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- Sell all shares of American International Group (AIG, news, msgs), TCF Financial (TCB, news, msgs) and Pfizer (PFE, news, msgs) at the open.
- With proceeds and all other portfolio cash, buy equal shares of Abbott Laboratories (ABT, news, msgs), Automatic Data Processing (ADP, news, msgs) and Philip Morris International (PM, news, msgs).
Bets can go both ways; sometimes they pay off, sometimes they don't. As a rule, however, I am not in the betting business. My priority is capital preservation. When I do take a risk it is usually because I have reason -- a tidbit of information that I have gleaned from a source or through good old-fashioned research.
In the case of American International Group (AIG, news, msgs), I believed their worst days were behind them, and coupled with the Fed rate cuts that were in the can and the ones that were projected, the company would get a good bounce. Unfortunately, in this very isolated case, my research did not pan out. So be it; I'll take the loss and soldier on.
TCF Financial (TCB, news, msgs) is a great regional bank and will do well later on. Today is not its day, though, and for purposes of this round of Strategy Lab, it is time to make a change.
Pfizer (PFE, news, msgs) continues to move sharply sideways. Until the drug pipeline issues are cleared up, it will continue to do so. I will keep Pfizer in my accounts, however, as the dividend is and has been spectacular. At some point, the full value of this company will be realized.
Now to the adds.
Abbott Laboratories (ABT, news, msgs) is getting a boost from the stent business it acquired from Guidant. ABT has always been an outstanding company, and it shows its managerial acumen by branching out to areas of pharma land that are paying off right now. The full value of this stock won't be realized by this round's end, but it nonetheless offers excellent current value.
If the Fed is truly finished with rate cuts, then Automatic Data Processing (ADP, news, msgs) will be a beneficiary. While the specter of rising interest rates is bad news for many companies, it's good for ADP as the company derives a portion of earnings from the float on the payrolls it processes and pays. As soon as the Street is convinced the Fed is done, the discounting mechanism will kick in and ADP's projected increase in earnings will get baked into the cake in short order.
Philip Morris International (PM, news, msgs) is representative of my favorite kind of company: a cash cow. Spun off from Altria Group (MO, news, msgs), Philip Morris holds all of the assets that caused Altria problems with legislators and litigators here in the States. Domiciled in Switzerland, where the Euros have fewer concerns about smoking, Philip Morris is poised to prosper.
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