Monday, February 20, 2012

A Crowded Trade or At Least a Time to Raise Some Cash?

There are times when the conventional wisdom not only is sensible (that's why it's conventional), but is also right.  Take the popularity of dividend-paying stocks.  That was last year's best mainstream investment strategy (which I concurred with).  The logic of buying stocks of some of the world's leading companies at 10-15 times earnings with dividend yields far above those on cash and even intermediate-term government notes was compelling.

This week's Barron's calls my attention to the possibility that it may be time to look elsewhere for compelling values.  Valuations admittedly are generally not stretched, but the special feature of this week's Barron's highlights the financial advisors who Barron's considers the tops in their field.  Most advocate the dividend-paying approach.

While I continue to think the dividend-paying stocks approach will be appropriate for many more months--at least until interest rates rise sharply--the 20-25% gain in stock prices in the last four months and the surge in optimism as reflected in sentiment surveys cause me again to urge raising some cash.

Yes, I realize the news from Europe and the U.S. economy is better, but price matters, and stock prices have moved significantly higher already.

Steve Lehman

S & P 500:  1361

No comments:

Post a Comment