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Issue No. 52
Nov. 14, 2017

Value vs Momentum

Rarely has the difference between leading and lagging stocks been as stark as today, thanks in part to the rise of passive investment strategies and exchange-traded funds that offer one-stop exposure to a sector, industry, or theme.

And with the equity market trending higher, investors rightly question why they should go out on a limb by putting your money into an underperformer?

Our model Portfolios have benefited from investors’ headlong rush into the utility sector, though 17 of our picks trade above our value-based buy targets. Other stocks can’t seem to catch a break, regardless of their earnings.

Historically elevated valuations in the utility sector also create a scenario where investors tend to sell first and ask questions later, a dynamic that can create compelling buying opportunities.

Remember what sparked a selloff in Dominion Energy (NYSE: D) in late January and early February 2017?

Memory failed me despite all the time I spend in front of a Bloomberg terminal, taking notes on earnings calls and poring over quarterly results—I had to revisit my Feb. 3 Alert for all the gory details. This first-quarter hiccup fades into the background when you consider management’s guidance for stepped-up dividend growth and the stock’s 19 percent total return since that bout of profit-taking.

In this market, investors must remain nimble and have the courage of conviction to distinguish real buying opportunities from falling knives—that comes from understanding a company’s underlying business. That’s why we dedicate so much time to analyzing quarterly results in the Utility Report Card and attending industry conferences.

 

Next Issue : Dec. 10, 2017View Past Issues

MODEL PORTFOLIOS & RATINGS

ABOUT ROGER CONRAD

Roger S. Conrad needs no introduction to individual and professional investors, many of whom have profited from his decades of experience uncovering the best dividend-paying stocks for accumulating sustainable wealth. Roger b