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A Thanksgiving Stock
Tweet Share on Facebook November 26, 2008 Comment (1)Thanksgiving dinner is more expensive this year: According to the American Farm Bureau, the average meal will set you back $44.61, up from $42.26 last year. Turkey prices are a big factor; they're up 8 percent (those on a budget might consider the Tofurkey, which costs around $10, and tastes good, too!) All the fixings--rolls, cranberries, and pies--are also more expensive.
So what's a stock investor to do? Charles Rotblut of Zacks.com thinks Winn-Dixie (symbol WINN) is a timely play. According to his report, the company saw a 3 percent increase in same-store sales in its first quarter, and gross margins--a measure of efficiency--also improved. As a result, Winn Dixie posted a smaller-than-expected loss of 4 cents a share. A bonus, says Rotblut, is that analysts increased their full-year profit projections. That consensus estimate calls for fiscal 2009 earnings of 3 cents per share, versus last month's forecast of a 3 cents-per-share loss.
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ETFs Could Surpass Index Funds By 2012
Tweet Share on Facebook November 26, 2008 Comment (1)A new study projects that by 2012, exchange-traded funds will overtake index mutual funds, reports IndexUniverse. By that year, Financial Research Corp. sees ETFs representing 6.8 percent of the pie of investment choices for retail investors. This would be the first time ETFs surpass index funds in terms of market share, says IndexUniverse.
However, Max Chen of ETFTrends points out a big caveat: The data doesn't separate retail and institutional investors, whereas mutual funds are typically retail investments.
Compared with the country's $6 trillion mutual fund industry, ETFs are still a fly speck. But get this: U.S. stock funds, which have surrendered nearly $170 billion in investor assets so far this year, are flirting with the biggest annual sell-off in their history (via TrimTabs Investment Research). But ETFs, which doubled their assets from $305 billion to $619 billion between 2005 and 2007, have actually seen investor money flowing in this year, to the tune of $100 billion.
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Mutual Funds That Offer Money-Back Guarantees
Tweet Share on Facebook November 26, 2008 CommentNew data out from Standard & Poor's reveals that actively managed mutual funds haven't been earning their keep, even before the current market meltdown. Over the five years ending last June, the S&P 500-stock index beat out roughly 70 percent of actively managed large-company funds, according to S&P. International funds and bond funds lagged behind their benchmarks by even more (87 percent and just over 75 percent, respectively).
Now that every single diversified stock fund is in the red so far this year (and mutual fund fees are set to rise next year), critics are calling for funds to trim their fees when they perform poorly.
Some already do. TFS Capital, a small-company fund based in Richmond, says its goal is to beat the Russell 2000 index by 2.5 percentage points. If it fails to do so, the fund forfeits its entire management fee. But if it beats the Russell by more than 2.5 percentage points, management could raise fees (annual expenses are currently 2.7 percent).
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Mutual Fund Fees May Rise in 2009
Tweet Share on Facebook November 25, 2008 Comment (20)A heads-up for mutual-fund investors:
InvestmentNews is reporting that the annual fees of mutual funds will likely increase in 2009, by an average of 0.05 to 0.10 percentage points for stock funds. That's according to a Lipper analyst.
Expense ratios are often tied to a fund's assets, which means funds with greater assets generally charge lower fees. A deluge of investors have bailed out of funds this year, which have caused assets to fall.
Morningstar's director of research, Russ Kinnel, thinks international funds will see the biggest fee hikes, since they've suffered steeper losses than stateside funds this year. Currency losses will also have an impact.
Bond funds should only see slight fee increases of 0.01 to 0.02 percentage points, according to Lipper.
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Citigroup's Bailout From a Shareholder's Point of View
Tweet Share on Facebook November 24, 2008 Comment (1)Citi's stock may be up on bailout news, but it's still trading at a "panic level", says Felix Salmon over at Market Movers.
What does the rescue mean for shareholders? Almost nothing, he says:
"Yes, they get to keep the full interest and upside on the $306 billion of assets which are being guaranteed by the government. But all the capital injections have come in the form of preferred shares with an 8% coupon--shares which might look like equity from a regulator's point of view, but which look very much like extra debt from a shareholder's point of view."
