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2011 Investment News
Letters The Lawrence Investment Group January 17, 2011: A Good Time to be in the Market
In my last newsletter, I expected Q3 earnings to grow significantly but expressed concern about revenue growth. As it turned out, Q3 earnings growth of 33% surpassed my expectations by a significant amount, but sales growth moderated to 7% which was about in line with my expectations. Nearly three-quarters of S&P 500 companies have reported operating profits that exceeded analysts’ expectations during Q3 2010. On an aggregate basis, while S&P 500 Index earnings exceeded prior expectations, revenue growth came up short of the consensus view due to weakness in the financial and energy sectors. With the early recovery phase of the economic cycle having subsided, earnings and revenue growth results became more mixed (Crosscurrents Prevailed) on a sector-by-sector basis: seven of ten sectors beat prior earnings estimates, and just four posted better-than-expected revenue growth.This week we enter the primary earnings reporting season for Q4; and I expect similar results. Earnings growth should again be very strong but there will be much focus on revenue growth as a predictor of the future. I expect the laggards of Q3, the financial and energy sectors, to improve in this earnings season; and, therefore I expect overall results to be very positive and serve as a catalyst for a slight upward trend in the overall market.The elections are behind us and that has removed a level of uncertainty for the market. The extension of the Bush Era Tax Cuts coupled with the decrease in payroll taxes should also serve to strengthen the market. Corporations are still not hiring at the pace we would like; and I believe they are still concerned about the cost and burden of newly imposed regulations and health care. The S&P 500 Corporations continue to sit on a record two trillion dollars of cash which they have been reluctant to put to work. As I mentioned last time, I expect to see a portion of this cash hoard to be returned to investors in the form of dividends, increased annual and/or special, as well as stock repurchase programs. There has been some discussion of major tax reform but it remains to be seen what will be done. In my opinion, the biggest impact to the continuation and acceleration of our fragile economic recovery would be a holiday on taxes of profits held overseas. The 35% tax that corporations would pay on the repatriation of these foreign held profits makes it virtually impossible to put that capital to work in this country. Perhaps we cannot afford such a tax holiday. However, it is unclear to me how keeping the tax rate at this level, and not collecting it because profits are not repatriated, actually helps our economy. I have had several requests recently for advice on how to deploy new assets or redeploy existing assets. Many of us, myself included, are receiving distributions from the maturation of CDs that we have laddered in the past. With those 6% plus interest rate CDs expiring, the challenge is how to remain risk diversified and still get a reasonable return. I just cannot bring myself to invest in sub 2% CDs at this time. I took a look at the investments I recommended in my March 11, 2010, letter and cannot help but conclude that we should continue on. In the nine months since I recommended those five stocks plus GLD, they have had a return of about 33% including dividends or an annualized return in the range of 45%. Those are the kind of returns that have enabled investors to recover all of the losses they incurred in the recent downturn and then some. To keep from cluttering up this letter, I have posted a table of the results of this “portfolio” on my financial blog at Larry's Blog if you are interested. That brings me back to my primary premise for the preservation and growth of wealth. We must be willing to find a comfortable position on the risk/return curve and then have the fortitude to position ourselves there and stay true to the course. Of course, we make mid-course corrections as the markets change (I am very glad that I bailed from Citibank on the way down) but none of us can be expert market timers. I watched many sell out, lock in their loss, on the way down and miss out on the tremendous upside of the recovery. Yes, some of our 401k’s may have looked more like 201k’s for a while, but, virtually all of those that I watch are now at or near all-time highs. I do not advocate buy and forget, hold forever; but, I do advocate making intelligent decisions and staying with the market with a well-diversified investment plan. I recommend you continue to invest in funds, ETFs, and/or stocks that focus on multinational corporations with large exposure to the BRICK countries. In recent letters, I have mentioned a few stocks I think we should own; and I would like to