Does Dividend Stripping Work? The Basics

Australian investors are blessed with an abundance of high yielding, fully franked shares that offer great opportunities for tax effective income generation. The systematic buying and selling of shares for dividends is sometimes known as dividend stripping. Dividend stripping is the process of buying shares cum-dividend, holding the share for the dividend and franking credit, then selling the share ex-dividend and moving on to the next opportunity. Each dividend season, financial journalists roll out articles about dividend stripping without providing hard evidence that it actually works. Nevertheless, it is a popular tactic among actively traded investment funds with the objective of generating consistent dividend income, franking credits and ideally, capital gains.

But is dividend stripping really worth the effort? Are we not just feathering our broker’s nest with the trading commissions we are paying? Aren’t we just exchanging dividend income for capital losses? In simple terms, does dividend stripping give us an edge over the broader market or a stock specific buy and hold strategy?

Examination of historical dividend and share price data by Dividends.com.au has determined that dividend stripping of S&P200 index shares can provide a significant edge of more than 6% over the S&P 200 index for a holding period of 46 days as long as some simple rules are followed.

We will come to the empirical analysis and simple rules for successful dividend stripping in the second and third instalments of this article, but in the meantime here is a recap of the important aspects of dividend stripping.

Dividends and Franking Credits

Australian companies usually pay dividends twice per year although many listed trusts and ETF’s pay dividends quarterly and some monthly. Dividends are highly valued by investors as they represent a known, tangible return on their investment. In effect dividend returns are more certain than capital gains. In addition, many Australian shares pay franked dividends which provide investors with franking credits. That is investors are credited by the Australian Tax Office for tax already paid by the company in earning the dividend. This has the net effect of inflating the value of the dividend to the investor, making them even more desirable. It is not hard to imagine a situation where shorter term investors flood into high yielding, fully franked stocks prior to them going ex-dividend in preference to non-dividend paying stocks.

The 45 Day Rule

To prevent savvy traders blatantly dividend stripping by buying on the last cum-dividend date and selling on the first ex-dividend date to accumulate near risk free franking credits, the Australian Government legislated for the 45 Day Rule. This states that if you are going to exceed $5000 in franking credits in the year then you must satisfy the 45 day holding period requirement. The shares must be held for 45 days between the buy and sell dates and the position must maintain a minimum 30% delta (i.e. you can’t hedge all of the stock specific risk away with options or other derivatives – although you can hedge 70% of it, but that’s a different story). It doesn’t matter if you buying the shares 46 days before the ex-dividend date and selling on the ex-dividend date, or buy on the last cum-dividend date and sell 46 days later, or buy and sell anywhere between these two dates – you will still qualify for the franking credit.

Cum-Dividend Share Price Behaviour

Quantitative analysis shows that high yielding, fully franked shares often outperform the market as traders take positions prior to the ex-dividend date. Macquarie Research in 2005 quantified the average excess return as 2.5% in the 46 days prior to the ex-dividend date. Our own analysis finds the effect can be even stronger. Bear in mind that this is also a period when earnings updates and reports result in stock specific volatility and sometimes severe corrections in individual stock prices.

Ex-Dividend Date Share Price Behaviour

All other things being equal, the share price should theoretically fall by the amount of the dividend on the ex-dividend date. Usually it will fall by only the face value of the dividend, not the franking credit. Although sometimes in high yielding, slow growth stocks that have been heavily bought into for the immediate, short term dividend, they will fall by the grossed up value of the dividend or further on the ex-dividend date and continue to fall for a few days.

The fall in the share price on the ex-dividend date can result in a capital loss which can sometimes be applied against previous capital gains to reduce capital gains tax liability.

Some stocks are heavily held by overseas investors. Overseas investors are not eligible for franking credits and anecdotally it has been suggested that they often sell out just prior to the stock going ex-dividend, only to buy it back after it goes ex-dividend possibly sells off further.

Post Ex-Dividend Share Price Behaviour

In a bull market, low yielding stocks will recover quickly the price lost on the ex-dividend date and will continue to churn higher. Higher yielding stocks can take much longer with often the ex-dividend date representing the high water mark in the shares price until the next dividend becomes due.

The Perfect Scenario

The ideal dividend strip is as follows. The market is steady, perhaps even trending up slightly. You identify a high yielding stock with good fundamentals from your target list and buy in with 12.5% of your capital 46 days prior to the ex-dividend date. The share price rallies as other traders jump on to the stock in anticipation of the large, fully franked dividend. The earnings announcement comes and goes without any significant hiccup. You then sell at the open on the ex-dividend date for a small but respectable capital gain, you qualify for the franking credit and the dividend payment date is only two weeks away so your will soon receive the cash dividend. You immediately reinvest your funds into the next dividend opportunity from your target list.

Real Life Examples

In reality, things rarely go so smoothly. For real life examples we will look at Australia and New Zealand Banking Group (ANZ), Macquarie Group (MQG), National Australia Bank (NAB) and Westpac (WBC) which all went ex-dividend in May 2013. The details of this real life example are provided in Table 1 below.

