Marketpulse
When Alan Greenspan was Fed chairman, a widely heard phrase was the “Greenspan put.” It meant that if the market ever started to fall sharply, investors could count on Greenspan riding to the rescue with an interest rate cut. Greenspan, though, always waited for stocks to drop by at least 20 percent. Current Fed chairman Ben Bernanke has much less tolerance for risk. He recently cut the Fed Funds rate by a half percent with…
FRONT PAGE
Income That Won’t Quit: Inflation-Beating Dividend Payers
Inflation is picking up smartly just as ever more Americans are becoming dependent on income from investments to let them enjoy their golden years. Below we present income plays designed to outpace rising prices.
GROWTH PORTFOLIO
Infrastructure: It’s What The World Needs Now, New picks Danaher, ABB, Supply a Lot of It; We Sell PetroChina, Microsoft
In a recent Alert, we sold PetroChina (from both Growth and Income; see p.5). This doesn’t mean we’ve grown any less bullish about energy, energy stocks, or even about the underlying fundamentals of PetroChina, China’s major oil company. Our sale was purely a response to the massive surge in the shares that resulted mainly from the bubble-like enthusiasm for everything attached to China’s own stock market (see p.10). PetroChina had started behaving more like a…
INCOME PORTFOLIO
Psst, Here’s a Tip: Buy TIPS: They’re the Only Bonds Designed to Keep Up With Inflation
First, a word of clarification concerning a figure you may have noticed in last issue’s Income Portfolio. Our table listed the Vanguard Inflation-Protected Securities fund as yielding 10.1 percent. Technically this was accurate. But it was misleading in that on an annual basis the fund yields a considerably more modest and more plausible 4.7 percent. We should have made this clear and apologize for not doing so. While on the subject, though, let’s look at…
FUNDFOLIO
Upgrading Our Core Value: Retiring a T. Rowe Price Fund in Favor of Smaller Homestead Value
In talking about how best to structure a mutual fund portfolio, we’ve often touched on the notion of starting with a “core” fund—which for most investors should be a relatively low-risk, low-volatility large-cap value or large-cap blend fund. With such a core fund, built around well-established large-cap companies, as your safe foundation, you can then selectively add more specialized or more volatile funds—an energy fund, for example, or a small-cap fund. This issue we’re retiring one…
FUND FINDS
Sunny Outlook: A Realtor That’s No Average Joe, St. Joe Has Value As Florida’s Biggest Private Landowner
Nearly two years ago Third Avenue Value fund joined FundFolio. This issue we’re adding one of the fund’s bigger positions—Florida real estate giant St. Joe Company—to FundFinds. Martin J. Whitman, Third Avenue Value’s manager since the fund’s 1990 inception, is famous for his “safe and cheap” approach. The idea is simple: birds that fly closer to the ground have the potential to soar far higher and also will be hurt much less if they fall. Similarly,…
FAST TRACK
Palm Still Can’t Get It Right: It Remains a Short, But We Take Profits in Public Storage; Energy Updates
Most of our Fast Track positions have been panning out nicely despite the market’s continuing turmoil, and many have actually made new highs. With quarterly earnings reports starting to come in, following are some updates. One of our shorts, Palm, reported fiscal first-quarter earnings in early October that once again disappointed investors. In fact, for the first time in more than three years the company turned in negative earnings results, losing 1 cent per share compared…
SECTOR SENSE
The Right Staff: The Beaten-Down Staffing Industry Should Rebound Absent a Recession
This issue we look at a sector that, given the less than full-throttle U.S. economic backdrop, might seem a counter-intuitive place to seek stock market gains: the human resources/staffing industry. But there’s reason to think this might be just the time to pick up shares in the group’s best-situated companies. The key point about stocks in this group is that they are cheap, trading at valuations not seen since the last recession. This means there’s little…
MARKET BITES
Market Bites
Rate Cuts and Stocks, Chindia, MasterKey
WHAT THEY'RE THINKING
John Buckingham: His Trademark Is Prudence
The investment letter The Prudent Speculator— originally named The Pinchpenny Speculator—has been around for 30 years. Under both names, as you might guess, its focus has been squarely on finding cheap, i.e., undervalued, stocks. It’s an approach that worked well for the publication’s founder, Al Frank, and is continuing to pay off for the current editor, John Buckingham. Buckingham first began working at The Prudent Speculator in 1987, when still a student at the University of…
SMALL CAP VALUE PORTFOLIO
Why Small Caps Will Roar Back: First, You Can’t Buck History; Second,Inflation Is on Its Way
Over the long haul, we remain convinced that small-cap value stocks have a risk/reward profile that makes them far more attractive than any other asset class. By that we mean that their long-term returns will more than make up for their added volatility. Shorter term, though, the small fry sporting the lowest valuations can lag their growth-oriented and large-cap counterparts by a wide margin. And that’s precisely where we find ourselves today. During the past 12 months,…
