Displaying items by tag: stocks

(New York)

While markets have been doing a little better of late, investors may be looking for safe stocks that could perform well. Well, if that is the case, look no further than three old-time consumer goods companies that look ripe for outperformance. Coca-cola, PepsiCo, and P&G all look set to thrive and are available at a bargain. On the back of a slew of industry factors, consumer goods stocks are down by over 12% this year. However, the three stocks mentioned are solid dividend producers and seem likely to provide strong earnings growth, making a 10% total return for the year look likely.

FINSUM: 4% dividend yields with good top-line revenue growth for rock solid stocks seems like a pretty attractive proposition to us.

(New York)

One of the pioneers of smart beta investing has just gone on the record tearing down the concept. A long time quant strategist, Vincent Deluard, who helped build early smart beta funds, has lost faith in the strategy as he has seen fund providers use statistics to disingenuously prove all manner of strategies using selective back-testing. Deluard even built model portfolios to show how “dumb” constructions could lead to good results, and “smart” constructions could lead to poor results.

FINSUM: We don’t think smart beta is necessarily “smart” or “dumb”. In the end, these are really just strategies that are only as “good” as the market circumstances they are applied to. Smart and dumb is ultimately about the buyer of the funds.

(New York)

Morgan Stanley has just put out a very bold prediction. The investment bank has picked a stock which it says will have a $1 tn market cap within a year. That stock is Microsoft. The stock current has a cap of around $740 bn and has risen more than 40% in the last year. But the big catalyst for a move higher is the success of its cloud computing division, Azure. Morgan Stanley summarizes its view this way, saying “Revenue drivers including Azure (Microsoft emerging as a public cloud winner), data center (share gains and positive pricing trends), Office 365 (base growth and per user pricing lift) and the integration of LinkedIn should drive durable double-digit revenue growth over the next three years”.

FINSUM: While bullish, this does not seem at all unlikely.

(New York)

Investors beware. US equity prices now seem to be entirely at the mercy of bond yields. Stocks have consistently struggled as yields have moved higher, and today Treasury yields seem to have broken an important threshold. Treasuries traded as high as 3.13% this morning, the highest level in seven years. Stock markets unsurprisingly fell. The markets were initially spooked by a solid US retail sales report that seemed to indicate the Fed might hike more aggressively than expected.

FINSUM: Yields definitely seem to have a strongly upward trend at the moment and have definitively broken out of that 2.9% band they had been locked in for a few weeks. Next stop 3.50%?

(New York)

Stock markets are moving sideways, bond yields are shooting higher, and there is a great deal of uncertainty about the direction of the economy. Investors are understandably nervous. With that in mind, Barron’s has published a piece outlining the best places to park your or your clients’ cash. The answer is short-term bond funds, which are almost all yielding over 2% and have significant insulation from losses related to rate rises. For instance, the Vanguard Short term bond fund is yielding 2.76% and has only lost less than 1% this year despite rises in yields. ETFs that track floating rate bonds are also a good idea given the environment. For example, the iShares Floating Rate Bond (FLOT), which yields 2.21%.

FINSUM: Short-term bond yields are finally significantly higher than equity yields, which means there is at last a good, and likely less risky, alternative to stocks.