8 ‘defensive stocks’ I won’t buy
Like many speculators these days, I'm waiting for a market correction in what looks like an overbought market. At the same time I'm looking for defensive stocks and for opportunities to generate income by writing covered calls on the stocks that I might buy. So a column, What to buy as the market tops, Commentary: Is it time to bring back the blue chips?, by Mark Hulbert, caught my eye today. Hulbert writes for MarketWatch.com and has been writing advisory letters since 1980.
Rather than watch the Broncos, I've spent more than three hours researching Hulbert's defensive investment ideas for this overbought market. I found two almost buys (PPL, WMT), a hold (my MO), and four stocks and an ETF that I won't even consider (ADM, BAX, DVY, FE, K). (Actually, the ideas came from a source Hulbert quotes in his column.)
First, I put the "Hulbert's defensives) into watch portfolios on SeekingAlpha.com, Morningstar.com and StockCharts.com so I could look at their ratings, fundamentals and technicals. Then I checked out their ratings and dividend cushions on Valuentum.com. Finally, I read some analysts' reports.
What I found is that ADM, DVY, K, MO and WMT are overbought or too close to it for my comfort in this market. On point and figure charts, ADM and DVY are breaking out while PPL and WMT are below their point and figure price objectives. PNF price objectives are met some 70% of the time. Some are beat as with MO and some are undershot one way or the other.
BAX, FE, K and MO are above their PNF price objectives.
ADM, DVY, K, MO, and WMT are above Morningstar's estimated fair values for those stocks.
For example, the one stock that looks mildly attractive at this point, WMT, is trading at $77.96. It's point and figure price objective (not target) is $91. But M* estimates its fair value based on discounted cash flow analysis at only $74, while Valuentum's FV estimate is $77 with a range of $62-$92
Three stocks (BAX, MO, WMT) have healthy Valuentum dividend cushions. That means their dividends are safe and likely to grow given their current and anticipated balance sheets. ADM, FE, K and PPL have dividend cushions of less than 1, which means their dividends aren't very secure and have no room for growth. Smart dividend investors buy stocks of companies that sport safe dividends and the potential to grow them. Dividend history is not a good indicator of the health of a company's dividend, according to Valuentum.
If you're looking to buy a stock that is already down so much from its 52-week high that it probably will stabilize soon regardless of what the general market does, BAX is trading at 87.4% of its 52-week high, FE 83%, K 91.5%, PPL 90.9%.
For income- and security-minded covered call traders, the news is bleak. Using the rule of thumb that you write covered calls only on stocks with high implied volatility and stocks that have wide spreads between implied and historical volatility, I wouldn't write covered calls on any of issues on Hulbert's list.
Lesson learned: After you read about a speculator's strategy, do your own research. You might come to a different conclusion.
Note: I am not an investment advisor, counselor nor professional, and I am not responsible for how others trade after reading my blog posts. I own MO, which is a hold for me at this time.
Stocks • Covered Calls • Defense Stocks • Dividend • Permalink
Why advertisers probably won’t use twitter and probably should not
twitter just announced that it plans to raise about $1 billion in an initial public offering of non-voting shares to the public. The IPO announcement has brought out the sharks in the advertising and stock picking worlds. In short, twitter doesn't look like a very good platform for its members, advertisers or speculators. But a bunch of twitter groupies (angels) probably will buy the stock even though the company is yet to make a profit and its growth is slowing.
When I want to mini blog on politics or sports, I use twitter. When I want to promote a post on my blog, I use twitter and/or Facebook. I am a fairly heavy user of twitter (6,900 tweets) and Facebook for mini-blogging about politics, but not about stocks or products.
When I want a product review, I go to Amazon.com. Great reviews, lots of opinions. The writing is as good, in some cases, as you'll see in computer and car mags.
When I want to talk to my real friends, some high school buddies and Colorado Republicans, I use FaceBook, my blog and email, if not a lunch date, etc..
When I want to get into discussions about products, politics, sports, health insurance, travel, hobbies, etc., there is nothing like the good old fashioned (1998- ) message board or forum.
When I want to send personal messages, I use e-mail.
If I want to sell something, there's nothing like Google Adsense, eBay, Amazon, Apple's app store or Craigslist.org.
I just searched twitter for printers because we all buy them at one time or another. #printers is unhelpful. Then I tried a brand, and all I got was that company's ads. No conversations, opinions, suggestions, rating. I won't go back to twitter for that kind of information. Facebook pages don't seem to be any more useful.
So as a small business, I'd probably continue to use Google's Adsense, Craig'slist.org, Amazon, ebay and maybe LinkeIn if I was selling services.
For car, health and property & casualty insurance, none of the above make much sense to me as a marketer unless I' was trying to drive some traffic to my web site. I'd use TV, Radio and direct mail. Same goes for consumer electronics, foods, drugs, investments, etc.
