What if Santa Doesn’t Come This Year?

The following was originally published on Kiplinger’s as Don’t Wish for a Santa Claus Rally. Prepare Instead.

Perhaps we should all give thanks that the market is closed for Thanksgiving. It’ll give us a chance to recover from quite a beating – and for some, time to wish for a “Santa Claus rally” to rescue stocks.

It’s rough out there. The November-to-April period seasonally has been the best time of the year to be invested. It looked like that might be the case this time around, too. After a devastating October that saw the Standard & Poor’s 500-stock index drop almost 7%, November started strong.

Alas, it didn’t last.

Stocks started sliding again in the second week of November, and by the week of Thanksgiving they had already taken out the October bottom. As of this writing, the S&P 500 was about 2% away from hitting new 52-week lows.

Is a Santa Claus rally still in the cards? December is a historically strong month, after all. The final month of the year has been positive more often than any other, finishing higher 66 out of the past 90 years. And the market indeed is ready for a reprieve in December following two lousy months in a row.

But don’t hang your hat on Santa Claus coming to town.

Why the Grinch Could Steal Christmas

We’ll start with stock valuations, which never seem to matter … right until they do.

Expensive markets can continue to get even more expensive, sometimes for years. Consider that Alan Greenspan first complained about “irrational exuberance” in the markets as early as 1996. It would be well over three years until the market finally rolled over. Yet when the bubble finally burst in the first quarter of 2000, it got ugly. The market was down 15% by year end and proceeded to lose nearly half its value before it finally hit bottom.

There’s no guarantee the market will follow a similar path this time around. But it’s worth noting that when the S&P 500 peaked in late September, it was actually more expensive than at the top of the 2000 tech bubble, at least as measured by the price-to-sales ratio.

To continue reading, please see Don’t Wish for a Santa Claus Rally. Prepare Instead.

Growth Stocks That Pay You Cash Too

The following first appeared on Kiplinger’s as 7 Growth Stocks That Will Pay You Cash Too

Investors seeking out growth stocks often discard dividends as unimportant, but they really shouldn’t. After all, there’s no greater sign of a company’s health than the regular, consistent payment of dividends. When the board of directors approves the payment of the quarterly dividend, it sends the unmistakable message that more cash is expected down the road.

Thus, a focus on dividends can help you improve the quality of your growth portfolio.

“We consider a reliable and growing dividend to be a major sign of a company’s health,” says Chase Robertson, principal of Houston-based RIA Robertson Wealth Management. “Limiting your pool of available stocks to dividend payers immediately improves the quality of the portfolio.”

Today, we will look at seven solid dividend-paying growth stocks. It’s not unusual for growth stocks to return 20% or more per year when they’re on a good run, so the dividends paid will be a small part of the total return. It’s exceptionally rare for a true growth stock to sport a high dividend yield.

Still, it’s nice getting paid something in cold, hard cash. If anything, the dividend allows you to realize a small portion of your gains along the way without having to sell your shares.

Let’s look at an example. While ubiquitous coffee chain Starbucks (SBUX) isn’t quite the growth monster it was 15 years ago, it’s still expanding like a weed. Revenues were up 11% last quarter and earnings were up 23%.

It sometimes seems like there is quite literally a Starbucks on every street corner, at least in urban and suburban areas. But the company still is finding plenty of fertile ground for new growth. Last year, the company reported it was opening a new store in China literally every 15 hours. Stop and fathom that.

Few investors buy SBUX primarily for its dividend. They buy the stock for its explosive growth and for the power of its brand, which isn’t far behind the McDonald’s (MCD) golden arches, the Coca-Cola (KO) logo or Mickey Mouse in terms of recognition.

Yet Starbucks is no slouch as a dividend payer. It currently yields 2.6%, well above the yield of the S&P 500. And the company has raised its dividend for seven years running.

