Sunday, December 12, 2010

Big Announcement

As you may be wondering why there has not been a post in a few days because I am creating a domain.  This blog will be transfering to its own domain sometime in the next few days.  I will of course keep you updated and give you the new site. 

Hang tight, there won't be any new posts in the mean time most likely but I will have plenty on the new site.

Also, this friday is when I will be releasing the interview with Hedge Fund manager Tim Ayles on the outlook for 2011.

Check back for more updates!!

Thursday, December 9, 2010

Freeport-McMoran's Big Day

Freeport-McMoran (FCX), came out with some big announcements today: a 2-1 stock split and a $1/share special dividend.  FCX closed up 2% today at $110.66 on the news. 

The stock split was approved by the board of directors today and will take place in February 2011.  As for the special dividend, the payments will be sent out on December 30 for all shareholders that hold the stock as of December 20.  You have some time to get a stake in FCX to reap this special dividend.

Freeport's stock is able to boost its regular dividend from $1.20 to $2 and issue a special dividend based on its huge profits from the rising copper prices.  The stock is up 38% this year and is positioning itself to move higher.  Freeport is stepping up production to meet the demand for copper and is certainly reaping the benefits.  Copper is expected to continue its climb after it closed at a record high yesterday, in the wake of higher demand and the construction of housing. 

These events are fantastic but it also tells us, the investor, that Freeport cares about its shareholders and really want to return value to the shareholders.  This is always a classic sign of a great, well-run company.

Fundamental Analysis
P/E: 14
Forward P/E: 11
Price/Sales: 2.84
PEG: 1.28
Price/Book: 4.4
ROE: 39%
Total Debt/Equity: 41
Revenue: 18B
Dividend yield: 3% (regular+special)
Earnings Growth (this year): 43%
Earnings Growth (next 5 years): 8%

Based on the fundamentals, it isn't oversold but the 8% growth over next 5 years isn't super attractive.  However, you have to look at the some of the good signs: low P/E, low P/S, good ROE, great dividend.  Remember, this is the bare bones fundamental analysis, more in depth would be needed to assume this is a good investment for you. Personally, FCX is a great way to play the rising demand of copper.  They have solid management that know how to please the shareholders and they will continue to position themselves to profit nicely from copper and gold.  FCX is one of my favorite mining stocks out there.

Trade: Pick up some FCX before December 20 to get in on that special dividend.  I am bullish on FCX until copper's demand decreases.  I would then scale back.  In short, if you buy FCX, you have to be able to watch the copper and gold futures to monitor price movements and how they will affect the stock and its earnings.

Disclosure: plan on buying FCX in near future

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.

Tuesday, December 7, 2010

Bush-Era Tax Cuts Extended

  • My interview will Hedge Fund Manager, Tim Ayles regarding market outlook and how to trade 2011 will be debuted on December 17, 2010
  • December Book of the Month is Aftershock by Robert Reich.  Book may be purchased through the Amazon link to the left of this writing
President Obama announced today that the Bush Tax Cuts will be extended for 2 years.  Markets surged at the open but ended lower with Dow down 3 points, Nasdaq up 4 points and S&P up just under a point.

Whether you agree with the tax extensions or not is your own personal opinion.  As far as the financial facts are concerned, the tax cut extensions will keep the low capital gain tax rate and low dividend tax rate.  So, as far as capital gains are concerned there are no new taxes but the estimated income loss for the government is $600B-$800B. Analysts polled said that the tax extensions will help make the recovery more speedy and easier to gain ground.

European Crisis Update
Hungary has, as of Monday, been added to the list of European countries that are in trouble.  Moody's double downgraded Hungary's debt ratings saying that the leadership is taking no active steps to reducing its blooming debt.  The EU faces yet another issue that could prove to be have a similar solution that transpired with Ireland and Greece.  The Euro lost gains that were posted last week.

Trades:  Stick with the trades advised in "Playing the European Crisis" and "Boosting Returns Using Dividends".

