In recent months, the insider sell/buy ratio for stocks has been significantly more than 20-to-1, notes Money magazine. "Historically, a ratio below 10-to-1, or $10 sold for every $1 bought, suggests bullish sentiment, and one above 20 indicates bearish sentiment. According to Thomson Financial, the ratio's been bearish 14 times in the past decade, and the market has dropped an average 6 percent in the following six months."
The highly disciplined managers at Jensen Fund (1-800-992-4144) wait until a stock is trading at least 40 percent below what it considers its fair value before buying shares. Such patience has produced 10.9 percent average annual gains over the past decade and has allowed the fund to rank among the top 1 percent of all funds in its Morningstar category for the past three years. Recent favorite stocks: Abbott Labs, Emerson, GE, Omnicom, Stryker.
The American Heart Association estimates that every 1 percent drop in total cholesterol reduces one's chance of contracting coronary heart disease by 2 percent to 3 percent, observes Medical Technology Stock Letter (P.O. Box 40460, Berkeley, CA 94704). "Cholesterol reduction experienced a quantum leap with the advent of statins. Now many statins are beginning to come off patent, making them easier to prescribe along with more expensive treatments. This opens the door for treatments complementary to statins. Our favorite biotech stocks in this area: Avant and Esperion."
Standard deviation is a statistical measure of how much a stock's return for a given period varies from its average return. The greater the variability, the greater the risk for investors. Starting with a universe of stocks it ranks highest for potential price appreciation over the next six to 12 months, Standard & Poor's recently examined those issues with the lowest downside deviations. Its eight favorites: Anheuser-Busch, Apollo Group, Chelsea Property Group, Dean Foods, Procter & Gamble, Vornado Realty, Weingarten Realty, Wintrust Financial.
The cash crunch among state and local governments as well as the competition from newly tax-advantaged stock dividends have combined to put pressure on many municipal bonds. Utility Forecaster newsletter (1750 Old Meadow Road, McLean, VA 22102) thinks four closed-end muni funds can weather this storm. "Because closed-end funds trade on exchanges, like stocks, and don't accept new money, they don't have to sell bonds to meet redemptions, or buy at a disadvantage in order to put new money to work. Our four favorites also recently sold at 3 percent average discounts to their net asset value: Blackrock Muni Target Term Trust, Nuveen California Muni Value Fund, Neveen NY Municipal Value, PIMCO Municipal Income Fund."
Investing in stocks ranks only fourth as a preferred method of accumulating wealth, say those who should know. According to the latest U.S. Trust Survey of Affluent Americans, the richest 1 percent say that these factors were "extremely important" to their wealth accumulation: corporate employment (41 percent), family-owned business (37 percent), professional practice (36 percent), securities (33 percent), real estate (26 percent), inheritance (5 percent).
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Investor's Notebook is a digest of investment opinion from the world's leading financial advisers. It does not recommend any specific investments, and no endorsement is implied or should be inferred. For more information, contact the individual firms cited.