Stocks are up this year but not everyone is profiting. One reason is that many investors, stung by the market collapse, have been looking for safety by investing in dividend paying stocks. But Richard Moroney, editor of Dow Theory Forecasts, says that investing for yield is a flawed strategy.

Moroney, a chartered financial analyst, points out that while the S&P 1500 Index is up about 16% so far this year, investors in high-yielding stocks (with yields of 4% or more) have a year-to-date return of just 4%. And he says that stocks that do not pay dividends are up an average of 29%.

We spoke with Richard Moroney to find out why this is the case -- and what income investors should do.

Continue reading Guru Strategy: Don't look to high yield stocks for high returns

Guru Strategy: Don't look to high yield stocks for high returns originally appeared on BloggingStocks on Thu, 18 Jun 2009 17:30:00 EST. Please see our terms for use of feeds.

"Golf has Tiger Woods, novelists have Tom Clancy, and the investment community has stars such as Bruce Berkowitz, Bill Nygren, Charlie Dreifus, and Mario Gabelli," states Paul Tracy.

In his The Street Authority Market Advisor, he suggests, "These money managers are at the pinnacle of their craft." Here, he takes a look at these "celebrities" and some of their current top stock holdings.

"These money managers have all amassed prodigious gains over the years for their shareholders. Over the past few months, these gurus have come out with ringing endorsements for certain stocks. This isn't empty talk -- they are putting their money where their mouth is.

Continue reading Investing with the stars: Top stocks from top managers

Investing with the stars: Top stocks from top managers originally appeared on BloggingStocks on Fri, 22 May 2009 11:00:00 EST. Please see our terms for use of feeds.

I have not decided who I am voting for yet. Or maybe it would be more accurate to say I have decided on multiple occasions only to become undecided again. While some will see me as fickle, or worse, others may be in the same boat.

I am also continuing to think about what difference any of the candidates can make on the economy, and based on these musings, where to invest. My current belief is that none of them will have a profound impact on our economy.

There are no financial wizards among them. Here is the shocker though: I like all three candidates, or at least can find some good in each of them. Each of them is a fighter, and I believe each one of them brings certain skill sets to the job. There are also things about each candidate that are inescapably negative. Clinton has so much baggage, Zsa Zsa Gabor would be jealous. Obama does not have the experience and he has a degree of arrogance (right sweetie); McCain is an old stick-in-the-mud who, as a long-time senator, has spent more hours with lobbyists than almost anybody, though he is pretending otherwise.

Where does this leave me from an investment perspective? My first choice, for stability with moderate growth and dividends, remains the defense sector. I wrote Defense sector rolls over S&P 500 for 8th straight year a while back and I still think that it is the most secure. Here's why:

A) None of the candidates will want to appear soft on defense when we are at war, and all three have made threatening remarks in some country's direction to make sure the electorate knows that.

B) The War in Afghanistan and Iraq rages on, and even the most optimist view is that a draw-down will take years.

C) Even if all war ceased immediately, the upgrading and replenishment of the hardware will cost billions of dollars and most of the defense contractors have that in their backlogs now. Chasing Value: General Dynamics & Raytheon -- The defense does not rest

Continue reading Investing in Everyone: Defense, Food, Power, Clinton, Obama, and McCain

Investing in Everyone: Defense, Food, Power, Clinton, Obama, and McCain originally appeared on BloggingStocks on Tue, 27 May 2008 19:05:00 EST. Please see our terms for use of feeds.

When it comes to defense spending over the last nine years, there has not been any rest. As I have reported on numerous occasions, the defense sector has beaten the market indices year after year. This year is no exception and two of my recommendations remain ahead of the market and are reporting new contracts every day.

Today, theThe Arizona Republic reports [registration required] that General Dynamics (NYSE: GD) is to receive billions in contracts for its C4 Systems as part of the Army's extensive modernization plan. The company is building a communications network for the Army and is the lead contractor with Lockheed Martin (NYSE: LMT) for a wireless network that will deliver mobile connectivity to soldiers on the field.