The positions would be entered 46 days prior to the pre-announced ex-dividend date. Note that at this stage the value and franking of the dividend has not been declared, so we use the previous year’s dividend plus any guidance since provided by the company. The position is closed on the ex-dividend date, satisfying the 45 Day Rule and qualifying the trader for the franking credit. The return on investment for three of the four positions is positive and outperforms the S&P200 Accumulation Index. An equal allocation of capital to all four stocks would have resulted in an absolute return of 10.5% or a relative return of 6.8%.

In the next post we examine the empirical evidence as to whether or not dividend stripping can provide a sustainable edge over the Australian share market.

 

Does Dividend Stripping Work? Part 2-An Empirical Study

In the previous post we looked at the basics behind dividend stripping and examined a recent example. Dividend stripping is a systematic trading technique used to harvest income via dividends and franking credits without maintaining a long term holding in the stock. The shares are purchased cum-dividend up to 46 days prior to the ex-dividend date and sold anywhere between the ex-dividend date and 46 days later to satisfy the 45 days holding requirement to qualify for the franking credit.

The popular financial press claims that dividend stripping outperforms the market in a rising market, but in a bear market, volatile individual stock returns due to poor sentiment and downward revisions in earnings make the picture less clear.The ASX did publish a fairly academic article (The Ex-Dividend Performance of ASX200 Stocks Measured Against the 45-Day Holding Rule (January 2000 – March 2011)) but it was difficult to glean the size and robustness of the claimed advantage of entry timing. Nick Radge recently published an ebook (Profiting from Dividend Momentum) on this very investment/trading technique. He provides evidence to support it with a limited high cap share portfolio model but stops short of proving it outside of the ASX top 20 stocks. Dividends.com.au decided to examine the dividend stripping concept by modeling theoretical positions using our historical dividend data base and unadjusted, closing share price data. Our database is flexible enough to run many tests and scenarios to enable us to test the concept thoroughly and optimise for any market edge.

Our Whole Dividend Return Model

We examined dividends and share price performance for S&P200 stocks for the five years between July 2008 and June 2013. This period was chose as includes GFC and post GFC markets. The model period includes 1328 dividend events for 161 current S&P200 companies who have paid at least one dividend in the last five years. As a benchmark we chose the S&P200 accumulation index (XJOAI) to give a fairer and more conservative comparison than using the S&P200 alone.

Individual stock return is the sum of capital gain (loss) plus dividends plus franking credits divided by the entry price 46 days prior to the ex-dividend date. The excess return over the S&P200 accumulation index is the ratio between the individual stock return and the return on the index for the same period. Interest costs and trading commissions are excluded from the basic analysis.

We used a gross annual yield based on historical dividends rather than actual dividends to prevent ex-post error – generally the dividend and franking percentage is not available 46 days before the ex-dividend date. Figure 1 is a scatter plot showing the relationship between historical gross yield and 46 day return for 161 dividend paying stocks between July 2008 and June 2013.

The results of our analysis are summarised by historical yield in Table 1.

We found that dividend paying shares with a historical gross annual yield of less than 2.0% generated equivalent returns to the S&P200 Accumulation Index for a comparable 47 day period.

Above a historical gross annual yield of 2.0% there was a strong relationship with average excess returns over the S&P200 accumulation index. The strongest effect was seen in the highest yielding shares where positions showing a historical gross annual dividend yield of greater than 12% produced an average excess return over the S&P200 Accumulation Index of 7.6%.

The effect was still very strong for positions with a lagged gross annual dividend of between 6% and 12% generating excess returns of 5.1%. Interestingly and perhaps contrary to popular belief, even the top percentile of observations, those with a historical gross yield above 27% generated an average excess return of 17.6%. Usually, very high yields are seen as a warning sign of corporate distress, but in the very small sample (11) we analysed the average capital gain was 8.5%.

The excess returns over the S&P200 Accumulation Index are due to strong relative strength of high yielding, fully franked shares 60 – 45 days ahead of the ex-dividend date combined with franking credit income. Interestingly, even if dividends and franking credits are ignored, capital gains still generate an average excess return of  2.3% for positions with yields above 4% suggesting that the effect is widespread and consistent. An interesting branch of study would be to determine if the results are dependent up on the number of days entered prior to the ex-dividend date.

Model Performance or a Theoretical Dividend Investing Fund

We then modeled a theoretical fund taking all dividend opportunities without discretion where the lagged historical yield exceeded 6% between July 2008 and June 2013. Capital was allocated evenly to all dividend candidates. The normalised equity curve of the dividend trading strategy is compared with the alternative investment in the S&P200 Accumulation Fund (Figure 2).

Our analysis shows that a properly executed dividend stripping strategy would have outperformed the Australian S&P200 share market index in all quarters since July 2008. The dividend fund was able to generate a positive absolute return in 17 out of 20 quarters.

Summary

We feel that the edge associated with holding high yielding, fully franked shares for the dividend is significant and enduring. While the concept of using dividend stripping to gain an edge over the market is not a new one to Australian investors, we feel this is first time it has been so comprehensively quantified and at least partially optimised. Future articles aim to look more closely at this concept and try to prove up timing and stock selection criteria. The next post will look at how to build a potentially profitable trading or investment strategy around this concept.

