John Wasik

Mid-cap stocks worth a close look

Jan 14, 2013 17:56 UTC

CHICAGO (Reuters) – Like the middle children they are, mid-cap stocks are often outshined by their mega-cap brethren. The largest two constituents of the S&P 400 Mid-cap Index are Regeneron Pharmaceuticals Inc and Equinix Inc, an information technology firm. Not exactly Apple Inc or Johnson & Johnson.

Yet inattention from the investing world often misses that fact that mid-caps often outperform large companies and are worthy additions to any portfolio. These are generally companies with a market value of from $1 billion to $4 billion but with an outer range of about $13 billion,

Take Ametek Inc, a $9 billion company, which produces electronic instruments for the aerospace industry. It rarely makes headlines, but the company hit a 52-week high on January 4. Overall, the S&P mid-cap index was up almost 4 percent year-to-date through January 11, compared to 3.2-percent return for the large-cap S&P 500 Index over the same period.

Mid-caps tend to prosper because of their flexibility to grow earnings and acquire companies away from the constant glare of analysts and financial media. Institutional investors also tend to shift their purchasing to mid- and small-cap stocks as a bull market matures.

An even better reason to consider mid-caps is their performance long-term when compared to the large-cap S&P 500 Index. Standard and Poor’s did a study of their mid-cap 400 index that covered the period from July 1991 through December 2011 that found that mid-sized companies posted an average return of 1.04 percent, vs. 0.75 percent for the large-cap index.

The Soul of the S&P 500: Durable stocks over time

Jan 11, 2013 13:03 UTC

CHICAGO (Reuters) – It takes a lot of gumption to buy mongrel stocks at the beginning of the year.

Generally, if you’re looking for stocks with upside potential, picking a beaten-up sector is a good way to find turnaround stories.

Last year’s comeback kid was the housing industry, which has been limping along since the 2008 meltdown. One of the biggest winners was the PulteGroup, the homebuilder that posted negative returns in four out of the past five years through 2011. The company has soared about 169 percent on the rebounding housing market for the past 12 months through January 9 as the market is continuing to favor the sector in 2013.

Three smart money moves for 2013

Jan 7, 2013 16:50 UTC

CHICAGO, Jan 7 (Reuters) – Using the non-courageous power of
hindsight, it’s easy to look back on the previous year and see
where the “smart” and “dumb” money flowed.

The direction of money last year tells a well-worn tale:
When fear dominates, money moves into safer vehicles such as
bonds and money-market funds.

After 2008, you can hardly blame anyone for still wanting to
avoid volatility. But those who retreated mostly to fixed-income
have missed the better part of a bull market that’s been running
since 2009.

Hedging “cliff” volatility might not get you too far

Jan 4, 2013 16:57 UTC

CHICAGO (Reuters) – Once again, “fiscal cliff” mayhem has given investors a furtive look into the unsettling world of market volatility, which will not end with Tuesday’s deal. We will likely see more Tilt-A-Whirl politics in the coming two months as Congress deals with the debt ceiling and budget cuts.

Volatility has long been the enemy of the mainstream investor. It is easy enough to measure and hedge, but short-term gauges and volatility products such as exchange-traded notes can get you into trouble. They do not work effectively for buy-and-hold investors and have to be timed precisely for traders.

The skittish mass psychology of 2011 set the stage nicely for exchange-traded products that track or blunt volatility. After a rough summer of debt-ceiling and euro zone gyrations, the S&P 500 barely eked out a gain.

Playing the wild cards in 2013

Dec 31, 2012 18:05 UTC

CHICAGO, Dec 31 (Reuters) – At this point, most investors
are peering over the fiscal cliff and feeling like Jimmy Stewart
in the classic Hitchcock film “Vertigo.” But if you look beyond
the precipice, there is some solid ground.

For one thing, the U.S. housing market will be better than
most people expect, which bodes well for patient investors
holding onto consumer-sector stocks. Most economists are not
predicting any startling jump in home sales or prices next year,
and they largely have not forecast how a housing rebound will
spill over into the wealth effect of increasing consumer
spending and job creation.