General Dynamics is up about $10 (12.5%) in the last year and offers a 1.5% dividend yield. Its current P/E is 16.5 and its P/S is 1.33 with a 15% ROIC. It opened today at $90.58.

Continue reading Chasing Value: General Dynamics & Raytheon: The defense does not rest

Chasing Value: General Dynamics & Raytheon: The defense does not rest originally appeared on BloggingStocks on Tue, 27 May 2008 14:32:00 EST. Please see our terms for use of feeds.

Radio World reported that Harris Corp. (NYSE: HRS) might sell itself. I just spoke with an analyst who said that there's a rumor that the suitor might be military contractor General Dynamics (NYSE: GD).

Harris is based in Melbourne, Fla., and has a market capitalization of $7.3 billion. Perhaps Harris thinks its growth potential in the defense industry is "less attractive" than anytime since Sept. 11, 2001. Harris has 16,000 employees and reported $5.1 billion in revenues and net income of $410 million over the last 12 months, ending March 28, 2008.

General Dynamics may be able to cut costs and increase revenues by combining the two firms. And Harris stock is clearly rising -- it's up 2.8%. Could it be due to this rumor? Please comment if you know more.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

Deal Rumor: Will General Dynamics buy Harris Corp.? originally appeared on BloggingStocks on Fri, 16 May 2008 11:23:00 EST. Please see our terms for use of feeds.

Last year, my best Chasing Value recommendation was Aluminum Corp of China ADS (NYSE: ACH), which sailed from $22 per share to a 52-week high of $90.95. I will take credit for finding a winner, but I cannot in all honesty say that I thought it would more than quadruple -- that part was luck. (The original story was Chasing Value: Aluminum Corporation of China ADS, which I still think is worth a read today.)

If you acquired what is often referred to as Chalco (China Alum. Co.) anywhere near the time I recommended it and still own it you are probably still very content with only perhaps a 90% gain as the stock has come down some, closing last Friday May 9 at $40.98

Another of my recommendations was General Dynamics Corp (NYSE: GD), which closed Friday at $90.92. This one is only up a few percentage points from my starting point of $88 per share, but you will note, curiously, that it is only 3 cents off ACH's high. Given the market's bad year, a gain when the market is losing is a bigger plus than the casual observer would perceive. The defense sector has provided the anticipated market defense as I discussed.

Continue reading Chasing Value: Cool trade -- Alum.Co. of China for General Dynamics

Chasing Value: Cool trade -- Alum.Co. of China for General Dynamics originally appeared on BloggingStocks on Mon, 12 May 2008 14:57:00 EST. Please see our terms for use of feeds.

MAJOR PAPERS:

• According to senior industry sources, the Financial Times reported that the Ministry of Defense could ask General Dynamics Corporation (NYSE: GD) to provide the vehicle design for a new generation of armored vehicles for the army. It is unclear whether General Dynamics, in competition with Nexter and Artec, will be awarded the contract or will be named the preferred bidder.
• Following the collapse in March of The Bear Stearns Companies Inc (NYSE: BSC), the Financial Times also reported that the SEC will soon require Wall Street banks to publicly disclose more details about liquidity and capital positions. Cox also urged lawmakers to pass legislation that would allow the SEC, or another regulator, the "explicit mandate to supervise" investment banks.

• According to the New York Times, Citigroup Incorporated (NYSE: C) will move senior investment banker Alberto Verme to Dubai by the end of the month in the hopes of establishing a stronger foothold in the region, a crucial area for global banks.
• The New York Times also reported that several large oil companies, including BP Plc (NYSE: BP), ConocoPhillips (NYSE: COP) and Chevron Corporation (NYSE: CVX), agreed to pay nearly $423M in cash in order to settle a lawsuit that alleged water contamination from methyl tertiary butyl ether, a gasoline additive. Under the terms of the deal, the oil giants also agreed to pay 70% of the future cleanup costs for the next 30 years. Exxon Mobil Corporation (NYSE: XOM) and several other companies named in the suit did not agree to the deal.

