Page 1 March 2014 The list below comprises the top 30 stocks, in order, of the 125 followed by, These are worthy of additional research. The highest Navigator Ranking is “Full Speed Ahead”, followed by “Power Up”, “Neutral”, and “Power Down”



Navigator Ranking: stocks are rated based on price to forward earnings growth ratios, current dividend yield, forward earnings yield, S&P Equity Ranking, and consensus of broker timeliness. The investment time horizon for Navigator Rankings is 3-years.

Market Trends utilizes the 75-day moving average (MA) and the 200 MA as reference points for medium-term market trends. We also rely on the EqualWeighted S&P 500 ETF (RSP) as the “market” indicator to follow. With an equal-weighted index, each component is rebalanced quarterly to reflect price movements and offers a broader reflection of the overall market trends. When the current price is above both the 75- and 200day MA, the trend is Green or Positive. When the current price is below the 75- and above the 200-day MA, the trend is Yellow or Caution. When the current price is below both the 75- and 200-day MA, the trend is Red or Negative.

Current Price RSP 75-day MA 200-day MA

$72.33 $69.86 $66.43

Comment: After pulling itself out of the Caution area in late Jan into early Feb, the overall market Saratoga Springs, NY March 2014 trend has regained its Positive footings. While RSP is 8.9% above its 200-day moving average and comfortably in positive territory, it may be time for a rest. The last times the market crossed below the 200-day MA was in Nov 2012 and March 2012. GDP growth will be positive in 2014, but continue sluggish. Most stock prices are fully valued and finding acceptable value has become a bit more difficult. Sluggish GDP growth will probably hold back stock valuations.

Triple Top Breakout: A bullish Point & Figure chart pattern that forms when an X-Column breaks above the equal highs of the two prior X-Columns.

Stocks Moving Up and Down in Navigator Rankings The following are stocks that moved up to and down from the top tier over the past month:

UP Movado Heineken Brinks JP Morgan Down GATX Corp Flextronics Glencore Xstrata plc Shire Pharmaceuticals


Point and Figure Chart of RSP Courtesy of P&F Pattern: Ascending Triple Top Breakout on Feb 19, 2014 Traditional 3 Box Reversal Bullish, Price Objective (revised) $63 (met)


Highest Ranking Stocks by Sector Basic Material: Glencore GLNCF, BHP Billiton BHP Consumer Discretionary: Ricks Cabaret RICK, Home Depot HD Consumer Staples: Walgreens WAG, Hildenbrand HI Energy: Halliburton HAL, Dorchester Minerals DMLP Financial: Och Ziff OZM, HSBC Holdings ADR HSBC Health Care: United Health Care UNH, Shire Pharmaceuticals SHPG Industrial: Macquarie Infrastructure MIC, Johnson Controls JCI Tech: United Technologies UTX, Cognizant Technology CTSH Utilities: Gabelli Utilities Fund GABUX, American Electric Power AEP Saratoga Springs, NY March 2014 Highest Ranking Quality Stocks Standard and Poor’s S&P Capital IQ offers a Quality Equity Ranking system that rates companies on two factors: 10-yr Earnings Growth and 10-yr Dividend Growth. A+ is the highest with B+ considered average. Of the 1500 or so companies followed by S&P, there are only 47 firms qualifying for A+ ranking. Below are companies with A+ ranking and are highest on our Navigator List:



Noteworthy Near Misses As our methodology has a relative focus (Firm A is higher rated than Firm B, then review the top 30) rather than an empirical focus (all firms over a preset number), near misses are a great place to find ideas worthy of further research. This month’s noteworthy near misses are:



The Value of Date-Specific Bond ETFs with Short-Maturities One predicament current fixed income investors are dealing with in today’s very low interest rate environment is rolling over maturing bonds or the need to increase one’s bond exposure. We all know 10-yr Treasuries are yielding about 2.7% and 30-yr


