Saturday, April 30, 2011
Top Stocks For 2011
More than 3,100 refund checks mailed to alleged victims of mortgage discrimination by Bakersfield company
More than 3,100 refund checks totaling $1.5 million have been sent to Latinos who were allegedly charged higher prices for home loans by a Bakersfield mortgage company, the Federal Trade Commission said.
The checks were part of a settlement announced last year between the agency, Golden Empire Mortgage Inc., and its owner, Howard D. Kootstra, of charges that the company illegally charged Latino customers more for mortgages than non-Latino borrowers. The practice violated the Equal Credit Opportunity Act, which bars creditors from discriminating against loan applicants on the basis of race, color, national origin or other factors.
Golden Empire Mortgage operates in California and six other Western states.
The FTC filed suit against the company in 2009, alleging it charged Latinos "substantially, statistically significant" higher prices for mortgages that "cannot be explained by factors related to underwriting risk or credit characteristics of the applicants.
Friday, April 29, 2011
Consumer Confidential: Baggage fees rise, Wal-Mart delivers, Nissan recalls SUVs
--It used to be that you could at least duck some baggage fees charged by airlines if you prepaid online. But apparently that's a perk that's going away. United Continental has done away with the $2 to $3 discount that passengers used to get if they paid for their luggage on the Net instead of at the ticket counter. The charge for domestic flights is now $25 for the first bag and $35 for the second, no matter how or when you pay. United and Continental used to offer a $2 discount on the first bag and $3 off the second to encourage passengers to pay up before arriving at the airport. Delta Air Lines Inc. still offers a similar discount. Other carriers, including AMR Corp.'s American Airlines, never offered different prices. Southwest Airlines Co. continues to allow passengers to check two bags for free.
--Need some food? Wal-Mart's website wants to be your first stop. The world's biggest retailer has started testing an online grocery delivery service, called Wal-Mart to Go, in the San Jose area. Other grocers, including Safeway and Peapod, offer similar services, though it's unclear how profitable these services are. Delivery charges for Wal-Mart to Go start at $5. For the test, Wal-Mart is shipping groceries from a San Jose store, packing them in tote bags and delivering them in temperature-controlled trucks that the company owns. Deliveries can be scheduled for the next day. The company is still working out deliveries of perishables such as meat and produce, but seems to be coming along quickly. On the other hand, it's hard not to recall the experience of Webvan.com and how that company crashed and burned with such a service.
--Heads up: Nissan is recalling nearly 200,000 sport utility vehicles to fix a defective steering column that can crack when exposed to road salt. An assembly hole can allow road salt and snow to collect in the steering assembly and cause corrosion, Nissan says. "The strut housing may crack and pull away from the inner hood ledge assembly," the carmaker warns. "This may lead to grinding noises, increased steering effort and possibly the steering column to break, resulting in the loss of steering control, which could result in a crash." The recall affects model years 1997 through 2003 of the Infiniti QX4 and model years 1996 through 2004 of the Nissan Pathfinder. Inspection and repairs will be conducted free of charge.
-- David Lazarus
Photo: Prepaying online won't always get a discount on checked bags. Credit: Tim Boyle / Getty Images
Bloomingdale's expands outlet concept, announces three new stores
Bloomingdale's, which launched an outlet concept last year, announced that it will open three new outlet stores in the fall.
The upscale department store owned by Macy's Inc. will open the new locations in Estero, Fla.; Wrentham, Mass.; and Schaumburg, Ill. The stores will be 24,000 to 25,000 square feet.
The company said that based on customer response, it is considering additional outlet stores "for 2012 and beyond."
"Our first four outlet stores have helped us to learn this business and refine our merchandising and in-store presentation," said Michael Gould, chief executive of Bloomingdale's. "We continue to see opportunity for growth."
The outlet stores offer apparel, accessories, jewelry, handbags and intimate apparel.
The first four Bloomingdale's Outlet stores opened last fall in Paramus, N.J.; Miami; Sunrise, Fla.; and Woodbridge, Va.
-- Andrea Chang
CIM Group breaks ground for Hollywood apartments
Hollywood's largest landlord broke ground Monday on a $20-million luxury apartment building just north of Hollywood Boulevard.
The developer is CIM Group, which owns the Hollywood & Highland entertainment center and the Sunset & Vine apartment tower along with several other large properties.
