 | BONDS OVERSHADOW STOCKS
By Charles Payne, CEO & Principal Analyst
3/10/2010 2:00:19 PM Eastern
Time
It has been one of those days where the market wanted to breakout but never got the news that could have provided a spark. In fact,
equities took a backseat to bonds both domestically and abroad.
* U.S. 10-year Treasury auction of $21.0 billion
* Portugal raised $1.34
billion as investors bid for $2.15 billion April 2021 @4.17%
* Citigroup $2.0 billion 8.5% 30-year TruPS
* Novartis raised $5.0 billion
*
MGM raised $845.0 million through a 10-year bond issuance
A pullback in foreign demand actually knocked the so-so equity rally off the rails.
Additional News Items
Wholesale trade saw sales continue to edge higher while inventories continue to decrease.
There was much greater petroleum demand than anticipated as
crude inventories climbed less than expected while gasoline and distillates experienced greater draw downs.
Does it Make Sense to be Mechanistic in One's Investment
Style?
By: Brian Sozzi, Research Analyst
I think over a long period of time, the "Dogs of the Dow" or other mechanistic
investment approaches becomes a crowded trade. By noting this I mean the more investors get into such stocks in the search for yield, the price of the
stock should theoretically go higher, thus reducing the yield. With yield declining, it reduces the attractiveness, or the very point of, the "Dogs of
the Dow" or other mechanistic investment approaches. I would think that perhaps those Dogs have less of a propensity to raise dividends given that
their operations are not as healthy as others in the Dow, helping to explain their higher yield from the onset. I suppose there is a law of
diminishing returns at play with regards to mechanistic approaches to investing.
I would rather put money to work in those companies that are
demonstrating a strong probability for a dividend reinstatement or dividend increase. It would be these companies that are likely to experience
stronger equity prices given their stronger earnings power. By extension, that free cash flow could be plowed (or reinvested) back into new growth
assets (in retail, it would be new stores or technology to drive efficiencies from existing stores and distribution) or returned to shareholders.
Again, investors here would enjoy share price appreciation in the early years of high growth in earnings followed by the arrival of dividends as the
business matures and growth slows.
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