What social marketers seem to be forgetting is that most people who write well enough to be comfortable on twitter, Facebook, etc., are smart enough to shop, ask questions, demand answers and use Amazon, eBay, Craigslist and the web sites of retailers and producers of goods and services. We're not going to be swayed or even attracted by banner ads, annoying display ads or marketers' trolls.
Marketers, of course, are under pressure from their clients to use social media, and they're pressuring their clients to use social media or be left out. The herd has been moving into social media for more than a decade (CompuServe, message boards, news and topic sites and then FaceBook and twitter.) To me, it seems they'd better be sure that they're not the lemmings who are being led to the last cliff.
But, then, I'm not in marketing today, and I'm old fashioned as a marketer and as a consumer. Retired. The kids are having their fun making money with twitter and Facebook, and they probably are helping some clients. But I keep thinking that a lot of clueless CEOs are being had.
Xcel Energy: Wind power subsidies benefit developers, not utilities nor consumers
Excel Energy, the biggest wind energy producer in America, says that it may not sign up for more wind energy because the subsidies extended as part of the bill that saved 99% of Americans from income tax increases inclluded some $40 billion in pork for developers of wind power farms and their suppliers like General Electric.
The wind production tax credit (PTC) disguises the cost of wind energy and exacerbates the costs of other types of enery sources, Excel's lobbyist said in a statement reported by The Foundry blog, which is part of the Heritage Network..
Excel has raised rates to pay for its "clean energy" investments in Colorado and Minnesota. Many of its wind farms are around our farm in SW Minnesota. That it isn't likely to buy more towers is another reason for us to not put towers on our farm. I've been agaisnt the towers because they're ugly, noisy and likely to be eyesores for decades after they wear out and cease to produce energy. Most important, we don't like being part of an uneconomic enterprise subsidized at the rate of $8.5 billion $10 billion a year by consumers and taxpayers for no good reasons.
The Hidden Costs of Wind Energy; Why the full cost of wind generation is unlikely to match the cost of natural gas, coal or nuclear generation, By American Tradition Institute.
The hidden costs of wind power, by Institute for Energy Research.
Top wind utility: Wind subsidy benefits industry, not consumers, by Lachlan Markay, The Foundry blog.
Wind turbines 'Only lasting for half as long as previously thought,' by Energy Tribune.
The Democratic war on science, by Steven Hayward at Powerline blog.
Science must be seen to bridge the political divide; Scientists in the United States are often perceived as a Democratic interest grouip. For science's sake this has to change, by Daniel Sarewitz @ http://www.nature.com.
Agriculture • Farming • Congress 112th • Stocks • Energy Stocks • Taxes • Permalink
Why I bought and hedged Republic Services Inc. (RSG) and may buy Waste Management (WM)
The waste management industry looks like a pretty good speculation for long-term dividend speculators. Today, I bought some Repubiic Services Inc. and sold covered calls on the stock, as explained below. I may buy some Waste Management (WM) too to complete my investment in the industry.
A post on Facebook by Crista Huff who blogs at The Right Huff got me interested in the stock, and I did some research on it, which I described on her FB thread. Since FB has made linking to threads clunky, I'm pasting my comments on Christa's thread below. This also will allow me to review my thinking about RSG and WM later.
Stocks • Covered Calls • Dividend • Read More
Pfizer (PFE) looks like a good long-term buy for income investors
While I believe the stock market is due for more of a correction in the face of a sluggish economic outlook, I'm looking for stocks that will pay nice dividends and will appreciate over the next five to 10 years. Thus, this morning, I bought a small position in Pfizer (PFE) and will add to that position over time unless something goes terribly wrong. Here's why:
Stocks • Covered Calls • Dividend • Stocks Medical • Read More
Pelosi Democrats want to tax away seniors’ dividend incomes
Nancy Pelosi’s House Democrats want to tax away seniors’ dividend incomes. While the Obama administration wants to hold the income tax rate on stock dividend income to the current 20%, House Democrats want to increase the tax to 39.6% for taxpayers who earn more than $250,000. While only those earning more than $250,000 would pay the highest rate, that would be enough to cause companies that pay high dividends to cut their dividends. Millions of seniors who saved and invested so that they could earn dividends in retirement would lose a big chunk of that income. Worse, a cut in dividends would cause the prices of their stocks to fall as seniors sold their stocks. In other words, Obama Democrats are about to lower the standard of living for seniors who have dividend stocks. And Congress is about to dramatically cut the wealth of those same seniors. Apparently the seniors’ votes aren’t important to the hard left Democrats who control Congress. This may be enough to give Republicans control of Congress after the November elections.
If you wonder why dividend stocks are depressed, the Democrats’ Dividend Tax is undoubtedly a major reason.