Thursday, April 28, 2011
Gas prices could reach $4.25 nationally by Memorial Day
Crude oil fell from 31-month highs Monday, but analysts were predicting that the reprieve wouldn’t reach motorists. Pump prices were expected to continue their rise, with some predicting $4.25 gasoline by Memorial Day.
UCLA Anderson School of Management receives $25 million
The UCLA Anderson School of Management will receive a $25-million gift from alumnus John Anderson, a Los Angeles entrepreneur, and his wife, Marion -- the largest donation in the business school's history.
The school already bears Anderson's name after a 1987 donation from him of $15 million, then the largest gift by an individual to that institution. Over more than two decades, the Andersons have donated almost $42 million to the school.
"This remarkable gift will enable us to chart the future by investing in a broad range of strategic initiatives, including research that advances management thinking and practice, curriculum initiatives that prepare our students to become global leaders, and student support that attracts the most talented candidates from around the world," UCLA Anderson Dean Judy Olian said in a statement.
Anderson graduated with a bachelor's degree from UCLA in 1940. He later earned a MBA from Harvard University and a law degree from Loyola University in Los Angeles.
He co-founded a law firm with another UCLA alumnus that has since closed its doors, and in 1956 he started Ace Beverage with exclusive rights to distribute Budweiser in Los Angeles. He is the longtime owner of Topa Equities, a privately held company based in Los Angeles with dealings that include real estate and beer distribution.
Anderson was ranked No. 189 in Forbes Magazine's 2006 list of the 400 richest Americans, with an estimated net worth of more than $1.9 billion.
"I was very lucky to come to UCLA on a scholarship, and I've never forgotten that," Anderson said in the statement. "The lessons and values I learned while attending UCLA shaped my thinking ... and helped build my business reputation."
The Andersons' previous donations have established two professorships in their name and helped fund a building for the graduate business school.
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Silver rallies closer to $50, gold gains as buyers keep coming
The price of silver made a run for the $50 mark on Monday, the previous nominal peak reached 31 years ago, as the wild bull market in precious metals rolls on.
April silver futures in New York traded as high as $49.10 an ounce but fell back to close at $47.15, up $1.09 for the session, or 2.4%.
The more active May silver contract made it closer to $50, trading as high as $49.82 before retreating.
Wednesday, April 27, 2011
American Apparel shares soar 27% after it secures financial lifeline
American Apparel stock jumped 27% on Monday following news that a group of Canadian investors had agreed to inject up to $45 million to help the Los Angeles clothing company.
Shares increased 34 cents to $1.58.
Now that it has secured a financial lifeline, American Apparel will focus on optimizing efficiency at its downtown L.A. factory and increasing sales productivity at its stores, Chief Executive Dov Charney said in an interview Monday.
"Maybe once we optimize the factory and the top line of each average store, we might look at increasing store count," Charney said. "We still think it's a business in its early stages, and we'll continue to work to grow the company. ... We really think we can take the company to another level."
The deal, announced last week, helped the company stave off a potential bankruptcy filing. The investors agreed to pump in $15 million in equity at 90 cents a share, a 27% discount to the company's $1.24 closing price Thursday. The stock market was closed Friday in observance of Good Friday.
The investors also are getting warrants to buy an additional $30 million worth of shares over the next six months, also at 90 cents a share.
Charney agreed to contribute $700,000 of his own money. However, unlike other existing investors whose ownership stakes will be diluted by the issuance of shares to the new investors, Charney said his prior ownership stake can be restored if the stock price rises in coming years.
The investment group is headed by Michael Serruya, a prominent Canadian financier.
Just a few weeks ago, American Apparel -- which in recent months had faced a slumping stock price, sales declines and two sexual-harassment lawsuits brought by five former employees -- had warned that it had doubts about its ability to continue as a going concern.
-- Andrea Chang
SEC shuts down Beverly Hills hedge fund and wealth management business
In an unusual move, the Securities and Exchange Commission has temporarily shut down a Beverly Hills hedge fund and wealth management business -- which allegedly sought to defraud investors -- before anyone actually invested.
Elijah Bang and Daniel Lee, who operated IU Group Inc., allegedly targeted retirees, professors and Christians by misrepresenting the business and its financial performance, soliciting clients using a variety of company names and claiming that the fund managed over $800 million, according to an SEC statement on Monday.
