December 17, 2014
FROM THE EDITOR
Nancy Zambell

by Nancy Zambell
Editor of Dividend Digest and Investment Digest
from Investment Digest, Issue 764

The markets hit a speed bump in the past couple of weeks, due mostly to uncertainty over slumping oil prices, questions about the Fed’s next moves, a Russian currency dive and more terrorism around the world.

And while our Advisor Sentiment Barometer has turned more bearish, this attitude seems to be focused on the short-end of the time horizon, with most advisors still bullish for the long-term.

Our recommendations this month are more conservatively biased, but offer plenty of value and growth picks, as well as a few opportunities that include a bit of income.

Our growth recommendations this month span a wide array of industries, including airlines, healthcare/scientific products, investment brokerage and rental cars.

With more discretionary income to spend, consumers are flocking to the Media/Entertainment industry, making our three recommendations in this sector very attractive.

It goes without saying that plunging oil prices have created a plethora of discounted energy companies, and we offer several value picks for your review. And (mostly) rising stock prices are also sending investors to some beaten-down metals bargains.

Companies loosening their purse strings are boosting technology firms’ prospects, and you’ll find a variety of picks here to fatten your stockings this holiday. And that fat cash store is also finding its way into the healthcare sector, where biotechs, pharma, facilities, and equipment are prospering.

Lastly, as U.S. markets trade at consistently higher levels, our contributors offer you some global alternatives to help diversify your portfolios.

We hope you enjoy this issue, and invite you to share your investment strategy questions and comments with us. And don’t forget to visit our website for a growing library of educational articles and videos. My blog has just kicked off, and my first posting introduces an idea for end-of-the-year tax housekeeping. You can read it here.  Watch for more tax savings suggestions in my next posting.

I wish you a very happy and healthy holiday season and look forward to continuing to bring you profitable investments in the New Year.

EDITOR'S PICK

December 19, 2014
Precision Castparts (PCP)
Ingrid Hendershot

Ingrid Hendershot

from Hendershot Investments

Precision Castparts (PCP) has grown from a small manufacturer of investment castings for a wide variety of applications to a global market leader producing investment castings, forgings and fasteners for aerospace, power and general industrial markets.

In fiscal 2014, aerospace markets accounted for 68% of sales, power markets represented 18% of sales and general industrial and other markets accounted for 14% of sales. On a business segment basis as of 9/30/14, forged products accounted for 43% of sales, airframe products represented 32% of sales and investment cast products accounted for 25% of sales.

Because of the complexity of the manufacturing process and the application of proprietary technologies, Precision Castparts is one of the few manufacturers that can consistently produce large, complex structural investment castings in quantities sufficient to meet customers’ quality and delivery requirements. This has enabled the firm to become the preferred and leading supplier of structural and airfoil casting for jetcraft and industrial gas turbine engines and to expand into the structural airframe and armament markets. Read More »


FEATURED INCOME INVESTMENT

December 11, 2014
Microsoft (MSFT)
Tyler Laundon

Tyler Laundon

from 100% Letter

For Microsoft (MSFT), 2002 to 2012 was a lost decade as the stock generated zero return, outside of dividends. The company had a virtual monopoly on PC software with Microsoft Windows, and a dominant enterprise software business. But in the middle of the last decade the competition raised the bar. Many new devices, such as those from Apple (AAPL) and Google (GOOG), didn’t need Microsoft’s operating system. And by most accounts, the release of Windows Vista in 2007 was a flop.

Despite a nice dividend, shares of Microsoft were not all that enticing. But that’s changed. The release of Office 365—a cloud-based version of the company’s most popular applications—is likely to be the biggest strategic move by the company in years. The consumer version includes Word, PowerPoint and Excel and offers online storage

The stock could easily trade up to a forward PE of 18 based on my forward EPS estimate of $3.10. That implies 10% near-term upside in the stock. While that doesn’t sound like a lot of upside potential, I firmly believe that a 10% gain here is just the beginning. Read More »


INCOME INSIGHTS

Jon Markman

Jon Markman

By John Markman from Strategic Advantage
Dividend Digest 267 dated December 10, 2014

No Panic, but Low Oil May Spell Problems

Stocks retreated Monday in relatively quiet, orderly trading that lacked a specific catalyst. We have seen this countless times in the past year, as it is a very common feature of trading when indexes are at or near all-time highs. It does not have any hidden meaning. It was a rest day, though to be sure a pretty deep one, as the S&P 500 recorded its steepest setback since Oct. 22.

Screen Shot 2014-12-11 at 2.42.53 PM

 

If there was one factor weighing on sentiment it was crude oil, whose spot price in Texas was obliterated again, sinking 4.2% to a five-year low around $63/barrel.
Morgan Stanley cut it price outlook, citing oversupply; the firm’s worst-case scenario has oil falling as low as $43 by the second quarter next year. That’s way out of consensus. Read More »