I’m a big football fan. Huge, actually.
I’ve been watching National Football League games since I was five. And I’m hoping that with a shrewd combination of new draft picks and free agents, my team, the New England Patriots, will finally land another Super Bowl title this year!
And if you’re a big fan like me, chances are you’ll be watching the NFL draft tonight. Heck, even if you aren’t a big fan, you’ve probably heard the hype or seen the glitz and glamour associated with the Radio City Music Hall event. Credit the NFL’s vast PR and marketing machine!
But what if there were an investment draft day? What would MY #1 “draft pick” look like?
Well, I’d start with a pick that offers a better yield than you can get with lousy government bonds! A 10-year U.S. Treasury yielding 2.6 percent offers ZERO attraction to me. Neither do 10-year German notes at 1.4 percent, or bonds from countries like Italy and Spain. They’re trading at record low yields thanks to central bank shenanigans, despite massive structural and financial problems!
And I wouldn’t just want a high dividend. I’d want to see a history of sustained (and preferably rising) payouts over time. After all, NFL team scouts don’t just watch how a player performs at the combine workout. They go back and review countless hours of game tape to see what those players did over their college careers.
|When it comes to picking an investment, put yourself in the shoes of an NFL decision-maker.|
Next, I’d make sure the stock had a top-notch Weiss Rating, at least a “B-” (Buy) or better. We’ve honed the Weiss Ratings model and methodology over a period of years, and the result is a system that spits out ratings daily on more than 12,000 stocks.
The model incorporates our analysis of both risk and reward factors, including data on cash flow, earnings, return on capital, valuation, debt-to-equity ratios, dividends, and many more.
I’ve found these ratings to be invaluable when it comes to screening out losers and zeroing in on winners!
Then, I’d look at the SECTOR that stock was in and analyze its longer-term prospects. You wouldn’t believe how much time and money has been wasted trying to identify a winning stock, only to see investors dump it — and all its competitors — because the sector itself is out of favor.
|“What if there were an investment draft day? What would MY #1 draft pick look like?”|
For example, in today’s NFL environment, you might be the best running back on the planet. But you’re still not going to garner the kind of top pick that a wide receiver, star defensive back, or other prospect might. That’s because the game is increasingly tilted toward passing over running.
Finally, I’d make sure it had a history of shareholder-friendly actions. Share buybacks. Strategic mergers. Aggressive investment in new products, which drives future revenue and earnings. That’s what you want to see as an investor; just like scouts and coaches want to make sure a draft prospect has a winning attitude and will fit in with a team’s culture.
Combine all those factors, and I think you’ve got a winning draft pick! But what do YOU think? Post your comments here.
Well, put yourself in the shoes of an NFL decision-maker. You have two possible investment draft picks:
Choice #1: GlaxoSmithKline (GSK). It sports a juicy yield of around 4.7 percent — almost double the yield on a 10-year Treasury. It has paid a dividend for several years, raising it by more than four percent over the past half-decade.
The firm just made a multi-billion dollar series of deals with Novartis AG (NVS) to boost its vaccine business and maximize profit in its consumer health care product lines. Plus, it sports a healthy B (“Buy”) Weiss Rating. The stock looks like it could break out to the upside at any time.
Choice #2: Sunoco Logistics Partners (SXL). Its yield is a bit lower at 3 percent, but that’s still well above what you get in Treasuries and it has been paying out nice dividends for several years. It’s building out its pipeline and storage infrastructure to serve new gas and oil producing regions in the U.S. Plus it’s rated A- (“Buy”) by the Ratings system. It’s firmly entrenched in a technical uptrend, but since it’s extended, a pullback or correction would be only natural at this time.
You only get one pick in the first round … so which would you go with?
Personally, I like both — and I have several other investment ideas too. There are seven rounds in the NFL draft after all! So keep reading Money and Markets for more details in the coming weeks, or consider something like those I discuss in my newest special report, “Six Mega Market Winners for 2014 — and Beyond!“
|OUR READERS SPEAK|
Now on to housing, a topic that definitely touches a nerve with you!