Some websites stated that the company was founded by "devoted Christians who believe in God, Jesus Christ and the Holy Spirit," the SEC said. Lee sent email solicitations to college professors. Both men told potential clients that they handled money for professional athletes, actors, executives and politicians.
The SEC obtained a temporary restraining order to halt business activities and filed a complaint in the U.S. District Court in central California accusing Bang and Lee of fraud and seeking financial penalties.
John McCoy III, the associate regional director for the Los Angeles office of the SEC, said it was unusual, but not unheard of, for the SEC to stop a business scam before any investors were lured in.
"Often, particularly with defrauded investors, we don't get a complaint or tip until someone actually puts in money, tries to get it out and then the person says, 'Oh well, I don't actually have any of it,' " McCoy said.
In this case, the SEC received an early tip from the public, and subsequent investigations have uncovered zero investors and no money, McCoy said. But further digging could turn up new evidence.
"Part of the problem with these cases is the lack of transparency," he said. "There's always the caveat that we don't know what we don't know."
According to the SEC, Bang and Lee are also old hands at securities fraud. In 2009, the California Department of Corporations ordered the two to desist and refrain from illegal and fraudulent sale of securities.
But last year, they began soliciting money again under UI Group, whose business license was suspended in California, and under a variety of other company names not registered with the SEC or the state.
Calls and emails to Bang and Lee were not returned. David Van Havermaat, an attorney for the SEC, said neither men had hired a lawyer yet.
McCoy added that the district attorney's office or U.S. attorney's office could also bring criminal charges against the two men.
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KCET sells Sunset Boulevard studio to Church of Scientology
Financially strapped KCET-TV has sold its landmark Sunset Boulevard studio to the Church of Scientology for an undisclosed price, the station said Monday.
KCET will remain at 4401 W. Sunset Blvd. for as much as a year while searching for a new location. The station is in discussions with several production facilities, according to a statement by its president, Al Jerome.
Tuesday, April 26, 2011
Leaf, Volt electric vehicles get top safety marks
The first of the new mass-market electric cars have won the highest safety ratings from an insurance industry trade group.
The Nissan Leaf, which is a powered only by electricity, and the Chevrolet Volt, which technically is a plug-in hybrid vehicle because it also has a small gasoline engine, were named Top Safety Picks by the Insurance Institute for Highway Safety.
Tuesday, April 19, 2011
Best Stocks to Invest In 2011 -Top Stock Picks to Buy
Between March 9 and May 4, Standard & Poor’s 500-stock index surged 34%. Beaten-down “value” stocks and stocks of smaller companies have been the best performers during the recovery. Examples of revived value stocks are Citigroup (symbol C), which tripled from an intra-day low of 99 cents on March 9 to $3.20 at the May 4 close, and Bank of America (BAC), which skyrocketed from $3 to $10.38. Meanwhile, Morningstar’s small-company-value index rose 22% in April, and its large-company-growth index gained just 8%.
I’m not jumping on the bandwagon. Given the fragility of the markets, the financial system and the economy, I don’t think stocks of small companies or companies with huge problems are the ones to buy. Instead, I think you should put most of your money into the highest-quality blue chips (companies with little or no debt and the ability to generate a lot of cash).
If you’re looking for ideas, Morningstar StockInvestor ($119 annually) is a great resource. According to the authoritative Hulbert Financial Digest, the newsletter’s stock picks returned an annualized 2.6% from the end of 1999 through last February, a period in which the broad-based Dow Jones Wilshire 5000 stock index lost an annualized 5.0%. What’s more, the Morningstar letter is less risky than the index and tends to do little trading; on average, the letter holds stocks for about three years.
Editor Paul Larson says he looks for companies with competitive advantages over their rivals: “My strategy is fairly simple. I focus on high-quality companies, and I buy them when they’re cheap.”
Morningstar’s 100-plus stock analysts estimate “intrinsic value” for every company they cover. They compare intrinsic value to a company’s share price to arrive at a star rating. Larson then draws up two lists — a “tortoise” portfolio and a “hare” portfolio-consisting of about 25 highly rated stocks each.
Larson’s favorite is Warren Buffett’s Berkshire Hathaway (BRK.B)(best stocks to invest in 2011). At $3,114.90 a share on May 4, the stock has shed more than one-third of its value in the past year. But Larson believes that Berkshire’s collection of more than 70 businesses, dominated by insurance, is dirt-cheap. Says Larson: “For a long time, people have been pricing Berkshire as though Buffett were no longer around. But he’s still alive and kicking-and adding value. And the balance sheet is still one of the strongest around, even though the company no longer carries a triple-A debt rating.”
