Last week we recommended BCE Inc. (NYSE: BCE) as a way to stabilize your portfolio amid market volatility. We chose a superb company that's a leader in Canada's telecommunications field and has a consistent history of generating ample cashflow. This cashflow allows the company to keep increasing its safe, high dividends and to repurchase shares.
Now, don't get me wrong - I'm not pushing you into a defensive investment cocoon. I still love the opportunity to make huge profits from the advent of new technologies that are revolutionizing both computing and communications in a way not thought possible only a few years ago. Assuming you have measured your risk appetite and incorporated many high-potential return opportunities in your portfolio, adding low-Beta, dividend-rich winners such as last week's and today's (Monday) will improve your portfolio diversification, reduce volatility and add some serious income.
Today's stable dividend winner is in the skyrocketing world of mobile computing. Powerful smartphones are giving us brand new capabilities, which greatly improve productivity. And the growing variety and availability of cloud computing services are already impressive. From mobile e-mail to mobile web-browsing and even mobile video and geo-location-based services, there's a myriad of applications now available to consumers. These services are only possible thanks to large technological improvements and investments in wireless networks.
Horacio R. Marquez
Article Index
Buy, Sell or Hold: AT&T Inc. (NYSE: T) Offers a Stable Dividend With Room to Grow
Buy, Sell or Hold: BCE Inc. (NYSE: BCE) Has Canada Covered
The market right now is torn between data that suggests the U.S. is waning and reports that many companies are increasing guidance and beating earnings estimates.
This has created a lot of volatility, and if you already have enough strong growth plays in your portfolio, adding some large, established companies with stable cashflows and hefty dividend yields could ease some of the anxiety you may be feeling.
Such an approach in my opinion is superior to bonds, since bond yields are just too low at these levels. That means you actually risk capital losses if they go up. In addition, safe dividends paid by leading companies are higher than bond yields. And unlike bonds, big companies usually can adjust prices in accordance with inflation.
There are a lot of companies for an investor to choose from, but BCE Inc. (NYSE: BCE) jumps out at me immediately. It is a dominant, well-managed company, and it has strong upside potential.
This has created a lot of volatility, and if you already have enough strong growth plays in your portfolio, adding some large, established companies with stable cashflows and hefty dividend yields could ease some of the anxiety you may be feeling.
Such an approach in my opinion is superior to bonds, since bond yields are just too low at these levels. That means you actually risk capital losses if they go up. In addition, safe dividends paid by leading companies are higher than bond yields. And unlike bonds, big companies usually can adjust prices in accordance with inflation.
There are a lot of companies for an investor to choose from, but BCE Inc. (NYSE: BCE) jumps out at me immediately. It is a dominant, well-managed company, and it has strong upside potential.
Buy, Sell or Hold: Tata Motors Ltd. (NYSE: TTM) Is Kicking Into High Gear
I am constantly hunting for profitable opportunities for my Money Map VIP Trader, the Money Map Report and this column in Money Morning. And I realized months ago that India would be the one major emerging market that would notably accelerate in the second half of the year and into 2011.
To take advantage of that trend, I recommended a very pro-cyclical play in my trading service, which you can only see by subscribing. But I also kept up my search and was able to find another good opportunity to recommend here. That opportunity is Tata Motors Ltd. (NYSE ADR: TTM).
About a month ago, my colleague and Money Morning Managing Editor Jason Simpkins articulated a view of the Indian economy that clearly details how that country is looking to accelerate growth. The major headwind for India has been inflation - more specifically, food prices.
However, India is experiencing a normal monsoon season and will soon see its production of food increase and food prices drop - the recent spike in wheat prices notwithstanding. This drop in food prices, coupled with renewed fiscal discipline will help bring inflation down from around 10% to about 6% by year end.
To take advantage of that trend, I recommended a very pro-cyclical play in my trading service, which you can only see by subscribing. But I also kept up my search and was able to find another good opportunity to recommend here. That opportunity is Tata Motors Ltd. (NYSE ADR: TTM).
About a month ago, my colleague and Money Morning Managing Editor Jason Simpkins articulated a view of the Indian economy that clearly details how that country is looking to accelerate growth. The major headwind for India has been inflation - more specifically, food prices.
