The Intelligent Investor $$$

Dividends Moving Higher

2010-08-12T13:12:00.001-07:00

Despite the dismal market this week, two of our companies announced dividend increases.

AFLAC (AFL) initiated a 7% hike increasing their dividend to $.30 a share. The stock now has a current yield of 2.4%. The company has also made a commitment to buy back stock. They may buy back as much as 3 million shares by the end of 2010 and plan to purchase 6 million shares in 2011.

Illinois Tool Works (ITW) announced a 105 dividend increase to$.34 per share. The stock has $2.55 in free cash flow per share and a current dividend yield of 3%.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Bond Holders Beware

2010-08-06T07:16:00.000-07:00

Good news for International Business Machine (IBM), bad news for investors. On August 2nd, IBM sold $1.5 billion of 3 year debt at a 1% interest rate. This rate is a mere .3% higher than government debt with a 3 year maturity and 50% less than the dividend yield on the common stock.

The Wall Street Journal had a great article talking about IBM’s remarkable track record of being able to issue low rates on bonds right before the Federal Reserve raises rates (link to article: http://blogs.wsj.com/marketbeat/2010/08/05/is-big-blue-flashing-a-bond-warning/?mod=wsjcrmain).

Pretty smart for IBM. If they used the proceeds to buy back their own stock, they are borrowing at 1% to get 2% on their dividend so even if the stock went nowhere they are still ahead of the game. If their track record holds true, this is bad news for bond holders. Higher rates will mean losses for bond investors.
Our advice? Buy the stock with a 2% dividend yield and put it away for the next 5 years.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

International Business Machine 2Q 2010 Earnings

2010-07-21T08:27:00.000-07:00

This is a company we want to own for the long term and are buyers on weakness in price. Stock is down based on disappointing revenue number. Overall earnings slightly beat consensus. We expect the revenue number to be mixed over this sluggish period of economic growth. We are encouraged by the following positives:
1. Dividend has increased by 18%.
2. Europe and China did not slowdown.
3. Services were down in the 2Q but expect to ramp up in 3Q. International Business Machine 2Q 2010 Earnings

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Intel's 2nd Quarter

2010-07-14T05:02:00.000-07:00

Intel’s (INTC) 2nd quarter came in at $.51, well above street estimate of $.43. Gross margins exceeded expectations at 67.2% versus 64%e. We are encouraged by management’s increase in guidance for the 3rd quarter despite the fact that inventories grew 12% quarter to quarter.
Company will benefit from the following areas:
1. Rebound in IT spending.
2. PC growth in emerging markets.
3. Increase in higher margin products.
In our opinion, this company continues to remain undervalued based on its ability to grow earnings and a superior balance sheet. Even if the stock traded at a market multiple for 2010, it would be worth $25.80 or a 22% increase from current price

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

2nd Quarter and Year to Date Performance

2010-07-13T06:30:00.000-07:00

Since the beginning of the year we have been talking about having a bumpy stock market this year. Year to date, the S&P 500 is down 7.6% In the second quarter, we hit a pretty hard bump with the S&P 500 down 11.9%. The combination of health care reform, Greece (and the other PIIGS countries) and financial services reform sent people running from the stock market to the safety of treasuries. So much so, that the 10 year bond is now yielding 2.95% and the 2 year note is at .62%. Compare this to a 2.8% dividend yield on the Dow. We also had some hiccups in the weekly unemployment claims. It has always been our belief that the economic recovery would be driven by capital spending with a sluggish consumer. We still believe that to be true. Our philosophy of buying high quality large cap dividend paying stocks is even more appropriate in this environment. As long term investors we recognize that these stocks offer great value when compared to bonds and cash. The next few years we expect a slow growing economy and these stocks have the financial strength and flexibility to thrive in that environment.

