Jason Simpkins
What Would Warren Buffett Do? The Hottest Trend for Savvy Investors
If Warren Buffett was going to invest in anything right now, where would he put his money?
At first, that question may be difficult to answer. But if you think about Buffett's classic investment approach – focusing on real assets with a reliable return and prizing valuation – it gets a little easier.
Stumped?
Try the housing market – single-family rental homes to be precise.
"If I had a way of buying a couple of hundred thousand single family homes and I had a way of managing them… I would load up on them and take mortgages out at very very low rates," Buffett said in an interview with CNBC. "It's a very attractive asset class right now."
It's a classic buy low, sell high opportunity – and one that more and more investors are taking advantage of.
In fact, sales of investment and vacation homes surged 65.4% last year to 1.2 million units, the highest level since 2005, according to the National Association of Realtors (NAR).
Naturally, low home prices were a major catalyst for that surge.
Last year, U.S. home prices were down 33.8% from their 2006 peak. But another factor was increased interest from investors – many of which boast six-figure salaries and desire a more consistent return than the stock market offers right now.
"I have doctors, lawyers, an engineer from Apple who told some of his buddies," Brian Hardie, who manages rental properties, told Forbes about his clients.
And with foreclosures on the rise this year, there will be an even greater opportunity for entrepreneurial investors, which means Hardie's client list at Regency Property Management will likely continue to grow.
Indeed, foreclosures that had previously been held up by litigation relating to robo-signing and other malfeasance on the part of banks are once again moving back through the system following a $26 billion settlement five major banks reached in January.
A February report from RealtyTrac showed new default notices – the first step in the foreclosure process – were up 1% from January. Furthermore, default notices increased dramatically in some states, such as Pennsylvania (35%), Florida (33%) and Indiana (37%).
As the NAR recently pointed out, 20% of February home sales were foreclosures. And if RealtyTrac's forecast for a 25% increase in foreclosures this year comes to fruition, the number of distressed sales will rise even further.
Meanwhile, the heightened rental property interest, dually helped by inflation, has given landlords more power – which means rents across the country are increasing.
This has created an optimal situation for investors that have the wherewithal to make it work for them.
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The Truth About $6 Gas, $200 Oil and the Quest for Energy Independence
No one needs to tell the average American about the impact of oil and gas prices. If they don't feel it in their wallets every day, they hear about it on the news every night.
But surprisingly, amid all the rhetoric, there have been no real answers to some of the key questions driving the energy debate… until now.
Is President Obama truly responsible for high gas prices, and can his opponents really bring them back down?
What role has Federal Reserve Chairman Ben Bernanke's loose monetary policy played in soaring energy costs?
Is more domestic drilling the answer?
Renowned energy expert Dr. Kent Moors answers all of these questions – and more – below.
Dr. Moors, an adviser to six of the world's top 10 oil companies and a consultant to governments around the world, also talks about the effect political turmoil in the Middle East could have on energy prices in the immediate term and how North America will gain energy independence in 15-20 years.
Here's what else Moors – a bona-fide energy expert – had to say…
Dr. Moors on Gas Prices
Can a U.S. President actually impact gas prices- at least enough to get gasoline back to $2.50 a gallon? Or is this just talk? I don't know whom to believe anymore…
Cameco Corp. (NYSE: CCJ) and Uranium Energy Corp. (AMEX: UEC) Are Poised to Profit from a Nuclear Renaissance
Uranium stocks got hammered last year in the wake of the Fukushima disaster.
But now, roughly one year later, uranium mining stocks have finally begun to bounce back… just like we told you they would.
After getting pummeled in 2011, shares of Cameco Corp. (NYSE: CCJ) – the world's second-largest uranium miner – are up 32% year-to-date.
Meanwhile, Uranium Resources Inc. (Nasdaq: URRE) and Uranium Energy Corp. (AMEX: UEC) are each up about 30% since the start of the year. And the Global X Uranium ETF (NYSE: URA) is up 25%.
But that's just the beginning.
These stocks are all still about 50% below where they traded prior to Japan's disaster.
And rising demand for nuclear energy and a dearth of uranium supplies will soon conspire to push these companies back to their pre-Fukushima levels.
You see, uranium miners cannot expand their operations – or even tread water – with uranium prices at $50.00-$60.00 per pound like they are currently.
They'd much rather have uranium prices of $70.00-$80.00 per pound. So right now there's not enough uranium being produced to keep up with growing demand.
About 170 million pounds of uranium was consumed last year, but only 140 million pounds was produced. And when you look at the way nuclear power projects are coming back online, it's obvious that the discrepancy will only get worse.
Global use of nuclear energy could increase by as much as 100% in the next two decades, according to the International Atomic Energy Agency (IAEA).
Why March Madness is Bigger than the Super Bowl
If you're planning on taking a little bit of time out of your work day to watch the first round of March Madness today, you're not alone.
