I’m always inspired by the story of legendary investor Shelby Cullom Davis who borrowed some money from his father-in-law to buy deeply, deeply undervalued stocks of insurance companies, eventually growing his fortune to $800 million. His thesis was that the market was unwittingly discounting the stocks by completely disregarding the huge piles of cash the companies were sitting on (which all insurance companies have…mainly by mandate). Warren Buffett did the same thing with a little insurance company called GEICO. I’ve always liked to poke around stocks of life insurance companies. There are two reasons. First, they typically have and grow… Read More

I’m always inspired by the story of legendary investor Shelby Cullom Davis who borrowed some money from his father-in-law to buy deeply, deeply undervalued stocks of insurance companies, eventually growing his fortune to $800 million. His thesis was that the market was unwittingly discounting the stocks by completely disregarding the huge piles of cash the companies were sitting on (which all insurance companies have…mainly by mandate). Warren Buffett did the same thing with a little insurance company called GEICO. I’ve always liked to poke around stocks of life insurance companies. There are two reasons. First, they typically have and grow huge piles of money. Second, betting on the insurance company is the equivalent to betting on the house at a casino. It’s hard to beat the actuarial tables. Like John Maynard Keynes said: “In the end, we’re all dead.” #-ad_banner-#But lately, I’m rethinking that for two reasons. One, lower risk interest rates are horribly low, so the huge piles of cash the life insurers are sitting on aren’t earning very much. Two, there is a ticking demographic time bomb called “Baby Boomers” looming in the near future. I selected three large life insurers whose stocks seem to be trading and… Read More

We all make mistakes, especially in the investment racket. But one great thing about this business, thanks to a fluid marketplace we often get second, sometimes third, even fourth chances. So, many times, it all works out. #-ad_banner-#Three years ago I sold all of my positions in AbbVie, Inc. (NYSE: ABBV) shortly after the company was spun off from Abbott Laboratories (NYSE: ABT). I had held Abbott Labs for many years. It was one of the most revered, steady, dividend growers out there. The stock performed consistently in my clients’ portfolios.  But the company decided to, basically, split in two. Read More

We all make mistakes, especially in the investment racket. But one great thing about this business, thanks to a fluid marketplace we often get second, sometimes third, even fourth chances. So, many times, it all works out. #-ad_banner-#Three years ago I sold all of my positions in AbbVie, Inc. (NYSE: ABBV) shortly after the company was spun off from Abbott Laboratories (NYSE: ABT). I had held Abbott Labs for many years. It was one of the most revered, steady, dividend growers out there. The stock performed consistently in my clients’ portfolios.  But the company decided to, basically, split in two. Abbott focuses on nutritionals, diagnostics, generic drugs, and medical devices while AbbVie is the research driven pharmaceuticals business. I was used to having all of those things in one bundle and, honestly, I didn’t understand the reasoning for the split or the complexion of the two new companies. I decided it was best to wait till the smoke cleared. So I sold my positions. Don’t get me wrong, I still made money. But I ended up leaving a lot of money on the table. Three years is long enough for the smoke to clear and I… Read More

Two years ago, I wrote about why I disliked regional bank stocks using Regions Financial (NYSE: RF) as a glaring example. Two years later, the stock is 18% lower since despite slow but noticeable improvements in the U.S. economy and repair in the financial sector. Most banks have had enough time to adapt to the regulatory environment. So why the poor performance? I drilled down into Regions’ numbers and those of its peers and pulled out a comparison between CEO compensation growth versus stock performance. Here’s what I found.   CEO Pay 5yr Growth Stock Price 5yr Growth (Excluding Dividends) Regions… Read More

