Utility stocks can best be described as the four-door, mid-sized sedan of equity investing: boring. Nothing sexy about them — they get you from point A to point B. Investors own utilities for the steady, above-average dividends just as people buy bland, mid-size sedans because they need something that just works. But sometimes both can seem overpriced. In 1987, the base price of a new, Honda Accord was around $9,795. Today, that base price is around $22,455, which implies an annual price increase of 4.3%; 33.5% more than the average annual inflation rate of 3.22% for the same time period. Read More

Utility stocks can best be described as the four-door, mid-sized sedan of equity investing: boring. Nothing sexy about them — they get you from point A to point B. Investors own utilities for the steady, above-average dividends just as people buy bland, mid-size sedans because they need something that just works. But sometimes both can seem overpriced. In 1987, the base price of a new, Honda Accord was around $9,795. Today, that base price is around $22,455, which implies an annual price increase of 4.3%; 33.5% more than the average annual inflation rate of 3.22% for the same time period. So, while that mid-sized sedan may still seem like a bargain, it’s gotten slightly more expensive over the longer haul. Utility stocks also outperformed inflation during a similar run. The average yield of utility stocks over the last 25 years has been 3.96% while inflation has averaged around 2.11% for the same period. Over the long haul, dividend paying-utility stocks delivered exactly what they should which is to keep pace with inflation. But sometimes utility stocks, like that boring sedan, can look expensive. The sector has been dealing with this recently. After a post-election dip that coincided with… Read More

I’ve looked at bond inventories (bonds for sale by various firms all along the street) on, more or less, a daily basis for the past 20 years. It’s a habit. It doesn’t necessarily mean I’m going to buy something. The main purpose of the exercise is to get a feel for the bond market that goes beyond looking at where Treasury bond yields are for that particular day. I see what investors are willing to pay for bonds based on multiple factors, the most important being yield and safety. In recent years, it seems that most investors have been more… Read More

I’ve looked at bond inventories (bonds for sale by various firms all along the street) on, more or less, a daily basis for the past 20 years. It’s a habit. It doesn’t necessarily mean I’m going to buy something. The main purpose of the exercise is to get a feel for the bond market that goes beyond looking at where Treasury bond yields are for that particular day. I see what investors are willing to pay for bonds based on multiple factors, the most important being yield and safety. In recent years, it seems that most investors have been more concerned with quality and capital preservation than yield. That’s no surprise in light of the volatility financial markets have experienced since the Financial Crisis of 2008. Accommodative Federal Reserve policy and investor fear have kept rates at historical lows for nearly a decade. But now that’s changing — albeit slowly. The unexpected election of Donald Trump, while inspiring a tangible rally in stocks, has sparked an upward movement in bond yields (prices go down) due to anticipated inflationary pressure from possible infrastructure spending and tighter foreign trade policy. The Federal Reserve gradually shifting away from its zero-rate federal… Read More

The French are funny. They smoke cigarettes while riding bicycles. They hail Jerry Lewis as a filmmaking genius. My favorite scene in Monty Python and the Holy Grail is when King Arthur and his men encounter the insulting French knight. And throughout the rise of western civilization, they’ve ALWAYS been a lynchpin in global affairs where continental Europe is concerned. #-ad_banner-#We’ve been reminded of that for the last few weeks as the world and markets have been biting their collective nails over the French presidential election. And it’s no surprise; the nervousness follows the UK Brexit vote and Donald Trump’s… Read More

The French are funny. They smoke cigarettes while riding bicycles. They hail Jerry Lewis as a filmmaking genius. My favorite scene in Monty Python and the Holy Grail is when King Arthur and his men encounter the insulting French knight. And throughout the rise of western civilization, they’ve ALWAYS been a lynchpin in global affairs where continental Europe is concerned. #-ad_banner-#We’ve been reminded of that for the last few weeks as the world and markets have been biting their collective nails over the French presidential election. And it’s no surprise; the nervousness follows the UK Brexit vote and Donald Trump’s populist-tilted upset in the 2016 U.S. presidential election. In France, the contest has pitted ultra-right wing, anti-EU Marine Le Pen versus, basically, everyone else, but mainly center-left candidate, pro-EU Emmanuel Macron. After the first round, Macron has emerged as the frontrunner and, although he faces Le Pen in the run-off, indications tell us that the French are leaning towards the more moderate Macron. Markets have breathed a sigh of relief with encouraging rallies and pundit-talk of, at long last, real growth in European equities. Here are three growth stocks for 2017 investors should look at. 1. Royal Dutch Shell (NYSE:… Read More

I had a manager at a firm I used work with. This guy had been in the investment racket for what seems like forever. He was always available to give young brokers advice on stock selection. He would refer to stocks that carried too much risk as “chocolate covered hand grenades.” They looked enticing but sooner or later were guaranteed to blow up in your face. #-ad_banner-#Coming of age in the business during the Tech Bubble of the mid-1990s, I learned a lot about ridiculous valuations. Stock prices and investor expectations can get a little over their skis if the… Read More