Treasuries 3.6%, with short maturities offering even lower returns. With the potential for interest rate risks to rise later this year and next, many investors are seeking to stay short in their maturities and are turning to corporate bonds to generate a bit more income. Rather than picking individual issuers with specific maturities, many investors rely on corporate bond funds with names that seem to fit their needs, such as XYZ Short-Term Corporate Bond Fund. However, unlike individual bonds, bond funds do not have a specific maturity date when an investor’s principal becomes due for repayment. The proceeds of maturing bonds held in the fund are reinvested back into the portfolio. Because of this feature, most bond funds trade based on competitive yields to its distributions and the NAV will fluctuate in value, generally moving higher as rates decrease and lower as rates increase. In times of low rates, preservation of capital becomes a bit trickier if income yield is also the goal. However, some investors are willing to move down the quality ladder to gain the higher yields. The use of a high-yield bond fund spreads the credit-risk over a much wider variety of issuers, but still lack a specific maturity date. There are investment vehicles called Unit Investment Trusts (UIT) that act like a bond fund in their holding of a portfolio of assets, but have a specific date for maturing/ distribution / liquidation. A UIT will usually match its portfolio maturities to the termination date. Prepayments of bonds assets to the UIT could create a return of capital ROC distribution to investors. This ROC distribution reduces ongoing income and final return of capital Saratoga Springs, NY March 2014 from the UIT. UITs offer the diversity of a bond fund with a date-specific return of capital. But they are difficult to find and liquidity may be an issue. A few years ago, Guggenheim Investments began offering their BulletShares ETFs. The basic concept is to offer short-term corporate bond portfolios with date specific maturities ranging from 2014 to 2021, in two investment grades – Corporate and High-Yield Corporate. Income is paid monthly and the ETF is liquidated/terminated on Dec 31 of the date-specific year. In the final year, accumulating principal repayments will be reinvested in low yielding commercial paper until distribution and the lower yield will most likely reduce final year income distributions. The following are examples of BulletShares datespecific maturities and credit quality: Guggenheim BulletShares 2016 HY Bond BSJG Guggenheim BulletShares 2017 HY Bond BSJH Guggenheim BulletShares 2016 Corp Bond BSCG Guggenheim BulletShares 2017 Corp Bond BSCH For investors seeking a place to park incomedesignated capital for the short-term until overall interest rates become more favorable, the definedmaturity of the BulletShares ETFs would seem to fit their needs. With the lowest yield on the curve, short-term fixed-income has been historically a difficult place to find adequate returns.

Not to be outdone, iShares have introduced their muni bond version of BulletShares. However, instead of investing in corporates, iShares invests in ATM-free tax-free municipal bonds with a datespecific flair. Examples are: iShares Muni-bond 2016 ETF MUAE iShares Muni-bond 2017 ETF MUAF More information can be found at their website: MUAF.htm Investors should be aware that with such short maturities, the expected return for tax-free munis is only a bit better than money market accounts. For example from the iShares website, the current price of $55.44 for MUAF would generate total annual returns on a Tax Equivalent basis of 0.34% going out to the end of 2017, or 4-yrs. Overall, the ease of buying and selling date-specific bond ETFs makes developing a bond ladder of different maturities with the reach of most investors. These ETFs are an alternative to individual bond selections for short-term investment horizons, especially for smaller bond portfolios willing to take on the credit-risk of a lower quality portfolio. Utilizing date-specific bond ETFs will usually trade interest rate risk in the portfolio for higher credit risk, but mitigates the credit risk though a diversified portfolio and closerin maturities where economic clarity is clearer.

More information can be found at their website: ulletshares

4 Saratoga Springs, NY March 2014 Income Ideas Off the Radar Screen Some higher dividend or income equities are intriguing but are not part of our investment-tracking list. These may include MLPs, REITs, or Preferred issues.

This month the highlighted issues include small-cap Arbor Realty Trust Preferred, Series C ABR-C. This issue carries a $25 par value, can be repurchased by the company after Feb 2019 at par, and offers a dividend of $2.12 for a coupon yield of 8.5%. Currently trading at a discount as the issue is recently listing with the NYSE, the current price of $24.50 gives a current yield of 8.75%. Interest may pick up and share price may move to a premium to par. The issue is cumulative, which offers better protection than the common if times get tough. The best home for this is in IRA accounts as the dividend is non-qualified. In addition, investors seeking more European exposure may want to research investment firms Pargesa PRGAF, PARG.SW or Groupe Bruxelles Lambert GBLBF, GBLB.BR. The investment firm holds a concentrated position in oil company Total TOT (25.8% of assets), cement maker Lafarge (23.0% of assets), industrial minerals processor Imerys (16.0 % of assets), natural gas and electric utility GDF Suez (12.9% of assets), spirits maker Pernod Ricard (14.2% of assets), and water company Suez Environmental (2.6% of assets). Trading at a 25% to 28% discount to the value of its publicly traded holdings in some of Europe's bestknown international companies, Pargesa or Groupe Bruxelles Lambert offer an actively managed diversified portfolio approach to investing in Europe. However, due to foreign dividend


withholding issues, this is one best held in taxable accounts. At a current Euro:USD exchange, the 2013 dividend is $3.66 a share for a yield of 3.8% and a 10-yr annual dividend growth rate of 7.8% Investors should review the Kinder Morgan group of companies with a focus on either the MLP Kinder Morgan Partners KMP or Kinder Morgan Inc. KMI. KMP owns the pipeline assets while KMI is a holding company. KMI owns 11% of the shares of KMP and the General Partner of the partnership, which comes with incentive distribution rights. These combined are about 80% of KMI cash flow. In addition, KMI is the General Partner of El Paso Pipeline Partners and 40% ownership of its shares. KMI currently yields 5.0% and is not structured as an MLP. This makes it very suitable for IRA accounts looking for exposure to natural gas infrastructure assets without a MLP tax structure. A recent negative article in Barron’s has created a bit of a stir with investors, but may be immaterial in the end as the basis for the negativity is not new news. In 2013, research firm Hedgeye also published an accusation of improper accounting by not fully reporting maintenance cap ex. This has pressured the stock and presents investors with a good entry

