Alternative Energy Stocks: Their Time Has Come

Though we certainly have a long way to go, most will agree that the economy is looking up.  Just a few weeks ago, Jeffery over at Queercents wrote about positive signs in the real estate market.

In this article, I’d like to share with you my optimism on alternative energy stocks.

Both legislative and public sentiment has shifted.  Alternative energy is “in.”

1. People like the idea of not being at the mercy of companies like Exxon-Mobil and the like for their energy needs. When it cost over $100 dollars to fill up your SUV every week, you start believing in alternative energy.  For a few quarters of excessive profits, oil companies will pay dearly.
2. Obama is definitive in his support, both verbally, and with lots of cash. Some of his goals : supplying 10% of all electricity used in the US with alternative energies by 2012, and reducing greenhouse gas emissions 80% by 2050.
3. The success of products such as solar panels, windmills, and the Prius is snowballing.
4. Much as many will never admit in the USA - global warming is a given.  Ask the polar bears.

Here’s some great reading - should you be inclined.  As always, buy stocks only after extensive research.

• Alternative Energy Stocks
  
• The NY Times Green Blog
• SecurityStockWatch: Alternative Energy Solutions
• Autoblog Green
• Seeking Alpha:  Energy

To all of us Treehuggers:  We have climbed the mountain.  Let’s enjoy the view.

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Stock Market Investing Tips 101: Creating a POA Revisited

(this is an update of a post from January,2008)

To all of you novice investors out there: with little money, but a brimming curiosity for the stock market, last January,2008, I started stock investing.

I started by writing this Plan of Action (POA).

If you want to start your own investment plan, sit down, pick up a pen, and make your own POA right now. Go ahead! What have you got to lose?

Stock Market Investing Goals for 2008/9

1. Opened an Ing Sharebuilder Account (completed, with there $50 promotion). If you are interested in a current promotion, Jim over at Bargaineering has a $25 deal going.  I am reading through various posts that Trade King is doing a lot right these days as well - and for less cost than Sharebuilder.  So you might want to check them out.
   
2. Generate $1000 through alternative incomes other than my day job. I generated about $500 through taking advantage of credit card sign-up bonuses, and giving up things like Starbucks’s coffee through the year.  Once I gained a little more confidence, I took a portion of our savings.
3. Through identified investigative strategies as described by Jason Kelly and Investor’s Business Daily, I chose 3 Stocks for purchase: Google (GOOG), a growth stock, Annaly (NLY), an REIT dividend stock, and Ford (F), a speculative stock.
   
4. Watch these stocks and purchase at low points in their market price fluctuation cycle. I now have 2 (yes 2!) GOOG, 400 of NLY, and 250 of F.
   
5. Watch the money grow!

To see my portfolio results so far go to this link.

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Ford CEO Takes Compensation Cut. But are the Vehicles Better?

Let’s talk about Ford.  I just bought 150 shares.

Two epiphanies about Ford have come out of this recession:

• CEO compensation is out of control.  Who gets paid $20 million to lose $14.7 billion, and need a $9 billion dollar bailout to stay in business?
• You don’t want to be driving a Ford lately. The Consumer Reports Car Issue tells all.

OK, so these aren’t exactly epiphanies.  U.S. consumers have felt let down by Ford - and other U.S. car companies - for a while.  The difference now is that Americans are no longer willing to tolerate poor quality for the sake of buying American.

Let’s look at Ford in more detail.

CEO Compensation

In an effort to address investors’ and taxpayers’ explosive negative feelings surrounding skyrocketing CEO compensations whilst they are all being hung out to dry,  CNN reports that Ford has given their President and CEO, Alan Mulally, 5 million shares of stock options between now and 2012.

Mulally will take a 30% pay cut for the next two years, reports CNN.

Further, all previous incentive bonus plans for both 2008 and 2009 have been eliminated - not only for. Mulally, but for all executives and salaried employees.

Mulally can sell up to 1/3 of the options a year from now, 2/3 two years from now, and all must be sold by 2019.

What’s good about this announcement?

• (Finally) tying executives’ incentive packages directly to profits makes sense.  They got away with blockbuster paychecks for as long as they could.  And without any regulation, you can bet when the heat’s off they’ll be walking away with  them again.  But at least their salaries are being held in check right now.
  