Colorado • Politics • PPC • Stocks • Dividend • Permalink
BP needs new CEO, top executives, board and corporate culture
Today’s House hearings showed that BP needs a new board, CEO, top managers and corporate culture. The British company’s board hired a CEO who has created or continued a corporate culture that puts cost cutting and making deadlines ahead of ensuring the safety of workers, the environment and shareholders.
The implied criticisms of BP dished out at the hearing by its peers at Exxon, Chevron and Shell were devastating for BP’s top managers. The other companies’ CEOs basically accused BP of cutting corners and taking risks that they wouldn’t take. Hindsight is great, but the comments make it clear that BP’s top executives are way in over their heads and must be replaced.
That all of the companies have the same disaster plan and that it was written by the same consultant only shows that consultants sell a lot of boilerplate solutions. And it shows that the companies’ risk managers aren’t doing their jobs and should be fired for not asking questions and participating in developing their worst case scenario recovery plans. Those risk managers are probably getting an earful from their bosses, and their careers probably are in trouble. The consultant also is probably in trouble with its clients for boiler plating them.
The idea that more laws and regulations would have prevented the oil spill and that more will is very debatable. Extensive FDA regulations don’t keep big pharmaceutical companies from marketing drugs that cause deaths and have to be withdrawn from the market. No regulations can prevent human errors.
What we have here is a tremendous failure of big government, which has failed to marshal the resources needed to protect the environment after the spill and continues to fail in providing leadership in the fight against the spill.
A smaller government with fewer competing power centers, agencies and conflicting laws and regulations would have a stronger chain of command and would have been much more flexible and aggressive in coordinating an effective response to the disaster.
PPC • Ethics • Trust • Stocks • Energy Stocks • Permalink
Should Feds be pouring $45 million into UQM Technologies? Buying votes for Betsy Markey?
Vice President Joe Biden is coming to Colorado to boast that the government has granted Longmont-base UQM Technologies $45 million that the company will use to build a factory, Chris Hubbard reports.
I’ve been following UQM off and on for about a dozen years, mostly because my former investment club owned it a few times.
The stock peaked at the beginning of the year at $7.45 and is trading at $4.10 now. It’s been trying to sell its technology for years, but investors haven’t seen enough potential to fund its expansion. When a company needs government support to stay in business and/or grow it, you know that the smart investors don’t think much of it. And if they don’t like it, it’s a loser. You can research UQM by searching “UQM stock” or by reading about it on Yahoo.
So we have the Democrats trying to pick winners and losers in the energy business. And, as usual, they’ve picked a long-term loser to back. You have to wonder about the political connections that brought the funding to UQM. Which top executives, directors, consultants, lawyers, lobbyists or large investors used their political influence to bring $45 million of taxpayers’ money to UQM?
Or is this just another effort by the Obama administration to use taxpayers’ money to buy votes for appointed Democrat Senator Michael Bennet and hard left Democrat U.S. Rep. Betsy Markey (D, CD-4) who represents Longmont in Congress?
Why hasn’t anybody bothered to buy this wonderful company and grow it? Why has the stock dropped so sharply since the beginning of the year? Why are its charts saying sell big time? The stock’s point and figure price objective is $1.00.
This is truly a big Biden/Obama deal that shouldn’t be happening.
For educational purposes only. Investigate before you speculate. I am not recommending any trades and take no responsibility for how others trade stocks, ETFs, commodities or anything else.
PPC • Economy • Ethics • Stocks • Energy Stocks • Permalink
Chris Dodd’s financial reform bill would limit credit, kill jobs, promote corruption
Senator Chris Dodd (D-CT) is being forced to retire because he allegedly took mini bribes from a mortgage bank. Yet President Barack Obama is working with Dodd to “reform” financial and credit market laws and regulations.
It’s no surprise, then, that the Dodd bill is as intellectually corrupt as its creator. And it’s no surprise that the bill would add bureaucracies that would force large banks and manufacturers to hire more lobbyists who would pour more money into the campaign fundraisers held by presidential candidates and members of Congress. Big government is corrupt government, and the financial reform bill would make the Federal government even more corrupt than it already is. By “corrupt,” I mean that politicians work for lobbyists and special interests who contribute to their campaigns, not for their constituents and country.
Here are links to some articles that discuss the weaknesses in the financial reform legislation being pushed by Obama and Dodd:
CBO confirms you’re on the hook for Wall Street bailout bill. The Heritage Foundation.
Democrats reach deal on tough derivative law. By Ronald D. Orol.
Financial reform’s big unknowns. By Robert J. Samuelson.
Senator Dodd’s Regulation Plan: 14 fatal flaws. By James Gattuso, The Heritage Foundation.
Dodd’s job-killer. By Mark A. Calabria, Cato Institute.
Crisis and ideology: The Administration’s financial reform legislation. By Peter J. Wallison, American Enterprise Institute for Public Policy Research.