The world’s largest and most diverse health-care company, best stocks to invest in 2011 -Johnson & Johnson (JNJ), is another favorite. Larson says that the company is largely insulated from economic downturns. “People need to take their medicines regardless of what the economy is doing,” he says. J&J is well-managed, has little debt and generates a staggering $1 billion in free cash flow per month (free cash flow is the money left after a company makes the capital expenditures needed to maintain the business). The stock closed at $53.76 on May 4.
Defense giant best stocks to invest in 2011- General Dynamics (GD) is another company that’s built to withstand recessions. It builds ships and armored vehicles, as well as information-technology systems for the military. “The government has a vested interest in maintaining the health of this company,” Larson says. “It came through the Defense Department budget cuts relatively unscathed.” The company boasts a rock-solid balance sheet. The stock closed at $54.00.
Wal-Mart Stores (WMT), the world’s largest retailer, has increased its market share during the economic slump. Its sales of consumer staples at discount prices have been increasing as other retailers have been going out of business. The company’s managers are focusing on cutting costs and satisfying customers. Wal-Mart, one of only two stocks in the Dow industrials to climb last year, closed at $50.84.
As employee benefits grow ever more complex, The best stocks to invest in 2011-Automatic Data Processing (ADP) benefits. It provides such services as payroll processing and benefits administration. Its large scale and respected brand, and the high cost of switching to another vendor, give it a big competitive advantage. The share price: $34.86.
When competitors were spending enormous sums to build up oil-and-gas reserves during last year’s bubble in oil prices, ExxonMobil (XOM) stayed focused on increasing profit margins. Because of that, Exxon can continue to buy back shares, raise its dividend and increase capital spending (at a price of $68.20, the stock yields 2.5%). It’s the world largest integrated oil-and-gas company, and participates in almost every facet of the business.
Best Stocks To Invest
Most of the queries by the investors will be related to the best stocks to invest and the experts reply that a particular sector will be performing well in the next few years and ask the investors to invest their money in these sectors. Some investors roughly follow the mutual fund companies and invest their money in the stock where the fund managers of the mutual funds invest. These investors consider that the fund managers will select the best stocks to invest and just follow them as an investment strategy. Some people having no experience in the stock market or lack knowledge about the stock market prefer the mutual funds for their investments. The stocks are selected based on the fundamental and technical analysis of the company stocks.
The fundamentals are considered if the investor wants to invest for a long time period of about 2 to 3 years. The technical analysis is used by the investors to select the best stocks to invest based on the past performance and certain patterns. The investors following the technical analysis will follow a certain pattern in the stock performance and predict that the stock will move up or down and arrive at the high and low. Then the investors will try to sell the stocks at the high and buy the stocks at the low.
The entries of speculators in the form of day traders make the stock market fluctuate to a great extent. The foreign institutional investors play a pivotal role in the performance of the stock market. Since the investors consider that the American and the London stock market have matured, they have shifted investing in the Asian stock markets where the returns are more. Currently, the Asian stock markets and the stocks listed in the stock exchange in the developing countries are the best stocks to invest. The stock experts comment that banking sector is always considered to be safe and will yield a steady return after some years. The blue chip and the information technology sector stocks can yield good returns in a quick manner. Similarly, each expert will give their comments about each industry and offer their buy and sell recommendation to the investors.
Monday, March 28, 2011
How to Choose the Right Financial Advisor
The truth is that most people today spend more time planning a two week vacation than they spend planning their retirement. And, oftentimes people will put their life savings in the hands of a total stranger they picked from a Yellow Pages ad because they simply don’t know how to research financial planners. And, this could prove to be a big mistake.
Although there are no iron clad guarantees, there are some questions you need to ask any financial advisor you are considering placing your money with. After all, this is the money you plan to live on for 20, 30, or more years! So this is a job that you definitely want done right.
Some experts have even likened picking a financial planner to hiring somebody for a job. And this makes a lot of sense. This person will be dealing with the business of your finances – so you will definitely need to hire the right person for the job.