However, India is experiencing a normal monsoon season and will soon see its production of food increase and food prices drop - the recent spike in wheat prices notwithstanding. This drop in food prices, coupled with renewed fiscal discipline will help bring inflation down from around 10% to about 6% by year end.
Buy, Sell or Hold: The Clorox Co. (NYSE:CLX) Is Cleaning Up
The Clorox Co. (NYSE:CLX) on Thursday reported net earnings of $171 million on sales of $1.52 billion for the fourth quarter of fiscal year 2010 ended June 30, compared to net earnings of $170 million on net sales of $1.5 billion the year prior.
This continued the company's trend of improvement. But more importantly, the bulk of Clorox's profit and margin growth came from its international unit, and the firm projected an expansion in earnings per share of at least 10% to 14% for next fiscal year.
Boring is beautiful when you're dealing with consumer staples, since share prices improve with incremental increases in sales and margins. In Clorox's case, this has meant taking advantage of low rates and dependable cashflow to finance expansion plans. But the good news is that the high financial leverage results in an exorbitant return on equity.
This continued the company's trend of improvement. But more importantly, the bulk of Clorox's profit and margin growth came from its international unit, and the firm projected an expansion in earnings per share of at least 10% to 14% for next fiscal year.
Boring is beautiful when you're dealing with consumer staples, since share prices improve with incremental increases in sales and margins. In Clorox's case, this has meant taking advantage of low rates and dependable cashflow to finance expansion plans. But the good news is that the high financial leverage results in an exorbitant return on equity.
Buy, Sell or Hold: Peabody Energy Corp.'s (NYSE: BTU) Global Dominance Is Heating Up Profit Growth
While advanced economies are still facing high levels of unemployment, more than a billion people in emerging markets are experiencing advancing standards of living.
As these emerging economies - especially China and India -grow, there is a strong trend toward urbanization. People are leaving the countryside for the cities in droves in order to reap the promise of the global economy. This secular process alone places huge demands on the existing infrastructure.
This growth is also boosting manufacturing and energy needs. China has surpassed the United States in both car production and energy consumption. And India's Tata Motors Ltd. (NYSE ADR: TTM) launched the cheapest car in the world, the Nano, which costs roughly $2,500. The critically acclaimed vehicle's mass appeal and affordability is creating additional congestion on India's famously overcrowded streets. Adding more fuel to the global-demand fire, most emerging economies implemented a strong dose of infrastructure spending within their budgets as a result of the global financial crisis of 2008.
The result of all that infrastructure development, urbanization and increased consumer affluence is a myriad of new road, bridge and building construction, additional urban development, and stepped-up production of cars, home appliances and other consumer goods. All of these developments require two key ingredients to become reality: Steel and energy.
As these emerging economies - especially China and India -grow, there is a strong trend toward urbanization. People are leaving the countryside for the cities in droves in order to reap the promise of the global economy. This secular process alone places huge demands on the existing infrastructure.
This growth is also boosting manufacturing and energy needs. China has surpassed the United States in both car production and energy consumption. And India's Tata Motors Ltd. (NYSE ADR: TTM) launched the cheapest car in the world, the Nano, which costs roughly $2,500. The critically acclaimed vehicle's mass appeal and affordability is creating additional congestion on India's famously overcrowded streets. Adding more fuel to the global-demand fire, most emerging economies implemented a strong dose of infrastructure spending within their budgets as a result of the global financial crisis of 2008.
The result of all that infrastructure development, urbanization and increased consumer affluence is a myriad of new road, bridge and building construction, additional urban development, and stepped-up production of cars, home appliances and other consumer goods. All of these developments require two key ingredients to become reality: Steel and energy.
Buy, Sell or Hold: United Technologies Corp. (NYSE:UTX) is Really Taking Off
We have already seen strength in industrial sales in many companies, but today's recommendation may be the most promising yet. United Technologies Corp. (NYSE:UTX) is hitting on all cylinders and is poised for both long and short-term gains.
The company reported earnings and hit it out of the ballpark. UTC reported quarterly earnings of $1.20 per share - even including the loss of 12 cents a share due to restructuring charges. That's 4 cents higher than analysts had expected - 16 cents higher, if you take out the one-time restructuring charges.