discuss them here. AAPL: Still going strong and a must hold. Last time I stated that $300 was still reasonable; and I now am expecting $385 in Q3 of this year and $405 by year end. AAPL is not just a technology company but more of a retail company with outstanding marketing. They do not always have the best technology but the do always have the best marketing positioning. I do not expect that to change this year. IBM: Up 18% since March letter and a great play to leverage gains from international growth and the weak dollar. More and more of IBM’s revenue is from software and systems management which is sold and paid for in foreign currencies and thus grows in spite of the weak dollar. I see continued international growth through 2011 with a dividend increase. CSCO: A laggard so far but undervalued and a key player in cloud computing. GLD: Up 22% since March letter and a continuing hedge against the inevitable inflation spike coming our way and the weak dollar. I do not know where it ends; but, I see limited downside risk and recent declines may be an opportunity to buy. XOM: With a 16% gain since March, I expect even greater growth on 2011. Watch for gas company acquisition. SLB: It took a while, but with a 36% gain since March, I cannot give up on this; as I see no solution to our dependence on petroleum products. CAT: The poster child for my model of companies with strong international growth and outstanding cost control foretelling strong profit growth. New depreciation rules mandate equipment purchases. CMI: Hand in hand with CAT BAC: Look for strong double digit gains early this year. BA: Again on my buy list as the Dreamliner is a dream come true. I expect record orders. DE: World food shortages and we are advocating burning food in our SUVs. Like CAT, New depreciation rules mandate equipment purchases. As you can see from the above comments, I remain strongly committed to large, blue chip companies that will see growth based on the recovery of international markets and whose profits are leveraged against the weak dollar. I think they are best positioned for sustainable real profit growth and have minimal downside risk compared to the rest of the market. Larry Hollatz, RFC® The Lawrence Investment Group
March, 2011: Buy High and Sell Higher These are tumultuous times but times to continue down the road of capital accumulation and wealth growth. Yes, there are geopolitical issues; and the resulting increase in the price of oil may slow the economic recovery, if it remains near or above $100 a barrel. At $120 a barrel, a level I do not expect, it would take out one half of one percent of projected GDP growth leaving us with 3.5 to 4.5% growth with perhaps 1% inflation. That being said, the bull market continues to surge with much more buying pressure than selling pressure. With bond rates near zero and bank savings rates below 2%, there is no better place to put money than in stocks. Warren Buffett just reminded us that the worst place to be today is in paper currencies; they are only going down. Therefore, the institutional buying pressure on securities continues. And, that is a trend I would rather ride than try to buck. We have all learned that the way to make money in the market is to “buy low and sell high”. Of course that is good advice, but what does it mean to those of us who did not buy low? In my March letter, I recommend buying Apple at $222, IBM at $128, XOM at $67 and GLD at $109, among others. I believe all would agree that those prices were low compared to where they are today; and, thus, we could have bought low and could sell high today. But what about those of us who did not buy then? What about those of us who would like to put more capital to work? Have we missed the opportunity to execute our basic strategy: “buy low and sell high”? Of course not. I strongly believe that in today’s
buyer driven market, it is perfectly reasonable to change that strategy to “buy high and sell higher”. So,
we missed a $100 run on Apple; does that mean we should buy When I look at all of the fundamentals in the market, it is hard to understand why the market is where it is. We are facing massive debt and no action has been taken to slow the red ink. The geopolitical issue is unstable. The housing market stinks. Unemployment remains far too high to sustain a recovery. And yet, institutional buyers are in charge; and I am not big enough to fight them. Therefore, I will continue to invest in those entities that continue to be pushed to higher levels. I am committed to the premise: “buy high and sell higher”. There is a lot of talk about the recovery of financials stocks, and yet we see their market prices remain at low levels. The problem is that the financials that accepted government bailouts have exploded their stock base. As an example, Citi Bank now has 29 Billion shares outstanding while IBM has 1.23 billion and Apple has