Investment Strategies 02 (Jun 10 - Jun 13)

[kennynah]

corollary to rule #7 -

Be Hard and Soft

[winston]

Five Things Investors Can Do In a Market Gone CrazyBy: Jeff Cox

So what can investors do in such an environment?

Market experts offer five suggestions.


1. Take a Breather

Most of the short-term trading nowadays seems controlled by high-speed computer algorithms, that go with the flow of the day's news.

With the market coming off a violent October rally — one of its best months ever, in fact — this could be a time for investors to gather themselves, until the market finds a clearer direction.

"The data...suggests that we're due for a slight pullback in the near term that will be followed with some nice gains going out a month or two," Paul Hickey at Bespoke Investment Management said in an analysis.

"It can't hurt to at least write some covered calls here and wait for overbought levels to work themselves off before jumping back in on the long side."

Hickey points out that the October rally was fueled mainly by investors buying up stocks that had taken the worst of the summer beatdown.

In fact, the 50 stocks hit hardest from July 7 through Oct. 3 are up a collective 35 percent or so since, suggesting the rally is getting a bit tired.

"If the market pulls back, you're prepared," Hickey said. "If it doesn't and continues higher, it's tough to get too upset."

[winston]

Continu ...


2. Go 'Neutral' But Watch Consumer Stocks

Standard & Poor's a few days ago raised its 12-month price target for the Standard & Poor's 500 [.SPX 1253.23 -7.92 (-0.63%) ] to 1,360 from 1,260.

Still, the firm recommends a fairly vanilla, or "neutral," portfolio of 45 percent US equities, 25 percent bonds, 15 percent foreign stocks and 15 percent cash.

However, it did raise consumer discretionary stocks to overweight and cut telecomms to underweight.

The firm's hesitance is based primarily on the Greece sovereign debt situation, which it calls "unsettling and ephemeral" and one that has "reignited global risk aversion."

"While there has been plenty of technical evidence to suggest to us that the worst is over, we are still worried about the action in some markets, and that some of our longer-term indicators have yet to give the all-clear sign," Sam Stovall, S&P's chief equity strategist, said in a note.

[winston]

Contnue ...


3. Emerging Markets Emerge Again

Tightening interest rate spreads between developed and emerging markets, tell Jim Paulsen that the latter class is ready to run.

The chief market strategist at Wells Capital Management has traced spread history and found that wider spreads favor developing market stock performance, while the reverse is true when the difference in benchmark rates decreases.

Moreover, he sees emerging market economies cutting rates as inflation fears subside, while major developed economies —such as the U.S., with its near-zero rate policies — have little wiggle room.

Emerging market mutual funds saw $3.5 billion in inflows last week, the most since the week ended April 11, according to Bank of America Merrill Lynch.

"Overall, a cycle has seemingly begun whereby emerging world policy interest rates will likely be lowered faster and more aggressively than will developed world interest rates," Paulsen wrote in an analysis.

"If this proves correct...investors may want to consider augmenting allocations of emerging stocks relative to domestic positions."

[winston]

Continue ....


4. Go Long — With Your Horizon

While the volatility makes for many gut-churning moments, getting out of the market now would be a mistake, says Gary Flam, portfolio manager at Bel Air Investment Advisors in Los Angeles.

True investors, he says, actually should be thinking about how they'll be positioned once Greece gets past the turmoil of its debt and political issues, which most recently have come through the waffling of President George Papandreou about whether the nation will accept bailout conditions.

"You have to be an investor and not a trader," Flam says.

"When I say 'investor,' you have to be looking to invest in good companies you think can do well over the next several years and aren't depending on the next Greek vote."

Valuation is often trumpeted as a reason to buy stocks in the current environment, with the S&P 500 trading at a 14.5 price-to-earnings ratio.

For Flam, the current era is reminiscent of the 1977 to 1982 market run that saw three bear market sell-offs and one near-bear — but which was followed by a massive bull move.

"On every sell-off they should be building up their equity exposure, because at some point over the next couple of years that next secular bull market is going to begin," he says.

"No bell is going to go off to signal it, but you want to be exposed to equities by then."

[winston]

Continue ...


5. 'Buy What You Know' (But Not Banks)

Those willing to take the longer view, then, might want to look away from betting on bouncebacks for the losers, but rather toward the familiar that will last through extended debt-crisis turbulence.

"When you're in a world like this, the best thing to do is get back to the basics.

You get back to blocking and tackling, you buy what you know," says Nadav Baum, executive vice president at BPU Investment Management in Pittsburgh, Pa.

"I like buying high-quality companies that you can fall asleep for 10 years and you know what they do."

Baum, though, doesn't like the uncertainty of banks in the current regulatory environment and their potential exposure to a global debt crisis.

"There are trap doors that nobody knows about," he says.

"It's much easier to go back to the basics."

http://www.cnbc.com/id/45164793/page/2/

[winston]

A Three-Step Plan to Surviving Market Paranoia
by Marc Lichtenfeld

There are always things to be worried about. Reasons why you shouldn’t take any risk.