I had a manager at a firm I used work with. This guy had been in the investment racket for what seems like forever. He was always available to give young brokers advice on stock selection. He would refer to stocks that carried too much risk as “chocolate covered hand grenades.” They looked enticing but sooner or later were guaranteed to blow up in your face. #-ad_banner-#Coming of age in the business during the Tech Bubble of the mid-1990s, I learned a lot about ridiculous valuations. Stock prices and investor expectations can get a little over their skis if the right conditions are present in the market. The S&P 500 index has delivered around a 5.5% return year-to-date, sparking the pundits to wring their hands and wonder aloud if the market is overvalued. The S&P 500 is currently trading at about 18 times expected earnings. If you’re a value-oriented investor, then that may seem a little expensive, especially if forward P/E is one of your primary valuation metrics. Otherwise, there’s not really cause for widespread concern about the market. However, I’ve identified three widely traded stocks that I would categorize as chocolate covered hand grenades. At their current levels, I’m… Read More

As the U.S. wireless telecom backbone has evolved since its infancy of the late 1990s, the game, save for a few minor players, has been dominated by two companies: AT&T (NYSE: T) and Verizon (NYSE: VZ). Combined, the two own about 65% of the U.S. market. With 142.7 million subscribers, Verizon holds the top spot over AT&T’s 131.8 million customers. It’s also common knowledge that the stocks of both companies are perennial favorites among dividend investors. Many hold both in their portfolios. After all, it makes sense to own both number one and two. But does it make more sense… Read More

As the U.S. wireless telecom backbone has evolved since its infancy of the late 1990s, the game, save for a few minor players, has been dominated by two companies: AT&T (NYSE: T) and Verizon (NYSE: VZ). Combined, the two own about 65% of the U.S. market. With 142.7 million subscribers, Verizon holds the top spot over AT&T’s 131.8 million customers. It’s also common knowledge that the stocks of both companies are perennial favorites among dividend investors. Many hold both in their portfolios. After all, it makes sense to own both number one and two. But does it make more sense to hold just one of them? At first glance, the two stocks look almost identical. As of this writing, T shares trade around $41.50 with a 4.7% dividend yield, while VZ shares seem a little pricier at about $49.20 per share with a 4.7% yield. But a look underneath the hood on both stocks tells a much different story. Here’s what I found. Stronger Signal?   AT&T Verizon Two-Year ROE 11.66% 95.90% Two-Year Div. Payout Ratio 97.13% 47.70% Two-Year EPS Growth 43.50% 27.02% Two-Year Avg. Total Return 18.60% 12.00%   While AT&T’s earnings per share (EPS) growth blew past… Read More

As equity markets grind higher and investors complain about the absence of value, they continue to flock toward cheap and efficient exchange-traded funds (ETFs). Money directed to equity ETFs grew 13% in 2016, pushing the assets under management to $2.4 trillion in the U.S. alone. While the ETF growth stampede continues, seemingly ignoring valuations in some cases, an ocean of value is being ignored among the ETF’s grandparents: the venerable closed-end fund (CEF). #-ad_banner-#I’ve always had a soft spot for the good old CEF. They tend to fly under the radar. So, before we go shopping, here’s a little historical… Read More

As equity markets grind higher and investors complain about the absence of value, they continue to flock toward cheap and efficient exchange-traded funds (ETFs). Money directed to equity ETFs grew 13% in 2016, pushing the assets under management to $2.4 trillion in the U.S. alone. While the ETF growth stampede continues, seemingly ignoring valuations in some cases, an ocean of value is being ignored among the ETF’s grandparents: the venerable closed-end fund (CEF). #-ad_banner-#I’ve always had a soft spot for the good old CEF. They tend to fly under the radar. So, before we go shopping, here’s a little historical background. CEFs trace their origin to investment trusts organized in Great Britain during the 1860s. The objective was to raise money for investment in the British Empire’s colonial possessions as well as to provide capital to the rapidly expanding railroads in the United States. Financed using bank leverage or the sale of debentures, their primary objective was income rather than capital appreciation. CEFs gained popularity in the United States during the Roaring Twenties. Prior to the Crash of 1929, CEF assets topped $4.5 billion, a significant chunk of the stock market’s total capitalization. But with the market excesses of that… Read More

Recently, I had to take an exam for yet another license my industry requires me to have. Aside from feeling like I’d given birth to a compliance officer afterwards, I came away from the experience, newly minted license in hand, with an investment idea. I took the exam, on a computer workstation of course, at one of the many testing centers owned and managed by British education and multi-media publisher Pearson PLC (NYSE: PSO). Although my exam was specific to the financial industry, qualification exams for other professions are also administered at the centers, including nursing and engineering to name… Read More

