Take Singles and Doubles, Put Runs on the Board

by Richard Band | October 4, 2012 8:30 am

What’s propping the stock market up?  Stock prices ended up on Wednesday[1] after a mixed day Tuesday[2] that had a slight upward bias—down 33 points for the narrow Dow industrials, but modestly higher for NASDAQ, the S&P 500 and most broader-based indexes.  Pretty impressive, really:  The bears haven’t mustered much in the way of selling pressure for more than two months now.

This limpness among the sellers is especially noteworthy when you consider the news background. According to Jeff Kleintop[3], strategist with LPL Financial, more than 80% of the Q3 earnings preannouncements from America’s corporations have been negative, double the historic norm.  Kleintop says we’re on the cusp of a “global profit recession.”

Apparently, the Federal Reserve’s repeated injections of cash into the bond and money markets have driven investors to keep buying stocks, regardless of the increasingly sketchy profit outlook.

Let’s face it.  Desperation (“I can’t stand earning zero on my money”) isn’t the sturdiest investment rationale.  It can abruptly turn to panic if prices start to falter.

As long as U.S. economic growth manages to hold above flatline, though, the basic uptrend for stocks can continue.  In such a climate, I’m certainly not inclined to swing for the fences.  But I think we can still punch out a stream of singles and doubles — and put runs on the scoreboard — with well-chosen, low-risk stocks.

The key characteristic to focus on is a lofty, bond-beating dividend yield.  Among the companies we’re following, semiconductor maker Intel (NASDAQ:INTC[4]) has pulled back into an attractive buying range.  As of today’s close, Intel’s dividend stood at a generous 3.9%.

Questions have been raised about INTC’s ability to refresh its product line as consumers increasingly migrate to mobile devices.  However, the company is, in fact, already making smartphone chips and will probably shift more of its (vast) resources in that direction over the next few years.

INTC also expects to be a major supplier of processors for Windows-based ultrabooks (ultrathin laptop computers) and tablets.  So this technology leader isn’t about to ride off into the sunset.  We’re tracking it as a Niche Investment outside the model portfolio.

A second high-yielding name you might accumulate in here is Washington Real Estate Investment Trust (NYSE:WRE[5]).  WRE’s board voted in July to pare the dividend as a defensive measure, even though the trust probably could have kept paying at the old rate for a while longer.

By retaining more cash flow internally, WRE has a good shot at accelerating its long-term growth rate.  A higher share price will likely result.  Current yield: a very safe 4.5%.

  1. ended up on Wednesday: https://investorplace.com/2012/10/markets-rally-on-brown-announcement-wednesdays-ip-market-recap-aapl-hpq-dell-leap-bby-mon/
  2. mixed day Tuesday: https://investorplace.com/2012/10/markets-cant-find-conviction-tuesdays-ip-market-recap-mco-fiaty-gm-z-cmg-expr-fran/
  3. Jeff Kleintop: http://finance.yahoo.com/blogs/breakout/great-disconnect-awful-earnings-vs-hot-stock-market-113011268.html
  4. INTC: http://studio-5.financialcontent.com/investplace/quote?Symbol=INTC
  5. WRE: http://studio-5.financialcontent.com/investplace/quote?Symbol=WRE

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