Cart (0)
business newsWhat to Buy (and Sell) in 2012
By
MoneyShow.com Dec 28, 2011 12:05 pm
Lessons to be learned from 2011 that will help make 2012 a prosperous year for savvy income investors.
PRINT
 |
|
For companies in capital-intensive industries like energy pipelines, I also expect to see dividend growth accelerate, as investments made the past few years start generating cash.
On the negative side, we are moving into an unusual election year, in which the Obama administration needs to both spur economic growth and deliver enough regulatory and environmental policy victories to its increasingly anti-corporate voting base.
The effective rejection of AT&T’s (T) bid to buy Deutsche Telekom’s (DTEGY.PK) T-Mobile USA is a warning shot that the federal government will act to please the base where it can, as well as drag its feet on decisions that could divide the Democratic Party.
An example of the latter is the delay until after the November election of any decision on the Keystone XL Pipeline, which is favored by unions and opposed just as strongly by many environmentalists.
Throw in still less-than-optimal economic growth globally and continuing turbulence in Europe, and even the strongest-looking company is at risk for an unexpected stumble. That includes the handful of stocks that were bid to new highs in 2011 because of their perceived safety. In 2011, diversification and balance were critical to investor success. Most stocks took big hits at some point during the year, but only a handful really melted down.
Investors who were broadly diversified across sectors and balanced between them were able to absorb the meltdowns and end the year in the black. Only those who doubled down in falling positions -- or who were churned out of good ones by self-defeating strategies like setting stop losses -- really finished the year underwater.
That will absolutely be the case again in 2012. Income investors should focus on holding a balanced mix of dividend paying stocks. They should include winning sectors from 2011, such as US electric utilities like Xcel Energy (XEL), water utilities like Aqua America (WTR), and pipeline-focused master limited partnerships like Kinder Morgan Energy (KMP).
But they should also own some that didn’t fare so well, such as high-yield telecommunications stocks like Consolidated Communications (CNSL). Dividend growth is a pretty good tipoff that investors have priced in too much risk for a laggard stock.
One area I would largely avoid is fixed income. Strong companies are borrowing at their lowest rates ever and are using the money to pay off existing debt. That means more bonds and preferred stocks are going to be called away.
And the only place to get decent yields is by taking on too much credit and/or interest-rate risk. Stick to stocks.
Editor's Note: This article was written by Roger Conrad of Utility Forecaster.
Below, find some more great investing and trading content from MoneyShow:
4 Growth Stocks Ready to Pop in 2012
Kate Stalter
A Fund for All Seasons
Katie Rushkewicz Reichart
Shoe Stock Looks Ready to Jump
Frank Ochoa
Things Are Looking Up
Mary Anne & Pamela Aden
Twitter: @TopProsTopPicks
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
