Sign in
Become a MarketWatch member today
Mark Hulbert
May 5, 2010, 12:01 a.m. EDT · Recommend (6) · Post:
View all Mark Hulbert "º
"¹ Previous Column
Are oil-service firms a contrarian buy?
First Take "º
Bewkes gives Time Warner momentum
By Mark Hulbert, MarketWatch
ANNANDALE, Va. (MarketWatch) -- If nothing else, investors are learning one important lesson from the prospect of Greece and other European nations defaulting on their sovereign debt.
Financial strength and quality matter.
A lot.
Unfortunately, however, investors are due for a big shock when they begin trying to act on what they're learning. There are precious few stocks that qualify as genuinely very high quality.
I was reminded of this disturbing trend by Kelly Wright, editor of Investment Quality Trends. In his latest issue, published earlier this week, Wright reported an alarming reduction in the number of stocks that are even eligible to be considered by his demanding stock-selection methodology.
That methodology focuses on the highest-quality blue chip stocks, favoring those issues whose dividend yields are high relative to their historical ranges and avoiding those whose yields are low. He defines his group of blue-chip stocks to be those that can jump over six hurdles:
Dividend increases five times in the last 12 years
S&P quality ranking in the "A" category
At least five million shares outstanding
At least 80 institutional investors
At least 25 years of uninterrupted dividends
Earnings improvement in at least 7 of the last 12 years
Wright -- along with Geraldine Weiss, who published this advisory service prior to him -- have been producing the service since 1966, more than four decades ago. During most of that time, Wright reports, the challenge was limiting the number of stocks followed by their service to a manageable number, since so many otherwise qualified.
Since mid-2003, however, Wright reports in the latest issue of his service, "the number of stocks that meet our standard for quality and have well-defined profiles of dividend yield has been steadily diminishing; so much so that, as of this issue, our Select Blue Chip universe has been reduced to just 246 companies."
Nor is the trend that Wright reports a function of the particular criteria that his service uses to determine which companies are high quality. Consider the financial quality ratings that are assigned by Ford Equity Research, a San Diego-based independent research firm that follows more than 4,000 stocks. The firm bases its quality ratings on a number of factors, such as a company's size, debt level, earnings history and industry stability.
Mark Hulbert is editor of the Hulbert Financial Digest, which since 1980 has been tracking the performance of investment advisory newsletters. The HFD became a service of MarketWatch in April 2002. In addition to his regular columns for MarketWatch, Hulbert writes a column on investment strategies for the Sunday New York Times, a monthly column for Barron's.com and a column on newsletters for the Journal of the American Association of Individual Investors. Dow Jones and MarketWatch are launching a weekly newsletter, Hulbert on Markets: What's Working This Week.
When was the last time that a Time Warner Inc. employee or stockholder had the luxury of feeling optimistic?
11:17 a.m. Today11:17 a.m. May 5, 2010
- fumango | 5:44 a.m. Today5:44 a.m. May 5, 2010
"Mark Hulbert: Fewer and fewer good-quality stocks http://on.mktw.net/c9Gxif" 1:24 a.m. EDT, May 5, 2010 from MktwHulbert
"Mark Hulbert: Are oil-service firms a contrarian buy? http://on.mktw.net/bBOdMf" 12:25 a.m. EDT, May 4, 2010 from MktwHulbert
"Mark Hulbert: Financials that are better than Goldman http://on.mktw.net/94H9Or" 9:31 a.m. EDT, May 3, 2010 from MktwHulbert
"Mark Hulbert: Retail, leisure, food picks for summer portfolios http://on.mktw.net/8Z33pr" 12:42 a.m. EDT, May 3, 2010 from MktwHulbert
"Mark Hulbert: Sentiment nears dangerous levels http://on.mktw.net/bzJDfV" 11:49 p.m. EDT, April 29, 2010 from MktwHulbert
On Mutual Funds
Investors: Dump foreign stock funds
Minyan Market Musings
Will Europe order a code red?
Media Web
Save Newsweek, combine it with Slate
On the Markets
Fewer and fewer good-quality stocks
On Retirement
'Sandwich' booomers face money squeeze
Read Full Article »