Don’t Be Lulled to Sleep by Brian Nelson, CFA
When everything seems to be going your way in the stock market, it’s always best to make sure you’ve got your bases covered, as fortunes in this business can change on a dime.
As we continue to significantly exceed the goals of our Dividend Growth portfolio(*), we continue to be cognizant of the Big Three: Syria, a new Fed chief, and the looming debt ceiling. For a deeper read on these three headline dynamics that could send the market into a tailspin for the remainder of the year, please click the following link (login required):
We’re not saying that the back half of 2013 will be tough for investors, but with the market largely trading in line with its 10-year average on a forward price-to-earnings ratio and our Valuentum Buying Index distribution highlighting more stocks at risk than bargains, we think some prudence is in order.
The geopolitical tensions in Syria remain top of mind with respect to the trajectory of the price of crude oil, while a change of the guard at the Federal Reserve could make things a bit more challenging for asset-allocation decisions. Though we do not believe the US can ever really default of its debt (regardless of what the credit rating agencies define as a technical default), the rehashing of the debt ceiling debate adds yet another degree of uncertainty to the capital markets. In general, the greater the uncertainty, the lower the valuations assigned to equities (more uncertainty–>higher discount rate–>lower stock valuations). And at the present, we’re looking at a market that no longer is undervalued.
So what are we doing now? First, we’re not panicking. We’ve seen all three of these dynamics before. But we love our high-teens cash position, and we’re holding strong with the existing constituents in our Dividend Growth portfolio (see page 5). Still, we would not be surprised if the market does give back some of its hefty gains that it has racked up this year. In any case, we’re laser focused on what we’re here to do: achieve our portfolio’s goals.
We hope you enjoy this edition of our Dividend Growth Newsletter.
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INSIDE THIS ISSUE
1 Don’t Be Lulled to Sleep
2 Verizon Making a Bold Leap (tickers: VZ, VOD)
3 Ballmer to Leave Microsoft; Market Cheers (ticker: MSFT)
4 Icahn Reignites Apple (ticker: AAPL)
5 Our Dividend Growth Portfolio
7 Was Cisco’s Fiscal Year 2014 Guidance a Red Flag? (ticker: CSCO)
9 The Market Fully Appreciates Seadrill’s Execution (ticker: SDRL)
10 Stocks with High VBI Ratings and Strong Dividend Growth Prospects (see article for tickers)
11 Our Dividend Growth Watch List
12 Yields to Avoid
13 Guidance Drives Slump at HP (ticker: HPQ)
14 Foot Locker’s Revenue Growth Slows; Will Hicks Leave? (ticker: FL)
17 Best Buy’s Comparable Sales Decline Moderate (ticker: BBY)
20 About Our Dividend Cushion™
23 Featured Reports: General Dynamics, Baxter, Western Union, Hillenbrand
27 Our Valuentum Buying Index
30 Valuentum Definitions