Monday, November 30, 2009

ShareBuilder: 20% OFF Real-time Trades - Today Only!

Here's a Cyber Monday shopping deal for all you customers of ING ShareBuilder - 20% commission rebate on all Real-time Trades that execute on Monday, November 30.ING Sharebuilder promo clock

You can make as many real-time trades as you want and get 20% off on each $9.95 commission.

Just add the promotion code CM2009 to one of your eligible accounts to get 20% off.

Details of the deal.

  • To qualify for your discount, you must enter promotion code CM2009 into one of your eligible ShareBuilder accounts by market close (4pm ET) November 30, 2009.

  • 20% Rebate applies to $9.95 Real-time commissions only.

  • Rebate excludes Mutual Fund trades and Options trades and any other additional services and charges beyond base commissions, including but not limited to the large order surcharge, express funding and other fees.

  • Only Individual, Joint and Custodial accounts are eligible for this offer.

  • The rebate will be credited to qualifying accounts approximately 2 to 4 weeks following the close of the promotion.

click here for full details.

Friday, November 27, 2009

SELL ALERT: 3 Stocks to Ditch While You Can?

Here's a head's up for anyone holding these stocks - Fair Isaac, Boyd Gaming and Great Atlantic & Pacific Tea Company (A&P). A recent SmartMoney article has hilighted these 3 stocks as having garnered more "sell" recommendations than "buys" in recent weeks.

Fair Isaac (FICO)
Fair Isaac’s performance is dependent upon consumers using credit, and spending money. Since the recession struck in 2008, consumers have done little spending and even less borrowing.

Boyd Gaming (BYD)
Boyd Gaming owns Casinos in big gambling towns like Vegas and Atlantic City. The company has a high debt load, and people aren't flocking to Vegas (its largest market) like they did two years ago. Sales fell 14% last year and are expected to fall another 7% this year which make repaying that debt a long road.

Great Atlantic & Pacific Tea Company (GAP)
A.K.A. the grocer A&P. While the company hasn't turned a profit in more than 2 years, and halted its dividend in 2000 the stock price has more than doubled since the summer. The reason appears to be speculation of a potential merger. Merger talks seem to be fading fast, and there's not much else to recommend this stock.

Tuesday, November 24, 2009

Investing Term Tuesday: Champagne Stock.

Champagne Stock is slang for a stock that has appreciated dramatically.

Champagne stocks make shareholders a great deal of money, usually relatively quickly. Champagne stocks are also commonly part of an industry or sector that is experiencing a bubble.

This term derives its meaning from the habit of individuals who hold such stocks to celebrate their good fortune by ordering an expensive bottle of champagne.

Thursday, November 19, 2009

Best Funds To Invest In Now.

These are peculiar times we find ourselves in. Here's a list of funds from Kiplinger that not only cover just about every bogeyman bandied about in the financial press these days, but hit upon some classic needs in a mutual fund as well.

Inflation protection

Sooner or later, the reckless monetary policy in Washington D.C. is going to catch up with us, and it will likely result in much higher inflation than we've seen in recent times. To combat that threat to your wealth, you may want to look into Fidelity Strategic Real Return (FSRRX). This fund holds a mix of 30% inflation indexed government bonds, 25% commodities, 20% real estate, and 25% floating rate loans. Diversification should provide for a smoother ride, and each asset type benefits from rising prices.

Net Asset Value (NAV):8.40
Yield: 2.58%
YTD Return: 22.12%
5y Avg Return: N/A
Rank in Category (ytd): 122
% Rank in Category (ytd): 18.86%
Beta (3y): 0.88
Morningstar Risk Rating: Above average

Benefit from a recovery

Eventually, the economy is bound to recover, and when it does you'll want to be in the T. Rowe Price Mid-Cap Growth (RPMGX), or so the staff at Kiplinger say. The manager of this fund focuses on fast growing companies, with high returns on investment capital. Small and mid-cap stocks typically lead out of a recession anyway, so this seems like a good choice for a recovery fund. It's a bit expensive however, with an NAV of 46.06.

yield: N/A
YTD Return: 38.69%
5y Avg Return: 6.27%
Rank in Category (ytd): 204
% Rank in Category (ytd): 23.94%
Beta (3y): 1.11
Morningstar Risk Rating: Average

Benefit from the falling dollar.

