As Ive discussed in recent market commentary, we see signs of a rotation into larger cap names and also into some of the laggard stocks. This is a clear indication of late stage market action. While we dont see an end of the bull market on the horizon over the near term, a 4-8% correction (give or take a few percent) is likely looming. We have recently added some short positions to the portfolio to partially offset risk from our long exposure. Additionally, we have shifted to a tighter than normal loss cutting policy, giving stocks in our portfolio little room to move against us.

The market may indeed keep crawling its way higher however, if the rally contains less and less participation, it will become increasing more difficult to make money. Therefore, our recommendation is to take smaller than normal positions, tighten stops, and nail down profits when you have them.

Mark Minervini

The engine behind this bull market are low interest rates driven by economic weakness. Bull markets are born out of recessions and this one is no different than many past bulls.

Despite recent relative strength in home building stocks, the housing market is still depressed as there remains an oversupply of homes as well as an abundant supply of foreclosures. Commodity prices are on the rise again however, core inflation and wage inflation remain weak. The employment picture has not yet improved enough to allow the Fed to normalize rates. Therefore, the proverbial punchbowl remains on the table with additional re-fills likely.

Bottom line: There is little competition for stocks.

The Feds commitment to stimulus is likely to persist throughout 2011. The extension of the Bush tax cuts and the 2% cut in the employee payroll tax rate and a 2-year extension of depreciation incentives for business investment is also a form of stimulus. The above coincides with a favorable election cycle period and a market that is trading at a reasonable multiple when the current interest rate environement in considered.

Certainly, the fundamental tailwinds remain strong. More importantly, our longs continue to work and the market refuses to give up much ground. Therefore, we continue to stick with our plan and add new names as they emerge on a stock-by-stock basis.

The big question is: how far out is the market looking forward and when will it cease discounting the positive side of the coin? The answer: no one knows. This is why regardless of how great all the rhetoric sounds, we adhere to strategy.

To put it in simple terms, all the statistics, analysts opinions and pundit predictions on Wall Street wont change the fact that we sell our stocks when they stop us out and we stop buying stocks when they cease to set-up constructively. In my 30 years as a stock trader, I have learned that this is by far more important than opinions and forcasts, including mine.

Until then, we continue to trade the best SEPA situations as we remain on a buy signal, and the party continues.

Mark Minervini

Japan has the third largest economy in the world based on gross domestic product for purchasing power parity and nominal GDP. Three quarters of the GDP comes from the service sector. The countries unemployment rate is 5.1%. The Tokyo Stock Exchange is the largest exchange in the world outside of the United States. There are over 15 different Japanese companies that trade on American stock exchanges, according to WallStreetNewsNetwork.com.

The Tokyo based Canon Inc. (CAJ), the popular manufacturer of copying machines, laser printers, inkjet printers, and cameras, pays a decent 2.3% yield and trades at 19 times forward earnings. The price earnings growth ratio is a very reasonable 0.96. Earnings for the quarter ending September 30 were up an astounding 85.6% on a 17.9% rise in revenues. The company reports earnings on January 27.

Toyota Motor Corp. (TM) is another Japanese dividend payer, yielding 1.1%. This manufacturer of cars, minivans, SUVs, and trucks has a forward price to earnings ratio of 20.7. Earnings for the latest quarter ending September 30 were up an incredible 352%, with sales increasing by 5.8%. Toyota reports February 4.

For a free list of Japan based stocks, which can be downloaded, sorted, and updated, go to WallStreetNewsNetwork.com.

Disclosure: Author didn’t own any of the above at the time the article was written.

By Stockerblog.com

Back in October last year, I announced the purchase of Aqua America (WTR:US), a water and wastewater services company that has over 3 million customers across 14 states.  At the time, I was pretty pleased with my purchase. Why?

o Aqua America provides what everyone needs; clean, safe, reliable water.
o Theyve been a dividend payer since 1939.
o Theyve paid quarterly dividends consecutively for more than 60 years.
o Their five year average dividend growth rate is over 8%.

