TL Stocks, 12/23

MarketPulse

AP

BUYBACK BONANZAMORTGAGE RATES FALL — TO NO AVAIL JOB MARKET IMPROVES — BUT NOT FOR FINANCIAL FIRMSThe average interest rate on a 30-year fixed-rate mortgage fell to a record low 3.91 per-cent last week. But mortgage applications also fell, down 2.6 percent from the previous

week, according to the Mort-gage Bankers Association. You might think that people were distracted by the holidays and so they weren’t applying for new mortgages or to refinance their existing ones at a lower rate. But Michael Fratantoni, the MBA’s vice president of re-search and economics, says the weak job market and con-sumers’ struggles with credit are to blame. And many of those who want to refinance have found that they don’t have enough equity in their homes to draw on. “Low rates are not enough,” Fratantoni says.

The government has reported a drop in the number of people who applied for unemployment bene-

fits the last few weeks. That’s a sign that companies are laying off fewer workers. But the good news isn’t extending to the financial in-dustry, according to outplacement firm Challenger Gray & Christ-mas. Challenger says financial companies announced more than 56,000 job cuts through Novem-ber. That’s more than twice the 21,430 in the same period of 2010. CEO John Challenger fore-casts more job cuts in the finan-cial business into the first quarter of 2012. One reason: The weak economy and volatile stock mar-ket means less business for in-vestment banking and trading op-erations.

What would you do with nearly $1 trillion? Strong profit growth means S&P 500 companies were sitting on a collective $998.6 billion in cash at the end of September. That’s up from $976.1 billion three months earlier, and it doesn’t in-clude banks and others that hold cash as part of their normal busi-ness. Americans in the unemploy-ment line wish they would use the cash to hire workers, but much of it is going to repurchasing stock. S&P 500 companies bought back $118.4 billion last quarter in stock, up 49 percent from a year earlier. They bought more during the quarter than they issued because of stock options, says S&P Indi-

ces. That means earnings will be spread over a smaller number of shares in the fourth quarter.

Total stock buybacks by S&P 500 companiesbillions of dollars

50

65

80

95

110

3Q2Q1Q4Q3Q2Q1Q

78

55

80

8690

109

118

2010 2011

Source: S&P Indices

The great bull market for bonds is coming to a close, and stocks will remain volatile for years, says Bar-ry James, president of James Ad-vantage Funds. But he says inves-tors can still make money in the in-

terim. There will still be small rallies within the malaise that will benefit investors. His Bal-anced Gold-en Rainbow fund invests in both stocks and bonds. It

ranks among the top 2 percent of its category for 10-year returns.

Over the last 10 years, stocks are close to where they started. What do you see going forward?We see another five to 10 years of this sideways (market). I wish it weren’t so, and eventually that’s going to change. And that doesn’t mean that we can’t have a 100 percent rally in that time frame. But we don’t think we’re in the clear yet for a new, big bull market. You need to be active in adjusting your equity levels, your fixed income levels, not be a passive, just buy-and-holder.

Your fund is now 50 percent stocks, after being only 35 per-cent in the spring. Why the in-crease? We have interest rates, which are very favorable. The (dividend) yield on the S&P 500 is better than a 10-year Treasury. The Fed is es-sentially saying: Take a risk and see what happens. It’s pushing people to find something with some higher potential. So if you can get paid the same as a bond and have the potential for a bigger return, that’s a positive.

For bonds, do you think we can expect another strong year like 2011? No, no, no, no. This is the thing that scares me when it comes to bonds: the history after a great year. In 2008, long-term Treasurys were up over 30 percent. In 2009, they were down 21 percent. So far in 2011, we’re up 30 percent so .... historically, the (average return) is still positive after big gains, but not much.

Have interest rates hit bottom? Right now, we think there’s still room for rates to go down more. That goes back to the dollar and safety. (Investors have flocked to the safety of Treasurys because they’re worried about Europe’s debt crisis). The great bond bull market over the last 30 years is coming to a close, but we may not be there yet, and it always goes longer than you expect. So we could get down to 1.5 percent on the 10-year Treasury, maybe low-er, you know with panic in Greece.