In the spot forex market, trades must be settled in two business days. If a trader sells 100,000 Euros on Tuesday, the trader must deliver 100,000 Euros on Thursday, unless the position is rolled over. As a service to our traders, FOREX automatically rolls over all open positions to the next settlement date at 5:00 pm New York time. Rollover involves exchanging the position being held for a position expiring the following settlement date. The positions being exchanged are usually not valued at the same price. The difference in amount varies greatly based on the currency pair, the interest rate differential between the two currencies, and fluctuates day to day with the movement of prices.

For positions open at 5.00 pm EST there is a daily rollover (interest payment) you pay for an open position depending on your established margin level and position in the market. If you do not want to earn or pay interest on your positions, simply make sure they are closed by 5.00 pm EST, the established end of the market day.

TERMS

Stop loss – you need to put the price you want to be stopped at in case a trade goes against you.

EXPLANATION

When you “buy” (or take a long position in) a currency pair, you are betting on the base currency, in your example the EUR. So you buy 1 EUR for 1.20 USD. When the price moves up to, say, 1.22 USD, you sell the 1 EUR for that amount, for a profit of 1.22 – 1.20 = 0.02 USD.
When you “sell” (or take a short position in) a currency pair, you are
betting on the quote currency, in your example the USD. So you buy 1.20 USD
for 1 EUR. When the price moves down to, say, 1.18 USD, you buy back the 1
EUR for that amount, for a profit of 1.20 – 1.18 = 0.02 USD.

so on AUD/USD

BUY bets on AUD strengthening
SELL bets on USD strengthening

CHARTS

Using candlestick charts

Forex Charts

The default chart type is called a ‘candlestick’ chart. This chart type is used frequently in the forex market. A bar on a candlestick chart shows the open, close, high and low prices for the selected period. The body of the candle shows the open and close prices where the wicks show the high and low prices.

If the closing price is higher than the opening price of the previous candle, then the candlestick will be blue. If instead the closing price is lower than the opening price of the previous candle, then the candlestick will be red. Candlesticks simply make it easier to see if the trading period ended up or down.

 ECONOMIC IMPACT CALENDAR

http://www.finfx.fi/en/economic-calendar/

EXAMPLES

 

Going long on AUD/USD (Aussie/Dollar)

Let’s say AUD/USD is trading at 1.0500/1.0501 at the moment.

Traders are bracing themselves for the worst, ahead of the release of US Q2 GDP figures.

You expect the Australian dollar will go UP against the US dollar, i.e. the Aussie dollar will strengthen against the US dollar, and decide to BUY AUD10,000 on AUD/USD at 1.0501.

As anticipated, the Aussie dollar strengthens against the US dollar. AUD/USD rises to 1.0591 and you decide to cash in your profits. Our new price is 1.0591/1.0592. You sell to close at 1.0591.

Result: You bought at 1.0501 and sold at 1.0591, an increase of 90 pips. This gives you a profit of: (1.0591-1.0501) x 10,000 = $90.

Alternative scenario: The actual US Q2 growth rate meets expectations, thus pushing the US dollar up against the Aussie dollar. AUD/USD declines to 1.0411. In this case, you would lose (1.0501-1.0411) x 10,000 = $90.

 

Going short on AUD/USD (Aussie/Dollar)

Let’s say AUD/USD is trading at 1.0500/1.0501 at the moment.

Traders are bracing themselves for AUS going down

You expect the Australian dollar will go DOWN against the US dollar, i.e. the Aussie dollar will weaken against the US dollar, and decide to SELL  AUD10,000 on AUD/USD at 1.0501.

As anticipated, the Aussie dollar weakens against the US dollar. AUD/USD falls to 1.0491 and you decide to cash in your profits.

 

 

MORE EXAMPLES

Forex Trading Example

Going Long on GBP/USD (Sterling/US Dollar)

It is the first Friday of the month and let’s assume that GBP/USD is currently trading at 1.6286/1.6288.

Traders are concerned about the employment situation in the US. They expect the level of actual non-farm payrolls to come in worse than economist estimates.

You expect that the US dollar will weaken and the British pound will strengthen against the US dollar, and decide to buy (go long) £10,000 on GBP/USD at 1.6288.

The trade size is in units of the first, or base, currency in the pair. For this trade, you choose a leverage scale of 50:1.

This requires an initial deposit of (£10,000*1.6288/50) $325.76. Find out more about Leverage.

As you anticipated, the pound strengthens against the dollar, and when it reaches 1.6350 you decide to cash in your profits. Our new price is 1.6350/1.6352 and you sell to close at 1.6350.

Result: You bought at 1.6288 and sold at 1.6350, a rise of 62 pips. This gives you a profit of:

(1.6350 – 1.6288) x 10,000 = $62.

Profit/Loss is calculated (and denominated) in the second, or counter currency of the pair.

Profit/Loss calculation: The difference between the closing price and opening price x size of trade.