CAIM LLC's 2nd quarter performance was -9.66% versus -11.9% for the S&P 500. Year to date we are -4.16% versus -7.6% for the S&P 500. Our overall stock selection has been better than the market and we are continuing to hold a 6% average cash position.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Media Appearance

2010-07-01T07:37:00.000-07:00

For all of you across the country Catherine Avery of CAIM, LLC will be featured tomorrow, July 1st, on the 5:30 pm and 7:30 pm newscasts on News 12 CT, Channel 12, 12 on the Money. Tune in to hear more about Baby Boomers and Investing!

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Where's the Faith?

2010-06-30T06:57:00.000-07:00

It's not in the equity markets, that's for sure. Yesterday's lack of confidence drove the 10 year bond yields to 2.96%. It's hard to believe that anyone would lend the debt laden government money for that price.

22 names in our portfolio yield 3% or higher. All of these companies are high cash flow generators and have low levels of debt. You have to believe that 10 years from now that we, as a country have the determination to turn around this economic malaise. If that's the case, these stocks are cheap and will reward investors over the long term. Let's not forget that with all that cash on the balance sheet, some of it will be going to increase the dividend. Does anyone think the government will raise your interest payment on the 10 year bond?

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Gaining More Confidence on the Economy

2010-06-16T07:26:00.000-07:00

In an April blog, we talked about how we liked the industrial stocks, and in particular, Illinois Tool Works (ITW). Yesterday, management came out with some positive comments for their May results. They are guiding the low end of street estimates upward ($.74 to $.80) for the 2nd quarter. There have been some doubters out there for a less than robust 2nd quarter earnings season but it looks like economic strength will continue. Company reported accelerated revenue growth in all 8 reporting segments. the top 3 were transportation, industrial packaging, polymers and fluids. Stock is off 11% from it's high of $47 and is a good buying opportunity in here.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Missed Opportunity in the Equity Markets?

2010-06-14T11:02:00.000-07:00

Not according to Jeremy Siegel. Professor Siegel spoke to financial advisers at Pershing LLC's national conference in Florida and delivered the following message:

"The S&P 500, now at just under 1,100, would have to rise to 1,500 - a roughly 35% increase - to return to its long-term trend line going back to 1935. From any historical standpoint, you're not too late. You still have an excellent market to give you extraordinary returns going forward."

According to Investment News, Jeremy Siegel thinks the current period is similar to the post-World War II era, when people expected a recession and avoided stocks. Investors then flocked to government bonds at low yields and got slaughtered over the next 30 years.

Looks to me like history will once again repeat itself. The individual investor will unfortunately wait until interest rates rise to sell their bonds at lower prices. Not to mention the issue that municipalities will face in the coming years will many individual investors who have not properly diversified their portfolios thinking that they were safe!

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Picking the "Best" dividend Paying Stocks

2010-06-11T07:48:00.000-07:00

Even in this volatile market, we believe dividend stocks are a far better option than government bonds, which have very little option to keep inflation at bay Even during the onset of recession, as many as 300 of the 500 companies listed in the S&P 500 raised their dividend payouts.

One important investing criteria when evaluating dividend paying stocks is to invest in those companies that are easy to understand. and have a dividend payout ratio of 50% or less.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Stocks for Today and Tomorrow

2010-06-09T07:17:00.000-07:00

Jimmy Lee, vice chairman of JP Morgan Chase, made an appearance on CNBC yesterday. He listed the following negative attributes for companies:
According to Lee, there are three basic principles that typically get companies into trouble:
Too much debt
Too little liquidity
Poor risk management

We couldn't agree more. As we have said many times, the U.S. economy encounters several headwinds next year to cause us to have sluggish growth for an extended period of time. What are the best types of stocks for that scenario?
1. low debt
2. strong cash flow
3. management committed to a solid dividend paying policy
In other words, high quality dividend paying stocks.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Catherine Avery was Featured in the New York Times

2010-06-08T06:46:00.000-07:00

CAIM LLC is proud to announce Catherine Avery's contribution to a New York Times article on blended families.