What stock industries look good now?We’ve been positive on utilities and staples. We’re just starting to pull back on utilities. They’ve had a great year this year. Staples we still like, companies like an Eli Lilly or Pfizer. We want to see earnings. Not projected earnings, because nobody is very good at that. But if they’ve had a history of good earn-ings, that’s a tale that we like to fol-low. And we look at something called price strength – how is the stock doing versus the market. We like stocks that are outperforming the market over the last year. It doesn’t bother us if a stock gets to a new high. Hey, that’s great. It can keep going. The problem is most people sell their winners, and all they have left is a portfolio of losers. In any given portfolio, it’s only a few of the positions that pull the whole portfolio along. And if you keep cut-ting the heads off your flowers, all you’ve got is a garden of weeds.

Staying nimble

InsiderQ&A

James

Stocks for a stronger dollarAltria (MO)Altria sells cigarettes like Marlboros exclusively in the U.S. It’s selling fewer cigarettes because fewer people smoke. But it has raised prices and cut costs. Investors like it because its dividend yield is more than double the average of S&P 500 stocks.

Friday close: $29.84Price-earnings ratio: 5(based on last 12 mos)

Dividend yield: 5.5%Revenue (first nine months)2010 $18.4B2011 $17.7BNet income (first nine months)2010 $3B2011 $2.6B

Stock change this year: 21%

UnitedHealth (UNH)The health insurer’s business is entirely in the U.S. Financial analysts like its prospects. It has expanded into businesses like pharmacy benefits management, which helps employers cut prescription drug costs. Some analysts expect those businesses to double in the long term.


Dividend yield: 1.3%Revenue (first nine months)2010 $70B2011 $76BNet income (first nine months)2010 $3.6B2011 $3.9B


CVS Caremark (CVS)CVS’s drugstores are in the U.S. and Puerto Rico. It should benefit as drugs lose U.S. patent protection the next few years. It earns more from generics than from name-brand drugs. New generics could add up to 15 cents in earnings per share in 2012, Citi investment research says.


Dividend yield: 1.6%Revenue (first nine months)2010 $71B2011 $78.8BNet income (first nine months)2010 $2.4B2011 $2.4B


Southern Co. (SO)All of the utility’s revenue comes from the U.S., and customers continue to use power regardless of the economy. Southern has a 4.1 percent dividend yield, nearly twice the average of S&P 500 stocks. Utilities are attractive because their dividend yields are higher than bonds yields.


Dividend yield: 4.1%Revenue (first nine months)2010 $13.7B2011 $14BNet income (first nine months)2010 $1.8B2011 $1.9B


The dollar is rising on anxiety about Europe’s debt crisis. That means U.S. companies earn less when money made overseas is translated back into dollars. But a rising dollar makes no difference to a company that does business only in the U.S. It also can benefit companies like oil refiners. Here are stocks that can do well when the dollar is up:

Air Products APD 72.26 6 98.01 86.05 3.51 4.3 s s -5.4 —2.78 2 6.2 15 2.7

Amer Water Works AWK 25.00 0 31.89 32.09 0.83 2.7 s s 26.9 +29.88 1 16.1a 18 2.9

Amerigas Part LP APU 36.76 6 51.50 44.34 0.71 1.6 s s -9.2 —3.13 3 12.3 19 6.7

Aqua America Inc WTR 19.28 7 23.79 22.02 0.45 2.1 s s -2.0 +.13 2 1.5 22 3.0

Arch Dan Mid ADM 23.69 4 38.02 29.06 1.36 4.9 s s -3.4 —1.64 2 0.2 9 2.4

AutoZone Inc AZO 246.26 9 343.90 330.30 4.30 1.3 s s 21.2 +21.48 1 23.2 16 ...