At some point, Starbucks really will have reached the point of global market saturation. The company won’t be able to open a new location without seriously cannibalizing sales at existing locations. But that day is likely years away. In the meantime, shareholders get to enjoy a market-beating dividend yield.

To continue reading, please see 7 Growth Stocks That Will Pay You Cash Too

Stocks for the Beginner Investor

The following first appeared on Kiplinger’s as 5 Great Stocks to Buy If You’re New to Investing

The biggest challenge for many new investors is simply knowing where to start.

There’s no clear consensus on how to invest. Value investors will say the best stocks to buy are cheap ones and rattle off plenty of statistics to defend their stance. Growth and momentum investors will counter that investing in dominant growth stocks is the way to go. After all, you’re not too likely to find an all-star like Amazon.com (AMZN) sitting in the bargain bin.

What about dividends? Or share repurchases? Various studies have shown that focusing on these factors can generate solid returns.

Despite all the attempts to quantify investing, it is often more art than science. No single strategy is right for all investors. Some excel at charting and other forms of technical analysis, while some fundamentalists find bargains by digging into the minutiae of the financial statements. And there’s everything in between.

The best way for beginning investors to learn is to try a little of everything. You don’t have to get it right the first time, and you don’t have to put your capital at serious risk. So today, we’re going to look at five of the best stocks to buy if you’re new at investing. These may or may not beat the market over the next year. It would be fantastic if they did, but that’s not our point here. We’re simply looking to learn the ropes.

I’ll start with one of the very cheapest stocks in the market.

Value investing has trounced all other disciplines of investing over the years, at least according to several academic studies such as Fama and French’s landmark 1992 paper “Common Risk Factors in the Returns on Stocks and Bonds.”

But there is no such thing as a free lunch. While value stocks may outperform over time, they can be painful to hold. Sometimes cheap stocks keep getting cheaper.

Consider automaker General Motors (GM), which trades for about $34 per share. It’s one of the cheapest large-cap stocks in America right now, trading for just 5.5 times expected 2018 earnings and 0.3 times sales. To put that in perspective, the Standard & Poor’s 500-stock index – a group of 500 companies considered to be reflective of the American economy – trades for 18 times expected 2018 earnings and 2.3 times sales.

However, GM also looked cheap by these same metrics back in July, when it traded for more than $44 per share.

Value investing can be frustrating, but General Motors is worth a try. GM clearly is undervalued by most traditional metrics, and you’re being paid to wait while Wall Street figures that out. GM pays a 4.4% dividend, more than twice what the average S&P 500 company pays out right now.

To continue reading, see The following first appeared on Kiplinger’s as 5 Great Stocks to Buy If You’re New to Investing

Investing In Latin America

The following is an excerpt from 7 Top Latin American Stocks to Buy, originally published on Kiplinger’s.

Brazilians have a tongue-in-cheek saying about their country. Brazil is the country of the future… and it always will be.

That’s probably a little unfair. Brazil and Latin America in general have grown and modernized to the point that their economies are barely recognizable to those who remember the commodity-driven economies of decades past. Latin America is highly urbanized and has a vibrant and growing middle class.

All the same, the region still has a long way to go to meet developed world standards. For example, per capita income in the United States, Germany and France is $59,495, $50,206 and $43,550, respectively, according to recent estimates by the International Monetary Fund. In contract, Chile – the wealthiest country in Latin America – has per capita income of just $24,558, slightly below Turkey and slightly above Croatia. Argentina and Mexico weigh in at about $20,000 each.

Rome wasn’t built in a day, and it will be a long time until these countries approach developed-world living standards. All need major investments in education and infrastructure to make that happen, and these take time.

In the meantime, intrepid investors looking to get a piece of that growth have abundant options at their disposal. Latin America is home to dozens of world-class companies that stand to benefit from the continued growth in the region. Today’s we’re going to look at seven solid Latin American stocks that you can hold for the long-term. The list is more heavily weighted to Brazil and Mexico, as these countries have the deepest capital markets and the broadest selection of liquid public companies. But up and coming growth darlings like Colombia and Peru are included as well.