Home foreclosures in November hit their lowest rate in six
years, a trend that is likely to continue, according to
RealtyTrac, an online marketplace of foreclosure properties.

Six ways to optimize your retirement portfolio in 2013

Dec 28, 2012 16:31 UTC

CHICAGO (Reuters) – You may be waiting to optimize your retirement portfolio, thinking that you should know what’s going on in Washington and Europe before you act.

However, there are some changes you can set in motion right now that could make a big difference down the road regardless of what happens with the fiscal cliff, tax changes and Wall Street:

1. Boost your contribution rate

The longer you wait to contribute, the greater return you will need to achieve your goals. Thanks to the compounding effect, the more your contribute, the more you can accumulate when dividends and appreciation are added.

Why you need to gauge your human capital

Dec 21, 2012 15:37 UTC

CHICAGO (Reuters) – The end of the year is a good time to illuminate your personal financial situation in a different way. Instead of focusing exclusively on financial capital – how much money you have accumulated – look at your human capital.

This calculus of human capital, which economists wonkily define as “the net present value of your lifetime earnings,” matters as much to your lifelong financial situation as the size of your nest egg.

When some people gauge their human capital, they find that they are not making enough money and decide to make some changes. That could mean starting a second or third career.

Can you really invest like Warren Buffett?

Dec 17, 2012 20:18 UTC

CHICAGO (Reuters) – For as long as I can remember, the investment maxim that most evokes a mix of adulation and performance anxiety is “Invest like Warren Buffett.”

How can mere mortals emulate an investing deity? In truth, most of us will never come close to “the Sage of Omaha.” He’s done all the things a stellar investor should do: He buys when there’s blood in the street, finds solid companies at great prices and keeps them “forever.” Lacking Buffett’s phenomenal verve and mettle, though, most of us won’t do this. But that doesn’t mean we’re doomed to failure.

Fortunately, the multibillionaire chairman and chief executive of Berkshire Hathaway Inc. has been generous with his wisdom and two recent books published in November compile and analyze it elegantly: “Tap Dancing to Work” by Carol Loomis, a long-time Fortune writer and Buffett friend and “Think, Act and Invest Like Warren Buffet” by Larry Swedroe, principal and director of research for Buckingham Asset Management, LLC.

Looking beyond emerging markets to ‘frontier’ economies

Dec 14, 2012 13:30 UTC

CHICAGO, Dec 14 (Reuters) – With China, Brazil and India
hitting icy patches on their economic growth paths, investing in
even younger emerging markets looks promising.

The so-called “frontier” economies offer diversification and
profit opportunities as big global investors look for low-cost
labor and resources. Most of these 25 or so countries won’t
appear on most individual investors’ radar screens, though. They
range from Bangladesh to Vietnam and are expanding due to
industrialization or global demand.

Vietnam, for example, benefiting from normalized relations
with the U.S. and membership in the World Trade Organization, is
one of the only Asian countries to have grown faster than China
since 2000, according to the McKinsey Global Institute. The
country’s manufacturing sector alone grew at a 9-percent annual
compounded growth rate from 2005 to 2010.

How to invest if the ‘fiscal cliff’ bears are wrong

Dec 10, 2012 17:15 UTC

CHICAGO, Dec 10 (Reuters) – Let’s assume, for a moment, that
the “fiscal cliff” bears are wrong.

Underlying pending tax increases and more debt-ceiling
battles is some fairly positive economic news. Job growth
surprisingly soared last month and U.S. home prices in October
posted their biggest increase in six years, according to
CoreLogic. Factory orders also rose unexpectedly during the
month. And the Federal Reserve’s stimulus policy is keeping
mortgage rates low.

That all bodes well for a low-growth, sustainable recovery
in which basic materials, industrials, emerging markets and even
utilities regain favor. The upswing in employment and personal
income will translate into a substantial consumer wealth effect,
and more people will be spending money on homes, autos,
appliances and consumer goods. Overseas, the rising U.S. tide
will lift emerging markets. Renewed confidence combined with
secular economic growth represents “a likely catalyst for the
next multi-year bull market,” notes the BMO Private Bank 2013
outlook for financial markets.