Bank of America BAC 4.92 1 15.31 5.60 0.40 7.7 s t -58.0—56.81 5 -28.0 ... 0.7

Bk of NY Mellon BK 17.10 2 32.50 20.08 0.96 5.0 s s -33.5—31.69 4 -10.0 9 2.6

Bon Ton Store BONT 2.23 1 17.49 3.34 0.10 3.1 s t -73.6—71.65 5 -35.5 ... 6.0

CVS Caremark Corp CVS 31.30 0 41.19 40.99 3.44 9.2 s s 17.9 +19.53 1 6.4 16 1.6

Cigna Corp CI 36.16 5 52.95 43.13 0.75 1.8 s s 17.6 +17.85 1 -0.1 9 0.1

CocaCola KO 61.29 9 71.77 69.94 2.50 3.7 s s 6.3 +9.52 2 10.1 13 2.7

Comcast Corp A CMCSA 19.19 6 27.16 23.84 0.51 2.2 s s 9.0 +9.43 2 -2.4 17 1.9

Community Bk Sys CBU 21.67 8 28.95 27.40 0.69 2.6 s s -1.3 +1.87 2 6.8 14 3.8

Community Hlth Sys CYH 14.61 1 42.50 17.22 0.48 2.9 t s -53.9—53.45 5 -14.1 6 ...

Entercom Comm ETM 4.61 3 13.63 6.42 0.51 8.6 s s -44.6—44.27 4 -21.2 6 ...

Fairchild Semicond FCS 10.25 2 21.02 12.20 0.46 3.9 s s -21.8—19.95 4 -6.0 9 ...

Frontier Comm FTR 4.79 1 9.84 5.12 0.20 4.1 t t -47.4—38.21 4 -7.1 34 14.6

Genpact Ltd G 13.09 4 18.16 14.90 0.24 1.6 s s -2.0 —2.17 2 24.6a 19 1.2

Harte Hanks Inc HHS 7.00 5 13.74 9.78 0.29 3.1 s s -23.4—20.60 4 -15.9 14 3.3

Heinz HNZ 46.99 9 55.00 54.15 1.66 3.2 s s 9.5 +12.73 1 6.8 18 3.5

Hershey Company HSY 46.24 0 61.23 61.00 1.60 2.7 s s 29.4 +30.04 1 6.1 23 2.3

Kraft Foods KFT 30.21 0 37.54 37.74 1.25 3.4 s s 19.8 +22.02 1 3.8 21 3.1

Lowes Cos LOW 18.07 8 27.45 25.27 0.25 1.0 s s 0.8 +.98 2 -2.3 18 2.2

M&T Bank MTB 66.40 5 91.05 76.89 4.14 5.7 s s -11.7 —6.41 3 -5.6 11 3.6

McDonalds Corp MCD 72.14 0 99.50 100.15 2.66 2.7 s s 30.5 +33.42 1 20.4 20 2.8

NBT Bncp NBTB 17.05 7 24.98 22.27 0.74 3.4 s s -7.8 —6.07 3 0.8 13 3.6

Nexstar Bdcstg Grp NXST 4.59 6 10.28 7.89 0.36 4.8 s s 31.7 +31.72 1 10.9 ... ...

PNC Financial PNC 42.70 8 65.19 58.57 3.48 6.3 s s -3.5 —.65 2 -2.2 9 2.4

PPL Corp PPL 24.10 9 30.27 29.65 0.91 3.2 s s 12.7 +17.61 1 0.3 11 4.7

Penna REIT PEI 6.50 4 17.34 10.47 0.34 3.4 s s -27.9—24.75 4 -15.0 ... 5.7

PepsiCo PEP 58.50 7 71.89 66.57 1.86 2.9 s s 1.9 +4.42 2 3.6 17 3.1

Philip Morris Intl PM 55.85 0 78.55 78.75 3.92 5.2 s s 34.5 +39.03 1 27.4a 17 3.9

