Blog Posts

Two Ways To Trade Puts

3/9/2014

MARKET CONDITIONS

PROFILED: Walgreens (WAG)

Put players from both the long and the short side of the aisle have been increasing their presence in Walgreen Company's (NYSE:WAG) options pits of late, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX).

On the long side, speculators at the ISE and CBOE have bought to open 4,670 puts on WAG during the past five sessions, compared to just 464 calls, resulting in a put/call volume ratio of 10.06.

As a point of comparison, the stock's 20-day ISE/CBOE/PHLX put/call volume ratio stands at 0.38, meaning roughly five calls have been bought to open for every two puts over the last month. In particular, a number of put buyers have targeted WAG's March 65 strike in recent sessions -- buying to open more than 1,700 contracts here since last Wednesday.

In other words, the stock needs to drop 2.5% from its current perch by the close on Friday, March 21, when front-month options expire, in order for these puts to move into the money.

Meanwhile, on the short side, traders at the ISE, CBOE, and PHLX have sold to open 1.66 puts for each one they've purchased throughout the previous 50 sessions, and a large portion of these put writers have targeted the April 52.50 strike.

This deep out-of-the-money strike is the site of peak put open interest in the front three-months' series of options, and since Dec. 2, more than 2,200 short contracts have been initiated here.

By writing the puts, the speculators anticipate the $52.50 level -- home to WAG's 50-week moving average -- will hold as support through the close on Thursday, April 17, which is when the back-month options expire. In this best-case scenario, the puts will finish worthless, and the traders will retain the initial net credit as their full potential reward.

On the charts, WAG hasn't traded south of $52.50 since Sept. 12. In fact, since hitting its intraday low of $50.88 that day, the stock has tacked on more than 30%. In light of this upward momentum, the recent crop of put buyers may be initiating trades at out-of-the-money strikes to guard against a potential pullback.

Considering the equity's Relative Strength Index (RSI) of 71 is sitting in overbought territory, a near-term consolidation isn't out of the question. This scenario is playing itself out in today's session, with the shares off 0.5% at last check to trade at $66.64.

On the fundamental front, Walgreen Company (NYSE:WAG) will release its February sales numbers one week from today. Additionally, the drugstore chain is slated to unveil its fiscal second-quarter earnings report before the market opens on Tuesday, March 25.

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Intrexon – The Next Great Biotechnology Success Story?

3/9/2014

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MARKET CONDITIONS

PROFILED: Intrexon (XON)

There are many qualities that make up a successful company, and contrary to popular belief, there is no magical cocktail of factors that every world leader must tick to climb to the top of its field. For example, the success of Apple Inc. is driven by a culture driven by researching, designing, developing, testing and marketing products that create markets that previously didn't exist, that at the same time creating a strong desire from individuals worldwide to own them.

That’s exactly what it did with iPods, iPhones and the iPad. The iWatch may be next. The strength of Google is understanding people, and how they behave online and in the real world. By doing this they are able to collect data, analyze it, package it, and ultimately, use it to create ever-better products and services, all of which attracts customers and advertisers to their world. Finding a new company that has a clear, simple to understand business model that can be applied in a wide market is a rarity, and finding one before it attracts the attention of the stock market is even more rare.

So hopefully, this article will answer the question, is Intrexon (XON) the next great biotechnology success story and is its' most recent close price of $25.90 is an opportunity to buy before everyone else does?

The Company and Business Model
The company starts badly in answering that question. It’s clear that not every company has an easy to distill message that communicates what exactly it does, and how it makes money. But that is one of the most fundamental considerations that has to be made when assessing whether you are going to put your own money into a business as a shareholder.

Intrexon (XON) is a biotechnology company that is active in the new field of synthetic biology. That’s not a bad thing by itself. New fields mean that the market is not saturated with competitors and the pressures that they bring. It’s less good when its unclear what the field does specifically, and how it can make money.

The company itself tries to explain its activities as assisting in designing and regulating those activities that take place within a cell, by manipulating DNA. It further states that by doing so, the applications for their technology are available in the full range of occupations and fields, from energy to food production as well as healthcare and science. Their suite of products includes Cell System Informatics a “Bioinformatics” software application and UltraVector an “integrated suite of tools”.