less than 1 billion. The rule of large numbers is working against these financials as it takes 30 times the revenue to impact the stock price of Citi as it does to impact the stock price of IBM or Apple. I still like BOA and still own WFC, but, they need very large numbers to impact their bottom lines. So, we must keep that in perspective when we see financial results. I have mentioned Apple several times in this letter, and would like to share with you a note I wrote a month ago in response to a client request: Here are a few more lite hearted thoughts on Apple: 2/3/20011 This stock will languish a while perhaps between $325 and $350 as the status of Jobs settles in. I think the most likely scenario is that Steve will step down as CEO and relinquish the day to day responsibility for the firm. I see this as a positive, as he has built a highly capable team to manage the business. I think he will stay on the board in the capacity of Vice Chairman responsible for technology and product development. This enables him to focus all of his attention on the part of the business that he does better than anyone else. As this all shakes out, investors will worry about the stock. However, they will come to understand that the next 10 to 12 quarters are already laid out and just need to be executed. With Verizon in the U.S, and other carriers around the world, including the iPhone in their offering, sales of iPhone will continue to grow well beyond the industry average. The introduction of the iPhone by these additional carriers will not have an immediate positive impact on their bottom line (in fact it may be negative for a while) as these phones are highly subsidized by the carriers. The switch from AT&T to Verizon will be slow as consumers are locked into long term contracts and family plans that are costly to terminate. Users who demand large downloads will find the service slower than AT&T. The positive impact will be on Apple’s bottom line as they will continue to sell every phone they can build at today’s, or even improved, gross margins. The iPad will go through a refresh in Q2; and I expect the impact to be immediate. There are no long term contracts for IPad because even if you are connected to a data plan, the hardware is not subsidized by the carriers. Yes, there is increased competition; but, Apple will remain the de Facto standard and again, I believe, they will sell all they can build. Sometime after Q2 earnings are released and the 2011 outlook is revised upward, the stock should break out of the below $350 range and climb quite steadily to the $385 to $400 range. I would not hesitate to add Apple to my portfolio today. If anything, I have an even stronger belief in Apple today than I did when I wrote this letter. Do not be concerned about competing technology being introduced by competitors. At some point in the future that may be a concern, but, that is eight to ten quarters away. As of now, the iPad has the best technology in the market and the iPad2 is even better. With 90% market share, it will take a long time for a marginally better competitor to “bite into the Apple”. It is not a question of if Apple will be a $500 stock but rather when will Apple be a $500 stock. Buy high and sell higher. As for the other holdings I have been advocating, I still like IBM, GLD, XOM, SLB, CAT, CMI and DE. Boeing has won, at least for now, the Air Force Tanker program and you should not under estimate what this means. It is like raising the level of the order floor or like putting 10 years of backlog on the books. In addition to the delivery of aircraft over the next decade, they also have the maintenance and support programs to generate significant revenue. I would rate BA a hold. If you still have CSCO, it is time to say goodbye. They will recover sometime and it may involve M&A action but I believe you can make money in other places while waiting for CSCO to recover. In summary, no market goes straight up forever. There are pullbacks, as we saw last week, and in this market; they are just an entry point for those still on the sidelines. Look at Apple. Each time the stock price drops to the 50 day moving average, it surges up under buyers’ pressure. It is not a time to buck the trend, but a time to look again at your favorite holdings, and double down on the winners rather than trying to pick the losers you hope will turn around. Building and preserving financial wealth to compliment True Wealth: Faith, Family and Friends Larry Hollatz, RFC®The Lawrence Investment Group April
13, 2011 The
Market Struggles with Maximum Turmoil We are reaching mid-April and the beginning of Q1 earnings season only to find the Dow Jones
firmly above the 12,000 level and the S&P above 1300. That is 100 points above where they were at this
time last year as the market marches higher in spite of the political unrest in the Middle East and the disasters in Japan.