Notes from the Top Och-Ziff OZM, Financial, Money Manager. Distributions paid for 2013 $1.73 is a TTM yield of 12.5%, distributions for 2012 of $1.12 yield 7.8%. KKR Financial KFN, Financial, Specialty. KFN has agreed to be returned back to the mother ship Kohlberg Kravis Roberts & Co. KKR. In a stock deal, KFN will become part of private equity firm KKR. Saratoga Springs, NY March 2014 We will drop coverage of KFN and replace it with KKR. Dorchester Minerals, DMLP Energy, Oil and Gas E&P. Oil and gas royalty firm wrapped in a MLP structure. Organized with no debt and no UBIT for unit holders. Variable distributions TTM yield 7.1%. Unhedged exposure to natural gas improves upside when natural gas pricing recovers. Chicago Bridge and Iron CBI, Energy, Infrastructure Construction. CBI has been a long-time favorite since 1997. Seems fully valued but continues to move higher on Warren Buffet’s addition to his portfolio and strong earnings growth. HSBC Holdings, HSBC, Financial, Global Bank. HSBC is preferred over Goldman Sachs or JP Morgan for greater non-US banking exposure. Target Corp TGT Consumer, Retail. Rebounding from the really bad effects of their data breach. Forward dividend yield is 3.1% vs. a 5-yr average of 1.9%. May take time to right the ship and recoup previous highs.

What Does That Mean, Anyway? Par Value - This issue discussed a preferred stock’s par value. What is par value? From Par value, in finance and accounting, means a stated value or face value. From this come the expressions at par (at the par value), over par (over the par value) and under par (under the par value). As an example, Arbor Realty Trust recently sold preferred shares, Series C, at $25.00 each share. The terms of the investment calls for the company to place a “par value”, or stated value, of $25.00 on each share . The terms also give Arbor Realty Trust the option to buy back these shares after 2019 at


par value, or $25.00. Preferred dividends are usually tied to the par value for determining comparable income yields. For example, this issue pays an annual dividend yield of 8.5%, or $2.12 a share, based on its par. Dividends on preferred stocks do not usually increase, unlike expectations for common stock dividends. Preferred stocks usually have par values of $25, $50, or $100 per share at time issue, which are preserved if and when the issue is repurchased by the company. Usually if the current market interest rates are low enough for the company to buy back the shares and reissue another series preferred at a lower interest rate, they may, again based on the terms of the specific series being repurchased. In the case of Arbor Realty Trust, the Series C cannot be bought back by the company until after 2019. Preferred shares will trade above or below their stated par value based on a number of factors including the likelihood of being repurchased in the short–term and the comparable interest rates. During times of financial stress, preferred may trade far below their par value if the fear of a default or suspension of the preferred dividend is possible. For example, the Series A preferred stock of HSBC Holdings traded at $10 during the 2009 financial crisis and was below par value of $25 from May 2017 to Sept 2010. Since the dividend was not cut, those who bought HSBC Series A at the low of $10 are still receiving a 15.5% annual cash yield on their cost of capital. In addition, share prices have since traded up to their par value and currently trade at $25 a share. Saratoga Springs, NY March 2014 About Us George C. Fisher, founder and publisher of, believes methodically incorporating overlooked equities in a diversified portfolio approach is far from rocket science. Guided by the framework of Modern Portfolio Theory, Fisher locates equity investment opportunities using widely distributed value indicators and advocates a minimum three-year investment horizon for most financial decisions. An understanding of the tools used to assess one’s personal risk factors and the methods of finding investments that meet these factors can be easily incorporated in most individual portfolio construction. offers both a monthly newsletter and multi-part financial education training with the advantage of personal communication. Topics include Assessing Personal Risk, Asset Classification and Diversification, Equity Research, Value Fundamentals, and Portfolio Implementation.

at Georgia-Pacific Corp before venturing out on my own, operating several businesses from manufacturing to export marketing management. President Ronald Reagan appointed him to the National Advisory Council overseeing the Small Business Administration from 1988 to 1991. For a complete list of equities followed, please contact us.

Much like a navigator assists in safe passage for the captain and owners of ocean-going vessels, helps teach the tools financial experts use in portfolio design and management. More information is available at

Fisher is a Seeking Alpha contributor. He is the creator of the 1997-2004 investment newsletters Power Investing with DRIPs, focused on timely selections of dividend paying stocks. Fisher has published two books through McGraw-Hill, All About DRIPs and DSPs, and The StreetSmart Guide to Overlooked Stocks. He occasionally uses the pen name Jon Parepoynt. A list of his previous SA articles can be found at: 1) 2) Fisher has been a Registered Investment Advisor, financial author, and entrepreneur. Fisher brings a variety of expertise to his clients, from corporate operational appreciation, to personal investment planning and management to stock market analysis skills. Fisher’s work experience covers a variety of fields. Prior to being a RIA, he spent 15 years as a corporate manager


by Saratoga Springs, NY

March 2014  
March 2014  

Monthly Investment Newsletter