Monday, December 19, 2011

Recent Market Weakness Increases Opportunities

The recent softness in the stock market has produced even greater declines in a number of stocks.  I am emphasizing high-quality multinationals with high dividend yields and dividend growth prospects, but I also am looking more closely at cheap stocks with low expectations.

If sentiment indicators become more pessimistic than they are now, I will be buying stocks selectively.  I continue to avoid European stocks because of headline risk for the Eurozone and the possibility of large declines in the Euro and losses for U.S.-based investors.  There are, however, a number of high-quality European companies with increasingly attractive valuations and dividend yields that are approaching very attractive levels.

A portfolio of core stocks of market leaders with high dividend yields and/or dividend growth and a small allocation to non or low-dividend yielding stocks, with high-yield bonds will produce an attractive level of current income, income growth, and total return prospects.

Steve Lehman

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