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No content published as part of the CAIM LLC blog constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person. To the extent any of the content published as part of the blog may be deemed to be investment advice, such information is impersonal and may not necessarily meet the objectives or needs of any specific individual or account, or be suitable advice for any particular reader. Each reader agrees and acknowledges that any specific advice or investment discussed in the blog must be independently evaluated by the reader and his or her adviser in view of the reader's investment needs and objectives.

Are We in the Sweet Spot?

April 7, 2010

 

That was the question posed to Leon Cooperman yesterday morning on CNBC. His response was a strong yes! The sweet spot he is referring to is the perfect time to be moving out of bonds into stocks. Low interest rates, a fairly valued stock market at 15x and signs of economic growth make the timing right. So why are individual investors still hunkering down in bond funds??? Bond yields have all ready started to rise and as the yield rises, prices go down and then they are left in the same situation as when they were invested in stocks at the height of the market. The real risk now is in bonds, not stocks! I have seen it over and over in my years as a mutual fund manager. The individual investor notoriously buys at the top and sells at the bottom. I’m with Leon. I think we are in the sweet spot.
Check out this week’s newsletter abut Joe and Moe. Comes out this Friday.
Have a great day!





On Thin Ice

March 26, 2010

 

Not surprised by Ben Bernanke’s comments yesterday that the economy is fragile and will keep interest rates low for an indefinite period of time. I have to say that “indefinite period of time” phrase is a little spooky to me. Interesting that it took the market a few hours to figure out that low interest may not be a good thing in this case if the economy is still struggling. This confirms our thesis that the economy and hence markets will be choppy this year. Futures are up this morning, but my guess is it’s more of a reaction to some resolution of the debacle in Greece.

How do we play this market? We suggest a mix of stocks (dividend paying, of course!) in different sectors. We like KO (Coca-Cola) and INTC (Intel)to balance out the portfolio. You will find that on days when the market is strong, INTC will perform better than KO and the opposite is true on weak days. Dividends are important to us, but we also want to see future catalysts for growth in our investments.

KO – Stock has a 3% dividend yield (50% higher than the S&P!), over $1.00 in free cash flow/sh and only 17% debt to total cap!
1. Company focus on improving product mix like vitamin waters and healthy alternatives.
2. Attractive exposure to emerging markets.
3. Strong focus on cost controls.

INTC – 2.8% dividend yield, 5% debt to total cap, 13.4x 2010 est versus 14.8x for the S&P 500.
1. Strong demand for consumer items like computers, digital tv and cell phones continues even in a moderately growing economy.
2. Operating margins moving back to previous high levels.
3. As economy recovers, we can potentially see an increase in eps growth rate.





 
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