Alternative scenario: If however, the actual non-farm payroll data had come in better-than-expected, the US dollar would have strengthened against the pound.

If GBP/USD would have gone down, say, to 1.6230 you would lose (1.6288 – 1.6230) x 10,000 = $58.

Profit/Loss Conversion: To help simplify the trading process, City Index automatically converts trading P&L into the client’s denominated account currency at the prevailing market rate at the time that the trade is closed.

Going long on AUD/USD (Aussie/Dollar)

Let’s say AUD/USD is trading at 1.0500/1.0501 at the moment.

Traders are bracing themselves for the worst, ahead of the release of US Q2 GDP figures.

You expect the Australian dollar will appreciate against the US dollar, i.e. the Aussie dollar will strengthen against the US dollar, and decide to buy (go long) AUD10,000 on AUD/USD at 1.0501.

For this trade, you choose a leverage scale of 20:1. This requires an initial deposit of (AUD10,000*1.0501/20) $525.05.

As anticipated, the Aussie dollar strengthens against the US dollar. AUD/USD rises to 1.0591 and you decide to cash in your profits. Our new price is 1.0591/1.0592. You sell to close at 1.0591.

Result: You bought at 1.0501 and sold at 1.0591, an increase of 90 pips. This gives you a profit of: (1.0591-1.0501) x 10,000 = $90.

Alternative scenario: The actual US Q2 growth rate meets expectations, thus pushing the US dollar up against the Aussie dollar. AUD/USD declines to 1.0411. In this case, you would lose (1.0501-1.0411) x 10,000 = $90.

Going short on EUR/USD (Euro/US Dollar)

It is mid-July, and let’s say that EUR/USD is trading at 1.4360/1.4361.

Investors remain worried about the impact of the sovereign debt crisis and you expect the euro will fall against the US dollar. You decide to sell (go short) €10,000 on EUR/USD at 1.4360.

For this trade, you choose a leverage scale of 20:1. This requires an initial deposit of (€10,000*1.4360/20) $718.00.

You were right. Euro depreciates against the dollar to 1.4251 and you decide to close your trade and take your profits. Our new price is 1.4250/1.4251 and you buy to close at 1.4251.

Result: You sold at 1.4360 and bought at 1.4251, a fall of 109 pips, giving you a profit of: (1.4360 – 1.4251) x 10,000 = $109.

Alternative scenario: If however, a weaker dollar across the board overnight had pushed the Euro up by 130 points to 1.4490, you would have lost (1.4490 – 1.4360) x 10,000 = $130.

Going long on USD/JPY (US dollar/Japanese Yen)

It is mid-March 2011 and USD/JPY is trading at 76.39/76.40.

The Japanese yen has surged since its worst earthquake in history due to high demand for yen as international businesses attempt to redevelop the devastated areas.

You believe that the yen is too strong and will fall back against the US dollar, i.e. the US dollar will strengthen against the yen. You decide to buy (go long) $10,000 on USD/JPY at 76.40.

For this trade, you choose a leverage scale of 25:1. This requires an initial deposit of ($10,000*76.40/25) 30,560 yen. As you predicted, USD/ JPY bounces back to 78.66 and you decide to take your profits. Our new price is 78.66/ 78.68. You sell to close at 78.66.

Result: You bought at 76.40 and sold at 78.66, a rise of 226 pips, giving you a profit of: (78.66 – 76.27) x 10,000 = 22600 yen.

Alternative scenario: If the dollar had continued to weaken against the yen, falling further to a record low of, say, 76.25, you would lose (76.40 – 76.25) x 10,000 = 1500 yen.

Going short on USD/CAD (US dollar/Canadian dollar)

It is mid-summer and let’s say USD/CAD is trading at 0.9520/0.9524.

A lack of progress in talks aimed at raising the US debt ceiling has weighed down on the US currency.

You expect USD/CAD will decline further and decide to sell (go short) $10,000 on USD/CAD at 0.9520.

You were right. The US dollar continues to weaken against the Canadian dollar and reaches a low of 0.9434. You decided to take your profits at this point. Our new price is 0.9430/0.9434 and you can therefore buy to close at 0.9434.

Result: You sold at 0.9520 and bought at 0.9434, a drop of 86 pips. This gives you a profit of: (0.9520 – 0.9434) x 10,000 = CAD86.

Alternative scenario: If the dollar had bounced back against the Canadian dollar to 0.9600, you would have lost (0.9600 – 0.9520) x 10,000 = CAD80.

Warren Buffett’s Top 25 Stocks for 2014

J.R. deBart

08/18/14 – 10:29 AM EDT

NEW YORK (TheStreet) — Warren Buffett is considered the most respected and successful investor. Often called “The Oracle of Omaha” for his impressive investing prowess, he is among the world’s wealthiest people.

Buffett studied under the legendary Benjamin Graham at Columbia University who had a major impact on Buffett’s life and investment strategies.

Buffett is chairman of Omaha, Nebraska-based Berkshire Hathaway Inc (BRK.A)  which he built from a textile company into a major corporation with a market cap over $324 billion. Under Buffett’s leadership, Berkshire shares averaged a 19.7% compounded annual gain in per share book value from 1965-2013.

