Insider Edge in Practice: Lorillard

By The Sizemore Letter

The best way to explain how to use the trading moves of company insiders is with an example.  In the spring of 2011, the shares of tobacco giant Lorillard, Inc. (NYSE: $LO) caught my attention.

Lorillard is the third largest manufacturer of cigarettes in the United States and the oldest continuously operating tobacco company. Newport, Lorillard’s premium menthol-flavored cigarette brand, is the top-selling menthol and second-largest-selling cigarette in the United States.

I’ve made the case for “Vice Investing” repeatedly in the Sizemore Investment Letter, and I’ve given special attention to the tobacco industry.   To briefly summarize, tobacco companies are uniquely attractive investment for a number of reasons:

  1. Government regulation and the threat of lawsuits prevent new competitors from entering the industry.
  2. Many institutional investors with “socially responsible” mandates are not permitted to invest in tobacco.  This lack of institutional buying has the effect of lowering the valuation, thus making tobacco stocks perpetual value stocks. (For a detailed explanation of this phenomenon, see “The Price of Sin”)
  3. Tobacco companies generally pay very large and growing dividends.   The reinvestment of dividends is the single most powerful wealth compounding tool available to investors.

While Lorillard enjoys all of these benefits, in April of last year it also has the bonus of trading at a significant discount to its peers.  It has the lowest P/E and the highest dividend yield of major tobacco companies—a whopping 6.7%.

Lorillard’s depressed price was mostly due to fears that the Food and Drug Administration would make the company’s primary product—menthol cigarettes—illegal.  The FDA decided against such a move earlier in the month, yet the share price still reflected investor fears that bad regulatory news would be coming down the pipeline.

There was one person, however, who was conspicuously confident.  The company’s CEO Murray Kessler spent nearly a million dollars of his own money three months before buying shares of Lorillard on the open market.

Corporate insiders sell stock for any number of reasons.  They exercise stock options and liquidate the shares.  They sell off shares of their concentrated positions in order to diversify their portfolios.  They unload a few shares to buy a nice vacation home in the Hamptons.  There are infinite reasons why an insider might sell the shares of the company they help to manage.  But there is only one reason why they would buy.

When you see the man who runs the company putting his own money behind it, you can be reasonably certain that good news will be forthcoming.  While it is illegal for corporate insiders to trade on material non-public information, there is nothing at all illegal about them using their intimate knowledge of the company and industry to handicap the odds of, say, an FDA decision and trade accordingly.  I’ll trust the judgment of an informed insider over the uninformed masses.

In Lorillard I saw the conditions for the perfect trade lining up.  In Lorillard, we had:

  • A solid vice investment at an attractive price
  • A 6.7% dividend that was likely to grow in the coming quarters
  • Aggressive buying of the company’s shares by the CEO—a man who ought to know a thing or two about Lorillard’s prospects

As luck would have it, the trade worked out even better than I had hoped.  The FDA clarified their position on menthol cigarettes, and the shares of Lorillard rose over 40 percent in less than a month.

Not all trades work out this cleanly, of course.  There is not—and never will be—such a thing as a perfect, risk-free trading strategy.  In the case of Lorillard, it was entirely possible that the CEO could have been wrong or that the FDA arbitrarily changed its mind.  These things can and do happen

Still, following the trading moves of company insiders gives you one more tool at your disposal and allows you to trade with more confidence.  When you’re putting capital at risk, it pays to use every tool at your disposal.

This article originally appeared on InsiderEdge.com.

Investing in Asia’s Frontier Markets


Investing in Asia's Frontier Markets

China's economy has grown by over 1000% since 1990. For similar growth opportunities, look no farther than Asia's frontier markets.

You may be reading quite a bit about China’s property bubble, higher manufacturing costs, slowing economic growth and its attempt to shift gears to a consumer-led economy.

What’s next for China is debatable, but there’s no question that it’s achieved tremendous progress in a short time.

For some perspective, China’s exports for the entire year of 1980 are equal to one day of exports in 2012! China’s economy of 1990 was equal to that of Taiwan – now it’s 12 times larger. At least 200 million Chinese have been pulled out of poverty.

You are probably thinking, “If only I could go back in time and invest in the China of 1980 or 1990.”

You can.

Just go to Asia’s new frontier of growth…

Asia’s New Frontier

These are countries that are 10 to 20 years behind China, such as Vietnam, Sri Lanka, Philippines, Indonesia, Cambodia, resource rich Mongolia and Papua New Guinea, and even Myanmar/Burma (more on this later).

Here’s a quick overview of the advantages of investing in frontier Asia.