I continue to believe that this market is fueled by worldwide economic growth. While we have not
seen rapid growth, especially at home, we have seen, and continue to see, steady and sustainable growth around the world. I am a bit concerned that the strategy I suggested
a year ago, to invest in large U. S. corporations with significant overseas revenue and profits, has been embraced by virtually
every talking head on the financial news. The concern is when everybody gets on the same band wagon, that
wagon tends to head into the ditch. That being said had you invested in the portfolio I recommended on
11 March 2010 and reiterated in April, you would have had a return of 37% for the past year and by the way, that is the return
I had in my taxable accounts. Let’s take a look at those stocks: AAPL: A nice gain of 50% in spite of its recent
pullback which I see as a buying opportunity. I have said so much about this stock in recent letters that
I suggest you review them rather than have me reiterate here. IBM: Up 29% since the March letter and still a great play to leverage gains from
international growth and the weak dollar. I see continued growth up to the $200 range in the next 12 months with profits protected
by foreign currency exchange rates. CSCO: My worst pick as it is down 33% and I suggested you sell it in my last letter. GLD: Up 31% since March letter
and a continuing hedge against the inevitable inflation spike coming our way and the weak dollar. I do
not know where it ends but I see limited downside risk. XOM: Up 24% since March letter and although not a rapid growth investment, I see
it providing solid growth for the rest of this year and well into 2012. Oil prices have spiked with the
Middle East unrest but I see them returning to $90 a barrel range which will support the continued growth of XOM. SLB: Up 36% Since March letter
and continues to benefit from high oil prices and comment under XOM above. CAT: Up a nifty 60% since my April newsletter where I also reiterated my accumulate
recommendation. Truly a stock which reflects international growth and should benefit from rebuilding Japan.
Again, an investment in the
above recommendations returned 37% over the past 13 months; a return I am quite proud of. With the obvious exception of CSCO; I continue to recommend the above stocks for returns above the
market over the next 12 months. As an aside, I recommend a more conservative portfolio
of mutual funds for retirement accounts and those portfolios have retruned 24 % over the past year.I expect the current earnings
season to again be marked by good to strong profit growth and bottom line improvement. The stocks that
will do the best will be those with above consensus top line growth driving those profits. S&P corporations
continue to have a record cash hoard estimated at more than two trillion dollars and I expect to see more of that come back
to investors in the form of increased dividends and stock buy backs. Also expect an increase in M&A
activities as this cash hoard is put to work.With all of the above in mind; it is a time to remain invested in a diversified
portfolio and to remain diligent if the market suddenly disappoints. I see a DOW of 13,000 in the near
future with an S&P breaking through 1400. We need some stability in Washington and some real movement
on spending reductions. The markets strength to date is not because of what is happening in Washington
but rather in spite of lack of action. The price of oil remains a headwind but I do see it coming down to the $90 range. The current
administration is another head wind for oil prices as their stated goal, by Energy Secretary Chu, is to raise gasoline prices
to European levels. The idea that we can solve our energy problems caused by decades of inaction can be
resolved by the development of green energy is an issue with this administration. Although that may be
a fine long term solution, the result is the lowest level of energy development in decades which only aggravates the short
term issue. For more on this issue see: Energy Crisis, March 9, 2011 at Keeping It Right. I mentioned financials in my last letter with the comment that the total shares outstanding
were so huge that it takes extremely large numbers to impact them. Citi Bank has responded to that situation
by announcing a 10 to one reverse split. That means for every ten shares you now own at about $4.40 per
share, after the “split” you will own one share valued at $44. This reduces share outstanding
by a factor of 10 to about three billion shares. Historically this kind of reverse split has been bad for
a stock in the short term but a good long term move. Many professional investors do not purchase stocks
listed below $10 as they approach the category of penny stocks. I would not hold Citi in my portfolio at this time.I heard just this morning
that 40% of Americans believe they will never be able to afford to retire and that 56% are not currently saving for retirement.