• As an owner of 150 shares of Ford stock (purchased at $2.04/share this week,) it gives me a “we’re all in this together” kinda feeling.  I like that.

What stinks about this announcement?

• On Dec. 4th, 2008, CNN reported that Ford promised to cut Mulally’s salary to $1 per year if they took the government bailout loan. Well, they took the $9 billion loan, but even with the 30% pay-cut, Mulally is still making over $1 million dollars a year. His standard salary without bonuses was $2 million.
  

• His stock options were priced at $1.96/share.  The stock closed at $2.19/ share on Friday.  That means if the company goes nowhere and the stock stays exactly where it is until 2012, Mulally still makes $11 millon.

Have You Driven a Ford Lately?

The really sad question, of course, is “Why would you want to drive a Ford lately?“

And the really sad answer given by many Americans is “You don’t.”

In 2007, Time magazine published the Top 50 Worst Cars of All Time.  The Ford Model T (1909), Edsel (1958), Pinto (1971), Explorer (1995), and Excursion (2000) all made the list.

I owned an Escort station wagon in the 1990’s, and once the car hit 75,000 miles it was over.  I became friends with the Triple A towing service dispatcher.

This got me to wondering:  “Were Fords ever any good?”  Or was it just that we didn’t know any better?  The success of Ford - and other poorly built American cars - may be purely the result of:

• brain-wash type marketing, and
• the “I must buy American” guilt complex.

Were Fords actually better built then?  Or was it just that we didn’t know any better?

Case in point.  Who remembers the Ford Pinto scandal?

Many of the Ford cars made the 50 top selling lists and 50 top famous cars lists as well.  That’s what makes me love them even as I hate them. When I was in college, I traveled many miles in an old (even back then!) blue ’60’s mustang.  A milk crate kept the driver’s seat from falling back.

So, if I feel this way about Ford, why did I buy those shares?  Because Ford has momentum right now.  They aren’t going under any time soon.  They’re making press announcements that say what I want to hear.  And the market is gaining momentum. Oh, and at $2/ share, they’re a bargain.

I checked out the Ford website, and right now - other than the Ford Ranger pick-up, which has always been my secret dream vehicle - nothing is catching my eye.  How about you?

What’s been your Ford experience?

Related Websites

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The Savvy Stock Investor: Google - Anatomy of a Stock - Part One

Using part of my meager stock budget, I bought two (yes, TWO) shares of Google on December 16, 2008. Price - $334 per share ( including purchase and eventual selling fees.)

On Jan 20th, 2009, the stock fell to its lowest since my purchase, $283 (-15%.)

And Monday, February 9th, 2009, about 2 months since I purchased it, Google hit $379 (+13%.)  Tuesday, it fell to 358 (+ 7%)  in a very sad bear market. What’s the point here?

The point here is that William O’Neil - founder of Investor’s Business Daily (IBD) - advises selling any stock whose value falls to 8.5%  below the purchase price. That means I should have sold at my selling point of $305 (- 8.5%.)

Great advice in a normal market.

But, ok, we all know that today’s market is far from normal. Dramatic daily market fluctuations are the norm, and I could needlessly  increase my losses  following this advice.

So I asked myself, “Self, what is this telling me?”

The answer came screaming back:

It ain’t black and white, Sherlock!!“

I)  I need to know my stocks.

Here’s at least some of what I need to know about Google.

1)  It’s sound technically.

Let’s analyze what the above data means.

A)  Earnings per Share (EPS) - by definition, for growth companies, it should have gone up in each of the last 5 years.  Check.

B) Operating Cash Flow per Share - should be increasing for the last 5 years. Check.

C)  Sales per Share - should be increasing for the last 5 years. Check.

D) P/E - should be dropping.  Check.

E)  P/S - should be dropping.  Check.

F) Return on Equity (ROE) - Desire ROEs of at least 20% maintained or improved over the yrs.  If you’re bargain hunting, you might accept a low or neg. ROE from time to time.  A steady ROE indicates a continuing return of substantial profits to investors.  Almost check.

So far, Google is looking good.  In part Two of this article, we’ll discuss other important parameters, such as volume, institutional and insider ownership, and the beat on the street.

Stay tuned.

Any thoughts out there on this stock?  Any one own some shares right now, or thinking of buying some?

photo credit: PicApp

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Global 100: Most Sustainable Corporations - Should Companies be Evaluated Within Their Business Sectors?

