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Adding KMI Here

May 1st, 2013 No comments

The market swooned today, and I took an opportunity to buy into Kinder Morgan, Inc (KMI) at $38.50/share.

I especially like buying into today’s market because Kinder Morgan just went ex-dividend about a week ago. Although I like collecting dividends, buying just after an ex-dividend at an even lower price after subtracting the dividend is a good way to buy shares. I got the dividend by a lower buy-in price, which is even better than a payment.

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So Goes IBM, So Goes The Market

April 20th, 2013 No comments

We had a real divergence in the market today, the S&P500 beat the Dow Jones Industrials (DOW) by more than 3/4ths of one percent (0.80%). Almost all of the this divergence can be attributed to IBM which was down over 8%, after a poor earnings report.

As I mentioned in this previous article, Why The DOW is Outperforming, a stock like IBM has outsized weight simply because of its high price (in absolute value). The DJIA is a price weighted index and not a market weight index.

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How To Understand And Use Return On Equity (ROE)

March 27th, 2013 No comments

Return on Equity (ROE) is a common financial measurement that investors use to evaluate a company. You might find it used in stock screens as one criteria. In its simplest form it is a measurement of how well a company does on earning a return on the money investors gave the company. An investor looks to earn an outsized return on his money invested compared to other options. ROE can tell you how well the company is doing in that respect.

However, it is best to use this metric not with the ‘headline’ number but each component that goes into it and how it changes over time. Also, depending on what kind of company you are investing in and what you are looking for in a return, you will want to use ROE in specific ways to evaluate the companies performance. If you are a dividend growth investor you will want to be particularly careful not to rely on the headline number as I will talk about. It is possible for ROE to be negative, zero, a big number and everything in between. The headline number doesn’t tell you enough, you need to look deeper.

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Weekend Investor: Bank Stress Tests Plus Recent Buys

March 16th, 2013 No comments

The major U.S banks have finished up their Federal Reserve stress tests. Nearly every bank passed, though a few (BB&T, JP Morgan, Goldman, Ally) didn’t pass or got a conditional pass which requires some changes to their financial plans.

Most of these banks are flush with cash and are wanting to increase dividends, buy back stock and retire debt. This stress test gives the banks the green light to move forward. If you are invested in corporate debt, this means more of the same: high interest rate debt will be retired plus newer issues will be at lower interest rates. The low interest rate policy of the Federal Reserve has helped to force all kinds of interest rates down. Even though everyone currently thinks that the economy is getting stronger, the interest rate picture still is the same story: debt interest rates are trending down. Unfortunately, this might mean that some of the debt I own now will be called.

This is still playing out, we will likely continue to see low interest rates even after the Fed starts to pull the punch bowl.

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Using the 4M’s To Find The Highest Quality Companies

March 12th, 2013 No comments

What are the highest quality companies that you can invest in on Wall Street and how can you find them? It’s a question that doesn’t have a consensus answer, you would think it would be easy to answer. The reason is that Wall Street tells you one thing about what you should invest in based upon your emotions, but the investments that actually make money won’t necessarily be recommended because they are ‘boring’ or don’t create wealth fast enough.

We all know how that can go. You can make fast money investing in stocks, but it is hard to do for a sustained period of time. The record holder for making money fast is Dan Zanger who turned $10K into $42M during a short stint in the first Internet Bubble (he says his return was professionally audited to be true).

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