Below is a link to the article:

http://www.nytimes.com/2010/06/05/your-money/estate-planning/05wealth.html

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Bulk Up on Dividends

2010-05-21T06:07:00.000-07:00

Boomers should buy dividend paying stocks to stay ahead of inflation. As stock prices rise over time, compared to a bond, high quality dividend paying stocks also have the ability to increase dividends (yield) over time, versus a bond which has a fixed interest rate and can be called. Even in a down market, investors will collect a stream of income from the equities, so why not get paid while you wait?

Baby Boomer investing 101

2010-05-19T06:38:00.000-07:00

The CAIM Mock Portfolio Taste Test. We recently completed our first ever recommended mock portfolio for baby boomers. Our survey reveals that our value oriented portfolio is cheaper and less risky than a traditional “growth” portfolio, and pays dividends, which are compounded as stock prices appreciate. Conclusion: Dividend stocks taste better for Baby Boomers than less appealing expensive growth stock peers.

2010-05-17T08:06:00.000-07:00

Barron’s article by Michael Santoli, this weekend further, supports our thesis that cash rich, dividend paying stocks should be the investment of choice for baby boomers and any individual who wants to achieve positive long term equity returns with low volatility. The article states that “corporate America is prepared to return cash to investors and to accelerate the spending, hiring, investing and acquiring that most companies curtailed stress and deep uncertainty of the financial crisis and the 2007-2009 economic contraction.” On the list of returning cash to investors is dividend increases. The article also mentions two of our favorite stocks, Intel (INTC) and International Business Machine (IBM). Our screens (CAIM LLC)have produced stocks with an average cashflow per share of $4.89, 30% debt and a dividend payout of 42%.
High quality U.S. companies are ready to come out of safety mode and regroup for growth. We are urging baby boomers to take advantage of this trend while these companies are attractively valued. These companies will be the life blood of boomer’s portfolios as they will need to out pace inflation and receive a stream of income from their investments.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Reaching for Yield

2010-05-13T07:39:00.000-07:00

As we mentioned last Friday we viewed the correction in the market as a buying opportunity. One of the hardest hit sectors in the correction were the consumer discretionary stocks. As a result, we established a position in Genuine Parts Co. (GPC).

Why we like this company:
1. High quality dividend paying stock. 3.8% yield, 16% debt to total capital, strong cash flow.

2. 55% of the company is leverage to the auto parts segment. With the median vehicle age in the U.S. over nine years old, we believe there will be sufficient demand for GPC’s products (GPC owns NAPA warehouse distribution centers)

3. Strong cash flow has the opportunity to be used for dividend increases, share repurchases, modest acquisitions.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Experiencing some Turbulence

2010-05-07T10:32:00.000-07:00

The best way to describe yesterday’s market is to liken it to hitting a major air pocket when flying. As we all know, they are not fun and they certainly can shake your sense of security. Market continues its slide this morning, even on the heels of a decent jobs report.
To put things in perspective, the Dow is now 20% off its highs and 63% above the low. This is a good time to remind ourselves that stocks do not move up in a straight line. We do not suggest that we can predict the market with any accuracy. Market timing is often a losing game. What we do is look for high quality dividend paying companies that have the ability to increase the dividend over time. We are using today as a buying opportunity for those stocks we like for the long term. In particular, we are adding to names like IBM, INTC, CVX, DOW.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Putting Things in Perspective

2010-05-03T08:32:00.000-07:00

Barron’s this weekend had a great article about JNJ. JNJ is one of our top 5 holdings. As the article says, this stock may not have been as “peppy” as the rest of the market, but there are several standouts about this high quality company:

1. Improvement in eps growth over the next few years.
2. Strong drug and medical device pipeline.
3. Solid balance sheet (low debt, strong cash flow)
4. 3.3% dividend yield.

