Utilities Buzz Stocks and ETFs- VPU, NRG and SO

Posted on Thursday, February 19th, 2009

Utilities stocks and ETFs usually weather a downturn in an economic cycle better than most other companies largely because of their predictable earnings.

Utilities vs. Bonds

Low interest rates are forcing investors to look beyond low yielding money market rates and bank CDs for income. To meet your income needs you need to use the right investment products.

Utility stocks and ETFs are an excellent choice to help you build the income portion or your investment portfolio. In many cases investors can net more income from the dividends paid by utility stocks and ETFs. Why? Because the qualified dividend income is taxed at a maximum rate of 15% (or to 5% for taxpayers in the lowest two tax brackets) whereas the taxable income from bonds is taxed at higher ordinary income rates. Even though most utility stocks and ETFs posted negative performance last year, they are among the best performing industry sectors so far in the early going of 2009.

Here are a few utilities buzz stocks and ETFs we’re watching:

1. Vanguard Utilities ETF (NYSEArca: VPU): VPU only fell 28% in 2008, compared to the S&P 500’s 38% drop. The 12-month yield is 3.9%, and the median market size of utilities stocks in the ETF is $10.7 billion. Holdings include: Exelon Corp. (NYSE: EXC), Southern Co. (NYSE: SO), FirstEnergy Corp. (NYSE: FE) and American Electric Power Co., Inc. (NYSE: AEP)

2. NRG Energy, Inc. (NYSE: NRG): Timing could be everything with this wholesale power generation company. Exelon Corp. offered $6.2 billion to buy NRG in late 2008. In an open letter to its shareholders, NRG stated that it would “support a deal with Exelon at a fair price but, at this point, we have no reason to believe they are willing to offer a fair price.” We expect Exelon to come back with an offer NRG can’t refuse. If this happens, NRG shareholders win.

3. Southern Co. (NYSE: SO): Smart grids–remember those words. They’re likely to pop up a lot over the next few months as stimulus dollars start pouring in. Smart grids combine special meters, wireless technology, sensors and software so customers can closely monitor energy use cut and back when the grid is stretched to its limit. Southern Co., which powers a lot of Alabama, Georgia, Florida and Mississippi, has been one of the early leaders of this technology. Shares of SO have been down about 15% over the past 12 months, more than half of the S&P’s decline. The company maintains a healthy 20% operating margin. John Quealy, an analyst with Canaccord Adams in Boston, told Reuters that the companies best positioned to benefit from the stimulus are those that are running pilot projects and have already started the change.

Here’s a cool video on why utility stocks rule (:

Top ETFs for 2009 YouTube Video

Posted on Saturday, February 14th, 2009

If you cant view the above. Try to check it out on google video here http://video.google.com/videoplay?docid=-4242486558099610171

Top ETFs for 2009- VBK, SDY, DLN and ITM

Posted on Monday, February 9th, 2009

ETFs are a great way to go for anyone looking to plug holes in their portfolio. If you’re looking for more exposure to foreign markets or can’t decide which biotech stock to invest in, maybe an ETF is the way to go. A lot of experts are pointing to ETFs as a good way for investors to get back some of their lost gains.

Here are a few differences between an ETF and an index fund.

Taxes: The big buzz about ETFs is their tax efficiency. The big “tax event” for ETF shareholders happens when you sell your shares, hopefully at a profit, after which you’ll pay capital gains taxes.

Expense ratios: By construction, ETF investors have less exposure to capital gains taxes than mutual fund shareholders. That’s because fund managers frequently buy and sell the fund’s holdings — and ask investors to pick up the tab. ETFs occasionally shift shares, too, although much less than most mutual funds. Annual expenses for ETFs range between 0.1% and 0.65% and are deducted from dividends. Index mutual funds charge anywhere from 0.1% to more than 3%.

Minimum investment requirement: For investors with limited funds (say, less than $1,000) who want to get started in the stock market, ETFs offer a cheap entrée. Through your discount brokerage account, you can buy one single measly share if you choose. In comparison, many index mutual funds have high initial balance requirements. (Those with lower requirements often charge higher fees.)

Ease of use: Here’s the double-edged sword of ETF investing. They are easy to buy — you simply need a discount brokerage account (and that’s easy to get — and cheap). Consequently, they’re easy to trade. And trade and trade and trade.