The good news did not stop there, either. UTC raised its guidance and share repurchases for the year, despite new challenges in Europe. Sales beat expectations and profit margins were higher across the board. Engine maker Pratt & Whitney and international elevator brand Otis were especially strong. That's remarkable considering the market's fear of a double-dip recession and the U.S. Federal Reserve's "uncertain" status about the strength of the economy.
The company reported earnings and hit it out of the ballpark. UTC reported quarterly earnings of $1.20 per share - even including the loss of 12 cents a share due to restructuring charges. That's 4 cents higher than analysts had expected - 16 cents higher, if you take out the one-time restructuring charges.
The good news did not stop there, either. UTC raised its guidance and share repurchases for the year, despite new challenges in Europe. Sales beat expectations and profit margins were higher across the board. Engine maker Pratt & Whitney and international elevator brand Otis were especially strong. That's remarkable considering the market's fear of a double-dip recession and the U.S. Federal Reserve's "uncertain" status about the strength of the economy.
Buy, Sell or Hold: Siemens AG (NYSE: SI) Will Benefit from Germany's Strength and the Euro's Weakness
The euro has suffered from the Greek debt crisis, and Spain and Portugal also are under closer scrutiny. But there are still significant opportunities for profit in the Eurozone.
Germany, for example, has the lowest debt to gross domestic product (GDP) ratio of all the major advanced industrial economies. And right now, it is taking measures to bring its budget deficit quickly into line. Despite a very rigid labor system, Germany is the second-largest exporter in the world, right after China. And the recent euro sell-off has given an extra "subsidy" of some 25% to German exporters.
This "subsidy" is likely to last for quite a while, since the structural situations of weaker European Union (EU) member countries will take time to resolve. It goes way beyond just having European banks pass some stress tests. So we are going to take advantage of a prudently managed exporting powerhouse with Siemens AG (NYSE ADR: SI).
Siemens is a conservatively run firm. It has very low levels of debt, which is rated in the middle of the investment grade scale (A). And despite the weakness in Europe, it has managed to increase its bottom line by 50% from last year's levels.
Germany, for example, has the lowest debt to gross domestic product (GDP) ratio of all the major advanced industrial economies. And right now, it is taking measures to bring its budget deficit quickly into line. Despite a very rigid labor system, Germany is the second-largest exporter in the world, right after China. And the recent euro sell-off has given an extra "subsidy" of some 25% to German exporters.
This "subsidy" is likely to last for quite a while, since the structural situations of weaker European Union (EU) member countries will take time to resolve. It goes way beyond just having European banks pass some stress tests. So we are going to take advantage of a prudently managed exporting powerhouse with Siemens AG (NYSE ADR: SI).
Siemens is a conservatively run firm. It has very low levels of debt, which is rated in the middle of the investment grade scale (A). And despite the weakness in Europe, it has managed to increase its bottom line by 50% from last year's levels.
Buy, Sell or Hold: Joy Global Inc. (NYSE: JOYG) Could Be a Gold Mine for Investors
Uncertainty and volatility have plagued the markets of late but there's reason enough to believe a short-term up-trend is in store.
For one thing, the speed of recovery has varied from country to country but emerging markets and commodity-producing nations continue to post strong growth. And while the global slowdown has brought about very high fiscal deficits, particularly in Europe, fears that the Eurozone economy is edging towards collapse are beginning to dissipate.
The European debt problem should be addressed at the end of this month, when the European Central Bank (ECB) publicizes the results of its stress tests. I expect the results will bring renewed confidence in the system. It's likely that the largest financial institutions will most probably all be sound, while there will be some smaller institutions that need restructuring. These smaller banks will either quickly recapitalize or be absorbed by larger institutions.
That means we could soon see a strong short-term bullish market trend.
Meanwhile, the International Monetary Fund's (IMF) recent World Economic Report Update showed global growth estimates for the next year and a half that were much stronger than expected.
For one thing, the speed of recovery has varied from country to country but emerging markets and commodity-producing nations continue to post strong growth. And while the global slowdown has brought about very high fiscal deficits, particularly in Europe, fears that the Eurozone economy is edging towards collapse are beginning to dissipate.
