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10 Ways to Make Money in the Market in 2017

The following is an excerpt from an article I originally published on InvestorPlace.

The year 2016 has been, for lack of better description, a strange one. It started with one of the worst Januarys in history and an oil price bust … continued with a surge of populist election surprises in Europe and the United States, and wrapped up with the Trump Rally — what might be remembered as the most unlikely rally in history based on pre-election sentiment.

BestInvestments2017So after a year like this, what will 2017 bring?

Frankly, your guess is as good as mine. I’m generally pretty optimistic, and I think it’s likely that the market surprises us to the upside next year. But I’m also a realist, and I also know that an aggressive Fed, surging bond yields and an expensive stock market all pose some pretty significant headwinds.

There are a lot of big question marks out there. But even with far greater uncertainty than usual, we still have to invest our portfolios in something.

So today, I’m going to cover 10 ways to make money in the market in 2017.

Some will be broad, while some will be specific stock and fund picks. Some will be fairly standard … perhaps even obvious. But others will be a lot different than the advice you’re reading elsewhere. Some might sound downright ridiculous, but hear me out. Unusual times call for unusual investing solutions.

Ways to Make Money in the Market in 2017: #1: Buy REITs

I really believe real estate investment trusts (REITs) are the single most attractive American asset class right now. REITs have gotten utterly obliterated by the recent surge in bond yields. As a sector, they are down about 14% from their summer highs, and many of the more “bond-like” conservative REITs are down by closer to 30%.

That’s ugly.

REITs are sensitive to bond yields for two reasons. First, they borrow a lot of money to buy their properties, so higher market interest rates cut directly into profits. Secondly, as income-focused investments, they are priced relative to bonds. So as bond yields rise (and bond prices fall), REIT yields rise (and prices fall).

But remember: REITs, unlike bonds, actually enjoy a rising payout over time. REITs tend to raise their dividend by at least a couple percent per year, more than keeping pace with inflation. And should the inflation that everyone seems to fear from a Trump presidency come to fruition, real estate should perform at least moderately well, as real estate is a natural inflation hedge.

That makes the Vanguard REIT ETF (VNQ) — which holds REITs such as Simon Property Group Inc (SPG) and Public Storage (PSA) — a natural play here.

This is the third time in three years that REITs have sold off aggressively on yield fears. The previous two times, REITs went on to soar to new all-time highs. Can we expect things to play out the same way the third? We shall see.

To read the full article, follow this link.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Best Stocks for 2017: General Motors Will Roll Over the Competition

10best2017_final_728x400-300x165It’s that time of year again… While the Best Stocks for 2016 contest is still going down to the wire — and yours truly is duking it out for first place, up 38% on the year — it’s already time to start planning for 2017. Here’s an excerpt from my 2017 submission:

As I’m writing this, we still have a few weeks left in 2016, and I’m duking it out for first place in the Best Stocks for 2016 contest with Jason Moser. His pick — mortgage processor Ellie Mae Inc (ELLI) — has a slight edge on mine — pipeline operator Energy Transfer Equity LP (ETE). But it’s a close race, and anything can happen. So may the best stock win!

Nerve-wracking, “blood-in-the-streets” markets like those are the kinds of markets I live for. I lost clients in December and January, but frankly, I didn’t mind. Those who stuck with me ended up enjoying a fantastic year in 2016 when the market turned up again.As we start 2017, we’re in a very different type of market. This time last year, stocks were in freefall, and energy stocks in particular were in full-blown panic mode.

Well, a year later, things are vastly different. We’re entering the year with investors feeling downright euphoric … and that makes me nervous. I’m sitting on cash positions of 15%-20% in most of my stock portfolios.

But there is one pocket of the market that I still consider massively and unambiguously cheap — automakers. So even if this stock rally fizzles in 2017, I think it’s likely that the automakers finish the year with a respectable return.

I chose General Motors (GM) as my pick for 2017. To read the full article, see General Motors Company (GM) Stock Will Roll to Victory

And as always, may the best stock win!

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Going Down to the Wire…

With one month to go in 2016, InvestorPlace’s Best Stocks for 2016 contest is going down to the wire. My pick, pipeline superpower Energy Transfer Equity (ETE), is tied for first place with Ellie Mae (ELLI), both up 40% on the year.

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Source: http://investorplace.com/10-best-stocks-2016/ Data as of 11/30/2016. Past performance no guarantee of future results.

 

Energy Transfer is rallying today, mostly on the news that OPEC had reached an agreement to curtail production and boost energy prices. Of course, a pro-energy incoming republican government and approval of long-delayed pipeline projects helps as well.

Regardless of how this year ends, best of luck to Jason Moser and the rest of the contestants. May the best stock win!

 

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Yes, the Apple Cash Hoard Really Is That Big

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People come from all around the world to see Mount Everest. But if you lived in Nepal and saw it lurking in the distance every day, it might not seem nearly as impressive. You might take it for granted or even dismiss it as no big deal.

That’s really where we are today with Apple (AAPL) and the absolutely gargantuan Apple cash hoard. It’s been so large for so long that no one really pays attention to it anymore. In fact, it seems the most common thing I hear said about the Apple cash stockpile these days is that “it’s really not that big when you take debt and potential taxes into consideration.”

Frankly, that’s ridiculous. Even allowing for a massive tax haircut, AAPL’s cash hoard would rank as one of history largest treasures… a fortune that would make Croesus blush.