The Merk Hard Currency Inv (MERKX) fund seeks to profit form a declining dollar by investing in gold and money market securities, denominated in foreign currencies. The fund does not appear to have a Morningstar rating, and the ratio of investments in currency to gold is not readily apparent, so be sure to read the prospectus on this one carefully before you invest.

yield: N/A
YTD Return: 12.69%
5y Avg Return: N/A
Rank in Category (ytd): 0
% Rank in Category (ytd): 0%
Beta (3y): -0.70
Morningstar Risk Rating: None.

Best new fund.

Kiplinger's pick for best new fund is the Third Avenue Focused Credit Investor (TFCVX) fund. Their reason seems to be that the fund sponsor, Third Avenue, seldom launches new funds so it must be good! I'm not sure that's enough for me to invest in a fund, but it does seem interesting enough to examine further.

Third Avenue Focused Credit Investor focuses on junk debt, specifically convertible bonds and distressed securities. Need I say that these are risky investments? Still, much of the risk may be wrung out of them since the toxic asset debacle of 2008. You'll have to do your own gut check on this one, as well as your own research because there isn't a lot of information or history out there for this fund yet.

Low minimum required investment.

Most mutual funds require minimum investment amounts that put the fund out of reach for the small investor, especially one just starting out. But some funds pride themselves on keeping a low minimum. Kiplinger rates their best low minimum fund pick for 2009 to be the same as last year: Amana Trust Growth (AMAGX) fund. The minimum investment is $250, and the fund focuses on large cap growth companies. While the managers choose their investments using Muslim principles as a guide, the fund is open to all investors.

It's interesting to not that Morningstar gives this fund a below average rating. Keep in mind that the average here is among all large cap growth funds, not just low minimum funds.

NAV: 20.66
yield: N/A
YTD Return: 22.28%
5y Avg Return: 8.93%
Rank in Category (ytd): 1280
% Rank in Category (ytd): 70.95%
Beta (3y): 0.75
Morningstar Risk Rating: Below average

Tuesday, November 17, 2009

Best ETF's For...

Kiplinger has released their annual "best of" edition, where they rate the best of just about everything. One of the categories is ETF's. I thought I'd share the picks, and some thoughts on them here, but you should check out the complete issue if you get a chance.

Best ETF for Income.

Kiplinger's pick for best Income ETF is the iShares iBoxx $ Invest Grade Corp Bond (LQD) ETF. It not only has a decent yield, but a pretty good return so far for the year, especially for a bond ETF - 11.65%.

LQD generally seeks to match the price and yield performance of the iBoxx $ Liquid Investment Grade Index. LQD invests 90% or more of assets in the bonds of the underlying index, with at least 95% in investment grade corporate bonds. The remaining 5% of assets can be in U.S. government obligations, and in cash and cash equivalents. It is a non diversified fund, meaning there is no stock component, only bonds. That's something to consider if diversification is important in the income portion of your portfolio.

Not only has this fund outpaced most other corporate bond ETF's, it also pays a monthly dividend.

YTD Return: 11.65%
Yield : 5.38%
Total Expense Ratio 0.15%

Best ETF for Those Seeking a High Return.

Kiplinger's first of two Vanguard funds recommended in this article is the Vanguard Emerging Markets Stock ETF (VWO). It's no wonder either, with an expense ratio of only 0.20%, and a total return year to date of a whopping 62.82%!

Vanguard's Emerging Markets Stock ETF tracks the performance of the MSCI Emerging Markets index. It's a passively managed fund which invests all or nearly all of its assets in a representative sample of the common stocks included in the MSCI Emerging Markets index.

YTD Return: 62.82%
Yield: 3.11%
Total Expense Ratio 0.2%

Small companies.

The second Vanguard fund recommended is the Vanguard Small Cap ETF (VB).

The VB ETF tracks a benchmark MSCI US Small Cap 1750 index. It invests all or nearly all of its assets in stocks that make up that index. Like all Vanguard ETF's, the VB has a low expense ratio (0.1%), but a high (for small cap stocks) yield of 1.76% - and it's had a pretty good run this year.