My goal is to keep my readers out of that group through prudent saving and investing. Good luck Building and preserving financial wealth to compliment True Wealth:
Faith, Family and Friends Larry Hollatz, RFC®
The Lawrence Investment
Group August 24, 2011 The Market Strengthens with Maximum Turmoil We are well into the second quarter earnings season and the market has done quite well in spite
of concerns of our slowing economy, our debt ceiling debate and the debacle of the European Financial Crisis.
The debt ceiling debate will be resolved and the U.S. will not default on our debt even if the debt ceiling is not
increased. Failure to increase the debt ceiling would cause significant financial turmoil but would not
in itself cause us to default. The decision to default would have to be made by the administration; and,
they will not make that. The European crisis will finally end with one or more countries defaulting and
most likely reverting to their own currencies which will then be revalued. The world will move on and the
world economy continues to grow. We worry about China but they continue to grow and much of their focus
is controlling that growth to hold down inflation. In China, 500 million people (1 ½ times the U.S.
population) are moving into the middle class and are demanding the middle class lifestyle. They want real
homes that consume commodities like copper, oil and coal. They want to buy cars and eat chicken, pork and
beef creating a demand for corn and other grains as well as fertilizer and farm implements. I continue
to invest in those U.S. companies that will flourish in that environment and get paid in local currencies that grow against
the dollar.By the end of 2011, the components of the S&P 500 will have
posted higher profits than ever in history and will have amassed an historic level of retained cash. That
cash will be put to work to grow revenues and profits and/or be returned to investors in dividends and stock repurchase programs.
That means there is no better place to be invested than in U.S. multinational equities. Look at
the risk/return ratio. There is no return on money market funds or bonds and you actually getter a higher
return on dividends from equities even without appreciation.I want to make
a couple of comments on the stocks I continue to recommend: APPL has been pushed down by technicians but has come back on
fundamentals. Look at the forecasts where downgrades were based on the stock target dropping to $450 which
was still an almost 50% gain when that forecast was made. Current estimates of a stock price of $450 to
$500 per share assume that tablet mark share (iPad) drops from the current 85% level to 50% in the next year.
That will not happen. Apple has broken the code and taken the battle directly to China where they
are rapidly gaining market share in phones and tablets against the indigent manufacturers. Apple has a
couple of years of outrageous growth in the bag. CAT has slowed
some as competition is growing. I think the continued world growth and Japan’s rebuilding efforts
continue to be a positive for CAT. I increased my holdings when it dropped to a double digit share price.
Gold
continues to be intriguing and, although I hate the price, you have to be in it (or silver) for at least 10% of your long
term portfolio. Investing
Styles - Technical vs. Fundamental There are, of course, many styles of investing but the two primary styles
are technical analysis and fundamental analysis. Since my focus on my own investments, and those with whom
I work, is on the creation and preservation of wealth, I have relied almost entirely on the fundamental method of investing.Technical analysis is a financial term used to denote a security analysis discipline for forecasting the direction of prices through
the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands in contradiction to much of modern portfolio theory. While fundamental
analysts examine earnings, dividends, new products, research and the like, technical analysts examine what investors fear
or think about those developments and whether or not investors have the wherewithal to back up their opinions; these two concepts
are called psych (psychology) and supply/demand. Technicians
employ many techniques, one of which is the use of charts. Using charts, technical analysts seek to identify price patterns
and market trends in financial markets and attempt to exploit those patterns. Technicians use various methods and tools; the study of price charts is but one.1
I have recently attended several seminars on technical analysis
and have found their reliance on chartsmenship and momentum trading to be overwhelming and almost addictive. In
the limit, the speakers recommend investing based on charts and trends. They suggest investing in a company
which has the best chart indicators even though you may not even know what that company is or does. Technicians
are often guided by charts, trends, psychology and momentum almost to the absence of the underlying fundamentals.
