stock prices
Here’s the text of the quarterly letter I sent to our Portfolio Management clients in mid-November: “Our investment approach relies on three key rules: 1. Invest mainly in well-established companies. These companies have an above-average chance of surviving an economic or market downturn, and thriving again when conditions improve....
All good investing advice includes 3 attitudes that are essential for long-term success. The best way to avoid investment mistakes is to adopt
T. ROWE PRICE GROUP INC. $49 (Nasdaq symbol TROW; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 252.6 million; Market cap: $12.4 billion; Price-to-sales ratio: 4.7; Dividend yield: 2.5%; TSINetwork Rating: Average; www.troweprice.com) saw the value of mutual funds and other assets it manages fall 5.9%, to $453.5 billion on September 30, 2011, from $482.0 billion at the start of the year. The uncertainty over European sovereign debt and a slowing global economy cut stock prices and spurred investors to redeem their mutual fund units. Most of these redemptions were made by institutional investors. However, the company saw strong demand for its target-date retirement funds for individuals. As a result, T. Rowe Price’s revenue rose 15.9% in the third quarter of 2011, to $679.4 million from $586.1 million a year earlier. Earnings rose 9.6%, to $184.6 million, or $0.71 a share, from $168.4 million, or $0.64 a share. T. Rowe Price is a buy.
Dividends rarely get the respect they deserve, especially from beginning investors. That’s because a dividend paying stock’s yearly 2% or 3% or 5% yield barely seems worth mentioning alongside yearly capital gains of 10%, 20% or 30% or more. But dividends are far more reliable than capital gains. A stock that pays a dividend of $1 this year will probably do the same next year. It may even raise it to $1.05....
I’ve often mentioned that I got my first investment job in 1964, at age 16, as a part-time assistant to an investment writer. My employer was generous with his time, and we often talked about the faults in my earliest investment ideas. One of the first of these talks centered on the upcoming 1964/1965 World’s Fair in New York City. I had heard about a new stock issue from a company that planned to set up some restaurants at the fair. I figured it had to be a huge success. After all, the fair was attracting great attention in the media and at my high school. That was sure to attract huge crowds who had to eat. My employer thought about that for a moment, then said, “Yes, but you’re not the only person who knows that.” I didn’t know it at the time, but this was my first glimpse of the two basic ways to make investment decisions: bottom-up and top-down....
Low interest rates, high unemployment and new banking regulations continue to weigh on the stock prices of Wells Fargo and J.P. Morgan. However, both companies have brought in tighter lending policies. That lowers their risk and improves their long-term outlooks. WELLS FARGO & CO. $26 (New York symbol WFC; Conservative Growth Portfolio, Finance sector; Shares outstanding: 5.3 billion; Market cap: $137.8 billion; Price-to-sales ratio: 1.7; Dividend yield: 1.8%; TSINetwork Rating: Average; www.wellsfargo.com) provides a wide variety of financial services through roughly 9,000 branches in the U.S. It also operates in Canada, the Caribbean and Central America. Warren Buffett’s Berkshire Hathaway holding company owns 7% of Wells Fargo’s shares. In the quarter ended September 30, 2011, Wells Fargo earned $4.1 billion, up 21.4% from $3.3 billion a year earlier. Earnings per share rose 20.0%, to $0.72 from $0.60, on more shares outstanding. More clients are repaying their loans on time. As a result, loan-loss provisions fell 47.4%, to $1.8 billion from $3.4 billion. That was the main reason for the earnings increase....
As investors near retirement, many advisors tend to recommend that they move an ever larger part of their investments from stocks to bonds and other fixed-return investments. Bonds can provide steady income and a guarantee to repay the principal at maturity. However, they could cost you returns in the long run....
A long-time reader and portfolio-management client recently asked a question that other investors may wonder about in today’s turbulent markets. He wrote, “You constantly remind members to have a balanced portfolio and strategy for long-term success when investing. But when do you take profits? You have mentioned a couple of times to sell, such as when a stock makes up too much of your total portfolio, or if a company shows questionable management or business decisions. My main question is why don’t we sell when stocks move up and there are profits to be had?” I often asked myself that question in my first decade or two in the investment business. In hindsight, it always seems easy to spot market tops and market bottoms. But trying to spot those tops and bottoms as they occur is harder. I investigated all sorts of market theories and signals that purport to tell you how to do it. They all seem to have “worked,” at least some of the time. But none worked consistently....