Opinion

John Wasik

Is your stock strategy working?

Jun 11, 2013 16:34 UTC

CHICAGO (Reuters) – For Eugene Fama, the University of Chicago professor and father of modern finance, the key to investing is relatively simple – stay in a low-cost, diversified portfolio to capture virtually all market returns with a mix that’s right for the amount of risk you can stomach.

Yet few people really believe that will work – they don’t like staying still – so they chase active managers or pick stocks themselves, usually buying and selling at the wrong times. They deceive themselves into thinking that they can outwit the smartest managers in the world and their costs won’t sink them.

With the stock market flattening out and perhaps taking a breather from its first-half surge, it’s worth taking a look at Fama’s basic tenets to avoid such bad behavior. (I recently had the chance to speak to him during a conference at the university sponsored by Loring Ward, an investment manager based in San Jose, California.)

Fama is best-known for research with long-time partner Kenneth French, a professor of Dartmouth College, which shows that certain groups of stocks tend to outperform over time: Value stocks bought at bargain prices tend to do better than companies focused on growth. Small companies tend to outpace large ones.

Known as the Fama-French “Three-Factor Model,” company size, style and market risk are essential to employ in a diversified portfolio.

Column: Housing rebound boosts timber stocks

Jun 3, 2013 20:42 UTC

CHICAGO (Reuters) – If a tree falls in the forest, can you make a little money? As the U.S. housing rebound continues, you can watch the value of your real estate rise. In addition you can reap gains from resource companies that own and process timber.

Since most U.S. homes are still framed with wood, timber becomes a more valuable commodity as new construction booms. Home prices gained the most in seven years in March, according to a recent S&P Case-Shiller housing index report. Housing starts in April rose 16 percent over the previous month with new building permits up 14 percent, according to the U.S. Census Bureau.

North American sawmills are running at the fastest pace in six years, up nearly 7 percent over last year, according to CIBC World Markets, a Canada-based investment bank. Growth in China is also contributing to the rebound. More than 60 percent of log exports from the Pacific Northwest head to the People’s Republic.

Housing rebound boosts timber stocks

Jun 3, 2013 20:39 UTC

CHICAGO, June 3 (Reuters) – If a tree falls in the forest,
can you make a little money? As the U.S. housing rebound
continues, you can watch the value of your real estate rise. In
addition you can reap gains from resource companies that own and
process timber.

Since most U.S. homes are still framed with wood, timber
becomes a more valuable commodity as new construction booms.
Home prices gained the most in seven years in March, according
to a recent S&P Case-Shiller housing index report. Housing
starts in April rose 16 percent over the previous month with new
building permits up 14 percent, according to the U.S. Census
Bureau.

North American sawmills are running at the fastest pace in
six years, up nearly 7 percent over last year, according to CIBC
World Markets, a Canada-based investment bank. Growth in China
is also contributing to the rebound. More than 60 percent of log
exports from the Pacific Northwest head to the People’s
Republic.

Column: Ways to hedge your bets in the bond market smackdown

May 31, 2013 14:52 UTC

CHICAGO (Reuters) – For investors who piled into bond funds this year, the past week has been an abject lesson of how to get bruised in short order.

An uptick in yields smacked bond prices, which move inversely to yields. Funds investing in high-yield and long-maturity issues got hit the worst. Yields on 10-year Treasury Notes hit a peak of 2.23 percent, the highest since April of last year, before dropping to 2.16 percent on Wednesday.

The pre-June bond swoon is a harbinger of things to come. The U.S. economy is heating up after years of decline, which will trigger greater demand for credit and lower bond prices.

Ways to hedge your bets in the bond market smackdown

May 31, 2013 12:02 UTC

CHICAGO (Reuters) – For investors who piled into bond funds this year, the past week has been an abject lesson of how to get bruised in short order.

An uptick in yields smacked bond prices, which move inversely to yields. Funds investing in high-yield and long-maturity issues got hit the worst. Yields on 10-year Treasury Notes hit a peak of 2.23 percent, the highest since April of last year, before dropping to 2.16 percent on Wednesday.

The pre-June bond swoon is a harbinger of things to come. The U.S. economy is heating up after years of decline, which will trigger greater demand for credit and lower bond prices.

Column: Five trends that favor stocks over bonds

May 29, 2013 12:05 UTC

CHICAGO (Reuters) – With the S&P 500 Index up more than 16 percent this year and health care, its top sector index, up 24 percent, it seems counterintuitive that so many investors are clinging to the low single-digit returns in bonds.

Money certainly isn’t gushing into stock mutual funds, even though the Dow Jones industrial average and the Standard & Poor’s 500 Index have hit a series of record highs.

Between April 24 and May 1, investors pulled more than $4 billion out of U.S. equities while pumping almost $1 billion into bonds, according to the Investment Company Institute, the trade group for mutual funds, exchange-traded funds and other U.S. investment companies. The following week, more than $7.3 billion was invested in bond funds, compared with only $363 million in U.S. stocks.

Five trends that favor stocks over bonds

May 29, 2013 11:59 UTC

CHICAGO, May 29 (Reuters) – With the S&P 500 Index up more
than 16 percent this year and health care, its top sector index,
up 24 percent, it seems counterintuitive that so many investors
are clinging to the low single-digit returns in bonds.

Money certainly isn’t gushing into stock mutual funds, even
though the Dow Jones industrial average and the Standard
& Poor’s 500 Index have hit a series of record highs.

Between April 24 and May 1, investors pulled more than $4
billion out of U.S. equities while pumping almost $1 billion
into bonds, according to the Investment Company Institute, the
trade group for mutual funds, exchange-traded funds and other
U.S. investment companies. The following week, more than $7.3
billion was invested in bond funds, compared with only $363
million in U.S. stocks.

Column: Three reasons why the golden age of dividends is dawning

May 24, 2013 12:51 UTC

CHICAGO (Reuters) – The golden days of summer might also brighten the portfolios of dividend lovers.

With most large corporations swimming in cash as the economy and earnings improve, adopting a dividend-centric strategy looks even more promising for moderate-risk investors.

Dividends, the portion of earnings that corporations pass along to shareholders in the form of quarterly payments, are becoming more generous. Not only do they reward long-term shareholders with higher total return, they are proven inflation hedges.

Three reasons why the golden age of dividends is dawning

May 24, 2013 11:59 UTC

By John Wasik

CHICAGO, May 24(Reuters) – The golden days of summer might
also brighten the portfolios of dividend lovers.

With most large corporations swimming in cash as the economy
and earnings improve, adopting a dividend-centric strategy looks
even more promising for moderate-risk investors.

Dividends, the portion of earnings that corporations pass
along to shareholders in the form of quarterly payments, are
becoming more generous. Not only do they reward long-term
shareholders with higher total return, they are proven inflation
hedges.

Column: Two ways to pick your summer stock retreat

May 20, 2013 20:00 UTC

CHICAGO (Reuters) – It used to be easy to abide by the old Wall Street nugget that you should pull out of the market in spring and come back in the fall.

But research shows that it doesn’t make sense to completely abandon the stock market during the summer months, particularly when it comes to individual sectors. Not all of them will decline.

There are several ways to seize gains if you want to make some portfolio adjustments. Here are two approaches.

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