YTD Return: 30.92%
Yield: 1.76%
Total Expense Ratio 0.1%

Complete portfolio.

The iShares S&P Growth Allocation (AOR) ETF is like a one stop shop for your somewhat generic allocation with moderate risk portfolio. It invests 60-70% in stocks, and 30-40% in fixed income securities like bonds and REITs.

It's a great out of the box portfolio for the investor who isn't sure what he should be investing in and what kind of allocation it should be.

YTD Return: 15.70%
Yield: N/A
Total Expense Ratio 0.11%

Wednesday, November 11, 2009

5 Things to Do When You Have a Bad 401(k) Plan.

401(k) plans can be a great way to save for retirement and let your savings grow tax-free. But the plans are chosen by employers and managed by 3rd parties and don't always have the best options. IRAs give you the entire universe of investments to choose from, but most employers offer a free match on a percentage of contributions to the 401(k) plans by the employee. So what's an employee to do when the 401(k) plan has lousy investment options?

Here are 5 options, though there may be more.

1. Be an index hugger.

If your 401(k) plan offers index funds, then you can still get broad-based exposure and diversification at a low cost. You won't be beating the market, but you won't under perform the market either.

2. Take the best and move on.

If your 401(k) plan has one or two excellent funds and a dozen other mediocre funds, take the one or two and skip the others. This may seem like you're not properly diversifying, but you should consider your entire collection of assets when diversifying, not just a single account.

For example, say your 401(k) plan has one excellent blue chip stock fund, and an equally excellent small cap stock fund, but the bond funds are lousy. You should invest in the stock funds offered by your 401(k) and invest the overall bond allocation in some other account, like an IRA account or maybe your spouse's 401(k). Each individual account will be non-diversified, but when taken together your total assets will be diversified.

3. Look into the "window".

More and more large employers are offering 401(k) plans with a "brokerage window" or "self-directed accounts." These options allow the employee access to hundreds or thousands of other mutual funds, ETF's and even individual stocks that aren't part of the standard 401(k) plans options.

Be sure to investigate the details and learn about any additional fees or transaction costs that may be associated with the use of the "window". There may be additional work on your end as well, since this option is unlikely to be available for automatic contributions like the standard 401(k) options. You may need to fill out additional paperwork or make other such declarations.

4. Talk to HR.

If you think your 401(k) plan stinks and you can get other coworkers to join you, you can petition your HR department to change the plan, or go with a new plan provider altogether. The more employees unhappy with the status quo, the more likely you can get your employer to change things.

5. Check out other options.

If all else fails, you can always go it alone with an IRA account. But if you get a company match on your contributions, then pick the best fund that's offered and contribute at least enough to get the full company match and put the rest in an IRA. There's no point in passing up free money, no matter how lousy the fund options are.

Monday, November 9, 2009

Mutual Fund Monday.

I'm down with the flu this week, which means I'm taking it easy - but not too easy. I'm catching up on some reading and found some nuggets of knowledge regarding mutual funds that you may not already know about and you may enjoy reading. So, without further ado (because I need to get to bed now), the blogs:

First up, from  The Oblivious Investor, comes
11 Tips for Selecting Mutual Funds. This short, concise list of things that matter (and why they matter) when picking a mutual fund will ensure you get in the right frame of mind, before you do anything rash and costly.

Next, the Amateur Asset Allocator has a great primer on the various Types Of Mutual Funds that will help sort out the differences between open-ended, closed-ended, indexed vs. actively managed and more.

And lastly, while we're on the subject of index funds, Retirement Savior reminds us that some mutual funds do outperform indexes, and tells us when (and why) When NOT to Use Index Funds.

Looking To Invest In Banks, Go Small.

By now, we now the sad story of the large national investment banks like Bear Stearns, AIG, Citigroup et. al.. Such examples give pause to investors, as they should, but they also taint the entire financial sector.

Believe it or not, there are many banks that stuck to lending and banking principles and never ventured into derivatives and toxic assets. Shares in these banks, usually small, regional banks, have taken a hit. Call it guilt by association. It's unfair, but it creates great opportunity for investors who can stomach the kind of volatility that often accompanies such subjective discrimination.