Newspaper wrap-up: General Dynamics may win MoD contract originally appeared on BloggingStocks on Thu, 08 May 2008 08:47:00 EST. Please see our terms for use of feeds.

Continue reading Defense stocks should be on your radar screen

Defense stocks should be on your radar screen originally appeared on BloggingStocks on Thu, 07 Feb 2008 16:19:00 EST. Please see our terms for use of feeds.

In recent months I have been recommending that investors take a look at the defense sector as a safe haven during this erratic stock market -- erratic and down. My most recent post on the subject was Chasing Value: Raytheon (RTN) up on earnings & 2008 outlook. The defense sector has beaten the S&P 500 index for eight years running and this year may mark the ninth straight.

In a previous post I trumpeted General Dynamics Corporation (NYSE: GD) and still believe in the stock. The price-to-sales is a modest 1.33. The P/E of 16 and dividend are average, but it has a healthy ROE near 20%. If you believe the forward looking P/E it is only 14. GD makes the Gulfstream aircraft for the wealthy jet-setter and the Abrams tank for the military. How many of those will need parts or replacement in the coming years?

When I was evaluating my 2008 picks I looked at most of the large defense contractors and included RTN over GD. If you look at the chart below and the original story Chasing Value: General Dynamics (GD) looking long and flying high!, you will find I was looking at General Dynamics around $90 a share. We bought in at $88 so you know I like it even more in the area of $83 where it is trading now.

Continue reading Chasing Value: General Dynamics (GD) revisited

Chasing Value: General Dynamics (GD) revisited originally appeared on BloggingStocks on Thu, 07 Feb 2008 08:50:00 EST. Please see our terms for use of feeds.

In searching out investments for 2008 -- what is likely to be a precarious stock market -- I have been touting the defense industry for the last two months as one of the stories for next year in terms of growth and safety. A press release today noted: "The benchmark SPADE Defense Index (AMEX: DXS) currently has a year-to-date gain of 21.5%, nearly 20% better than the widely followed S&P500 broad-market index."

Certainly this might have been expected in the aftermath of the September 11 tragedy, and given that the U.S remains at war in Iraq and Afghanistan. But this is just one aspect of the industry. Some companies like Boeing Co (NYSE: BA) are doing equally well in the private sector selling new planes and replacement parts for aging fleets.

Raytheon Co (NYSE: RTN) is heavily involved not just with airport security, but develops radar and monitoring systems for airport safety. This is of growing concern as the skies become more congested and airports more impacted.

United Technologies (NYSE: UTX) makes military helicopters that are also used for civilian fleets and fire fighting. UTX also is a world leader in the private sector owning Otis Elevator, Carrier Air Conditioning and more.

Continue reading Defense sector rolls over S&P 500 for 8th straight year

Defense sector rolls over S&P 500 for 8th straight year originally appeared on BloggingStocks on Wed, 19 Dec 2007 15:05:00 EST. Please see our terms for use of feeds.

Lockheed stock has shot up over the past three months, hitting a one-year high of $113.74 earlier this month. LMT opened this morning at $106.16. So far today the stock has hit a low of $106.15 and a high of $108.90. As of 11:05, LMT is trading at $108.70, up $1.73 (1.6%). The chart for LMT looks bullish and steady, while S&P gives the stock a positive 4 STARS (out of 5) buy rating.

For a bullish hedged play on this stock, I would consider a January bull-put credit spread below the $90 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just 3 months as long as LMT is above $90 at January expiration. Lockheed would have to fall by more than 17% before we would start to lose money.

Continue reading Lockheed Martin, defense stocks on a roll

Lockheed Martin, defense stocks on a roll originally appeared on BloggingStocks on Wed, 24 Oct 2007 12:38:00 EST. Please see our terms for use of feeds.

Remember when Boeing was a laughingstock? originally appeared on BloggingStocks on Wed, 24 Oct 2007 12:20:00 EST. Please see our terms for use of feeds.

"New leadership often emerging during corrections," says Richard Moroney in Dow Theory Forecasts, who highlights 6 relative strength blue chips.