Procter & Gamble PG 57.56 9 67.72 66.67 1.53 2.3 s s 3.6 +5.34 2 3.4 17 3.1

Prudential Fncl PRU 42.45 4 67.52 50.92 2.85 5.9 s s -13.3—11.81 3 -8.1 7 2.8

SLM Corp SLM 10.91 5 17.11 13.87 0.46 3.4 s s 10.2 +10.44 2 -21.9 15 2.9

SLM Corp flt pfB SLMBP 39.30 1 60.00 40.10 0.80 2.0 t t -8.5 ... 0.0 ... 11.5

Southn Union Co SUG 23.85 9 44.65 42.19 -0.02 0.0 s s 75.3 +77.55 1 10.0 21 1.4

TJX Cos TJX 42.55 0 64.45 65.31 3.17 5.1 s s 47.1 +48.42 1 18.7 19 1.2

UGI Corp UGI 24.07 6 33.53 29.25 1.06 3.8 s s -7.4 —3.99 3 4.4 14 3.6

Verizon Comm VZ 32.28 0 39.49 39.98 1.20 3.1 s s 11.7 +18.35 1 7.4 16 5.0

WalMart Strs WMT 48.31 0 59.66 59.99 1.72 3.0 s s 11.2 +14.65 1 7.6 14 2.4

Weis Mkts WMK 36.52 0 42.20 41.72 1.54 3.8 s s 3.4 +8.45 2 3.8 16 2.9

52-WK RANGE FRIDAY $CHG%CHG %CHG %RTN RANK %RTNCOMPANY TICKER LOW HIGH CLOSE 1WK 1WK 1MO 1QTR YTD 1YR 1YR 5YRS* PE YLD

Notes on data: Total returns, shown for periods 1-year or greater, include dividend income and change in market price. Three-year and five-year returnsannualized. Ellipses indicate data not available. Price-earnings ratio unavailable for closed-end funds and companies with net losses over prior four quar-ters. Rank classifies a stock’s performance relative to all U.S.-listed shares, from top 20 percent (far-left box) to bottom 20 percent (far-right box).

LocalStocks

SOURCE: FactSet

China’s cheap labor is getting more expensive. Wages in China are rising by 15 percent to 20

percent per year, Credit Suisse analysts say. That means Chinese manufacturers are losing their

cost advantage over factories in other countries. So they’re looking at robots and other

automation to replace human workers and lower their costs.

Foxconn Technology Group, for example, is building a manufacturing complex in Taiwan to make factory automation equipment.

Several U.S. companies will likely benefit as more factories around the world turn to automa-tion. The table to the right shows stocks that

Credit Suisse analyst say could be among them: • Emerson makes motors and drives used in

industrial automation, such as steam valves used in sanitizing equipment for beer making.

• Honeywell recently said Russia’s largest mineral fertilizer producer will use its simulator as

part of its training program for plant operators. • Rockwell Automation makes motors, drives

and other products used in bread-making, automotive and other plants.

• SPX makes pump units used in margarine plants, among other products.

StockScreener

Stocks on autopilot

Data through Dec. 21 *1= buy; 2 = hold; 3= sell

Emerson EMR $46.97 $39.50 $64.56 -22.2% 3.5% 1.7 14

Honeywell HON 54.19 41.22 62.28 1.7 2.7 1.3 16

Rockwell Auto. ROK 72.45 50.36 98.19 2.3 2.3 1.7 15

SPX SPW 59.22 40.66 87.13 -15.3 1.7 1.5 17

AVG. PRICE-EARNINGS 52-WEEK 1-YEAR BROKER RATIOCOMPANY TICKER CLOSE LOW HIGH CHANGE DIV. YIELD RATING* (based on

last 12 mos.)