He follows a value investing strategy that is an adaptation of Graham’s approach: Discipline, patience and value consistently outperforms the market. His moves are followed by investors worldwide. Buffett seeks to acquire great companies trading at a discount to their intrinsic value, and to hold onto them for a long time. He will only invest in businesses that he understands, and always insists on a margin of safety.

Regarding the types of businesses Berkshire likes to purchase, Buffett has said,”We want businesses to be one that we can understand, with favorable long-term prospects, operated by honest and competent people, and available at a very attractive price.”

What follows are Buffett’s top 25 holdings as of June 30, 2014…

25. Precision Castparts Corp. (PCP)

Shares Held by Warren Buffett’s Berkshire Hathaway:  1,877,000 shares
Value of Holdings:  $474 million
Portfolio Weighting as of 06/30/2014:  0.44%

Precision Castparts Corp. manufactures and sells metal components and products worldwide.

It operates in three segments: Investment Cast Products, Forged Products, and Airframe Products.

TheStreet Ratings team rates PRECISION CASTPARTS CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

“We rate PRECISION CASTPARTS CORP (PCP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, expanding profit margins, increase in net income and notable return on equity. Although no company is perfect, currently we do not see any significant weaknesses which are likely to detract from the generally positive outlook.”

You can view the full analysis from the report here: PCP Ratings Report  24. Costco Wholesale Corp. (COST)

Shares Held by Warren Buffett’s Berkshire Hathaway:  4,333,000 shares
Value of Holdings:  $499 million
Portfolio Weighting as of 06/30/2014:  0.46%

Costco Wholesale Corporation, together with its subsidiaries, operates membership warehouses.

The company offers branded and private-label products in a range of merchandise categories.

TheStreet Ratings team rates COSTCO WHOLESALE CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

“We rate COSTCO WHOLESALE CORP (COST) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its revenue growth, increase in net income, largely solid financial position with reasonable debt levels by most measures, good cash flow from operations and growth in earnings per share. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.”

You can view the full analysis from the report here: COST Ratings Report

23. Phillips 66 (PSX)

Shares Held by Warren Buffett’s Berkshire Hathaway:  6,496,000 shares
Value of Holdings:  $522 million
Portfolio Weighting as of 06/30/2014:  0.49%

Phillips 66 operates as an energy manufacturing and logistics company.

It operates in four segments: Midstream, Chemicals, Refining, Marketing and Specialties.

TheStreet Ratings team rates PHILLIPS 66 as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

“We rate PHILLIPS 66 (PSX) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company’s strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, attractive valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income.”

You can view the full analysis from the report here: PSX Ratings Report 22. National Oilwell Varco, Inc. (NOV)

Shares Held by Warren Buffett’s Berkshire Hathaway:  7,302,000 shares
Value of Holdings:  $601 million
Portfolio Weighting as of 06/30/2014:  0.56%

National Oilwell Varco, Inc. provides equipment and components for oil and gas drilling and production; oilfield services; and supply chain integration services to the upstream oil and gas industry worldwide.

TheStreet Ratings team rates NATIONAL OILWELL VARCO INC as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

“We rate NATIONAL OILWELL VARCO INC (NOV) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its increase in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, increase in stock price during the past year and attractive valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins.”

You can view the full analysis from the report here: NOV Ratings Report 21. VeriSign, Inc. (VRSN)

Shares Held by Warren Buffett’s Berkshire Hathaway:  12,985,000 shares
Value of Holdings:  $634 million
Portfolio Weighting as of 06/30/2014:  0.59%

VeriSign, Inc. provides Internet infrastructure services to various networks worldwide.

The company offers domain name registry services that operate the authoritative directory of .com, .net, .cc, .tv, and .name domains, as well as the back-end systems for various .gov, .jobs, and .edu domains.

TheStreet Ratings team rates VERISIGN INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

“We rate VERISIGN INC (VRSN) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company’s strengths can be seen in multiple areas, such as its increase in stock price during the past year, compelling growth in net income, revenue growth, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company shows weak operating cash flow.”

You can view the full analysis from the report here: VRSN Ratings Report 20. Viacom, Inc. (VIAB)

Shares Held by Warren Buffett’s Berkshire Hathaway:  7,607,000 shares
Value of Holdings:  $660 million
Portfolio Weighting as of 06/30/2014:  0.61%

Viacom Inc. operates as an entertainment content company in the United States and internationally.

The company creates television programs, motion pictures, short-form video, apps, consumer products, social media, and other entertainment content.
19. M&T Bank Corp. (MTB)

Shares Held by Warren Buffett’s Berkshire Hathaway:  5,382,000 shares
Value of Holdings:  $668 million
Portfolio Weighting as of 06/30/2014:  0.62%

M&T Bank Corporation operates as the bank holding company for M&T Bank that provides commercial and retail banking services.

The company’s Business Banking segment offers deposit, lending, cash management, and other financial services to small businesses and professionals.