Stock is trading below a market multiple because of past drug patent expirations, concerns over health care reform and sluggish results in consumer products. We agree with Barron’s that this is all about to turn around. Let’s not forget, next year we enter into several potential headwinds that could slow this market down (higher taxes, higher interest rates, lack of employment). You want to keep your portfolio diversified amongst different sectors.
Just to keep things in perspective, here’s a plug for the value of long-term investing. Below are the rates of return for JNJ versus the S&P 500 over several time periods.

2 years: JNJ -5% S&P -16%

10 years: JNJ +56% S&P -18%

20 years: JNJ +808% S&P +259%
Source: Baseline.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Not Done Yet

2010-04-28T09:36:00.000-07:00

Today we applaud IBM for raising its dividend 18%. Stock sold off last week on what some would say was mixed results. 1st quarter numbers came in $.04 above consensus at $1.97 while revenues were flat year over year. We continue to like the stock for the long term and view the sell off as a buying opportunity. Here’s what we like about IBM:
1. Margins continue to improve.
2. Revenues should show improvement as the year progresses.
3. Cash flow continues to be robust (i.e., dividend hike)
4. We believe the stock is currently undervalued. Historically, IBM has traded on average at a market multiple. Using a 15x multiple and management’s 2010e of $11.20 our target is $168.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

53 Years of Shareholder Loyalty

2010-04-22T09:57:00.000-07:00

Emerson Electric Co. (EMR)
Here’s a company that has increased its dividend for 53 consecutive years. With $2.07 in free cash flow, we expect this trend to continue. Company reports on 5/4, $.54e versus $.53. This will be the first quarter of positive year over year gains. While this company is geared more towards later cycle investments, they are thriving in a very difficult environment:
1. Strong balance sheet.
2. Excellent cost controls .
3. Positive momentum in the auto sector and climate business.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Blowout Quarter for ITW

2010-04-21T06:10:00.000-07:00

ITW Blowout Quarter
1. On 4/20, ITW reported 1st qtr eps of .58 versus a $.21 in 2009 (from continuing operations). Consensus was looking for $.57.
2. Most importantly, revenues were up 14.6% from last year’s quarter. I was impressed to see that North America’s base revenues were up7.1%, lending credibility to the fact that we are in a recovery phase in the U.S.
3. Operating margins increased 1050 basis points to 13.4%.
Two industries we have been talking about in our blog, autos and PCs, were strong drivers for the quarters eps. Transportation +35.6%, PC board fabrication business +89.4%!
Now, for the words we all want to hear, management is raising guidance for 2nd qtr to a range of $.74 to $.86. Full year is being guided upwards to $2.72 to $3.08.
We continue to like this stock.

Disclaimer:
You understand that no content published as part of the CAIM LLC blog constitutes a recommendation that any particular investment, security, portfolio of securities, transaction or investment strategy is suitable for any specific person. To the extent any of the content published as part of the blog may be deemed to be investment advice, such information is impersonal and not tailored to the reader.

Autos in the Driver's Seat

2010-04-20T07:40:00.000-07:00

Tyco Electronics Ltd. (TEL)
Expected to report 1Q on 4/28, $.52 versus $.14 in 2009. This company is a great proxy for the overall economy as they manufacture many goods from consumer to industrial. On a fundamental basis:
1. Strong cash flow of $2.21/sh.
2. 25% debt to total capital.
3. 14% long term eps growth (versus 10% for S &P).
4. This high quality company has been trading at a 10% discount to the market.

