Attention! by Brian Nelson, CFA
We need your attention!
The markets have had quite a run from the March 2009 depths of the Great Recession, and we need you today more than ever to apply your faculties to your investments. Though we highlighted the coming contraction in earnings multiples (stock prices) December 24, if you missed that warning, there is no point in our being happy (Here’s the note: /20131224_1).
Remember, we only do well when you do well—our interests are tied 100% given our members-only business model. In light of recent emerging market fears, if you’re not already visiting our website more frequently and/or following us on Twitter (if you have an account) for real-time updates (@Valuentum), we encourage you to do so. We’re on high-alert at the moment, especially in light of recent emerging-market fears stemming from the collapse of the Argentine peso, unexpected rate hikes in South Africa (pressuring the rand), and currency weakness in Turkey.
The recent slide in the market was expected, and we don’t think you should over-react. However, a retracement of the S&P 500 to 1,680 wouldn’t be unusual, even though it would represent another 5.7% decline from Friday’s close. The 10-year average of the S&P 500 earnings multiple is about 14, and this measure applied to the forward-year expected earnings of $120 implies a very reasonable 1,680 forecast. Many optimistic pundits are expecting a move to 2,000 by the end of the year, but we’re preparing for another leg down in the equity markets. You should be on the look-out.
Though the Best Ideas portfolio (housed in the Best Ideas Newsletter, released on the 15th of each month) is very well-positioned given its 25% cash balance, we think we are also well-positioned in the Dividend Growth portfolio (see page 5) with a near-13% cash balance. The Dividend Growth portfolio is focused on high-quality, cash-rich dividend growth gems with strong balance sheets and resilient business models, positioning it well for upside potential but also cushioning it against downside risks.
Though we don’t think investors should over-react in any way, we do think paying closer attention to your investments as uncertainty begins to elevate is warranted. We encourage you to visit our website more frequently (the recent articles section is down the middle of our home page) and to reach out to me with any questions you may have. My direct email is brian@valuentum.com.
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INSIDE THIS ISSUE
1 Attention!
2 Financial Analysis 101: Understanding How Dividends Impact Valuation
5 Our Dividend Growth Portfolio
9 Valuentum’s Dividend Growth Portfolio Gems Shine Bright (tickers: MSFT, PG)
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 GE’s Fourth Quarter Results Were Excellent (ticker: GE)
14 Chevron’s Balance Sheet Slowly Losing Luster (ticker: CVX)
15 Intel Reveals Stabilizing PC Demand (ticker: INTC)
16 Johnson & Johnson Registers Strong 4Q Performance; 2014 Outlook Conservative (ticker: JNJ)
17 5 Steps to Understand Why Apple is Cheap (ticker: AAPL)
18 Surveying Fourth Quarter Earnings at Health Care Firms (see article for tickers)
19 About Our Dividend Cushion™
22 Featured Reports: PG, JNJ, AAPL, EMR
26 Our Valuentum Buying Index
29 Valuentum Definitions