BUY OF THE WEEK 2/25/2014

Posted on February 25, 2014 | Podcast

AAII Journal Editor Charles Rotblut Editor explains to Chuck Jaffe of MarketWatch why Myriad Genetics (MYGN) is his “Buy of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Buy of the week



Upcoming Chapter Meeting: AAII Northern New Jersey

Posted on February 24, 2014 | Local Chapters


Date: Monday, March 3, 2014
Topic: Profiting from Rising Rates: Forecasts & Strategies for 2014
Speaker: Mark Skousen, Ph.D., Editor in Chief, Forecasts & Strategies

In this presentation, Mark Skousen will lay out several strategies to use as interest rates rise. He will outline three investments to avoid when rates rise and three investments that can draw profit from higher rates. Attendees will learn how to protect their portfolios and profit with dividend-paying or private-equity stocks. Skousen will also share his outlook for the economy under new Federal Reserve chair Janet Yellen, and include recommendations on his favorite five stocks to buy now.

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DIVIDEND INVESTING ALERT FOR THE WEEK ENDING 2/21/2014

Posted on February 21, 2014 | Dividend Investing

What a difference a couple of weeks makes. As of last night, the Dow Jones U.S. Index (IYY) and the S&P 500 were both back to about breakeven for the year. This comes after the U.S. markets reached pullback territory (a decline of at least 5%) earlier this month.

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Mutual Funds Probably Should Stay Open

Posted on February 20, 2014 | Investor Update

Investor-Update

Yacktman Focused (YAFFX), a fund we recently deleted from the AAII Model Fund Portfolio, is one of a relatively small group of value-oriented mutual funds to close last year. When a mutual fund closes, it either stops accepting investment dollars from new investors or stops accepting any new investment dollars, be it from new or existing shareholders. Some funds may partially close by removing themselves from broker networks and requiring new investors to directly go through the fund. The latter is what the Sequoia Fund (SEQUX), which I own, did for a while before completing closing its doors to new investors at the end of last year.

Mutual funds, like many other investment products, earn money based on a percentage of assets managed. In concept, a mutual fund manager would want his assets under management (AUM) to be as high as possible to maximize his profits. With the average domestic large-cap fund charging nearly 1% in annual expenses, every extra billion dollars’ worth of AUM adds up to a lot of profits.

In practice, there can be a limit to what level of AUM makes sense. A fund manager with a very targeted strategy can end up with more investment dollars than good ideas. This is particularly the case if a fund invests in a country with a comparatively small securities market or follows a restrictive strategy. It can also make sense to place a cap on a fund’s AUM to prevent it from becoming so large that it is difficult to do anything but essentially mimic an index fund, albeit at a higher cost.

Funds may close, however, because a manager simply believes the prevailing market environment doesn’t offer enough attractive investment opportunities. Investors may see a preliminary sign that this is occurring by monitoring the fund’s cash balance. For example, Yacktman Focused ended 2013 with a 20.8% cash allocation, up from 16.3% a year prior.

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AAII Sentiment Survey: Optimism Rebounds for Second Week

Posted on February 20, 2014 | AAII Survey

Optimism rebounded for the second consecutive week, but remains below the levels registered at the start of the year, according to the latest AAII Sentiment Survey. Pessimism, meanwhile, fell to levels not seen since mid-January.

Bullish sentiment, expectations that stock prices will rise over the next six months, rose 2.1 percentage points to 42.2%, a six-week high. The historical average is 39.0%.

Neutral sentiment, expectations that stock prices will stay essentially unchanged, rebounded by 2.5 percentage points to 35.0%. This is the seventh consecutive week with a neutral sentiment reading above its historical average of 30.5%.

Bearish sentiment, expectations that stock prices will fall over the next six months, dropped by 4.6 percentage points to 22.8%. This puts pessimism at a five-week low. Bearish sentiment is also below its historical average of 30.5% for the 20th time in the past 24 weeks.

The above-average reading for neutral sentiment extends a trend that has occurred over the past 12 months. Since February 28, 2013, neutral sentiment has been above its historical average 36 out of 52 weeks (69% of the time). In comparison, bullish sentiment has been above its historical average 25 times and bearish sentiment has been above its historical average 18 times over the same period. The pattern suggests that despite the overall strong performance of the stock market, individual investor enthusiasm for stocks remains reserved.