Sunday, December 5, 2010

Boosting Returns With These Dividend Stocks

There are many basics that you need for a well diversified portfolio.  You need your techs like Intel (INTC), your energies Exxon Mobil (XOM), your food and drink Coca-Cola (KO), etc.  What is very important for a basic portfolio to have is high yielding dividend stocks. Dividends are important because they can not only boost returns but they can also help cover losses sustained in the stock.

 I put the stocks in bold for a reason, they all pay decent yielding dividends, 2.7%-3%.Yes, 3% is a good dividend but there are some stable companies paying huge dividends, 6-8%. 

I recommend Verizon Communications (VZ), Eli Lilly (LLY), Waste Management (WM), Bristol-Myers Squibb (BMY), National Presto Industries (NPK).

Verizon Communications (VZ):

Verizon is the well known cell phone corporation that operates all over the US.  Verizon recently introduced its new 4G experience which will be a huge growth driver over the next few years.  VZ has benefited greatly from the Android phones this year, boosting sales.  The big news for VZ is the fact that they may be getting the Apple iPhone in the coming year.

Dividend Yield: 6%
Price/Sales: .86

Eli Lilly (LLY)

Eli Lilly is a biotechnology company that develops drugs for mostly neuropsychological disorders such as schizophrenia, manic episodes, bipolar medications, ADHD, depression, etc.  Although LLY is a strong company, its sales forecasts have been lowered because most of its cash cow drugs will be expiring.  However, LLY is known for innovation and they are paying you pretty well to wait out any turbulence. 

Dividend Yield: 5.7%
Price/Sales: 1.66

Waste Management (WM)

WM is a garbage company, literally.  Waste Management offers collection, transfer, recycling, disposal, and waste-to-energy services. WM are the leaders of the trash industry with a market cap of 16.56B, nearly 5.5B larger than its next closest competitor Republic Services (RSG).  WM has an expected growth of over 12% in 2011.

Dividend Yield: 3.6%
Price/Sales: 1.35

Bristol-Myers Squibb (BMY)

BMY is another pharmaceutical company that innovates drugs for serious diseases such as "affective (psychiatric) disorders, Alzheimer’s/dementia, cardiovascular (primarily atherosclerosis/thrombosis), diabetes, hepatitis, HIV/AIDS, obesity, oncology, rheumatoid arthritis and related diseases, and solid organ transplant".  As you can tell by the list there are some very serious diseases on there: HIV/AIDS, Alzheimer's to name a few.  BMY has had many successful drugs to combat these diseases and the stocks performance over the years shows that.  BMY is one of the huge leaders in the biotech/pharmaceutical industry.

Dividend Yield: 5%
Price/Sales: 2.28

National Presto Industries (NPK)

A small, diversified company that makes diapers, cooking appliances and ammunition.  NPK has a sizable insider holding of the stock at over 30%.  Their balance sheets are clean of debt but the best part is they pay a regular dividend...and a special dividend every year.  Thereby making a very sizable yield that is pretty attractive.  NPK is estimated to grow over 11% in 2011.  NPK is also estimated to make 157.75M this quarter, up 4.5% from last year.

Dividend Yield (Total): 6.5%
Price/Sales: 1.73

As you can see there are some nice dividends that were recommended that will surely boost your returns and give you some working capital while you earn capital gains. It is always important to have a great, big dividend yield to provide security in volatile times. 

  • Look for an upcoming interview with hedge fund manager Tim Ayles for his outlook for 2011 and how to set up your portfolio for success in the new year.
  • Be sure to check out the "recommended ebook buys" section of the left side of the webpage to get in on some great financial ebooks that will make you money
  • Also check out the book at the beginning of this post that can be purchased through Amazon.  Aftershock by Robert Reich is a well done book about the 2008 crisis but way more indepth than most books about the crisis.  Check it out, it is only $12.43, normally $25.

Dislosure: Long XOM

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.

Thursday, December 2, 2010

Rally: Day 2

Markets rallied for the second day in a row today with the Dow up 106 points, NASDAQ and S&P both up over 1%.  The continued rally was a surprising number in November same store retail numbers.  This showed us that the consumer was out and shopping more than expected, as I previously guessed in earlier posts such as "Playing the Consumer This Holiday Season".

