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Utility Sector: Check The Ingredients Before Buying

High dividend yields are NOT enough to warrant investing in the utilities sector. Too many investors put their hard-earned money in utility stocks with the assumption that relatively high-yielding dividends from stable business make a good investment. The real question that investors in any equity security must ask is: does my expected return from a stock justify the risk of investing in it?
by David Trainer, Founder & CEO
New Constructs
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Total Annual Costs Ratings Methodology for Predictive Fund Rating

Total Annual Costs used to rate a fund's expenses reflects the all-in cost of a minimum investment in each fund assuming a 3-yr holding period, the average holding period for mutual funds. This rating reflects all expenses, loads, fees and transaction costs in a single value that is comparable across all funds. Our goal is to give investors as accurate a measure as possible of the cost of investing in every fund to determine whether this cost of active management is worth paying.
by David Trainer, Founder & CEO
New Constructs
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Asset Allocation Ratings Methodology for Predictive Fund Rating

The Fund Asset Allocation Rating informs investors of each fund's level of allocation to cash (non-equities) as well as how that level compares to other equity mutual funds. We assume investors in equity funds prefer those funds to be maximally invested in equities given that investors can much more cheaply invest in cash on their own. We do not believe that most investors want to pay the high fees associated with equity funds to invest in cash.
by David Trainer, Founder & CEO
4Comments

ETF Shoppers: Accounting Trickery At Its Worst In Financial Sector

There are 25 financial sector ETFs. Per Figure 1, these 25 ETFs have drastically different stock holdings and, therefore, allocations. The lowest number of holdings is 24 while the highest is 496. For starters, investors interested in the financial sector cannot expect many good investment options given that the sector gets my “dangerous” rating and ranks ninth out of the ten sectors that make up the economy. Details are in our sector roadmap report.
by David Trainer, Founder & CEO
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Picking The Diamonds Out of The ETF Rough

Having too many choices can be intimidating. And there are definitely lots of choices when it comes to ETFs. For example, in the equity market alone, there 30+ technology sector ETFs, or 35 ‘large cap value’ and 20 financial ETFs. A very healthy selection abounds for every category of ETF. The problem is that these ETFs are not made the same even though they may be in the same category. There are major differences in methodologies between funds, which results in drastically different holdings even within a given sector. See Figure 1.
by David Trainer, Founder & CEO
New Constructs
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Sell Starbucks (SBUX) – Still A Bad Stock

Similar to my prior interviews on SBUX, I found it easy to make the bear case for a stock that is as expensive as Starbucks (SBUX). As my regular readers know, when I say "expensive", I back that up with details such as: to justify its $40 stock price (closing price from prior day), SBUX had to grow profits at 10% compounded annually for more than 25 years.
by David Trainer, Founder & CEO
1Comments

Buy LRCX: More Value Than Meets the Eye

Most of my research and publishing tends to focus on companies manipulating accounting rules to make their reported earnings look better than the real economic cash flows of their business. It is unfortunately rare that I find a company whose economic earnings are outpacing the reported accounting results and whose stock is cheap. One such company is Lam Research (LRCX – very attractive rating). One of September’s most attractive stocks, LRCX offers investors hidden value.
by David Trainer, Founder & CEO
New Constructs
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Should Directors Ignore Those One-Time Items?

I do not think so. The question, however, is not so much about what directors ignore. You cannot ignore something about which you are unaware. The real issue is that most directors and investors are simply unaware of the many one-time items because they are buried deep in the annals of footnotes in annual reports or 10-K filings.
by David Trainer, Founder & CEO