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Protecting Against An Inflation Surprise

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I don’t see much in the way of inflation coming down the pipeline. In fact, I see the same deflationary forces that are plaguing Japan and Europe to continue nipping at our heels for the next several years.

But… let’s say I’m wrong. Let’s say something comes out of left field that ignites inflation. What then?

I gave my thoughts on inflation to Kira Brecht, writing for US News and World Reports:

“Real estate is a natural inflation hedge that also tends to pay decent current income. A basket of REITs is generally a good addition to any portfolio, and now more than ever,” says Charles Sizemore, founder of Sizemore Capital Management.

One option for investors includes the Vanguard REIT ETF (VNQ). Sizemore calls it “a very solid option. It gives broad diversification to the REIT sector and has the lowest fees of any of its competitors.”

Sizemore says the best advice for investors now may be to stay flexible.

“Be willing to invest in new ways you’ve never invested before,” he says. “We’re in uncharted territory. We’ve never had negative interest rates, nor have we had this level of central bank manipulation. We don’t know how this story ends, so we need to stay nimble and flexible.”

You can read the full article here.

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Searching for Dividends in the Retail Sector

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I gave my thoughts on the retail sector to Reuters’ Caroline Valetkevitch. Here is an excerpt of the article:

Some of the best deals at big retailers like Macy’s, Staples and Gap are not in their stores but on the stock market: their dividends are through the roof.

After a Wall Street selloff hit shares of stores that turned in weak earnings for the latest quarter, the companies are sporting yields at historically high levels…

But experts warn that unusually high dividend yields can be a trap, and retailers more typically are seen as cyclical stocks with below-average yields…

Nonetheless, some investors think the leap is worthwhile. Charles Sizemore, who focuses on dividend stocks as chief investment officer of Sizemore Capital Management in Dallas, said he owns and is bullish on shares of Wal-Mart (WMT) and Target (TGT), both yielding roughly 3 percent and with histories of raising their dividends.

He said he would shy away from smaller specialty retailers. “Retail is volatile because consumer tastes change, and the entire sector is undergoing a structural change because of e-commerce.”

Still, he doesn’t think retailers in general are at risk of having to slash their dividends like many energy companies have been forced to do. They are still making enough money to cover their dividends, and that wasn’t the case with the most stressed oil companies in recent months…

Many high-yield retailers have solid balance sheets, even if their earnings are weak, said Sizemore. “If anything, they would be raising their dividends, because they have nothing else to do with their cash.”

You can read the full article here.

High dividend yields in the retail sector are essentially a product of two factors:

  1. Investors have dumped the sector en masse, pushing stock prices down.
  2. Facing a dearth of opportunity to expand and reinvest in their businesses, retailers are choosing to spend more of their cash on dividends.

The entire retail space is being transformed by the likes of Amazon (AMZN) and its peers, but in an otherwise overpriced stock market, some of the beaten-down retailers are finally cheap enough to warrant consideration.

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What’s Ahead for Ford and GM?

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Photo credit: Adam Dooley

I recently gave my thoughts on Ford (F) and General Motors (GM) to US News and World Reports’ Lou Carlozo:

“Ford and GM have both had excellent runs operationally,” says Charles Sizemore, a portfolio manager on Covestor and founder of Sizemore Capital Management in Dallas. “Sales have been robust and profits have followed. Yet Wall Street seems unduly pessimistic about their prospects going forward, pricing in pretty significant sales declines.”

Another reason for the pessimism revolves around a bad accident that hasn’t even happened yet: skyrocketing interest rates.

“Yes, rising interest rates — if they ever actually happen — are bad for auto sales, which depend on credit,” Sizemore says. “I get that. But if the economic outlook is as bad as the prices of auto stocks suggest, then U.S. stocks should not be trading at a Shiller price-to-earnings ratio of 26. So either investors are wrong about auto stocks — or they’re wrong about the rest of the market.”

You can read the full article here.

I’m currently long both General Motors and Ford in my Dividend Growth portfolio and expect both to deliver outsized total returns in the year  ahead.

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Lessons Learned From Prince’s Untimely Death

I gave my thoughts to Kiplinger’s Stacy Rapacon on lessons we can learn from the unfortunate passing of Prince. The music legend apparently passed away without a proper estate plan. Or if he had an estate plan, no one knows where it is… which is just as bad. See below:

Keep a copy of your will somewhere handy and be sure to tell your family—or at least your lawyer—where it is. All the estate planning in the world is for naught if your loved ones don’t know where the documents are. In Prince’s case, he was unmarried and had no surviving children, so at least in this case there are no grieving widows and orphans to worry about. But chances are that Prince intended his multi-million-dollar fortune to go, if not to a friend or friends, then to a charity. His wishes may never be carried out if his will cannot be found.

I’ve told my wife repeatedly where to look for the documents in the event I meet an untimely end. But I also know good and well that, if that day came, she might not be mentally able to deal with it at first. So, I keep one of the estate lawyer’s business cards pinned to the bulletin board in our kitchen. Yes, it’s a little morbid, but at least the number is there to call if she needs it. The estate lawyer has copies of all of our documents in the event that the originals are lost or destroyed.

You can read the full article here.

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Will Oculus Propel Facebook Higher?

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I gave my thoughts to InvestorPlace’s Kyle Woodley for a piece he wrote on Facebook’s (FB) Oculus. Here’s an excerpt:

Charles Sizemore, portfolio manager on Covestor and chief investment officer at Sizemore Capital Management, a registered investment advisor in Dallas, is among those who think virtual reality will stall again.

“Gamers might embrace it, but I don’t see a lot of people watching movies on their couch wearing a face mask,” he says. “A lot of the consumer innovations of recent years — 3D television, curved screens, etc. — have failed to make much of a splash. I expect this to be mostly a niche product.”

But even if Oculus does sink, don’t count Facebook out as dead money.

Facebook is great, goggles or not. Facebook is sitting near its all-time high following a 40 percent run over the past year, and has expanded its reach to more than 1 billion people on a hunk of rock that has just 3.3 billion Internet users. How much more can we expect Facebook to grow?

Even a true Oculus bear thinks Facebook is chock full of upside.

“Facebook is the lone standout success story in social media,” Sizemore says. “None of the other social media platforms have managed to monetize their user base like Facebook has. And the closest thing Facebook has to a true rival — Twitter (TWTR) — is still something of a niche player. Given that Facebook is only starting to find ways to monetize Instagram, the company should have a lot of healthy growth in front of it.”

You can view the full article here.

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