Saturday, July 24, 2010

"Not too large, Not too small, Just right" a Goldilocks and the Three Bears variation and why Mid-Cap stocks are just right to add growth to your IRA

Dow Jones 10424.62 (UP) Week ending July 23rd, 2010

Just like Goldilocks is conflicted about what decisions to make when she strays into the foreign place of the Three bears house in the woods, many people are not sure what decisions to make with their allocations in 401K or IRA accounts for retirement. One thing I would make sure is that you have a good dose of Mid-Cap mutual funds or stocks. Mid-Cap stocks are companies with a market capitalization generally between $2 and $10 billion dollars. I would say as much as 30-35% of the stock allocation in your IRA should be devoted to Mid-Cap. (I would not even have bonds in your portfolio until you are 50 years old, you need capital growth to retire!).

So unless you are like Winnie the Pooh and have an endless Honey Pot out in Hundred Acre Wood to keep you going in retirement, (don't get stuck in the rabbit's door), then you should probably jot down some of these names. I would look to buy into these stocks as they have small corrections, since they are all doing pretty well here, so buy them with a margin of safety built in.

Roper Industries Inc. (symbol ROP, $62.01)
is a good steady growing company. 5 year revenue growth of 12.67% and earnings growth of 14.05%. Well managed and well liked on Wall Street, it has a 12 month Total Return of 30.4%.


The second Mid-Cap to bolster your IRA growth is Mead Johnson Nutrition Co.(Symbol MJN, $54.55). This spin-off from Bristol-Myers Squibb has had quite a year with a 12 month Total return of 52.2% and is digesting a little of that here. Earnings for 2011 are projecting $2.72 per share. Long term earnings growth is projected at 9.3%. People will continue to buy their baby formula with their great brand recognition with the product Enfamil.

Dr Pepper Snapple Group Inc. (Symbol DPS, $39.82) is another familiar brand to most people. This company has a 12 month total return of 64%. A bonus 2.5% dividend yield adds to the pot. $2.79 a share earnings for 2011 and 9% long term earnings growth makes this pick probably the one to buy first.

Fidelity National Information Services Inc. (Symbol FIS, $28.10) is projecting 2011 earnings per share of $2.37. This Jacksonville, Florida company has earnings growth projected at 13.17% FIS Inc.'s (FIS) second-quarter earnings jumped 52% following last year's acquisition of Metavante. The provider of payment-and bank-processing services closed the $2.9 billion deal in October. It gave FIS a bigger presence in the financial information-technology market. This company has a solid balance sheet and should do well going forward.

So have a Goldilocks retirement and "Be a Pepper" and deploy some quality Mid-Cap stocks or mutual funds in your 401K.

Stay Cool (99 degrees today)

Freewilly

Saturday, July 17, 2010

"All you can do after that ugly wreck of a week on Wall Street is have a drink and a cigarette"

Dow Jones 10097.90 (Down and ugly) Week ending 07-16-2010

What an ugly end of the trading week on Friday down an ugly 261.41 points on the DJIA. Maybe capitulation could be around the corner next week as retail traders throw in the towel in disgust. Well if your like me and need to make money in bad and good markets, it may be time to look at the tobacco stocks. With unemployment still rolling along at 9.5 to 17% depending on if you count the fall offs, Tobacco and liquor stocks should be performing just find and pay you a dividend to boot.


The first stock in the group I would look at is Reynolds American Inc (symbol RAI, $55.17). This stock has a dividend of 6.53% and earnings that are growing at 6% a year. The 12 month total return on the stock is 35%. The industry revenues are going flat to down a little but it is still a very profitable business.

The next stock I would take a look at is Philip Morris International Inc.(Symbol PM , $49.67). This company pays a 4.67% dividend yield. This company operates at 25.30% net profit margins and is growing at 10% a year. People are going to smoke and drink and swear, just like they always have.

Of course we can never forget about Wall street's forever darling Altria Group Inc. (Symbol MO, $21,26). "MO" has a 6.59% dividend yield and a one year and 3 year Total return of 29%. I will take that number in this trading environment, no problem! With $2.00 a share earnings in 2011 the stock is just flat-out cheap here.

So buy and hold these stocks till unemployment gets down to 4% and enjoy the dividend.

Please comment. I will answer questions on any stock subject. Just throw it out there for the readers. All ideas are accepted here.

Freewilly

Friday, July 9, 2010

It's all about turning the corner and surging forward out of the slipstream ..... just like in Le Tour de France "

Dow Jones 10,198 (UP) week ending July 9th

Sorry I missed you all last Saturday. Sometimes there are more important things in the world going on than the stock market. No not the World Cup!

Of course I am speaking of
the beginning of the 21 stages of Le Tour De France beginning on July 3rd, which is also my vacation week.

I love the ebb and flow of the race with the sprinters taking charge in the flat lands, (Mark Cavendish with HTC - Columbia pictured winning back to back Stages 5 & 6) and now swinging towards the Alps where Alberto Contador of Astana and Lance Armstrong of Radio Shack hit their best paces. Just like in the stock market different teams lead the Peloton, then out from behind a team bunched together at the front comes a sprinter to turn the corner and surge forward with a burst of speed to the finish line.

So what sprinters are going to break away from the pack in this Stage and turn of the corner in the stock market?

Google, Inc. (Symbol GOOG, $467.46) . It is time for this great leader to step it up and show it's paces. The stock is cheap here. Projecting earnings of $24.82 a share this year and $28.69 next year (PE 16). This company has a 5 year sales growth rate of 42.43% and a 5 year earnings growth rate 43.57%. What gives it the catalyst to surge into the slipstream? Issues in China are starting to settle out a bit here, so there is no longer anything holding it back.

It is also time for my "lead-pipe" cinch stock pick of the year from earlier, Monsanto Co. (Symbol MON, $51.21) to finally surge ahead here. I thought for a minute that people had stopped eating or something crazy like that. The stock has a 12 month total return of -41.9%. But I think we hit the down hill race here and Monsanto surges back into the 60'S. Growth in earnings will be the catalyst that brings this quality company stock higher.

I did take my copy of Barron's on vacation with me and found you a cheap stock to buy while I sipped a frosted mug of ice cold Yuengling Traditional Lager amber beer (privately owned co.) and that stock is Goodyear Tire & Rubber Co. (symbol GT, $10.89). Earnings are surging from .23 cents a share this year to $1.55 per share next year.

So keep the rubber to the pavement with Goodyear and Le Tour De France and catch the next single good stocks that are moving to the front for a win!

Go Lance Armstrong and the Radio Shack team.

Freewilly