On February 5, 2013, Virgin Media (VMED) was given a buyout offer at $47.87 per share by Liberty Global (LBTYA). Virgin Media is already a member of the Nasdaq 100 Index while Liberty Global was recently added to the same index on December 14, 2012 (see Nasdaq 100 re-rank here).

Virgin Media was featured in our Nasdaq 100 Watch List Summary section on December 16, 2011 (found here). Our worst case scenario for the stock was that it might trade as low as $13.28, it never came to be. In fact, VMED never traded lower and has subsequently gained as much as +117%.

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There are a couple of important observations about fundamentals that need to be addressed. First, there weren't any offers for VMED at the 2011 low. This suggests that many corporations either cannot identify values at the low or

The new year is right around the corner and we're not letting the fiscal cliff stop us from searching for investment ideas. We've decided to turn to an old strategy, the Dogs of the Dow which was introduced by Michael O'Higgins, for some potential opportunities. The Dogs of the Dow strategy suggests that you buy the top ten highest yielding stocks of the Dow Jones Industrial Average at the beginning of each year.

The top ten companies were AT&T (T), Verizon (VZ), Kraft Foods (KRFT), Merck (MRK), Pfizer (PFE), General Electric (GE), Johnson & Johnson (JNJ) and Procter & Gamble (PG). Below is the performance of the "Dogs" for 2012.

On December 14, 2012, the Nasdaq OMX Group announced the names of the companies that would be added and dropped from the Nasdaq 100 Index (found here). This year, there were ten companies added and dropped.

The ten companies added in 2012 were:

After the market closed on October 24, 2012, Akamai Technologies, Inc. (AKAM) reported "Third quarter revenue of $345 million, up 23 percent year over year, GAAP net income of $48 million, up 14 percent year over year; or $0.27 per diluted share, up 17 percent year over year, Normalized net income of $79 million, up 24 percent year over year; or $0.43 per diluted share, up 26 percent year over year." The news seemed to caught the market flat-footed, as the stock had been selling off from the October 8, 2012 high of $39.60 down to the closing price of $36.11 on October 24, 2012.

Last year, on October 24, 2011, we posted our recommendation of Akamai as being among the best candidates for consideration from our Nasdaq 100 Watch List. At the time, AKAM was trading at $23.85 and we said the following of the stock:

"…we

When discussion of market valuation comes up, the mention of price-to-earnings ratios (p/e ratio) is often brought up to possibly explain if the market is overvalued or undervalued. The arguments generally follow along the line of reasoning that when the stock market rises then so too will the p/e ratio, which will be indicated when the market is overvalued on a relative basis. Alternatively, when the stock market is in a declining trend, the p/e ratio will also decline to historical lows allowing for a good indication of when the market is undervalued. The point usually is that there is a correlating relationship between the rise and fall of the stock market and p/e ratios.

While the line of reasoning regarding p/e ratios and stock market valuation is logical and can easily be demonstrated over a majority of stock market history, there have been periods when an inverse relationship between

We read a great article by Vince Martin titled "Procter & Gamble Is Severely Overvalued" (found here). Martin went through a detailed analysis of the reasons why Procter & Gamble (PG) should be considered an overvalued stock. Because Martin did not mention selling the stock (a cardinal sin of dividend investors), given such a strongly titled article, we thought we'd try to estimate what the downside risk for PG might be so that investors could prepare for when to buy the stock.

Keep in mind that as of October 12, 2012, Procter & Gamble has a price chart with the following activity since early 2007:

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Overall, the price of PG has vacillated widely with a high of $74.67 and a low of $44.18. Dow Theory suggests that the midpoint of such a range is the dividing line between a stock that is bullish or bearish.

Two years ago, we created a dividend watch list and compared that list to the one created by Scott's Investments at around the same period of time. Both stock lists were generated after the close of market on Friday October 8, 2010 and before the stock market opened on Monday October 11, 2010.

A month and a half after the lists were created, we submitted an article titled "Comparing Two Dividend Strategies" in which we compared the relative performance of both lists. The stock list created by Scott's Investments was focused on companies that had dividend yields of 4% or greater. The stock list that we created had a focus on companies that have had a dividend increasing policy of ten years or more and were within 20% of their respective 52-week low.

Understandably, some argued that it was disingenuous to compare two stocks lists after such a

On September 13, 2012, the Federal Reserve issued a statement (found here) that an additional round of quantitative easing (QE3) was going to be the preferred method for monetary policy going forward. The QE3 would be in the form of $40 billion of monthly purchases of agency backed mortgage securities. The rationale for this policy implementation was explained to be put in place to ensure maximum employment and price stability. We wonder whether a natural state of maximum employment has already been achieved. After all, isn't it always at the maximum level?

