Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

A Simple Recipe for Beating the Market 3 to 1

By

Over more than eight decades of stock market history, a dividend focused approach has been a winning investment strategy. Consider that if you invested $100 in the stock market in 1927—as measured here by a portfolio of large-capitalization stocks— today your portfolio would be worth $190,000. A tidy sum to be sure, but if you instead invested that same $100 in the highest yielding stocks (top 20%) and rebalanced annually, your portfolio would now be worth $586,000. That’s three times as much.  To some, a dividend-focused approach just sounds too boring. The highest yielding stocks are … [Read more...]

Netflix: The Risk of High Expectations

By

Most of you are no doubt familiar with Netflix—the leading DVD and video-streaming rental business in America. Up until recently, Netflix was a high flyer—a momentum stock. From year-end 2009 to June 2011, the shares rose over 375%—the highest return in the S&P 500. During the company’s 18-month price vault, revenue growth accelerated from 23% to 52%, and EPS growth averaged more than 57%. Those are impressive numbers for a company operating in the throes of a lackluster economy. Investors were so impressed with Netflix’s business prospects that after paying 30X earnings in December of … [Read more...]

Home Prices Tumble and Confidence Plunges

By

The commerce department released September new home sales yesterday. The number of new homes sold in September came in at an annual rate of 313,000—13,000 more than economists’  average estimate. But new home prices tumbled to a post-bubble low. The average price of a new home in the U.S. fell to $243,900 in September—the lowest price in eight years. Falling house prices along with stubbornly high unemployment, stock market volatility, and incompetence in Washington are taking a toll on consumers. In October, the Conference Board’s Consumer Confidence Index (the expectations component) … [Read more...]

Did the Fed Just Signal QE3?

By

Are you ready for another round of reckless money printing from the most activist Federal Reserve in U.S. history? Last week, the doves (easy money advocates) on the Federal Open Market Committee (FOMC) started laying the groundwork for a third round of quantitative easing. Is that a tacit admission that Operation Twist, the most recent real-time experiment in monetary policy, has failed? Probably, but a majority on the Fed believe money printing stimulates the real economy, despite all of the commonsense evidence to the contrary.  How do members of the Fed reach such a conclusion? … [Read more...]

A Truly Terrifying Chart

By

The chart below is the spread between French and German government bonds. Equity markets have rallied on hopes that an American-styleshock and awe bailout package from France and Germany can solve the euro-area’s debt crisis, but the bond market has other ideas. The French-German spread has blown-out to the highest level since the euro’s founding. Contagion is spreading to the core of the euro-area. Investors are beginning to doubt France’s ability to fund the multi-trillion dollar bailouts needed to solve the crisis. At a 114 basis point spread over German bonds, the market is rating France … [Read more...]

3 Reasons Dividends Trump Buybacks

By

In September, Warren Buffett announced that the Berkshire Hathaway board authorized a multibillion-dollar share-buyback program. Berkshire shares soared as much as 12% on the news. The market’s reaction to the buyback announcement is common. When companies announce buyback plans, their stocks often get a pop. But are the gains justified? This question is more important today than it has been in years past. Over the last decade, share buybacks have become the preferred method of returning cash to shareholders. In 2006 and 2007, U.S. companies bought back more in stock than they paid in … [Read more...]

Disturbing Jobs Data

By

Weekly jobless claims, a leading indicator of both the labor market and the U.S. economy were released this morning. Claims came in at 404,000, a drop of 1,000 from last week, but still above the crucial 400,000 mark that signals trouble. The four week moving average, which smoothes out the weekly volatility, came in at 408,000. Over the last 20 years, average weekly jobless claims of 408,000 have been consistent with monthly payroll employment growth of about 5,000. Just to prevent the 9.1% unemployment rate from rising, the U.S. must create at least 100,000 net new jobs per month. Without a … [Read more...]

Coping with Manic Markets

By

The S&P 500 leapt higher by 3.4% today on yet another plan-to-make-a-plan out of Europe and on news that the Chinese government will boost its stake in the nation’s largest banks. The benchmark index closed above its 50-day moving average for the first time since July. In the span of only five trading days, stocks have gained more than 11%. The sharp end of day bounce off of the 1,074 level last Tuesday, and the follow-through rally, have some technical analysts convinced stocks are poised for an upside breakout—see here. In only one week, the prevailing sentiment on the Street has shifted … [Read more...]

Diverging Performance

By

The S&P 500 hit a cyclical bull market high on April 29 of this year. During a volatile session on Tuesday, the index dipped into official bear market territory (a drop of more than 20% from a recent high), but a stunning final hour rally of more than 4% helped the index narrowly escape the official bear market label. Should you care if the S&P 500 enters an official bear market? Unless your entire portfolio is invested in an index fund, the S&P 500’s performance is likely to differ, sometimes widely, from the performance of your own portfolio. For example, if your portfolio … [Read more...]

Welcome to the Bear Market

By

On a closing basis, the S&P 500 hasn’t dropped the necessary 20% to be considered an official bear market, but for all intents and purposes U.S. stocks are in a bear market. If you measure the index on an intra-day basis, the peak to trough decline was 21.58% at today’s low. And if not for a curiously timed and still unsubstantiated rumor from the Financial Times about a European bank recapitalization plan, the S&P 500 was set to close down more than 20% from its April high. Instead, the index ripped more than 4% higher in the last 40 minutes of trading. This is the FT’s second … [Read more...]