. The products they distribute include Arbaxane, Pomalyst, Istodax, Thalomid, Revlimid, and Vidaza. They generate $5.5 billion in revenue. Celgene released data from its ongoing Phase III trial of Apremilast earlier this year, which shows the drug successfully reduces psoriatic arthritis symptoms by up to 20% compared to the placebo. This should continue the upward trend of Celgene’s biotech stock. YTD: +73%

Biogen Idec Inc. (NASDAQ:BIIB)

Biogen Idec offers various treatments for different cancers, autoimmune-inflammatory diseases, and multiple sclerosis. Their pharmaceutical products include Avonex, Fumaderm, Rituxan, and Tysabri. Biogen’s biotech stock has quickly risen 34% from its February $155.40 flat-base buy point and has experienced consistent growth in their EPS (earnings per share) for the past eight years. Their success is estimated to continue with more than 20% gains for 2013 and again in 2014. YTD: +54%

Takeda Pharmaceutical Company Limited (TYO:4502)

Takeda Pharmaceuticals manages the research and development of products to treat patients who suffer from cardiovascular disease, diabetes, prostate cancer, and gastroenterology. Their product line includes Actos, Amitiza, Benet, Enbrel, Prevacid, and Uloric. Takeda recently announced that it would be acquiring Inviragen (a bio-pharmaceutical company specializing in vaccines for infectious diseases). Many investors feel this will drive the stock upwards since it strengthens their position and aligns them with a world-class leader in the fight against dengue. Dengue is a serious mosquito-borne illness that threatens the lives of nearly half the world’s population. YTD: +21%

Teva Pharmaceutical Industries Ltd. (NYSE:TEVA)

Teva Pharmaceutical is the largest generic drug manufacturer in the world and specializes in medications to treat respiratory disorders, central nervous system diseases like Parkinson, chronic lymphocytic leukemia, and pain relievers for muscle spasms in musculoskeletal conditions. The company’s biggest-selling drug is Copaxone for multiple sclerosis, which is expected to face extensive competition from a recently launched alternative from Biogen Idec. Teva is also due to launch a new product line later this year which includes a generic version of Amgen anti-infection drug Neupogen. YTD: +10%

Allergan, Inc. (NYSE:AGN)

Allergen is a healthcare company that discovers, develops, and commercializes various medical devices, biologics, over-the-counter consumer products, and a diverse range of pharmaceuticals. One of their most well-known products is Botox, but they are also providers of the increasingly popular adjustable gastric banding system, LAP-BAND. Allergen’s other products include Restasis, Tazorac, and the Refresh brand of artificial tears. Allergan’s growth has been recently started to slow down. Allergen however is a relatively stable biotech stock. YTD: -1.4%

Valeant Pharmaceuticals International Inc. (NYSE:VRX)

Valeant Pharmaceuticals handles the development and marketing of medications used in the fields of dermatology, neurology, and infectious diseases. In March of 2012, Valeant acquired a 19.9% minority equity investment in Pele Nova Biotecnologia S.A and in April of this year, they acquired the entire share capital of Obagi Medical Products Inc. These are both strong signs that this is a company focused on growth and expansion. Their revenue also rose significantly this year and is almost at $1.04 billion. YTD: +52%

Regeneron Pharmaceuticals Inc. (NASDAQ:REGN)

Regeneron is a bio-pharmaceutical company that invents, develops, manufactures, and distributes medicines for the treatment of several different serious disorders. They produce Eylea for neovascular macular degeneration, Arcalyst injections for Cryopyrin-Associated Periodic Syndromes (CAPS), and Zaltrap for metastatic colorectal cancer. Eylea, in particular, has been a factor in their positive gains. The company has been on a consistent upswing, reporting total revenues of $440 million compared to the $232 million generated during the corresponding quarter of 2012. YTD: +56%

How to invest in thoroughbred horses and other racehorses

From betting online to buying stock in horse racing track operator or buying your own horse, there are lots of ways to invest in thoroughbred horses.

Investing in racehorses requires a level of commitment that chases away most amateurs. But, no matter what your level of interest, there are ways to get involved in the Sport of Kings. Here are a handful:

1) Bet at the track or online. The simplest way is to head to the nearest racetrack, buy a race card and place your bets in person. Typically, you’ll be able to bet on live minor league races that take place at your local track, or you can bet on national races (which are shown on TVs at the track) via simulcast. It’s also legal to bet on horses online in more than a dozen states including California. Some of the leading online horse betting sites include TVG.com, Twin Spires and The Racing Channel.

