4 Stocks for the Reckoning

03/15/2012 8:45 am EST


Jack Adamo

Editor, Jack Adamo's Insiders Plus

While good news is beating back the bad news at this point, there are still some serious dark clouds that are going to have to clear and it pays to stay cautious, says Jack Adamo of Insiders Plus.

Aside from the worldwide recession likely to ensue from what’s going on in Europe, sooner or later there will be blowback from the huge moneyprinting going on there—which totaled more than €1 trillion last year, on top of the bailout money.

That will be aggravated by the money continuing to be printed here and in Asia (to keep their currencies from getting too strong to support exports).

Whether that blowback will be in the form of another huge stock-market bubble (and ensuing bust), or runaway inflation, or a Japan-like growth ice-age, I don’t know, but it won’t be pleasant.

The Wall Street Journal was “encouraged” that the Nikkei broke 10,000 this week. It was 30,000 in 1989. Meanwhile, our government sees no inflation at home. Gasoline, home heating fuel, and food are not in the “core” inflation statistics our enlightened fathers use. Wages are, however—so don’t worry, they’re not getting out of hand.

Enough. I’m through with my rant. The simple fact is that whatever debacle is coming is beyond our control or ability to time, so we have to deal with the situation at hand. Right now I’m contented to hold the diversified stocks we have, with our emphasis on gold and dividends, and to let our hedges ride for the time being.

At least the latter are treading water now; maybe they’ll prove their worth soon. Gold will definitely do the same, and the dividends may shrink a bit, but for the most part they’ll keep on coming.

And here's some good news from current portfolio stocks:

Companhia de Bebidas das Americas (ABV)
Ambev reported a 14.3% increase in fourth quarter EPS of 98 cents. Fourth-quarter volumes are typically 29% of annual sales, compared to about 24% for the other three quarters, so we can’t extrapolate these results forward, but full-year results weren’t too shabby either, with EPS growing 11.2% to $2.76.

We’re paying just 15 times earnings for a company whose past growth and future prospects beat the vast majority of what’s available in the US, despite higher P/Es and less trustworthy earnings.

We should also get some added returns from currency appreciation in the long term. Buy Ambev up to $41.

Canadian Imperial Bank of Commerce (CM)
The bank reported decent first-quarter earnings. (The company is not on a calendar fiscal year.) Diluted EPS were up 7% to $1.93, compared with $1.80 a year ago. However, excluding some “one-time” items, EPS fell 3%. Revenues rose 1%.

I’m a lot more trusting of Canadian banks than ours. They certainly have their problems, but residential real estate loans are much more secure, and the unbridled greed factor does not compare to ours.

CIBC raised its dividend a little, to 90 cents. That’s always welcome news. Buy Canadian Imperial Bank of Commerce up to $80.

Vector Group Ltd. (VGR)
This company declared a regular quarterly cash dividend on its common stock of 40 cents per share, the same as last quarter. The Vector Dividend occasionally fluctuates because of periodic real estate sales or lack thereof, so it’s nice to see it maintained at the recent high level. Buy Vector Group Ltd. up to $19.50.

M&T Bank (MTB)
In a small bit of encouraging news, M&T has just completed renovating its corporate headquarters. Unlike the typical big US corporation, whose big shots need Xanadu-like palaces from which to command their minions, MTB just fixed up the old place. Total bill: $4 million. That’s less than a bathroom renovation for an S&P 500 CEO.

I like that MTB’s management is careful about how it spends my money. Buy M&T Bank Corp. up to $85.

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