The equity market is looking pretty tired these days and many professional investors seemingly don’t have a sense as to where share prices will go in the near term.
Valuations have been extreme at many fast-growing companies, but this isn’t unusual. The fastest-growing companies are often overbought by institutional investors who can afford to trade on momentum. Closer to quarter-end, much of the action actually is just window dressing.
The vast majority of brand-name stocks are due for a meaningful correction. That would be a healthy development for an equity market that’s up around 25% year-to-date.
I think investors need to be highly cautious and very conservative with their holdings. Dividend-paying blue chips are my favorites going into 2014 because they have the cash, the healthy balance sheets, and the pricing power to keep earnings elevated, even if the U.S. economy experiences its next recession (which is a very plausible development next year).
I recently wrote about The Walt Disney Company (DIS), which has been reporting great earnings results all year. The company just announced a 15% increase to its annual dividend.
Two weeks ago, NIKE, Inc. (NKE), another company that I like, announced a 14% increase in its quarterly … Read More
You don’t often hear a lot about United Technologies Corporation (UTX) these days; it’s an old economy name that doesn’t seem to garner much attention from the media.
Nevertheless, the company that makes elevators, helicopters, airplane engines, and HVAC (heating, ventilation, and air conditioning) and fire/security systems continues to perform excellently. It’s a component of the Dow Jones Industrial Average, and the stock’s had an exceptional year. (See “The One Market Sector That’s Consistently Outperforming the Rest.”)
Approximately $17.0 billion of the company’s total sales in 2012 came from its “UTC Climate, Controls and Security” business. Next was “Pratt & Whitney” aircraft engines at $14.0 billion. “Otis” elevators and escalators brought in $12.0 billion in sales last year, followed by “UTC Aerospace Systems” at $8.3 billion and “Sikorsky” helicopters at $6.8 billion.
As a conglomerate with a strong constituent in aerospace, United Technologies has an excellent track record of increasing its dividends to stockholders.
In 2012, the company increased its common share dividend by a total of 11.5%, representing its 76th consecutive year of paying dividends. According to the company, from fiscal year-end 2002 to year-end 2012, United Technologies delivered a 225% total return to shareholders, which is … Read More
The Walt Disney Company (DIS) just doubled its equity market capitalization over the last 24 months. It is a stunning performance and a breakout from its long-term trend.
What stood out in the company’s latest quarter was its earnings growth. Profitability is improving substantially due to increased spending at theme parks.
Once again, Disney’s parks and resorts business segment grew strongly, up eight percent in the recent quarter to $3.7 billion. The company’s largest revenue segment is from media networks, which is a very mature and saturated market. Media network sales grew only one percent to $4.95 billion in the most recent quarter.
Company management specifically noted that there was a noticeable increase in guest spending at domestic parks and resorts. This led to a big increase in Disney’s consumer products sales which grew 14% to $1.0 billion in the latest quarter.
If you want a very good breakdown of the company’s global operations, take a look at its annual form 10k, which breaks down all of the company’s holdings and their respective financial performance.
There are still a lot of companies that are reporting quarterly earnings and, in many cases, the numbers are pretty decent. Let’s look at some of the winners.
The iconic jewelry brand Tiffany & Co. (NYSE/TIF) reported outstanding quarterly earnings growth of 50% due to significant sales strength and margin expansion from the Asia-Pacific region. The company’s American stores saw total sales grow four percent to $417 million, with European sales growing a surprising seven percent to $104 million.
Tiffany & Co. boosted its full-year earnings outlook for its fiscal year ending January 31, 2014, and the stock jumped seven points on the news, closing at a new all-time record high.
Much smaller Movado Group, Inc. (NYSE/MOV), which is based in Paramus, New Jersey, reported an 18.4% increase in third-quarter sales to $189.7 million.
The company’s quarter earnings fell comparatively due to a tax provision, but income before taxes grew to $34.0 million from $25.0 million in the same quarter last year.
Movado beat Wall Street consensus and tightened its guidance to the high end of its previous outlook.
Higher-end retailers like Tiffany & Co. aren’t representative of a general trend, but La-Z-Boy Incorporated (NYSE/LZB) recently shot way up on … Read More
There are lots of companies but very few stocks I like in this stock market, because stocks have already gone up in value so tremendously.
Countless large-caps provided excellent returns this year, and many of them are old brands that still offer meaningful dividend yields. What’s transpired with the equity market this year has been truly amazing and practically, I don’t think the run is over just yet.
Cracker Barrel Old Country Store, Inc. (CBRL) has a 52-week trading range of $60.07 to $118.44 and a forward price-to-earnings (P/E) ratio of 18.46, according to Thomson Reuters. And guess where the stock is now—right at its all-time record high, up approximately 84% (not including dividends) since this time last year. All this from a mature restaurant brand.
Johnson & Johnson (JNJ), one of my key benchmark stocks and the kind of company that’s welcome in any long-term equity market portfolio, has had a really good year. Its capital appreciation is reminiscent of its performance in the late 90s.