Two years ago, I wrote about why I disliked regional bank stocks using Regions Financial (NYSE: RF) as a glaring example. Two years later, the stock is 18% lower since despite slow but noticeable improvements in the U.S. economy and repair in the financial sector. Most banks have had enough time to adapt to the regulatory environment. So why the poor performance? I drilled down into Regions’ numbers and those of its peers and pulled out a comparison between CEO compensation growth versus stock performance. Here’s what I found.   CEO Pay 5yr Growth Stock Price 5yr Growth (Excluding Dividends) Regions Financial Corp (NYSE: RF) 13.8% annually 3.9% annually Wells Fargo & Co. (NYSE: WFC) 0% annually 14.4% annually SunTrustBanks Inc (NYSE: STI) (14.7%) annually 7.5% anually Regions’ CEO, O.B. Grayson Hall got paid the most for the worst performance. Granted, Wells Fargo (NYSE: WFC) is a much bigger institution and plays at a different level than Regions, which is strictly a regional entity. But Wells Fargo handsomely rewarded shareholders while keeping executive compensation in line. SunTrust (NYSE: STI) is a closer comparison, but as you can see, its CEO actually took a steady pay cut (I’m sure he’ll figure out… Read More

Once heralded as the bridge to an oil-free energy future, natural gas seems to have been relegated to stepchild status in the hierarchy of carbon fuels. Why? It’s cheap, clean, efficient and plentiful. That’s part of the problem. The Energy Information Administration (EIA), estimate that there are 388.8 trillion (yes… trillion) cubic feet of proven natural gas reserves in the United States. That’s a lot of product to be pumped along with the 20+ trillion cubic feet of dry natural gas we pump annually. And we keep discovering more. Take a peek at a 20-year study of the spot price. Read More

Once heralded as the bridge to an oil-free energy future, natural gas seems to have been relegated to stepchild status in the hierarchy of carbon fuels. Why? It’s cheap, clean, efficient and plentiful. That’s part of the problem. The Energy Information Administration (EIA), estimate that there are 388.8 trillion (yes… trillion) cubic feet of proven natural gas reserves in the United States. That’s a lot of product to be pumped along with the 20+ trillion cubic feet of dry natural gas we pump annually. And we keep discovering more. Take a peek at a 20-year study of the spot price. After a couple of flirts with ridiculous prices, we’re pretty much back to where we started when I still had hair and wore size 32 jeans. #-ad_banner-#The other challenge is lack of industry consolidation. The top 10 U.S. natural gas producers control 31% of the market. That’s a decent number. But compare that to the top 10 petroleum producers who tap 52% of the market. Thin margins due to low prices don’t get companies excited about acquisitions. So with prices in the toilet and lack of merger activity, can investors make any money with natural gas? The answer… Read More

Since the Financial Crisis of 2008, the United States, when compared to the rest of the world’s monetary policy or economic performance, has been referred to as “the cleanest dirty shirt”, “the prettiest woman in the ugly woman beauty contest”, and, my personal favorite, “the tallest midget in the circus”. The primary benchmark is the yield on U.S. Treasury bonds versus the sovereign bonds of other nations.  Global government bond yields have been kept stubbornly low mainly due to the enormous supply of cash created by central bank quantitative easing (QE) in which central banks such as the Federal Reserve,… Read More

Since the Financial Crisis of 2008, the United States, when compared to the rest of the world’s monetary policy or economic performance, has been referred to as “the cleanest dirty shirt”, “the prettiest woman in the ugly woman beauty contest”, and, my personal favorite, “the tallest midget in the circus”. The primary benchmark is the yield on U.S. Treasury bonds versus the sovereign bonds of other nations.  Global government bond yields have been kept stubbornly low mainly due to the enormous supply of cash created by central bank quantitative easing (QE) in which central banks such as the Federal Reserve, the Bank of Japan (BOJ) or the European Central Bank (ECB) buy government bonds from financial institutions in hopes that the institutions will lend the cash to create demand at both the corporate and consumer level. In theory, increased consumption will stimulate business growth and lead to mild inflation. Interest rates will then gradually rise to head off rampant inflation keeping the business cycle steady while also rewarding investors with a little more return for their risk. #-ad_banner-#That hasn’t happened.  In fact, rates have done the opposite by continuing to fall. While the Fed in the United States has ended… Read More