The European debt problem should be addressed at the end of this month, when the European Central Bank (ECB) publicizes the results of its stress tests. I expect the results will bring renewed confidence in the system. It's likely that the largest financial institutions will most probably all be sound, while there will be some smaller institutions that need restructuring. These smaller banks will either quickly recapitalize or be absorbed by larger institutions.
That means we could soon see a strong short-term bullish market trend.
Meanwhile, the International Monetary Fund's (IMF) recent World Economic Report Update showed global growth estimates for the next year and a half that were much stronger than expected.
Buy, Sell or Hold: Enbridge Energy Partners, L.P. (NYSE: EEP) Brings Some Stability to a Volatile Market
It seems like every week there's a new development that forces investors to rethink their investment strategies.
This week we will see the initial consequences of the weekend's all-important Group of 20 (G20) meeting. A lot of very important issues are up for debate among the world's top 20 countries, as are policies that will shape the intensity and distribution of global growth in the months and years ahead.
The meeting will be fraught with controversy as each economy is proceeding at its own distinct pace of growth and faces its own set of challenges.
China, which recently showed a superlative 50% year-over-year increase in exports, has run out of excuses to justify its undervalued currency. The country also is facing strong inflationary pressures, which include labor strikes by workers demanding higher pay.
This week we will see the initial consequences of the weekend's all-important Group of 20 (G20) meeting. A lot of very important issues are up for debate among the world's top 20 countries, as are policies that will shape the intensity and distribution of global growth in the months and years ahead.
The meeting will be fraught with controversy as each economy is proceeding at its own distinct pace of growth and faces its own set of challenges.
China, which recently showed a superlative 50% year-over-year increase in exports, has run out of excuses to justify its undervalued currency. The country also is facing strong inflationary pressures, which include labor strikes by workers demanding higher pay.
Buy, Sell or Hold: Cummins Inc. (NYSE: CMI) is a High-Powered Engine Maker That's Revving Up Its Revenue
Nestled in the heartland of America, Cummins Inc. (NYSE: CMI) is an icon of American manufacturing done right. And now that it's being powered by new technology, emerging markets growth and new regulatory standards, the company is ready to book serious profits.
Founded almost 100 years ago and publicly traded since 1957, Cummins dominates the diesel truck engine market in the United States and is strongly increasing its international presence.
The high quality, efficiency and durability of the engines Cummins designs and builds are the foundation of the company's leadership. And its strong and disciplined cost controls, inventory, and receivable management are vastly superior to that of its competition.
Founded almost 100 years ago and publicly traded since 1957, Cummins dominates the diesel truck engine market in the United States and is strongly increasing its international presence.
The high quality, efficiency and durability of the engines Cummins designs and builds are the foundation of the company's leadership. And its strong and disciplined cost controls, inventory, and receivable management are vastly superior to that of its competition.
Buy, Sell or Hold: A Copper-Price Rebound Could Mean a 50% Gain For Freeport McMoRan Copper & Gold Inc. (NYSE: FCX)
It's time to play "the metal of the economists"- copper. And that brings us to one stock: The publicly traded king of copper - Freeport McMoRan Copper & Gold Inc. (NYSE: FCX).
Let me explain ...
Last week, I provided a solid "defensive-investing" pick for readers who wanted to balance their portfolios - and wait for the latest global-financial storm to pass.
During the past week, we got very strong indications that strong hands see value in the market:
Let me explain ...
Last week, I provided a solid "defensive-investing" pick for readers who wanted to balance their portfolios - and wait for the latest global-financial storm to pass.
During the past week, we got very strong indications that strong hands see value in the market:
Buy, Sell or Hold: TransCanada Corp.'s (NYSE: TRP) Low Risk and High Dividend Yield Break the Waves of Uncertainty
The U.S. stock market has been choppy these past few weeks and it's no secret why.
The European debt crisis is taking center stage and eliciting strong policy responses from key European governments. And while those policy responses have moved in the right direction, we're still waiting on sustainable progress.
