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Serious Money: Buying the Super Caps, Part 4 -- the Dividend

Posted May 20th 2010 12:00PM by Sheldon Liber (RSS feed)
Filed under: Microsoft (MSFT), General Electric (GE), Wal-Mart (WMT), General Motors (GM), Exxon Mobil (XOM), Johnson and Johnson (JNJ), Bank of America (BAC), Procter and Gamble (PG), Wells Fargo (WFC), Serious Money, China Mobile Limited (CHL)

China Mobil CHL logoIt's a cliché but it rings so true: just show me the money! In the case of stocks that's profits and distributions, or dividends.

The super cap review, in which I examine large cap stocks through different valuation methods, started with the 12 stocks with the highest capitalization and through several stock screens has been trimmed to just 10 stocks.

It has been widely reported that dividends contribute as much as 40% of the market stock appreciation on long term holdings. All things being equal, a diversified basket of dividend paying stocks should outperform a similarly diversified portfolio that does not.

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Serious Money: Buying the Super Caps, Part 3

Posted May 19th 2010 12:10PM by Sheldon Liber (RSS feed)
Filed under: Competitive Strategy, Microsoft (MSFT), General Electric (GE), Wal-Mart (WMT), Exxon Mobil (XOM), Johnson and Johnson (JNJ), Bank of America (BAC), Procter and Gamble (PG), PetroChina Co Ltd ADR (PTR), Wells Fargo (WFC), Serious Money, Stock Screen, China Mobile Limited (CHL)

Exxon Mobil XOM logoOver the years I have referred to "my pal Warren" (Warren Buffet) on many occasions. He has taught me a great deal. I have learned a few things from Sir John Templeton (RIP) as well. But when I think about the price-to-earnings-to-growth (PEG) ratios, it is Peter Lynch who stands tall.

Lynch has been retired for many years and has been generous enough to share some of his thoughts in a couple of worthy books: One Up on Wall Street and Beating the Street. I highly recommend these best sellers to anyone that wants to expand their knowledge of value investing or manage their own finances.

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Serious Money: Buying the Super Caps, Part 2

Posted May 18th 2010 10:40AM by Sheldon Liber (RSS feed)
Filed under: Microsoft (MSFT), Apple Inc (AAPL), General Electric (GE), Wal-Mart (WMT), Exxon Mobil (XOM), Johnson and Johnson (JNJ), Bank of America (BAC), Procter and Gamble (PG), PetroChina Co Ltd ADR (PTR), BHP Billiton Ltd ADR (BHP), Wells Fargo (WFC), Serious Money, China Mobile Limited (CHL), Stock Picks

In my search for value investments among the top twelve stocks by capitalization -- the "super caps" -- I began by reviewing the price-to-earnings and price-to-sales ratios. Today we will move on to examine price-to-book (P/B) and price-to-cash flow (P/CF).

If you are one of the lucky ones that benefited from the market's long rise from the depths of Hades and are now looking to rotate into less volatile positions, or you still remain apprehensive and want to stake out a new position, some of these super caps may be just for you.

Continue reading Serious Money: Buying the Super Caps, Part 2

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Serious Money: Buying the Super Caps

Posted May 17th 2010 12:00PM by Sheldon Liber (RSS feed)
Filed under: Microsoft (MSFT), Apple Inc (AAPL), Cisco Systems (CSCO), General Electric (GE), Wal-Mart (WMT), Berkshire Hathaway (BRK.A), Exxon Mobil (XOM), Johnson and Johnson (JNJ), Bank of America (BAC), Procter and Gamble (PG), PetroChina Co Ltd ADR (PTR), BHP Billiton Ltd ADR (BHP), Wells Fargo (WFC), Serious Money, S and P 500, China Mobile Limited (CHL), Stock Picks

Walmart WMT logoSince early last fall, the majority of pundits have been saying that there would be a rotation from small cap stocks to the safety of large cap stocks in the new year. So far, the small cap stocks have maintained the lead, but a shift is taking place and the longer the bull runs and the worse global news becomes, the more this is likely to continue.