I’m slow to adopt things. Eleven years ago, tired of the books stacked up on the nightstand, my wife gave me an Amazon Kindle (Nasdaq: AMZN) for Christmas. It sat in the box for four months. Eventually, I came around. I haven’t purchased a hard copy book since. It took me awhile to incorporate exchange traded funds (ETF’s) into my practice. In constructing portfolios, I still use individual stocks for my equity allocations. However, I have been gravitating toward ETF’s in the fixed income space, primarily in preferred stocks.  #-ad_banner-#Preferred stocks are a hybrid security that falls into the debt… Read More

I’m slow to adopt things. Eleven years ago, tired of the books stacked up on the nightstand, my wife gave me an Amazon Kindle (Nasdaq: AMZN) for Christmas. It sat in the box for four months. Eventually, I came around. I haven’t purchased a hard copy book since. It took me awhile to incorporate exchange traded funds (ETF’s) into my practice. In constructing portfolios, I still use individual stocks for my equity allocations. However, I have been gravitating toward ETF’s in the fixed income space, primarily in preferred stocks.  #-ad_banner-#Preferred stocks are a hybrid security that falls into the debt portion of a company’s capital structure. Often, they are issued at $25 par face value per share and pay a higher dividend than the common stock. Preferreds are senior to the common stock but are junior to bonds and bank debt. There’s usually a call feature allowing the issuer to redeem the preferred shares at their $25 face value. Lastly, they’re usually exchange listed, giving them a liquid marketplace. Preferreds are popular among individual investors thanks to their availability, attractive yields and conservative profiles in comparison to a common stock. As a professional investor, the challenge I’ve found in the… Read More

The phrase “adult diapers” typically doesn’t whip investors into a buying frenzy. But with 10,000 American baby boomers turning 65 on a daily basis and a current population of 44.7 million people age 65+ in the United States, there is a big need that has to be filled. Everyone is focused on selling Boomers healthcare, retirement communities and wealth management; personal hygiene products are often overlooked. Domtar Corp. (NYSE: UFS) to the rescue. As the largest producer of uncoated freesheet paper in North America, Domtar is also major pulp producer. But the demand for uncoated, freesheet paper has been on… Read More

The phrase “adult diapers” typically doesn’t whip investors into a buying frenzy. But with 10,000 American baby boomers turning 65 on a daily basis and a current population of 44.7 million people age 65+ in the United States, there is a big need that has to be filled. Everyone is focused on selling Boomers healthcare, retirement communities and wealth management; personal hygiene products are often overlooked. Domtar Corp. (NYSE: UFS) to the rescue. As the largest producer of uncoated freesheet paper in North America, Domtar is also major pulp producer. But the demand for uncoated, freesheet paper has been on the decline due to the continuing proliferation of digital technology, forcing the company to reinvent itself through acquisition in the personal care product space. #-ad_banner-#The company was formed in 2006, merging the fine paper assets of Weyerhaeuser (NYSE: WY) and Domtar, Inc. Right now, 83% of revenue is generated from pulp and paper. Annually, the company produces about 1.6 million metric tons of pulp and paper with a total manufacturing capacity of 3.4 million metric tons. Personal care only represents 17% of annual sales which topped $5.2 billion last year. But that’s where the growth lies. The company’s top two… Read More

While worldwide GDP growth slows to a crawl reliable investments can be hard to find. But I’ve found a reliable dividend payer that could give your portfolio a boost. Over the last two weeks the S&P 500 Index (SPX) has rallied nearly 6%, a marked improvement from the beginning of the year’s poor performance. Many market observers, me included, think the volatility will stick around for 2016. #-ad_banner-# One of the main volatility drivers for this year will be investors accepting the fact that global economic growth will remain lackluster at best. For 2016, the World Bank sees U.S. real… Read More