Recently, I had to take an exam for yet another license my industry requires me to have. Aside from feeling like I’d given birth to a compliance officer afterwards, I came away from the experience, newly minted license in hand, with an investment idea. I took the exam, on a computer workstation of course, at one of the many testing centers owned and managed by British education and multi-media publisher Pearson PLC (NYSE: PSO). Although my exam was specific to the financial industry, qualification exams for other professions are also administered at the centers, including nursing and engineering to name a few.  Honestly, when I first looked at the stock, I was not impressed.     As you probably know, I’m not a chart guy. But if you go by these tea-leaves, the wiggles aren’t encouraging — and neither are the fundamentals. Earnings Per Share (EPS) has declined, on average, 131% on an annual basis over the last two years. Annual revenue has shrunk by 9.5% on average for the same period. But the short-term pain may be paving the way for long term gain. #-ad_banner-# Pearson, like most large publishing and media companies, is grappling with the disruptive technological… Read More

For the past three years, I’ve driven an SUV and a pickup. I got an unbelievable deal on the pickup (I always buy used), but it needed new tires. When I took the truck to the friendly neighborhood tire guys to replace them with similar all-terrain tires, I then understood why they were so friendly and why the truck was such a good deal. Ouch. I’m not alone. Currently, light trucks and SUVs represent 63% of 2016’s record year for U.S. vehicle sales, which came in at 17.55 million. Three years ago, the truck and SUV share of auto sales… Read More

For the past three years, I’ve driven an SUV and a pickup. I got an unbelievable deal on the pickup (I always buy used), but it needed new tires. When I took the truck to the friendly neighborhood tire guys to replace them with similar all-terrain tires, I then understood why they were so friendly and why the truck was such a good deal. Ouch. I’m not alone. Currently, light trucks and SUVs represent 63% of 2016’s record year for U.S. vehicle sales, which came in at 17.55 million. Three years ago, the truck and SUV share of auto sales was right at 50%. As far as cars on the road in the United States, the average age of a vehicle in the light truck/SUV category is around 6.1 years. Eventually, tens of millions of tires will be replaced to the tune of $800 to $1,400 a set. That’s why I’m looking at Cooper Tire and Rubber Company (NYSE: CTB). Cooper is the number five tire manufacturer in North America and number twelve worldwide, with 2016 sales of $2.92 billion. Why do I want to buy the middle of the pack? First, the stock is a genuine value with attractive… Read More

Market observers like to refer to companies involved in mature or dying industries as “buggy whip” companies. What is commonly overlooked is that many of these companies, despite their old-fashioned brand image and reliance on dated technology, have been quietly transforming themselves into high-tech, cutting-edge enterprises. And the stocks are usually a bargain. One of my favorite names in this situation is Pitney Bowes (NYSE: PBI). I’ve written extensively about the company in years past but have been out of the stock for quite a while. It’s time to get back in. Here’s why. The stock has given… Read More

Market observers like to refer to companies involved in mature or dying industries as “buggy whip” companies. What is commonly overlooked is that many of these companies, despite their old-fashioned brand image and reliance on dated technology, have been quietly transforming themselves into high-tech, cutting-edge enterprises. And the stocks are usually a bargain. One of my favorite names in this situation is Pitney Bowes (NYSE: PBI). I’ve written extensively about the company in years past but have been out of the stock for quite a while. It’s time to get back in. Here’s why. The stock has given back 35% of its value over the past year. The readjustment has created an extremely cheap forward P/E of 7.6 with an attractive dividend yield of 5.60%. But is the stock a value or a value trap? PBI Is Adapting To The Changing Market You don’t have to convince me that physical mail is a declining business. At the same time it’s important to realize that it will still be around in some form or fashion for quite a few years if not decades to come. You can’t send a guitar you sold on eBay (Nasdaq: EBAY) via e-mail. Read More

During a bull market, you can just about set your watch to individual investors being fashionably late. Institutional money is always early to the party. They must be per their investment mandates. But individual retail investors are a completely different animal. Why do individual investors always get in late during a bull run? This chart of the S&P 500 going back to the turn of the century is the best explanation. Over the last 17 years, the index has endured two bear markets, where the average decline was 47%, and two significant corrections with average drawdowns of 16.5%. Read More

During a bull market, you can just about set your watch to individual investors being fashionably late. Institutional money is always early to the party. They must be per their investment mandates. But individual retail investors are a completely different animal. Why do individual investors always get in late during a bull run? This chart of the S&P 500 going back to the turn of the century is the best explanation. Over the last 17 years, the index has endured two bear markets, where the average decline was 47%, and two significant corrections with average drawdowns of 16.5%. This translates into a major market downturn every 4.25 years. That’s a lot of volatility, and volatility always frightens individual investors. But as everyone knows, when dealing with market forces the opposite side of fear is greed. Once individual investors see that the train has left the station, they usually chase it. One of the main vehicles used in the chase, of course, is the venerable mutual fund. #-ad_banner-#With this is mind, fund manager stocks are an excellent way to profit from tardy investors jumping into the market. As investors shovel money into the funds, increasing the managers’ assets under… Read More