In my opinion, this is an acceptable technique for day trading and short term trading but is not the method I advocate
for creating and preserving wealth. Every study I have seen that compares the long term results of short
term traders vs. long term investors indicate I invite you to join
me in building and preserving financial wealth to compliment “true” wealth: faith, family and
friends. Larry Hollatz, RFC®
The Market Struggles with Maximum Turmoil September 16, 2011 The past quarter has been the most volatile period I can ever remember with very large swings, both up and down, on any given day. For a long time I was able to take three steps forward and two steps back and still remain in the black, but some of the recent sessions have yielded giant steps backward. And yet the fundamental health of the majority of companies in the S&P 500 remains strong. Second quarter earnings season is effectively over with 499 or 99.8% of S&P 500 reports in. With the exception of a handful of financials, most notably Bank of America (which I encouraged you to avoid), which had a $12 billion negative swing in net income from last year, this is another great earnings season. The year-over-year growth rate for the S&P 500 is 11.9%, way off the 17.1% pace those same 499 firms posted in the first quarter. However, it you exclude the Financial sector, growth is 19.3%, actually up slightly from the 19.1% pace of the first quarter. At the beginning of earnings season, growth of 9.7% was expected; 12.2% ex-Financials. All of this portends to solid growth from the fundamentals if we can just focus on earnings and performance without the chaotic disruptions that are attacking the markets. I see the distractions as the Euro crisis, high U.S. unemployment, uncertainty in our tax laws, and job killing federal regulations. In spite of all this unrest and turmoil, I expect the positive Q3 earnings season to provide the catalyst for another upswing in the U. S. markets. The Euro crisis will solve itself as one cannot have a unified monetary policy with a diversified fiscal policy. In Europe they openly admit that the financial system is dying, that the euro is in danger of not surviving and that the EU does not work in its present form. In other words, ignore the ceaseless headlines of promises that all shall be well. Because it won’t. And in the end it will not matter to the world economy. We did just fine without the euro in the past and we will do just fine without it in the future. If Europe can just focus on preserving the health of their major banks, the world will do just fine without the euro. There will be no Lehmans in Europe. Our high unemployment is aggravated by the tremendous uncertainty that prevails in major corporations over tax laws and regulations. Earlier this year I suggested a tax holiday for the repatriation of a trillion plus dollars and we still need that. Businesses must know what the taxes will be on future operations before they hire today. They must know what regulations will be in effect and they must not be sued by the NLRB for expanding production in our country. And finally, our employment level continues to be negatively impacted by our current energy policy, or perhaps better said, our lack of one. The price of oil today is about $90 a barrel as I suggested earlier this year, but this is with extremely weak world demand. With just a small uptick in global economic growth I fear we will again see oil at over $110 a barrel, stifling growth just as it begins. The current administration is a head-wind for oil prices as their stated goal, by Energy Secretary Chu, is to raise gasoline prices to European levels. The idea that we can solve our energy problems caused by decades of inaction, through the development of green energy is an issue with this administration. Although that may be a fine long term solution, the result is the lowest level of energy development in decades which only aggravates the short term issue and guarantees our continued dependence on outside nations while continuing to wait for Godot. For more on this issue see my energy blog at http://www.keepingitright.com/id2.html. In August we have seen three solar panel companies go out of business with the loss of over 1300 jobs. Solydra is the latest with the layoff of 1100 employees as it announced it will shut down a factory built, with the help of a $535 million federal loan guarantee, and file for bankruptcy protection. If the administration would abandon its unitary focus on green energy jobs, of which there are few, and focus instead on exploiting the resources we already have by drilling, fracking, and building the Keystone pipeline, we could generate a million new jobs with private industry footing the bill rather than with government stimulus. And tapping the 200 year reserve of natural gas in North America is estimated to create another million jobs while reducing our dependence on foreign resources and allowing us to keep hundreds of billions of dollars a year in our own country. I apologize if this all seems