That sounds impressive. But dig a little deeper and things start to get disturbing. The product offerings mentioned above comprise in major parts fancy database systems. Yep. A database. That’s what is underpinning those fancy names and impressive (and definitely made-up) words like Bioinformatics. Further, if the technology did what it said it did, there would be a more focused approach to its application rather than a generic list of industries where DNA engineering could certainly have far-reaching and world-changing applications.

Financial Facts and Figures
Unfortunately the financial facts and figures disclosed at the last earnings call did nothing to change the unclear picture of the company. Expenses increased from a modest $1.1 million to almost double that amount. There was also over $1 million in charges related to stock options, a massive number when considering the size of the company, the burn rate of cash and the short trading history with no profits to back it up.

The figures are even worse for the research and development side of operations, with costs blowing out by 93% compared to the previous corresponding quarter. Even worse, most went on employee costs, with no new products or significant commercial initiatives beyond a research partnership with a University and some tentative and very early stage trials on various diseases.

The figure that should be of most concern, however, is the one that indicates just how fast the company is burning cash. In nine short months it was able to spend $4.9 million, with no discernible change in the company metrics. While that may not sound significant, it represented half of the companies total cash pile, and indicates that a capital raising or more investment will be needed from shareholders very soon to bolster a deteriorating balance sheet..

Outlook
The industry outlook for synthetic biology may well be in transformation. The ability to change the quality of foodstuffs, prevent disease and engineer better medicine all has the power to change the world, and should be taken seriously.

However, Intrexon (XON) as it currently stands does not look as though it has the strengths to deliver such lofty goals. Poor financial management, an unclear business focus and a lack of cash generating products or services all point to a company that is difficult to get enthusiastic about.

Conclusion
Finding new companies with novel business ideas and innovative approaches to solving the problems they set out to tackle is one of the most rewarding aspects of investing. Identifying these stocks has the potential to be a once in a lifetime success, like those who bought into Google or Apple early on.

However, an investor needs to understand the business well enough to be comfortable in risking their money. A company like Intrexon (XON) could well be the next big thing, but at present it appears to leave far too many questions unanswered for the vast majority of investors.

However, technically it looks like XON has bottomed out at $24 level and any good news would attract buyers. Therefore, prudent investors should keep eye on XON to make its move to the upside with a stop below $23.00 and target 34.00.

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How To Collect Double-Digit Yields From Stocks Like Visa, Starbucks, IBM, etc...

2/26/2014

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I know many people who have lack-luster performance in their portfolios; particularly their retirement accounts. They just don't believe that it is possible to "safely" generate double-digit returns in the market without taking considerable risk. Many of them think they have had a good year if their annualized returns are between 6% to 10%. We are talking about people with portfolios of at least $400 thousand to millions of dollars. Now don't get me wrong... 6% to 10% yield is great, especially if it is within a short period of time or you didn't have much money to start with.

MARKET CONDITIONS

Why settle for that when you can "safely" increase that yield by simple "hedging" your investment. Many people think that people who participate in option strategies are risk takers and like the "gambling" or volatility element that the stock market offers. I don't know about you but I actually work for a living and I can't imagine taking risks with my children's educational costs, my retirement objectives or even my lifestyle. If I want to gamble my money away, I'd go to a casino. Investing in the market doesn't have to be a gamble or even risky if you follow a few simple guidelines. First and foremost educate yourself about any and everything you don't understand. No broker or financial planner should have a better idea of what you should do with YOUR money than yourself. Second be conservative in your investment strategy... that is if your are interested in building wealth. Finally, learn how to hedge...hedge...hedge! Nothing in life is guaranteed but death and taxes; well taxes for most people.

By Austin Hatley

I can't believe more people aren't taking advantage of this...

With bond yields near record lows and traditional income securities like savings accounts and certificates of deposit earning next to nothing, we're regularly finding "instant yields" as high as 9.2%... 13.7%... and even some as much as 19.8%.

For instance, right now our research is showing an opportunity to collect a $1,575 cash payment from Visa (NYSE: V) for a 7.8% instant yield... a $980 cash payment from Starbucks (NYSE: SBUX) for a 12.8% instant yield... and we've even identified an opportunity to earn a $2,070 payment from International Business Machines (NYSE: IBM) for a 15.3% instant yield.

And the best part thing about these "instant yields" is that there's nothing complicated about them. To collect, you don't have to monitor your brokerage statement daily. Nor do you need a million-dollar bank account and access to a high-powered financial advisor.