TheStreet Ratings team rates M & T BANK CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

“We rate M & T BANK CORP (MTB) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its expanding profit margins and reasonable valuation levels. We feel these strengths outweigh the fact that the company has had sub par growth in net income.”

You can view the full analysis from the report here: MTB Ratings Report 18. Suncor Energy, Inc. (SU)

Shares Held by Warren Buffett’s Berkshire Hathaway:  16,458,000 shares
Value of Holdings:  $702 million
Portfolio Weighting as of 06/30/2014:  0.65%

Suncor Energy Inc., together with its subsidiaries, operates as an integrated energy company.

The company primarily focuses on developing petroleum resource basins in Canada’s Athabasca oil sands; explores, acquires, develops, produces, and markets crude oil and natural gas in Canada and internationally; transports and refines crude oil; markets petroleum and petrochemical products primarily in Canada; and markets third-party petroleum products. It operates in Oil Sands; Exploration and Production; Refining and Marketing; and Corporate, Energy Trading, and Eliminations segments.

TheStreet Ratings team rates SUNCOR ENERGY INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

“We rate SUNCOR ENERGY INC (SU) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company’s strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, solid stock price performance and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.”

You can view the full analysis from the report here: SU Ratings Report 17. Chicago Bridge & Iron Company (CBI)

Shares Held by Warren Buffett’s Berkshire Hathaway:  10,701,000 shares
Value of Holdings:  $730 million
Portfolio Weighting as of 06/30/2014:  0.68%

Chicago Bridge & Iron Company N.V. provides conceptual design, technology, engineering, procurement, fabrication, modularization, construction, commissioning, maintenance, program management, and environmental services to customers in the energy infrastructure worldwide.

TheStreet Ratings team rates CHICAGO BRIDGE & IRON CO as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

“We rate CHICAGO BRIDGE & IRON CO (CBI) a BUY. This is driven by a few notable strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company’s strengths can be seen in multiple areas, such as its robust revenue growth, notable return on equity, impressive record of earnings per share growth and compelling growth in net income. We feel these strengths outweigh the fact that the company shows weak operating cash flow.”

You can view the full analysis from the report here: CBI Ratings Report 16. Verizon Communications, Inc. (VZ)

Shares Held by Warren Buffett’s Berkshire Hathaway:  15,001,000 shares
Value of Holdings:  $734 million
Portfolio Weighting as of 06/30/2014:  0.68%

Verizon Communications Inc. provides communications, information, and entertainment products and services to consumers, businesses, and governmental agencies worldwide.

TheStreet Ratings team rates VERIZON COMMUNICATIONS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

“We rate VERIZON COMMUNICATIONS INC (VZ) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company’s strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, compelling growth in net income, expanding profit margins and impressive record of earnings per share growth. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.”

You can view the full analysis from the report here: VZ Ratings Report 15. The Bank of New York Mellon Corp. (BK)

Shares Held by Warren Buffett’s Berkshire Hathaway:  24,653,000 shares
Value of Holdings:  $924 million
Portfolio Weighting as of 06/30/2014:  0.86%

The Bank of New York Mellon Corporation provides various financial products and services in the United States and internationally.

Its Investment Management segment provides institutional, intermediary, retirement and retail investment management, distribution, and related services.

TheStreet Ratings team rates BANK OF NEW YORK MELLON CORP as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

“We rate BANK OF NEW YORK MELLON CORP (BK) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its reasonable valuation levels, solid stock price performance, expanding profit margins and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.”

You can view the full analysis from the report here: BK Ratings Report 14. USG Corp. (USG)

Shares Held by Warren Buffett’s Berkshire Hathaway:  39,002,000 shares
Value of Holdings:  $1.175 billion
Portfolio Weighting as of 06/30/2014:  1.1%

USG Corporation, through its subsidiaries, operates as a manufacturer and distributor of building materials worldwide.

It operates in three segments: North American Gypsum, Worldwide Ceilings, and Building Products Distribution.

TheStreet Ratings team rates USG CORP as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

“We rate USG CORP (USG) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company’s strengths can be seen in multiple areas, such as its revenue growth, notable return on equity and reasonable valuation levels. However, as a counter to these strengths, we also find weaknesses including generally higher debt management risk and poor profit margins.

You can view the full analysis from the report here: USG Ratings Report 13. General Motors Co. (GM)

Shares Held by Warren Buffett’s Berkshire Hathaway:  32,960,000 shares
Value of Holdings:  $1.196 billion
Portfolio Weighting as of 06/30/2014:  1.1%

General Motors Company (GM) designs, manufactures, and markets cars, crossovers, trucks, and automobile parts worldwide.

The company markets its vehicles primarily under the Buick, Cadillac, Chevrolet, GMC, Opel, Holden, and Vauxhall brand names, as well as under the Alpheon, Jiefang, Baojun, and Wuling brand names.

TheStreet Ratings team rates GENERAL MOTORS CO as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

“We rate GENERAL MOTORS CO (GM) a BUY. This is driven by some important positives, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company’s strengths can be seen in multiple areas, such as its revenue growth and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.”