The advisor explains, "Stocks have retreated sharply and broadly, reflecting concerns that turmoil in the corporate-junk-bond and mortgage-debt markets will spill over to the broader economy - and perhaps halt the boom in takeovers."

Near-term volatility seems likely, he suggests, and a pullback to 12,700 to 13,350 on the Dow Industrials would be consistent with a secondary correction in an ongoing bull market. While holding some cash on the sidelines seems prudent, he advises, his recommended cash position remains at 5% to 10%.

Looking to find the stocks that will qualify as "new leadership" for after this correction, he notes, "A stock's ability to outperform during such pullbacks is a bullish indicator."

Continue reading New market leaders: Six-pack of blue chips

New market leaders: Six-pack of blue chips originally appeared on BloggingStocks on Fri, 03 Aug 2007 14:02:00 EST. Please see our terms for use of feeds.

Let me introduce my Yankee Doodle Dandy portfolio, a compilation of red, white and blue stocks for investors to consider as they celebrate our nation's independence.

Regardless of your views on the Iraq war, there's no denying that defense stocks including Lockheed Martin Corp. (NYSE: LMT), Northrop Grumman Co. (NYSE: NOC), Raytheon Co. (NYSE: RTN) and General Dynamics Corp. (NYSE: GD) are reasonably valued. This is especially noteworthy considering that defense spending will need to be maintained at pretty high levels for years to come in order to replace equipment that's been worn out from combat. President Bush is proposing to spend a record $439 billion in fiscal 2007 on defense and another $42.7 billion on homeland security.

Lockheed, the maker of the F-16, seems especially cheap, trading at a forward multiple of 14.6. Its shares have only gained 4.6% this year even though the company reported better-than-expected first-quarter results and raised earnings guidance. Missile and defense electronics company Raytheon, up less than 3%, is in the same situation.

Investors often overlook the huge businesses that Lockheed and Raytheon have in areas outside of defense, including computer systems and air-traffic control. The managements of both companies also have vastly improved over the past few years. Northrop and General Dynamics have always been pretty well run.

Boeing Co. (NYSE:BA), notably the second-largest defense contractor, also looks worth snapping up. Its stock is up less than 3% this year, which is surprising considering how well it's rebounded against European rival Airbus. The company trades at a forward multiple of 17.7.

Continue reading My Yankee Doodle Dandy portfolio

My Yankee Doodle Dandy portfolio originally appeared on BloggingStocks on Wed, 04 Jul 2007 07:15:00 EST. Please see our terms for use of feeds.

Continue reading The week in Defense and Aerospace

The week in Defense and Aerospace originally appeared on BloggingStocks on Mon, 19 Mar 2007 18:19:00 EST. Please see our terms for use of feeds.

MOST NOTEWORTHY:

• JMP Securities downgraded shares of WCI Communications Inc (NYSE: WCI) to Underperform from Market Perform to reflect the negative Q4 pre-announcement and lower-than-expected traditional home net orders.

• L-1 Identity Solutions Inc (NYSE: ID) was downgraded to Sell from Neutral at Oppenheimer, noting that the Transportation Security Administration is prepared to award the Transportation Worker Identification Card contract to Lockheed instead of L-1.

• General Dynamics Corp (NYSE: GD) was downgraded to Hold from Buy by AG Edwards, citing valuation.

• Matrix USA downgraded Microtune Inc (NASDAQ: TUNE) to Strong Sell from Sell on valuation.

• Convergys Corp (NYSE: CVG) was downgraded to Sell from Hold, with a $22 target, based on valuation.

• BancFirst Corp (NASDAQ: BANF) was downgraded to Underperform from Market Perform, with a $45 target, at Keefe Bruyette following the disappointing Q4 report.

Analyst downgrades 1-25-07: L-1 Identity could lose contract, gets downgraded originally appeared on BloggingStocks on Thu, 25 Jan 2007 11:34:00 EST. Please see our terms for use of feeds.

MOST NOTEWORTHY:

• UBS upgraded International Business Machines Corp (NYSE: IBM) to Buy from Neutral with a $118 target, citing improving fundamentals and expectations that software acquisitions will contribute to expanding organic growth rates, increased margins and multiple expansions.