Here are three smaller banks, recently recommended by SmartMoney magazine.

Provident Financial Services (PFS)
Provident is a well run, new jersey bank with a solid balance sheet and enough cash on hand to ride out the current recession. Provident has 82 branches and only 1.5% of their loans are "nonperforming", which is well under the industry average. The stock trades at 1.1 times the tangible book value, which is cheap for any sector.

City National (CYN)
City National is located in Beverly Hills, CA and caters to the affluent (think high-end Hollywood). Analysts expect earnings to rise sharply in 2010. They currently have $28 billion in assets, and $13 billion in deposits. Though the price has fallen 26% on worries of exposure to California's pummeled real estate market, analysts say that the bank has high quality assets and earnings should "rise significantly."

TCF Financial (TCB)
While loan losses have been increasing, this Midwest bank has a stable deposit growth and commercial leasing business. This is by far the riskiest bank on the list, but it shouldn't be destined for bailout/failure country. Analysts say the "repair work is ongoing", which may make for a few more rocky quarters, but patient investors should be rewarded.

Thursday, November 5, 2009

How Often Do You Rebalance Your Investments?

I had always heard that investors should rebalance their portfolios at least once a year, maybe twice a year and at the same time every year. But I never heard that everyone should rebalance at the same time of year, yet that's exactly the basis of a recent Wall Street Journal article:
Given the remarkable run in share prices, prudent, long-term investors should consider rebalancing their holdings to lock in gains and return their portfolios to a more diverse position. Advisers usually tell investors they should do this at the start of each year.

I've shied away from the beginning of the year because that's when many people's bonuses come in, and some of those find their way into the market. By rebalancing before the new year, I've got my asset allocation in order before this new money comes in.

The article points out that after the recent market rebound from it's March low makes it especially important to rebalance. After all, if the market should take another tumble toward those lows, your asset allocation could be so out of whack that it could magnify those losses even more.
"The exception to doing it annually or on a calendar basis is when you see significant shifts in asset values," says David Fleisher, co-founder and president of Firstrust Financial Resources in Philadelphia. "A 50% rise in the stock market, as we've seen, would qualify."

I couldn't agree more.

I actually have my portfolio set to rebalance automatically every October anyway so I'm set for this go around, but this article got me wondering when people usually

Wednesday, November 4, 2009

Mutual Fund Share Class Comparison Gets Easier.

Investors who own shares of mutual funds are probably familiar with the 3 most common classes of shares: A, B, and C. But recent market conditions have led over 400 mutual funds to eliminate class B shares form their offerings.ABC's of mutual funds is getting clearer.

The reason for the elimination is cost. It simply costs the fund company less to offer fewer classes of shares.

Class-A Shares charge a front-load commission that is taken off your initial investment.

Class B Shares often carry deceptively high annual fees.

Class C Shares charge a fee when you sell the shares.

The tracking and bookkeeping is apparently not worth the return on B class shares for many fund companies. Given the fact that class B shares can be automatically converted to Class A shares after a certain period of time, it's easy to see why they can be an added hassle for fund companies. This is especially true if investors are trading more frequently, and the company would make more on the buy and sell loads charged from class A and C shares.

For a much more detailed overview of the definitions and differences of mutual fund share classes, see The ABCs Of Mutual Fund Classes at Investopedia's site.

For a better option, you might want to look into ETFs. The only load they carry is the brokerage commission, which can be less than $10 at most online brokers.

There is no correlation to paying higher fees, and earning a greater return on your investment so why pay more?

Case studies.

Here are 3 big-name mutual fund companies that have recently eliminated their class B share offerings.

American Funds. Citing a loss of investor interest, American funds eliminated it's B shares in April. Maybe the lack of investor interest was due to the fact that the B class shares charged investors a penalty if they were sold within 7 years of purchase.

Evergreen Investments is a subsidiary of Wells Fargo. They eliminated their class B offers in June stating a desire to respond to "client needs."

Charles Schwab had no load funds anyway, but still eliminated its share classes for simplicity.

Monday, November 2, 2009

5 Energy Stocks To Invest In.

Introducing the "new, pragmatic approach to energy investing" (as it is called by SmartMoney) - also known as the having it both ways approach. It's a new way to invest in energy stocks, and it mimics what the big oil companies themselves are doing. It's a hedge, really.