While worldwide GDP growth slows to a crawl reliable investments can be hard to find. But I’ve found a reliable dividend payer that could give your portfolio a boost. Over the last two weeks the S&P 500 Index (SPX) has rallied nearly 6%, a marked improvement from the beginning of the year’s poor performance. Many market observers, me included, think the volatility will stick around for 2016. #-ad_banner-# One of the main volatility drivers for this year will be investors accepting the fact that global economic growth will remain lackluster at best. For 2016, the World Bank sees U.S. real GDP growth at 2.8%. The outlook for the Euro area and Japan is much more dismal at 1.8% and 1.7% respectively. On average, developed markets are poised to turn in anemic growth of just 2.4%. While forecast GDP growth for the developing world is better than 50% that of developed markets at an average of 5.2%, the double digit days seem to be long gone. While China targets 7% growth (if you can trust them), it’s a far cry from the “China Miracle” of old. As a professional investor, the challenge I face on a daily basis is finding stable… Read More

I have a confession to make. I love American Presidential politics the same way that many people love sports. It’s my March Madness — but it lasts almost an entire year.  2016 is turning in to one of the strangest elections I’ve ever watched. It’s a bit like a 50 car pileup; you know you shouldn’t look but you just can’t resist. #-ad_banner-#On the GOP side, the biggest ruckus is being kicked up a by billionaire real estate mogul turned reality TV star with zero government experience who is running a populist themed campaign that defies conventional wisdom on a… Read More

I have a confession to make. I love American Presidential politics the same way that many people love sports. It’s my March Madness — but it lasts almost an entire year.  2016 is turning in to one of the strangest elections I’ve ever watched. It’s a bit like a 50 car pileup; you know you shouldn’t look but you just can’t resist. #-ad_banner-#On the GOP side, the biggest ruckus is being kicked up a by billionaire real estate mogul turned reality TV star with zero government experience who is running a populist themed campaign that defies conventional wisdom on a daily basis. The Democratic choices are no less weird with a geriatric, self-avowed, socialist senator who is also running on an angry, populist platform and a former Secretary of State with a politically dynastic name and trust issues. While the media devours this circus, the market jury is still out till at least summer, when the picture should be a bit clearer. In the meantime, smart investors should consider these moves to make sure their portfolios will be ready to weather the politically induced chaos should it arrive. 3 Areas To Avoid In An Election Year By nominating convention… Read More

This might be a controversial viewpoint, but I love boring investments. Of course, “boring” is a relative term. These stocks may not be on the frontline of streaming media delivery or cloning. So, from that point of view, yeah, some people might consider them boring. But I don’t find getting yields 186% higher than the 10-year U.S. Treasury or earnings that are as dependable as a Timex watch boring. To me, those qualities are dead sexy. #-ad_banner-#Thanks to the market correction, I’ve found three high quality, high yield stock bargains. All three names are considered cyclical stocks, which  typically advance… Read More

This might be a controversial viewpoint, but I love boring investments. Of course, “boring” is a relative term. These stocks may not be on the frontline of streaming media delivery or cloning. So, from that point of view, yeah, some people might consider them boring. But I don’t find getting yields 186% higher than the 10-year U.S. Treasury or earnings that are as dependable as a Timex watch boring. To me, those qualities are dead sexy. #-ad_banner-#Thanks to the market correction, I’ve found three high quality, high yield stock bargains. All three names are considered cyclical stocks, which  typically advance ahead of a rebound. That makes this a great time to pick up these shares. Pick Up These Shares Before The Rebound Thanks to fears of a weak global economy, shares of International Paper Co. (NYSE: IP), the world’s largest paper and forest products company, have tumbled nearly 40% from their 52-week high. For value shoppers, this pushes valuation metrics down and yields up with the forward P/E at a low 10.3 and a dividend yield of 5.1%. Over the last decade, the company has slowly unwound its office paper business and focused its energy on packaging. The result… Read More