Sure, the Dow has reached record highs. That doesn't mean investing has gotten any easier. Quite the opposite...
When the markets make a major move higher, investors always run the risk of buying at the top and getting crushed as the market retreats.
It's called chasing momentum, and it can be fatal to your portfolio. Just ask Apple Inc. (Nasdaq: AAPL) shareholders who jumped in at $700 only to watch as the price dropped to less than $420/share. With little change in the company's outlook, Apple investors who bought near the peak managed to lose 40% in a bull market.
Today I want to tall you about a safer and more lucrative approach.
I call it "heirloom investing," because you'll pass these stocks on to your grandchildren.
The Biggest News from the Stock Market Today
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Three Safe Stocks to Buy in a High-Flying Market
Stock Market Today: Why Stocks Slipped After Seven-Day Rally
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After a seven-day rally that produced consecutive record highs for the Dow Jones Industrial Average, the stock market today (Tuesday) took a breather.
In early afternoon trading, the Dow Jones Industrial Average was down 16.66 or .12% at 14,430.63. The Standard & Poor's 500 Index was off 4.94, or .32% at 1,551.37. The Nasdaq was lower by 16.30, or .50% at 3,236.
"We've just been going up and up and up every day, and now a slight pullback. There is nothing surprising here, by any stretch of the imagination-it's natural to get a little pullback like this," Sean Kelly, managing director at Knight Capital told The Wall Street Journal.
Market participants continue to closely watch the S&P 500 Index. The broad-based market benchmark is close to its all-time closing high of 1,565.15 hit on Oct. 9, 2007.
But investors may be getting a bit concerned about the recent bull run. After falling to a six-year low on Monday, the VIX (the market's fear index), rose 7.8% Tuesday.
Also, the current bull market is aging. It turned 4 on Saturday. Only five of the past 11 bull markets have made it to their fifth birthday, according to data from S&P Capital. The average bull market since 1932 has endured for roughly four-and-a-half years.
Not helping stocks Tuesday was a read from the National Federation of Independent Business. While the report showed its small business optimism index rose in February, exceeding expectations, the federation's reading on expected business conditions remained in deep recession territory. Moreover, business owners reporting declining sales far surpassed those reporting increased sales.
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Stocks to Buy: These Companies Will Profit from Higher Crop Prices
Farm incomes are expected to climb to an all-time high this year, according to the U.S. Department of Agriculture. The expected increase - to a net farm income total of $128.3 billion, up from $112.8 billion in 2012 - is good news, not only for farmers but for fertilizer companies. Especially these three...
Stocks to Buy: Time to Pull the Trigger on These Three Winners
U.S. gun sales are at an all-time high. Ammo is flying off store shelves as well.
And that bodes well for companies in the firearms industry, putting the three mentioned below on many investors' "stocks to buy" list.
Fact is, demand for guns and ammo over the past few months is breaking all records. Just take a look at statistics compiled by the FBI's National Instant Criminal Background Check System (NICS).
In February, NCIS recorded 2,309,393 background checks - 32% higher than February 2012. December 2012 saw the most background checks in any month in U.S. history, when nearly 2.8 million background checks were performed.
Altogether, the FBI recorded more than 16.8 million background checks for gun purchases in 2012, the highest number since they began publishing the data in 1998.
What's more, the actual number of weapons sold could be even higher because customers can purchase multiple guns for each check, USA Today reports.
In fact, demand is so high, the companies that make these products are having a hard time keeping up.
Dale Raby, manager at Gus's Guns shops in Green Bay, WI, told The New York Times his inventory of guns and ammunition was almost wiped out, especially AR-15 military assault rifles.
"I almost had fistfights over...that type of gun," Raby said.
"If I had 1,000 AR-15s I could sell them in a week," Jack Smith, an independent gun dealer in Des Moines told the Times.
Around the country, many guns are simply out of stock and prices are skyrocketing.
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The FBI and the SEC Are Cracking Down on People Just Like You
If you happen to do something that you probably do, and have been doing - only, you didn't know it was "abusive manipulation" of the markets - they're already after you.
Dow Hits Record High – What Does That Say About the U.S. Economy?
Equity market cheerleaders got very excited about the Dow Jones Industrial Average hitting a new record high yesterday (Tuesday).
The Dow closed at 14,253.77, topping its previous record close of 14,164.53 on Oct. 9, 2007.
While it is nice to see a sign that equities are improving following the devastating shock of the financial crisis of 2008, today's Dow Jones Industrial Average is not the same index as it was in 2007.
In fact, if we look back at when the Dow Jones Industrial Average last exceeded 14,000, we'll see that the Dow seems to have less of a connection now to what is really happening in the economy than it did in 2007.
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Stocks to Buy Now: Cash in on Dividend Growth in this Energy Subsector
Income investors looking for stocks to buy in the energy space have had several prominent choices over the years.