It is necessary to put the implementation of QE3 into perspective. The first official pronouncement of QE took place on November 24, 2008. At that time, the stock market, as reflected by the Dow Jones Industrial Average, had already declined -37.66% from the October 2007 high. The deployment of QE1 at the time resulted in a

Attempts by Barron's to explain Dow Theory have failed miserably… again. In the September 29, 2012 article by Jacqueline Doherty titled "Broken Dow Theory," it is suggested that "A lagging transportation sector historically has been considered a bad omen…" and then recites the standard, sub-standard nomenclature "Less shipping means fewer goods are being produced and purchased, which means the economy is slowing and the stock market could be headed for a fall." Doherty goes on to cite data from Bespoke Investment Group asserting that even though the Transportation Index (IYT) has fallen behind the market in general, it may not mean that the stock market, as represented by the S&P 500 (SPY), necessarily needs to follow the same script.

Fortunately, Dow Theory is very specific about how to interpret the Dow Jones Industrial (DIA) and Transportation Averages since the publication of Robert

On April 10, 2012, we recommended Agnico-Eagle Mines (AEM). At the time, we were basing our first individual recommendation of gold stocks on our Gold Stock Indicator. Our Gold Stock Indicator had been in a declining trend since November 2010, suggesting that no purchase of gold stocks should take place. However, once our Gold Stock Indicator declined below the long-term buy indication in early April 2012, it was a clear signal to start acquiring gold stocks.

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The reversal of the declining trend has been reflected in gains in the gold stock sector across the board. In our initial analysis of Agnico-Eagle Mines we projected that, based on Edson Gould's Altimeter, the stock price was likely to increase from +100% to +175% over a two-year period. Since our recommendation on April 10, Agnico-Eagle has gained just over +45%. Our experience indicates that there will be many

An article titled "Apple-less Dow faces changes to make-up," found in the Financial Times, suggests that the current owners responsible for the composition of the Dow Jones Industrial Average (DIA) are considering ways to make it possible to add Apple (AAPL) to the 116-year old index. The myopic view of changing the Dow Industrials simply for the purpose of adding Apple will haunt the index managers and investors alike.

In the past, the changes in the composition of the Dow have been ill-timed to begin with. In our article titled "Dow Jones' Decline Largely Impacted by Index Changes," we highlight the fact that composition changes routinely impacted the Dow Industrials negatively. Additionally, we have demonstrated that the changes to the Dow Industrials from 1929 to 1932 were the sole contributor to the decline of the index by -89%, when compared to the Barron's 50 Index in

There comes a time when great companies reach a sell range. In our view, Abbott Laboratories (ABT) just approached that mark.

After highlighting the fundamental and technical aspects of Abbott back at $47 on Sept. 24, 2009, in an update and actively accumulating the stock near the Jan. 31, 2011, low, the stock has risen 47% since 2009 and 53% since 2011 (excluding dividends). The annualized return is equivalent to +13.89% since 2009 and +28% since 2011. The stock outpaced the S&P 500 by roughly 13% from our 2009 review and by 37% since our early 2011 article.

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Let's revisit our original assessment of Abbott in 2009. The stock was trading at 14 times earnings and 10 times cash flow, and was sporting a 3.4% dividend yield. Today, Abbott is currently trading at 22 times earnings and 12 times cash flow, and has a 3.0%

The cover story for the September 10th weekly magazine Barron's is on the recent surge in real estate and how the rise in property prices is no fluke. In the article by Jonathan R. Laing titled "Happy at Last," readers are given a cautiously optimistic assessment of what has already been a well established trend in the real estate market. A distinction in this article is the confidence with which many professionals believe that the current rise in real estate is sustainable for the foreseeable future.

We agree that real estate will have a sustainable trajectory upward as we outlined in our December 10, 2010 article titled "Real Estate: The Verdict is In" (found here). We believe that the clear reversal of the indicators that we discussed at the end of 2010 has proven that the real estate market has bottomed. The following is a

After our sell recommendation of Warner Chilcott (WCRX) on April 30, 2012 (found here), the stock price had been on a 3-month slide. The stock had declined by $4.02, or -24%, by the first week of August.

However, on August 8th, after the announcement that the company was no longer for sale, WCRX found some traction and started to move higher and rose from $12.63 to as high as $14.09, nearly +12% in a single month.