P.S. Don't get excited about the stock's spectacular rise in percentage today. As of early this afternoon, it was up more than 50 percent, but shares are still trading at just $5.70.
P.P.S. Here's how the bailout could turn into a raw deal for taxpayers.
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At Long Last, Google Gets a Sell Rating
Tweet Share on Facebook November 24, 2008 Comment (1)Merriman Curhan Ford analyst Richard Fetyko slapped a sell rating on Google this morning, saying he sees downside to analysts' consensus estimates and that investors will get a better entry point in the next six months.
The full report is here, but here's a summary of his reasoning:
-The weak consumer and business purchasing environment spells bad news for search-engine marketing. But: "SEM is expected to be among the last places to see cuts, and we are there now."
-The company's paid-click volume is under pressure. People are searching for fewer commercial items and they're clicking on fewer ads.
-Fetyko sees a slowdown in international regions in the fourth quarter of 2008 and into 2009. Just over half of Google's sales are done overseas.
So at what price would Fetyko tell investors to buy?
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Munger's Berkshire Move: A Sign That the Stock is Dirt Cheap
Tweet Share on Facebook November 24, 2008 Comment (3)In his latest email dispatch, hedge fund manager Whitney Tilson says Charlie Munger's sale Friday of 2,000 Berkshire Hathaway shares--or 13 percent of his stake in the company--is a major indicator that the stock is dirt cheap. Say what?
Munger sold Class A shares of Berkshire--which happens to be the country's most pricey stock--in exchange for a promissory note for $77,500 a share for family members. The stock closed at $90,000 on Friday (it closed Thursday at $77,500, and I got a few heated responses to this post as it was trading around $77,000.)
Says Tilson:
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The Best and Worst Times to Buy Stocks
Tweet Share on Facebook November 21, 2008 CommentFeel-good markets are terrible times to buy stocks, and vice versa. Pretty intuitive, right?
Not to many investors. Come sit on the therapist's couch...or read Jason Zweig's recent column on the psychology of investing. He describes how present emotion and future returns are inversely correlated. Say what?
"When did your house feel like the safest investment? Just as its appraised value hit an all-time high, of course. The Dow felt safe when it was at 14000, and it feels risky as hell now that it is clinging to the edge of 8000 with its fingernails. That's perceived risk: low when prices go up, and high when prices go down."
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Investors' Incredible Shrinking Stock Allocations
Tweet Share on Facebook November 21, 2008 Comment (3)A chart posted on The Big Picture today (courtesy of FusionIQ) illustrates how much stock allocations have dropped compared with a 21-year historical average of 60 percent. Today, allocations are 15 percent less than that historical mean. Blogger Barry Ritholtz says that's significant because it mirrors the readings seen at other major lows in 1987, 1990, and 2002. "Now while it doesn't mean we bottom tomorrow (though we could) it does mean stocks are certainly in the eighth or ninth inning of the decline and not the third or fourth (however, as we know in baseball, even the last few innings can get ugly sometimes before the game ends)." He also points out that very low stock allocations are bullish for stocks because it means "investors have sold in droves, thus reducing much of the selling pressure from the market...the low equity allocations suggests a large buildup in sideline cash (i.e., new buying power) from many individuals."
Here's the chart:
(Courtesy of FusionIQ) -
It's No Fairy-Tale Ending, But Some Reserve Primary Investors Will Get Cash Back
Tweet Share on Facebook November 21, 2008 Comment (4)Investors in one of the Reserve money-market funds are getting a break. The Treasury has agreed to backstop the Reserve U.S. Government Fund, which is among more than a dozen Reserve funds that froze customer withdrawals in September (Here's the back story.)
The fund is covered by the Treasury's Temporary Guarantee Program for Money Market funds. In a press release yesterday, Bruce Bent, president of the Reserve Management Company, said the U.S. Government Fund will return all of investors' money early next year.
Unfortunately for investors in other Reserve funds, a Treasury spokeswoman told Bloomberg that the department doesn't foresee a similar agreement with any other funds. However, investors in the Reserve Primary fund are getting some, but not all, cash back.
Interestingly, Bruce Bent, founder of the Reserve, criticized other money market funds on Nightly Business Report last summer for taking on too much risk:
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