Investing Topics: Value Investing

Taper talk is rife again in the financial media. And the all-too-familiar consensus is still that the Federal Reserve will abandon cheap money in the near future, driving up interest rates and sending dividend-paying stocks plummeting.

At its core, the stock market is about people. The numbers offer clues to the odds of company’s success. But as an analyst for nearly 30 years, I’ve found keeping tapped in to the market mood is no less essential.

Don’t believe everything you hear. The odds are still heavily in favor of enough Democrats and Republicans joining forces to prevent the first bona fide US default since the government operated under the Articles of Confederation.

Dominion Resources (NYSE: D) shares hit an all-time high this week. The catalyst: A proposed spin off of the company’s natural gas assets into a master limited partnership (MLP), with an initial public offering in the second quarter of 2014.

Here’s the news from our Portfolio holdings over the past week. 

Utilities pay some of the safest and highest dividends on Wall Street. But they’re stocks, not substitute investments for bonds.

Those who’ve tried to treat them like bonds have consistently underestimated their returns in bull markets, as well as downside in bear markets. Similarly, those who’ve bought when interest rates were falling and sold when rates have risen have routinely paid too much and sold too cheaply. And occasionally as in 2008, they’ve had their heads handed to them.

It’s been mere days since Verizon Communications (NYSE: VZ) announced it will buy Vodafone PLC’s (London: VOD, NYSE: VOD) 45 percent stake in Verizon Wireless. And scores of articles and opinions have already been posted.

That’s understandable. At roughly $130 billion, only Vodafone’s takeover of Mannesmann and AOL’s (NYSE: AOL) purchase of Time Warner (NYSE:TWX) rank larger in dollars. And both of those deals went off at the inflated valuations of the 1999-2000 generational top for technology and telecom.

It’s practically an article of faith among short sellers that betting against wireline phone companies is close to a sure thing.

That’s likely to prove disastrous, however, in the case of Consolidated Communications (NSDQ: CNSL), the only company in the sector not to cut its original dividend.

Southern Company (NYSE: SO) currently sits near a new 52-week low. The reason: A combination of investor worries about rising interest rates and concern about its substantial capital spending program.

Utilities and essential services stocks are known for their long-run stability—both all-weather business strength and low share price volatility. But even they pale before the unmatched reliability of utility bonds.