  • Faster Growth – Faster growth than emerging markets like Brazil, Russia, India and China.
  • Youthful Population – 40% of the world’s 14 to 25 year olds are in frontier markets, while North America, Japan and Europe together make up only 10% of this key consumer group.
  • Low Debt – On average, frontier markets have better balance sheets with only half the debt to GDP of developed markets.
  • Integration With the Global Economy – cellphones and the internet have made “catch up” easier and faster.
  • Attractive Market Valuations – Cheaper than both emerging and developed markets despite higher growth rates.
  • Inefficient Markets – Offer experienced fund managers opportunities to pounce on bargains.
  • Low Correlation to Other Markets – Frontier markets don’t move in tandem with emerging or developed markets, offering the potential for lower portfolio volatility.

The case for looking closely at these markets is compelling. This is why I’ll be covering these markets at the upcoming Investment U Conference in San Diego.

Frontier Market Snapshot

Here’s a snapshot of just some of the markets I’ll be talking about.

  • Vietnam – Market Vectors Vietnam ETF (NYSE: VNM)

Vietnam’s market is on fire, up 20% so far in 2012.

Still, it offers good value as it evolves into one of Asia’s lowest-cost manufacturing hubs with wages about half that of China. With a 97% literacy rate and a youthful population of 87 million and ample natural resources, Vietnam offers huge potential if its government will only get out of the way.

  • Indonesia – Aberdeen Indonesia Fund (AMEX: IF)

Indonesia has been one of my favorites for quite some time.

Three times the size of Texas, Indonesia is a democracy with the fourth-largest population in the world. The country is on a roll, fueled by better fiscal policies. It’s the only country in the G 20 (largest 20 economies in the world) to have declining government debt/GDP, which also has a balanced budget. Foreign investment and exports are rising and the country is home to natural resources such as oil, natural gas, coal, tin, rubber and palm oil.

The World Bank reports that Indonesia has the planet’s fastest-growing middle class, and they’re a savvy group. Indonesia represents the world’s third-largest user of Facebook, behind the United States and the U.K. Challenges include the need for much better infrastructure and confronting corruption.

  • Myanmar/Burma

Burma is in transition to ending 50 years of economic and political isolation.

It was once one of the wealthiest countries in the region as a major port and source of natural resources. To get a feel for its potential, just look at neighboring Thailand, which has an economy 10 times larger. A beautiful country with many historical sites, the country’s biggest opportunity out of the box is tourism. While Thailand had more than 12 million visitors in 2011, Burma had only 200,000.

Despite my enthusiasm for frontier Asia, the biggest challenge, for me, so far has been finding easy ways to capture frontier Asia growth. Investing directly in frontier Asian companies is a daunting task for most investors, and frontier market funds have most of their assets in the Middle East and Africa.

This is why I’m so interested in learning more about Leopard Capital’s upcoming Leopard Asia Frontier Fund. I have watched Leopard’s progress in frontier Asian private equity with keen interest. I’m thinking this on-the-ground experience will give them a serious leg up on competitors.

I look forward to meeting those of you who are coming to San Diego. Don’t miss Leopard Capital CEO Doug Clayton’s speech on investing in frontier Asian markets.

Good Investing,

Carl Delfeld

Article by Investment U

Gold in Euros, Sterling Drops to 10-Week Low as India Raises Import Duties, US Inflation “Rears Its Head” as Gas Prices Surge

London Gold Market Report
from Ben Traynor
BullionVault
Friday 16 March 2012, 09:15 EDT

THE SPOT MARKET gold price dropped to $1641 an ounce shortly after US market open – a 4.4% fall on the week – as stocks and commodities were broadly flat, with stock markets looking set for a weekly gain by Friday lunchtime in London.

On the currency markets, the Pound and Euro both rallied against the Dollar following the release of the latest US inflation data, while over in India the government announced it is to double its duty on gold imports as a percentage of the gold price.

Silver prices fell to $32.14 per ounce – a 6.3% loss for the week as we headed towards the weekend.

“Gold still appears to be taking a hit,” says a report from German refiner Heraeus.

“If it is to escape the downward trend in the short term, it will have to overcome the price resistance at $1726 per ounce…only then will it begin moving up again.”

“Near-term resistance ,” add technical analysts at bullion bank Scotia Mocatta, “is at the 200 day moving average, currently at $1682…key resistance is at $1716, last week’s high.”

The gold price in Euros fell to a 10-Week Low at €40,266 per kilo (€1252 per ounce) on Friday. Sterling gold prices also hit their lowest levels in 10 weeks, dropping to £1041 per ounce.