Integrated names such as Exxon Mobil Corp. (NYSE: XOM) and Chevron Corp. (NYSE: CVX), for example, have lengthy dividend increase streaks, though neither fit into the high-yield category.
Royalty trusts and master limited partnerships (MLPs), two asset classes abundant in the energy sector, have surged in popularity in recent years mostly due to their large payouts and high yields. MLPs have also proven popular with conservative investors due to the predictable, prosaic nature of the oil and gas transportation business that leads to a steady stream of rising dividends.
But broadly speaking, the oil services subsector has been left out of the energy dividend conversation.
Oil services investors have had only a couple options within the sector when looking for dividend stocks to buy.
Stock Market Today: With Dow at Record High, Will the Climb Last?
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The Dow Jones Industrial Average was at a record high after nearly six years, as the stock market today (Tuesday) rallied enough to push the index up nearly 70 points at the open.
Just minutes after the opening bell, the Dow sailed passed its all-time high of 14,165 hit on Oct. 9, 2007. Less than a half-hour into the trading session the Dow roared higher by triple digits propelling benchmark to yet another record.
By 1 p.m. the Dow was up 146.99, or 1.04%, at 14,274.81. The Standard & Poor's 500 Index added 17.32 or 1.14%, to 1,542.52, leaving it in striking distance if its record close of 1,565 hit in 2007. The Nasdaq climbed 43.39 or 1.37% to 3,225.42.
Money has poured into stocks over the last several months as individuals have begun to feel more comfortable about the health of the economy - but can it last?
"The question is, can the Dow maintain these levels? The market is interested in risk-that's why the Dow is higher, why the riskier currencies are higher," Matthew Lifson, currency trader at Cambridge Mercantile Group in Princeton told Reuters.
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Stocks to Buy Now: These Three Retailers Are Prime Takeover Targets
The wave of deal-making on Wall Street hasn't extended to retail yet. But that's about to change.
That's because retailers make for great M&A candidates - which also makes for some stocks to buy now ahead of this takeover trend.
Takeovers provide chances for companies to cross-sell products and negotiate better with landlords and suppliers. Plus, retailers face low regulatory barriers to deals.
That's why major retailers are among a list of 71 companies Morningstar says are some of the most likely takeover targets this year.
"We think 2013 will bring an uptick of deal activity," said R.J. Hottovy, director of global consumer equity research for Morningstar. "There's no shortage of companies with available capital on their balance sheets and high operating margins, fewer organic growth opportunities and candidates with attractive valuations."
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Stocks to Buy: Will Solar Shine This Year?
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Since legendary investor Warren Buffett took a liking to solar this year, investors have been wondering if it's time to revisit this beleaguered industry when looking for stocks to buy in 2013.
The solar sector has endured a beatdown for about two years, with massive oversupply of solar panels and unfavorable publicity combining to keep solar stocks down.
But two recent purchases by MidAmerican Energy Holdings Co., a subsidiary of Buffett's Berkshire Hathaway Inc. (NYSE: BRK.A, BRK.B), have brightened the solar stocks outlook.
MidAmerican announced a $2 billion to $2.5 billion deal to buy two California solar power projects from SunPower Corp. (Nasdaq: SPWR). MidAmerican also agreed in January to invest in what will be the world's largest solar photovoltaic operation, which is partly owned by First Solar Inc. (Nasdaq: FSLR).
Many solar stocks and solar ETFs, including Market Vectors Solar Energy (NYSE: KWT) and Claymore/MAC Global Solar Index (NYSE: TAN), have soared on the MidAmerican news. They're both up about 17% this year.
Does this mean investors should follow Buffett into solar stocks? Here's a look at the sector.
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Stocks to Buy: Three Small Cap Stocks for Safety & Dividend Growth
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Here's how to get rich in stocks: Buy elite businesses at a good price and let the dividends compound over the years. That's the safe, steady road to building true wealth.
The key is in selecting the right stocks to buy.
However, most investors starved for solid dividend-payers often overlook one of the safest and most lucrative sectors - small cap dividend stocks.
Instead they focus on large cap businesses like Wal-Mart Stores Inc. (NYSE: WMT) or McDonald's Corp. (NYSE: MCD).
But therein lies the problem--everybody knows they are great companies. That alone can drive their share prices to dizzying heights.
So investors who limit their choices to the big blue chips can end up paying too much-while missing out on another category of stocks that could make them even more money.
In short, they miss the quality small-cap dividend-payers. Here's why that is a big mistake for most investors.
Small Cap Stocks to Buy
Small-cap stocks can be an individual investor's best friend.
In the period between 1927 and 2009, small-cap value stocks returned 14.9% per year.
Meanwhile, returns on large-cap value stocks averaged roughly 3% less per year.
So why do these small frys outperform their larger cousins?
First of all, their small size makes them fly under the radar of many institutional investors.