I know, my 401k has nose-dived, too.  And it’s hard for me to complain about Exxon -Mobil profits when that’s probably the only company holding up some of my dismal retirement funds right now.

But the economy will turn around, and when it does, won’t it be nice to consider such frivalties as sustainable business practices again?

Below is a link to a recently released Global 100 list - sponsored by a Canadian watch dog group, The Corporate Knights.

I’m always a little suspect of the criteria for making up these lists, but this one seems legit.

However, there seems to be a trend towards evaluating companies within their sector - rather than overall. That means companies that process coal, or manufacture hazardous pesticides, can conceivably make the list.  This Global 100 list is no exception.

I think the sector system is dumb, and misses the point. What do business sectors have to do with a company’s impact on sustainability?  How do you process coal responsibly?

I do like the company that did the research, Innovest Strategic Value Advisors.

Here’s the list:

• The 2009 list of the Global 100:  Most Sustainable Corporations in the World

Here’s the lists of companies that were  dropped or added from last year.

If you’d like more information on how this Global 100 list was chosen, here’s some FAQs.

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Free Investor’s Business Daily (IBD) Offers

If you’re into investing, but not sure you want to pay the expensive fees for Investment tools such as Investor’s Business Daily, here’s a chance to check out their products for free.

I’m getting the newspaper right now, and also have the on- line edition.

The best news about it?  They don’t ask for your credit card number up front.  No strings.  You just sign up.

Smoke and Mirrors: Stock Dividends Financed by Loans

Can the Obama Administration find a way to stop the continuing economic downward spiral brought on by Bush’s deregulation years?

In the next few months, companies that have been giving dividends for years, will be reducing or eliminating them.  A few of those companies will even go bankrupt.

Which raises the question:  When is a company’s stock dividend not really a stock dividend?

Answer:  When the company borrows money to finance it.

Seems that a few years ago, when all that subprime loan money was flowing freely, it wasn’t just homeowners who were being sucked in.  Companies, eager to please their shareholders, were subsidizing their dividends with loans.

Between Q4 2004 and Q3 2008, the companies of the prestigious S&P 500 paid $200 billion more in dividends than they earned.

But in the beginning of 2008, the well began to run dry.  New loans were not as free flowing, and just like in the sub-prime housing market, payments for the old loans were increasing.

For the first time since 1958, Standard & Poor reported that more dividend reductions were announced than increases.

Now, in 2009, with the lending belts tightened another few notches, these “solid” companies are being forced to come out from under their rocks even further.  Dividends are dropping, as companies struggle to pay back old loans, and deal with plummeting revenues brought on by the recession.

Will further bailout requests be far behind?  It may be either that, or more bankruptcies, which lead to more job losses, which lead to less spending, which leads to more bankruptcies….

It’s a bit unnerving.  Much like it may have felt during the early FDR years, I would imagine.

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The Savvy Stock Investor - Tracking a Market Sector

A funnel graph showing the structure of a stock classification system.

In 1990, when Pete graduated from college, his grandfather gave him a small portfolio of stocks.   Among the stocks were 100 shares of Pfizer (PFE). At the time, PFE was selling for about $4 per share.

In the year 2000, Pete and his spouse, Susan, newly married, wanted to buy their first home.  Pete had forgotten about the shares, until now, when they were scraping together every penny they could.

When he called his grandfather’s broker and asked him to sell the shares for him, he was delighted to hear that not only was PFE now selling at $40 per share, but in that 10 year time period, it had split 4 times, the first 3 times at 2:1, and the last time at 3:1.  Pete now had 2400 shares to sell at $40/share!!!! Similar results were obtained with Bristol Myers Squib and Pfizer, two of the other biotech stocks in Pete’s portfolio.

Pete and Susan ended up paying cash for the house, with money to spare.

Why was this portfolio so successful? Pete’s grandfather, a top-notch  broker, had done his homework.

• In studying the various market sectors he had seen that in the biotech sector, pharmaceutical companies were dumping millions of dollars into advertising campaigns for prescription drugs such as Prozac and Lipitor.
• Inside sales and institution purchases were up, supported by an increase in the volumes of stocks being traded each day.

These and other indicators helped him determine which sector he had wanted to take a chance on.  Why did he decide to purchase more than one stock from this market sector when building his grandson’s protfolio?