Many blue chips trade similarly to Cracker Barrel and Johnson & Johnson: they go through long periods of consolidation providing minimal capital gains, and then they explode in trading action, typically associated with … Read More
It’s an amazing performance that few people predicted at the beginning of the year—this stock market might just keep on climbing right into the New Year.
Just recently we looked at Automatic Data Processing, Inc. (ADP) as it broke a new all-time record high of $77.00 a share. Now, the position has surpassed $80.00 a share, still boasting a 2.4% dividend yield. It was $60.00 a share in January.
The stock market should have experienced a major correction this year, but it consolidated during the summer and reaccelerated instead.
The huge price movements of so many large and mature enterprises are not unusual in the historical performance of the stock market. In the middle of 1998, ADP was $30.00 a share (split adjusted). Two years later, the position hit a new, all-time record-high around $60.00 before correcting with technology stocks.
ADP and so many other positions illustrate the power that monetary policy has on the stock market’s business cycle. Clearly, equities today are overbought, but institutional investors have to be buyers, because investors don’t pay fees to have money sitting in cash.
While I feel that the stock market can close this year out strongly, generally speaking, I am not … Read More
As evidence of the fervor to which institutional investors are bidding this market, Johnson Controls, Inc. (JCI) jumped five percent on the day the company announced a new $3.65-billion share buyback program and a 16% increase to its dividends.
These are good times for corporations and equity investors. Companies can borrow on the cheap, and they are keeping shareholders happy with rising dividends and share buybacks.
Johnson Controls is based in Milwaukee and sells a great deal of equipment to the automobile and the heating, ventilation, and air conditioning (HVAC) industries.
The company’s dividends have been rising consistently, and for the quarter ended June 30, 2013, earnings per share grew an impressive 32%.
Not surprisingly, the stock’s been doing extremely well. At the beginning of the year, it was trading around $31.00 a share; now, it’s around $50.00.
This kind of capital gain has been very common among countless blue chips. It is a highly unusual and monetary policy-fueled rise. In my view, in the case of Johnson Controls, the company’s share price is overvalued, even with the recent news regarding its dividends.
While there is certainly a lot of liquidity in the stock market now—and there is … Read More
Tyson Foods, Inc. (TSN) is one of the biggest processors and sellers of meat and countless prepared food products sold in more than 90 countries. John W. Tyson founded the company in 1935 by hauling chickens to market in Kansas City and St. Louis.
Tyson’s total sales last year were $33.0 billion, with the sale of beef products representing 41% of total revenues, followed by chicken at 35%, pork at 14%, and sales in prepared foods at 10%.
Tyson’s most recent quarter (fourth fiscal quarter of 2013), turned out to be a record in terms of sales and earnings per share. The company beat its own expectations for fiscal 2013, handily beating its previous outlook for international sales; operating margins, especially for chicken and beef, also grew substantially. This contributed to a marked improvement in bottom-line earnings and adjusted earnings per share attributable to the company.
Management reported increased demand as well as higher prices in the most recent quarter. Input costs for fiscal 2014 are expected to drop due to higher grain supplies. The company continues to … Read More
Recently, I revisited J. Anthony Boeckh’s book The Great Reflation, which was written in 2010 and is a thorough, well-written analysis of the long-run cycles experienced by the U.S. economy and the affects of financial crises and monetary policy on the stock market.
Back in June, I presented a summary of Boeckh’s conclusions in this column. Many of his points, based on a non-political historical analysis of business and stock market cycles, have come to fruition. (See “Breakdown: U.S. Economy and Its Cycles in 18 Brief Points.”)
Here are Boeckh’s key top-10 conclusions:
1. The global financial system will always remain flawed and subject to price inflation and bubbles, so long as it is based on fiat paper money. All anchorless fiat money systems are destined to suffer inflation and instability.
2. Stock market investors will be playing a cat-and-mouse game with the Federal Reserve for years to come, a problem caused by excessive private and public debt.
3. Deleveraging of the private sector bodes … Read More
For a company with just one operating division that’s generating meaningful growth, E. I. du Pont de Nemours and Company (DD) seems to have an uncanny ability to appreciate in value on the stock market.
DuPont is a big player in the agriculture sector, and this operating division is somewhat of a proxy on the sell-side industry.
Last quarter, the company reported sales growth of five percent to $7.7 billion. The company’s agricultural division experienced the best gain, with a 15% hike in sales to $1.6 billion.
If institutional investors buy the stock market based on improving balance sheets, DuPont’s fits the bill. The company’s third-quarter cash position soared from $4.3 billion to $7.0 billion.
The stock was trading around $45.00 a share at the beginning of the year, and it is currently trading at approximately $62.00 with a 2.9% dividend yield. For such a mature enterprise, an impressive capital gain like this is indicative of a monetary policy-induced stock market, where even slow-growth enterprises have been bid significantly.
Across the board, Wall Street has been increasing DuPont’s earnings estimates for this year and next. For 2013, total sales are expected to grow approximately three percent, accelerating to 6.3% … Read More
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