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Turner Investments says the rally is junk



June 20, 2009 – Comments (2)

Morningstar has a nice synopsis of Turner Investments' shareholder letter saying that the lowest quality stocks are rallying the most. Turner is a quant shop. They believe that this rally is a "statistical anomaly". It seems that the stocks rallying the most are junk stocks under $1. Turner's full piece is available on their website.

I quite agree. The high quality stocks have also rallied off their bottoms, but they are still cheap. I recommend looking at large cap stocks with wide moats, like JNJ, Procter and Gamble, Novartis, Lowes, Kinder Morgan, Caterpillar, Berkshire Hathaway, Pepsi, Sysco, Cisco, Intel, 3M and Microsoft. All these firms except Berkshire pay reasonably generous and growing dividends. They are available at relatively high yields.

American Express is definitely a bluechip firm that's been unreasonably punished. I still think it's  a buy. It's available at a relatively high yield now, although it's been reluctant to increase its dividend.

I have a number of more aggressive picks that I also feel have wide economic moats. These include Compass Minerals, Enterprise GP Holdings, Paychex, Vulcan Materials, IMS Health, Western Union, Monsanto and Apollo Group. The first 5 pay dividends. Paychex pays quite a large dividend. EPE pays a very large one and I expect that to grow quite rapidly.

2 Comments – Post Your Own

#1) On June 20, 2009 at 2:07 PM, weiwentg (97.82) wrote:

Correction - Cisco does not pay a dividend. It was Oracle that initiated a small one, and I got confused. I would like to see Cisco pay one out in the future, and I think they have the cash flow to do it.


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#2) On June 21, 2009 at 12:07 AM, chk999 (99.96) wrote:

I agree with you about American Express. I think it got pummeled for no real good reason. It has great return on capital and just keeps growing.

Chris - long AXP, JNJ, PG and other fine companies

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