In general, how a market sector goes, so will go the stocks in it.

The graph below illustrates the above story.

What are Market Sectors?

These are simply companies categorized with other similar companies so that they can be compared to each other, as well as with other industries.

The Dow Jones Indexes and the Financial Times Stock Exchange Index based in London put together a global Industry Classification Benchmark (ICB) used worldwide - though not exclusively.

Another popular industry classification system developed by Standard & Poor and Morgan Stanley Capital International (MSCI) is the Global Industry Classification Standard (GICS).

This funnel graph shows how the ICB sectors are broken out.

This link brings you to an 8 page PDF file published by the ICB describing all of the various classifications.

Market sectors are one of many valuable indicators to watch when building your portfolio.

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New Global Sustainability Fund Based on the Dow Jones Sustainability Index (DJSI)

On December 18th, the Dreyfus Corporation launched the first ever U.S. based - Global Sustainability Fund.

This fund will invest in stocks based on the The Dow Jones Sustainability World Index (DJSI).  Dreyfus will become one of over 70 financial institutions around the world licensed to offer such a fund.

They will be the first in the United States.

There’s currently over 6 billion dollars invested in social index funds tracking one of three of the Dow Jones Sustainability Indexes (DJSI).

From the Social Funds personal finance site:

“Launched in 1999 by Dow Jones Indexes, a leading global index provider, and Sustainable Asset Management (SAM), an asset management company exclusively focused on sustainability investments, the Dow Jones Sustainability World Index measures the performance of global sustainability leaders.

Following SAM’s latest global analysis of corporate sustainability leadership, completed in September, 33 companies will join the index, while 25 firms will be deleted – increasing the number of component companiess to 320 from 312.”

The DJSI is controversial in that it chooses “best in class” stocks from any business sector, including the sin sectors - such as tobacco, gaming, and arms manufacturing.

“Companies chosen from these sectors have met the criteria of moving towards future world sustainability,” say the managers of the DJSI.  “If you exclude them, you do not give them an appropriate incentive to improve.”  Also, we cater to mainstream investors who want to be exposed to the entire economy in their portfolios. The exclusion of an industry is an ethical decision, with so many different views on what industry is considered ’sin.’ We therefore follow a flexible approach of providing a composite index and at the same time subset indexes that exclude certain industries. And then the asset manager or the licensee can decide which path to follow.”

Socially responsible investment companies (SRI)such as Calvert Group follow a similar approach, though certain sectors, such as arms manufacturing, are always excluded.

It’s always been a difficult decision for me when investing for retirement- do I have enough money to retire, or do I invest in SRI stocks?  Through the years I’ve monitored the SRI’s, and they just haven’t been able to cut it in terms of returns.  I’m hoping this relatively new and more moderate DJSI approach will be the answer.

What do you think about it?

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Working Capital Model Investing - The Process

The following is a guest post by Steve Selengut, author of “The Brainwashing of the American Investor: The Book that Wall Street Does Not Want YOU to Read”, and “A Millionaire’s Secret Investment Strategy.”  Steve has been a Professional Portfolio Manager since 1979. He currently runs the Kiawah Golf (or not) Investment Seminars and  the Investment Grade Value Stock (IVGS) Index.

Steve Selengut

This will be the first of a series of periodic posts by Mr. Selengut.

Most people enter the investment process tip first. They hear something, grab an idea from a popular blog, accept a Cramerism or some motley foolishness, and think that they are making investment decisions. Rarely, will the right-now, instant-gratification, Internet-generation speculator think in terms that go beyond tomorrow’s breaking news.

It just doesn’t work that way in the long run. Investing takes place in an uncertain environment with at least three important cycles working their way through time at different rates of speed. Each should have an impact on investor decision-making. More often than not, short-term thinking and impulse decision-making are ineffective long-term investment strategies—

Today, in the midst of a cyclical “perfect storm”, how many Wall Streeters have the cold-blooded temperament required to focus on anything other than dwindling market values, depressing economic news, and income securities that just don’t want to react normally to minuscule interest rates?

The short-term mentality thrust upon investors by the tax code, the media, and the underground investment advice community obscures the big picture and makes investing more and more difficult as time goes on. The Working Capital Model (WCM) is a long-term-thinking-only-welcome-here approach that is based in a much less frantic, but parallel, investment universe.