In fact, all you really need is 100 shares of a single stock -- and the willingness to sell those shares for a profit.

I'm talking, as you might have guessed, about selling covered calls.

You've heard or read about a covered call strategy before which involves selling call options on stocks that you already own. In exchange for selling the options, you receive upfront payments known as premiums. These premiums can range from a few hundred dollars to $10,000 or more, depending on the size of your investment.

In exchange for paying the premium, the buyer now has the "option" to buy that stock from you for a specific price known as the option's strike price. Whether or not he exercises that option depends on the stock's price the day the option expires.

If, on that day, the stock is trading above the option's strike price, you'll be required to sell those shares -- usually for a profit -- to the option buyer. If the stock is trading below the option's strike price, then the option expires worthless and you keep the premium with no further action required on your part.

Think about that for second.

I don't know anyone who buys a stock without wanting to sell it eventually. Even long-term growth investors usually have a price target for most of their underlying holdings.

So why not get paid while you wait for your stocks to get there?

That's essentially what covered calls allow you to do. By selling covered calls, you're generating a constant income stream while waiting for your stock holdings to appreciate in value.

Since you already own the stocks you're writing the options on, and you're willing to sell those stocks when they reach your target price, employing this strategy adds zero additional downside risk...

But at this point you're probably wondering: What if the stock declines in value?

In that scenario, selling covered calls can only help you.

Remember, to sell covered calls, you have to actually own the stock you're writing the option on. So regardless of whether you use this strategy, your portfolio is still going to take a hit from the declining share price.

But the beauty of covered calls is that they let you offset some of the damage. That's because for every premium you receive, you simultaneously lower your cost basis in that investment.

To see how it works, consider International Business Machines (NYSE: IBM).

Last year, the $206 billion IT services company was one of 39 stocks in the S&P 500 to finish 2013 in the red. All told, IBM fell from $192 a share in January to below $187 by December 31 -- a 3.1% loss on the year. As a result of that lackluster performance, I'm willing to bet most IBM shareholders lost money on the stock during the past 12 months.

But for people selling covered calls, IBM wasn't nearly as much of a disappointment. In fact, chances are those investors actually made money on the stock last year.

That's because for most of 2013, options investors were able to generate anywhere from $200 to $400 every two months by selling covered calls on IBM.

Just how much they received depends on both the length of the contract (how long until the option expires) and the value of the strike price.

For example, right now IBM trades near $188 a share -- close to where it sat at the beginning of 2013. In order to generate what we call "instant income," investors could sell March $190 calls on IBM for $4.80 a share. Since each contract controls 100 shares, the trade would generate approximately $480 in "instant income." As long as IBM isn't trading above $190 the day the option expires, you'll get to retain your shares and keep the premium you collected as pure profit.

Since in this example the trade lasts roughly two months, you could repeat this process six different times over the course of a single year. Assuming you get roughly $4.80 every time you sell a call, you would essentially generate a whopping 15.3% "yield" ($28.80/$188) on your investment.

Another way to think of it is that you're lowering your cost basis by $28.80. So instead of losing 3% like everyone else, covered call investors could have earned as much as 13% by investing in IBM. And that's before even considering IBM's dividend, which currently pays another 2% annually.

That's the power of this strategy. Regardless of what your portfolio looks like, you can dramatically juice your returns by selling covered calls. All you need is at least one stock you're willing to sell at a profit if it jumps higher.

What's more, while this strategy works great for big blue-chip companies like IBM, you can earn even more income -- and get even higher returns -- if you're willing to use this strategy on companies that aren't as well known.

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This Stock Could Soar Much Higher

2/25/2014

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Haliburton research offices and original Headquarters in Duncan Oklahoma

MARKET CONDITIONS

Dick Cheney

No wonder Dick Cheney is so rich, Look at that massive complex. I'm sure there are a lot of secrets buried at the bottom of that lake!

The GE acquisition didn't pan out for Halliburton but shares are up 23% - a solid gain for seven months.
But don’t take that money and run just yet. There are several catalysts that could push shares even higher over the next 12 month. Halliburton is one of the largest oil- and gas-services providers in the world.

It helps companies like ExxonMobil (XOM) and ConocoPhillips (COP) drill for hydrocarbons, provide well construction, and manage production for the life of a well.