I have decided to examine the largest of the large cap stocks; lets call them the "super" caps; the top twelve as of May 13, 2010. Over the course of this series, the order will change and the bottom few may fade in and out as the market activity dictates. I may update the order, but for simplicity's sake will not change the stocks from the current list.

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Serious Money: Goldman Sachs Shares Dirt Cheap

Posted Apr 27th 2010 10:30AM by Sheldon Liber (RSS feed)
Filed under: Management, Goldman Sachs Group (GS), Options, Serious Money

It is an unfortunate thing that we live in a world where you are guilty until proven innocent in far too many cases. This is the burden that Goldman Sachs (GS) faces as it has been convicted in the court of public opinion. Not only has it been convicted, but the public does not actually care whether it is guilty or not. The public feels Goldman has done the nation wrong and must pay.

On Tuesday, Lloyd Blankfein, CEO of Goldman Sachs, is testifying in front of the Senate Permanent Subcommittee on Investigations. He will try to put his best foot forward, and hopefully it will not end up in his mouth. Blankfein may be top dog at the company, but he would do himself a big favor if he stays cool, calm and collected -- and maybe before the day is up someone will throw him a bone.

The public may want Goldman Sachs to pay, but how much should you pay for the stock under these circumstances?

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Serious Money: The Cost of Pushing Chinese Yuan Higher

Posted Apr 22nd 2010 2:00PM by Sheldon Liber (RSS feed)
Filed under: International Markets, Rants and Raves, Competitive Strategy, Ford Motor (F), China, International Business Machines (IBM), Anadarko Petroleum (APC), Serious Money, Headline News, Marathon Oil (MRO)

"Be careful what you wish for" goes the ancient Chinese proverb. The United States government, pushed and prodded by its industrial leaders to get the Chinese to raise the value of the Yuan, should heed these wise words.

The goal, of course, is to make U.S. goods and services cheaper, thereby improving the balance of trade. The problem is that it makes everything cheaper.

It is true that it would support the remaining manufacturing base, software companies, commodities and consulting services. However, this is but a portion of what we have to offer.

What happens if the Yuan increases by 20% against the dollar, and they decide to buy International Business Machines (IBM) the company, not just IBM mainframes? This is not so far fetched. Lenovo bought the ThinkPad notebook computer division from IBM and now it sells Lenovo ThinkPads to us. They would be able to buy IBM 20% cheaper than you or I could buy it.

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Serious Money: Goldman Sachs Is All the Rage

Posted Apr 19th 2010 2:20PM by Sheldon Liber (RSS feed)
Filed under: Management, Rants and Raves, Scandals, Money and Finance Today, Goldman Sachs Group (GS), Serious Money, Headline News, Stocks to Buy

My, my, what a tangled web we weave, when first we practice...

It seems Goldman Sachs Group (GS), now charged with fraud by the Security and Exchange Commission, was doing more than practicing. Apparently its business practices leave much in question about its ethical practices and how far it would go to make a deal. In particular, failing to disclose what the SEC deems material facts that may have altered an investor's decision to buy a collateral debt obligations in the form of a Residential Mortgage Backed Security (RMBS).

One might think an experienced investor would have been suspicious from the onset about any security that actually included the letters "BS" in its title and that this would have been adequate disclosure.

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Serious Money: Dow Top Ten -- If Only the Market Was Open

Posted Apr 2nd 2010 1:20PM by Sheldon Liber (RSS feed)
Filed under: Good news, General Electric (GE), Intel (INTC), Home Depot (HD), Employees, Walt Disney (DIS), Caterpillar (CAT), JPMorgan Chase (JPM), Money and Finance Today, Bank of America (BAC), Boeing Co (BA), duPont(E.I.)deNemours (DD), Economic Data, Kraft Foods'A' (KFT), Serious Money, DJIA

To those taking time off for Good Friday: "May the Force Be with You!" To those working half days, enjoy your time with your families. The U.S. stock markets are closed today and that might be best so that we all can take a breather.

Given that stock markets all around the world were up yesterday, including ours -- again ... April Fool's Day! -- even day traders expressed confidence because they obviously were willing to hold stocks knowing the long weekend left plenty of time for unforeseen bad news to to slam their positions.

