With the Dow Jones Industrials moving triple digits four days in a row, I would certainly say that volatility is back in the market; and the volatility index (VIX) showed us that by moving up 13.28% for the week. With the Federal Open Market Committee (FOMC) kicking off a meeting next week on 18Jun13 and concluding on 19Jun13, I would expect a little bit more volatility just from the words the Fed Chief will say about the meeting after it concludes. I'd expect some more talk about "tapering" but that doesn't bother me at all because I've been positioning myself in stocks of companies that provide a service to consumers which the consumer will spend on regardless. This week's activities in Abba's Aces included purchasing of good yielding dividend stocks such as Cincinnati Financial (CINF), Amgen (AMGN), and Hasbro (HAS). Let's take a look-see at each one individually really quick and find out if we can pick up some more.
While the S&P 500 was down 1.01% for the week of 10Jun13, Cincinnati Financial was down 0.6%. Cincinnati Financial is engaged in the property and casualty insurance industry where it operates in 39 states. I always believe that insurance companies are great to invest in because if you own a home or car, you sure know that you want to protect your assets and buy insurance to do just that. You know as well as I do that you keep paying that monthly bill to your insurance company and nothing ever happens to your property; you can almost go years without ever having to use your insurance even, and that whole time the insurance company is just collecting your money and making money off of it; and on top of all that I'm sure you've noticed that your insurance rate increases year after year. As we can see from the chart below that the relative strength index (RSI) bounced off of oversold territory in early June and the moving average convergence-divergence (MACD) graph also started to spike upwards with the divergence decreasing. Both these graphs indicate bullish patterns. If you believe in the housing and automobile recovery stories going on, then you have to believe in an insurance company such as Cincinnati Financial. The ex-dividend date for the company is on 17Jun13, and it isn't the only property/casualty insurer I've been picking up lately; I've also been picking up Travelers (TRV) because I wanted to diversify between mid and large cap companies.
While the S&P 500 was down 1.01% for the week of 10Jun13, Amgen was down 1.41%. During the week a research report came out claiming that Amgen's Enbrel, which is used to treat rheumatoid arthritis, showed to be no more effective than a cocktail of three generic treatments and the stock drop about 1.5% that day. Enbrel accounted for $4.23 billion in sales last year, but according to the work of Bio Vantage, they ran a scenario where if the growth rate of Enbrel were to decline by 15%, the intrinsic value of Amgen shares would be $98. On the same day as this Enbrel report, Amgen reported that a phase 3 trial for a product used to treat ovarian cancer patients met its primary endpoint of progression-free survival goals; indicating a 34% reduction in the risk of cancer progression or death. The National Cancer Institute estimates 14,030 deaths along with 22,240 new cases of ovarian cancer this year. If Bio Vantage's work is correct, you are getting the ovarian cancer treatment for free essentially if it gets approved. I believe the stock is a value play with room for dividend growth along. As we can see from the chart below that the relative strength index (RSI) also bounced off of oversold territory in early June and the moving average convergence-divergence (MACD) graph also started to spike upwards with the divergence decreasing. Both these graphs indicate bullish patterns. Consumers will always spend money on their own welfare and I believe if they have been having success with Enbrel, they will not switch away from it to go with the cocktail of products, or else the stock would have dropped a bit more than the 1.5% it did on 12Jun13.
While the S&P 500 was down 1.01% for the week of 10Jun13, Hasbro was down 2.02%. During the week, I was reading an article by Matt Cilderman where he was describing piracy of toys through 3-D printing techniques and this alarmed me as to what it would do to the stock price of Hasbro and Mattel. 3-D printing might take a while to catch on to the everyday consumer, but I believe there may be an issue here and has me contemplating getting out of the stock. As we can see from the chart below that the relative strength index (RSI) is flat and the moving average convergence-divergence (MACD) graph also is flat with the divergence decreasing. The MACD may be bottoming out shortly if I see the divergence bars getting smaller. Although parents will go to great lengths to make their kids happy and quiet by purchasing them toys, I don't think the parent will care if the toy is a counterfeit or not which I believe will eat away at Hasbro's revenue, and that's why with any sort of pop in the stock, I believe I will be selling it.
With volatility in the market looming, I believe the way to beat it is to get into stocks with high paying dividend yields and that make products which consumers will buy no matter what. I will continue to use the Warren Buffet method of picking stocks, picking up things that are common to everyday living with good dividend yields. Both Cincinnati Financial and Amgen to me exhibit these qualities and will continue to buy into them, but I will hold off on buying anymore of Hasbro for now till I do some more homework on this 3-D printing situation and what it entails to make your own toys at home. I'd like to hear other people's thoughts about my thoughts on the Hasbro situation.
Disclaimer: These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!