Buy This Rare Value in Today’s Bloated Market
May 15, 2013 – by Richard Band
I rub my eyes, shake my head. What is the S&P 500 doing at these levels, up some 16% since 2013 started?
It’s beyond the beyond. It’s over the top.
But we’ll stay focused on the task at hand: to earn the highest returns we can without exposing ourselves to a boomerang shot if and when the crowd suddenly wakes up and realizes it has been bagged.
Frankly, I much prefer it when there are lots of bargains to choose from. From a writer’s standpoint (purely selfish, of course), it’s a lot more fun and exciting to say, “Buy this, and this, and this!”
However, we have to play the hand we’re dealt. Stock bargains are scarcer these days than dentures on barnyard fowl, regardless of all the silly “studies” purporting to show that equities are cheap compared with artificially depressed interest rates. If one key element in the equation is bogus, how can the product be correct?
Yet, despite the frustration any truly value-conscious investor must feel about today’s market, there are a few — a very few — stocks still priced to deliver satisfactory returns over both the short- (one year or less) and long-term.
EMC Corp. (NYSE:EMC), the newest member of our model portfolio, is one such name.
EMC is a world leader in hardware and software for information storage. The company churns out more than $5 billion of free cash flow per year — a spectacular number for a business with $22 billion of sales.
Here’s the most interesting angle, in my opinion: Up to now, longtime CEO Joe Tucci has resisted paying a dividend. However, he appears to be having a change of heart — perhaps as a result of seeing all the controversy Apple (NASDAQ:AAPL) stirred up by refusing, for so long, to “share the wealth” with stockholders.
Joe now says an EMC dividend is a question of “when, not if.”
I figure EMC could easily pay a 3% dividend without in any way compromising the company’s growth prospects. Not to mention, if a generous dividend were announced soon, I project the stock could rally from its current price of $23 per share up to the high $20s or low $30s within a year.
Richard Band’s Profitable Investing advisory service helps retirement savers outperform the market without losing a minute of sleep along the way. His straightforward style and low-risk value approach has won seven Best Financial Advisory awards from the Newsletter and Electronic Publishers Foundation.