With a market cap of about $3 billion they are not a small company and they have lots of room to grow through both acquisitions and service diversification.

So why did I sell them with mostly upside to be had?

Although I consider Aqua America a good company with long-term growth prospects, I recently found out that Aqua America is not eligible for any dividend reinvestment plan with my discount brokerage institution. This is in contrast to what Aqua America offers with their transfer agent Computershare in the U.S. Here are some highlights from their website:

o Aqua America, Inc. has a Dividend Reinvestment and Direct Stock Purchase Plan (the “Plan”) that offers investors a convenient and economical way to purchase shares of the Company’s Common Stock.
o Computershare Shareholder Services, Incwill administer the Plan and act as Agent for the participants.
o As a shareholder, you can buy additional shares of our common stock at any time for as little as $50. You can pay by check or by a one-time online bank debit through the Buy Stock Direct option noted above, or have your payment automatically withdrawn from your U.S. bank account.

While DRIPping Aqua America through Computershare has its merits, I do not want to go through the hassle of setting up a U.S. bank account or always commit to a minimum $50 cheque to purchase more WTR:US shares. Unfortunately when I made my Aqua America purchase in October I assumed because they offered a full DRIP via their transfer agent they would offer a synthetic DRIP with my discount brokerage institution. This was not the case. This was alarmingly clear when dividends were paid to me in December in cash.  

My lesson learned?

Before I make another U.S. stock purchase, Ill check with my discount brokerage institution to ensure the stock is synthetically DRIP eligible. Not all U.S. companies who offer DRIPs with their transfer agents offer these plans synthetically with brokerages. Im not sure why WTR:US Board of Directors made this decision (maybe they want to keep more control over the companys shares?) but it was an annoying revelation for me.

Sure, I could have kept Aqua America shares and not had the dividends reinvested but I think that goes against my strategy as a dividend investor. For every stock I own, I want to have enough shares of any company to DRIP at least one full share every quarter. I can do that for almost every stock in my portfolio, except for a couple Canadian stocks. 

o My DRIPs will provide me with dollar-cost averaging.
o My DRIPs take the emotions out of my investing.
o My DRIPs will not cost me anything to buy more shares.
o My DRIPs will take advantage of the magic of compounding.
o My DRIPs help me set and forget part of my retirement plan.

 
What can I say? I made another investing mistake and Ill probably make more.  How about you? Any investing mistakes you care to share?

My Own Advisor

But there are also regular corporations, such as Alaska Communications (ALSK) which provides landline and wireless services to Sarah Palin’s state. The stock sells for around $10 per share, has a forward price to earnings ratio of 37, and pays a yield of 7.8%. The company reports earnings on March 4.

Another example is Hercules Technology (HTGC) which is a private equity, venture capital, and venture debt firm. It sells for less than $11 per share, has a forward PE of 9.8, and pays a yield of 7.4%.

Provident Energy (PVX) processes, transports, stores, and markets natural gas liquids in the United States and Canada. It sells for slightly more than $8 per share, has a forward PE of 17, and yields 8.8%.

For a list of over 15 stocks that pay a yield over 6% and sell for less than $10 per share, go to wsnn.com. Just remember, very high yields may not be sustainable.

Disclosure: Author didn’t own any of the above at the time the article was written.

By Stockerblog.com

Scotiabank motives aside (selling products) that seems like a pretty high number almost 4 in 10 Canadians will retire but work in retirement to make ends meet.

The study goes on to state:

56% of Canadians think they will need less than $1 million to fund their retirement, half of those believe they will need less than $300,000 to retire on.
28% of Canadians think they will need between $1 to 2 million to retire on.
16% believe they will need more than $2 million to retire on.

 Financial necessity is a pretty vague term but I hope this doesnt include travelling for a few months each year, playing golf every day, going back to school or buying a house on the ocean like some retirees plan to do. None of these come cheap.

I wonder if they work at a Bell call centre in Toronto?

