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Get your defensive plan ready

Indexes might not be in correction territory, but they're getting closer. Now's the time to consider what moves to make.

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The sector's outperformance has been surprising, but the current market correction brings risk.

By MoneyShow.com May 17, 2011 10:38AM
By Tom Aspray, MoneyShow.com

One of the surprising areas of market strength since the March 2011 lows has been the retail sector. In past years, this has not been a typically strong seasonal period for the group, but the Dow Jones Retailers index is up over 10% in just two months.

Many of the big retailers have reported strong earnings in the past week, including Macy’s Inc. (M), Kohl’s Corp. (KSS), and Dillards, Inc. (DDS), but strong earnings have not boosted all the stocks in this group.

The sharp increase in gas prices has kept many investors away from these stocks, as it was expected to have a serious impact on consumer confidence and limit shopping trips to the mall. Now that crude oil prices have softened, the better-than-expected earnings have been met with some good buying.

Of course, the key question now is whether the current market correction will set up a favorable entry point on the long side, or whether now is the time to get out of these stocks.
 

The billionaire investor made few moves and posted just a small gain in the first quarter.

By TheStreet Staff May 17, 2011 10:33AM

By Frank Byrt, TheStreet

 

Warren Buffett'sBerkshire Hathaway (BRK.B) made only two trades in the first quarter: initiating a small stake in MasterCard (MA) and trimming its big stake in ConocoPhillips (COP).

 

It's the second quarter in a row of little activity for the investment company run by the man dubbed the Oracle of Omaha for the trading prowess that helped him build an estimated net worth of $50 billion over half a century. In the first quarter, former hedge fund manager Todd Combs started working at Berkshire, managing part of the portfolio, as the 80-year-old billionaire selects a succession team.

 

Berkshire Hathaway's 26-stock investment portfolio was valued at $53.6 billion as of March 31, up $1 billion, or 2%, from the end of 2010, according to a Securities and Exchange Commission report that the hedge fund filed late Monday. Buffett isn't required to publish foreign holdings. The benchmark S&P 500 Index ($INX) rose 5.4% in the first quarter.

 

Evercore may be smaller than big investment banks, but it's well-positioned to get a piece of the buyout biz in 2011.

By InvestorPlace May 17, 2011 9:34AM
By Hilary Kramer, InvestorPlace.com

investorplace logoAfter the 2008 financial crisis, merger-and-acquisition activity plunged. But recently, things have perked up. Just look at Microsoft (MSFT) last week, which paid a hefty $8.5 billion for Skype, or the recent plan from AT&T (T) to acquire T-Mobile from Deutsche Telekom for $39 billion. (Microsoft owns and publishes MSN Money.)

No doubt, the deal making has boosted the fortunes of investment banks. But your best bet to cash in on the M&A boom isn’t one of the big players. It's a smaller buyout shop that is doing big business despite its size.

That stock is Evercore Partners (EVR).  

One is a cheap stock that has simply run out of buyers, while the other is undisciplined and lacks a growth catalyst.

By Jim Cramer May 17, 2011 8:55AM

jim cramerthe streetWhen I check out Twitter, it's almost always the same stocks that have people hot and bothered: Apple (AAPL) and Google (GOOG). People just keep wanting to know what I think of them.

 

I'll begin with Apple because we own it for Action Alerts Plus. It's a cheap stock that just happens to be out of buyers. It seems that everyone who wants it already owns it, and the angst factor is causing selling.

 

I think the stock is cheap even if you don't back out the cash, and I also think that if Steve Jobs were healthy, the price would be higher. I just get the sense that so many people have one foot out the door that it can't rally.

 

Abbott is about as balanced as it gets in the pharmaceutical sector, and an increase in sales and profit is likely this year.

By Jim J. Jubak May 16, 2011 5:14PM
Jim JubakYou can certainly find stocks with a higher dividend yield than the 3.4% that Abbott Laboratories (ABT) paid when I added it to my dividend income portfolio on May 6. (It closed that day at $52.52.)

But I think you’ll be hard pressed to find a stock paying that much that has the same potential for very safe and steady growth. (See my recent post for my latest update of that portfolio.)

Abbott is among the most balanced of the big U.S. drug companies. Pharmaceuticals accounted for just 56% of sales
in 2010, with the rest coming from nutritional products (16%), diagnostic products (11%), and a vascular business (9%) that makes stents and catheters.

The drug business itself is diversified across existing and potential blockbusters, such as Humira and Kaletra, potential new drugs from the four new molecular entities in late stage development and the 20 that the company projects will be in Phase 2 or Phase 3 clinical trials by the end of 2011, and recent acquisitions that have expanded the company’s market share in emerging economies such as India. (57% of Abbott Laboratories’ sales now come from overseas.)
 