2) Invest in horse racing-related stocks. There are lot of companies that promise exposure to horse racing – namely through the companies that operate horse racing tracks. One of my favorites is Churchill Downs, Inc. (NASDAQ:CHDN), which runs the Kentucky Derby and recently reported record revenue on the strength on surging growth in its online betting service (at TwinSpires.com). Other horse racing-related stocks include Penn National Gaming, Inc (NASDAQ:PENN) and MTR Gaming Group, Inc. (NASDAQ:MNTG).

3) Buy a horse. Thoroughbreds are bred to do one thing: race. To even buy one, you need to register and be approved as a thoroughbred owner in your state. Once you’re approved, you’ll need to pay annual dues to your state thoroughbred owners association. In exchange, you’ll get the opportunity to bid on thoroughbreds at auction. Once you have one, you can expect to pay about $1000 per month in food and maintenance. On top of that, training costs will start around $2,000 a month on the low end (per Stanley Barton at Seeking Alpha). Investing in quarterhorses is cheaper but the payout is smaller and so is the number of tracks that host quarterhorse racing.

4) “Claim” a horse. One of the ways horse tracks try to ensure that races are fair is by forcing owners to set a “claim” price for their horses. About half of all horse races have a “claim price” a horse owner must agree to before entering his or her horse in a race. If the claim price is, say, $20,000, that means the owner of that horse is legally obligated to sell the horse to any buyer for $20,000 before the start of the race.

“About half of all races at North American tracks are claiming races,” Barton writes. “The claiming price can range from as low as $2,000 to hundreds of thousands, although the majority are between $5,000 and $50,000.”

Interestingly, you must “claim” a horse before the race. If the horse wins, the proceeds go to the current owner, then you get to take the horse home for what you hope will be a bright future full of more racing.

5) Enter a thoroughbred partnerships. Horse ownership partnerships provide a unique way of distributing the high cost of owning and racing a horse. Team Valor is one company among many that offers investors an opportunity to buy an ownership stake in a horse. Team Valor also produced the 2011 Kentucky Derby winner Animal Kingdom. According to the site’s Q&As, the average cost to go in on a horse goes “from a low of $6,000, with a median of $12,500 and as high as $75,000 to $100,000.” Should the horse win a purse, you’ll split the winnings between the six and 12 other investors in the horse.

Horse racing is called the Sport of Kings because it’s anything but cheap. If you genuinely have a love for the sport, though, it’s rewarding even without the prospect of financial gain. Every dollar you earn after that is icing on the cake – and, if you find the right horse – it might make for a lot of icing.

One of the most famous racehorses of all time, Secretariat, brought in more than $145 million in winnings and stud fees starting in 1973. Seattle Slew is estimated to have made north of $200 million at stud after being sold at auction for a mere $17,500, according to Barton. That’s the stuff of legend, and it’s part of what makes investing in horses so tantalizing. Just remember that whether you wind up with a winner or loser, the costs to get your horse to the track are very real.

Horse photo by Danagouws.

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8 signs we’re headed for a bear market in stocks

Every day, it looks more and more like we’re headed for bear country. Here are 8 key signs that we’re a long way from an economic recovery.

Stocks are flirting with a 20 percent decline from market highs in April. A 20 percent decline is the generally-accepted definition of a bear market, and it looks more and more like we’re headed for the dreaded bear country. Here are 8 key signs that we’re a long way from a recovery:

1) The ECRI. There’s just one institution that can legitimately claim to have “never been wrong” at predicting a recession. That’s the Economic Cycle Research Institute (ECRI), and last Friday they sounded the warning bell. “Early last week, ECRI notified clients that the U.S. economy is indeed tipping into a new recession,” the company wrote on its Web site, “and there’s nothing that policy makers can do to head it off.”

If the ECRI is right this time, they’re predicting the official unemployment numbers could rise from 9 percent as high as 15 percent. That would put the “unofficial” unemployment numbers closer to 25 percent.

2) “Close to faltering.” Even Federal Reserve chairman Ben Bernanke acknowledged widespread weakness yesterday when he warned the U.S. economy is “close to faltering.”