American Funds BalA x ABALX 18.26 +.33 +6.2 +4.5/A +2.5/BAmerican Funds BondA m ABNDX 12.47 -.09 +.2 +6.4/B +3.4/EAmerican Funds CapIncBuA m CAIBX 49.09 +.42 +5.7 +3.0/A +1.0/CAmerican Funds CpWldGrIA m CWGIX 32.15 +.96 +6.7 -7.3/C -.6/BAmerican Funds EurPacGrA m AEPGX 35.82 +.97 +5.4 -12.9/C -1.1/AAmerican Funds FnInvA m ANCFX 35.56 +1.27 +8.4 -1.2/D +.7/AAmerican Funds GrthAmA m AGTHX 28.86 +.61 +6.3 -4.2/D -.4/DAmerican Funds IncAmerA x AMECX 16.74 +.20 +7.1 +5.8/A +1.8/BAmerican Funds InvCoAmA m AIVSX 27.17 +.72 +8.1 -1.4/D -.7/CAmerican Funds NewPerspA m ANWPX 26.52 +.75 +6.0 -7.0/C +.9/AAmerican Funds WAMutInvA m AWSHX 28.51 +1.05 +9.8 +7.5/A +.3/ABlackRock GlobAlcA m MDLOX 18.23 -.04 +3.7 -2.5/C +3.8/BBlackRock GlobAlcC m MCLOX 17.00 +3.7 -3.2/C +3.0/BBlackRock GlobAlcI MALOX 18.31 -.06 +3.7 -2.2/C +4.1/BDodge & Cox Income DODIX 13.20 -.20 +.5 +4.4/E +6.2/BDodge & Cox IntlStk DODFX 29.19 +.13 +6.7 -15.6/E -3.3/ADodge & Cox Stock DODGX 102.30 +3.17 +10.2 -3.5/D -3.9/EFidelity Contra FCNTX 67.72 +1.84 +5.9 +.2/B +2.8/AFidelity DivrIntl d FDIVX 25.56 +.78 +5.2 -13.1/C -4.3/CFidelity Free2020 FFFDX 13.56 +.24 +4.1 -.8/D +1.2/BFidelity GrowCo FDGRX 81.27 +2.05 +5.7 +.6/B +4.1/AFidelity LowPriStk d FLPSX 35.88 +1.01 +7.0 +.8/A +2.3/BFidelity Spartan 500IdxInv FUSEX 44.75 +1.63 +9.1 +2.7/A -.1/BFrankTemp-Franklin Income A m FKINX 2.09 +.04 +5.8 +2.8/B +2.8/CFrankTemp-Franklin Income C m FCISX 2.11 +.04 +5.7 +2.3/C +2.2/DFrankTemp-Mutual Euro Z MEURX 18.78 +.52 +7.4 -10.1/A -.5/AFrankTemp-Templeton GlBond A mTPINX 12.46 +.10 +2.4 -1.3/E +9.2/AFrankTemp-Templeton GlBondAdv TGBAX 12.43 +.11 +2.4 -.9/E +9.5/AHarbor IntlInstl d HAINX 52.30 +1.64 +7.0 -10.7/A -.5/AOakmark EqIncI OAKBX 27.16 +.72 +5.7 +1.1/C +4.4/APIMCO AllAssetI PAAIX 11.95 +.11 +2.2 +3.1/A +5.6/APIMCO ComRlRStI PCRIX 7.39 +.20 -.7 -5.0/B +2.3/APIMCO LowDrIs PTLDX 10.30 -.03 +.6 +1.9/B +5.1/APIMCO TotRetA m PTTAX 10.85 -.05 +1.0 +3.7/E +7.3/APIMCO TotRetAdm b PTRAX 10.85 -.05 +1.0 +3.8/E +7.5/APIMCO TotRetIs PTTRX 10.85 -.05 +1.0 +4.1/E +7.8/APIMCO TotRetrnD b PTTDX 10.85 -.05 +1.0 +3.8/E +7.5/APermanent Portfolio PRPFX 46.41 +.52 +.9 +4.4/A +8.7/AT Rowe Price EqtyInc PRFDX 23.23 +.92 +10.0 +.3/C -.7/BT Rowe Price GrowStk PRGFX 32.04 +.96 +6.8 -.4/B +1.4/CT Rowe Price HiYield d PRHYX 6.47 +.04 +3.2 +3.2/C +6.5/AT Rowe Price MidCpGr RPMGX 53.06 +1.68 +6.9 -.8/B +5.7/AVanguard 500Adml VFIAX 116.47 +3.58 +9.1 +2.8/A /BVanguard 500Inv VFINX 116.47 +3.61 +9.1 +2.6/A -.1/BVanguard GNMAAdml VFIJX 11.15 -.04 +.3 +7.8/A +6.8/AVanguard InstIdxI VINIX 116.39 +4.25 +9.1 +2.8/A /BVanguard InstPlus VIIIX 116.40 +4.25 +9.1 +2.8/A /BVanguard MuIntAdml VWIUX 13.98 +.01 +1.5 +9.2/B +4.9/BVanguard STGradeAd VFSUX 10.62 -.01 +.1 +2.1/B +4.3/BVanguard Tgtet2025 VTTVX 12.59 +.29 +5.8 +.2/B +1.4/BVanguard TotBdAdml VBTLX 10.93 -.13 -.2 +7.5/A +6.3/BVanguard TotBdInst VBTIX 10.93 -.13 -.2 +7.5/A +6.3/BVanguard TotIntl d VGTSX 13.09 +6.1 -13.2/C -3.2/BVanguard TotStIAdm VTSAX 31.49 +.97 +9.1 +1.7/B +.6/AVanguard TotStIIns VITSX 31.49 +.96 +9.1 +1.7/B +.6/AVanguard TotStIdx VTSMX 31.48 +.97 +9.1 +1.6/B +.4/BVanguard Welltn VWELX 31.57 +.68 +6.4 +4.2/A +3.5/AVanguard WelltnAdm VWENX 54.53 +1.18 +6.4 +4.3/A +3.6/AVanguard WndsrII VWNFX 26.24 +1.01 +9.7 +3.3/B -1.1/BWells Fargo AstAlllcA f EAAFX 12.15 +.18 +2.0 +1.1/ +2.3/

