|
INVESTOR'S NOTEBOOK by Brendan Boyd
(A digest of investment opinion from the world's leading financial advisers)
Brendan has included two "golden oldies" in this release, items that still hold up after all these years!
The current convergence between long-term and short-term interest rates is one of the strongest developments in Wall Street history, observes Investech Research Market Analyst newsletter (2472 Birch Glen, Whitefish, MT 35997). "Either the bond market's aberration will be reversed by a sharp upward spike in long-term rates by year-end, or astute bond vigilantes are anticipating the deflationary fallout of a bursting real estate bubble or a more serious economic slowdown. Whichever takes place, the outcome may not be painless for investors."
Clipper Fund, which has appreciated an average 16.17 percent annually over the past decade, likes established companies with dominant franchises. But it buys only those trading at discounts of at least 30 percent to its estimate of their intrinsic value. Clipper's managers also look for positive factors such as insider buying and share-repurchase programs and usually holds just 20 to 30 issues. Recent favorites: Freddie Mac, Marsh & McLennan, Altria Group, American Express, Electronic Data Systems, Pfizer.
Utility stocks have traditionally been popular with income-oriented investors. Dow Theory Forecasts newsletter (7412 Calumet Ave., Hammond, IN 46324) recently recommended 10 A-minus and B-rated utilities with average yields of 4 percent. To weed out weak companies, DTF eliminated those with payout ratios (dividends as a percentage of earnings) of no more than 70 percent and quality scores of at least 50. The 10 qualifiers: Energy East, Exelon, KeySpan, National Fuel Gas, New Jersey Res, Northwest Natural Gas, NSTAR, Southern Co., WGL Holdings, WPS Resources.
To identify particularly efficient stocks, Value Line (220 E. 42nd St., New York, NY 10042) recently screened all the issues it ranks "2" (above average) or better, for timeliness, and computed their average percentage earned on shareholder equity (net profit divided by common and preferred equity). It found eight stocks with average returns on equity of more than 40 percent: NVR, DaVita, Equifax, GlaxoSmithKline, Telecom New Zealand, Tupperware, Dell, ITT Educational.
(From January 1982) Home buyers considering an adjustable-rate mortgage should contact as many potential lenders as possible, says California real estate analyst Alan Crittenden, asking each these five questions: (1) What index will rate changes be pegged to? (Crittenden favors less volatile indicators such as Moody's Corporate Bond Index.) (2) How often will rates move? (The less frequent the better.) (3) Do the changes have legal limits? (4) How much can rates change over the loan's term? (5) Will payments be fixed, allowing higher rates to increase the principal?
(From March 1983) A trading tip from one of the wiliest veteran stock swappers around, Charles Allmon of Growth Stock Outlook newsletter (P.O. Box 15381, Chevy Chase, MD 20825): "On AMEX trades, place limit orders only. If you don't, you invariably buy at the day's high and sell at the day's low. With few exceptions, AMEX stocks trade in a tissue-paper-thin market."
Value will always trump growth, says The Turnaround Letter (225 Friend St., Boston, MA 02114). "For example, in 1950 you would have been better off buying Standard Oil of New Jersey (the forebear of Exxon-Mobil) and holding it instead of buying IBM. IBM has performed better in virtually every growth-related metric since, but because IBM's stock price already reflected even higher expectations for growth, Standard Oil has produced higher total returns."
(Investor's Notebook reflects the opinions of experts. It does not recommend any specific stocks, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited.)
COPYRIGHT 2005 UNIVERSAL PRESS SYNDICATE
|