Yes, it’s a bailout bill. By Phillip Swagel. The American, the journal of the American Enterprise Institute.
Do you have any reforms in size XL? Gretchen Morgenson, NYT.
Banks • PPC • Financial Reform • Ethics • Stocks • Bank Stocks • Permalink
Ali Hasan calls bankers crooks and supports their anti-mark-to market accounting games
Ali Hasan, a film maker who is running for Colorado Treasurer, is charging that Treasurer Cary Kennedy, a Democrat, has invested in what he calls bailout banks. And he frequently wonders why the bankers who took Troubled Asset Relief Program (TARP) funds under pressure from the government aren’t in jail. He thinks that bankers who make bad decisions are crooks, which makes no sense. Under that logic, anybody who makes a mistake is a crook.
Yet, in a speech this morning to
Colorado • Politics • PPC • Ethics • Trust • Stocks • Bank Stocks • Read More
Health insurers’ stocks jump on news Obama will try to force ObamaCare on Americans
Speculators apparently think that price controls would be good for health insurers.
That’s the message health insurance stocks are sending. They’re up more than 1%. The idea is that if Obama nationalizes health insurance and health care, health insurers will make more money even though Obama and Pelosi would effectively run the companies for their own benefits. Or, it may be that speculators like Wellpoint’s politically tone-deaf and self-destructing 39% increase in Anthem Blue Cross and Blue Shield premiums. Makes no sense to me.
Health insurance • Health Insurance Reform • Stocks • Stocks Medical • Permalink
Health insurers’ stocks have plunged since Senator Scott Brown’s election
The stocks of health insurers have plunged since Jan. 19 not only because the over all market has faded but also because Congressional Democrats and President Obama appear to be looking for ways to punish insurers because the politicians couldn’t sell a bad health insurance reform bill to voters. Note that Senator Scott Brown (R-MA) won his election on Jan. 19, taking away the Democrats’ super majority in the U.S. Senate and killing the versions of ObamaCare that had passed the Senate and House.
Obviously, a lot of speculators thought, incorrectly I think, that the insurers would have profited from ObamaCare’s requirement that individuals would be forced to buy health insurance. If the mandates had passed, the politicians would have found ways to take all of the profit and then some out of the new business they would have handed to the insurers.
Here are charts for AET, CI, CVH, HS, HUM, UNH, WLP, and the exchange traded health funds, XLV, IYH and VHT. Click on a chart for more information.
Health insurance • Health Insurance Reform • Stocks • Stocks Medical • Permalink
Almost 2,800 energy, climate and environmental lobbyists are writing checks for Congressmen
Although leading members of Congress are telling the White House to shelve the cap and trade bill until 2011, almost 2,800 lobbyists for alternative energy, traditional energy, energy consuming and other companies are gearing up to fill the campaign coffers of Congressmen. Whether they are fighting for government subsidies and regulations that would make otherwise uneconomic alternative energy companies great investments or they are protecting oil and coal producers, the lobbyists stand to make a killing helping politicians further distort the U.S. and world economies. Because Colorado is an important natural gas, oil and coal producing state, it will be affected by these battles. Of course, with five lobbyists for every member of Congress, the best way for a lobbyist to gain access to a member is to contribute to his or her campaign. Votes are for sale and money talks. Politico’s impact graphs:
Colorado • Energy • Stocks • Energy Stocks • Read More
Why buy insurers’ stocks when Obama health bill (HR 3590) would bankrupt them?
On Monday, liberals sneered when insurers’ stocks rose, indicating that speculators thought ObamaCare (HR 3590) would be good for the big regional companies. But today several of the stocks are sinking, probably in response to University of Chicago Professor Richard A. Epstein’s op-ed piece in The Wall Street Journal, Harry Reid turns insurance into a public utility; the health bill creates a massive cash crunch and then bankruptcies for many insurers. His original, more detailed argument is here.
Here are charts for AET, CI, CVH, HS, HUM, UNH and WLP. Click on a chart for more information. The stocks that are sinking serve the individual and small group markets. Those that are rising are less invested in those markets, I think.
Now, the big companies might benefit from
Health insurance • Health Insurance Reform • Stocks • Stocks Medical • Read More
Why are health insurers’ stocks falling?
Why are health insurers’ stocks off their recent highs?
Charts for AET, CI, CVH, HS, HUM, UNH, WLP, XLV, IYH and VHT are here.
It could be profit taking. Speculators may be worried that ObamaCare (HR 3950) will require insurers to sell insurance people with pre-existing conditions without imposing tough, costly fines on free riders who don’t buy insurance. If people are allowed to buy insurance only after they become ill, they will. And premiums will soar for those who do buy insurance. Either way, insurers’ small 2% to 5% profit margins would shrink.
Some speculators may be thinking that
Health insurance • Health Insurance Reform • Stocks • Stocks Medical • Read More