“Recent indicators, including new claims for unemployment insurance and surveys of hiring plans, point to the likelihood of more sluggish job growth in the period ahead,” Bernanke told Congress. He hinted that the Fed is prepared to take more action if things worsen. The markets liked that, but it’s a clear indication that we’re far from out of the woods.

3) Manufacturing contraction. For the first time in two years, the Global Manufacturing PMI dipped below 50 – the cut-off line that differentiates growth from contraction. The measure hit 49.9 in August – a low we haven’t seen since June 2009. Things are even worse in Europe where the manufacturing index fell below 50 for the second month in a row.

4) Death to the Hang Seng? Hong Kong’s Hang Seng Index, which includes shares of many of China’s largest companies, sealed up its worst quarter in a decade when the market closed on Friday (per BusinessWeek). All told, the index shed 22 percent in three months. Hang Seng shares haven’t seen losses that steep since September 2001.

5) European contagion. Goldman Sachs slashed their forecasts for U.S. growth in the first quarter of 2012 to a paltry 0.5 percent. “The European crisis threatens U.S. economic growth via tighter financial conditions, reduced credit availability and weaker growth of U.S. exports to the region,” Goldman economist Andrew Tilton said (per the Financial Post). “This impact is likely to slow the U.S. economy to the edge of recession by early 2012.” Late last week, Goldman also published a report arguing that developed markets don’t just face a downturn but rather have a 40 percent chance of economic stagnation for the next five years.

6) Greek debt default looms. Yes, the EU’s frantically trying to find some way to stop Greece from defaulting on its debt, but the long-term picture for the country doesn’t look good. If they don’t get a bailout by November, Greece will have to start defaulting on pensions, salaries and bonds (per CBS). Even if they do get a bailout, it’s unclear how the government will be able to manage a debt load that stands at 150 percent of GDP. Recently, investors grew so pessimistic on three-year Greek bonds, the interest rates rose above 100 percent.

7) Class warfare. Doom and gloom newsletter writers have been talking for years about the coming civil unrest in the U.S. It’s something I’ve started realizing doesn’t just happen in other countries. Protests in Greece and Italy are so common they rarely make the international news. And now, Wall Street’s dealing with its own set of protestors. In a matter of weeks, Occupy Wall Street has spread from New York to Chicago, Los Angeles, Seattle and Boston. Now, several unions are getting in on the act, too (per CNN). High unemployment and a lack of opportunities leads to civil unrest – no matter where you live.

8) Down with bonds. Moody’s downgraded Italy’s government bonds yesterday from Aa2 to A2 (per the Financial Post). Funding’s getting harder and harder to get for the weakest European governments, and that means they’re going to be forced to slash their spending. That doesn’t bode well for consumer-driven economies abroad or at home.

Official government numbers may not show that we’re in a recession yet, but the signs are clear. In the words of ECRI co-founder Laksman Achuthan, “you haven’t seen anything yet.”

“A new recession isn’t simply a statistical event,” Achuthan writes. “It’s a vicious cycle that, once started, must run its course. Under certain circumstances, a drop in sales, for instance, lowers production, which results in declining employment and income, which in turn weakens sales further, all the while spreading like wildfire from industry to industry, region to region, and indicator to indicator. That’s what a recession is all about.”

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The Baby Boomer stock shock and what you can do to avoid it

A prolonged sell-off in the stock market thanks to the retirement of waves of Baby Boomers could mean stock prices won’t recover to their 2010 levels until 2027.

Two researchers buried amid reams of data at the Federal Reserve Bank of San Francisco emerged recently with a disquieting prediction: the first great wave of Baby Boomer retirements is going to push down stock prices for the next 10 years. According to researchers Mark Spiegel and Zheng Liu, stocks in 2021 could be worth 13 percent less than were in 2010.

Worse than that, Spiegel and Liu don’t expect stock prices to fully recover to their 2010 levels until 2027. I’ve dubbed it the Baby Boomer stock shock, and its had me exploring ways to protect my capital over the next 16 years.

Born between 1946 and 1964, Baby Boomers are the single largest demographic in America, and they make up fully 25 percent of the population. The youngest Boomer is now 44 years old, and the oldest Boomers should start qualifying for retirement benefits this year. According to Speigel and Liu, those Boomers are going to start selling shares they’ve spent decades accumulating, and that’s going to drive down the overall stock market.