In addition, we are dealing with the uncertainties related to the oil spill in the Gulf of Mexico, which could have very important economic and financial implications. As if this were not enough, we saw an escalation of the rhetoric in the seemingly endless animosities between North and South Korea, and Hamas and Israel. And Iran continues to pursue a nuclear arsenal.
The European debt crisis is taking center stage and eliciting strong policy responses from key European governments. And while those policy responses have moved in the right direction, we're still waiting on sustainable progress.
In addition, we are dealing with the uncertainties related to the oil spill in the Gulf of Mexico, which could have very important economic and financial implications. As if this were not enough, we saw an escalation of the rhetoric in the seemingly endless animosities between North and South Korea, and Hamas and Israel. And Iran continues to pursue a nuclear arsenal.
Buy, Sell or Hold: Deere and Co. Thrives on Strong Global Trends and Flawless Execution
Deere & Co. (NYSE: DE) beat earnings estimates by a mile last week. It reported $1.58 earnings per share, beating most analysts' estimates by 50 cents! In addition, the company raised its earnings outlook.
In typical fashion, Deere continues to be conservative in guidance. And as I will explain below, the agricultural cycle this year is poised for a large upside surprise, as it is at the very beginning of a prolonged secular pickup.
The bottom line of Deere's performance last quarter is a prelude of things to come. Agriculture is zooming, and thus machinery in that sector is - and will continue - to command premium pricing. At the same time, global inflation is picking up slightly, but is still very subdued, which will help margins some more.
In typical fashion, Deere continues to be conservative in guidance. And as I will explain below, the agricultural cycle this year is poised for a large upside surprise, as it is at the very beginning of a prolonged secular pickup.
The bottom line of Deere's performance last quarter is a prelude of things to come. Agriculture is zooming, and thus machinery in that sector is - and will continue - to command premium pricing. At the same time, global inflation is picking up slightly, but is still very subdued, which will help margins some more.
Buy, Sell or Hold: Citigroup Inc. (NYSE: C) Is a Turnaround Play that Investors Can't Afford to Miss
Citigroup Inc. (NYSE: C) is truly a global bank. With operations in more than 100 countries, it leads in consumer banking, credit cards, corporate lending, investment banking and brokerage. But its forays into the U.S. mortgage market, and its huge exposure to the U.S. retail and corporate banking markets, created huge losses from which the company is still recovering.
Citi, guided by a prudent and savvy investment banker, Vikram Pandit, has embarked in one of the most ambitious and difficult transformations ever attempted by a financial institution. It is shedding bad assets, cutting costs, raising capital and has segregated the impaired assets and businesses that Citi would like to dispose into a so-called "bad bank," a subsidiary by the name of Citi Holdings. The success of the restructuring will depend on both Citigroup's execution and on the underlying strength of the U.S. and global economies.
But therein lies the huge upside. As I have written before, there are few investment opportunities more profitable than the restructuring and turnaround of a business. And given the huge size of Citi's balance sheet and the fact that banks are pro-cyclical to the economies in which they operate, the potential gains are extremely large.
Citi, guided by a prudent and savvy investment banker, Vikram Pandit, has embarked in one of the most ambitious and difficult transformations ever attempted by a financial institution. It is shedding bad assets, cutting costs, raising capital and has segregated the impaired assets and businesses that Citi would like to dispose into a so-called "bad bank," a subsidiary by the name of Citi Holdings. The success of the restructuring will depend on both Citigroup's execution and on the underlying strength of the U.S. and global economies.
But therein lies the huge upside. As I have written before, there are few investment opportunities more profitable than the restructuring and turnaround of a business. And given the huge size of Citi's balance sheet and the fact that banks are pro-cyclical to the economies in which they operate, the potential gains are extremely large.
Buy, Sell or Hold: Cypress Semiconductors Boasts a Strong Showing Since Dec. 14 Recommendation
Back on Dec. 14 of last year - as the market had "inexplicably" risen and investors were jumping ship - afraid that the market would correct - I issued a call to buying Cypress Semiconductors Corp. (Nasdaq: CY).
I mentioned back then that, at $10.40 per share, the stock was a steal and that several factors would propel it much higher. Today, with the stock having rallied some 10%, we will review these reasons to analyze their validity moving forward: