"Current stock valuations aren't nearly as scary as the 46-to-1 price/earnings multiple for the S&P 500 that we saw during the depths of the recent recession," says the usually cautious Investech Market Analyst newsletter (2472 Birch Glen, Whitefish, MT 59937). "While still above the 70-year average P/E of 16-to-1, today's valuations are being supported by the lowest interest rates in half a century. With most major indexes still off their bullish highs, we don't consider the overvaluation argument a showstopper."
Despite a risk-aversive approach to growth stocks, Vanguard Windsor II Fund has appreciated an impressive 10.7 percent annually over the past decade. Windsor II spreads manager risk by using multiple managers. It also demands market caps of more than $1 billion, above-average dividend yields and multiples no higher than the market average. And it avoids big bets on both individual stocks and sectors. Recent favorites: Allstate, Cendant, Citigroup, ConocoPhillips, Wal-Mart.
The stocks of real estate investment trusts (REITs) have done so well lately that their yields have declined. Not to worry, says Utility Forecaster newsletter (1750 Old Meadow Road, McLean, VA 22102). "REIT preferreds still have hefty yields. Preferreds are a cross between common stocks and bonds. Like bonds, their dividends don't change and they're senior to common stock in any bankruptcy. Like common stocks, they pay dividends quarterly." Utility Forecaster's five favorite REIT preferreds recently yielded an average 7.7 percent: BRE Properties, Chelsea Properties, ProLogis Trust, Vornado Realty, Weingarten Realty.
Stocks with long histories of growth in both earnings and dividends outperformed the S&P 500 from 1986 through 2002, notes Standard & Poor's weekly newsletter The Outlook (55 Water St., New York, NY 10041). The Outlook recently recommended seven such stocks. All carried A or A-plus S&P earnings and dividend rankings, and four- or five- star rankings for above-average appreciation potential over the next six to 12 months. The seven: Alberto Culver, Anheuser-Busch, Applebee's, Avon Products, Citigroup, Clorox, Pfizer.
There are two big risks in owning municipal bonds now, says Kiplinger's Personal Finance Magazine (1729 H St. NW, Washington, DC 20006). "First, with bond yields at 35-year lows, there's probably nowhere to go but up, and rising yields mean lower bond prices. Second, credit quality has suffered because of depleted state and local treasuries. Credit agencies have lowered California's bond ratings and warn they may lower other states' too."
A new study published by the Journal of Financial Research found that female fund managers have a much harder time attracting money than their male counterparts, especially when their funds are new. The study found that despite the fact that the performance of female and male bond-fund managers has been about equal, from 1991 through 2000 significantly less money flowed into the female-managed funds.
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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.