wall street
To cut your investing risk, we recommend following our three-part system: Hold mostly high-quality, dividend-paying stocks, spread your money out across the five main economic sectors (Manufacturing & Industry; Resources; Consumer; Finance; Utilities) and avoid or downplay stocks in the broker/public relations limelight.
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How “in-the-limelight” stocks can hurt your portfolio
Even well-established large cap stocks (or shares of larger-sized companies) can stumble. That’s especially true when they’re in what we call the broker/public relations limelight. Investors can build up unrealistic expectations when stocks spend time in that limelight. When broker/public-relations favourites fail to live up to those expectations, they drop much further than they would have if they had been less widely followed....
The U.S. restaurant industry has faced tough challenges over the past 18 months. That’s because the economic downturn has prompted more consumers to eat at home, or to spend less when they dine out. The best U.S. restaurants have done a good job of cutting costs during the slowdown. Some have improved their menus by introducing new items and focusing on value-priced meals. And a few have taken advantage of the slowdown to expand into new markets with strong growth potential. That has helped these restaurants report improved results. It also puts them in a good position to profit as the global economy continues to improve. In light of the improvement in the U.S. restaurant industry, we’ve updated our buy/sell/hold advice on two U.S. restaurant growth stock picks, Ruby Tuesday (symbol RT on New York), and Chipotle Mexican Grill (symbol CMG on New York), in the current issue of Stock Pickers Digest, our newsletter for more aggressive investors....
KRAFT FOODS INC., $28.92, New York symbol KFT, is close to completing its purchase of U.K.-based Cadbury plc (New York symbol CBY). Cadbury is a leading maker of confectioneries, including chocolate, candy and gum. Investors who hold over 90% of Cadbury’s shares have tendered their holdings to Kraft’s offer. In all, Kraft is paying $19.4 billion in cash and shares. It expects to complete this takeover within the next two months. Meanwhile, Kraft earned $3.0 billion in 2009. That’s up 63.9% from $1.8 billion in 2008. Earnings per share rose 67.8%, to $2.03 from $1.21, on fewer shares outstanding. However, the 2008 earnings were depressed by $1.0 billion of writedowns and costs related to Kraft’s three-year restructuring plan, which it recently completed. The plan included selling or discontinuing less-profitable brands, closing plants and cutting jobs....
Small cap stocks are companies with a “market cap” (the value of shares they have outstanding) below $2 billion, or some other arbitrary figure. (In a recent Wall Street Stock Forecaster, we updated our buy/sell/hold advice on a U.S. small cap stock that’s up nearly 63% since March 2009. See below for further details.) Small cap stocks have the potential for strong gains, but they are generally more volatile than large-cap stocks. Temporary setbacks, such as a poor quarterly earnings report or the loss of a contract, can quickly cut their share prices. That’s why we view even the best small-caps as aggressive, and advise investors not to overindulge in small caps....
Last week, Newmont Mining (symbol NEM on New York), one of the world’s biggest gold producers, said that it believes that gold could rise as high as $1,350 U.S. an ounce this year. Gold has fallen from the all-time high of $1,214.80 U.S. that it reached in late 2009, and now trades around $1,092 U.S. We cover Newmont in our Wall Street Stock Forecaster and Canadian Wealth Advisor newsletters. See below for more on this gold mining stock’s wide-ranging operations.
Gold investing can expose you to unique risks
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Our Successful Investor rating system is a key guide we use to make stock market picks for our newsletters and investment services, including Wall Street Stock Forecaster, our publication that focuses on top-quality U. S. stock market picks.
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Use our ratings to quickly spot the best U.S. stock market picks
We continue to recommend that Canadian investors hold 25% to 30% of their portfolios in well-established U.S. companies, like the stock market picks we recommend in Wall Street Stock Forecaster. To help you quickly and easily determine whether a U.S. stock is appropriate for your portfolio balance and risk tolerance, we display one of our six Successful Investor ratings next to every stock we cover in Wall Street Stock Forecaster....
One part of our three-pronged investing program is to spread your money out across the five main stock sectors of the economy (Manufacturing & Industry; Resources; Consumer; Finance; Utilities). (The other two parts are to hold mostly high-quality, dividend paying stocks, and downplay stocks in the broker/public-relations limelight.)
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How we place stocks in the appropriate stock sectors
Many stocks clearly fit in certain stock sectors. Royal Bank, for example, obviously goes in the Finance sector. But sometimes correctly categorizing a stock requires a judgment call. That’s the case with La-Z-Boy Inc. (symbol LZB on New York). We update our buy/sell/hold advice on La-Z-Boy in the current issue of Wall Street Stock Forecaster, our newsletter that focuses on U.S. stocks. See below for further details on this rapidly changing company....
Demand for medical devices and supplies will undoubtedly continue to grow as the population ages. Companies in this fast-changing field make a wide range of products, from laboratory instruments to bandages and surgical tools. Some medical-equipment firms are large and well-established, like C.R. Bard (symbol BCR on New York), one of the stocks we cover in our Wall Street Stock Forecaster newsletter. Bard makes many different medical devices and tools, and has over $2.4 billion U.S. in annual sales. The company also has a long history of paying dividends. At the other end of the scale are companies like Intuitive Surgical (symbol ISRG on Nasdaq). Intuitive’s share price has been rapidly rising, but its sales of $874.9 million U.S. are only about 36% of Bard’s sales. As well, Intuitive only has one product — the da Vinci computerized surgical system (more on that below) — and does not pay a dividend....
INTERNATIONAL BUSINESS MACHINES CORP., $125.50, New York symbol IBM, is our Stock of the Year for 2010. IBM is the world’s largest computer company, with operations in over 170 countries. It specializes in making large mainframe computers for business and government clients. However, the key to its appeal is that it is shifting from manufacturing to designing computer systems and managing them on behalf of its clients. IBM gets dependable revenue streams from the resulting long-term maintenance contracts....
Technology has made extraordinary advances in the past decade, yet lots of investors lost money when they invested in it. Often, that was because they invested too early. In their eagerness to get in on the “ground floor,” they bought tech stocks based mainly on potential improvements in the technology. But they failed to consider the political, financial and practical obstacles that new technology always faces.