A survey by MSN showed 86% of employees will spend at least part of their workday checking in on the tournament, up from 81% last year.
And 56% of employees will devote at least one working hour to each of the first two days of March Madness.
With U.S. workers earning an average of $23.29 per hour, employers will lose roughly $175 million to distracted employees on just those two days, according to Chicago-based outplacement firm Challenger, Gray & Christmas.
In the past, the firm has found that in all more than $1 billion worth of productivity goes to waste during the entire March Madness tournament.
Of course, the tournament doesn't just lose money…
March Madness also makes it – a lot of it as it turns out.
March Madness Has More Green than the St. Patrick's Day Parade
The most watched tournament in the country generates over 90% of the NCAA's entire operating revenue.
And it means even bigger business for CBS Corp. (NYSE: CBS) and Time Warner Inc. (NYSE: TWX), which teamed up to pay $10.8 billion for the rights to broadcast the tournament through 2024.
While a 30-second spot during this year's Super Bowl cost a record $3.5 million, the 3.5 hour long program still only generated about $245 million of total ad revenue.
But with three Turner Networks sharing broadcast rights with CBS, the four channels took in $738 million in ad sales last year.
That's 20.2% more than in 2010, when the tourney brought in $613.8 million.
And that doesn't even include revenue from online advertisements on streaming games or a new smartphone app selling for the first time this year at a price of $3.99.
Online viewing has become extremely popular over the years, especially during the first two days of the tournament when multiple games take place during working hours.
In 2011, CBS and Time Warner said free digital viewing resulted in an average of 2.4 million daily unique visitors on broadband and 702,000 average daily unique users on the mobile app.
In total, there were 26.7 million visits across online and mobile from the start of the First Four on March 15 to the completion of the third round on March 20. That was a 63% increase over the year prior.
Meanwhile, online revenue from the tournament surged 825% from $4 million in 2006 to $37 million in 2010. There's no data available on how much it took in last year.
Then there's the gambling.
Marathon Petroleum Corp. (NYSE: MPC): The Best Way to Turn High Gas Prices into High Octane Profits
Average gas prices currently are about $3.75 according to AAA's Daily Fuel Gauge Report.
That's higher than the average for all of 2011, which was the priciest year ever for gasoline. And what's worse is they're only going higher from here.
But if you think that investing in oil majors will help you overcome the sting of high gas prices this summer, think again.
While prices for both gasoline and crude oil have surged more than 10% this year, stock prices for oil majors like ExxonMobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX) have been flat.
The dividends these companies pay won't make a dent, either.
It would take the average American something along the lines of a $20,000 investment in a stock that yields 3% to compensate for the surge we've seen in gas prices.
One reason these stocks have floundered is that the recent rise in oil prices has largely been the result of political tensions in Iran, rather than increased demand for oil.
Another is that President Obama has Big Oil subsidies in his crosshairs as he heads into this year's election.
Energy lobbyists have flooded Capitol Hill and Republicans have rallied to the defense of oil companies, but the November election will ultimately decide the fate of the $4 billion of subsidies oil majors get every year.
With so much money at stake, investors are rightfully wary of companies like Exxon and Chevron.
Still, that begs the question: If big oil stocks offer no respite from high gas prices, where can investors turn?
One solution is to invest in the United States Gasoline Fund LP (NYSE: UGA).
UGA invests in futures contracts on unleaded gasoline traded on the New York Mercantile Exchange (NYMEX). It's already up 18% this year.
But there's still an even better option, and that's
Agricultural Stocks: Deere & Co. (NYSE: DE) and AGCO (NYSE: AGCO) Are Poised to Reap Gains
Many analysts are forecasting lower food prices this year, and that's taken a toll on many agricultural stocks.
But there are two reasons why investors shouldn't be so quick to abandon the sector.
In fact, two stocks, Deere & Co. (NYSE: DE) and AGCO (NYSE: AGCO) are poised to reap gains now that ag stocks have pulled back
Here's why.
- Much of the pessimism surrounding crop prices is overdone.
- Many ag stocks are still excellent long-term plays – despite any short-term trepidation.
I'll explain.
It's true that farmers currently are planting more staple crops in an effort to exploit high prices. But as we've seen in just the past few months, floods, droughts, and rapidly rising demand could easily intercede to keep prices near record levels.
The most important crop to watch right now is corn.
Preliminary USDA data suggest that farmers this year will plant the biggest corn crop since World War II. However, that's exactly what will be needed, since corn is facing the greatest supply constraints of any staple crop.
Indeed, even a bumper crop will first have to compensate for the shortages of the current crop year, which are significant. By this year's autumn harvest, global stocks of corn as a share of consumption will have fallen to the lowest level since 1974.
"There has been no rebound in global corn stocks," Ed Allen of the USDA's economic research service told the Financial Times. "This has maintained very tight markets for corn."