The search giant plans its first-ever bond offering for later this afternoon, and demand is riding high.

By Kim Peterson May 16, 2011 2:40PM
One of the hottest investments of the day is Google's (GOOG) first-ever bond offering. People are expected to go crazy over the $3 billion offering, slated to be sold this afternoon.

The funny thing is that the bonds aren't exactly paying well; there are definitely better ways to make money. But this is Google we're talking about, and that's enough to get investors plenty worked up.

"People aren't going to do very much credit analysis, they're going to look at the balance sheet, and look at the cash, and say 'This is ridiculous' and put their orders in, and probably big orders," one money manager told Bloomberg. "It will be scooped up like nobody’s business." 

As part of a lawsuit settlement, the satellite radio company says it will not raise subscription prices through the end of the year.

By Kim Peterson May 16, 2011 1:54PM
Sirius XM (SIRI) shareholders aren't happy with the company's decision not to raise subscription prices this year.

The news, announced in a regulatory filing, comes as part of a lawsuit settlement that Sirius agreed to last week. Through the end of the year, Sirius won't raise the price of its basic satellite radio service, its other programming packages or its Internet streaming services. In addition, it won't increase its U.S. Music royalty fee or decrease its multi-radio discount.

Current subscribers can renew their subscriptions at those rates before the end of the year. Shares of Sirius fell nearly 3% on the news to $2.17 in midday trading. The stock has made a remarkable turnaround as the auto sector has recovered, rising 18% in the past year.

Post continues after video about Sirius' recovery this year: 

The company's charitable foundation runs three donation-based restaurants, which have raised money for surrounding communities. With video.

By Kim Peterson May 16, 2011 1:24PM
Panera Bread (PNRA) plans to open more pay-what-you-want nonprofit restaurants, saying the business model is a success.

Customers place orders as they would at any other Panera, but the cashiers simply tell customers the suggested payment amounts for their orders. What customers actually put into the donation box is up to them.

Panera has opened three such specialized cafes, which raise money for charities. It plans to open a new one every three months, The Associated Press reports. Yes, there was that time when three college students paid $3 and received $40 worth of food, but mostly people are generous with their wallets, the company says.

Post continues after this video about whether Panera's nonprofit concept will work: 

Funds that hold commodities or rely on complicated strategies used to occupy a small niche in the fund industry, but that's changing.

By TheStreet Staff May 16, 2011 1:22PM

By Stan Luxenberg, TheStreet

 

Alternative funds once represented a small niche in the mutual fund universe, but that is changing.

 

During the past year, inflows into alternative mutual funds and exchange-traded funds have totaled $25 billion, according to Morningstar. Now the category has $151 billion in assets and includes 540 funds.

 

Morningstar recently announced that it would begin tracking new categories of alternative funds, including inverse debt and managed futures. "It's clear that alternative funds are here to stay," said John Rekenthaler, vice president of research for Morningstar.

         

Alternative funds aim to diversify portfolios by focusing on investments that don't necessarily track stocks or bonds. The funds hold commodities or use complicated strategies, such as trading futures or selling stocks short.

 

This fund offers investors fixed-income exposure to growing economies.

By TheStreet Staff May 16, 2011 12:34PM

Image: Brazil (© Donald Edwards/age fotostock)By Roger Nusbaum, TheStreet

 

Exchange-traded fund companies have offered increasing specialization in equity ETFs for years, and now that trend is coming to fixed-income ETFs.

 

The most interesting new bond ETF is Market Vectors' LatAm Aggregate Bond ETF (BONO). LatAm is short for Latin America. The ticker symbol is taken from bono, which is Spanish for bond.

 

This new ETF tracks a large number of countries. Brazil has the largest weighting, accounting for 27% of the fund, followed closely by Mexico, which accounts for 26%. Colombia has a 12% weighting, the Cayman Islands has 8.8%, and Chile has a disappointingly low 2.9%. There are also more than a dozen countries with individual weightings of less than 1%. The fund has more than 450 holdings, which explains why some of the country weights are so small.

 

This small-cap defense company has the all the right qualities.

By Motley Fool Pick of the Day May 16, 2011 11:54AM

By Jason Moser

 

A little more than a week ago, I penned an article citing three stocks on my watch list, thinking that at least one of them had a good chance of making it into my real-money Rising Stars portfolio. Now I'm putting one of those stocks to work and playing a little defense in my quest for investing domination.