Some of the most important questions you will need answers to include:
* What is your experience? Today, just about anybody can call themselves a financial professional. But where the rubber meets the road is whether or not the person is truly qualified to give good, knowledgeable financial advice. Therefore, inquire as to what licenses and other qualifications they possess such as professional or industry designations like a Certified Financial Planner (CFP) or Chartered Financial Consultant (ChFC). You should also ask how long they have been in the financial services industry. Because, while it’s nice to give everyone a chance, you will likely be much more secure with an experienced professional who has worked in both up and down markets successfully.
* How do you get paid? This is a biggie because an advisor’s pay source may have more to do with his or her recommendations than you think. There are numerous types of compensation structures in the financial services industry. The advisor could be paid on commission, a flat fee, an hourly rate, or a combination of any or all of these. Be sure to inquire as to any conflicts of interest as well. For example, if a financial services representative is paid on commission and they only offer a limited number or types of products, then this could be a red flag as to where their true interests lie. Search here for a list of local, pre-screened fee-based financial planners to match your needs.
* What is your track record? There are actually a variety of ways to evaluate an advisor’s track record. One such method is to simply inquire as to how many clients’ portfolios are performing in line with or better than their goals. Include both short and long term goals in this conversation. In addition to investment performance, you will also want to know their track record in terms of any disciplinary actions for unlawful or unethical actions in their professional career. If the advisor is registered with the United States Securities and Exchange Commission, then you can actually look up this information online
* Can I get it in writing? Once you feel comfortable with an advisor, ask them if you can have an agreement in writing that will detail the services that they will provide for you as well as the fees that you will be paying them for those services. Information in this document should include their investing strategies, specific benchmarks for performance, and suggested products to help get you there. And, always keep this document in your files for reference.
Regardless of how well your relationship is with your financial advisor, always keep in mind that it is you who is ultimately responsible for your money. You may not be at the helm making every trade, but you are responsible for ensuring that your advisor works in your best interests and that they handle your finances properly.
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‘Foundation’ stocks: ‘Prudent’ trio
Each month, we suggest a group of stocks that could help serve as a portfolio foundation. Here’s a look at Kraft Foods (KFT), Verizon Communications (VZ) and Waste Management (WM).
Kraft Foods is the world’s second largest food and beverage company, trailing only Nestlé.
With 51% of revenue derived outside of North America, Kraft materially altered its product portfolio and its capital structure earlier this year when it acquired control of Cadbury plc for $18 billion.
Despite the high price and associated acquisition- related risks, we believe Cadbury is a good strategic fit for Kraft which should accelerate growth and provide access to a number of developing international markets.
While many investors fear that weak consumer spending trends and rising raw material prices will pressure Kraft’s margins, we think the company has a good handle on how to manage through such an unfavorable environment, even if conditions weaken further.
Through ‘Six Sigma’ and various technology enhancements, the company is already emphasizing overhead cost reductions and improvements in productivity.
With a market cap of $55 billion and a dividend yield of 3.6%, Kraft is a dominant player and, we believe, a core holding in the Food, Beverage & Tobacco industry group.
Widely regarded as having one of the best networks in mobility, Verizon Communications offers wireless, broadband and wireline services throughout the United States.
Verizon is a perennial favorite of ours in the communications sector mostly because of its strong cash flow generation and pricing power, but also because it boasts the largest subscriber base and lowest churn rates.
We expect top-line growth to be driven by continual increases in wireless data services, especially now that Verizon can offer service on the cult-like iPhone, which your editor just picked up.
Just a few months ago, Verizon declared a 3% dividend increase despite the spinoff of cash-flow-generating properties.
Margins and revenues are strong, cash flows are booming, and there is no reason to suspect that the fat 5.3% dividend yield is in danger.
Moreover, the company has been cutting costs through staff reductions and in conjunction with landline divestitures.
A dominant player in the communications area, we view Verizon as a core holding and expect the next generation of wireless connectivity to boost margins through higher data-service usage.
It is oft said that one man’s junk is another man’s treasure. True or not, the owner of those green refuse trucks is the nation’s largest provider of collection, disposal, recycling and waste-to-energy services.
Waste Management (WM) has nearly a 30% market share and almost 40% of overall landfill capacity. The company’s revenue stream is well diversified both geographically and by business segment.
While WM continues to face headwinds from the slow-down in waste volumes from construction, the company has been able to drive increased profitability via favorable pricing and an efficient cost structure.
WM generated strong free cash flow ($1.2 billion) during 2010, which supports management’s continued efforts to return cash to shareholders in the form of dividends and share repurchases.