The point is that, as an investor, you should have a plan.

Don’t rely on whims or intuitively knowing the right time to buy or sell. You will be wrong. Guaranteed.

Timing the market is next to impossible.

To make money in the markets you need to be invested for the long term.

And here’s how to do it:


• Allocate your assets across a spectrum of classes, including international stocks, domestic stocks, bonds, precious metals and real estate.

For a simple formula that has been proven to beat the S&P 500 with far less risk, take a look at The Gone Fishin’ Portfolio.


• Don’t watch CNBC. The financial media thrives on scaring you so that you’ll be forced to watch even more of their nonsense and react accordingly.

Ignore them and your portfolio will be much better off.


• And finally, invest in stocks that have a history of raising their dividend every year. If you’re seeking income, you can achieve impressive yields in just a few years as the dividend gets raised.

For wealth builders, the power of compounding dividends generates huge returns when you reinvest the dividends over the years.


Stick to your plan and over the years, you should be more than fine.

http://www.investmentu.com/2011/Novembe ... anoia.html

[winston]

This Simple Strategy Hasn't Lost Money Since the Great Depression By Dr. Steve Sjuggerud
Thursday, November 17, 2011

I love simple investing strategies – the simpler and dumber, the better.

I prefer the simple strategies in part because the history of Wall Street is full of the failures of complicated strategies…

One of the most famous Wall Street failures is Long-Term Capital Management, which was run by two Nobel Prize winners in economics and some Wall Street legends.

Its complex mathematical models lost the firm $4.6 billion in less than four months.

So I like to keep it simple. And the strategy I'll share with you today couldn't get any simpler… And yet, since the Great Depression, you never would have lost money by following it.

In the simple strategy I'll explain today, your wealth would have compounded at over 16% a year when this strategy was in "buy" mode since the end of World War II (1945), versus an 11% annual total return for the stock market.

This simple strategy did have a losing stretch during the Great Depression. But so did just about every other stock strategy. And it still beats the pants off the stock market when in buy mode.

From 1900 to 1945, the stock market had an annualized total return of only about 7%. But this strategy returned 11% when in buy mode.

So it's easily delivered excellent returns since 1900.

Over history, this strategy has signaled "buy" 42% of the time from 1900 to today… and it's signaled "buy" 37% of the time since 1945. So it's not rare.

Here's all you do…

If one particular thing is true at the end of a month, you buy stocks and hold for the next five years. That's it.

The "one particular thing" that needs to be true is simple. It's the most basic measure of whether stocks are cheap or not – it's the price-to-earnings (P/E) ratio. All that is measuring is the price of stocks over their earnings over the last 12 months.

If you buy when stocks are cheap (at a P/E of 13 or lower) and hold for five years, it's very unlikely you'll lose money. This strategy hasn't lost money since the Great Depression.

Chances are, you haven't heard about this…

The reason you haven't heard about it is simple… With the exception of a brief moment in the recent stock market bust, the last time it signaled was in the 1980s.

But recently, according to Bloomberg, the P/E of the stock market hit 13 again. For the first time since the 1980s, stocks are cheap.

History shows that, if you buy the overall stock market (the S&P 500, which is easy to buy through shares of SPY) at the end of any month when the P/E is less than 13, the total return five years later has always been positive.

You might see different numbers for the P/E ratio. Economist Robert Shiller's ratio, for example, is currently at 21. But as I explained here, extremely low earnings in 2009 knocked Shiller's number out of whack.

In short, by using a different yardstick, stocks might not look as cheap. But history shows using this simple P/E strategy will provide market-beating returns… with very little risk.

When the stock market P/E closes below 13, buy stocks, and hold for the next five years. You wouldn't have lost money in any five-year period since the Great Depression.

And since World War II, you would have compounded your wealth at 16%-plus a year when in buy mode.

In short, stocks closed the month of September at a P/E below 13. It's time to buy and hold for five years…
Source: Daily Wealth

[winston]

The Best Stock Investing Strategy Since 1965 By Dr. Steve Sjuggerud
Monday, November 28, 2011

What's the best strategy for investing in stocks? James O'Shaughnessy was determined to find out…

O'Shaughnessy tested literally hundreds of stock investing strategies in the updated version of his book, What Works on Wall Street.

The most successful investing strategy (the one that had the highest return relative to the risk taken) was what O'Shaughnessy called the "trending value" strategy.

When I read about the "trending value" strategy, I woke up my wife at 11:30 p.m. to show her. (What kind of husband am I, waking her up then?)

"What's the big deal?" she said.

"This is EXACTLY what I've been writing in True Wealth for years," I told her. "We look for value, and we wait for the uptrend. And this is what O'Shaughnessy discovered that works best over the last half century!"

Specifically, investing in stocks with the "trending value" returned 21% a year since 1965. If you had invested $10,000 in the trending value strategy in 1965, it would have turned into $48 million.