Both currencies jumped against the Dollar immediately following the release of US consumer price index inflation data. The seasonally-adjusted CPI rose 0.4% in February, its biggest rise for 10 months, while the unadjusted annual rate held at 2.9%, according to the Bureau of Labor Statistics.

“Inflation is rearing its head,” says Bill Gross, head of the world’s largest bond fund Pimco.

“We’re seeing that in oil prices and other commodities, and we’re seeing it in the numbers.”

The BLS says 80% of the monthly rise is accounted for by higher gasoline prices. Gas prices rose 6% last month, compared to 0.9% in January and the biggest jump since December 2010, following recent gains on the oil futures market.

Britain and the US meantime look set to co-operate on releasing strategic oil reserves, Reuters reports.

“This has to be discussed broadly,” Britain’s prime minister David Cameron, who has been on an official visit to the US this week, said on Thursday.

“It’s something worth looking at.”

The Brussels-headquartered Society for Worldwide Interbank Financial Telecommunication (SWIFT), the world’s major international messaging service for financial transactions, is to cut services to Iran’s financial institutions effective from tomorrow.

“Disconnecting banks is an extraordinary and unprecedented step for SWIFT,” said chief executive Lazaro Campos yesterday.

“It is a direct result of international and multilateral action to intensify financial sanctions against Iran.”

Over in India, the world’s largest gold consumer last year, the government announced Friday that it is doubling the import duty on gold from 2% to 4%. This follows a similar increase in India’s gold import duty back in January.

The duty hike “will reduce demand for gold significantly” reckons Bombay Bullion Association president  Prithviraj Kothari. Kothari forecasts that gold demand in India could drop by 30% this year, the Wall Street Journal reports.

“Today’s duty increase will dampen Indian demand,” agrees UBS precious metals strategist Edel Tully.

“The Indian market will wait for lower prices and there is also the risk that this duty hike will lead to increased smuggling.”

India set a record last year when it imported 969 tonnes of gold bullion.

“One of the primary drivers of the current account deficit has been the growth of almost 50% in imports of gold and other precious metals in the first three quarters of this year,” said Indian finance minister Pranab Mukherjee, who was announcing next year’s budget.

There are also potential signs that gold imports to China, the world’s second largest gold market, are starting to concern authorities.

China’s National Bureau of Statistics meantime has revealed that officials in the northern city of Hejin reported “seriously untrue” economic data last year, newswire Bloomberg reports.

Here in the UK, chancellor George Osborne is considering cutting the top rate of income tax from 50p to 45p in next week’s Budget, according to press reports.

Ben Traynor
BullionVault

Gold value calculator   |   Buy gold online at live prices

Editor of Gold News, the analysis and investment research site from world-leading gold ownership service BullionVault, Ben Traynor was formerly editor of the Fleet Street Letter, the UK’s longest-running investment letter. A Cambridge economics graduate, he is a professional writer and editor with a specialist interest in monetary economics.

(c) BullionVault 2011

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

 

 

Yen Set for Weekly Loss After BOJ Minutes Release


By TraderVox.com

Tradervox (Dublin) – Minutes of the BOJ meeting have indicated that another asset purchases program is on the making confirming what BOJ’s governor has been saying. The yen has declined 1.3 percent over the week against it major pairs. Yen’s weekly drop comes as US economy shows some signs of recovery with more positive data expected to be released today. The sentiments by BOJ of further stimulus have prompted investors to look for higher yielding assets.

Sean Callow a Senior Currency Strategist in Sydney has indicated that the BOJ meeting has consistently been aimed at weakening the yen and this is yielding fruits as the currency has been the worst performer in all sixteen major currencies. The BOJ minutes released yesterday indicate that some members of were concerned of sending the wrong signal with the increased asset purchases and insisted that the BOJ should be very clear in explaining it actions to the public. They feared that the large bond purchases may be construed as financing government deficit spending.

The yen opened trading at 83.56 per dollar in London but later increased to 83.92 at 12:40 GMT. It had reached its weakest since April 13 yesterday when it traded at 84.18. The yen has dropped 1.3 against the dollar this week and 1 percent against the euro.

Bank of Japan has continued to put more effort in weakening the Yen as they expanded loans to the banks aimed at enhancing long-term growth on March 13. The announcement came the same day when the Fed raised their US economic outlook saying that the unemployment is set to reduce gradually and the economy expected to register a moderate growth.

