Hello 2012

Last week we said goodbye to 2011, a year with plenty of sturm und drang but, at the end, little net change.  At the closing bell last Friday it was a mixed bag of results for US markets. Here are the final numbers for the year:

 Dow Jones Industrial Average: +5.53% (DJIA for short)

Standard & Poors 500:  -.002% (let’s call that “unchanged”)

Nasdaq Composite: -1.8%

 The financial media will tell you how the Dow Jones is unrepresentative of our markets, because it is an index made up of just 30 large companies.  That last part is true, of course.  But the kind of companies that make up the index are (mostly) stable, dividend-paying businesses. Names like Exxon, Procter & Gamble, McDonalds, and 3M are what you’ll find there, and those kind of companies have been steadily recovering from the global recession. Another thing common to most of them is that they pay regular cash dividends to their shareholders – and raise those dividends frequently. By contrast the 500 companies that make up the S&P index are a necessarily very mixed bag, and the Nasdaq index is tech-heavy.  Both of those indices have many of what would traditionally be called “growth stocks.”  As in “I don’t mind if they don’t pay me a dividend because I’m looking for growth.”

 If that’s your plan, you’ll need to look hard. The last ten year’s average annual return for the S&P 500 Index is just over 2%. By contrast, the current average annual cash dividend yield for the 30 stocks of the DJIA is now 3%.  I think the chances of making money in 2012 look pretty good if I can expect 3% just for showing up. The directors and officers of most public companies seem to take pretty good care of themselves. I expect them to consider their shareholders by paying cash dividends.  In most cases, if they do not, then I will not consider them.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

Like It’s 1999

The Internet was still novel, if not new, and more people were getting on board daily. It was considered certain that massive profits would follow, even if there were few profits in evidence at the time.  Wall Street was partying in 1999, raking in millions for technology firms issuing stock and for their underwriters.  By March of 2000, the bubble had popped, and the markets began a two-year decline that would see the NASDAQ Composite, an index stuffed with tech companies, down more than 80%.

 Some of those newly-hatch IPOs, like Pets.com, didn’t survive the bursting of the Dot-com Bubble, as it became known. Other once-promising firms still exist, but are worth small fractions of their original price. Sycamore Networks is a good example.  It went public in late 1999 and ended its first day with a valuation of $14 billion.  Today, twelve years later, you could buy the entire company for $650 million, about a nickel on the dollar of that first-day price.

 I am put in mind of all this by reading a story today about Twitter and their current value, and all the will-they-won’t-they-go-public chatter.  The NY Times reports Twitter is worth $8 billion despite having sales of only $200 million (that’s 40 times sales) and being “close to profitability.” The same article mentions that online game company Zynga is expected to go public soon at a valuation of $20 billion – 33 times sales and over 200 times earnings.  By comparison, Exxon Mobil sells for just over 1 x sales and about 10 x earnings.  Not high-tech enough?  Apple sells for 4 x and 15 x, and Google for 6 x and 20 x.

Welcome back to the tech funhouse.

 GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

And Nobody Notices? – Part 2

The New York Times never did pen an article about Exxon’s big oil & gas find in the Gulf (mentioned yesterday in Part 1) though late yesterday they did reprint a Reuters story on the topic.

 But it’s a new day, there is more natural gas news, and the Times is once again behind the times.  Bloomberg has the story, so do a few other news outlets, but since it can’t compete with Congressman Weiner’s travails, perhaps it doesn’t get wide distribution.  Today’s news is that Exxon has purchased more natural gas assets, mainly in Pennsylvania’s Marcellus Shale, for nearly $2 billion. That’s real money, even for Exxon, and it is a clue about where you should be looking for real results in the energy field.  Remember: wind and solar power in the US (which the White House is subsidizing and wants to double) account for less than 1% of our national consumption.  Meanwhile, natural gas, which has infrastructure in place, burns clean, and has abundant domestic supply, accounts for 22%.

 So take your pick: you can follow the politicians in their subsidized quest, or look to companies producing and delivering natural gas.  I suspect one will benefit the investor more than the other.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).

And Nobody Notices?

Today Exxon Mobil announced two major oil discoveries in the Gulf of Mexico that could lead to production of more than 700 million barrels. I noticed the news on the Dow Jones news wire this morning and looked for additional detail about the story in my regular morning news source: The New York Times.  But as of midday today there was no word in the Times about the find. My other regular morning news check-in, the Democrat & Chronicle online, also has failed to note this story as news.  The closest either of these august publications had on the topic was yet another hydrofracking rant from the Times and a puff piece about pie-in-the-sky fuel cells from the D&C.

 The reality is that Exxon, like so many well managed companies, is out there working every day, doing what they do: making money for their shareholders.  That the New York Times and the Democrat & Chronicle failed to notice makes me wonder.

GTC

(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp.  The author’s opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).