The rebound in the S&P 500 after its recent pullback continues to alleviate concerns, at least temporarily, among individual investors about whether the market established a short-term top at the start of the year. Also helping to boost optimism are sustained earnings and economic growth, the Federal Reserve’s tapering of bond purchases and the debt ceiling agreement. Keeping some individual investors bearish are worries about the potential for a correction, elevated stock valuations, the pace of revenue growth and Washington politics.

This week’s special question asked AAII members if there are any economic or market catalysts they are looking for over the next few months. No consensus appeared among the answers. Approximately 20% of respondents said they are watching corporate revenue and earnings growth. Slightly more than 17% said the labor market is a key indicator, especially an acceleration in job growth or a decrease in the unemployment rate. Nearly 12% were focused on the general rate of economic expansion. Other respondents said they were monitoring interest rates, foreign economies and Federal Reserve policy.

This week’s AAII Sentiment Survey results:

  • Bullish: 42.2%, up 2.1 percentage points
  • Neutral: 35.0%, up 2.5 percentage points
  • Bearish: 22.8%, down 4.6 percentage points

Historical averages:

  • Bullish: 39.0%
  • Neutral: 30.5%
  • Bearish: 30.5%

The AAII Sentiment Survey has been conducted weekly since July 1987 and asks AAII members whether they think stock prices will rise, remain essentially flat, or fall over the next six months. The survey period runs from Thursday (12:01 a.m.) to Wednesday (11:59 p.m.) The survey and its results are available online at: http://www.aaii.com/sentimentsurvey



Sell OF THE WEEK 2/19/2014

Posted on February 19, 2014 | Podcast

AAII Journal Editor Charles Rotblut explains to Chuck Jaffe of MarketWatch why Intel (INTC) is his “Sell of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Sell of the week



BUY OF THE WEEK 2/18/2014

Posted on February 18, 2014 | Podcast

AAII Journal Editor Charles Rotblut Editor explains to Chuck Jaffe of MarketWatch why E*Trade Financial Group (ETFC) is his “Buy of the Week” on the MoneyLife Radio Program. MoneyLife is a daily personal finance show that sorts through the financial clutter to bring you the information you need to lead the MoneyLife.

Audio url: Buy of the week



AAII WEEKLY FEATURES 2/18/2014

Posted on February 18, 2014 | Weekly Features

This week’s AAII Weekly Features has been updated.
View this week’s Top AAII Articles, Featured Stock Screen and Member Question.

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Upcoming Chapter Meeting: AAII Chicago

Posted on February 15, 2014 | Local Chapters


Date: Saturday, February 22, 2014
Topic: Investing With Volume Analysis: Turn Up the Volume
Speaker: Buff Dormeier, CMT, President and Founder of VolumeAnalysis.com

If price is the market’s testimony, then volume must be the market’s polygraph. More than any other indicator, volume tells you the real force and extent of investor’s convictions about present prices. By reading the market’s volume-oriented “lie detector tests,” you can uncover market trends sooner with more reliability and thus can position yourself to capture the profits those trends might deliver.

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February 2014 AAII Model Portfolios Updated – Market Pulls Back to Open the Year

Posted on February 14, 2014 | Model Portfolios

After pulling back to begin 2014, it seems that the market has stabilized slightly and is in need of a catalyst to spur any movement in either direction. While our recovery seems to be ongoing, the improvements have been slow, especially in the labor markets. We have now had two months of weak jobs growth. And although the unemployment rate is decreasing, there are still a record number of long-term unemployed as well as underemployed workers. On a positive note, however, we will not be seeing a repeat of 2013’s gridlock on the debt ceiling. The Republican-controlled House passed a “clean” bill to increase the debt ceiling, meaning that the bill did not include any other demands. It is almost certain to pass the Democrat-controlled Senate. Additionally, new Federal Reserve Chair Janet Yellen spoke before Congress, highlighting the still-weak labor market. She will likely continue slowly tapering government bond-buying while keeping interest rates near zero.

AAII’s Model Portfolios were not able to escape the weakness of the overall stock market last month. During January, the Model Shadow Stock Portfolio lost 7.6%, underperforming both the Vanguard Small Cap Index fund (NAESX), which lost 2.1%, and the DFA US Micro Cap Index fund (DFSCX), which fell 4.4%. The Model Shadow Stock Portfolio has a compound annual return of 17.8% from its inception in 1993, while the Vanguard Total Stock Market Index fund (VTSMX) has gained 9.1% annually over the same period.

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