And while global corn production is expected to rise, there's still a chance bad weather will damage the harvest just as it has in the past two years.
Last year, wet weather early in the season delayed planting while hot weather in the summer scorched young stalks. That contributed to two consecutive years of shrinking supplies.
Analysts say a third straight year would be rare, but according to economists at the University of Illinois, there is a 40% chance corn yields will fall short in any given year.
"The odds slightly favour a corn yield above trend in 2012, but there is certainly precedent for another year below trend," the economists wrote last month. "More specific expectations about the 2012 average yield will depend on how the planting and growing season unfolds."
Good News for Agricultural Stocks
Corn isn't the only crop facing supply constraints, either.
January droughts in Argentina and Brazil reduced global soybean production by 7.2% this year. And with farmers focusing on corn there's less land available for soybeans. The USDA anticipates soybean production will fall by 12.7 million metric tons this year.
On Oct. 1, the start of the next season, soybean inventories will be 20% lower than they were last year, according to Jefferies Bache LLC. As a result, soybean prices, which are up nearly 9% year-to-date, will gain another 6.7% by June, the New York-based commodities trader estimates.
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Occidental Petroleum Corp. (NYSE: OXY): The Best Way to Profit From the Monterey Shale
It has been a long time since California seen a profit opportunity like this.
The state's Monterey Shale formation may hold as much as 500 billionbarrels of oil making it more valuable than the gold rush of 1848.
With oil prices expected to hit $150, if not $200 a barrel this year that means the profit potential is limitless.
After all, peak oil isn't a myth – it's a reality.
Traditional oil production is plateauing, while demand in emerging markets continues to rapidly increase.
Meanwhile, turmoil in the Middle East has threatened supplies even further. And the war with Iraq didn't end up being the energy bonanza many thought it would.
And now the Arab Spring and tensions in Iran have escalated to the extent that military intervention there seems to be a foregone conclusion.
That's why the Monterey Shale – a rib-shaped formation that extends from Northern California down through the Los Angeles area and then offshore to outlying islands – is getting so much attention.
And unlike other shale plays in the United States, the Monterey is primarily oil, not gas.
That means Monterey shale does not require hydraulic fracturing, which has come under fire from environmentalists.
It also means companies can extract much of the oil using simple vertical wells, rather than the more expensive horizontal drilling needed for shale gas plays. Some horizontal drilling will be used, but it is not required in all fields, greatly reducing operating expenses.
In fact, in large parts of the formation, production costs are less than $10 a barrel.
Think about what that means for profit margins with crude prices currently near $110 a barrel.
So how can investors profit?
The Stocks Warren Buffett is Buying
Warren Buffett has gotten a lot of headlines recently for his critical assessment of the U.S. tax code.
But don't forget that Buffett became one of the world's wealthiest men through his career as an investor – not a political pundit.
For that reason, Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B) is one of the most successful and widely followed companies in the world.
In fact, a 2007 study by two university professors entitled "Imitation is the Sincerest Form of Flattery" showed that buying what Buffett buys – even a month after his purchases – is a pathway to superior returns.
"The market … appears to under-react to the news of a Berkshire stock investment since a hypothetical portfolio that mimics Berkshire's investments created the month after they are publicly disclosed earns positive abnormal returns of 14.26% per year," the study said.
And right now Berkshire is making big moves.
Android@Home, Project X, and Other Secrets of Google Inc. (Nasdaq: GOOG)
Lately, Google Inc.'s (Nasdaq: GOOG) Mountain View, CA-based headquarters have looked more like the clandestine lair of a Bond villain than a business center.
The company has poured more than $120 million dollars into construction projects that are fit to house testing labs and top-secret initiatives with names like "Project X."
One theory about what's going on at the Googleplex involves the development of a driverless car.
And that may well be true – but the more immediate and practical use for the renovation would be to expand the base from which the company competes with rival Apple Inc. (Nasdaq: AAPL).
Google's war with Apple continues to escalate as the two companies fight for ground in three major consumer markets: mobile devices, Internet search and digital media.
Google fired its first salvo at Apple with the introduction of its Android operating system, which has come to dominate the smartphone market.
Apple recently retaliated by introducing Siri – the voice-activated search engine that has been a major selling point for the latest iPhone.
Still, the biggest clash is set to take place in your living room.
Google and Apple are fighting to be the company that supplies your media at home, stores it for you in a cloud drive, and then distributes it to your wireless devices.
Google has even expressed interest in bringing other appliances into the fold, connecting things like lighting, heating, and air conditioning via the Android operating system – a seamless integration dubbed "Android@Home."
The goal is to let you control every electronic device in your home through a smartphone or tablet.
This is a battle for what futurists call the "digital living room."
And it's just getting started. Here's a sneak peak at what's in store.
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