The investment community evaluates short-term time intervals, and compares all performance to popular indices that rarely have any direct relationship to real live investment portfolios. If an investor thinks long term when constructing his investment plan, how does he justify short term thinking when it comes to performance evaluation?

In rising markets, investors second-guess their profit-taking disciplines because they exited a security too early, and strong markets often tempt the shortsighted into more aggressive asset allocations. In falling markets, just the opposite occurs. Most investment decision-making is a series of much-too-late, knee-jerk reactions to cyclical conditions that are misunderstood.

Market Value growth does little more than increase a person’s hat size; Working Capital growth increases a person’s asset base. The point is that paper profits can’t be reinvested or reallocated. True portfolio growth requires additions to the income and growth producing asset base— the working capital.

The most important fundamental tenets and basic differences between the WCM methodology and modern Wall Street craziness are these:

One. The length, depth, breadth, and height of the various cycles are presumed to be totally unpredictable. Additionally, even though they are inter-related and inter-connected in many ways, none of them are related in any way, shape, or form to the calendar year.

Unlike Wall Street, and most of Main Street for that matter, the calendar has no role as a measuring device within the WCM, making the horse race mentality, and competitive atmosphere disappear entirely.

Two. To be successful, an investor must make cycle-savvy, buy-sell-hold decisions, and formulate different performance expectations for securities based upon their purpose. The WCM recognizes only two classes of securities, Equity and Income, leaving more speculative “others” out of the equation entirely. Each class is purchased with a different primary objective in mind.

Investors must learn what to expect from each, and at different stages of the various cycles. The cyclical focus of the WCM makes it easier to determine now the actions and decisions most likely to produce the best results later— in terms of investor specific investment goals and objectives.

Three. The WCM does not focus blindly on short-term changes in the market value of securities, nor does it concern itself with calendar time intervals. Similarly, it does not look at cyclical peaks and troughs as either good or bad. Rather, it attempts to deal with conditions at hand in a manner most likely to achieve long-term goals.

Four. The generation of annually increasing levels of “base income” is given paramount importance in the WCM. It is defined as the total of interest and dividends produced by the portfolio, without the inclusion of realized capital gains. Income pays the bills, not market values.

Five. The WCM is as much a planning tool as it is a decision making model. Working capital is defined as the cost basis of the securities and cash contained in the portfolio. This approach simplifies the implementation of the asset allocation decisions that all investors should be making before they purchase security number one.

Six. The WCM uses the market value of securities quite differently than most other investment methodologies. It recognizes that the price of a security is as much a function of speculation about the movement of market price as it is about the inherent fundamental quality of the security itself.

Lower prices of IGVSI stocks, for example, are considered opportunities for purchase, while higher prices are considered opportunities for profit taking.
Similarly, lower prices of income Closed End Funds translate into opportunities to increase income and reduce average cost per share, while higher prices are also viewed as profit taking opportunities.

The Working Capital Model operates in an environment of cycles rather than calendar years, and emphasizes a security’s fundamental value as opposed to its market price. Market Value is used only to signal buying and profit taking decisions. The methodology has three operating objectives:

One. Growing Working Capital at a rate consistent with portfolio asset allocation. Higher equity allocations should produce a higher long-term rate than income portfolios.

Two. Growing portfolio base income at a rate consistent with portfolio asset allocation. Higher income allocations should produce a higher growth rate than equity portfolios.

Three. Trading securities for reasonable profits, as often as possible. Equity portfolios should produce more capital gains than income portfolios, and mostly short term if the operating disciplines of the WCM are being observed.

When the cycles converge higher, new market value highs will appear as well.

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The Savvy Stock Investor - Ensuring High Quality EPS Numbers

Earnings-per-share ( EPS ) numbers are a key indicator of a stock’s growth.

They can also be easily fudged.  So much so, that insiders on Wall Street also have an additional whisper number.

Investopedia describes the  whisper number this way:
“1. Traditionally, the unofficial and unpublished earnings per share (EPS) forecasts that circulate among professionals on Wall Street. In this context, whisper numbers were generally reserved for the favored (wealthy) clients of a brokerage.

2. A company’s forecasted future earnings or revenues according to the collective expectations of individual investors. In this sense, a whisper number would be compiled by a website polling its visitors. Individuals come up with a whisper number using their own analyses of company financials, market trends, gut feel, etc.”