You can view the full analysis from the report here: GM Ratings Report 12. DirecTV (DTV)

Shares Held by Warren Buffett’s Berkshire Hathaway:  23,468,000 shares
Value of Holdings:  $1.995 billion
Portfolio Weighting as of 06/30/2014:  1.9%

DIRECTV provides digital television entertainment services in the United States and Latin America.

The company acquires, promotes, sells, and distributes digital entertainment programming primarily through satellite to residential and commercial subscribers.

TheStreet Ratings team rates DIRECTV as a Hold with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

“We rate DIRECTV (DTV) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company’s strengths can be seen in multiple areas, such as its solid stock price performance, growth in earnings per share and increase in net income. However, as a counter to these strengths, we find that we feel that the company’s cash flow from its operations has been weak overall.”

You can view the full analysis from the report here: DTV Ratings Report 11. The Goldman Sachs Group, Inc. (GS)

Shares Held by Warren Buffett’s Berkshire Hathaway:  12,632,000 shares
Value of Holdings:  $2.115 billion
Portfolio Weighting as of 06/30/2014:  2.0%

The Goldman Sachs Group, Inc. provides investment banking, securities, and investment management services to corporations, financial institutions, governments, and high-net-worth individuals worldwide.


TheStreet Ratings team rates GOLDMAN SACHS GROUP INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

“We rate GOLDMAN SACHS GROUP INC (GS) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company’s strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, growth in earnings per share, increase in net income and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.”

You can view the full analysis from the report here: GS Ratings Report 10. Moody’s Corporation (MCO)

Shares Held by Warren Buffett’s Berkshire Hathaway:  24,670,000 shares
Value of Holdings:  $2.163 billion
Portfolio Weighting as of 06/30/2014:  2.0%

Moody’s Corporation provides credit ratings; and credit, capital markets, and economic related research, data, and analytical tools worldwide.

TheStreet Ratings team rates MOODY’S CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

“We rate MOODY’S CORP (MCO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, reasonable valuation levels, expanding profit margins and good cash flow from operations. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.”

You can view the full analysis from the report here: MCO Ratings Report 9. DaVita HealthCare Partners, Inc. (DVA)

Shares Held by Warren Buffett’s Berkshire Hathaway:  37,621,000 shares
Value of Holdings:  $2.721 billion
Portfolio Weighting as of 06/30/2014:  2.5%

DaVita HealthCare Partners Inc. provides kidney dialysis services for patients suffering from chronic kidney failure or end stage renal disease.

It operates kidney dialysis centers and provides related lab services primarily in outpatient dialysis centers and in contracted hospitals.

TheStreet Ratings team rates DAVITA HEALTHCARE PARTNERS as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

“We rate DAVITA HEALTHCARE PARTNERS (DVA) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company’s strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income.”

You can view the full analysis from the report here: DVA Ratings Report 8. U.S. Bancorp (USB)

Shares Held by Warren Buffett’s Berkshire Hathaway:  80,094,000 shares
Value of Holdings:  $3.470 billion
Portfolio Weighting as of 06/30/2014:  3.2%

U.S. Bancorp, a financial services holding company, provides a range of financial services in the United States.

Its services include lending and depository, cash management, capital market, and trust and investment management services, as well as merchant and ATM processing, mortgage banking, and brokerage services.

TheStreet Ratings team rates U S BANCORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

“We rate U S BANCORP (USB) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins, increase in stock price during the past year, increase in net income and growth in earnings per share. We feel these strengths outweigh the fact that the company has had somewhat disappointing return on equity.”

You can view the full analysis from the report here: USB Ratings Report 7. Exxon Mobil Corporation (XOM)

Shares Held by Warren Buffett’s Berkshire Hathaway:  41,130,000 shares
Value of Holdings:  $4.141 billion
Portfolio Weighting as of 06/30/2014:  3.8%

Exxon Mobil Corporation explores and produces for crude oil and natural gas.

As of December 31, 2013, the company had approximately 37,661 gross and 31,823 net operated wells.

TheStreet Ratings team rates EXXON MOBIL CORP as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

“We rate EXXON MOBIL CORP (XOM) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its revenue growth, attractive valuation levels, good cash flow from operations, increase in net income and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows low profit margins.”

You can view the full analysis from the report here: XOM Ratings Report 6. Procter & Gamble Co. (PG)

Shares Held by Warren Buffett’s Berkshire Hathaway:  52,793,000 shares
Value of Holdings:  $4.149 billion
Portfolio Weighting as of 06/30/2014:  3.9%

The Procter & Gamble Company, together with its subsidiaries, manufactures and sells branded consumer packaged goods.

The company operates through five segments: Beauty, Grooming, Health Care, Fabric Care and Home Care, and Baby Care and Family Care.

TheStreet Ratings team rates PROCTER & GAMBLE CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

“We rate PROCTER & GAMBLE CO (PG) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its growth in earnings per share, increase in net income, good cash flow from operations, largely solid financial position with reasonable debt levels by most measures and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.”

