8 September 2011
Welcome to the September edition of II Insight
The start of this month turned out to be just as tumultuous as August. What's more safe haven assets are falling by the wayside. Gold is struggling at its August high and the Swiss Franc is being devalued by intervention from the Swiss National Bank. Most equities remain volatile with many now entering bear markets. So where can one invest and still sleep at night?
Our mystery chart “Y” is one suggestion. It depicts an easily investable asset class versus the S&P 500 and over the long-term it outperforms by a wide margin. It's relatively resilient to market shocks and what's more offers a decent income stream. Read on to discover our mystery chart for asset “Y”.
In this month's report we also review recent results from our Advisors Sentiment Survey as a key spread reaches an important juncture.
Our Advisors Sentiment Survey
for the first week of September showed an erosion of optimism down to a key level. This reference point has proved to be a buy signal in the past three years.
The difference between the bulls and bears contracted to +1.1%. Typically when the spread falls to around the “zero” level equity markets bounce. On the chart we have annotated each previous occasion since the March 2009 bottom when the spread has dropped to zero. Each occurrence was followed by a rally of at least 4 weeks in duration.
However, all bets would be off should the spread breach the zero level. A sustained break would be evidence that equities were indeed in a bear market. Should this occur, the deeply oversold levels (negative values) such as were seen at the tail end of 2008 or 2002 will be the point from which a significant recovery rally can emerge. However, such low levels of sentiment would likely be associated with lower levels for stocks.
This indicator will be one of the key metrics to watch over the next few month. For further details on our Advisors Sentiment Survey and to subscribe, click here
Drum roll… our smoking hot
mystery chart is…if you haven't guessed already…the Tobacco sector!
Our website contains a hundred or so sub-sectors and all can be charted. The tobacco group contains eight stocks: Alliance One International (AOI), Altria Group (MO), British American Tobacco (BTI), Philip Morris (PM), Lorillard (LO), Reynolds American (RAI), Universal Corp (UVV) and Vector Group (VGR).
The dividends from these stocks are amongst the biggest out there. Altria Group (MO)
for instance pays 6.1%. The P&F price and relative charts for the stock are mind boggling! Versus the S&P 500 MO
has outperformed by 650% since March 2000 and that doesn't even consider the dividend income! MO
was rated as a strong buy in the Coe Report
on September 9th
Subscribers can chart these stocks as well as over 5000 others. Subscribers also receive buy and sell suggestions. Across our US portfolios we are already in Reynolds American, British American Tobacco and Lorillard (and have been for some time).
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