As of Apple’s latest quarterly earnings report, the company had $231.5 billion in cash and marketable securities. The Apple cash balance — the gross number, before any debt or tax considerations — would be the 13th-largest company in the world… bigger than Wal-Mart (WMT) and just a hair smaller than Procter & Gamble (PG).

Now, of course, the Apple cash is mostly overseas, while Apple’s $72.4 billion in debt is mostly domestic. Let’s pretend that Apple suddenly got religion and decided it wanted to be debt free… now. And let’s further assume that Apple wanted to move its entire cash hoard stateside because… go America!  And let’s take this one step further and assume that Apple is paying the full 35% U.S. corporate tax rate on the whole pile of money. (None of these are realistic assumptions, mind you, but let’s go through the exercise anyway…)

After taxes, Apple’s $231.5 billion in cash becomes $150.5 billion. That would still put the Apple cash hoard in the top 30 largest companies in the S&P 500… about on par with Phillip Morris International (PM) and just a hair smaller than IBM (IBM), Disney (DIS) and Pepsico (PEP).

After stripping out the $72.4 billion in debt, the $150.5 billion becomes $78.1 billion. That’s still not exactly chump change. In fact, that’s nearly double the average market cap of all S&P 500 and more than four times bigger than the median market cap of all S&P 500 companies.

And remember, this all assumes the absolute worst case scenario for taxes. Were Apple to actually attempt to repatriate its cash, it would likely negotiate much better terms.

So, yes. The Apple cash hoard is a big deal, no matter how you slice it.

To read the full article, see Call the War Chest Waahmbulance!

Charles Lewis Sizemore, CFA is the principal of Sizemore Capital Management, a registered investment adviser in Dallas, Texas. As of this writing he was long AAPL.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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Stocks That Are Fit for a President

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Photo credit Donkey Hotey

I wrote a tongue-in-cheek piece for InvestorPlace on 12 Stocks Fit for a President. The following is an excerpt:

We’re in the middle of a presidential election year, and what a campaign it’s been so far. It’s looking like our choices will be two of the most polarizing political figures in modern history. But no matter who wins in November, we all have to get up and go to work the next day.

We also have portfolios to manage.

So, in the spirit of the 2016 election, I’m going to propose a portfolio fit for a president. And by “fit for a president,” I mean that the stock shares its name with a former commander-in-chief.

This probably isn’t the most scientific way to build a portfolio. But can you credibly say it’s any more ridiculous as a basis for investment decisions than the Hemline Indicator, the Super Bowl Indicator, or the Bangladeshi Butter Indicator?

Alas, Donald Trump’s companies are not publicly traded, and there’s no public company with “Clinton” in its name. Though there is a Sanderson Farms (SAFM), so perhaps the market is telling us to expect a Bernie Sanders upset in November.

Hail to the Chief … I guess.

Presidential Stocks: Washington Real Estate Investment Trust (WRE)

George Washington is the father of our country, the leader of our war of independence against Great Britain and our first president. He’s also the only person to be elected to the presidency with a unanimous vote of the Electoral College.

I’m not sure what President Washington would think of our nation’s capital, which bears his name. But as a successful businessman, he’d know a good profit opportunity when he saw it. If there is one sure bet in this life, it would be that the government will continue to get bigger. And as government grows, so does the city that supports it.

Washington REIT (WRE) is a real estate investment trust that focuses on office, retail and apartment properties in the Washington DC area. It’s a small-cap REIT with a market capitalization of just $2 billion and a respectable dividend of 4.1%. George Washington himself preferred to invest in farmland, but you could do a lot worse than Washington DC real estate.

Presidential Stocks: Carter’s Inc. (CRI)

Poor Jimmy Carter gets even less respect than Gerald Ford, whom he succeeded as president. Carter’s presidency was best remembered for runaway inflation, the Iranian hostage crisis, and that unfortunate sweater he wore during a fireside speech encouraging Americans to turn the thermostat down. But Carter wasn’t all bad. Some of the reforms and deregulation that Reagan is known for actually started under Carter’s administration. Whether Carter is actually smart enough to appreciate the pro-business accomplishments of his presidency is debatable, however.

Regardless, Carter’s, Inc. (CRI) is a stock you ought to keep on your radar. It’s one of the biggest makers of baby clothes in the world. That hasn’t been a great business to be in lately, as American births have been trending downward since 2008. But with millennials starting to enter their family formation years, I expect Americans births to start ticking up again, and soon. And when they do, you can bet that you’ll see a sustained bump in sales for Carter’s and its peers.

You can read the rest of the article… and all 12 presidential stocks… here: 12 Stocks Fit for a President

Disclaimer: I built a portfolio of 12 stocks with no other criteria than sharing a name with a past president. This is a spoof. For crying out loud, please do not consider this serious investment advice.

Disclaimer: This material is provided for informational purposes only, as of the date hereof, and is subject to change without notice. This material may not be suitable for all investors and is not intended to be an offer, or the solicitation of any offer, to buy or sell any securities nor is it intended to be investment advice. You should speak to a financial advisor before attempting to implement any of the strategies discussed in this material. There is risk in any investment in traded securities, and all investment strategies discussed in this material have the possibility of loss. Past performance is no guarantee of future results. The author of the material or a related party will often have an interest in the securities discussed. Please see Full Disclaimer for a full disclaimer.

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