You can view the full analysis from the report here: PG Ratings Report 5. Wal-Mart Stores, Inc. (WMT)

Shares Held by Warren Buffett’s Berkshire Hathaway:  58,797,000 shares
Value of Holdings:  $4.414 billion
Portfolio Weighting as of 06/30/2014:  4.1%

Wal-Mart Stores Inc. operates retail stores in various formats worldwide.

The company operates through three segments: Walmart U.S., Walmart International, and Sam’s Club.

TheStreet Ratings team rates WAL-MART STORES INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

“We rate WAL-MART STORES INC (WMT) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company’s strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.”

You can view the full analysis from the report here: WMT Ratings Report 4. International Business Machines Corp. (IBM)

Shares Held by Warren Buffett’s Berkshire Hathaway:  70,174,000 shares
Value of Holdings:  $12.720 billion
Portfolio Weighting as of 06/30/2014:  11.8%

International Business Machines Corporation provides information technology (IT) products and services worldwide.

The companys Global Technology Services segment provides IT infrastructure and business process services, including outsourcing, process, integrated technology, cloud, and technology support.

TheStreet Ratings team rates WAL-MART STORES INC as a Buy with a ratings score of B+. TheStreet Ratings Team has this to say about their recommendation:

“We rate WAL-MART STORES INC (WMT) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company’s strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.”

You can view the full analysis from the report here: WMT Ratings Report 3. American Express Company (AXP)

Shares Held by Warren Buffett’s Berkshire Hathaway:  151,611,000 shares
Value of Holdings:  $14,383 billion
Portfolio Weighting as of 06/30/2014:  13.4%

American Express Company, together with its subsidiaries, provides charge and credit payment card products and travel-related services to consumers and businesses worldwide.

The company operates through four segments: U.S. Card Services, International Card Services, Global Commercial Services, and Global Network & Merchant Services.

TheStreet Ratings team rates AMERICAN EXPRESS CO as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:

“We rate AMERICAN EXPRESS CO (AXP) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its revenue growth, notable return on equity, growth in earnings per share, increase in net income and solid stock price performance. We feel these strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.”

You can view the full analysis from the report here: AXP Ratings Report 2. The Coca-Cola Company (KO)

Shares Held by Warren Buffett’s Berkshire Hathaway:  400,000,000 shares
Value of Holdings:  $16,944 billion
Portfolio Weighting as of 06/30/2014:  15.8%

The Coca-Cola Company, a beverage company, manufactures and distributes coke, diet coke, and other soft drinks worldwide.

The company primarily offers nonalcoholic beverages, including sparkling beverages and still beverages.


TheStreet Ratings team rates COCA-COLA CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

“We rate COCA-COLA CO (KO) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its expanding profit margins, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself.”

You can view the full analysis from the report here: KO Ratings Report 1. Wells Fargo & Company (WFC)

Shares Held by Warren Buffett’s Berkshire Hathaway:  463,458,000 shares
Value of Holdings:  $24.359 billion
Portfolio Weighting as of 06/30/2014:  22.6%

Wells Fargo & Company provides retail, commercial, and corporate banking services to individuals, businesses, and institutions.

The company’s Community Banking segment offers checking and market rate accounts, savings and time deposits, individual retirement accounts, and remittances; and lines of credit, auto floor plan lines, equity lines and loans, equipment and transportation loans, education and residential mortgage loans, and credit and debit cards.

TheStreet Ratings team rates WELLS FARGO & CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

“We rate WELLS FARGO & CO (WFC) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company’s strengths can be seen in multiple areas, such as its solid stock price performance, increase in net income, expanding profit margins and growth in earnings per share. We feel these strengths outweigh the fact that the company shows weak operating cash flow.”

You can view the full analysis from the report here: WFC Ratings Report


Nonfarm payroll employment
http://www.bls.gov/ces/
is a compiled name for goods, construction and manufacturing companies in the US. It does not include farm workers, private household employees, or non-profit organization employees.

The NFP report causes one of the consistently largest rate movements of any news announcement in the forex market. As a result, many analysts, traders, funds, investors and speculators anticipate the NFP number – and the directional movement it will cause. With so many different parties watching this report and interpreting it, even when the number comes in line with estimates, it can cause large rate swings. Read on to find out how to trade this move without getting knocked out by the irrational volatility it can create.

 

It is an influential statistic and economic indicator released monthly by the United States Department of Labor as part of a comprehensive report on the state of the labor market.

The financial assets most affected by the NFP data include the US dollar, equities and gold. The markets react very quickly and most of the time in a very volatile fashion around the time the NFP data is released. The short-term market moves indicate that there is a very strong correlation between the NFP data and the strength of the US dollar. Historical price movement data shows a small negative correlation between the NFP data and the US dollar Index.

The Bureau of Labor Statistics releases preliminary data on the third Friday after the conclusion of the reference week, i.e., the week which includes the 12th of the month, at 8:30 a.m. Eastern Time ie New York Time; typically this date occurs on the first Friday of the month. Nonfarm payroll is included in the monthly Employment Situation or informally the jobs report and affects the US dollar, the Foreign exchange market, the bond market, and the stock market.