It's investing in the traditional energy supplies like coal and oil as a core to the portfolio, while also adding alternative energy like solar, wind and biofuel to the mix.

The U.S. Energy Information Administration projects fast growing economies like India and China will help drive energy consumption up by 33% by 2030. This will also drive up research into green and renewable energy sources, but it will also push the price of oil up to where it will be profitable to tap the harder to drill wells and process the more costly oil shale supplies of Canada - hence the hedge. Fossil fuels aren't going away anytime soon, but they also won't last forever.

Here are 5 energy stocks that should benefit from the new and old sources of energy.

Schlumberger (SLB).

This Houston based oil services firm helps customers like Exxon Mobil improve their efficiency in finding and extracting oil. Schlumberger gets nearly 75% of its $27 billion in annual sales from customers outside the U.S., so it's also a nice foreign investment play. It's active in operations off the west African coast as well as Russia.

Drilling fell nearly 60% in the U.S. and 30% in Russia when the recession hit, so it's not a short term hold by any stretch, but it's a good long term buy and hold opportunity. The cost of energy is only going to go up in the future, which is why many analysts say that Schlumberger’s long term potential far outweighs the short term challenges.

Apache (APA).

Natural gas prices fell 75% when new reserves of gas came into the market, and while this may be good news for consumers it's not so good for Apache, who gets more than half its income from natural gas.

But natural gas is only half the story. While natural gas is not expected to hit it's all time high again anytime soon, oil has rebounded quite a bit from it's near $30 per barrel low. Apache's plan is to only drill when oil is $40 or more a barrel, and search for gas when it's at least $4.50 per million BTUs. Not surprisingly, Apache is spending much of it's focus on oil these days.

Analysts say the company has a long term record of boosting production through acquisitions and operating efficiencies. As Ben Halliburton, chief investment officer of money manager Tradition Capital says, “They do a great job blocking and tackling.”

First Solar (FSLR).

Even though demand for solar energy worldwide is expected to be flat for this year, and even though the world is gripped by recession, this maker of solar panels expects earnings to soar 70% this year, and sales to increase 55%. Not too shabby.

Despite the buzz around green, renewable energy, solar energy is only a blip on the global energy radar. That means that if solar energy can become cost effective, there's a lot of room for growth.

Some analysts expect demand for solar energy to grow more than 40% as the recession ends and governments continue to favor clean energy with grants and subsidies.

To ready itself for this anticipated growth, First Solar plans to double its production and manufacture enough solar panels to provide 1,000 megawatts of electricity.

If all this research and anticipation pans out, this would give First Solar an edge against any competitors.

Telvent (TLVT).

Telvent provides traffic management and other services to improve efficiency in energy and transportation industries. Efficiency is seen by some analysts as the low-hanging fruit of the push for cleaner, greener energy. This makes sense, because it's easier to cut costs than increase revenue.

The massive $787 billion government spending bill passed by congress in February included $4.5 billion for building a “smart grid.” The smart grid makes use of technology and services provided by companies like Telvent to increase the efficiency of energy transmission.

Telvent's client base includes utilities and governments around the world, and they hope to get a large part of the smart grid projects. The company headquarters were moved from Madrid to outside Washington, D.C. last year, which probably won't hurt their bid for federal projects any.

Massey Energy (MEE).

Last up on the recommended energy stocks on this list comes from America's often battered coal industry. Demand for coal is down, and competition from natural gas is up and Washington has made the coal industry second only to "Big Oil" on its energy enemies list. All of this factors into coal stocks being all but left for dead.

So why is a coal company like Massey Energy on a list of recommended stocks?

In a word, opportunity.

All those negatives have beaten share price down so far that there is a potential for huge return. Despite its status in Washington, coal remains one of the cheapest and most abundant sources of energy and still powers half of the U.S. electric output.

Massey is the nation’s 4th largest coal producer and the largest coal company in Central Appalachia.

Regardless of the ideals of the green energy movement, America is not likely to wean itself from coal for more than a decade at the earliest and Massey Energy is poised to reap the rewards for the time being.