Monday, December 8, 2008
(Cont'd from above)...

Jim (cont'd):   

We got an oil tanker company, a telco, a utility, a natural gas pipeline operator, and a member in good standing of big Pharma to round everything out...

Again, some growth... highest yield... a lot of safety... All five of these stocks have yields in excess of 5%... safe dividends that we know the companies should be able to pay...

And the reason that I like this so much is that a lot of people come up to me and say, listen Jim, what do I do?... The market is so scary... This is a safety blanket portfolio...

First, the oil tanker play... which doesn't seem like it's safety, but I'll go into it... is Nordic American Tanker (NAT)... I know, it seems crazy to recommend an oil tanker with oil down at $43 a barrel... but that's precisely why NAT, with its stupendous expected 9.4% yield and no debt, works...

Alright, complicated, but I'm going to attempt it... This is a play on the contango in oil prices, which is Wall Street gibberish for that fact that the price of oil in futures, say in a year from now, is much more expensive than the price of oil right now...

So how do you capitalize off that?...

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Here's what you do...

Investors are using oil tankers to store their barrels of crude... Right now, there are 15 supertankers being used just as storage tankers... That number can go much higher, as long as this situation continues...

Plus, there is a strike in France, locking up tankers... both of which will help NAT maintain its ultra high yield...

The second member of our dividend (portfolio)...

Verizon (VZ), still yielding 5.4%... I know that we been harping on this one since the mid-$20s... it doesn't matter...

It just raised its dividend by 7% in the third quarter... Its acquisition of Alltel... VZ will own half of Verizon wireless... the largest wireless play in the country... They are the sole distributor in this country of the touchscreen Blackberry Storm, which is apparently selling like hotcakes... allowing Verizon to better compete with AT&T (T)... which has the iPhone...

One of its main competitors, Sprint, is troubled... FiOS, its television and high-speed data offering, is kicking cables butt everywhere... buy, buy, buy!...

FiOS already has 1.6 million TV customers and 2.2 million Internet customers... the old wireline business may be weathering but FiOS and wireless will keep Verizon growing...

Then, in any portfolio, you need a utility for safety...

This time, we're going to pick on Great Plains Energy Inc. (GXP). That's got a 9.1% yield... This is juicy...

GXP operates Kansas City Power and Light, serving 800,000 customers in Western Missouri and Eastern Kansas. The reason I picked GXP for this is that it should be able to raise rates in the near future, even though its dividend is really high already...

The company has a number of ongoing rate cases, and these higher rates should go into effect over 2009...

GXP is nearing the end of the big capital program... It's kind of like Wisconsin Energy that we'll hear from... That involve the construction of cleaner coal plants, a wind project, and retrofitting its existing plants.

The stock has been beaten up by selling from investors who formally owned shares of Aquila, an energy company that GXP acquired... That's how its dividend became so large.

The fourth spot?...

I think you add Cramer-fave, Kinder Morgan Energy Partners (KMP)... I'm not stopping... this is one of those master limited partnerships that has to distribute almost all of its profits back to shareholders in the form of a mighty 8.7% yield...

KMP owns pipelines and terminals... It makes its money gathering natural gas, and transporting everything from natural gas to jet fuels through its pipeline...

Don't worry about the price of the commodity, which is plummeting... what matters for KMP is predominantly the volume it transports... it's less leverage the price of the commodity which, as I said, is why it's plummeting...

That's why we like it... that's why the yield is sustainable... they are the industry-standard play, and KMP is the industry standard in management... I know that I harp on this, but I think it's the best of the lot... and you need a nuclear winter, or perhaps, the earth to stand still... to jar this one...

Finally, we need a drug stock... you got to get a little growth in here...

Bristol-Myers Squibb Co. (BMY*), right now, yielding 5.6%... an AAP name... I really like this... the company's got a strong balance sheet and the best near-term earnings the group... courtesy of its strong core drug sales, cost cuts and asset sales...

Hey, sales are up 15% in the last quarter... Alright, I know... Plavix is the company's big drug... a $4 billion blockbuster... a cardiovascular drug that prevents platelet building... and keeps arteries nice and clear... I know, it's going to lose patent protection in 2010, but we're confident they'll be able to make up some of that shortfall with other drugs in the pipeline... and continue their partnerships with other well-known Pharma companies like Astra Zeneca and Pfizer... and take proactive steps, selling off non-core businesses.

BMY has other strong drugs, like its breakthrough and I psychotic drug, Abilify... I'm sure you've seen the commercials... where the warning at the end is longer contents... Sales for this drug were up 34% in the third quarter, even though, when you watch the ad, you're scared to death...

The company also got a decent portfolio of HIV and AIDS drugs, and Erbitux for cancer... a drug that just got new indications for head and neck cancer...

BMY got $1 billion from its 17% stake in ImClone when Lily acquired it... and now it has $7.5 billion in cash and equivalents... It's a really shareholder friendly management team... probably the best in the business... one that you can count on to find ways to return value to shareholders... and there have been some rumors on the Street that it could even be a takeover candidate... buy, buy, buy!...

I don't recommend companies on a takeover basis unless the fundamentals are good... You've got it.

Here's the bottom line...

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The Bottom Line!:     We have produced the ultimate defensive high-yielding portfolio for you, with a monumental average yield of 7.6%... Here they are... write them down... these are for people who are unsure what to do... you've got a tanker, you've got a gas pipeline company, you've got a drug company, a telephone company, and you've got a utility... That is exactly what we are looking for when we play "Am I Diversified?"... and we want dividends...

Read Jim's next Segment here