LT shared some great insight on what’s going on in his neck of the woods — and on the challenges many of today’s potential buyers face:
“The real estate market in central Texas is booming as well, but you’d better be a high-end buyer and have flawless credit. A lot of folks say they would rather rent, but we’ve noticed that most of them have had credit problems, such as a foreclosure, in their history, and can’t qualify for a loan, anyway. I don’t think the American dream is dead, but it’s pretty sick for many mid-income earners.”
Doug in Colorado, on the other hand, was downright positive on conditions in his backyard. His on-the-ground report: “My buyer was competing with 15 offers on one home, and 10 on another! Finally got one today and made an offer over asking price within three hours of property being able to show. Totally a seller’s market.”
My take? Real estate IS local and there will always be hotter and cooler markets. But unless home price growth cools, income and economic growth perks up, banks loosen lending standards more, and the government stops over-regulating the industry, we’re not going to see a big pick up in housing demand.
Any other reports from YOUR hometown that could benefit everyone? Weigh in here.
Meanwhile, in the wake of yesterday’s item about the “Companies Fire Workers; Stocks Soar!” headline at USAToday.com, R. Freschi weighed in with this: “Many top executives today find that’s it’s a lot easier to juice results by cutting expenses than by actually growing revenues. The latter requires creativity and knowledge. Eventually there’s no more “fat” to cut, then what?”
You’re dead on! It’s easy to trim expenses by ordering fewer office supplies, putting off hiring, or outsourcing jobs and firing Americans. That’ll buy you a few pennies per share in profit come quarterly reporting time. But true corporate visionaries have even better ideas for GROWING wealth — for both employees and shareholders — by investing in their businesses and coming up with new products.
Who would be on your list of men and women like that? Any names that come to mind? Tell me who and why here.
Here’s a quick recap of the OTHER important news of the day …
Personally, I think Federal Reserve Chairman Janet Yellen is just another disingenuous Fed bureaucrat who is carrying Ben Bernanke’s torch, rather than striking out a new path. That means she has the same fatal flaws as him, and is pursuing the same policies he did.
But let’s be honest — if there’s one thing Wall Street likes, it’s cheap money! So stocks rose on the back of her second day of testimony before Congress today. The Dow Industrials finished the day up 32 points after a larger gain early on, while the Nasdaq Composite fell by 16.
Interest rates drifted lower by a couple of basis points until a plug-ugly 30-year bond auction caused longer-term yields to reverse course and end higher. Commodities were largely flat on the day.
In the “Who can debase their currency the fastest” race, European Central Bank President Mario Draghi took the lead today. While he and his buddies did not cut interest rates or launch Euro-QE at today’s policy meeting, they did strongly suggest they would next month.
That caused a sharp reversal lower in the value of the euro against the dollar. Now we have to watch to see if it’s a wiggle or a sizable trend change!But I’m spying a potential key reversal on the chart!
Tesla Motors (TSLA) founder Elon Musk is a visionary, no doubt about it. But investors who envisioned raking in nice profits after the carmaker reported earnings are coming up empty! The stock tanked by more than $22 at one point today thanks to disappointing margin figures and multiple price target cuts by analysts.
Sunday delivery from Amazon.com (AMZN) is debuting in another 15 cities, following up on an earlier roll out in New York and Los Angeles. No word yet on whether Amazon will ever give Domino’s Pizza’s (DPZ) old “30 minutes or it’s free” delivery pledge a try!
Russian President Vladimir Putin asked secessionists in eastern Ukraine to delay a vote on forming their own autonomous region. But they ignored his request. That raises the potential for more geopolitical turmoil after the Sunday referendum. Stay tuned!
Reminder: If you have any thoughts to share on these market events, don’t hesitate to use this link to put them on our blog.
Until next time,