Tools for the little guy investor

We may not have access to the whisper on Wall Street, but there are ways to protect yourself from misleading EPS numbers.  Here’s a few:

• To not get caught on number 1 above, practice number 2. e.g., Get on some message boards and look for comment trends.  A good one is the Motley Fool’s Community Discussion Boards.
• Look at the operating cash flow per share versus the EPS. Cash flow can be found in the income statement- unfortunately often not released until months later.  Divide the cash flow by the same total number of outstanding shares used to calculate the EPS.  If the number is higher or close to the same, that’s a good indication that the EPS number is legitimate.  If the number is lower, there may be a good explanation, but if it occurs for too long, that could be an indication of creative accounting technique.  These techniques are all legal, mind you.  Go figure.  If the company has a negative cash flow but is reporting positive earnings, there also could be a good explanation, but raise the red flag and start looking under the company’s carpets.
• Jason Kelly , author of the best selling book The Neatest Little Guide to Stock Market Investing, says the total sales-per-share ( SPS ) is a more accurate number, and harder to fudge.

By monitoring cash flow per share and sales per share in addition to the EPS, you can have a much better understanding of a company’s true earnings and growth.

Above all, know your stock thoroughly before making your purchase.

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Announcing: The S&P 500 Dividend Aristocrats for 2009

Here they are, hot off the press.  After the holiday, I’ll be sitting down and taking a closer look.   My plan:   Get the stocks looking interesting to me onto my Stocks-to-Watch Worksheet, and get to know everything about them I can.

Some interesting posts on the changes to the Aristocrat list can be found at:

• Seeking Alpha.  The S&P’s 2009 Dividend Aristocrats:  Who Made the Cut
• The Dividend Investor.  Dividend Aristocrats in Danger.

The information below is gleaned from their posts.  I highly recommend visiting their sites if you’re interested in dividend stocks.

Who’s new on the list.

(BMS)

(LM)

Who’s out.

• Anhauser Busch (BUD)-acquired
• Bank of America (BAC)
• Comerica (CMA)
• Fifth Third Bancorp (FITB)
• KeyCorp (KEY)
• Nucor Corp. (NUE)
• Progressive Corp. (PGR)
• Regions Financial (RF)
• Synovus (SNV)
• Wm. Wrigley (WWY)-acquired

Who’s hurting.

• Pfizer (PFE) - will be out if they do not increase their dividends by November 2009
• State Street (SST) - they have until 2010.

The list.

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4 Beginner’s Tips for Investment Success From William O’Neil

This may sound overly optimistic, but I believe we’re hovering at the start of what hopefully will be a long - if volatile - market swing upsurge.  The horses are at the gates, waiting for the gun.

With my meager investment pot, I hope to cash in on some of the profits.   I’m learning all I can about avoiding the major pratfalls of the beginning investor.

I thought I’d share what I’m learning.

I’m reading a couple of books by William O’Neil - founder of Investor’s Business Daily, or IBD  to us budding investor-savy types.

• 24 Essential Lessons for Investment Success
• How to Make Money in Stocks

Here‘s what I’ve learned so far-

Reduce your risk by cutting your losses.

• Nobody’s perfect.  We’re all going to pick a few dogs.
• Sell any stock that drops below 10% of the original purchase price. Drop this to 8% as you hone your skills for picking stocks.  (Note:  this book was published in 2000.  I am not sure how this rule stands up in the current seesaw market.)

Be persistant.

• When you’ve found a stock you like, jump in! You won’t take “play stocks” seriously enough.  They’re not as motivating as the real thing.
• Don’t be discouraged.  As long as you sell at 8% price drops, that’s all you can lose.
• Give yourself some time to educate yourself.  The average time to learn to invest successfully is 2-3 years.
• Educate yourself!  Devote time to understanding the market.

Choose high-quality stocks.

• If your investing less than $5000, limit yourself to 1 or 2 high-quality stocks.
• Stay away from cheap stocks.  In general, you get what you pay for.
  
• Don’t try to make big killings.  It’s just not realistic.  Profit is profit.
  
• As a beginner, stay away from the higher risk futures, options, foreign and lower priced unproven stocks.

Skip the emotional attachment.

