January, 2011

"House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.”

~ Ben Bernanke -  October 20, 2005

The Professional Opinion

DJIA: 11577.51


Buy on the dips.

Buy Recommendations

Suncor (SU)
when you can get it under $33.00 a share.

Comment:  I have found that with this stock and a beta of somewhere around 1.7,  Suncor makes for a better trading stock than a buy and hold stock.  You just need a little patience.

Fund Addition

Vangard Wellesley (VWINX)
 has been added to the retirement portfolios.

A Starling in winter plumage expressing its displeasure at posing for photos.

Personal Portfolio
The Year End Results!  A year or two more of returns like this will undoubtedly hasten retirement.
Financially Speaking,  It was a pretty good year.

The US and Canada look like good places to be in 2011 and the bulk of the portfolio is probably going to stay right here at home.  
The latest housing news has been lousy, as has been the employment scene.  More chatter about a housing double-dip which I think makes some sense.  

One sector I am intimately familiar with is the power generation and transmission sector.  This area has been firing on all cylinders.  At some point more power means more usage and more usage will in theory mean more jobs.  

Stocks are cheap right now and volume is still quite light.
If sentiment changes this year,  it could be profitable one.


Personal Portfolio

The Yearly Evaluation

Where the funds are really allocated

Once a year  it's a good idea to run your holdings through Morningstar's Instant X-Ray to get a true picture as to where your assets are allocated.  Compared to the S&P 500,  I'm light on IT, heavily favor financials, light on health care and heavy on cyclical growth.  That looks ok to me, but I will be reducing financials a bit.

The portfolio

Instant Xray (the free service) also provides you with YTD returns of the top ten holdings and the percentage of total assets they represent.
I am overweight Goldman Sachs and plan to stay that way for a while.  I picked it up in the 140's and I still think it's cheap.

What's New for 2011?

Best  Buy

Best Buy got Creamed when they missed earnings.  

Best Buy Data

The stock is sitting near its 52 week lows,  the PE is more than reasonable and a Beta of 1.4 suggests the stock price can move rapidly, and hopefully in the upwards directions.  

Another thought about this stock - gift cards.  Those aren't counted until they are redeemed and I would imagine Best Buy sells a ton of gift cards.

I personally like Best Buy and do a lot of shopping there.  The thing I wonder about is the impact discounters like Walmart and Target will eventually have on sales.  I would have to say I am bullish short term and neutral long term, and am therefore adding this to the portfolio.

A  REIT  Possibility

Weyerhauser is in the process of converting itself into a REIT and is part of my strategy to think a bit outside the box.  
The large drop seen here is the result of a one-time distribution to share holders, ridding itself of excess cash.  

Opinions are quite varied:


And from the horse's mouth:


And from CNBC

I think this could be attractive as a long term hold and I rate it for 2.5 % of the portfolio and with NLY comprising 3.5%, there should not be much of a downside from these levels going forward.   

Dividend Paying Stocks vs Bonds

I've been encouraging this route for a while now because stocks are cheap,  yields on the dividend paying stocks can be quite high,  much higher than yields on treasury notes or bank savings accounts.  Reinvest those dividends in more shares of stock and with any luck you will end up with more shares and a higher share price.  You can't do that with bonds.

The  15%  tax cap on dividends is in place for another two years,  which means dividends in a taxable account are a cost effective way to increase your portfolio while paying a minimum of taxes.

Banks Currently Paying a Whopping Penny a Share - What about them?




The rumor mill has it that a number of financial stocks are going to be raising their dividends from the penny a share they are currently paying to something more appetizing now that most have met their capital requirements and are working on getting out from the boot of big brother.

BAC and HBAN are both paying out a penny a share and Citi pays nothing.  As the economy improves and banks actually start lending more and more people get hired,  these stocks are worth consideration if one is looking for upside potential in the share price and the dividend.

I have a love/hate relationship with BAC,  I'm neutral on Citi, and HBAN was one of my best performers for the year.  We'll  see what the new year brings.

Here are three current dividend payers I like:




I own all three and as you can see,  I've had nice share appreciation coupled with a generous yield this last year.  You won't see that with a typical bond holding.  The forward PE on all three suggests that these stocks are still not fairly priced and have room to run.

Jim Cramer devoted a few minutes to the idea and I learned something I did not now about short sellers and dividend paying stocks.

It's Worth a Listen

And....... Here is Cramer's Prediction for the New Year:

Cramer Prediction

Whatcha doing out there?
Standard poodles are very good at minding everyone else's business, inside or outside the house.