political but we must know our environment when making investment decisions. Since writing the above earlier this week, I have seen several major corporation CEOs and fund managers state that borrowing for investment and job creation is stymied by the current level of uncertainty in the future tax code and the impact of 2000 new regulations coming on board. We may not all agree on the severity of these issues but in investing, perception is reality. All of this makes a tough environment in which to invest but I remain a strong believer in our future and the future of U. S. based international corporations. When making investing decisions, we must always look at the risk/reward curve when allocating resources. We should never have our retirement funds in investments that cause us to loss sleep at night. The problem is that the return on money market funds and one year treasures is zero. This week I saw the ten year notes drop below 2%. It is hard to calculate a risk/return ratio when the return is zero. And of course, inflation is not zero but running at about 3.5% implying money in our mattress will incur a purchasing power decrease of 50% in twenty years. Inflation in the cost of a college education and medical costs is considerbly higher and therefore, investments to fund those accounts cannot remain in zero percent return instruments. I believe our current deficit situation will result in significantly higher inflation in the future. Although money market investments and low yield bonds have little if any capital loss risk, they have a tremendous and increasing purchase power degradation risk. Again I follow my own advice. In some of the recent deep market dips, I have increased my holdings in APPL and CAT. CAT has gone down more but I am sure it will return but AAPL continues to grow. You may be getting weary of these same old stocks but the portfolio I recommended in March, 2010 is still up 46% or just over 30% per annum ignoring dividends. Continue to look for buying opportunities in the following: AAPL – We have found out there is no tablet market but only an iPad market. HP, RIM, and Sony have all pulled back under that realization leaving Apple with 93% market share. Of course there will be competition in the future but not before Apple reaches the $500 per share price. IPhone 5 comes out in Oct and I believe there will be a standard iPhone and an iCloud phone. The iPad refresh is behind schedule but there is no completion to take market share. Apple will continue to astound analysts with quarterly results though Q1 2012. IBM – Shares are trading at $167.24. IBM provides a variety of information technology products and services and greater than 50% of their revenue is in foreign currencies. The shares have traded in a range between $128.54 to $185.63 in the past 52 weeks. Earnings estimates for IBM are just over $13 per share in 2011 and about $14.77 for 2012. IBM shares barely dipped below a key support level and have started to quickly bounce higher. I think a play in technology is supported by the fact that employers cannot find workers with the skill set needed for available jobs. Some of that education shortfall will be mitigated by the application of technology. CAT and CMI – Both companies are impacted but slowing growth in world economies but both should provide above average returns for another two years. DE – Deere is well positioned to provide improved agricultural efficiency as our growing world increases demand on higher levels of the food chain. The emerging middle class in China has created, and vastly increased, demand for pork, chicken and beef which all rely on corn and other grains for production. Couple this with our continuing penchant on burning corn to power our SUVs while people are starving in other parts of the world, and the demand for Deere products continues to grow. SLB – Schlumberger will continue to benefit from the international thirst for oil and gas to fuel current needs in-spite of the painfully slow move to green energy. They will play a significant role in rebuilding the Iraq infrastructure and deliver strong results through 2012. XOM – Nothing to say other than it must be a core holding in any portfolio. GLD – It is hard to recommend gold and silver at these prices but again I think we face rising inflation and continued uncertainty at home and abroad in the near future and gold should be at least 10% of your portfolio. Buy on dips and hope for the best; a good long term hold. PRWCX – This Price Waterhouse fund is my favorite fund for continued growth in your lower risk portfolios. They are able to move from equities to bonds and other instruments and continue to provide an above average return with below average risk. Take a deep breath and look to the future when making these investment decisions. I invite you to join me in building and preserving financial wealth to compliment “true” wealth: faith, family and friends. Larry Hollatz, RFC® Past Investment Letters @ Larry's Blog |
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