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Serious Money: Optimistic Economic View

Posted Mar 29th 2010 11:30AM by Sheldon Liber (RSS feed)
Filed under: Google (GOOG), Microsoft (MSFT), Apple Inc (AAPL), Cisco Systems (CSCO), General Motors (GM), Berkshire Hathaway (BRK.A), Citigroup Inc. (C), Johnson and Johnson (JNJ), JPMorgan Chase (JPM), Bank of America (BAC), Economic Data, Wells Fargo (WFC), Serious Money, Financial Crisis

The negativity in the market place has been palpable for several years and is only thawing out now, in some people's view, while others rant about a "double-dip" or "W-shaped" recovery. In contrast to those who shun the market, I have been buying stocks at bargain basement prices over the past year with a return on investment that is "staggering," to quote a Wells Fargo Financial Consultant familiar with my account.

I am well aware that the record deficit spending in the United States is even more staggering. Everyone knows about the high unemployment rate, foreclosure rate, bank failure rate, and tepid consumer confidence. So why am I so optimistic about the economic recovery? Here's why, as simply as I can state the case:

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Serious Money: Greek Bonds or High Yield Stocks?

Posted Mar 24th 2010 12:00PM by Sheldon Liber (RSS feed)
Filed under: International Markets, AT and T (T), Altria Group (MO), Verizon Communications (VZ), Duke Energy (DUK), Serious Money, Southern Company (SO), Financial Crisis, Annaly Capital Management (NLY)

When I read that economically troubled Greece has 10-year bonds currently yielding between 6.32% and 6.44%, I wondered why these have any worth at all given the many alternatives offering a better return and greater liquidity? This baffled me.

Only Tuesday, I wrote about Telecom Corp New Zealand (NZT), a stock paying over 10% yield. The story also mentions that AT&T, Inc. (T) is currently paying a 6.4% yield and Verizon Communications Inc. (VZ) is offering 6.25%. From my perspective, these are far better bets, safer and with some upside too than Greek debt.

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Serious Money: Intuitive Surgical Hits New Highs

Posted Mar 2nd 2010 3:00PM by Sheldon Liber (RSS feed)
Filed under: Major Movement, International Markets, Products and Services, Competitive Strategy, Next Big Thing, Johnson and Johnson (JNJ), Japan, Serious Money, Intuitive Surgical Inc (ISRG)

It was only a matter of time before Intuitive Surgical (ISRG) surpassed it's previous all time high of $359.59 set on December 14, 2007. I have blogged many times about ISRG in my Chasing Value column. Today, I'm delighted that the stock is rising, but I think it is getting a bit rich and the value proposition has changed -- intra-day it hit $366.50.

Intuitive has a trailing P/E ratio of 61 and a projected P/E of 46. I commonly average the two for such volatile stocks which translates to 53.5. There are certain times when that might be alright, but with a PEG ratio (price-to-earnings-to-growth) of 2.05, this is not one of them. If you own it I am not suggesting selling it, but if you do not it might be wiser to put it on your watch list and wait for the market to calm down.

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Serious Money: Cheapest Stocks List Shrinks from 26 to 21

Posted Feb 9th 2010 2:30PM by Sheldon Liber (RSS feed)
Filed under: Management, Hewlett-Packard (HPQ), Wal-Mart (WMT), JPMorgan Chase (JPM), AFLAC Inc (AFL), Archer-Daniels-Midland (ADM), Campbell Soup (CPB), Chevron Corp (CVX), Chubb Corp (CB), ConocoPhillips (COP), CVS Corp (CVS), Darden Restaurants (DRI), Goldman Sachs Group (GS), Verizon Communications (VZ), duPont(E.I.)deNemours (DD), Kimberly-Clark (KMB), Lockheed Martin (LMT), Hasbro Inc (HAS), Entrepreneurs, Serious Money, Stock Screen, Raytheon Company (RTN), Xcel Energy (XEL), EZCORP (EZPW), Travelers Companies Inc. (TRV)

While most investors are fretting the markets recent contraction, you can be quite confident that "my pal Warren" has a smile on his face, as does Peter Lynch, Ken Heebner, Bill Miller, Bruce Berkowitz, and any number of fellow value investors that know now may be a time of opportunity. That is because they have the experience and understanding to pounce when they have a chance to buy things cheap.