The stock could see 35%-plus gains from the massive shale growth potential in both the U.S. and international markets. So far, Halliburton is performing well, climbing almost three times higher than the S&P 500…

There are a lot more profits to come

One catalyst that will continue to push shares higher is cap-ex spending. “Cap-ex” is short for “capital expenditures.” It’s a broad measure of how much oil and gas companies plan to spend to find the stuff.

According to investment firm Barclay’s, global oil-and-gas cap-ex has been rising around 7% since 2010. That may not sound like a big percentage. But looking at the numbers, it means oil and gas companies are projected to spend $723 billion over the next 12 months.

The Troubled Asset Relief Program our government passed to save the entire U.S. economy from depression in 2008 didn’t even have that much money.

This cap-ex growth is great news for Halliburton. As oil and gas companies spend more money to drill in the oil sands in Canada, offshore in the North Sea, or in the shale areas in Texas and North Dakota… they need Halliburton to help manage their projects.

Another catalyst that should push Halliburton shares higher is rising oil prices. Oil prices have surged to more than $100 a barrel. This will allow oil companies to drill in more expensive areas – including deeper parts of the Gulf of Mexico and hard-to-reach shale areas like the Permian Basin in Texas and the Utica Shale in Pennsylvania and Ohio. This will also result in stronger profits for Halliburton, which manages many new massive oil and gas projects.

Halliburton trades at just 11 times forward earnings today. That’s super-cheap. The average S&P 500 company trades at 15 times earnings. The company is also expected to grow its earnings 30% annually over the next two years.That’s about four times faster than the market.

It’s one of the few growth stocks in the S&P 500 that’s dirt-cheap. And the company should see strong earnings at least over the next 12-24 months. Halliburton (HAL) shares have much higher to soar. I urge you to hang on for the ride.

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A Diamond In The Rough

2/25/2014

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MARKET CONDITIONS

Most investors head for the hills when a stock is hit by analyst downgrades. As for me, I want a closer look. Value frequently materializes after an exodus. I see value following the investor exodus from Diamond Offshore Drilling (NYSE: DO), whose business is readily gleaned from its name: Diamond provides offshore drilling rigs — in deep and shallow waters — to large integrated energy companies. Clients include Royal Dutch Shell (NYSE: RDS.a), BP (NYSE: BP),Petrobras (NYSE: PBR), and PEMEX.

Diamond is a long-time holder but to be honest, it has been the rare disappointment. Diamond’s shares have simply failed to gain traction. Worse, its shares have actually backslid in recent months, and not in an inconsequential amount. Diamond’s price graph is hardly cause for celebration.

Then again, Diamond Offshore Drilling’s price graph is hardly cause for despair. Indeed, I see opportunity.

As a price-appreciation investment, Diamond has left much to be desired. As an income investment, it has continually performed. The company continues to pump out $3.50 per share in annual dividends. At today’s lower price, that translates to a lush 7.4% yield – one of the highest in the sector.

So why is Diamond’s share price depressed? Issues cover the macro and the micro.

On the macro side, overcapacity is a concern. Offshore drillers have aggressively expanded in recent years. Diamond’s fleet has increased nearly 41%, going to 45 rigs from 32. Concurrently, a few large oil companies have hinted at plans to reduce capital expenditures. Rising supply coupled with falling demand has analysts sucking their thumbs and whining over the possibility of lower dayrates and lower rig-utilization rates.

On the micro side, Diamond Offshore Drilling has suffered setbacks in Brazil, which accounts for more than 30% of its annual revenue. Specifically, two of Diamond’s rigs were contracted to the Brazilian oil service company OGX, which filed for bankruptcy in October 2013. Diamond took a $75 million hit in the third quarter of 2013 related to OGX non-payments.

These concerns have lead to a cascade of downgrades, most of which hit the market over the past month. Investors, in turn, responded with a hard sell. Diamond’s shares are down over 16% year to date.

Time to buy. I say that because Diamond’s shares are oversold – WAY OVERSOLD!

For one, Diamond Offshore Drilling continues to make money and cover the dividend. EPS in 2013 posted at $3.95, which is a disappointment and a 23.8% reduction from EPS of $5.18 posted in 2012. Still, it was enough to cover the dividend. What’s more, EPS is expected to recover to $4.50 in 2014.

In other words, circumstances are better than recent share performance would lead investors to believe. Indeed, I believe they are even better than most analysts believe.

