We're getting a market rally today, but look at what's leading
the charge: none other than the momentum-driven commodity sector
names.
Potash Corp (
POT
) ramped up huge this morning on news the company received an
unsolicited acquisition bid from BHP Billiton (
BHP
) . This lit a fire under other companies in the space, such as CF
Industries (
CF
) , Mosaic (
MOS
) , and Agrium (
AGU
) . This was great news for traders that are holding these momentum
plays. Despite paying dividends (very puny ones), we are not
interested in playing in the manic-style turns the sector is now
known for. We have seen sporadic jumps in the space, and we all
know M&A could propel the sector into a mini-bull market as
well, but unless you possess the discipline and timing skills to
maneuver through, I would avoid the "who's the next takeover"
temptation.
We also see news out this morning that legendary investor Warren
Buffett has nearly doubled his stake in Johnson & Johnson (
JNJ
) . Mr. Buffett likes to "prune the garden" at various times when
it comes to his holdings, and we employ the same strategy here at
Dividend.com at times. There will be circumstances when some names
get a bit ahead of themselves in terms of price, and the
risk/reward is not as good as other areas of the market. Thus, we
remove names from our "Recommended" list until we feel their
valuations are more appropriate. Mr. Buffett did that with JNJ - we
cut Berkshire's holdings in that name from 64 million shares at the
end of 2007, all the way down to 24 million in March 2010. Now, his
company has upped its position back to 41 million shares.
Getting back to the commodity buzz I mentioned earlier, I am not
thrilled by the news of consolidation in the commodity sector. Less
players can sometimes mean higher prices on the back end. The last
thing we want to head toward is stagflation, where unemployment and
inflation is high and economic conditions are weak.
That's it for today, folks! As always, check out our
Best Dividend Stocks List
for our top dividend recommendations. Plus, if you haven't done so
already, test out our new
Monthly Dividend Income Generator
tool, which makes scheduling your dividend income payouts easy. See
you tomorrow!
Be sure to visit our complete recommended list of the
Best Dividend Stocks
, as well as a detailed explanation of
our ratings system here
.