How to avoid the Baby Boomer stock shock

While the overall stock market might suffer from prolonged selling as Boomers cash in their equities, stocks that specifically cater to an older population could be poised to outperform. JPMorgan Chase & Co. (NYSE:JPM) has actually put together a list of just such stocks. Dubbed the Aging Population Index, this group of 21 stocks has outperformed the S&P 500 six out of the eight past years (per the Financial Post).

The index is heavily weighted toward healthcare (at 48 percent), consumer discretionary items (at 33 percent) and financial stocks (at 14 percent). Among the companies?

Royal Caribbean Cruises Ltd. (NYSE:RCL). Stress-free trips on clear blue Caribbean waters. Just what the doctor ordered. There are even a handful of retirees who have opted to live out the rest of their days on cruise ships (per Snopes). The industry’s been working hard at appealing to younger travelers, but their bread and butter for the next 20 years will be Boomers.

Chico’s FAS, Inc. (NYSE:CHS). With a clothing line that’s specifically targeted at high-income women over 35, the company’s stock is up more than 123 percent over the past 10 years (not counting three stock splits earlier in the decade). Chico’s designs its clothes with a toned-down color palette and fills its racks with sizes aimed at “plumper” figures.

Sun Healthcare Group Inc. (NASDAQ:SUNH). One of Sun Healthcare’s largest businesses is SunBridge, which operates more than 200 nursing homes and post-acute care centers. All told, SunBridge houses 22,000 beds in 25 states, and that number should start accelerating rapidly 10 years from now. The average age upon admission to a nursing home is 79 (per PBS.org). As Boomers start aging, long-term care will be inevitable for many.

The Scotts Miracle-Gro Company (NYSE:SMG). The National Gardening Association pegs the average age for gardeners at 55 (per Mlive.com). Companies like Miracle-Gro that cater to that niche are in the fat part of the growth curve. The oldest Boomers are still gardening and the youngest Boomers could just be getting started.

In general, Boomers won’t be fully liquidating their portfolios, but they probably will be moving from high-risk sectors like tech into stable, dividend-paying stocks. Keep the macro-trend in mind, and you should fare better than the S&P in the years to come.

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Eleven reasons to AVOID investing in Dow Jones Industrial Average stocks

Of the 30 stocks in the Dow Jones Industrial Average, 11 of them would actually be worth less or just about the same as they were 10 years ago (including dividends!).

When I first started writing this blog post, I was going to call it “How to Invest Safely in Stocks.” My second recommendation was that beginners should start with a handful of the 30 stocks that make up the Dow Jones Industrial Average. Once I started digging through the numbers, though, I was a startled at what I found. Apparently, the blue-chip stocks aren’t the no-brainers most investors like to think they are.

Need proof? Check out this chart I put together of the 10-year returns for each of the 30 Dow Jones stocks:

Company 10-Year Stock Return 10-Year Dividend Return on $1,000 investment $1,000 is now worth
3M Company +46.6% $590.94 $3,458 (aided by a stock split)
Alcoa Inc. -68.1% $134.46 $449.82
American Express Company +41.47% $122.40 $1,514
AT&T Inc. -31.8% $357.12 $1,024
Bank of America Corp. -51.8% $718.58 $1,109
The Boeing Company +12.54% $218.16 $1,311
Caterpillar Inc. +208.7% $787.17 $7,093 (aided by a stock split)
Chevron Corporation +113.9% $794.85 $4,791
Cisco Systems, Inc. -7% $7.20 $933
The Coca-Cola Company +45.2% $284.76 $1,734
du Pont +11.1% $372.72 $1,462
Exxon Mobil Corporation +82% $319.44 $2,086
General Electric Company -61.9% $200.4 $572
Hewlett-Packard Company +2% $123 $1,129
The Home Depot, Inc. -32.7% $117.58 $780
Intel Corporation -29.7% $136.54 $825
International Business Machines Corp. +57.1% $127.26 $1,605
Johnson & Johnson +20.8% $257.22 $1,426
JPMorgan Chase & Co. -16.1% $273.12 $1,107
Kraft Foods Inc. +8.7% $283.34 $1,339
McDonald’s Corporation +198.4% $387.25 $3,351
Merck & Co., Inc. -51.2% $218.70 $698
Microsoft Corporation -20.1% $416.64 $1,998
Pfizer Inc. -56.3% $196.56 $634
The Procter & Gamble Company +68.6% $607.79 $3,884 (aided by a stock split)
The Travelers Companies, Inc. +11.8% $120.34 $1,206
United Technologies Corporation +94.9% $529.54 $4,305
Verizon Communications Inc. -31.5% $305.33 $988
Wal-Mart Stores, Inc. +4.7% $130.29 $1,141
The Walt Disney Company +25.1% $110.20 $1,330