• General Dynamics (NYSE: GD) was upgraded to Outperform from Neutral at Cowen, as the firm sees better-than-expected growth for General Dynamics Combat business, driven by the DoD's 2007 supplemental budget.

• Bear Stearns upgraded shares of TiVO Inc (NASDAQ: TIVO) to Peer Perform from Underperform, as the company believes risk/reward is now more favorable.

• Bernstein upgraded shares of Constellation Brands (NYSE: STZ) to Market Perform from Underperform citing valuation.

• Goldman Sachs added Royal Caribbean Cruises (NYSE: RCL) to their America's Conviction Buy List, beliving that RCL's overhang from higher energy expenses is abating and that pricing trends may be slightly better than expectations.

Analyst upgrades 1-8-07: IBM upgraded to Buy at UBS originally appeared on BloggingStocks on Mon, 08 Jan 2007 11:05:00 EST. Please see our terms for use of feeds.

MOST NOTEWORTHY:

• General Dynamics Corp. (NYSE:GD) was the only noteworthy company initiated today; Caris initiated the military equipment-maker with an Average rating based on valuation.

OTHER INITIATIONS:

• Merriman initiated Bankrate Inc. (NASDAQ:RATE) with a Buy rating; the firm said Bankrate has a number of attractive assets and competitive strengths that include a high level of direct-to-site traffic, high quality traffic, pricing leverage and strong management.
• Deutsche Bank started Color Kinetics Inc. (NASDAQ:CLRK) with a Buy rating and $23 target, as it believes Color Kinetics is an attractive play on the rapid adoption of LEDs.
• HSBC initiated Peabody Energy Corp. (NYSE:BTU) and Arch Coal Inc. (NYSE:ACI) with Overweight ratings.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Analyst initiations 12-5-06: General Dynamics with Average originally appeared on BloggingStocks on Tue, 05 Dec 2006 11:14:00 EST. Please see our terms for use of feeds.

MOST NOTEWORTHY: Yahoo! (YHOO), SanDisk (SNDK) and General Dynamics (GD) top today's extensive list of downgrades.

• Yahoo!, Inc. (NASDAQ: YHOO) was downgraded to Hold from Buy at Stifel Nicolaus & Co. The firm believes that Google (GOOG) is the only company to recommend in the large-cap Internet media/search sector.
• SanDisk Corp. (NASDAQ: SNDK) was downgraded at Citigroup and Oppenheimer to Neutral from Buy at both firms. Oppenheimer believes margins have peaked, pricing is aggressive and oversupply will hit the company in the first half of 2007.
• General Dynamics Corp (NYSE: GD) was downgraded at Goldman Sachs to Neutral from Buy on valuation.

OTHER DOWNGRADES:

• JMP Securities downgraded Labor Ready, Inc. (NYSE: LRW) to Outperform from Strong Buy citing the slowdown in the residential housing market and other peripheral markets. The firm does not see a strong catalyst for Labor Ready until late-2007.
• Stifel Nicolaus & Co. downgraded Coca-Cola Enterprises, Inc. (NYSE: CCE) to Hold from Buy. Stifel believes further negative estimate revisions are likely.
• United Parcel Service, Inc. (NYSE: UPS) was downgraded at Raymond James to Outperform from Strong Buy.
• Pfizer, Inc. (NYSE: PFE) was also downgraded by Raymond James, to Market Perform from Strong Buy. The firm cited poor earnings quality for Pfizer's downgrade.
• Finally, Merriman downgraded P.F. Chang's China Bistro, Inc. (NASDAQ: PFCB) to Neutral from Buy. The firm believes the current valuation reflects the improving sales trends and they expect management to remain conservative with 2007 guidance.

Analyst summaries provided by TheFlyOnTheWall.com (subscription required).

Analyst downgrades 10-20-06: Yahoo!, SanDisk only start the list originally appeared on BloggingStocks on Fri, 20 Oct 2006 11:06:00 EST. Please see our terms for use of feeds.