We believe the company will have a great year based on better than expected auto sales in the U.S. and a pickup in cap spending later in the year. Exiting low margin businesses should also help the numbers.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

On the Right Track

2010-04-19T09:38:00.000-07:00

Coca Cola (KO)
We have previously blogged about and want to reiterate the following: Stock has a 3% dividend yield (50% higher than the S&P!), over $1.00 in free cash flow/sh and only 17% debt to total cap!
1. Company focus on improving product mix like vitamin waters and healthy alternatives.
2. Attractive exposure to emerging markets.
3. Strong focus on cost controls.
Company is reporting 1st quarter numbers on 4/20. Street is expecting $.74 versus $.65. To confirm that KO is moving in the right direction, the recently announced an increase of its stake in Innocent Drinks to take a majority ownership of the U.K. based fruit and smoothie drink maker.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Triple Whammy for Intel (INTC)

2010-04-15T03:46:00.000-07:00

INTC announced it's 1Q earnings results. The quarter beat expectations on both a revenue and eps level. The street was looking for revenues of $9.7 billion and came in at $10.3 billion. Earnings consensus was $.38 and posted $.43. In addition, gross margins for the quarter were better than expected. at 64% vesus 61%. The triple whammy for INTC! We are even more excited about the prospects for this stock as the quarter revealed the beginnings of a cyclical recovery in demand for corporate servers. Prior demand for INTC was mostly drivenby consumer electronics. The company has guided annual eps up and we are increasing our target on this company to $31 or 16.5x 2010e of $1.90.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

T. Row Price Group (TROW)

2010-04-12T07:06:00.000-07:00

Cost controls + new products is the theme for this financial sector stock. The financial sector has been a difficult place for us to find companies we are comfortable with. Given the government involvement and lack of dividend security, we are underweight this sector. However, one company we like in this group is TROW. They recently raised their dividend in the 1st quarter 2010 from .25/quarter to .27/quarter. What we truly like is the future outlook for this stock. This weekend, Barron's highlighted this company and spoke about their expansion into international mutual funds. In addition, they are adding ETFs and managemment has done a great job of containing costs. Earnings for 2010 are expected to rise 48% and then 16% into 2011. We believe this company will be a beneficiary of investors shifting out of bond funds into equity funds.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

Are We in the Sweet Spot.........

2010-04-07T04:45:00.000-07:00

That was the question posed to Leon Cooperman yesterday morning on CNBC. His response was a strong yes! The sweet spot he is referring to is the perfect time to be moving out of bonds into stocks. Low interest rates, a fairly valued stock market at 15x and signs of economic growth make the timing right. So why are individual investors still hunkering down in bond funds??? Bond yields have all ready started to rise and as the yield rises, prices go down and then they are left in the same situation as when they were invested in stocks at the height of the market. The real risk now is in bonds, not stocks! I have seen it over and over in my years as a mutual fund manager. The individual investor notoriously buys at the top and sells at the bottom. I'm with Leon. I think we are in the sweet spot.
Check out this weeks newsletter abut Joe and Moe. Comes out this Friday.
Have a great day!

Cash is King

2010-03-31T08:03:00.000-07:00

Yes, cash is king, but it cetainly does no good under the mattress! One of the most cash rich sectors out their are the industrials. This is an overweighted sector for us and one of our favorite names is Illinois Tool Works (ITW). In addition to it's 2.6% dividend yield, this cash rich company ($2.53 free cash flow/sh)has been a master at cutting costs in the downturn and is on it's way to positive revenue growth in 2010. Even though companies have been keeping lean inventories, at some point they will have to do restocking. GM has recently reported a sales increase of 11.5% in February with some new producs sellling out! ITW will benefit from all of this. Even if interest rates do move up and cramp economic growth, you have a cash rich company paying you a dividend while you wait. As long term investors, our minimum time horizon is 12-18 months. Our target price is 15x 2012e of $4 or $60. that's a 20% upside plus the 2.6% dividend yield.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

On Thin Ice

2010-03-26T05:56:00.000-07:00

Not surprised by Ben Bernanke's comments yesterday that the economy is fragile and will keep interest rates low for an indefinite period of time. I have to say that "indefinite period of time" phrase is a little spooky to me. Interesting that it took the market a few hours to figure out that low interest may not be a good thing in this case if the economy is still struggling. This confirms our thesis that the economy and hence markets will be choppy this year. Futures are up this morning, but my guess is it's more of a reaction to some resolution of the debacle in Greece.