The company announced that it expects to pay $1.36 per share in dividends during 2011 and will allocate up to $575 million towards stock buybacks.
Considering the new dividend level, shares are trading with a current yield of 3.7%
Cree: Is It Lights Out for the LED Bellwether?
The trading action after the Cree pre-announcement seemed to suggest that a good number of investors had run out of patience, with more than 19 million shares traded on Wednesday when Cree shares fell by more than 12%, and notably, fell to a new 52-week low, below the $43 mark (Cree shares would finished the week at $44.85).
Just about a year ago, in the middle of April 2010, Cree shares were above the $80 mark. It’s been up and down, and then up and down again, since that year-ago high mark for Cree shares. Even before Wednesday, Cree shares took a big hit since its January earnings, when it first reported the excess inventory in the LED market. Cree shares had been as high as $72 in December 2010.
Top Funds for Your 2011 401k
Now to be certain, if 2011 is anything remotely close to 2010, we are going to see a lot more flux in equities. That said, I also suspect that we’re going to see more upside in stocks of all stripes — and that could turn out to be very good for the well-thought-out 401k portfolio.
So, what funds should you have exposure to as we ring out the old and begin the New Year?
Here are six of my favorite mutual funds and ETFs for 2011.
#1 – Vanguard Dividend Growth (VDIGX)
Large-cap dividend payers were underwhelming in 2010, and the stock picks of Vanguard Dividend Growth (MUTF: VDIGX) manager Don Kilbride were underwhelming as well. In fact, after a three-year run of strong outperformance, Kilbride has lagged for the last two. That said, Dividend Growth’s long-term performance remains well above its benchmark, and it’s always good to invest with a top-notch manager when they’re down because the rebound can be doubly strong.
The differences between this fund’s portfolio and that of most index funds focused on dividend-payers is that Kilbride has the flexibility to go overseas, and he’s done so, putting as much as 15% of the fund’s assets in foreign stocks (the current allocation is just over 6%). With domestic markets outperforming, it’s a good bet that some of Kilbride’s holdings got swept along in the current foreign market pessimism. More importantly though is the fact that Kilbride’s portfolio consists of fewer than 50 stocks. In other words, when Kilbride’s right on a stock or two, he’s going to be very right, and when wrong, which isn’t often, it’s going to hurt.
Some of the top holdings in VDIGX include corporate behemoths Automatic Data Processing (NASDAQ: ADP), Johnson & Johnson (NYSE: JNJ) and Medtronic, Inc. (NYSE: MDT).
I’ve got confidence that Kilbride and his analysts and colleagues at Wellington Management will begin to outperform again. Whether it comes in the next month or in several, this is one fund that meets many of my criteria for a winner, with a single manager, tight portfolio and strong track record and resources to back it up.
#2 – PRIMECAP Odyssey Aggressive Growth (POAGX)
The PRIMECAP Odyssey Aggressive Growth (MUTF: POAGX) invests in common stocks of companies expected to show rapid earnings growth. However, the managers don’t pay up for growth, preferring to identify companies where they feel a catalyst is in the offing, but hasn’t been reflected in current stock prices. I believe this fund is going to be a long-term winner (it’s my single largest personal holding) thanks to its management, led by Theo A. Kolokotrones, President and Co-Founder of PRIMECAP Management Company. The strength of the PRIMECAP team lies in their consistency, among other things. While they only outperform their index benchmarks about six of every 10 months, when they do outperform, they more than make up for months when they lag these same benchmarks. Periods of underperformance are perfect opportunities to add to holdings. Of course, if you’re a long-term investor like me, periods of outperformance are also great for adding to holdings.
Some of the fund’s top current holdings are in the biomedical sector, a market segment with tremendous earnings growth potential. The fund currently holds Crucell NV (NASDAQ: CRXL), Dendreon Corporation (NASDAQ: DNDN) and Cepheid (NASDAQ: CPHD), all high-profile biotech stocks with potentially huge earnings as well as huge upside. If you don’t have an aggressive growth component in your 401k component in 2011, then POAGX is definitely one to consider for 2011.
#3 – Fidelity Low-Priced Stock (FLPSX)
Manager Joel Tillinghast has rarely owned less than 800 names, and often he owns more than 1000. At last count, the Fidelity Low-Priced Stock (MUTF: FLPSX) held 907 stocks. Tillinghast buys stocks priced at $35 a share or less, which increases the likelihood of small- and mid capitalization investments in bull markets but can net him companies of virtually any size in bear markets.
