The following two-part article puts forth ten stock ideas that I believe would be better off in your investment portfolio than one comprised primarily of Certificates of Deposits (CDs) or bonds, or even government treasuries. This is not to say that CD's do not have value or offer some level of security, but they are long term losers.
A basket of high yielding-high quality stocks can offer a higher return, better tax advantages, and the potential of significant appreciation for those with a long time horizon. Five year CD earning 4%, or a utility stock? I pick the utility every time.
My wife sent me the following quote from Ambrose Redman that I thought would be worth sharing with readers: "Courage is not the absence of fear but rather the judgment that something else is more important than one's fear."
It seems that might be extended to one's view on investing as well. What is really important, the short term or the long term, growth or value, the promise of riches or the hope for stability? In each case I would favor the latter over the former and this brings to mind one of my pal Warren's lessons: Do not buy a stock unless you would be happy to own it even if the market was closed for ten years.
Every trade publication made mention this week that Huaneng Power International, (ADR) (NYSE: HNP), following the decision by China's National Development and Reform Commission to lift power price tariffs, said it's increased prices by 5.67% in a move effective Aug. 20.
The stock is down from $41.75 in December when I suggested adding it to your watch list, to about $35 ten weeks ago when I last wrote at length about it in Chasing Value: You want power, buy power -- Huaneng Power HNP. It closed today at $28.36, up $0.31(+1.11%) and is paying a 5.78% dividend yield.
The Motley Fools recently reported that the Chinese goverment will be increasing their efforts to clean up the environment. Along those lines Huaneng Power is in the procees of building the first zero-emissions coal-fired power plant. HNP also announced that it is raising generating capacity to 36,993 MW.
HNP remains one of my favorites for the next few decades as China continues to develop. As long as the dividend remains secure it is a very compelling stock to include in a long term diversified portfolio as a core holding.
Sheldon Liber is the CEO of a small private investment company and the principal for design and research at an architecture & planning firm. He writes the columns Chasing Value and Serious Money.DISCLOSURE: I currently own shares of HNP.
After five months of tracking my 2008 picks, it is rewarding to finally have a breakthrough -- topping the three major stock indices and Berkshire Hathaway (NYSE: BRK.B) too. It has been painful to have to report each month that I was being bested. However, since I have not seen anything contradicting my original rationale for my eight picks I stood my ground.
Moving into positive territory by pennies was Loews Corporation (NYSE: LTR). Among its holdings is a 51% stake in Diamond Offshore Drilling, Inc. (NYSE: DO) that has been doing well as the world remains desperate for more oil and natural gas.
Bunge Limited (NYSE: BG) was the other stock to cross the line into the black, while Valero Energy Corp. (NYSE: VLO), although improving, remains my worst performer. It is still down almost 28% after five months.
This month saw great improvement after last month's disaster. Having to conclude my findings on a specific month end day, or any day, depending on the news, sometimes distorts results. For example news on March 31 sent the market down and on April first my picks shot up an unusual amount; hopefully the trend will continue.
My riskiest stock pick Newcastle Investment Corp (NYSE: NCT) was down the most in March but recovered about 35% of the loss in April leaving Valero Energy Corp. (NYSE: VLO) the dubious honor of being my worst performer, down over 30% in the first four months of the year.
April showed improvement as many companies reported positive earnings reports or beat expectations.
Most of my picks improved. Higher food prices no doubt helped Bunge Limited (NYSE: BG) which recaptured losses moving up 23% from its recent bottom. My two winners Raytheon Co. (NYSE: RTN), the high tech defense contractor, and Reliance Steel & Aluminum (NYSE: RS) were joined by a third, Anglo American plc (ADR) (NASDAQ: AAUK) which had a 10% swing entering positive territory.
Watching one of your largest holdings go up in value is a vision of joy. The same is not true on the way down. Huaneng Power ADS (NYSE: HNP) is indeed way down from its high of $57.50. I recommended the stock last year at $26.50 and looked brilliant until last month when it completed retracing its upward trajectory back to that level.
The company reported an 80% drop in earnings attributed to higher coal costs Tuesday. However, today the value buyers must be back in droves because the stock closed up almost 16% as one of the day's big movers. The stock closed at $30.25, up over $4 per share. The following three-year chart captures the drama.
After three months it is time to face the facts: two of the three indices beat my picks handily. I have not made a good showing so far and unlike most investment idea sources, I feel obliged to air my dirty laundry for all to see.
My riskiest stock pick Newcastle Investment Corp (NYSE:NCT) is down almost 37% this year, and the energy stocks did almost as poorly even though fuel prices are near all-time highs. The downers were not offset by this months' repeat winners.
March was a seesaw battle, but in the end there was not much to show for it. However, unlike the last day of January (down 370 points in the Dow) and February's last trading day (down 315 points), March had a final day of plus 46.49, which is not very meaningful.
Most of my picks sagged a little more, while two remain in positive territory. Raytheon Co. (NYSE: RTN), the high tech defense contractor is up and Reliance Steel & Aluminum (NYSE: RS) is way up.
