Sunday, 21 June 2009

Act now or inflation is going to get you


When inflation ravaged Germany in the 1920s, it found most people unprepared. There were a lot of lamentations, but only when it was too late. Millions of families suffered a depreciation of their savings due to their refusal to acknowledge reality. The signs of the coming tide had been everywhere for people to read. Nevertheless, few did what was required.

Was it failure to understand or resistance to take action? We don't know, but complaining about excessive rain will make little sense when overflowed rivers are flooding the streets. Nobody can tell exactly how high inflation will be in the next years, but prudent men are already aligning their investments with their reasonable expectations.

These are some of the companies that, today 21 June 2009, I am researching as possible additions to my own portfolio. In my selection, I have combined different criteria, such as my wish to spread risks internationally, in different currencies, and my preference for businesses with a stable client base. The latter will be put to test when companies are obliged to raise prices due to inflation.

1.- VERIZON (NYSE:VZ). This telephone operator makes its profits through subsidiaries and joint ventures in all five continents. Even if there is high inflation in some markets, this company should be able, to a good extent, to set off negative effects with income from other territories. The price/earnings ratio is, at this moment, about 13. If the dividend remains stable, the yield should be in the range of 6.5% this year, which is nice to take home.

2.- CELLCOM ISRAEL (NYSE:CEL). This company, which has about 3.1 million customers, is a major operator in the Israeli telecommunications market. It is difficult to predict how the economy of that area will develop in the next years. Personally, I am optimistic, but it is undeniable that placing your savings in that part of the world entails extra risks. The current price/earnings ratio is about 9.5 and the high payout policy of the company may lead to a dividend yield in the range of 12%.

3.- MAGYAR TELEKOM (NYSE:MTA). This Hungarian telephone operator has more than 5 million customers. At this moment, its current price/earnings ratio is around 7 and its dividend yield in the range of 11%. While the company itself is doing reasonably well, Hungary is experiencing serious economic trouble and local public opinion is asking for a policy change. This stock should benefit if the Hungarian economy turns around in the next years, but it remains to be seen if a change for the better will actually take place.

4.- JOHNSON AND JOHNSON (NYSE:JNJ). This company makes and distributes cosmetics and personal-care products around the world. In addition, it sells pharmaceuticals for, amongst others, dermatology, cancer, and cardiovascular applications. The varied international sources of its profits make this sort of company specially attractive in times of inflation. At its current level, this stock has a price/earnings ratio around 13 and a dividend yield in the range of 3.5%.

5.- BRISTOL MYERS (NYSE:BMY). A major pharmaceutical company that, in addition to medicines, sells nutritional products, such those for children. It makes and distributes drugs for applications in the cardiovascular area, mental health, cancer, and others. These days, the price/earnings ratio of this stock is around 11 and is expected to produce a dividend yield in the range of 6%.

Although no company offers perfect hedging against inflation, it makes sense to devote some effort to studying foreign shares in order to spread risks internationally. The five above constitute my personal choice at this moment, but you should never follow any opinion without making your own research. Always check things for yourself before committing your savings to any investment. Since it looks as though inflation is coming, the sooner you start with your research, the better.

[Text: http://johnvespasian.blogspot.com]

[Image by digitalART2 under Creative Commons Attribution License. See the license terms under http://creativecommons.org/licenses/by/3.0/us]

Act now or inflation is going to get you


When inflation ravaged Germany in the 1920s, it found most people unprepared. There were a lot of lamentations, but only when it was too late. Millions of families suffered a depreciation of their savings due to their refusal to acknowledge reality. The signs of the coming tide had been everywhere for people to read. Nevertheless, few did what was required.

Was it failure to understand or resistance to take action? We don't know, but complaining about excessive rain will make little sense when overflowed rivers are flooding the streets. Nobody can tell exactly how high inflation will be in the next years, but prudent men are already aligning their investments with their reasonable expectations.

These are some of the companies that, today 21 June 2009, I am researching as possible additions to my own portfolio. In my selection, I have combined different criteria, such as my wish to spread risks internationally, in different currencies, and my preference for businesses with a stable client base. The latter will be put to test when companies are obliged to raise prices due to inflation.

1.- VERIZON (NYSE:VZ). This telephone operator makes its profits through subsidiaries and joint ventures in all five continents. Even if there is high inflation in some markets, this company should be able, to a good extent, to set off negative effects with income from other territories. The price/earnings ratio is, at this moment, about 13. If the dividend remains stable, the yield should be in the range of 6.5% this year, which is nice to take home.

2.- CELLCOM ISRAEL (NYSE:CEL). This company, which has about 3.1 million customers, is a major operator in the Israeli telecommunications market. It is difficult to predict how the economy of that area will develop in the next years. Personally, I am optimistic, but it is undeniable that placing your savings in that part of the world entails extra risks. The current price/earnings ratio is about 9.5 and the high payout policy of the company may lead to a dividend yield in the range of 12%.

3.- MAGYAR TELEKOM (NYSE:MTA). This Hungarian telephone operator has more than 5 million customers. At this moment, its current price/earnings ratio is around 7 and its dividend yield in the range of 11%. While the company itself is doing reasonably well, Hungary is experiencing serious economic trouble and local public opinion is asking for a policy change. This stock should benefit if the Hungarian economy turns around in the next years, but it remains to be seen if a change for the better will actually take place.

4.- JOHNSON AND JOHNSON (NYSE:JNJ). This company makes and distributes cosmetics and personal-care products around the world. In addition, it sells pharmaceuticals for, amongst others, dermatology, cancer, and cardiovascular applications. The varied international sources of its profits make this sort of company specially attractive in times of inflation. At its current level, this stock has a price/earnings ratio around 13 and a dividend yield in the range of 3.5%.

5.- BRISTOL MYERS (NYSE:BMY). A major pharmaceutical company that, in addition to medicines, sells nutritional products, such those for children. It makes and distributes drugs for applications in the cardiovascular area, mental health, cancer, and others. These days, the price/earnings ratio of this stock is around 11 and is expected to produce a dividend yield in the range of 6%.

Although no company offers perfect hedging against inflation, it makes sense to devote some effort to studying foreign shares in order to spread risks internationally. The five above constitute my personal choice at this moment, but you should never follow any opinion without making your own research. Always check things for yourself before committing your savings to any investment. Since it looks as though inflation is coming, the sooner you start with your research, the better.

[Text: http://johnvespasian.blogspot.com]

[Image by digitalART2 under Creative Commons Attribution License. See the license terms under http://creativecommons.org/licenses/by/3.0/us]