By Matt Towery –
We all knew that Greece would default on its debt and leave a mess for the EU. And predictably, the Wall Street “bubble” traders reacted by dumping the good, the bad, and the ugly in Monday’s trading. And the continued head-scratching as to how a nation of Greece’s size and stature manages to keep its economy from melting down while trying to maintain its entitlementmania will keep the story in the news for a while.
But most experts are telling us that the likelihood that this Greek meltdown will impact U.S. companies, including U.S. multinational corporations, is slim. While the market has basically chased its own tail for the first half of the year, there have been opportunities to catch a rising star or two this year. The events in Greece may give us all an opportunity to dive in or dollar-average certain holdings that have suffered some setbacks but which might be big winners down the road.
Note: I am not an investment advisor, so you better darn well find one if you decide to play around in the financial markets. But as a guy who scans the news and opinion surveys to determine where and how I invest, here are my own ideas as I continue to enjoy “Newsvesting.”
First, let’s look at what is already hot. The big companies in the homebuilding industry have seen their shares rise in value over the past few months. Back in the spring I chose one home builder and one home improvement/supply company. This year household formations have grown in numbers, a big reverse from the time period of and following the Great Recession. Lennar Homes (LEN) is one of the giants in the homebuilding business that has its act together. I was holding off on it in 2014 and even into early spring of this year because Lennar, just like its competitors, had a false run-up in value based on a mistaken belief that home buyers were ready to roll in 2014. They weren’t, and the brutal winter caused their stocks to all sink.
I rolled the dice this spring really based on this information about household formation ticking up (Home Depot’s brilliant Carol Tome was one of the first to enlighten Wall Street about this shift). I figured that if Home Depot was smart enough to have Tome, they were the company to fill my home improvement/building supply space. So I went with HD at the same time I purchased shares in LEN.
They have both taken off again in the last few months. I’m not sure this latest burst of activity in housing will be as big or will last as long as that of the last one that led to the bubble burst of 2007; it has quite a way to go to get to that level. Both LEN and HD stalled out Monday and came back with a whimper on Tuesday. And with Greece still trying to decide if it will stay in the EU, there are several more days ahead of us in which we could see the stock market drift downward, taking hot stocks with it. That might be a good time to catch a strong homebuilder or supply company in hopes of enjoying what should be good times for them in the coming months.
As more of a long-term investment, I’m turning to good old-fashioned “sin,” and that means “demon cigarettes” in the form one of the best run companies in America, Altria. Altria (MO) is the old Philip Morris’s domestic corporation and it has a dynamite dividend yield. The good news is that MO has become a bit less costly to purchase this year after a huge surge in January and February led to a drop in price per share in the spring and into June.
The analysts stay high on Altria and so do I. For all the talk of smoking declining in the U.S., many ignore MO’s diversification into other areas and the fact that if interest rates really do rise later in the year, the dollar will resume its strengthening, which will boost Altria’s stock prices. In my case, I sold half of the Altria I bought last year to take some profits, and kept the other half. As a “hedge” on MO I purchased shares of its foreign “sibling,” Philip Morris International (PM), last year. The great thing about both companies is that they pay handsome dividends. But PM does well when the dollar is weaker and foreign currencies are stronger and Altria does better when the reverse takes place. So a buyer of
both can in a sense “balance out” these shifts, enjoy great dividends, and know that historically, shares in both companies have continued to climb over the long haul.
As an update on past posts, I sold much of my Preferred Apartment Communities (APTS) in May, but I’m still high on it and will likely pick up some more during this Grecian downdraft. As for ConocoPhillips (COP), I bought and sold it in a range between $63 to $70 numerous times during the first six months of the year (more like the first four months). COP’s price support has been around $60 and is hovering in that area now. I’m back into COP at these levels and will likely add to my holdings as oil supplies continue to appear bountiful and oil-related stocks remain depressed. COP has the strongest position of the oil production/exploration companies and could be prime pickings for an acquisition later this year. I’m holding a small amount it, along with Exxon Mobil (XOM), which has also been hit by the drop in oil prices and the strength of the dollar. Both have strong dividend yields and are being tested during the crisis in Greece. Both are purchases for the long term (unless one or both pop way up on a spike).
Finally, if you believe we will have interest rate increases in the future, you are looking at banks. My picks have included Wells Fargo (which I bought ages ago), SunTrust (STI), which I purchased Monday on the market reaction to Greece, and New York Community Bancorp (NYCB). Of all of these, NYCB has been the best pick in that it is cheap, has a great dividend yield, and has slowly but surely risen in value. Wells Fargo is the nation’s best “big bank” and SunTrust, in my opinion, is the strongest regional. I rolled the dice and added Bank of America (BAC), which has been a true fiasco in recent years, to my list of bank holdings. It might be that this one banking dog will never hunt. So I’ll watch it oh so carefully.
As for Greece, as a nation they are reaping the “rewards” of their own entitlement-laden economy and their selection of an unrealistic dreamer as their leader. But while America still has some vestige of its free enterprise heritage tradition still alive, we might do well to make a dollar as Greece sinks into its final humiliation from its onetime status as the center of the world to that of a beggar nation.
Note: This column is in no way meant to serve a professional source of investment assistance or advice. The author holds no license to conduct investments of any type for others. He’s just a news and polling junkie who happens to invest based on the concepts of Newsvesting™. Matt Towery’s book, “Newsvesting,” will be released in late September.