(New York)

Everyone has heard of the “Dogs of the Dow”, or the strategy of buying the laggards of the Dow. It is has been of the few highly successful value-based strategies over the last decade. If you have liked the Dogs of the Dow approach then check out “Fast Dogs”, which could be a good strategy. The idea is to buy the ten stocks with the fastest dividend growth in the Dow. The strategy has performed well in the last three years and just edged out the S&P 500’s performance (it is hard to track it further because dividend growth rate data is historically spotty). What will likely make this strategy successful is that companies with rising dividend growth are naturally signaling improvement and a brighter future, so an increasingly optimistic outlook is de facto. And of course, investors love dividends.

FINSUM: We like this idea. It would probably work better in rising rate markets, but generally speaking it seems like a smart approach in any environment.

(New York)

There has been a lot of speculation over the last year that FedEx might be a buyout target. This time last year, everyone thought Amazon would buy the logistics company to beef up its own network. That did not happen. Now the speculation is that it might be on Warren Buffett’s list. Buffett has expressed that he is itching to make an “elephant-sized” acquisition, and FedEx fits the bill in more ways than one. Not only is it huge, but it has a more than $125 bn hoard of cash. Buffett likes simple businesses with good management and large moats, or barriers to entry which prevent competition. FedEx fits the bill perfectly.

FINSUM: This feels like a match made in heaven. Both parties refuse to comment. Hmmmm…

(San Francisco)

Morgan Stanley has just made two interesting picks in the tech world. While these are not specifically tech companies, these chipmakers are so closely related that it is fair to lump them in. In particular, Morgan Stanley is bullish on rising memory demand in chips and therefore likes two names to do well. The first is Micron (ticker: MU), and the second is Western Digital (WDC), both of which specialize in DRAM and NAND. The former is used in mobile phones and servers, while the latter is used in smartphones and solid state hard drives. According to Morgan Stanley, “channel checks make it clearer that customers are building real conviction that memory will tighten [more demand versus supply] over the course of 2020, which is leading them to put more inventory into place”.

FINSUM: This matches exactly what we see on the consumer demand front, so we do not have any argument with these picks.

(New York)

The global economy has not been in worse shape from a trade perspective n several years. Despite progress in the trade war between China and the US, global trade continued to drop in the past couple of months and was down over 1% from its 2018 level in November. Perhaps most worryingly, the falls were broad-based, with the Eurozone, the US, Latin America, and emerging Asia all seeing falls in trade.

FINSUM: The big question here is whether this is just policy-related or whether there is a real decline in economic momentum that is not yet showing up in other figures. Time will tell.

(New York)

After about three years of being a laggard and worrying investors that a recession may be coming, US real estate looks to be turning the corner. Not only have home sales been rising, but new mortgage data looks very encouraging. Home lenders extended $2.4 tn in new home loans last year, the most since 2006. That figure is a whopping 46% increase from 2018. One economist from Freddie Mac described the situation bluntly, saying “When a large and cyclical part of the economy—housing—is starting to improve, it’s a good sign for the economy at large”.

FINSUM: It is important to note that most of this was refinancing activity because of the drop in rates, so it is not as massive an increase as it appears. Still, good momentum.

(San Francisco)

Barron’s has featured a very eye-opening call. The argument comes from the CIO of Ariel Investments. She argues that it is time to short Apple. Referring to the company as the “blue chip of yesterday”, she contends that Apple is not a tech company, but a consumer electronics one, and that whether its new products are a hit has a huge impact on revenue. It is trying to pivot to services, but it has no first mover’s or any other natural advantage in doing so and is competing with big names like Netflix and Disney. It is even behind competitors in its core iPhone business and trying to catch up. She argues that a blue chip of yesterday is the worst kind of stock because all the good news is priced in, but none of the bad news is.

FINSUM: This is quite a stark portrayal of Apple. While we do not completely agree, there is some significant truth to this argument and it warrants concern.

(New York)

The market is at all time highs, multiples are huge, and earnings are trending the wrong way. If you are looking to buy into some downside protection, take a look at these 4 tech names. These stocks have big dividends which should offer some significant downside protection as tech shares with lower multiples and good dividend yields provide insulation. Here are the names: IBM (4.7% yield), Broadcom (4.2%), Hewlett Packard (3.2%), and Cisco Systems (2.9%).

FINSUM: IBM trailed the tech market last year but still had a respectable 16% gain. Seems like a good choice given the big dividend yield.

(Beijing)

The new SARS/Coronavirus that has broken out in China has been serious enough that it has actually spooked markets. 17 people have already died and 600 more have the pathogen, which is as yet poorly understood. Now the city where it was first found, Wuhan, has been quarantined. However, the quarantine has been greatly undermined by the fact that it was instituted after the country’s biggest annual migration—the Lunar New Year, when Chinese go home to visit family. One the big worries is that the virus seems to have “superspreading” characteristics, or the kind of virus that spreads much more rapidly from person to person than normal.

FINSUM: This is a pretty scary bug, and the US already had its first confirmed case (a man in Seattle that had come directly from Wuhan).

(Atlanta)

US Real estate has been a worry spot for the last few years. For the last three years or so everyone thought real estate might be the initial signal that the economy was headed lower. However, that never materialized and real estate has been looking modestly better for the last several months. The end of 2019 continued that streak as existing home sales rose 3.6% in December as low unemployment helped support the housing market.

FINSUM: We think the housing market is just solid and steady right now. No huge speculative gains, no gigantic increases in debt etc. It is a nice contrast to publicly-traded securities!

(New York)

Investors seem to have every reason to worry about bonds. Prices are high, yields are low, and low quality companies are accessing easy financing even in the face of an uncertain economic future. With all that said, there might not be any reason to worry at all. Central banks are still gaming the system. From the Fed being really conservative with rates, to the ECB and BOJ doing massive QE, the whole central bank mechanism is conspiring to prop up bond prices in a major way.

FINSUM: As long as that pre-condition of huge central bank support is in place, it is hard to see bonds taking much of a hit.