How do we play this market? We suggest a mix of stocks (dividend paying, of course!) in different sectors. We like KO (Coca-Cola) and INTC (Intel)to balance out the portfolio. You will find that on days when the market is strong, INTC will perform better than KO and the opposite is true on weak days. Dividends are important to us, but we also want to see future catalysts for growth in our investments.

KO - Stock has a 3% dividend yield (50% higher than the S&P!), over $1.00 in free cash flow/sh and only 17% debt to total cap!
1. Company focus on improving product mix like vitamin waters and healthy alternatives.
2. Attractive exposure to emerging markets.
3. Strong focus on cost controls.

INTC - 2.8% dividend yield, 5% debt to total cap, 13.4x 2010 est versus 14.8x for the S&P 500.
1. Strong demand for consumer items like computers, digital tv and cell phones continues even in a moderately growing economy.
2. Operating margins moving back to previous high levels.
3. As economy recovers, we can potentially see an increase in eps growth rate.

Disclaimer: NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND MAY NOT NECESSARILY MEET THE OBJECTIVES OR NEEDS OF ANY SPECIFIC INDIVIDUAL OR ACCOUNT, OR BE SUITABLE ADVICE FOR ANY PARTICULAR READER. EACH READER AGREES AND ACKNOWLEDGES THAT ANY SPECIFIC ADVICE OR INVESTMENT DISCUSSED IN THE BLOG MUST BE INDEPENDENTLY EVALUATED BY THE READER AND HIS OR HER ADVISER IN VIEW OF THE READER'S INVESTMENT NEEDS AND OBJECTIVES.

2010-03-18T08:57:00.000-07:00

Our thoughts today on maximizing your investments.....
We at CAIM LLC hope you enjoy hearing our views about the markets and dividend paying stocks. Our first blog starts with our overall view of the economy, markets and investing. We look forward to hearing your comments!

Economy
We believe the worst of the recession is behind us and we have started to move into a recovery phase. Throughout the year we expect to get conflicting data causing us to question whether we double dip or move into the expansion phase. Just last week we had great retail sales numbers , up .3% (up >8% ex autos) and unemployment claims dropped 6,000. This week the trend continued for another drop in unemployment claims, marking 3 weeks in a row of improving numbers. So, what's the flip side? Consumer sentiment and confidence numbers continue to lag.

Markets
Can the markets continue to go up without the participation of the individual investor? Our expectations are for a choppy market in 2010. This will be caused by conflicting economic data, risk in overseas markets (like Greece) and the outcomes of political reform in Washington. Our target for the S&P 500 is 1280 based on an eps estimate $77.50 (First Call) and a p/e of 16.5x. This earnings estimate is 20% higher than last year. We expect corporate profits to do well and believe the individual investor will start to slowly move into the market this year due to the lack of returns in bonds and cash.

Investing
At Caim LLC, we favor dividend paying stocks that also have growth potential. Our discipline is based on companies that have low levels of debt and positive free cash flow. For example, we like companies such as Intel (INTC) and Coca-Cola (KO). Both companies pay dividends 50% higher than that of the S&P 500 and almost 300% more than money market funds!

More on stocks in our next blog!

Disclaimer: YOU UNDERSTAND THAT NO CONTENT PUBLISHED AS PART OF THE CAIM LLC BLOG CONSTITUTES A RECOMMENDATION THAT ANY PARTICULAR INVESTMENT, SECURITY, PORTFOLIO OF SECURITIES, TRANSACTION OR INVESTMENT STRATEGY IS SUITABLE FOR ANY SPECIFIC PERSON. TO THE EXTENT ANY OF THE CONTENT PUBLISHED AS PART OF THE BLOG MAY BE DEEMED TO BE INVESTMENT ADVICE, SUCH INFORMATION IS IMPERSONAL AND NOT TAILORED TO THE READER.