Creditcorp (BAP)

Apart from Colombia, Latin America’s brightest star of the past 20 years has been Peru. Like Colombia, Peru has its share of domestic unrest. In the 1980s, Peru was essentially a failed state. But in the years that have passed, the country has managed to restore law and order and has adopted solid growth policies.

The problem with investing in Peru is its lack of large, liquid stocks. The handful of Peruvian stocks with healthy trading volume tend to be clustered in the metals and mining sector.

There is, however, one large-cap Peruvian stock that gives broad-based exposure to the growing Peruvian economy: Creditcorp (BAP), a banking group with an $18 billion market cap.

The group’s Banco de Credito de Peru is the country’s largest retail bank and the natural choice for many middle class and wealthy Peruvians. But the group is also active in tapping the needs of working-class Peruvians via microfinance leader Mibanco and has vast insurance and wealth management wings as well. You can think of Creditcorp as a one-stop shop for Peruvian finance.

As we were reminded in 2008, finance can be a volatile sector. But Creditcorp has managed to survive and thrive through booms and busts and everything in between. If you believe in the long-term Peruvian growth story, Creditcorp is your best option.

To continue reading, please see 7 Top Latin American Stocks to Buy.

Disclosures: No current position in any stock mentioned.


MLPs That Should Crush the Market in 2018

The following is an excerpt from 5 MLPs That Should Crush the Market in 2018.

For a collection of companies that tend to own boring, cash flowing assets, it sure has been a wild ride in master limited partnerships.

On a total return basis (including dividends), the Alerian MLP Index — which is heavily weighted to the largest midstream oil & gas pipeline operators — doubled in value between the fourth quarter of 2010 and its all-time high in the fourth quarter of 2014.

Unfortunately, it all went downhill quickly. Encouraged by low interest rates and high energy prices, the pipeline companies borrowed heavily to finance their growth projects while distributing virtually all of their cash flow from operations as cash distributions. When crude oil started to tumble in 2015, the banks and bondholders got jittery and even some of the largest players found themselves effectively locked out of the capital markets.

Before it was over, the distribution growth that investors found so attractive went into reverse. Many MLPs froze their distributions and several actually had to slash them.

But those rough years helped to create the fantastic opportunity we have today. As a sector, MLPs got their leverage under control and started funding their growth projects with internally generated cash flow rather than new debt. This brings the sector more in line with “normal” public company behavior.

With firmer energy prices and more stable financing, MLPs are getting their growth mojo back, yet prices don’t fully reflect that reality, at least not yet.

So, today we’re going to take a look at five MLPs that I expect to deliver market-crushing total returns in the years ahead.

I’ve been a fan of Energy Transfer Equity LP (ETE) for a long time. In fact, it was my winning entry in InvestorPlace’s Best Stocks for 2016 contest.

Today, ETE is the linchpin in an energy infrastructure empire with over 71,000 miles of natural gas, natural gas liquids, crude oil and refined products pipelines.

Energy Transfer’s structure can be a little confusing to the uninitiated. Energy Transfer Equity is the general partner of two other MLPs: Energy Transfer Partners LP (ETP) and Sunoco LP (SUN), which distributes fuel to gas stations in over 30 states.

This complicated structure has become something of a liability to the company in an era in which investors demand more transparency. Furthermore, the company really hurt its reputation when it tried to buy Williams Companies (WMB) back in early 2016 … before changing its mind and resorting to questionable means to terminate the deal.

That’s OK. I like companies that have a little egg on their face, as we can often get them at a good price. Today, ETE is no exception. It yields a solid 7.2% and, after a short hiatus, started growing its distribution again last year.

To continue reading, please see 5 MLPs That Should Crush the Market in 2018.

Disclosures: Long ETE