This is the fourth installment of my series to discover just that: cheap stocks. If you would like to get on board from the beginning then review the initial post which screened for stocks with lower than market average P/E ratios, see Serious Money: Market Looks Cheap to Me -- 35 Stocks. In the second installment, I looked at yield and PEG ratios: Serious Money: Still Cheap Market -- 35 Stocks + Yields & Growth. Then I moved on to the the P/S and P/CF metrics in Serious Money: Cheapest Stocks Yet -- From 35 to 26, cutting nine stocks.

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Serious Money: Cheapest Stocks Yet -- From 35 to 26

Posted Feb 3rd 2010 10:40AM by Sheldon Liber (RSS feed)
Filed under: eBay (EBAY), Pfizer (PFE), Wal-Mart (WMT), International Business Machines (IBM), Johnson and Johnson (JNJ), JPMorgan Chase (JPM), Abbott Laboratories (ABT), AFLAC Inc (AFL), Altria Group (MO), Archer-Daniels-Midland (ADM), AutoZone Inc (AZO), Bristol-Myers Squibb (BMY), Campbell Soup (CPB), Chevron Corp (CVX), Chubb Corp (CB), ConocoPhillips (COP), CVS Corp (CVS), Darden Restaurants (DRI), Goldman Sachs Group (GS), General Mills (GIS), Verizon Communications (VZ), duPont(E.I.)deNemours (DD), Kimberly-Clark (KMB), Merck and Co (MRK), Lockheed Martin (LMT), Hasbro Inc (HAS), Serious Money, Stock Screen, Raytheon Company (RTN), Xcel Energy (XEL), EZCORP (EZPW), Travelers Companies Inc. (TRV)

Is the market overpriced? Maybe it is cheap, or perhaps it is fairly valued. This is the third in a series examining the issue. Still, it has been my contention that it does not make any difference because no matter how the market is valued as a whole, there are plenty of cheap stocks out there to accommodate a large amount of capital allocation even this deep into a bull run.

If you would like to follow along from the beginning, the initial post screened stocks for lower than market average P/E ratios: Serious Money: Market Looks Cheap to Me -- 35 Stocks. In the second installment, I looked at yield and PEG ratios: Serious Money: Still Cheap Market -- 35 Stocks + Yields & Growth.

Continue reading Serious Money: Cheapest Stocks Yet -- From 35 to 26

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Serious Money: Market Looks Cheap to Me -- 35 Stocks

Posted Jan 28th 2010 3:00PM by Sheldon Liber (RSS feed)
Filed under: Hewlett-Packard (HPQ), eBay (EBAY), Pfizer (PFE), Wal-Mart (WMT), International Business Machines (IBM), Johnson and Johnson (JNJ), JPMorgan Chase (JPM), Abbott Laboratories (ABT), AFLAC Inc (AFL), Altria Group (MO), Archer-Daniels-Midland (ADM), Bristol-Myers Squibb (BMY), Campbell Soup (CPB), Chevron Corp (CVX), Chubb Corp (CB), ConocoPhillips (COP), CVS Corp (CVS), Darden Restaurants (DRI), Goldman Sachs Group (GS), General Mills (GIS), duPont(E.I.)deNemours (DD), Kimberly-Clark (KMB), Merck and Co (MRK), Lockheed Martin (LMT), Hasbro Inc (HAS), Serious Money, Stock Screen, S and P 500, Xcel Energy (XEL), Travelers Companies Inc. (TRV)

We frequently receive comments that the market is overpriced. Recently one of our active readers commented that the market P/E was 30, which it's not. The actual rate (S&P forecast) has been even higher at times due to the volatile market.

The average should trend closer to the long term P/E of 15.7 in the next few years. However, I have reviewed companies often covered on our site and come up with a list of 35 stocks that have price-to-earning ratios below the long-term average already. I think there are dozens of bargains regardless of the status of the overall market.

Continue reading Serious Money: Market Looks Cheap to Me -- 35 Stocks

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