• You’re not getting married here, your buying a stock. They’ll come and go.
• Base your investing choices on sound fundamental and technical analysis.
• Fundamental Analysis looks at a company’s numbers:  earnings, earnings growth, sales, profit margins, and return on equity are some of the more common ones.  It also looks at the overall company:  the product, and how it’s positioned against competition in its market sector.
• Technical Analysis is all about timing.  Charts analysis is the tool here.  Buying and selling at the right time can make or break profits.

I’ll leave you with these thoughts from Phillip A.Perry- the artwork above is by him as well.

Horse Race at Balinrobe

Sitting in the Dublin airport
We wondered can we make the Balinrobe Races
Well just for the sport
We put the rental through its paces
We arrived in plenty of time
With a tip from Dublin which was just sublime
At the races we were just plain rookies
We placed our bets with the colorful bookies
We watched our horse limp to the gate
As to the tip there was now much debate
Then they were off, thundering down the track
It was too late to get our money back
With a mere lap to go our horse was moving through the pack
Afer the race we went to the bookies stand with a big paper sack

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A Dividend Stock to Look At: NLY - Annaly Group

In December of last year, the REIT stock Annaly Group (NLY) was one of Fortune’s top 10 stocks for 2008.

But when the subprime disaster hit last spring, NLY went down with the financial sector ship.

Turns out it was guilt by association.  Now that the fog is lifting, Annaly’s outlook over the next two years is to increase their dividends, currently at approximately 15%.

In September, Forbes reporting NLY as one of Six Financial Stocks Worth the Risk.

I am not a financial analyst.  I’d love to hear what some of you dividend investors out there think about this one.

From what I see, NLY’s financials look solid, there’s insider ownership, and the analysts are supportive.

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The S&P Dividend Aristocrats Aren’t the Only Great Dividend Stocks to Look At

I’ve been looking for solid dividend stocks.  Finally, my searches are paying off.  I googled upon a blog called the The Dividend Growth Investor, and there I’ve found 3 lists, each packed with credible dividend stocks that should keep me out of trouble for a while.  Kudos to the DGI blog. I encourage you to visit there for more detailed information.  Here’s the 3 lists- 2 well known ones from S&P, and a third surprise list.

Standard and Poor’s Aristocrats

S&P offers 3 Aristocrat indexes, 2 of which I’ll discuss here.

I. The S&P 500 Dividend Aristocrats- These are for people looking for stable large cap stocks providing relatively secure dividends.  These stocks are good if you’re retired and/or need steady passive income.

To make it to the 500 Dividend Aristocrats you must:

1. Be an S&P 500 company.
2. Have seen increases in your dividends every year for the last 25 years.

Stocks are reviewed each December to ensure they meet the above criteria. There are 57 stocks on the list as of October, 2008: Here’s a link to them: List

II. The High-Yield Dividend Aristocrats- started in 2005, this index measures the performance of the 50 highest dividend-yielding U.S. Dividend Aristocrats. If you don’t need the dividends for at least 10 or 15 years, these could be a good choice for you.  Though higher yields are obtained, in its short life span, this index has yet to consistently outperform the S&P 500.

To make it to the High-Yield Dividend Aristocrats you must:

1. Be one of the 1500 S&P Composite constituent stocks, and
2. Have followed a managed-dividends policy consistent with increasing dividends every year for at least 25 years.

Here’s a link the this list of 49 stocks as of October, 2008.  You can also purchase an Exchange Traded Fund (ETF) of these stocks.  It trades under the symbol SDY.

Standard and Poor’s Aristocrats- NOT!

The final surprise list is called the US Dividend Champions.  It would only make sense that there would be some great dividend stocks out there that are not a part of the 1500 stocks playing in the “As The S&P World Turns.” soap opera.

From the Dividend Growth Investor:

“What about a company with a market cap of less than 2 billion dollars, which trades 200,000 shares a day and has increased its dividends for 40 years?” and

“I found a more thorough list of US companies that have continuously increased their dividend payments to shareholders for over 25 years on www.dripinvesting.org website. There are more than 130 companies in the US that fit this criterion. The person who prepared the list is Dave Fish, Exec. Editor of The Moneypaper, Direct Investing, The Moneypaper Guide to Direct Investment Plans as well as a Co-manager of The MP 63 Fund(DRIPX).”

I know what I’ll be doing this long holiday weekend:  plugging some of these stocks into my Stocks-to-Watch Worksheet, and seeing how they do.

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