Two months into the year and investors' true 'metal' was tested, and mine more than most. February showed signs of improvement over January, but the last week ended hopes of any rally. The last day of January saw a 370 point drop in the Dow and February's last trading day closed with similar results, down 315 points.
The soft stock market did display many points worth noting. The Dow Jones Industrial Average was about break even for the month, indicating investors were showing some signs of support for large cap stocks, prompted in part by news of increased profits at Wal-Mart (NYSE: WMT) and share buy-backs at IBM Corp (NYSE: IBM).
Some of my picks also sagged a little more, although not as much, while two turned into positive territory. In January, only Raytheon Co. (NYSE: RTN), the high tech, defense contractor, was up. In February, the weak dollar and inflation concerns boosted Anglo American plc (ADR) and Reliance Steel & Aluminum (NYSE: RS) -- two commodity plays.
January was a wild ride and February holds the promise of more of the same after yesterday's 370 point drop in the Dow. All the major indices were down in January and so were seven of my eight picks. Only Raytheon Co. (NYSE: RTN), the high tech defense contractor, was up. My two high flyers from last year, Huaneng Power International, Inc. (ADR) (NYSE: HNP) and Valero Energy Corp. (NYSE: VLO), were the biggest losers.
Among the indices, the DJIA lost the least and the NASDAQ lost the most. The average return for my eight picks was -7.82%. This underperformed the average of the indices that was -7.58% -- but my new stalking horse Berkshire Hathaway (NYSE: BRK.B) bested both, so Buffett is still the man.
Now including dividends for my picks which average 3.91% divided by 12 for the one month allows for an additional .326%, reducing the loss to -7.494%. Using 1.8% for the average dividend of the indices divided by 12 adds 0.15%, reducing the loss to -7.43%. The dividends tighted things up. BRK.B does not pay a dividend.
The following are my eight picks with the starting share price as of December 28, 2007:
I recently posted Chasing Value: Final list -- 8 stocks for 2008 and mentioned that all of them pay a dividend. If this year is going to be as gloomy as some would have you believe, then stocks that pay dividends, as a group, will outshine those that do not.
The following are my eight picks, with the closing stock price as of my start date December 28, 2007 and the dividend yield. Last year, there were more stocks among my picks that paid a dividend higher than the S&P 500 Index average of 1.8% . This year there are only two.
The more questions you have these days about the investment world, and the more concerned you are about economy over the next few years, the more you should have some of your assets in electric utilities. Regardless if our nation makes a push toward nuclear, solar, or wind power or does nothing at all, electric utilities will remain the big players. Year in and year out they have a stable customer base, pay a higher dividend yield and have a much higher level of predictability than almost any other investment class.
Another factor that is likely to contribute to the growth of electric utilities is the push toward electric "plug-in" cars. I have not done any analysis as to how this will affect global warming, the price of gas, the quality of air, or total national energy consumption, but those issues aside, if we change even 25% of the nation's automobiles to all-electric over the next ten years, that is a lot of growth.
Historically, the Dow Jones Utilities Average has beaten the pants off the Dow Jones Industrial Average for total return. There are short periods of time when the Industrials jump past the Utilities, but over the long haul, investors have done much better with what seems like the less attention-grabbing, boring old utilities. Choosing boring stocks remind you of anyone? Yes, "My Pal Warren" has been buying these boring stocks over the last decade (adding to his others in chocolate, underwear, ice cream and insurance) and you can see the results in the five-year chart comparing the two Dow indices.
This year has been a stock picker's market extraordinaire! This month's review provides ample evidence of this, as you'll note that Google (NASDAQ: GOOG), which I included for fun because of its popularity, beat all else as a portfolio of one. The average of my seven picks came in second, beating James Cramer's average based on his nine picks. Both Cramer and I beat each of the three indices I am tracking, and therefore beat the average as well, with the largest and most stable, the Standard & Poor's 500 coming in last.
Of course, this could easily change given recent market volatility. A sharp downturn in the market could reverse our fortunes. A lot can happen in the remaining two months -- I take nothing for granted.
While Google shined brightly this year, Cramer and I have each made one pick that shined brighter. Cramer's best, Apple (NASDAQ: AAPL) has gone into orbit this year on the wings of the iPhone, iPod, and growing Mac sales. Benefiting from rising oil prices, shortages in China and the Chinese government allowing a 10% price hike, my PetroChina ADR (NYSE: PTR) has rocketed, becoming the second-largest capitalized company in the world. PTR has done this even in the shadow of Berkshire Hathaway (NYSE: BRK.A)selling its shares and Warren Buffett questioning the huge appreciation of the Chinese stock market and stocks overall.
Back on August 16, with the Dow opening under 13,000 for the first time since April, our BloggingStocks experts outlined a number of stock plays to ride out this volatile market. Picks ranged from Dow components and other household names to obscure business-to-business giants and foreign market leaders.Here, we review our picks weekly.