I expect Diamond will continue to make money, and make it at a growing rate in the future. Even with the aforementioned issues, Diamond’s backlog is around $9 billion, nearly three years of revenue, and provides sufficient visibility on the company’s financial performance.

What’s more, long-term growth in worldwide oil demand is unlikely to abate, and the low-hanging fruit is already taken. According to the 2013 World Energy Outlook, the total world oil supply in 2012 was

87.1 million barrels a day (MBD), an increase of 11.9MBD over the 75.2 MBD produced in 2000. Less than one-third of this increase was in the form of conventional crude oil – the easy stuff pumped directly out of the ground. More than two-thirds was what the International Energy Agency calls “unconventional crude” (light-tight oil, oil sands, and deep/ultra-deepwater oil) or natural-gas liquids.

The long-term outlook for offshore drilling is clear: Oil companies will need to invest more to extract oil, whether they want to or not. That will keep drilling contractors like Diamond Offshore Drilling busy.

In the meantime, investors can pick up shares of a premier offshore drilling contractor with a yield of 7.4% that trades at a mere 10.5 times 2014 EPS estimates.

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It’s Time to Get Cash OUT of the Dollar and INTO this Currency

2/25/2014

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I have been in the renminbi for almost two years now and have achieved about a 42% return. I got hit on a futures trade where I shorted the US dollar prematurely otherwise, I would have had a year to date return of about 200%.

MARKET CONDITIONS

I should have known the US would continue to manipulate the market and try to hang on by a thread to their reserve currency standing. I even have the bulk of cash assets offshore in a Hong Kong bank and highly suggest that you all go offshore as well. When genius investment gurus like Steve Sjuggerud break camp from the US dollar and even go as far as to suggest Canadian equities...well let's just say the writing is on the wall in neon pink! I'm very excited about this article because it proves that I was right despite some Wall Street types saying I pulled the trigger too soon. I just don't want to get blind-sided and should shouldn't either.

By Dr. Steve Sjuggerud, True Wealth

Jim Rogers has one of the greatest track records in history… He delivered a 4,200% return to investors of his legendary Quantum Fund in the 1970s… at a time when the U.S. stock market returned just 47%. And then he walked away from managing money. Today, Jim and I agree on a major investment idea. We agree that the time has come to move a portion of your money OUTSIDE of the U.S. dollar… and into a place you’ve probably never considered.

I have a simple way to make the investment… and I believe it’s the safest place to park your cash over the next few years. Jim is more ambitious. He believes it could be a triple-digit winner. Either way, it’s an idea you need to consider today.

Let me explain…

This summer, Jim predicted that China’s currency could soar by 300%, 400%, or even 500% against the U.S. dollar in the next couple decades. “If anyone wants to sell renminbi, I’d be willing to buy,” Jim said.

And just last month, Jim said he expects China’s currency to replace the U.S. dollar as the world’s most important currency in the next 20 years. (He is so optimistic about China, he moved his family from New York to Asia, and his young daughter now speaks fluent Mandarin.)

Anyone investing in China’s currency over the last few years has done well. Just this week, the dollar hit a new low versus China’s currency… the renminbi. In fact, the dollar has looked pretty bad against the renminbi over the last decade. Take a look:

Importantly, Jim and I both believe this trend will continue for one simple reason… China’s currency is deeply undervalued.

The renminbi is undervalued by 30%-50%, according to The Economist magazine.

China’s currency has appreciated 3%-4% per year in recent years. I think that’s our “base case” going forward. However, we might do much better than that in the coming years… thanks to Janet Yellen.

“There will be a prolonged period of appreciation for the renminbi,” Li Daokui, a former adviser to China’s central bank, said when he heard Yellen got the job. He knows Yellen will keep printing money and keep interest rates at zero for a “relatively longer period,” which would further weaken the dollar.

So we can expect to earn 3%-4% a year in profits simply by holding cash in China’s currency – with the potential for much bigger gains if smart people like Jim Rogers are right.

The easiest way to make the trade is through a U.S.-traded exchange-traded fund (ETF) that pays a 3.3% dividend.

I’m talking about the PowerShares Chinese Yuan Dim Sum Bond Fund (DSUM).

This fund holds a portfolio of “dim sum” bonds. A dim-sum bond is issued OUTSIDE of China, but it is IN China’s currency. This is exactly what we want.