What’s startling is this: of the 30 stocks in the Dow Jones Industrial Average, 11 of them would actually be worth less or just about the same as they were 10 years ago (including dividends!). That’s remarkable considering I didn’t factor in inflation, which have averaged 2.4 percent over the past decade (per FinTrend.com).

That means your odds of throwing a dart at a list of the Dow stocks and hitting a winner are only around 63 percent. That’s not much better than going to the casino and counting a few cards at the blackjack table.

Before you toss your hands up and cash in your IRA for guns and ammo, though, I’d be remiss if I didn’t point out that the average return on $1,000 for the 30 Dow component stocks was $1,842 over the past 10 years. Indeed, a $1,000 investment in Caterpillar Inc. (NYSE:CAT) would be worth $7,093 today. That’s not bad, but seeing the returns from a company like GE, which has crumpled more than 60 percent over the past 10 years is scary. And this year hasn’t been kind to the Dow, either. Take a peek at the YTD returns on each of the component stocks:

Company Ticker YTD Return Dividend Yield
3M Company NYSE:MMM -10.8% 2.86%
Alcoa Inc. NYSE:AA -27% 1.07%
American Express Company NYSE:AXP +3.9% 1.61%
AT&T Inc. NYSE:T -3.17% 6.05%
Bank of America Corp. NYSE:BAC -51.8% 0.62%
The Boeing Company NYSE:BA -10.5% 2.88%
Caterpillar Inc. NYSE:CAT -14.7% 2.3%
Chevron Corporation NYSE:CVX +2.25% 3.34%
Cisco Systems, Inc. NYSE:CSCO -25.8% 1.6%
The Coca-Cola Company NYSE:KO +2.28% 2.79%
du Pont NYSE:DD -12.1% 3.74%
Exxon Mobil Corporation NYSE:XOM -4.02% 2.68%
General Electric Company NYSE:GE -17.3% 3.97%
Hewlett-Packard Company NYSE:HPQ -41.9% 1.96%
The Home Depot, Inc. NYSE:HD -7.9% 3.1%
Intel Corporation NYSE:INTC -7.85% 4.33%
International Business Machines Corp. NYSE:IBM +8.33% 1.89%
Johnson & Johnson NYSE:JNJ -1.51% 3.6%
JPMorgan Chase & Co. NYSE:JPM -21.2% 2.99%
Kraft Foods Inc. NYSE:KFT +6.47% 3.46%
McDonald’s Corporation NYSE:MCD +14.3% 2.78%
Merck & Co., Inc. NYSE:MRK -13.1% 4.85%
Microsoft Corporation NYSE:MSFT -14% 2.67%
Pfizer Inc. NYSE:PFE +0.9% 4.52%
The Procter & Gamble Company NYSE:PG -4.07% 3.40%
The Travelers Companies, Inc. NYSE:TRV -11.8% 3.34%
United Technologies Corporation NYSE:UTX -14.02% 2.84%
Verizon Communications Inc. NYSE:VZ -2.6% 5.6%
Wal-Mart Stores, Inc. NYSE:WMT -3.23% 2.80%
The Walt Disney Company NYSE:DIS -14.6% 1.25%

Just seven out of the 30 Dow component stocks have actually appreciated in value this year. That should give you pause before you invest in a high-profile company solely on the strength of its name and brand.

The Takeaway

Here are three key things I take away from the charts above:

1) Energy is the name of the game. One sector in the Dow has strongly out-performed others in recent years. Namely, oil (ala Chevron and Exxon). And I wouldn’t expect that to change – particularly as fears over inflation mount.

