When to Move From High-Fliers to High Quality Stocks

Seeking Alpha just published an article of mine with the above title. Please read it here.

New Seeking Alpha Article on Best Buy

I posted an exclusive article on Seeking Alpha making a case for investing in Best Buy, for instance by selling put options. You can read my article here.

Exclusive Articles on Seeking Alpha

Dear readers,

From now on some of my articles will be published exclusively at Seeking Alpha. I wrote an article called Two Short Ideas for Bearish Investors, which was published there yesterday.

If you are interested in following me on Seeking Alpha, you can do so here. Registration for the web site is free.

Call and Put Selling – A Follow-Up

As promised, I am revisiting some put and calls sales I wrote about in October 2009 and May 2010. In October 2009, I advocated selling covered calls on stocks to take advantage of a market that had risen substantially in a short amount of time – little did I know that it had far higher to go. After a strong pullback in May 2010, I suggested writing puts to take advantage of a weaker market and higher implied volatilities (higher prices, in other words) in options.

Before looking at the results, note that there was nothing particularly clever about the selection of stocks (the 12 largest stocks in the U.S. by market capitalization at the time the first article was written) or the timing (I suggested selling calls after a significant increase in the market and selling puts after a significant decrease). The following chart shows that I was not nailing any tops or bottoms.

Investing for Income in 2011 with Stocks and Options – Part 3: High-Yield Stocks

A discussion about investing for income would be incomplete without looking at stocks with high dividend yields. To screen for good candidates, the following criteria were used:

* Current dividend yield over 4%.

* Growth rate of dividends over 3% in the last five years.

* Low or medium fair value uncertainty (as determined by Morningstar’s analysts).

I eliminated from the list healthcare companies (since I wrote about them recently), financials (due to lack of transparency and risks that are not easily quantified) and limited partnerships (due to tax issues that can complicate the picture). That does not mean that I think companies in these categories are ill suited for income investing – only that I wanted to avoid them in this article for the sake of simplicity. Perhaps I will address them later in a separate article. The list of candidates was further trimmed down to what I subjectively consider the best opportunities.

Investing for Income in 2011 with Stocks and Options – Part 2

While some tech companies have been on fire this year, sporting valuations and price action reminiscent of the tech bubble, the older tech giants have grown into their valuations and many look like good investments at current prices. Here is a look at forward P/E ratios and dividend yields for a group I call Value Tech:

Investing for Income in 2011 with Stocks and Options – Part 1

Generating a decent rate of return on an investment portfolio, while not taking too much risk, is challenging in a low interest rate environment. The standard safe investment — longer term Treasury bonds – currently offers a low rate of return with plenty of risk as demonstrated by recent market action. High-quality stocks, some with dividends yielding more than the bonds, generally seem to offer much better value.

Turbocharging a Position in Apple

Apple Inc. (AAPL) is hardly a well kept secret – it is one of the most widely followed and admired companies in the world. And for good reason. Consumers can’t get enough of Apple’s products and revenues and profits maintain breakneck growth year after year. But for some reason, Apple’s stock market value reflects a company whose growth will hit a wall in the next couple of years. It may come as a surprise to some, but Apple’s earnings have risen even faster than its stock price. For a nice graphical presentation, see this article.

Lessons not learned – The Federal Reserve inflates asset prices to stimulate the economy

Last week, Fed Chairman Ben Bernanke and Treasury Secretary Tim Geithner seem to have made a wager: who could erode his credibility more quickly. I am calling it a tie. However, it is more serious in Bernanke’s case, as his words and actions have significant consequences.

Usually a press release from the Fed is considered sufficient to explain its actions. But following the Fed’s announcement on Wednesday of the widely anticipated QE2, the second round of quantitative easing — a massive plan to buy government bonds — Bernanke wrote an article in the Washington Post. After patting the Fed on the back for its “strong and creative measures to help stabilize the financial system and the economy,” Bernanke goes on to explain the thinking behind QE2. 

Tech in your portfolio – out with the new, in with the old

The old tech bellweathers of the 1990s failed to meet the unrealistic expectations investors had of them. The stocks have fared poorly since the market peaked in 2000, but revenues and earnings have generally grown reasonably well. The result is that these stocks, so overpriced a decade ago, can now be considered value stocks. In addition to having low P/E ratios and decent growth, most of these companies have strong balance sheets with plenty of cash.