Whats your magic number? Do you have one?

Cheers,
Financial Cents/My Own Advisor

Most analysts say that pharmaceutical stocks and consumer staples are the best places to put your money during rising rates. But there is one stock that will benefit big time from higher interest that doesn’t fall into either of these sectors. The stock is Apple Inc. (AAPL).

Why Apple? First of all, it has no long-term debt. Second, the company has a huge amount of cash. No wonder why I referred to Apple as a money market fund a few months ago. Although many articles report that it has about $51 billion in cash, that number includes $25.391 billion in what Apple’s accountants consider long-term marketable securities. But Apple does have $11.261 billion in cash and cash equivalent securities plus $14.359 billion in short term marketable securities, for a total of $25.56 billion.

Apple’s weighted average interest rate has been dropping for the last three years, as have rates in general, from 3.44% in 2008, to 1.43% in 2009, to 0.75% for the current year. Of the $25.56 billion in what is essentially cash, total income based on the 0.75% weighted rate is about $191.7 million.

If the rate increased to 3% and assuming the balance remains the same (but it should certainly increase), interest income on effective cash would rise to $766.8 million, and at 5%, the income would be $1.278 billion, or $1.18 in additional earnings per share, currently at $15.15 per share. This additional interest is a pre-tax number, but based on the companys effective tax rate, additional earnings would still be close to a dollar a share.

Plus there are no other expenses incurred in generating this income. No salaries, no capital expenditures of manufacturing equipment, no purchase of raw materials, no office space rental, no nothing; just some electrons on a computer screen. Talk about easy money.

If you want to check out the lists of stocks which have a lot of cash, which can be downloaded, sorted, and updated, go to WallStreetNewsNetwork.com.

Disclosure: Author owns AAPL.

By Stockerblog.com

Guest Article

Overview of bond trading

In the financial and investment market, bonds refer to a type of debt security whereby the issuer of the bond owes the purchaser a debt. Depending on the specific terms of the bond, the issuer is obligated to paying the purchaser interest and/or repays the total principle to the purchaser at a later date. This date is referred to as the maturity day. It is a formal financial contract the borrowed money is repaid with interest included and paid at fixed intervals throughout the life of that contract.

There are numerous types of bonds such as bearer bonds, fixed-rate, and many others. However one of the most common and popular are the municipal bonds which are typically issued by different government agencies such as a city or local governments, state governments, or US territories. The interest that the purchaser of the bond receives is normally exempt from federal and state income taxes.

Overview of stock trading

Even though stock trading is a common terminology, it is actually a misnomer because you really dont trade shares of stock. You purchase them for the purposes of selling them at a profit. In the language of the financial and investment markets, you purchase and sell shares of stock either on the floor of one of the different stock exchanges or online. Additionally, the individual who purchases and sells shares of stocks is referred to as a stock trader.

Advantages and disadvantages bond trading

As with any type of financial and investment instrument, there are certain advantages and disadvantages to trading bonds. Although they tend to be much less aggressive than shares of stocks typically are, they usually provide the investor with a steady income stream. Over the long-term, this means that their performance might be poorer than what you would experience with stocks. Additionally, and like other investments, there are certain risks involved with bond investing.

The two primary advantages are those involving income and ratings. The income advantage is the fact that they are a safer investment than stocks while the rating advantage is a system that enables the investor to gauge a bonds reliability. The key disadvantages involve risk and security. The former is associated with the fact that you cant always trust those systems that rate bonds. The security disadvantage refers to the fact that the bond is only as good as what the borrowers ability to repay the loan is.

Advantages and disadvantages of stock trading

As with trading in the bond market there are certain advantages and disadvantages where stock trading is concerned that you need to be aware of:

The key advantages are:

o better returns on ones investment
o familiarity with the larger companies
o wide range of investment choices

The key disadvantages include:

o cost of shares
o leverage is typically lower than other forms of investments such as the FOREX market
o uptick rules regarding short selling meaning that you have to wait for the price of the stock to increase before you can short sell it

I dont know about you, but applying for a mortgage can be frustrating and time-consuming. From our perspective, we were just another number applying for a bunch of numbers. Insert a great mortgage broker into the equation.

