Top Advisors Corner

Mary Ellen McGonagle: Who Says Yield Stocks Are Out of Favor?

The biggest winners over the last week have offered abundant yields as well as high returns.

It’s been an exciting time to be in the markets over the last week or so.  After 3 months of sideways angst, the markets have sprung into action as investors have been jolted by the reality of a having new sheriff in town next year. The one party sweep in the elections brings fiscal and regulatory change that is being widely celebrated as many stocks have catapulted to impressive gains.

Not all groups have participated equally however as high yielding and more defensive Consumer Staples and Utility stocks have suffered the most.  Instead, investors have embraced Industrial and Material stocks with an eye toward fresh spending on infrastructure projects. Defense stocks also jumped as increased spending there has been hinted at.

The biggest winners of course have been in the Financial sector (up 11%) and the reasons are many.  To start, we have a Federal Reserve that is almost certain to raise rates next month.  Higher rates are a positive for banks and insurance companies as increased rates improve profit margins on both fixed income investing as well as corporate lending.  The next area of Finance to benefit are the Brokerage stocks as the newly robust market will bring more trading back to the equity markets. Whether retail or institutional, these increased trading volumes will bring profits.  Asset Management stocks have also seen huge gains as renewed interest in a formerly lackluster market is making these companies interesting again.

In addition to having charts that show clear-cut uptrends, stocks in these groups offer dividends. And in some cases, these dividends are healthy.  Take Arlington Asset Inv Corp. (AI). This Smaller Cap investor in Mortgage Backed securities is up 10% since the election and the stock also boasts a 15.7% yield.  Larger Cap Waddell & Reed (WDR) is up over 12% as it tries to reverse a multiyear downtrend. And while the stock still has work to do, the 9.4% yield may give investors patience. A more attractive alternative is New York based Apollo Global Mgmt. (APO) which is breaking out of a 4 month base after posting a 6.5% gain and offering a 6.5% dividend. (see below)

The Industrial Sector’s Aerospace & Defense stocks offer more modest yields but most of the names in this group average around 2%.  The same can be said for other infrastructure related stocks such as those in the Heavy Machinery area. 

The fact that the 3 best performing Sectors also pay dividends is quite a bonus for investors.  As always, you’ll want to seek out the leadership names in these groups as not only will you get yield, you’ll be sure and outpace the markets in total returns as well.

 

Mary Ellen McGonagle

MEM Investment Research

www.MEMinvestmentResearch.com

WEEKLY CHART OF ONE OF MANY HIGH YIELDING FINANCIAL STOCKS

 

Gene Inger: The Inger Letter November 11, 2016

Financial transmission - is creating velocity all over the place now. It's a totally bifurcated market; with the much-touted pundit FANG stocks of course really getting clocked (they were hiding places to hold Averages up in the long-running distribution); while long-downtrodden Industrials have sprung to life. Most of this is happening beyond the optimism you all know we'd suspected in-event of a Trump victory; and it's primarily because money is and will be flowing-in like mad. Couldn't know how it would unfold; but sniffed-that the media (part of the establishment) was not correct in presumptions. You could tell it in their Election night tone.

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Tom McClellan: My Final 2016 Poll Analysis

Since the 2000 election, I have been tracking how the presidential election poll numbers follow in the footsteps of the stock market, with the key insight that we can gauge how the popular vote is likely to turn out based on how the stock market was moving the week before the election.  It is on that basis that I am now predicting that a Trump victory is likely next week

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Alan Newman: Crosscurrents - November 3, 2016

Healthcare Cost Dilemma

The most recent numbers show healthcare costs have climbed to 17.5% of our GDP, better than one dollar of every six.  By the way, Happy Halloween—the snapshot at center is quite frightening.  While this picture represents only unsubsidized health insurance premiums, the math surrounding health care costs in an aging society is truly scary.  Consider that over the last year, the medical component for the CPI is up 4.8%.  The National Health Expenditure (NHW) fact sheet (see http://go.cms.gov/1O1cWhR) claims “For 2015-25, health spending is projected to grow at an average rate of 5.8 percent per year….projected to grow 1.3 percentage points faster than GDP….as a result, the health share of GDP is expected to rise….to 20.1 percent by 2025.”  there’s no way consumers will be able to hide.  Healthcare already presents an incredible obstacle for those who live in the real world, unfettered by the government’s statistics.  It’s going to get much worse.     

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Gene Inger: The Inger Letter November 3, 2016

Defensive stances across the Board - remain appropriate for investor portfolio structures, as tough as that is for the impatient eager to get into the game anew and given year-end strategies often contemplated about this time of year. Our multi-month historic, unprecedented uncertainties confronting markets, persist; as that matters. (Holding a home-run Dec. S&P short-sale guideline from 2167 without a stop, makes this point.)

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Mary Ellen McGonagle: Looking For Bright Spots in a Bleak Market

With six of the nine S&P Sectors trading below key support, it’s easy to be concerned about the near term prospects for the markets.  The upcoming election as well as an impending rise of interest rates has wreaked havoc on investor’s confidence as money continues to flow out of U.S. Equity markets and into Bond funds (Per Lipper U.S. Fund Flows). 

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Tom McClellan: Gold's 13-1/2 Month Cycle Low

 Gold was supposed to see a 13-1/2 month cycle low ideally due in October 2016, and that low appears to have arrived right on schedule.  In past cycles, the actual price low can arrive +/- a month from the ideal date, and still be considered to be “on time”.  So while it is not certain yet that the cycle bottom for sure is in, things are looking pretty good in that respect at the moment. 

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Mary Ellen McGonagle: TWO STOCKS THAT SHOULD BENEFIT MOST FROM RECENT STRENGTH IN RETAIL SALES.

It’s been a tough year for Retail stocks as consumers continue to shift their spending habits. (see Retail ETF below).  While department store sales endure declining sales in the face of increasing internet sales, an even larger shift is taking place as more and more discretionary income is going toward “experiences” rather than the latest designer purse or extra pair of pricey jeans.

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