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After the close of trading on September 5, 2012, seemingly out of nowhere, it was announced that the "main" shareholders and company management were going to sell nearly half of their holdings, or nearly 42.9 million shares, in the company (found here) and (found here). Among the management that is selling shares is CFO Paul Herendeen who will be letting go of 30.9% of the

We believe that now is the time to consider selling American States Water (AWR) at the market based on a few indications in the water utility industry.

First, the price of American States Water at point 2 has achieved the prior high that was set in 2007, at point 1, in the chart below. Even the most minor downturn from the all-time high suggests that there is considerable downside risk, especially if the stock was bought at or near our March 7, 2010 recommendation of water utilities (found here).

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Another factor being considered as part of our sell recommendation of AWR is that the water utility sector has experienced a triple top as indicated by the best performing industry ETF, First Trust ISE Water Index (FIW), since our March 7, 2010 recommendation of water utilities in the chart below (FIW is the blue line).

As long-term investors in precious metals, we have featured several articles that warned about the pitfalls of gold and silver investing rather than highlighting the redeeming attributes in the sector. One reason for this is the one-sided analysis that permeates throughout the gold and silver investment community.

Too often there are voices clamoring for attention about reasons to invest in gold and silver and very few of those same voices willing to say "dump the junk." Some analysts in the gold sector will defy logic by recommending gold stocks in an obvious declining trend rendering their analysis moot since anyone can use the rationale "we're in a bull market" to justify their claims.

One sure sign that we're in a gold bull market is when gold and silver mining companies start paying ever increasing dividends. In a 2009 article titled "Why Silver Beats Gold As a Precious Metals Play

The time will come when governments of the world realize, by force in some cases, that more value and confidence can be gained from using gold (GLD) as collateral as the last resort bailout mechanism rather than paper or digital money. However, gold as collateral is very much the financial equivalent of a nuclear option.

No nation wants to actually resort to gold as collateral for a bailout because as one nation dips its toes in the water, all subsequent nations will follow in its path at ever higher gold prices. It is only the last nation in the pool, with sizable gold reserves, that benefits the most from using gold as collateral. The first nation in the pool becomes the sacrificial lamb. However, gold investors need to be prepared for the unexpected when gold is used as collateral for a bailout.

As an example, in 1974 the official rate

As precious metals investors since 1996 (long only) and speculators since 2008 (long and short), we readily admit that when the right price appears we're going to sell a large portion of our physical inventory. We have written numerous articles on gold (GLD) and silver (SLV) highlighting both the good and the bad associated with investing in precious metals. We feel that a balanced view of both the risks and rewards of precious metals investment and speculation is critical to the longer term goal of wealth accumulation.

Unfortunately, there is a contingent of precious metal marketers that would rather stretch the truth or even promote myths to inspire undue hope, fear, and reckless optimism. A common myth by these marketers is that if we have a gold "standard" instead of a U.S. dollar-based financial system, our debt laden society would become stable. Unfortunately, promoters of this claim have not carefully

No, this is not an article about the prospect of Berkshire Hathaway falling from the current price of $121,950 to $32,100. Instead, this is what Edson Gould's Altimeter suggests that Berkshire Hathaway's (BRK.A) stock price is currently trading at.

Edson Gould's Altimeter compares the current stock price relative to the dividend that is paid by a company. As we all know, Berkshire Hathaway does not pay a dividend. So, how did we arrive at a dividend for Berkshire Hathaway? We borrowed the dividend policy of Charlie Munger's Wesco Financial (WSC). We thought that there would be no better corporate dividend policy to replicate other than that of Warren Buffett's right-hand man.

Exactly what portion of Munger's dividend policy did we replicate? First, we took WSC's average dividend payout ratio of 13% from 1999-2010 and applied it to Berkshire Hathaway's 1977 reported operating earnings of $22.54 per share. This resulted in

Review

On August 23, 2009, using Dow Theory and the Industrial Production Index [IPI], we predicted that the National Bureau of Economic Research [NBER], the organization charged with defining a recession, was going to say that the recession ended in June 2009 (article here). We specifically said the following:

"Implicit in my discussion of the IPI [Industrial Production Index] is that we are at a turning point for the economy. Based on the combination of the Dow Theory confirmation of July 23, 2009 and the IPI turning up from the June low, I will have to guess that the National Bureau of Economic Research [NBER] is going to proclaim June 2009 as the official end to the recession. The end to this recession will be lackluster and questioned from all corners."

As has been the case historically, the announcement that the recession had ended came 1 year and