In the seventh week since our Volatile Markets stock recommendations, only a few of our picks have seen significant movement.
After stalling last week, South Korean steelmaker Posco (NYSE: PKX), has jumped another $7.39. The 4.08% gain brings Peter Cohan's tip to $188.52, 52.02% higher than its August 16 opening price of $124.01.
Sheldon Liber's recommendation, Huaneng Power International Inc. (NYSE: HNP), gave back some of last week's 18.08% gain this week. Despite the Chinese utility's 6.53% knock, Huaneng still stands a formidable 30.40% higher since our volatile markets feature ran.
Back on August 16, with the Dow opening under 13,000 for the first time since April, our BloggingStocks experts outlined a number of stock plays to ride out this volatile market. Picks ranged from Dow components and other household names to obscure business-to-business giants and foreign market leaders.Here, we review our picks weekly.
Posco (NYSE: PKX)'s gains have tapered a bit -- Peter Cohan's pick followed up last week's 10.41% run with a modest 1.30% rise this week. Still, just six weeks since our Volatile Markets feature, the South Korean steelmaker stands 46.06% higher! Incredible.
This week's big story, however, is Huaneng Power International Inc. (NYSE: HNP), recommended by Sheldon Liber. The Chinese utility nearly doubled its gains as of last week, shooting 18.08% higher, closing Thursday up 39.51% in the last six weeks!
Back on August 16, with the Dow opening under 13,000 for the first time since April, our BloggingStocks experts outlined a number of stock plays to ride out this volatile market. Picks ranged from Dow components and other household names to obscure business-to-business giants and foreign market leaders.Here, we review our picks weekly.
Wow! I hope you looked into Peter Cohan's pick, Posco (NYSE: PKX), when our feature ran. Like a broken record, again I ask how long the South Korean steelmaker can continue these fantastic gains -- 44.37% higher in just five weeks! Even if you bought in last week, you'd already be up 10.41%. Phenomenal.
Also performing handily are two of Sheldon Liber's picks, Huaneng Power International Inc. (NYSE: HNP) and Anadarko Petroleum (NYSE: APC). China's Huaneng rose 1 1/2% since last week to close at $44.99 Thursday, putting it up 18.43% since our virtual purchase August 16. Texas energy concern Anadarko has gushed 4.48% higher since last Thursday, climbing to $52.96, a total gain of 11.54% since our August 16 Volatile Markets feature.
Given investors anxiousness about the economy and hearing more gloom and doom than I think is warranted, I thought I would get back to basics with "my pal" Warren, and add to the series I started several months ago. I decided to write the series after receiving encouragement from friends and associates that read With Warren Buffett by my side ....
Today, I am writing about the concept of Durable Competitive Advantage, which is the ability to get ahead and stay ahead with a high level of certainty. It is also referred to as Sustainable Competitive Advantage.
To achieve a Durable Competitive Advantage, several factors have to be present. One is a big moat (Buffett expression) surrounding the enterprise. This usually means businesses that sell commodities where price is the primary factor in determining opportunity, have no moat as price takers. Their profit margins are not easily defendable. Another factor is barrier to entry. How easy would it be for someone to enter the same business and compete? The T-shirt business is a good example, of something without a Durable Competitive Advantage. Anyone could enter this business in one day, and they do. So unless the business has some unique concept, it does not have the promise of relatively predictable and sustainable profit margins in the future.
The following two-part article puts forth ten stock ideas that I believe would be better off in your investment portfolio than one comprised primarily of Certificates of Deposits (CDs) or bonds, or even government treasuries. This is not to say that CD's do not have value or offer some level of security, but they are long term losers.
Every trade publication made mention this week that 
After five months of tracking my 2008 picks, it is rewarding to finally have a breakthrough -- topping the three major stock indices and 
This month saw great improvement after last month's disaster. Having to conclude my findings on a specific month end day, or any day, depending on the news, sometimes distorts results. For example news on March 31 sent the market down and on April first my picks shot up an unusual amount; hopefully the trend will continue.
Watching one of your largest holdings go up in value is a vision of joy. The same is not true on the way down. 
After three months it is time to face the facts: two of the three indices beat my picks handily. I have not made a good showing so far and unlike most investment idea sources, I feel obliged to air my dirty laundry for all to see.
Dow. All the major indices were down in January and so were seven of my eight picks. Only 
This year has been a stock picker's market extraordinaire! This month's review provides ample evidence of this, as you'll note that 
Given investors anxiousness about the economy and hearing more gloom and doom than I think is warranted, I thought I would get back to basics with "my pal" Warren, and add to the series I started several months ago. I decided to write the series after receiving encouragement from friends and associates that read 
The Wal-Mart Weekly: Retailer accused of sweatshop conditions in Bangladesh
Fog clearing - maybe. Clear skies - no! GE, JNJ, MRK, PG, RTN, WFC
Cramer on BloggingStocks: A fighting chance for the credit markets.