Heres a short (but not inclusive) list of great things a great mortgage broker can do you:

Give you customer focus – Unlike banking representatives, mortgage brokers are not tied to any one bank. Sure, they might have some favourites, but great brokers canvas the full field. Our guy was looking out for the customer (us), our terms, conditions and pre-payment options. He was working to find a product that fit our needs and situation, not his agenda. In brief, our mortgage situation is not ideal, we have a hefty penalty to pay if we break our existing mortgage and go with another lender within the next two years. (This is a reminder to look at the detailed print of your mortgage agreement before you purchase a new home .) In our case, a great opportunity arose and sometimes you simply cant pass those up regardless what the fine print says – life happens, choices need to be made and chances need to be taken. Back to my point, you can certainly make a strong argument that mortgage brokers work for themselves, not you, however without attention to personal detail, they wouldnt be in business. Our broker put our needs and requirements #1. He was always very responsive. He never said he didnt have time for us or needed to take another call.

Give you leverage The way I see it, using a mortgage broker to fund a mortgage, youre going to get more attention because the lender wants that broker to continue sending business their way. As an individual customer, were just a number apply for a bunch of numbers. In talking with our broker, I know if he sensed any run around from a prospective lender hed move on and our mortgage prospects would go with him.

Save you money No doubt mortgage brokers are compensated by the lenders they strike the deal with but a) that means you dont pay them and b) as long as the rate and conditions of the mortgage are better than what you could have obtained youre saving money. Potentially lots. Like I mentioned earlier, our broker worked hard to get us a good deal. He knew his stuff and actively monitored bond yields for us. We more than appreciated that because without our new great rate and its associated terms, we wouldnt be coming out ahead over our hefty mortgage penalty. Weve taken our lumps and learned from them. My advice? Dont take a five-year mortgage term if theres even a chance you might move within that term period. Sure, you can sometimes port your 5-year fixed term to your new home (it doesnt cost anything but the mortgage appraisal and sometimes a small discharge fee) but that wasnt ideal for us. In hindsight, we should have taken a shorter fixed term a few years back or instead, given historical research, a variable rate. Click here to read more about variable mortgage rates and how more often than not, you come out a winner over a fixed rate mortgage.

In closing, mortgage brokers can be a tremendous resource, if you have the right one. Were glad we worked with our guy. Actually, we still are.  He’s still checking in with us to ensure all the rebates we were able to take advantage of are coming our way, including one for the mortgage appraisal.

I know if I have mortgage question going forward, Ill drop him a line. Hell take my call, hell listen, hell provide good customer service and objective feedback. I dont mind sharing who we used because the experience was very positive.

Thanks very much Rob!!

Click here if you want his contact information.

Do you agree or disagree what a great mortgage broker can do for you?
Any positive or “other” experiences youd like to share?

Cheers,
Financial Cents

WallStreetNewsNetwork.com has just updated its list of over a dozen China stocks that pay dividends with yields ranging from one percent to as much as 7.5%.

The wireless telecom company, China Mobile Limited (CHL) trades at 11.6 times forward earnings and yields 3.3%. Dividends are paid twice a year.

PetroChina Co. Ltd. (PTR) has been paying dividends since 2000, and pays twice a year also, most recently in May and September. This producer of oil and natural gas has a forward PE of 9.9 and pays a yield of 3.3%.

Another China company with a long term track record of paying dividends is China Petroleum & Chemical Corp. (SNP), which has been paying semi-annually since 2001. This oil, gas, and chemical company has a forward PE of 6.6 and yields 2.3%.

For a free Excel database of over a dozen high yielding China stocks, which can be sorted and updated, go to wsnn.com. Eight of the stocks have yields in excess of 2%.

Author does not own any of the above.

By Stockerblog.com