What's more, mutual funds and pension funds have billions to invest, making it nearly impossible to buy and sell small stocks without having a huge influence on the price. As a result, a fund manager may find himself chasing a stock higher as he tries to take a meaningful position simply because he's the only big buyer.
Second, because the big fish tend to attract the big bucks, small caps are often ignored by Wall Street analysts. Most analysts simply aren't about to spend precious hours researching a company that no one follows.
So "in-the-know investors" buying small cap dividend payers face a lot less competition and can pick up shares at a good price.
Plus, many of these small cap dividend machines actually have a lot in common with their big brethren.
Like many large-cap, dividend-paying stocks, these companies generate tons of cash flow, have great brand names and wide competitive moats in their respective industries.
More importantly, they also have a history of dividend growth. They just happen to be much smaller than giants like Coke (NYSE: KO)and Procter & Gamble (NYSE: PG).
The bottom line: Investors who are willing to accept a slightly higher degree of risk should consider investing in small-cap value stocks that pay dividends.
Three Small Cap Dividend Machines
With that in mind, here are three small caps that are members of the Russell Global Small Cap Dividend Achievers Index. To qualify they must have raised their dividends annually for more than 10 years and meet minimum cash volumes.
In short, these are companies that throw off plenty of cash and safe dividends.
They include:
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Stock Market Today: Apple, Bernanke, Durable Goods in Focus
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The stock market today (Wednesday) opened modestly higher before staging a strong rally by mid-day.
Shortly after noon, the Dow Jones Industrial Average had jumped 133 points, or .96%, to 14,033, putting it within reach of its all-time high of 14,164, set in 2007. The Standard & Poor's 500 Index added 15.71, or 1.05%, to 1,512; and the tech-heavy Nasdaq climbed 35.18, or 1.09%, to 3,163.
Federal Reserve Chairman Ben Bernanke remains in the spotlight today. The Fed chief continues to defend the central bank's easy-money policies in his second day of testimony before Congress.
Also garnering attention was the Commerce Department's report that showed a 5.2% drop in orders for durable goods - products designed to last at least three years. The decline, steeper than the 3.5% decline economists had expected, came after strong gains in the previous month.
The slump shows the impact from reduced spending, ahead of sequestration, that has already taken hold.
With defense contractors feeling the effects of impending automatic spending cuts, defense capital goods orders plunged 69.5% in January, marking the steepest drop in more than a decade.
Also falling was demand for civilian aircraft, which plummeted 34%. The steep drop in this volatile category was attributed to a decline in orders at The Boeing Co. (NYSE: BA) due to battery problems in its Dreamliner 787.
The stock market today got a boost from the National Association of Realtors monthly index report of pending sales of existing U.S. homes - up 4.5% in January from the previous month, handily beating the 1.5% analysts had projected.
And providing a cushion, if not a catalyst, to markets, was an announcement from Fitch Ratings. The firm said that while sequester and a U.S. government shutdown would "erode confidence," it wouldn't prompt a downgrade of the nation's AAA credit rating.
Does the Heinz Deal Mean Warren Buffett Has Become a Doomsday Prepper?
At $28 billion, the famed ketchup maker is valued at a rich 23x earnings. And Buffett won't even control management. Given Warren's long and storied history of value investing and a hands-on style, this purchase is bizarre. Unless...
"Safe" Stocks You Need to Dump Right Now
Many investors have one or two "safe" stocks they own that, for whatever reason, have become sentimental favorites they never consider selling.
These companies typically are household names, large, and considered by almost everyone - even fund managers - to be safe investments.
That means even if you're not holding such stocks in your personal portfolio, you may own mutual funds that own them, or they could lurk somewhere in your 401(k).
Many "safe" stocks are really hidden time bombs, ready to blow a big hole in your portfolio at any moment.
And as Money Morning Chief Investment Strategist Keith Fitz-Gerald points out, even the most stable, veteran companies can morph into portfolio-destroying dogs.
"Just because you think a stock is safe doesn't mean that the markets will treat it that way," Fitz-Gerald said.
What's more, he said, is that "the very definition of safe has changed," noting how the massive leverage common on Wall Street can unravel a company almost overnight, as happened with Lehman Brothers at the height of the 2008 financial crisis.
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Why Oil Refiners Are Among the Best Energy Stocks to Buy Now
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Shale oil production continues its upward path, increasing overall U.S. oil production and making specific groups of energy stocks among the best to buy right now.
In fact, the U.S. Energy Information Agency (EIA) reported last month that domestic oil production surpassed the 7 million barrel a day level, the highest point in nearly 20 years. Production this year, the EIA says, will rise by another 14%.
This is obviously good news for the companies producing that oil, and it gets even better. Many industries outside the energy sector, including chemicals and railroads, have benefited from the shale boom.
But there is one subsector in the energy industry that has reaped the rewards of plentiful oil from the Bakken and other areas more than any other, and that's the refining industry.
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