Thursday, March 24, 2011

3 "Paid to Wait" Stocks Other Value Managers Like

I have opined in the past that there are only a select few "value driven" money managers that I respect for their skill and have a good track record over complete market cycles. One such fund is the Jensen Fund (JENSX). 

Health-care stocks barely budged last year as worry over legislation kept them from joining the broader equity-market rally. Robert Zagunis, manager of the Jensen Fund, says this year will be different, especially for companies such as:

  1. Medtronic(MDT)
  2. Abbott Labs(ABT)
  3. Stryker(SYK).
I agree with Robert's conclusion. Medtronic was purchased in 2010 in our portfolios, with Abbott and Stryker added the first week of January 2011. All three of the above mentioned stocks qualify as WFG Paid to Wait stocks and are owned in our privately managed accounts and our no load mutual fund.

Tuesday, March 15, 2011

Paid to Wait Stocks Shine in Market Sell Off

All of the major U.S. stock averages are now on pace to close at new lows after all peaking on February 18th. Leading the way on the downside are the Nasdaq and Russell 2000, which are both down more than 5% from their highs.

Source: Bespoke Group. Data as of 3/14/11.

WFG is overweight high quality Paid to Wait stocks, underweight small company Russell 1000 stocks entering 2011 and short Russell 1000 stocks in our mutual fund.

Wednesday, March 09, 2011

200 Years Later and Still No Wiser

More than two centuries ago, Adam Smith warned of the dangers of having financial institutions that were "Too Big To Fail." The paragraph below was taken out of a recent Barron's article:

Adam Smith discussed at length the 1772 collapse of the Ayr Bank in Scotland, which ended up costing the Duke of Buccleuch and other investors. It was laid low by "chimerical projectors…who would employ money in extravagant undertakings, which, withal the assistance given them, they would probably never be able to complete." It was important, Smith claimed, to limit the size of enterprises so that one bank failure wouldn't incinerate the entire financial system.

Does the above look familiar to you? Unfortunately, even after our most recent experience with the 2008 financial collapse, lessons still have not been learned. Wells Fargo, JP Morgan, Bank of America and Citi Bank are four major banks that got bigger, not smaller.

Even worse, now more than ever the housing markets are relying on Fannie Mae and Freddie Mac to help finance mortgages--two companies standing at death's door with outstretched hands asking for donations from the taxpayer.

We have come out of the 2008 crisis with even more financial institutions that are Too Big to Fail. What will the next round of profits and greed bring when the cycle turns down? More pain, not less, we suspect.

Tuesday, March 08, 2011

Uncle Sam's Growing Bill

In the most recent newsletter from Grant's, it was projected that net interest expense (payments less income) for Uncle Sam would be $658 billion at a rate of 5.8%. The average maturity of debt issued by the treasury is five years. This means that by 2016, the U.S. government would need to refinance the majority of its debt. If net interest costs went up by 1%, the annual interest payment goes up by $151 billion. If rates were to hit the highs seen in the early 80s, net interest payments would be $1.49 trillion. Notice that is a T for trillion.

Are we worried about the government deficits and the road the U.S. economy is headed towards? You bet we are. Economic risks are very elevated right now, and it is not the time to be aggressive. We believe that patience that will pay off in the long run.

Wednesday, March 02, 2011

Doug Kass Agrees With Jerry Wade-Be A Contrarian "It Ain't a Popularity Contest"

Doug Kass is one of the few financial experts that gets quite a bit of media airtime that:

  1. Knows what he is talking about.

  2. Has been right much more than wrong with his market forecasts.
Click the blog title above for an excellent article just penned by Doug at