It was right there. Page 625. No. 1 out of hundreds of strategies. I loved it. While we don't do "trending" or "value" exactly like O'Shaughnessy does in the book, it still validates our True Wealth principles of looking for opportunities that are cheap and hated, and in an uptrend.

It's interesting to me because "trending value" is what I do… but this leaves me with no friends in the investment world…

You see, the world has two types of investors: value investors and trend followers. Behind closed doors, the two groups don't like each other. They each think the other group is full of fools.

Me? I have no friends in either group. The fact that I could believe in using both value AND the uptrend doesn't allow me in either club. I am a fool to both groups…

But it turns out, I get the last laugh… Trending value is the best risk-adjusted strategy out of hundreds of strategies tested back to 1965, according to this excellent book.

So while I have no "friends," it turns out, we're doing what's proven to work.

So where do we stand today in the markets, looking through a "trending value" lens? Here's what I see going on…

I believe we have what we want… we have our "cheap, hated, and in an uptrend" setup in place.

The shaky part is the uptrend. It's barely in place, and it's teetering…

I believe stocks (and most investments) bottomed out at the beginning of October, when the S&P 500 index stopped falling near 1,100. I believed that was the start of a new uptrend – a new bull run.

Hundreds of percent gains are possible in the next big uptrend. Stocks are dirt-cheap and hated. We have the recipe we're looking for.

Our upside is dramatic, and our downside risk is small.

Stocks in general are cheap. So I am willing to give up a little downside risk (using a stop loss) to participate in the incredible upside potential from here.

"Trending value" is what works in investing. Right now, we have the value. But the uptrend is tenuous. If stocks hit a new low for the year, the uptrend is gone… We'll have the value, but not the trend.

If that happens, there's no need to be aggressive in the stock market… we'll simply wait for the next uptrend.

Trending value is what works in investing. Stick with it…

Source: Daily Wealth

[winston]

A 93% Chance to Trounce the Stock Market with This Simple Strategy By Brett Eversole
Monday, January 23, 2012


Investing in companies that "do the right thing" can make you big money… without taking big risks.

The data show that buying companies that "do the right thing" turned $10,000 into $298 million between 1927 and 2009. Even better, it dramatically outperformed traditional "buy and hold" investing nearly 8-to-1 over the same period.

Today, I'll explain what I mean by "do the right thing"… and how you can immediately put it to work in your portfolio. Let's get started…

For the past three months, I've been working closely with Steve Sjuggerud and Porter Stansberry to find companies that consistently do the right thing for you, the shareholder.

While "doing the right thing" for the shareholder sounds like something every company should do, it's actually a rarity in the stock market. Most publicly traded companies are managed by people with little to no personal ownership of shares.

They don't have "skin in the game." Thus, they tend to overpay for acquisitions, dilute shareholders with option grants, or just flat out mismanage the business. Companies that devote themselves to operating a great business for the benefit of shareholders stick out… and they outperform those that do not.

That seems simple enough. But how do companies "do the right thing"?

Simply, they return a lot of cash to shareholders. They pay out a large percentage of their profits directly to shareholders in the form of both dividends and share buybacks…

Dividends are cash returned directly to shareholders. And you can think of share buybacks as a "tax-free dividend."

When a company buys back shares of its stock, your remaining shares become more valuable. It's like cutting your pizza into six slices instead of eight… The pizza is the same size. But each of your slices is bigger – each share is worth more. And unlike a regular dividend, you don't have to pay taxes on that increased value unless you sell your shares.

Together, dividends and buybacks add up to something called "shareholder yield."

Wal-Mart is an excellent example of a company that does the right thing. It has an exceptionally high shareholder yield…

In the last year, Wal-Mart paid over $5 billion to shareholders in dividends and returned $9 billion to shareholders through share buybacks. And in June 2011, the company authorized the repurchase of another $15 billion.

James O'Shaughnessy investigated shareholder yield in his book What Works on Wall Street. Based on O'Shaughnessy's testing, buying the top 10% of companies based on shareholder yield turned $10,000 into $298 million from 1927-2009. That's a 13.2% annualized return. A buy-and-hold strategy over the same period turned $10,000 into "just" $38 million.

This strategy also beat the market 93% of the time over rolling 10-year periods. As a long-term strategy, it's hard to find a more profitable and safe system.

Fortunately, we have an easy way to invest based on shareholder yield. It's called the John Hancock Tax-Advantaged Global Shareholder Yield Fund (HTY). HTY focuses on global businesses with high shareholder yield.

HTY holds stocks like telecom bellwether AT&T, pharmaceutical giant Bristol-Myers Squibb, and Altria, one of DailyWealth's favorite dividend payers. In 2011, the fund rose 8% (including dividends). The S&P 500 was up just 2%.

Shareholder yield is an easy way to find companies that "do the right thing" for their shareholders. And O'Shaughnessy proved that buying these businesses dramatically beats the rest of the market.

Source: Daily Wealth