Measures taken by the BOJ seem to be working as the economy has shown some signs of recovery from last year’s tsunami and earthquake. The BOJ has put on hold this month’s asset purchases as it monitors the situation and effects of the last asset purchases. Positive reports from the US seem to be aiding the BOJ’s plan to weaken the yen.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

US Dollar down across the board


By TraderVox.com

Tradervox (Dublin) – Euro retraced back below the 1.3100 levels as it was under the pressure all day. It is trading near the opening price at 1.3073. Trade balance data from EMU came below expectation at a deficit 7.6 billion Euros against the expected surplus of 4.6 billion Euros. The support may be seen at 1.3060 and below at 1.3040. The resistance may be seen at 1.3100 and above 1.3140.

The Sterling Pound has printed a fresh high of 1.5742, during the European session. It is currently trading near the high at 1.5738, up about 0.17% for the day. The resistance may be seen at 1.5760 and above at 1.5800. The support may be seen at 1.5700 and below at 1.5650 levels.
 
The USD/CHF pair is trading in a tight range of 35 pips. The pair is approaching the daily low of 0.9215 printed during the Asian session. It is trading around 0.9223, down about a tenth of a percent for the day. The support may be seen at 0.9200 and below at 0.9160 levels. The resistance may be seen at 0.9250 and above at 0.9300.
 
The USD/JPY pair is approaching the 84 levels after a pause of yesterday. The pair has printed a high of 83.92. The pair is trading near the high at 83.86, up about 0.40% for the day. The support may be seen at 83.80 and below at 83.30. The resistance may be seen at 84 and above at 84.30 levels.
 
Australian dollar is trading comfortably above at 1.0500 levels at 1.0550, up about 0.20% for the day. The support may be seen at 1.0500 and below at 1.0450. The resistance may be seen at 1.0560 and 1.0060 levels.
 
The US dollar index has come off the recent highs and is approaching the 80 levels. The pair is trading around 80.36.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
Tradervox.com is a Forex News Portal that provides real-time news and analysis relating to the Currency Markets.
News and analysis are produced throughout the day by our in-house staff.
Follow us on twitter: www.twitter.com/tradervox

Capital One Announced Offer of Common Stock to Help HSBC

On late Wednesday, Capital One Financial (NYSE:COF) announced an offer of $1.25 billion of common stock to assist HSBC’s (NYSE:HBC) U.S. credit card business.Capital One plans to purchase HSBC’s credit card business that consists an estimated $30 billion in loans, for $2.6 billion.Capital One Financial (NYSE:COF) has potential upside of 9.6% based on a current price of $52.88 and an average consensus analyst price target of $57.95.

USD Drops Against Yen

Source: ForexYard

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The U.S. dollar dropped off its recent rally Friday morning. Analysts are suggesting the greenback is at last hitting resistance against the Japanese yen. As of early Friday afternoon, the USD/JPY had fallen from a very strong showing on Thursday and hovered close to 83.47. The recent rally against the yen surprised some traders as the Japanese currency was showing signs of life earlier in the week. The current position of the USD/JPY also remains well above the psychologically significant mark of 80.00. This could be an indication of overall confidence in the American economic recovery as well as the BoJ’s actions not quite having the effect that many were expecting.

Read more forex news on our forex blog.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

EUR/USD Fails to Move Below 1.3000 Level

Source: ForexYard

The US dollar largely maintained its recent gains against the euro throughout yesterday’s trading session, as a batch of positive US data continued to boost confidence in the American economic recovery. The EUR/USD spent much of the day trading around the 1.3050 level, after dropping as low as 1.3002 during Asian trading. As we begin to close out the week, traders will want to pay attention to two US indicators set to be released today. The Core CPI, set to be released at 12:30 GMT, and the Prelim UoM Consumer Sentiment figure, scheduled for 13:55 GMT, are both considered valid indicators of economic health and could help the dollar extend its gains.

Economic News

USD – USD Retreats Slightly vs. Yen

After breaking the psychologically significant 84.00 level during Asian trading yesterday, the USD/JPY retreated during much of the European session. The pair fell some 80 pips before stabilizing around the 83.30 level. The EUR/USD spent most of the day trading around the 1.3050 level, after dropping as low as 1.3002 during early morning trading. Despite the relatively small losses taken by the greenback yesterday, market sentiment is still overwhelmingly bullish for the dollar. Positive US indicators, including yesterday’s weekly Unemployment Claims figure, continue to boost confidence in the American economic recovery.

As we close out the week, traders will want to pay attention to several US economic indicators. The Core CPI figure, set to be released at 12:30 GMT, is considered a valid indicator of inflation and has the potential to create dollar volatility. Later in the day, dollar pairs could also see some movement following the release of the Prelim UoM Consumer Sentiment. Analysts are forecasting the indicator rose to 75.8, following last month’s figure of 75.3. If true, the dollar could see additional gains before markets close for the weekend.