Normally I’m wary of huge portfolios like Tillinghast’s, but his long-term track record—which reaches back to 1989’s market collapse and banking model meltdown—has been one of solid, consistent performance, particularly when markets and economies find a bottom and begin climbing out of a trough. And he’s built that record on his massively diversified portfolio.
The top holdings in FLPSX come from a variety of sectors, including health care services, consumer services and technology. Companies such as UnitedHealth Group Inc. (NYSE: UNH), Lincare Holdings Inc. (NASDAQ: LNCR), Oracle Corporation (NASDAQ: ORCL) and Safeway Inc. (NYSE: SWY) top the list of the diverse equity exposure in FLPSX.
#4 – Vanguard Emerging Markets ETF (VWO)
It’s risky, and volatile, but the emerging markets are the growth engines of the global economy. As such, a good 401(k) will contain some exposure to this dynamic market segment, and Vanguard Emerging Markets ETF (NYSE: VWO), which tracks the MSCI Emerging Markets Index, is a great way to get it.
The index this fund tracks has changed over the years with countries added and eliminated. Stocks in Brazil, China, India, South Korea and Taiwan represent more than 65% of the fund’s assets at present. And foreign “big-oil” is a major influence on the index, with major producers among the top holdings. In fact, this fund provides tremendous exposure to the energy business without having to invest in an energy sector fund.
Some of the biggest holdings in the fund read like a who’s who of emerging market corporate giants. Companies such as Brazilian mining firm Vale (NYSE: VALE), oil and exploration company Petroleo Brasileiro (NYSE: PBR), premier Asian telecom stock China Mobile Ltd. (NYSE: CHL) and Latin America wireless communications firm America Movil SAB de CV (NYSE: AMX).
Now, because VWO is an exchange-traded fund, you’ll have to use your brokerage option in your 401(k). Of course, I realize that not all plans offer a brokerage option. But the fund also has open-end shares, ticker VEIEX, which may be available in your plan and are fine to use as a substitute for the ETF shares, though they charge 0.50% front-end and 0.25% back-end “purchase” and “redemption” fees. Also, don’t overdo it on your emerging markets allocation. Many of the larger companies you already have in your portfolio have exposure to the emerging markets through their foreign sales and earnings. A 5% to 10% position here would be aggressive.
#5 – Vanguard International Growth Investor (VWIGX)
I always considered Vanguard International Growth Investor’s (MUTF: VWIGX) former lead manager Richard Foulkes one of the best of the breed among international investors. Since Foulkes retired almost five years ago, Virginie Maisonneuve has ably taken over Foulkes’ approximately 45% portion of this $15 billion portfolio.
The fund has three managers, with Baillie Gifford handling another 45% of assets and M&G Investment Management handling about 10% or so. What’s encouraging about the fact that there are three management teams on this portfolio is that it hasn’t exploded to hold hundreds of stocks—it currently has about 180 or so, including companies like Chinese Internet giant Baidu, Inc. (NASDAQ: BIDU), Israeli pharmaceutical company Teva Pharmaceutical Industries (NASDAQ: TEVA) and international consumer conglomerate Unilever Nv/Plc. The top 10 holdings make up about 17% of assets. That’s a good sign of manager conviction, and a whole lot better than buying into a foreign-stock index fund.
With growth stocks presenting some decent opportunities, this fund is a good option as a core foreign holding, particularly given its 25% stake in emerging markets. If international stocks prove to be big winners again in 2011, exposure to this well-managed, diversified international growth fund will be a key component to substantial 401(k) performance going forward.
#6 – Short-Term Investment Grade (VFSTX)
This is my favorite Vanguard fund at the short end of the yield curve. Formerly called Short-Term Corporate, it is extremely safe, produces steady returns, and offers some diversification away from plain-vanilla Treasury funds. Rather than investing only in Treasury, Agency or other government-backed securities, Short-Term Investment-Grade (MUTF: VFSTX) invests in high-quality corporate bonds, asset-backed bonds and a smattering of other non-Treasury securities. The combination responds to rising or falling interest rates less rapidly than Treasurys, meaning that it rises a bit slower when rates drop and falls a bit less when rates rise, since its excess yield protects investors and prices. Over time, a portfolio like this one will outperform a Treasury portfolio, as this one has.