With DSUM, you’ll earn a 3.3% dividend. PLUS, you’ll get the renminbi’s appreciation – around 3%-4% a year, maybe more. You may also see a capital gain as DSUM’s bonds increase in value. It could add up to 10% a year… in an income investment.

You MUST face the facts… You have too much of your wealth in the U.S. dollar…

Every day, our politicians are actively making the U.S. dollar more unattractive in global markets. Meanwhile, China is actively making its currency more attractive.

According to one of the best investors of all time – Jim Rogers – the renminbi could overtake the U.S. dollar within 20 years as the world’s most important currency. And he says it could go up in value by 300%, 400%, or 500% in the next couple decades.

You can choose to ignore this trend and see your wealth in U.S. dollars shrink. Or you can position a portion of your portfolio in China’s currency to take advantage of it. I recommend parking some of your cash outside the U.S. through shares of DSUM.

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This Special Stock Yields 7%

2/24/2014

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MARKET CONDITIONS

Every year, the 12,000 employees at the U.S. government’s General Services Administration (GSA) are tasked with spending roughly $66 billion dollars on all of the goods and services needed to keep our government running.The biggest expense: real estate. Although Uncle Sam owns nearly 10,000 buildings, he’s also the nation’s largest renter. The government never bounces a rent check, and tends to look for long-term, stable leases; and as it turns out, renting to the government is quite profitable.

A top landlord to Uncle Sam throws off sterling cash flow, which translates into a rock-solid 7% dividend yield for investors. That’s a lot of reward for little risk.

I’m talking about Government Properties Income Trust (NYSE: GOV), a real estate investment trust (REIT) that leases more than 10 million square feet spread across 82 buildings, mostly to the public sector.

(Roughly 68% of revenues are derived from the U.S. government, another 20% from state governments, 7% from the private sector, and 5% from the United Nations).

A sample of tenants includes:

– The Centers for Disease Control (CDC) in Atlanta
– Many of the Federal Bureau of Investigation’s (FBI) satellite offices
– A U.S. Army Logistics Center
– The state of Oregon’s capital complex

Apparently, business is good. While the national office building vacancy rate hovers at around 14.8%, according to Reis.com, this landlord has a vacancy rate around 7%. Equally important, this REIT’s vacancy rate tends to be stable in any economic climate compared to commercial office buildings, which saw a spike in the vacancy rate up to the 18% to 20% range when the U.S. economy slowed in 1987, 1991, 2002 and 2009; and GOV’s key tenant is staying put. In the most recent quarter, the average lease renewal was for a term of 20 years.

With government spending under pressure, it’s fair to wonder if GOV might start to see government tenants consolidate into fewer office spaces. “We really are not seeing impact specifically on our properties from sequester,” noted CEO David Blackmon on a recent conference call, adding that “the buildings we have in the D.C. market tend to be relatively strategic to the government tenants. So fortunately for us, it hasn’t had a real effect on occupancy at our portfolio.”

Wondering how can GOV afford to pay out such robust dividends? The answer lies in the company’s judicious use of debt leverage. Thanks to locked-in cash flows, GOV can borrow at low interest rates, and a debt-to-EBITDA ratio of 3.5 means that a little equity goes a long way. Over the past three years, GOV has generated net profit margins in excess of 20%. In contrast, Boston Properties (NYSE: BXP), the country’s largest office REIT, has net profit margins in the 10% to 15% range.

Minimal organic growth
To be sure, the government’s need for office space is likely to remain stable, but isn’t expected to grow in coming years. Yet GOV manages to finds paths to growth anyway, as it acquires more buildings that already house government tenants. That explains why revenues shot up from around $80 million in 2009 to more than $200 million by 2012. Analysts see that figure approaching $250 million by 2014.

That doesn’t mean management is pursing growth for its own sake. GOV has looked at more than 40 potential acquisitions thus far in 2013, with active discussions underway and plenty of deals could be announced in coming months.

Yet even with such acquisitions, don’t expect the dividend to grow at a robust pace. GOV periodically raises fresh capital through secondary share offerings, which means that the share count often rises almost as fast as net income. That can impede EPS growth. For example, analysts expect the REIT to earn around $2.15 a share in 2013 and 2014, right around the levels earned in 2012.

Roughly 10% of those profits are retained to fatten up the balance sheet, while the other 90% supports the dividend. That payout ratio means management can preserve the dividend, even if profits take a modest dip in any given year.