EUR – Euro Falls vs. CHF Following SNB Statement

The euro tumbled vs. the CHF during European trading yesterday, following the Swiss National Bank’s (SNB) Monetary Policy Assessment. The assessment stated that the SNB would actively work to make sure the EUR/CHF does not trade below the 1.20 level. As a result, the EUR/CHF dropped some 65 pips, reaching as low as 1.2073 during European trading. The euro also had a bearish day vs. the Japanese yen. The EUR/JPY was down over 100 pips, reaching as low as 108.56, before bouncing back to the 109.00 level.

Turning to today, euro traders will want to keep an eye on several US indicators which have the potential to bring the EUR/USD down. The pair came dangerously close to dropping below the psychologically significant 1.3000 level yesterday, before bouncing back to the 1.3500 level. Should any of the US news today come in above expectations, investor confidence in the US economic recovery may continue to go up, which could turn the EUR/USD bearish once again.

JPY – JPY Sees Gains against EUR and USD

After several days of continuous bearishness, the Japanese yen was able to recoup some of its losses during yesterday’s trading session. The USD/JPY, which had recently gone as high as 84.15, tumbled close to 85 pips throughout the European session yesterday, before stabilizing at the 83.30 level. The EUR/JPY fell over 100 pips yesterday, reaching as low 108.57, before staging a mild recovery and stabilizing around 108.85.

Turning to today, yen traders will want to keep an eye on several US indicators scheduled to be released over the course of the day. The recent monetary easing policy from the Bank of Japan continues to weigh down on the yen. Analysts are predicting that, given the poor state of the Japanese economy and recent strong US economic indicators, the USD/JPY has the potential to reach 85.00 in the near future. Should any of the US news come in better than expected today, the yen could reverse yesterday’s gains before markets close for the week.

Gold – Gold Sees Mild Gains in Trading Yesterday

After spending much of the week stuck in a bearish trend, gold saw mild gains during yesterday’s trading session. The price of gold had dropped as low as $1634.09 an ounce on Wednesday, largely due to the strengthening US dollar. A strong USD typically limits the appeal for high yielding commodities, like gold. The trend briefly changed yesterday, and the precious metal was able to reach as high as $1650.91 during the evening session.

Despite yesterday’s slight upward movement, analysts warn that gold’s bearish trend may continue for the foreseeable future. US indicators continue to show that the American economy is growing. It would appear that for the time being, a bullish dollar means that any upward movement by gold may be limited.

Technical News

EUR/USD

The Slow Stochastic on the 8-hour chart has formed a bullish cross, indicating that upward movement could occur in the near future. This theory is supported by the Relative Strength Index on the daily chart, which has crossed into oversold territory. Going long may be the wise choice for this pair.

GBP/USD

Most long-term technical indicators show the GBP/USD trading in neutral territory at this time. The daily chart’s Williams Percent Range and Relative Strength Index are both range trading. As there is no defined trend, traders may want to take a wait and see approach for this pair ahead of any major movements.

USD/JPY

Technical indicators on the daily chart continue to show that this pair is overbought and could see downward movement in the near future. These include the Slow Stochastic, which has formed a bearish cross, and the Relative Strength Index which is currently at 80. Going short may be the wise choice for this pair.

USD/CHF

The daily chart’s Williams Percent Range is currently well into the overbought zone, indicating that a downward correction could occur in the near future. This theory is supported by the Relative Strength Index on the same chart, which is currently around 75. Going short may be the wise choice for this pair.

The Wild Card

USD/NOK

Following the upward movement this pair has seen in recent days, technical indicators now show downward movement may occur in the coming days. A bearish cross on the daily chart’s Slow Stochastic signals a possible reversal. Additionally, the Williams Percent Range is trading at the -20 level, indicating that a bearish correction could occur. Forex traders may want to go short in their positions.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

 

IMF Approves More Funding for Greece’s Bailout

Good news for Greece and the Euro zone. The International Monetary Fund has just approved 28 billion euros in funding for the cash-strapped country over the next four years.The IMF statement said today it will allow 1.65 billion of the funds for immediate release to add to Greece’s economic bailout. The country’s total bailout package now amounts to 172.7 billion euros.This is the second bailout Greece has received over the past couple years. Back in May 2010 it received it’s first bailout amounting to 110 billion euros. In return for both bailouts, government officials are implementing cost-cutting measures, slashing pensions and salaries while raising taxes.