Wednesday, March 25, 2009
(Cont'd from above)...

So for everyone who wants to be in control of his or her own finances… for all of you people who don’t want to trust the professionals… cause many of them are only in it so they can take your cut of the money… for those of you who don’t buy the bogus argument that owning individual stocks are for morons… and the people, like me, who encourage you are criminals… let me bring my nearly 30 years of experience and expertise to bear… and let me help you put together the best portfolio possible… make sense… let me teach you using the logic that I use as a pro…. how to analyze a stock with an eye toward the most important long term consideration for a public company… the ability to sustain and raise its dividend… which dividends historically accounted for 40% for the appreciation from stocks… they represent a great way to protect yourself in bull markets and in bear markets.

First, we ask what sectors are in important for diversification purposes… got to stay diversified… only free lunch… you know that I like oil… and I have said over and over again that oil stocks are a great place to be… because they throw off a lot of cash that can generate big dividends… and because there is a long term scarcity of crude… next, I analyze which oil stock has the best fundamentals… and therefore can raise its dividend most consistently… and what do I come back with?…

Chevron Corp. (CVX*)… a Dow stock and one of the largest oil companies in the world after its acquisitions of Texaco and Unical… it has been around as long as oil companies have been public… part of the old standard oil empire before it was broken up by Teddy Roosevelt… I like it so much that I own it for my charitable trust, which you can track at ActionAlertsPlus.com.

What makes for best fundamentals in a group that seems so cheap… because the stocks are trading at a big discount to $50 oil… something that we determined because the oil stocks were at these same levels when oil was in the $40’s going to the $30’s… what makes Chevron better than say big dog Exxon… you have to look at the industries key metrics… the apples to apples… and compare the companies based on them… for oil that means comparing things like production growth… Chevron is expected to grow production at 4% this year… it does better than any of its peers… you look at replacement rate… reserve replacement rate, its ability to find new oil to make up for what it takes out of the ground every year… 2008 Chevron’s replacement was 146%… go to the website… read the presentation, it is amazing… this is among the best of the bunch… so it can take advantage of the long term shortage of petroleum… best product pipeline, the future… let’s just know that Chevron will have growth in the future...

Beautiful balance sheet… loads of cash, compared to the industry.. it can make an acquisition or raise the dividend… you know I want it to do the latter… know this is not just why you should buy Chevron… it is a tutorial on how I think that you should evaluate stocks… just like you would look at a new car by looking under the hood, kick the tires… we have seen the fundamentals… let’s give the dividend a test drive.

Chevron has got a 3.7% yield… I would be patient with your buying… hopefully we get a pullback to $65... there, look I actually want it to go lower so we can buy it more cheaply… you can buy some at a level where the yield will come in at 4%… last 5 years Chevron has raised its dividend by an average of 12%… the last 21 years an average of 7%… now I don’t expect a big dividend increase this year… oil prices are still down relative to 2008... but it has the cash to do it… small boost… not to mention a tradition of boosting dividends… you buy Chevron in stages on the way down… it is always a sin to buy it all at once… because we are way too fallible as people to call exact bottoms.

Hey listen, believe me I think you will do better than the pros… a lot of the pros…. and everybody who arrogantly proclaims that index funds are the only way to invest… and it is irresponsible, totally wrong to pick your own stocks… they always look conservative, they always look… you know I could do that… I could sit at my chair… I want you to buy index funds because you are to stupid to pick, no I want you to buy index funds because that is more conservative… remember, you are not outclassed by the people who sit down and say that stuff… the big guys move too much money… they have to worry about moving a stock every time they buy, buy, buy… or sell, sell, sell… you don’t… you are investing with thousands not billions… you take your capital gains when you want to… in order to control your taxes not the mutual funds taxes… cause you are paying them when you want them to… this is more important than ever under the Obama administration… you can do this yourself… you just need to know what you are doing… and that is why I come out here and try teaching you every night… I don’t come out here every night just to hit the buttons… and pull the heads off the bulls… they really hate that… then like I grab a picture of my great-great-grand uncle Lenin… hey your money is much safer in your hands invested in high quality stocks like Chevron… than in the hands of professional mutual fund managers who don’t have a show… but can sit there and say, you are stupid… but he doesn’t really say that.

Most people think that mutual funds will get out of the market if they are worried… if they are worried that the market will sink won’t the guy sell like I told you to do at Dow 10,000 on October 6th on the Today Show…. no, mutual funds do not work that way.. they almost never sell… they are always fully invested… look at your 401K if you have any doubts about that… now, index funds you can buy back everything you sold when I told you to… and no index fund will ever do as well as you for the rest of your life… they can’t catch up… you can’t count on anyone else to protect your money like it is your own…. but if you get worried about the stocks in your portfolio… Chevron goes up on a big run… you think it looks precarious… you can just sell… you will be fine.

The bottom line…

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