The businesses of the top 10 companies in the Vanguard Dividend Achievers fund could easily be part of your Saturday morning errands, especially if the kids and family are visiting. You could start the morning by leaving the house with a can of Diet Pepsi, stop by a Chevron station to fill up the tank, then swing into Walmart for some baby supplies like Pampers and Johnson’s Baby Shampoo for the little ones and Ibuprofen for yourself just in case you use the self-checkout lane. Hop back in the car, zip over to ExxonMobil for a car wash, scoot across the street for a Coke and a Big Mac, and … [Read more...]
Vital Intelligence for Investment Success
If you read The Wall Street Journal or the Financial Times, you have likely heard about the “risk trade.” It’s a term journalists have been using with increasing frequency to explain the behavior of financial markets. You see, since the financial crisis struck, risky assets have either been rising together or falling together. There has been much less distinction among the returns of risky assets. You have days where either bonds are up or stocks, commodities, and risky currencies are up—it’s risk on or risk off. This recent phenomenon can be explained by an increase in the correlation among … [Read more...]
Stocks with the Highest Prospective Returns
For decades, I have advised my monthly strategy report subscribers to invest in stable companies with entrenched competitive positions, strong balance sheets, and a history of paying dividends. Many of the stocks I advise are considered high-quality stocks. What is a high-quality stock? There are varying definitions of quality. Standard and Poor’s generates quality rankings for stocks based on the growth and stability of earnings and dividends. Others include measures of debt and returns on capital. Most investors would consider stocks with consistent earnings growth, strong balance sheets, … [Read more...]
3 Reasons to Invest with Caution
At Young Research we maintain three cyclical stock price indexes—an early cyclical index, a late cyclical index, and a stable growth index. When evaluated together, the relative performance of these indexes versus the S&P 500 serves as a useful real-time indicator of the economy. The benefits of using asset prices as one gauge of the strength of the economy are that they are not subject to reporting lags, data is not revised, and there is no chance of modeling error. Asset prices are determined daily by the collective wisdom of millions of well-informed investors. These investors have … [Read more...]
Need Yield?
Do you invest in stocks for income? Is your portfolio focused primarily on U.S. stocks? If so, you might consider diversifying globally. The dividend yield on the U.S. stock market is one of the lowest yields in the world. In the chart below, I show the yields of 23 of the world’s major stock markets. The dividend yield on U.S. stocks is only 2.11%, compared to an average of 3.09% and a high of 5.45% in Spain. The U.S. is the sixth-lowest-yielding stock market in the group. If you invest in stocks for dividends or income, a global approach is advisable. When you take a global approach to … [Read more...]
A Must-Have MLP Fund
You don’t want to miss the boat on master limited partnerships (MLPs) especially now that the asset class is receiving more press. A recent Wall Street Journal piece by Tom Lauricella and Carolyn Cui, “Frenzy in Energy Partnerships,” shed more light on the relatively unknown natural resource pipeline market, which has been attracting billions of dollars owing to its attractive 6%–7% yield. In fact, as the article points out, through the beginning of this month, MLPs rallied 15% on the year and 11% per year over the past 10—as measured by the industry benchmark, the Alerian MLP Index—for … [Read more...]
How Many Utilities are in Your Portfolio?
A powerful relative strength rally in utilities stocks is underway. The S&P 500 Utilities Index has outperformed the S&P 500 index by 12.5% since early April. Investors are bidding up high yielding utilities stocks in search of yield. … [Read more...]
Creative Destruction
Creative Destruction – Popularized by Joseph Schumpeter, a “process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one.” In just 10 years, two industry titans have been knocked to the floor and replaced by a start-up and another firm that most industry pundits had written-off. The age of the Windows desktop PC is coming to a close and the age of smart phones, tablet computers, and cloud computing is beginning. But don’t put money on it. Microsoft and Dell looked like no-lose … [Read more...]
Wall Street Begging for More Stimulus
The stock market mounted a powerful rally in July. The S&P 500 jumped almost 7% for the month and has tacked on another 2% so far in August. The rally is most unusual given the raft of weakening economic data that has been reported in recent weeks. My chart shows a marked downtrend in the Citigroup U.S. Economic Surprise Index. The Citigroup index measures the difference between projected economic data and actual economic data. A falling index indicates that economic data is coming in worse than expected. Since expectations are what drive stock prices, a declining surprise index is often … [Read more...]
Back to Even and Then Some
Are you tired of the media’s nonstop market analysis yet? It’s distracting at best and harmful to your health at worst. With the Dow up 7.1% in the month of July, it’s worth noting how little ground has been picked up from mid-June of this year through the end of July. Even after climbing out of the valley of the March 2009 lows, the price of the Dow is still only worth three-quarters of its value from its October 2007 peak. Those taking a balanced investment approach had a much better experience. I like using the Vanguard Wellesley fund to illustrate the advantages of a balanced … [Read more...]
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