You can find other REITs with more robust growth prospects, but as a good rule of thumb, the greater the prospective growth, the smaller the dividend yield. The typical REIT sports a dividend yield slightly below 4%, according to Morgan Stanley. For the subcategory of office REITs, the average yield falls to 3.5%. That’s just half the yield sported by GOV.

Put simply, lack of organic growth in this case can be a very good thing. Dividends may not grow smartly, but investors can be strongly assured that the current $1.72 a share dividend will be around next year, and well down the road.

Investors can find 7% dividend yields in a wide range of stocks, but you’d be hard-pressed to find another one with such low chances of a dividend cut.

Those looking for high yields and safety should look into Government Properties. There may be a few dips in share price between now and the coming budget discussions, so investors now have a limited-time opportunity to snatch up the stock at a lower price and enjoy even higher returns.

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3 Super-Safe Preferred Stocks Providing Plentiful Payouts

2/23/2014

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MARKET CONDITIONS

These so-called 'hybrids' are too often ignored and considering their eye-popping yields, they shouldn't be. There is nothing better than the power of compounding especially with these kinds of dividends. Although preferred stocks typically yield higher dividends than the common stock, make sure you don't over-pay for them. DO YOUR ANALYSIS before you buy! Remember part of your gains in equities are based on buying BELOW par value.

Preferred stocks are the unsung heroes of dividend yield. Preferreds only really started to get attention when bond yields cratered, sending dividend investors on the hunt for other sources of fixed income. And I have to admit, when I found preferred stocks, I fell in love.

After all, preferred stocks have many of the advantages of bonds in that they trade in very tight range, they pay a regular dividend, and they are higher up in the capital stack than equity. In addition, if a company is forced to reduce dividends, it must first kill the dividend to the common stock before the preferred stock.

Before the picks, a few educational notes: Preferred stocks you’ll want to avoid are those whose companies have already cut common dividends, indicating the company is struggling with its cash position and income generation. You’ll also want to avoid preferred stocks trading substantially above par, or the price they were originally offered at. Most preferred stocks are “callable,” which means the company can pay the issuing price for shares after a certain date. You don’t want to buy a preferred stock at $28 and have it called at $25. It’s OK to pay a slight premium, but not too much.

Now, onto those preferred stocks to buy:

#1. Preferred Stocks to Buy: Ashford Hospitality Trust (AHT) Series D 8.45% CumulativeDividend Yield: 8.45%

I love this hotel REIT and its stock for many reasons. Ashford Hospitality Trust is extremely well-managed, boasting management that has been in the hotel business for 24 years. Leadership has shown deftness and creativity with the company’s financing over the years.

During the financial crisis, when virtually every other hotel REIT cut both common and preferred dividends, Ashford never cut its preferred stock. It negotiated loan maturities out several years. It purchased interest rate derivatives called “flooridors” that generated additional income while the hotel business was in the toilet.

I’ve owned these shares for quite some time, and I suggest owning them for the long term. Ashford’s D shares trade just slightly over their $25 issuing price and yield a very attractive 8.45%.

#2. Preferred Stocks to Buy: Public Storage Series TDividend Yield: 6.58%

I also like both Public Storage (PSA) and its Series T preferred stock. As a result of the financial crisis, many people lost their homes. What happens when people get evicted from a house? They downsize. That’s one reason we’ve seen apartment REIT stock prices appreciate, but that’s also why Public Storage has done so well.

You can’t fit a household’s worth of stuff into an apartment, so you rent storage for all those extra-large sofas. Housing remains troubled, and with people increasingly being moved into part-time jobs or leaving the workforce, this overall secular trend is continuing.

Public Storage has 10 different series of preferred stock, but I like the Series T because it trades at $21.83, which is more than 12% below par. I don’t see any reason for this discount, and it also boosts the 5.75% dividend (at par) to 6.58% at the current price.

#3. Preferred Stocks to Buy: PowerShares Preferred Portfolio (PGX) Dividend Yield: 6.6%

Of course, if you’re worried about picking the right preferred stock, you can always go with an ETF, which offers diversification.

There are a few preferred ETFs floating around, but one I favor is the PowerShares Preferred Portfolio (PGX).

