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GE Pulls Back From 8-Year High, Russia Still Pumping

publication date: Apr 4, 2016
author/source: Brian Nelson, CFA

By Brian Nelson, CFA

The last week of each calendar quarter is often a busy one for the Valuentum team. Not only did we release the Dividend Growth Newsletter on the first of the month (download here pdf), but we also released the financial advisor publications as well (see here). If you haven’t received them, please be sure to let our team know, and we’ll forward those along to you. These documents just scratch the surface of our research and analysis offering. Please don’t forget to RSVP for an upcoming orientation webinar here.

We also wanted to make you aware of the update cycle for our ETF analysis. We’ve now released the 2016 versions for the Consumer Staples (here pdf), Consumer Discretionary (here pdf), Energy (here pdf), and Banks/Financials sectors (here pdf). These documents help outline our views on each individual sector and offer up a few ETF ideas for consideration in light of expense-ratio and underlying-constituent considerations. Please feel free to dig in – there’s a wealth of contextual information that many have found extremely informative. The documents help explain why we hold a few ETFs in the newsletter portfolios.

Is the dead cat bounce over for crude oil prices (USO)? It looks that way. The price of the West Texas variety is now in the mid-$30s per barrel, as the very idea of a freeze by global participants is losing steam. Did it really have any momentum in the first place? Russia (RSX) announced today that oil output hit “a post-Soviet high” – that’s 30 years. The recent strength in crude oil prices looks more like short-covering than anything else. We’re anxiously awaiting the next OPEC meeting in Doha, Qatar, later this month (April 17) for an incremental update, but we’re not holding our breath for a production cut announcement. Investors should continue to expect energy (XLE) shares to be volatile in the coming weeks.

One of the anchor weightings of both newsletter portfolios, Apple (AAPL) has quietly surpassed $110 per share. We particularly liked the relative strength during the trading session April 4, which may suggest investors moving back into shares after taking a bit off the table. We maintain our view that shares look incredibly cheap, and we welcome readers to visit the company’s 16-page report and dividend report on its landing page here. Our talk with Apple last month was quite encouraging, and we expect the company to continue to be prudent with capital-allocation decisions in light of the uncertain domestic tax situation. Shares are looking to break out.

We’ve dropped coverage of SunEdison (SUNE). What a nightmare. It wasn’t but a few months ago that hedge fund manager David Einhorn took a board seat at the beleaguered company. News hit the wire recently that SunEdison is preparing to file for Chapter 11. Certainly all solar companies are different, but witnessing the company fall from over $30 in July 2015 to ~$0 is quite incredible. We can’t say we haven’t been warning you about the hazards of investing in solar, “Solar Not So Bright.” Excessive risk-seeking behavior often ends very badly. With Ackman’s blunder in Valeant (VRX), “Valeant’s Back Firmly Up Against the Wall,” it’s been a bad year for some of the biggest hedge-fund names.

Let’s end this short update on a very positive note. Though it pulled back a bit during the trading session April 4, General Electric (GE) hit an 8-year high on Friday. How wonderful is that for the holding that graces both newsletter portfolios?! Shares were added in the mid-$20s, and it’s great to see such relative outperformance in a market that continues to struggle to capture 2015 highs. Oh – and how about the “Monthly Dividend” giant, Realty Income (O). Shares are now over $62 each! Incredible. May the dividends keep flowing… News flow for this time of year is rather slow, but please stay engaged with your investments. We’re available for any questions.

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