Here are a few ETFs we think are worth keeping an eye on:

1. Vanguard Small Cap Growth ETF (VBK): Although the year-to-date returns were -40%, we think small-caps may lead the charge of the next bull market. Roughly 19% of this ETF’s holdings are in healthcare and industrial materials–both reasonably stable sectors. Holdings include: Devry, Inc. (NYSE: DV), Edwards Lifesciences (NYSE: EW) and ANSYS, Inc. (Nasdaq: ANSS).

2. SPDR S&P Dividend (SDY): Dividend ETFs seem to be gaining a lot of interest lately. This investment seeks to replicate, before expenses, correspond generally to the price and yield of the S&P High Yield Dividend Aristocrats index. The fund uses a passive management strategy designed to track the price and yield performance of the Dividend index. It is nondiversified.SDY has been down almost 23% over the last 12 months. However, its holdings, which include Con Edison (NYSE: ED), FirstMerit Corp. (Nasdaq: FMER) and Vectren Corp. (NYSE: VVC), all of which we think are in sweet spots of the market.

3. WisdomTree LargeCap Dividend (DLN): Another dividend ETF. DLN’s holdings include Chevron Corp. (NYSE: CVX), Pfizer, Inc. (NYSE: PFE), and Wal Mart Stores (NYSE: WMT). he fund employs a passive management (or indexing) investment approach designed to track the performance of the WisdomTree LargeCap Dividend index. It attempts to invest all, or substantially all, of assets in the stocks that make up the Index. DLN generally uses a replication strategy to achieve its investment objective and generally will hold each stock in approximately the same proportion as its weighting in the index. It is nondiversified.

4. Market Vectors Intermediate Municipal (ITM): The fund invests at least 80% of total assets in fixed-income securities that comprise the index. It has adopted a fundamental investment policy to invest at least 80% of assets in investments suggested by its name.

Here’s a cool video on ETF investing:

Technology buzz stocks- CBAK, HEV and XDSL

Posted on Saturday, February 7th, 2009

Tech companies have lost their sizzle, thanks to a meteoric rise and crash, and maturity. Sure you can still make money investing in Microsoft (Nasdaq: MSFT), but you have to pick your spots–a new product launch, or big upgrade, for example.

Or buying more shares of Cisco (Nasdaq: CSCO) on weakness and fewer when the stock peaks, and making your money on dollar-cost averaging into the company’s steady 12% earnings growth, as Jim Jubak of MSN recently stated.

One of the buzz trends to keep an eye on is batteries, according to Jubak. Devices are getting smaller and more demanding. Lithium-ion batteries alone powered 50 million laptops, 800 million cell phones and 80 million digital cameras sold in 2005.

Here are a few battery buzz stocks you should keep your eye on:

1. China BAK Battery, Inc. (Nasdaq: CBAK): This company is poised to capitalize on the growing global market for batteries. Gross profit for the first quarter of FY 2009 increased nearly 50 percent, to $10.6 million, from $7.1 million a year earlier. Revenue for the quarter increased 30 percent to $68.1 million, from $52.8 million a year ago. The Company reported cash and cash equivalents of $37.2 million as of December 31, 2008, and gave revenue guidance of between $270 million and $300 million for FY2009–a 16 percent increase over 2008 at the midpoint range.

2. Ener1, Inc. (NYSE: HEV): No huge sales here–just a lot of great technology. Although the Japanese have traditionally led the battery market, Ener1 is a homegrown company with great ties to Japan. The company just announced a memorandum of understanding with ITOCHU Corporation, a highly diversified global trading company that leads the world market in distribution of specialized equipment and materials needed to produce lithium-ion battery cells. In addition to battery technology, Ener1 develops commercial fuel cell products through its EnerFuel subsidiary and nanotechnology-based materials and manufacturing processes for batteries and other applications through its NanoEner subsidiary. The company has about $18.6 million in cash, and is trading below its 50-day moving average.

3. mPhase Technologies, Inc. (OTCBB: XDSL): The company’s technologies are based on electrowetting, a unique way to store and manage power. In late January, mPhase announced that it was “getting close” to selecting a contractor to construct the company’s AlwaysReady Reserve Battery, that will be used in the AlwaysReady Emergency Flashlight. According to a recent news release, the AlwaysReady Reserve Battery is a manually activated lithium reserve cell with a minimum storage life prior to activation of 20 years. This is a promising, high-risk, micro-cap, penny stock.

