My internal debate at the moment is whether to believe the charts or believe the fundamentals. My targeted companies are all dividend paying, large firms. I become a reluctant buyer as the dividend drops below 3% and very antsy if it is below 2. On the other hand anything paying over 5.5% or so also makes me nervous. What does that leave?
A few key samples of what I am holding are:
Southern Company (NYSE:SO) is my largest single position
Kinder Morgan (NYSE:KMP)
Realty Income (NYSE:O)
Occidental Pete (NYSE:OXY)
And I have a taste for KMB, PG, WMT, WAG, JNJ and RDS.A with GE and BP as garnish.
Not very adventurous.
(As a side note I have a rule that if I make a capital gain 4 times the dividend in a three month time frame I cash out and seek greener fields. I may be a fool, but then.)
So here are my concerns. Today among the types of stocks I like I am seeing two sorts of chart patterns. First, the extended bull run. KMB and PG are good examples surging past old highs, and some in this group are stalling at the old highs. JNJ for example. GE and BP have really broken to the upside, and chart-wise truly seem overbought.
The others are drifting lower. SO, my biggest holding is case in point, hovering over the $40 ish level, and floundering enough I suspect lower prices ahead. T has a little bounce, but is only dragging itself higher slowly. Its chart looks a lot like poor SYY who it I hear is the darling of short sellers.
So many of these charts seem poised for a retrenchment that it gives me pause.
On the other hand, I like all the businesses. I think they are making money, distributing money, and making decent progress with their strategic plans. Generally fundamentals are good. (Poor SYY, a disastrous IT project probably cost the company more than lunch money, yet they are sitting a bunch of cash. I'd be afraid to short sell that one.)
Lastly I look at the (flawed) Dow 30 index and in almost every view (I like bigcharts.com) it seems overbought, from the "All Data" to the 1 month time frame.
With QE possible allowing almost infinite buying resources when do we run out of buyers for stocks?
I'd like to hear from others how they balance these issues.
Disclosure: I am long SO.
Additional disclosure: I am long everything I mentioned. I may lighten or add to my positions on fear, hope or greed striking me irrationally at any moment.