The day began with some disappointing news on increase in unemployment benefit applications which again shows the reality of the jobs situation, as I described in yesterday's post.

However, great news on the housing front.  Pending home sales role 10.4% last month and real estate corp, Toll Brothers (TOL) returned to profitability for the first time since early 2007.

This is huge news for the housing sector which has just been a downer debby of a sector for a while now. Finally, we get some good news and Toll Bros, who was hit pretty hard in the beginning of the housing fall, finally returned to profitability.

European Crisis Update:
We like to keep readers up to date on the latest events that are occurring overseas, as they will have an impact on the US markets. 

Today's update is S&P's announcement that they may be cutting Greece's debt rating sometime over the next three months.  Greece's current rating is a "BB+" which is really not all that good.  S&P says they have seen little progress with Greece's handling of their debt since their mini crisis back in March and April of this year.  This is right within my estimates that I outlined in yesterday's post in terms of what could happen to Europe.  I am reiterating to buy put options on: iShares MSCI Ireland Index (EIRL), iShares MSCI Spain Index (EWP), iShares MSCI Italy Index (EWI) which were recommended last Saturday.

As far as the American economy is concerned stick with the recommendations from the past few weeks that I have been giving you, stick with strong retail stocks: Best Buy (BBY), Nordstrom (JWN), WalMart (WMT), and Amazon (AMZN).  Best Buy (BBY) reports earnings on December 14 so watch for those earnings to be quite good.

Disclosure: Long BBY

Disclaimer: Invest Chief is not held accountable to any loses sustained by stocks recommended. It is always important to do your own research of the stock before you invest. These trades and ideas are the opinions of the crew of Invest Chief. Invest Chief receives absolutely no compensation from companies that are recommended. We are a private organization, dedicated to promoting financial well being and prosperity.

Wednesday, December 1, 2010

December Starts With A Bang

Major rally started December as new economic news proved that the economic recovery was gaining strength.  The Dow Jones closed up 2.3%, Nasdaq up 2% and S&P up 1.6%.

The private sector added 93,000 jobs in November after an expectation of 58,000 jobs, polled by economists.  Also there was an upward revised October's job creation from 43,000 to 82,000.  The Chinese also posted a positive manufacturing number which gave signs of stability in China.

It didn't stop there, the Fed released numbers from the Beige Book which showed improving economic climate around the country, this included a very positive consumer spending numbers.  Later, Goldman Sachs increased the GDP outlook for the US in 2011 from 2% to 2.7%.

Ford Motor Corp said they saw a 24% raise in car sales for November, GM saw 12% increase.

A major thought on the minds of traders today was whether or not the S&P would close above the 1200 mark, which in theory, gives a great chance of a "Santa Claus Rally" to close out the year.  The S&P closed up 1206 today passing that mark.  After the huge news today, I think that a Santa Claus rally could be possible with only one obstacle on the horizon...Europe.  Europe has been a major issue for traders lately and it isn't going to go away until decisions are made and steps are taken to resolve, or at least temporally capped.

Jobs Reality (Downer Debby alert!!): Yes, jobs are being created and less people are filing for unemployment benefits.  That is great news but there are under-the-surface reasons behind those facts.  Employers tend to hire more staff around the holidays to cope with demand of the season.  Most of these jobs that are being created now will be lost in January.  I guarantee January's job report is not going to be showing that employers added more jobs because of the fact that we are still in a downturn and we are not in that point of the recovery yet where sustainable job growth is a reality.  The huge optimism behind jobs right now is great but remember that unemployment is still at 9.6%.

Look, I'm not trying to ruin the party and kill the fun but it is better to be a smart trader than a trader who doesn't step back and look at the full picture because those traders always get burned in the end.  Its about positioning yourself to outperform and make money rather than falling for the false hope that is jobs. 

For example, 93,000 jobs were created in private sector, sweet.  What you may not know is that today, State Street Corp announced that it will be cutting 5% of its workforce to cut costs.  This is just one more example that yes, jobs are getting temporally better for the holidays but the underlying facts are that a recovery is not coming soon.