Here’s a cool video on mPhase’s nano battery:

Penny stock investing and a few penny buzz stocks

Posted on Thursday, February 5th, 2009

I recently watched an interview with Tim Sykes, the author of An American Hedge Fund. Sykes, who’s in his mid-20s discussed a few reasons why your 20’s may be a good time to explore the volatile world of micro cap stocks.

Here’s the interview:

Now, before you get too excited, there’s a lot of downside to playing penny stocks.

Investopedia.com has a great primer for anyone interested in highly volatile penny stocks.

According to Investopedia, there are four main reasons to be leery of penny stocks:

1. Lack of reliable information available to the public: The key to any successful investment strategy is acquiring enough tangible information to make informed decisions. For micro cap stocks, information is much more difficult to find. Companies listed on the pink sheets are not required to file with the SEC and are thus not as publicly scrutinized or regulated as the stocks represented on the NYSE and the Nasdaq exchanges; furthermore, much of the information available about micro cap stocks is typically not from a credible source.

2. No minimum standards:
Stocks on the OTCBB and pink sheets do not have to fulfill minimum standard requirements to remain on the exchange. (Read What are the listing requirements for the Nasdaq?) Sometimes, this is why the stock is on one of these exchanges. Once a company can no longer maintain its position on one of the major exchanges, the company moves one of these smaller exchanges. While the OTCBB does require companies to file timely documents with the SEC, the pink sheets have no such requirement. Minimum standards act as a safety cushion for some investors and as a benchmark for some companies.

3. Lack of history:
Many of the companies considered to be micro cap stocks are either newly formed or approaching bankruptcy. These companies will generally have a poor track record or none at all. As you can imagine, the lack of historical information magnifies the difficulty in picking the right stock.

4. Liquidity: When stocks don’t have much liquidity, two problems arise: first, there is the possibility that the stock you purchased cannot be sold. If there is a low level of liquidity, it may be hard to find a buyer for a particular stock, and you may be required to lower your price until it is considered attractive by another buyer. Second, low liquidity levels provide opportunities for some traders to manipulate stock prices, which is done in many different ways – the easiest is to buy large amounts of stock, hype it up and then sell it after other investors find it attractive (also known as pump and dump).

Even with all the risks associated with penny and micro-cap stocks, there is a lot of upside if you choose the right ones to get behind.

Here are 3 Penny Buzz Stocks that we think are worth keeping an eye on:

Glowpoint, Inc. (OTCBB:GLOW): If you’re an avid ESPN viewer, you’ve probably seen Glowpoint’s technology at work. The company provides high-quality video conferencing technology to media companies. Trends like high definition video on the Web are creating a lot of opportunities of Glowpoint to grow its customer base, and develop new solutions. The company has a trailing P/E of 7.8, and has quarterly (yoy) revenue growth of 4.5 percent. Glowpoint has about $1.7 of cash in the bank, and earned about $0.51 per share last year.

Soyo Group, Inc. (OTCBB: SOYO): This computer, and consumer electronic products maker just unveiled 20 of its newest products at this year’s Consumer Electronics Show including bluetooth adapters, external hard drives, and HD TVs. The company’s Honeywell line of HD TVs is also being sold on Feb. 7th on HSN this Saturday. 9, Management projects total revenue will be approximately $110 million, with approximately $2 million in profit and $0.04 earnings per share.

Goldspring, Inc. (OTCBB: GSPG): Hard assets like gold and silver could make a comeback this year in light of the shaky global economy. The company just announced test results that revealed strong gold and silver mineralization in the deposit at the Hartford Complex in the Comstock Lode District of Nevada. The stock could be primed to make a run in the next few weeks, as the company is planning to announce

Just remember, penny stocks are volatile and erratic. If you buy a stock at $0.10 and sell it at $0.15, that represents a 50% return on your investment. A 5 cent decline, however, would leave you with a 50% loss. Many stocks trade in this range on a daily basis. If your investment capital is $10 000, a 50% loss is a $5000 loss. Do this twice and you’re investment is gone. Keep your stops close. If you get stopped out, move on.