blue chip stocks
We noted with interest (and some amusement) the unveiling of the prototype of “The Rationalizer,” a new device that aims to sense day traders’ stress levels and alert them when it may be time to step back from trading. The idea is to ensure that traders avoid the mistake of trading based on emotion. The device is made by Philips Electronics (symbol PHG on New York), one of the blue chip stocks we’ve taken a close look at in the most recent issue of Wall Street Stock Forecaster (see below for a full update on this Netherlands-based electronics firm). The Dialogues Incubator, an initiative of Dutch bank ABN AMRO, also played a role in its design. Users of the device wear an “Emo Bracelet,” which senses a trader’s stress level and makes the accompanying EmoBowl, which sits on the traders’ desk, change from yellow to red as the trader becomes more stressed....
During the 1990s, many investors held to a fixed idea that global stock market equities would be more profitable than North American stocks. This was especially true, so they claimed, of companies based in China, India and other emerging markets. We advised our readers to resist investing heavily in emerging markets during those years. Instead, we recommended that investors look to their U.S. holdings, and the buys we recommended in Wall Street Stock Forecaster, for overseas exposure. U.S. blue-chip stocks operate in many countries. And we felt that the domestic U.S. market offered opportunities that simply weren’t available in Canada. In the end, this advice paid off handsomely for our readers....
Some investors get pessimistic about the stock market when they see selling by insiders in the U.S. blue chip stocks that they hold. The value of insider buying and selling as a market indicator seems self-evident. After all, company insiders — officers, directors, or owners of 10% or more of a company’s stock — are apt to know more than outsiders do about what’s going on in their business. Insiders in the U.S. have to report buying and selling to the Securities and Exchange Commission (SEC). Many advisors claim that they can detect valuable investment opportunities, including rising blue chip stocks, by studying insider data. But the deeper you look, the more you’ll find that this data leads to muddled conclusions at best....
We’ve always believed that investors should sell a stock if they have any doubts about the integrity of the people who are in charge of the company. In other words, if you think a company is run by crooks, you should sell the stock right away, no matter how attractive it seems as an investment. As the Madoff scandal so clearly shows, there are no limits to the ways in which unscrupulous operators can abuse and cheat you if they are inclined to do so. Over the years, we’ve refrained from recommending, or advised selling, a number of stocks, including blue chip stocks because we felt their capital structure or promotional materials were designed to make it easy for insiders to mislead or take advantage of the investing public. We didn’t miss much as a result; in fact, we sidestepped some ugly situations. To profit from this rule — that is, to use it to enhance your long-term returns, not just avoid losses — you need to apply it in a moderate fashion. That is, you need to distinguish between lack of integrity on one hand and naiveté, or poor judgment, on the other....
BANK OF NOVA SCOTIA $44 (Toronto symbol BNS; Conservative Growth Portfolio, Finance sector; Shares outstanding: 990.0 million; Market cap: $43.6 billion; SI Rating: Above average) is taking advantage of the credit crisis to expand its wealth management operations. Sun Life Financial Inc. wants more flexibility to pursue acquisitions, so it has agreed to sell its 37% stake in CI Financial Income Fund (Toronto symbol CIX.UN) to Bank of Nova Scotia. CI Financial is Canada’s third-largest mutual fund company. Following the purchase, Bank of Nova Scotia will own 37.6% of CI Financial. The $2.3 billion purchase price is equal to 2.3 times the $1.0 billion or $0.98 a share that Bank of Nova Scotia earned in the three months ended July 31, 2008. The deal should be a good one for Bank of Nova Scotia. It’s paying $22 a unit for CI. That’s more than CI’s current price of $16.80, but 33% below its record high of $32.69 in August, 2006. As one of our recommended blue chip stocks, Bank of Nova Scotia is a buy....
3M COMPANY $69 (New York symbol MMM; Conservative Growth Portfolio, Manufacturing & Industry sector; Shares outstanding: 669.0 million; Market cap: $46.2 billion; WSSF Rating: Above average) is one of the world’s largest industrial companies and is an example of the kind of blue chip stocks that can pay off for investors. It makes over 50,000 products in six main areas: Industrial and Transportation (30% of revenue); Health Care (16%); Display and Graphics (16%); Consumer and Office (14%); Safety, Security and Protection (13%); and Electro and Communications (11%). Major brands include Post-it notes, Scotch tape, Scotchguard protection and Thinsulate insulation. Like many of our favourite blue chip stocks, the company’s broad product base cuts its reliance on a single industry or customer. It also sells its products in over 60 countries, which limits its exposure to a single geographic area. Overseas sales now account for about two-thirds of 3M’s sales.