 

The business
Elbit Systems
(ESLT) may not be what you would call a headline stock, but the company takes care of business when it comes to defense. Based out of Haifa, Israel, Elbit is the largest non-government-owned defense company in Israel, with an extremely diverse range of programs and clients around the globe with business segments in the U.S., Israel, Europe, South America, and Asia.

 

And the technology is cool. Elbit's a major player in everything from aerospace and helmet-mounted systems to lasers and advanced C4I (command, control, communications, computers, and intelligence) systems.

 

Soup is all but forgotten as a meal choice, even though Americans have plenty of cans in their pantries. With video.

By Kim Peterson May 16, 2011 11:53AM
Campbell Soup (CPB) is in a rut.

The stock price has stumbled over the past year. Sales have fallen in eight of the past 10 quarters. Profit is down from a year ago, and the company has lowered its full-year forecast. The chief executive is leaving.

Soup doesn't sell that well anymore. Americans have all kinds of choices for quick meals at home, leaving the can of soup -- once the go-to choice for lunch in a jiffy -- in the dust. People still buy soup, but they just forget to eat it, so the cans are relegated to the back of the pantry.

Post continues after this video about Campbell's troubles: 

Materials and industrials look technically vulnerable, meaning investors should exercise caution and have tight stops in place.

By MoneyShow.com May 16, 2011 11:35AM
By Tom Aspray, MoneyShow.com

Since the March 2009 lows, two of the best-performing sector ETFs have been the Industrial Select Sector SPDR (XLI) and the Materials Select Sector SPDR (XLB). XLI is up 148% from the March lows and XLB is up 117%, while the S&P is up 100%.

Of course, many of the individual stocks in these sectors have seen even more dramatic gains, and soon after the lows were formed, the relative performance analysis of these groups identified them as the star performers.

In August 2009, I noted that the S&P Industrials had completed a reverse head-and-shoulders bottom formation. The sector closed that week at 219 and hit a high last week of 336.
 

Don't be seduced too easily into buying ETFs, ETNs or other exotic investment products.

By TheStreet Staff May 16, 2011 11:00AM

Image: Throwing money down a hole (© Art Glazer/Stock Illustration/Getty Images)By Greg Plechner, TheStreet

 

We've seen the cliche, a 40-year-old hitting a midlife crisis and trading in his reliable 2002 Toyota Camry for a faster sports car that will likely get him into trouble -- at home and on the road. While we can all relate to being lured by owning the trendiest hot-ticket item, sometimes it's best to avoid those temptations, including when it comes to choosing retirement investments.

 

When you are in your 40s, you're well into what is often viewed as the "accumulation phase" of retirement planning, the period when you are usually working and contributing regularly to your 401k and other retirement accounts to build up your retirement nest egg. You may be advised to buy a diverse mix of mutual funds at companies with low cost structures and consumer-friendly business practices.

 

Which you do, of course, until a newer and sometimes more exotic product hits the market, with the promise of better and bigger returns. Recently, ETFs and ETNs have become those vehicles. Proponents point to their tax efficiency and low expenses, but they can also be more complex and potentially riskier. Before you trade in your staid mutual funds, take a closer look at what you are buying.

 

Keep an eye on funds tracking silver, agriculture, construction, retail and the Dow.

By TheStreet Staff May 16, 2011 10:13AM

Image: Watching ETFs (© Don Carstens/Jupiterimages)By Don Dion, TheStreet

 

Here are five exchange-traded funds to watch this week.

 

1. iShares Silver Trust (SLV)

 

As forecast in last week's "5 ETFs to watch," commodities have continued to behave in a volatile manner. The bullion-backed SLV's performance was particularly bipolar. During the early part of the week, SLV managed to pull off gains, but its strength was short-lived. By Friday, it had retreated to the previous week's lows.

 

Silver will continue to generate press in the week ahead as market watchers debate and discuss the longevity of the current commodities shakeup and look for ways to navigate it.

 

Although I continue to view precious metals as a promising long-term play, I urge investors to avoid being overly exposed to this asset class. By keeping exposure to materials like gold and silver small and concentrated, you can benefit from their long-term defensive nature while protecting against short-term volatility.

 

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[BRIEFING.COM] Equity indices have extended to fresh session highs with the Nasdaq pushing its gain to 1.1%. Chipmakers pressured the broader market earlier and remain among the laggards, but the PHLX Semiconductor Index has narrowed its loss to 0.5%.

Elsewhere within the tech-heavy space, biotechnology continues showing relative strength. The iShares Nasdaq Biotechnology ETF (IBB 222.59, +4.98) trades higher by 2.3% after finding support at its 200-day moving average, which is a ... More


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