2) Banking stocks have a lot of ground to make up. The fact that JPMorgan Chase is down 16.1 percent over the past 10 years, and Bank of America’s down a whopping 51.8 percent could get you thinking banking stocks have to turn the corner soon. I’d argue there’s a lot of pain for them on the horizon, particularly with the imminent threat of inflation. Banks thrive and dive on interest rates, and all those fixed mortgages BAC’s underwriting at 3 percent could come back to bite them in a high-inflation environment. That’s a big part of why banking stocks have fallen in recent months, and it’s a trend I expect to continue.

3) Follow the macro-trends. If you would have invested $1,000 in gold at the start of 2001, you’d now be holding onto $6,797 in bullion. Energy and inflation are the stories du jour, and your portfolio should reflect that reality. No one can say the next 10 years will play out the same as the past 10, but we can say the demand for oil isn’t going away anytime soon, and neither is our government’s debt problem. You can’t afford to ignore the macro picture anymore, unless, of course, you’re happy rolling the dice in your IRA.

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Top 10 new investing books for 2011

Here are 10 new investment books that should help you prepare for the coming economic turmoil, whether it be deflation, 10 percent inflation or a complete re-structuring of the global financial system.

If you’ve been reading my blog for any length of time, you should have a sense that I’m worried about the direction of our economy, as well as the world economy. I’m not a complete pessimist, though. If you’re willing and able to put work into protecting the capital you’ve accumulated, you should be able to whether the coming economic storm.

To do that, though, you’re going to need a lot more than a stock brokerage account. You’re going to need to get educated about what’s going on behind the scenes in the business world and at the Fed. Here are 10 new investment books that should help you do that:

***

1) Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown.
The new and updated second edition to Aftershock, the authors have expanded the book with forecasts for 2012 as well as an in-depth break-down of the current economy. They focus heavily on inflation, which they predict will rise to 10 percent in two to three years.

***

2) (**Preorder Only**) The Great Crash Ahead: Strategies for a World Turned Upside Down.
Famed financial newsletter writer Harry S. Dent, Jr. argues that we’re due for another major economic meltdown sometime between 2012 and 2014. Dent has a contrarian view arguing that deflation, not inflation, will capsize us next. His reasoning? Aging baby boomers are going to start cashing in their chips. That fact coupled with staggering public and private debt will cause the economy to cave in on itself.

***

3) George Lindsay and the Art of Technical Analysis: Trading Systems of a Market Master.
Perhaps one of the most gifted financial prognosticators ever born, George Lindsay’s techniques live on through the newsletters he left behind. Ed Carlson takes Linday’s ideas and translates them into visual charts and easy-to-understand language so you can start using technical analysis on your own before you buy and sell stocks.

***

4) The Era of Uncertainty: Global Investment Strategies for Inflation, Deflation, and the Middle Ground.
For the first time in years, the macro-economic picture is going to out-weigh picking individual stocks. It’s not just a question of a where a particular company’s headed, it’s a question of how the global financial system is re-shaping itself. The authors delve into several different scenarios for how the economic mess will play out in the years to come.

***

5) Understanding China’s Economic Indicators: Translating the Data into Investment Opportunities.
We all know about CPI, jobless claims, inflation rates and unemployment in the U.S., but increasingly, it’s China’s economy that’s setting the tone for the rest of the world. This book looks at 35 key economic indicators that can give us clues about where the economy in the People’s Republic is heading. And it comes from a reputable source: Tom Orlik, a China correspondent for The Wall Street Journal.

***

6) Trading Tools and Tactics.
Fundamental analysis is a great way to destroy your portfolio, according to technical trader Greg Capra. Here, he lays out the insights behind all those mystifying terms you’ve never really understood: candlesticks, shooting the gap, retracements and more. It’s a book designed for daytraders, not the buy-and-hold crowd.

***

7) The End of Growth: Adapting to Our New Economic Reality.
You can give up on the idea that our economy is going to recover. According to Richard Heinberg, this period of high unemployment, falling home prices and stagnant or negative growth is the new normal. We could only forestall the energy, economic, environmental and social problems plaguing us for so long. It’s time now for us to start looking at ways to fix them.

***

8) Extreme Money: Masters of the Universe and the Cult of Risk.
A cutting look at how the global financial system really works. Satyajit Das draws on 30 years of experience in high finance giving us a look at the housing crisis came about, how hedge funds make money and how a handful of banks and insiders control the bulk of the cash in the largest economy in the world.