I use this fund as a higher-yield cash substitute and would recommend it in that role for most any retirement portfolio invested for the long haul. Of critical importance from a portfolio diversification/safety standpoint is that while the fund can lose and has lost money in bond market routs, its short duration means it drops less than funds holding bonds of longer maturities and, because of rising yields in its portfolio, begins recouping its losses with larger income streams faster. When interest rates backed up from their recent Nov. 4 lows, Short-Term Investment-Grade lost just 1.3% (data is through 12/20) versus 3.0% for the overall bond market
Wednesday, March 2, 2011
Gold, the States, and Federal Monetary Policy
The Constitution prohibits states from coining money but allows them to make "gold and silver Coin a Tender in Payment of Debts." By prohibiting everything except "gold and silver Coin" the Constitution clearly considers gold and silver coinage to be legitimate, no matter who issues it.
States haven't issued currency in any form for more than a hundred years. So why now? Disgust is probably the answer. Various state legislators are disgusted by the federal government's promiscuous dollar-printing. Accordingly, legislators in a dozen states are contemplating legislation to issue gold or silver-based currencies, including Utah, South Carolina, Virginia and New Hampshire.
The transcript of the debates in the original Constitutional Convention shows that the attitude of the Founders toward paper money was one of contempt. One delegate, Roger Sherman, called for the insertion of an absolute prohibition against states issuing their own paper money.
Sherman's argument prevailed, as the Founder's decided that the states would not possess the power to "emit bills of credit, nor make any thing but gold and silver coin a tender in payment of debts" making these prohibitions absolute...
As for the federal government, the earliest drafts of the Constitution included language permitting the federal government to issue unbacked paper money. But this language would not survive the final draft.
Many of the Founders objected strongly to this power. The objections were summed up by delegate Oliver Ellsworth, who sought to "shut and bar the door against paper money."
"Paper money can in no case be necessary," Ellsworth argued, "The power [to issue it] may do harm, never good."
Since most of the Founders agreed, the federal government was also denied the power to issue non-convertible paper money. The federal government mostly operated within these constraints - the main exception being the Civil War, when saving the Union took precedence over all other considerations.
But for most of American history, dollars have been convertible into gold or silver. It is a 20th century innovation to have non-convertible currency. In 1932, FDR denied US citizens the right to convert their dollars into gold by US citizens. Then, in 1971, Richard Nixon denied foreign central banks the right to convert their dollars into gold.
On August 15, 1971, Nixon declared:
I have directed Secretary Connally to suspend temporarily the convertibility of the dollar into gold... Now, what is this action - which is very technical - what does it mean for you?
Let me lay to rest the bugaboo of what is called "devaluation."
If you want to buy a foreign car or take a trip abroad, market conditions may cause your dollar to buy slightly less. But if you are among the overwhelming majority of Americans who buy American-made products in America, your dollar will be worth just as much tomorrow as it is today. (Emphasis supplied.)
President Nixon called the suspension "temporary," but it has been anything but temporary...and the dollar has suffered as a result.
The dollar today is worth less than a quarter was worth in 1971. And yet, Washington has been curiously unresponsive to the suffering brought by Nixon's failed promise. Why? Because Washington, itself, has been a primary beneficiary of monetary depreciation.
The federal government spent $15 billion from 1789-1900. Not $15 billion a year. $15 billion cumulatively. Uncle Sam will spend $10 billion per day in 2011. The federal government spends more every two days than it did altogether for more than America's first century. Although these sums are not adjusted for inflation, they give a correct impression of the magnitude of the change from what our Founders set forth and our early statesmen delivered.
How does Washington get its hands on so much money? Three ways. Taxation, borrowing and printing dollars. The third mechanism is usually the easiest road...at least for a while. Almost no one complains about printing dollars because almost no one feels the resulting consequences directly or immediately.
The power to print money at whim is wrong. It is toxic to our personal and national wellbeing. And it is unconstitutional.
No wonder that legislators in twelve states are considering issuing their own gold-based currencies. By doing so, these states are challenging the federal abuse of an unconstitutional power - challenging the issuance of unhinged paper money.
Federal officials should take these state initiatives as a cue. Federal officials have sworn to preserve, protect and defend the Constitution of the United States. Let them take their oath seriously and restore the convertibility of dollars to gold.