MutualFundsFRIDAY WK RETURN/RANK

GROUP, FUND TICKER NAV CHG 4WK 1YR 5YR

Dow industrials

+3.6%

+9.5%

Nasdaq

+2.5%

+7.3%

S&P 500

+3.7%

+9.2%

Russell 2000

+3.6%

+12.3%

LARGE-CAP

SMALL-CAP

p p

p

ppq

p pp

pp

q

MO

YTD

MO

YTD

MO

YTD

MO

YTD

WEEKLY

WEEKLY

WEEKLY

WEEKLY

+6.2%

-1.3%

+0.6%

-4.6%

Mortgage rates hit new lowThe average rate on the 30-year fixed mortgage fell to 3.91 percent, an all-time low. It had been at 3.94 percent a week earlier, which tied a record low. Mort-gage rates tend to follow Treasury yields, and the 10-year yield is hovering just above 2 percent. Inves-tors have bought Treasurys because they want something safe. When demand for Treasury notes rise, prices go up, and yields fall.

InterestRatesMIN

Money market mutual funds YIELD INVEST PHONE

3.253.253.25

.13

.13

.13

PRIMERATE

FEDFUNDS

Taxable—national avg 0.01Fidelity Select Money Market 0.10 $ 2,500 min (800) 544-6666

Tax-exempt—national avg 0.01Alpine Municipal MMF/Investor 0.10 $ 2,500 min (888) 785-5578

Broad market Lehman 2.31 0.02 t s -0.72 3.29 2.15Triple-A corporate Moody’s 3.88 -0.02 s s -1.12 5.31 3.73Corp. Inv. Grade Lehman 3.82 0.01 t s -0.28 4.22 3.36

FRIDAY6 MO AGO1 YR AGO

FRIDAY CHANGE 52-WKU.S. BOND INDEXES YIELD 1WK 1MO 3MO 1YR HIGH LOW

Municipal Bond Buyer 4.89 -0.04 t s -0.61 5.95 4.87U.S. high yield Barclays 8.47 -0.17 t t 0.84 10.15 6.61Treasury Barclays 1.01 0.03 t r -1.11 2.46 0.96

FRIDAY CHANGE 52-WKTREASURYS YIELD 1WK 1MO 3MO 1YR HIGH LOW

3-month T-Bill 0.01 0.01 t s -0.12 0.151-year T-Bill 0.16 0.01 s s -0.15 0.34 0.076-month T-Bill 0.03 0.00 t s -0.15 0.20 0.012-year T-Note 0.29 0.06 s s -0.36 0.83 0.165-year T-Note 0.98 0.18 s s -1.08 2.39 0.78

10-year T-Note 2.02 0.17 s s -1.37 3.72 1.7230-year T-Bond 3.05 0.20 s s -1.42 4.77 2.72Money fund data provided by iMoneyNet Inc.

Rank: Fund’s letter grade compared with others in the same performance group; an A indicates fund performed in the top 20 percent; an E, in the bottom 20 percent.

Documents

TL Stocks, 12/23