***

9) (**Kindle Book**) Rupert Murdoch, The Master Mogul of Fleet Street: 20 Tales from the Pages of Vanity Fair.
Let’s just forget that he bought MySpace. It’s hard to argue that Rupert Murdoch isn’t a financial genius (just take a look at this gigantic Wikipeda page that lists all of News Corporation’s holdings). Still, there’s always been the sense that Murdoch’s a wolf in sheep’s clothing (and the current phone hacking scandal just drives the last nail in the coffin). This Kindle book takes a fine-toothed comb over Murdoch’s career through a series of Vanity Fair articles.

***

10) Endgame: The End of the Debt Supercycle and How It Changes Everything.According to Endgame’s authors, we’re at the end of a six-decade debt binge, and now we’re due to pay the piper. That means debt restructuring and austerity measures are probably on their way in the U.S. and throughout Europe. Our entire economy, tax structure, benefits system and personal habits are due to change – whether we want them to or not.

***

Upcoming Release

1) Steve Jobs: A Biography.
OK. This isn’t actually a book on investing, but I’m stoked to read it anyway. No matter how often we complain about Apple products, it’s hard to deny Steve Jobs is a genius. He turned Apple into a household word in the 1990s, left to reinvigorate Pixar, then returned to the crumbled corporate husk that was Apple and repositioned it as a money-minting machine with the iPod, iPhone and iPad. Brilliant.

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Why do companies go public?

Here are the Top 3 reasons companies go public. Nearly 100 companies held IPOs last year, but why exactly did they take the plunge?

Every month or so, a high-profile technology company makes headlines with an IPO (or initial public offering) of stock. By doing so, those companies are transforming themselves from private corporations to public corporations. That transformation costs millions of dollar and brings with it a whole lot of intense scrutiny from the media and investment community. It also threatens to change the corporate culture of a company and fixate it on short-term rather than long-term results. And yet, nearly 100 companies held IPOs last year (excluding ADRs, REITS, limited partnerships and a few other categories). Why did they take the plunge? Here are the Top 3 reasons companies go public:

1) Boatloads of cash. When a company goes public, it’s actually trading equity for cold hard cash – and lots of it. Just how much money is at stake? That depends on the company’s profitability and prospects for growth. Russian search engine operator Yandex (NASDAQ:YNDX), for example, raised $1.3 billion on May 25 in exchange for 16.2 percent of the company’s equity.

After an IPO, a company’s free to use that cash however it sees fit, and it never has to repay a penny (not a bad deal, eh?). Most companies use that money to pay down debt, acquire new businesses or invest in future growth. Often, companies do all three. The catch is, the company must release detailed quarterly financial records that adhere to strict standards set by the SEC. Investors then use that financial data to determine whether or not that company is a good investment.

2) Brand awareness. Since it costs so much (typically between $10 million and $30 million a year, per SFGate.com) to satisfy the accounting and legal costs associated with being publicly-traded, most companies prefer to take the easy route and remain private. Companies that do decide to go public get boatloads of press, consumer awareness and exposure for new products. Because it’s so difficult to go public, the act in itself lends a new level of cachet or prestige to a brand. All told, BusinessWeek lists just 33,000 public companies around the world.

3) Playing with the big dogs. The world’s largest private company (according to Forbes) is Cargill. The agribusiness company logged estimated sales of $109 billion in 2009. Compare that with Exxon Mobil Corporation (NYSE:XOM), which regularly tops lists of the largest public companies in the world. Last year, XOM’s sales exceeded $430 billion – nearly four times as much as Cargill’s 2009 sales.

Going public gives companies a competitive advantage for a number of reasons. Most importantly, they have access to more capital, and they can get that capital for cheaper than their private counterparts. In addition, public companies are no longer subject to SEC rules that limit private companies to fewer than 500 shareholders. That means public companies can offer bigger pools of employees equity stakes. That gives them a powerful tool to recruit and retain the top talent in their respective industries.

Because public companies have access to more cash, they can also buy out competitors and start-ups, using acquisitions as a tool to fuel growth. Since Google, Inc. (NASDAQ:GOOG) went public in August of 2004, for example, the search engine has acquired more than 85 other companies as it expands into new areas, buys new revenue sources and speculates on up-and-coming technologies. Smart acquisitions help bolster bottom lines for public companies that are eager to keep their shareholders happy. And the larger those companies get, the more acquisitions you’re likely to see.

