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BY WARREN BOROSON
NEWJERSEYNEWSROOM.COM
BOROSON ON MONEY
Good advice I give people who invest in mutual funds is: read Morningstar Mutual Funds regularly. Good advice I give people who invest in individual stocks is: Read the Value Line Investment Survey regularly.
Yes, a subscription to either publication is very expensive, but you can always patronize that horrible socialist institution, a public library, to read them. In Hackensack, where I live, when you ask for permission to examine Value Line, the librarians insist that you leave your driver's license with them – lest you drive off with Value Line to parts unknown.
Sometimes, I grant, there are long lines of people waiting to read Value Line; in fact, I'm told that life-long friendships have been made by gentlemen and ladies who began chatting while patiently waiting their turn to read Value Line.
Value Line is valuable because it has no axes to grind. Its only source of income is from subscriptions, so it can afford to offend giant corporations. (Later, I'll report what the newsletter writes about Hovnanian Enterprises.)Something relatively new in Value Line are entire investment portfolios, in its Selection & Opinion section – four of them, from conservative (high yielding stocks) to adventuresome (possible high fliers). Examples of high-yielding stocks: Inergy (10%) and Suburban Propane (8.2%).
I pay special attention when a new stock is added to these portfolios; these new additions sometimes do very well indeed. (I've done nicely with Apache Corporation.)
The latest issue (Aug. 26) reports that MasterCard has just been added to a portfolio, and that stock certainly seems worth checking out.
Value Line also gives general investment advice, and right now it's "cautious." It suggests that the typical investor be 60-70% in stocks, down from 65-75%. (I happen to be far more conservative, but then I'm [illegible] years old.)
Of course, the most valuable service that Value Line provides is rating stocks - on how they will perform over the next six months to a year. The ratings go from 1 (bravo!) to 5 (yuck). There are a number of different ratings, but the most important are "timeliness" and "safety."
Be advised that Value Line gives two evaluations: a number indicating how a stock may behave over the next year ("timeliness") and an analyst's estimate of how it may behave in the years to come. These evaluations sometimes conflict.
The best stocks, of course, get 1-1 ratings – tops for timeliness, tops for safety. And yes, I was able to find one New Jersey company so blessed: Medco Health Solutions in Franklin Lakes. "This timely stock," writes Value Line, is attractive for both the year ahead and long-term performance." Its recent price was $43.68; Value Line thinks the price may rise to $80 to $95 by 2012-2013. The company manages pharmacy benefit programs.
Another New Jersey corporation that Value Line gives high marks to is Bed Bath & Beyond, in Union, the home-furnishing store, which gets a 2-1. "We expect the company to continue to gain market share domestically with its flagship chain and through new concepts," writes Value Line. Bed Bath has been opening Christmas Tree Shops. The recent price was $34.69; Value Line thinks it might rise to $50-$60 by 2012-2013.
A stock that Value Line is dubious about is Hovnanian in Red Bank, the homebuilder. It gets a 4-5. "These shares hold little investment appeal at this time," the newsletter writes. "All told, we see an unattractive risk-return scenario here."
Here are the ratings of other New Jersey companies:
Johnson & Johnson, 3-1; Honeywell International, 3-1; Merck, 3-2; Prudential, 2-3; Chubb Corp., 3-1; Public Service Enterprise, 3-3; Campbell Soup, 3-2; Great Atlantic and Pacific Tea Company, 4-4; Quest Diagnostics, 2-2; Becton-Dickinson, 3-1; NRG Energy, 3-3; Avis Budget, 3-5; Sealed Air, 3-3; Wyndham Worldwide, 3-4.
Boroson on Money appears Mondays at Newjerseynewsroom.com.
Warren Boroson has been writing about personal finance for 40 years. If you have a question, send it to This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
