The meat packing business is historically cyclical, and bad times can put unprepared companies into bankruptcy. That's why John Tyson, chairman of Tyson Foods, is trying to shift the company's business into branded prepackaged and prepared foods that perform better during market swings. Jacob Bunge reports for The Wall Street Journal: For 16 hours at a stretch, the stream of deep-brown strips and other products continues across Tyson’s 50 U.S. plants that together disassemble 37 million chickens each week, turning them into nuggets, wings and breasts. By now, another 10.5 pounds have filled … [Read more...]

Earnings growth has begun to slow, and investors are getting worried. Justin Lahart reports for The Wall Street Journal: The earnings slowdown owes something to last year’s corporate tax cut reaching its anniversary date: Credit Suisse strategist Jonathan Golub calculates that the tax cut added about 7 percentage points to earnings growth in the fourth quarter. The slowdown also owes something to one big company: Apple . First-quarter estimates for the iPhone maker, which accounted for over 4% of S&P 500 net income last year, have come down sharply since the company issued a … [Read more...]

Sales of traditional cigarettes are falling even faster than expected. That trend is reassuring tobacco companies like Altria of the importance of their investments in e-cigarettes and other smokeless alternatives. Jennifer Maloney writes for The Wall Street Journal: Altria CEO Howard Willard on Thursday offered new projections on U.S. cigarette industry volumes, saying cigarette sales would continue to decline at a faster clip than they have in the past as smokers switch to e-cigarettes. He also said his company’s recent $12.8 billion investment in vaping startup Juul Labs Inc. would allow … [Read more...]

Jeremy Grantham’s firm, GMO, says the bubble in U.S. stocks is busting. Grantham is an expert in financial bubbles and widely known for identifying in advance the dangers of the dotcom and housing bubbles. In a recent piece written by one of Grantham’s associates, a new model of bubbles suggests we may be at the beginning of the end of inflated U.S. stock valuations. Bloomberg has the story. The size and duration of the moves in stock prices in the final three months of 2018 toward their long-term average valuation is consistent with the moves linked with the bursting of the technology … [Read more...]

Researchers working for the NBER have made an interesting case that high levels of common ownership in companies could be anti-competitive. This trend is exacerbated by high levels of indexing, as a greater percentage of publicly traded shares are owned by the same index funds. Bloomberg reports: The rise of indexing mutual funds and other diversified investors is increasing the temptation for public companies to act in the interests of their rivals, a trio of professors say. Their study, “Common Ownership in America: 1980-2017,” is the latest entry in a growing body of research looking … [Read more...]

Aaron Brown sends investors a note of caution from the opinion page of Bloomberg, writing: The S&P 500 Index reached a record high in September, extending the longest bull market in history and generating an inflation-adjusted return of 300 percent since March 2009. The rally drove price-to-earnings ratios above 33, to levels only matched at the height of the dot-com bubble. The S&P 500 is now down 15 percent from its September high, reducing the P/E ratio to 28. So what does history suggest might happen in 2019? On average, the outlook is not good when stocks are falling, but … [Read more...]

Buybacks can't save the market from falling. The buyback boom has been symptomatic of the Fed funded liquidity bubble, and therefore can't be an anti-cyclical counterweight when the liquidity is removed. Lu Wang reports in Bloomberg: In a quarter where U.S. firms have announced plans to spend more money buying back shares than almost any other period in history, the S&P 500 is down 15 percent, the biggest drop since the 2008 financial crisis. At its worst point this week, the index was within two points of entering a bear market. The futility can be framed in various ways. Critics of … [Read more...]

You can stack the odds in your favor. At its root, buying above average yields means the “market” or index yields less. Your task is to root out the higher yields, a contrary stance, and pick the winners from there. Your work has just begun. Because relying simply on the highest dividend yields is a fool’s errand. If the top dividend payers were always the top performers then investing would be easy. You and I know that’s false. What Dick Young has taught you, and tens of thousands of investors like you, is that a large part of investing involves art, not science. In baseball, there’s … [Read more...]

Markets have become more volatile in 2018 than they have been for some time. I hope you'll reread this post I wrote on September 7, 2018 and reevaluate the risk in your portfolio today.  I have written to you before about my unease with program trading, especially stop losses (see here and here). Add to that the algorithmic groupthink of computerized trading and it's a nasty brew. Today the Wall Street Journal's Stephanie Yang reports: On Feb. 5, the Dow Jones Industrial Average suffered its worst one-day point-decline in history amid a tumultuous week for global markets. Although the … [Read more...]