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How to short bonds with ETFs before the collapse

Betting against bonds and the dollar could be one of the few prudent investments we have left. Here’s a list of the best short bond ETFs that will help you do just that.

The chairs on the Titanic will soon be rearranged. On June 30, the Federal Reserve is slated to end QE2. No longer will it be the primary buyer of U.S. debt. If foreign investors, mutual funds and banks don’t step in to fill the void, bond prices could fall quickly and yields could skyrocket in the face of rising inflation and record debt levels at the Treasury.

Just last week, we learned that Bill Gross, the founder of Pacific Investment Management Co. (better known as PIMCO), bet against the U.S. Treasurys market with short positions taken up in February. That’s a big vote of no confidence in U.S. debt as PIMCO manages world’s biggest bond fund.

You can do the same with a variety of short bond ETFs. Here’s a list of the most popular short bond ETFs. Keep in mind that long-term bonds (20+ years) are generally the most sensitive to inflation, and therefore will likely perform the best in the event of a bond market crash. All of the ETFs listed below are leveraged except for TBF. Direxion’s Treasury Bear ETFs are leveraged 300 percent:

ProShares UltraShort 7-10 Year Treasury ETF (NYSE:PST)
Volume: 158,000

ProShares UltraShort 20+ Year Treasury ETF (NYSE:TBT)
Volume: 15.7 million

ProShares Short 20+ Year Treasury ETF (NYSE:TBF)
Volume: 490,000

Direxion Daily 10-Year Treasury Bear 3X Shares (NYSE:TYO)
Volume: 39,000

Direxion Daily 30-Yr Treasury Bear 3X Shares (NYSE:TMV)
Volume: 1.1 million

In Bill Gross’ words, government debt and entitlements will undermine the dollar in the years to come. “Unless entitlements are substantially reformed, the U.S. will likely default on its debt; not in conventional ways, but via inflation, currency devaluation and low to negative real interest rates,” he writes at Pimco.com. Until we see change in Washington, betting against bonds and the dollar could be one of the few prudent investments we have left.

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Three reasons to buy Google stock now (NASDAQ:GOOG)

Social networking, not search, is the tech sector du jour, but there are signs that now might be the perfect time to make a big bet on Google.

While Twitter and Facebook shares skyrocket on private exchanges, stock in the world’s largest search engine Google Inc. (NASDAQ:GOOG) has flatlined. Google shares are down 2 percent since the start of the year. Over the past 12 months, the Dow Jones Industrial Average has out-performed Google by more than 10 percent. Social networking, it seems – not search – is the tech sector du jour.

Still, there are signs that now might be the perfect time to make a big bet on Google. Here are three reasons to consider adding the stock to your portfolio today:

1) Google Android eats the iPhone OS for breakfast. Android, Google’s free operating system for mobile phones, has started cannibalizing market share. The OS should be running on 49 percent of all smartphones worldwide sometime next year, according to research by Gartner Inc. (IT). Google gives away the OS to phone manufacturers, but the company gets a 30 percent cut of all paid apps that are purchased in the official Google app store – aka the Android Market. Apple’s App Store fueled the company’s record-breaking profits for several years now, and Google finally appears poised to catch up.

2) YouTube gets serious about bringing home the bacon. In a move aimed at taking market share from Netflix, Inc. (NASDAQ:NFLX), Google’s looking to turn YouTube into something like a Web-based television station. The company’s planning to invest as much as $100 million to finance professionally-produced original programming, according to MediaPost. As YouTube moves from computers to home televisions, the site’s ad revenue should start climbing – particularly if they can create and stream compelling original content.

3) Death to the iPad. Just as Google’s challenging the iPhone’s supremacy in smartphone app downloads, Android tablets could do the same to the iPad. A number of Android-powered tablets have already gone to market or will do so soon including the Motorola Xoom and the Samsung Galaxy. As more Android tablets land in consumers’ hands, app sales in the Android Market should start heating up. Google’s 30 percent rake on each app download will be like money in the bank.

Still not convinced Google’s a buy? Consider the fact that the company’s new CEO Larry Page seems to realize Google’s sagging. An internal memo that went out last week informed employees that their bonuses could rise or fall by 25 percent depending on the success of Google’s social strategy in 2011. Google realizes search isn’t the be-all end-all, and I expect that will mean good things for profits moving forward.

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