With the easy money considered over, traders should remain a little more nimble and cautious this we...
12/12/2003 12:00 am EST
New newsletters are continually being launched, but few have what it takes to survive. One that will clearly thrive for years to come is Michael Sivy's Money Portfolio Advisor Plus—a long-term, fundamental service that ranks among the best new publications I've seen in years. Here are excerpts from the premier issue.
"The stock market has now reached a point that usually occurs only once every six or seven years. After a recession and a harsh bear market, a rebound finally looks to be under way. Each time the cycle comes around to this point, investors get a chance to get on board close to the ground floor. But if you hesitate for too long, you may well miss the biggest profits of the bull market that follows. So this is the crucial moment to get started with stocks—or to boost your holdings of equities if you’re already a long-term investor.
"I’ve been covering the stock market’s ups and downs for more than 20 years, mostly in Money magazine. I advocate a systematic, rational approach to conservative investing that minimizes your risk while offering you a strong chance to earn superior long-term returns. Specific strategies may differ from investor to investor. But there’s no doubt that at this point, you should be participating in some way."
"Like Woody Allen’s old joke that 90% of life is just showing up, the key to investing success is simply being a part of the stock market—for the simple reason that stocks pay higher returns than most other investments. Yes, you’ve heard that before, but over the long term, high-quality stocks earn an average of almost 12% a year. With compounding, the wealthbuilding effect is phenomenal—over 24 years, an initial $100,000 would grow to more than $1.5 million, even if you made no further contributions along the way."
Sivy recommends that investors keep the core of their stockholdings—50% to 60%—in large, seasoned companies. But he also follows smaller growth companies and other special situations that can "add a little extra zing to your returns." Here are two of his favorite special situation plays:
"T. Rowe Price (TROW NASDAQ) is an ideal growth pick for a long-term bull market. Its income is based on the size of the assets it manages. That means the company’s earnings get a double benefit in a bull market. The value of the stocks in T. Rowe’s funds goes up as the market rises. And investors add new money to the funds. The result is that assets under management—and hence earnings—grow faster than the overall market. T. Rowe is also a timely choice right now because of the scandals afflicting the mutual fund industry. Shareholders are moving money into the most conservative fund companies, especially firms like Fidelity, Vanguard, and T. Rowe Price. (Of these, only T. Rowe Price trades publicly.)
"St. Joe (JOE NYSE) is a unique company with enormous asset value, and its shares serve as a perfect long-term inflation hedge. In the 1930s, Alfred I. DuPont and his associates also bought up enormous tracts of timberland, particularly in the Florida Panhandle. The landholdings were the basis for St. Joe, which today, is a nearly pure play on the value of Florida land. The company owns almost 3% of the state, with plenty of acreage along the Gulf of Mexico. Above-average population growth in Florida should continue to boost the stock value of this land-rich company, which would also likely soar if inflation ever became a serious worry again."
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