Most preferred ETFs are heavily weighted toward financials, and this is no exception. However, I’m not as concerned as I used to be about financials, and this ETF is globally diversified, which puts me a little more at ease. PGX currently yields 6.6%.

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Sean Hyman's US Dollar Analysis & Portfolio Picks

2/20/2014

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Sean Hyman

Sean Hyman is the editor of "The Ultimate Wealth Report" and a regular guest on shows including Fox Business, CNBC, and Bloomberg Television. He is known for his uncanny ability to predict market moves, but what many people don't know is that Sean is a former pastor.

Though Sean has years of experience with Charles Swab, he points to the Bible as his
secret to investing.

MARKET CONDITIONS

He attributes the "Biblical Money Code" found in Scripture for taking him from making only $15,000 a year to now being able to give away up to $50,000 a year. He doesn't share that to brag, but to show that it is possible to change your financial status and to be a blessing to others.

Sean has applied ancient biblical principles and radically changed his own life and helped do the same for others. For example, he used these principles to transform his father's $40,000 retirement account into $396,000. He also
used the code to help a friend change $2,000 into $10,000 in about a year.

Below is a presentation on his analysis of the US dollar and certain investments within his own portfolio.

When you're a commodities investor, an understanding of the U.S. dollar — where it's headed, and why — is critical for success. In today's video, Sean Hyman dissects the dollar's technical charts for answers, and review the holdings in his portfolio one by one. You can watch the video presentation below.

For those of you starting or adding to your own portfolios, the following holdings were at, near, or below Sean's recommended "buy" price as of yesterday's close:

• In the Core Value Portfolio: Devon Energy (DVN), Peabody Energy (BTU), PowerShares Agriculture
(DBA), Newmont Mining (NEM), iShares Silver Trust (SLV) and HollyFrontier (HFC);

• In the Global Value Portfolio: Encana (ECA), Petrobras (PBR), Vale S.A. (VALE), Teck Resources (TCK),
Barrick Gold (ABX), Companhia Energetica (CIG), WisdomTree India Earnings (EPI), NTT DOCOMO
(DCM), iShares FTSE China 25 (FXI), Market Vectors

PORTFOLIO TABLE AND ALLOCATION RECOMMENDATIONS

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Traders Are Making a Big Mistake Right Now

1/28/2014

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MARKET CONDITIONS

Get ready for a one-day-wonder rally. The S&P 500 is down over 3.6% from its high earlier this month. Most of that decline happened late last week and continued yesterday. As a result, lots of folks are calling this the start of the long-awaited correction; and lots of traders are shorting stocks aggressively into the market's weakness. Those traders are making a mistake.

Let me be clear, I do think the market is in the process of forming a long-term top. And I think stocks will be lower in the months ahead. But I'm not shorting stocks right now... not after the market has already been smacked down hard over the past week. And not after so many short-term technical indicators are showing extreme oversold conditions. Selling stocks short into extreme oversold conditions is a sure-fire way to lose money... fast.

During bear markets and during correction phases in bull markets, stocks often experience "one-day-wonder"-type rallies. These are the huge, one-day, rocket-shots higher that happen out of nowhere after the market has hit oversold levels, when it looks like it's ready to fall off a cliff, and after traders have loaded up on the short side.

Folks looking to buy stocks rush into the market worried that they've missed the bottom. Traders who bet too heavily on the short side rush to cover to try to minimize their losses. And stocks pop violently higher.

We're set up for one of those one-day-wonder rallies right now. Take a look at this chart of the S&P 500 plotted along with its 50-day moving average (DMA)...

This is the fourth time over the past year the S&P 500 has dipped below its 50-DMA and looked like it was ready to collapse. On the three previous occasions, stocks managed to rally and go on to make new highs.

This time may be different, especially if you believe as I do that stocks are forming an important long-term top. The S&P 500 may not rally back and make new highs this time around. But it is due for a rally.

Look at the two-day relative strength index (RSI) and the full stochastics – two measures of overbought and oversold conditions – at the bottom of the chart. Both of those indicators are in "extreme oversold" territory. Stocks have rallied off those conditions each time this happened before. It's likely we'll get a rally this time around, as well. And any sharp rally from this point is going to cause a lot of pain to traders who got aggressively short over the past couple days.

Rather than sell stocks short into extremely oversold conditions, it's better to wait for the inevitable oversold bounce. Traders can then short stocks as they approach obvious resistance areas, like the 50-DMA.

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