Question:
I’ve owned Tim Horton’s for years. I bought it when I lived up north. There was one on every corner, and they were always busy. Now living here, I don’t feel I can see how they’re doing. What is your recommendation?
Answer:
Tim Hortons, Inc. (NYSE: THI) is a North American and Canadian restaurant chain. It was owned by The Wendy’s Company (NASDAQ: WEN), but was spun off in 2006. The company has done well since the spin-off. It has a good debt to equity ratio at 30%, and the company pays a 2% dividend. The company has room to grow. If you own it, we recommend holding the company. If you are looking for a restaurant stock, Starbucks (NASDAQ: SBUX) might be the better buy, as it has a lower price-to-earnings-to-growth multiple, meaning it looks more attractively valued based on expected growth.
Question:
My family has owned Ford for years, holding on to it through every rough patch. I’m going to keep some shares since the investment is a “legacy” from my great grandfather; otherwise, I’m looking to sell. What else would be a good buy right now?
Answer:
Ford Motor Company (NYSE: F) was very close to going under several years ago. In 2001, the stock dropped to $1. Overall, we are not optimistic for Ford. While they have reinvented their models, there is a lot of competition in the automotive industry. Chrysler and General Motors Company (NYSE: GM) actually benefited from filing bankruptcy and restructuring. They have a lower cost structure and lower debt. As a stock, we suggest avoiding Ford. The company is still controlled by the Ford family. This year and next may be very good for the automotive industry, but we do not deem Ford as a high quality holding. With so much competition, it may not perform as you would want a stock you own to perform. Ford pays a dividend, which it recently doubled. However, we think this might be a risky move for a company that has 80% debt to capital.
If you are interested in exposure to the automotive industry, we recommend Advance Auto Parts, Inc.(NYSE: AAP), as the average age of cars on the road is increasing. During uncertain economic times, Americans are more apt to repair their own cars.
Question:
What are your thoughts on Teva Pharma? I currently hold a small position. Also would you buy either Lockheed or Northrop Grumman with pending Defense Dept cuts? If so, do you favor one over the other?
Answer:
We have owned Teva Pharmaceuticals (NYSE: TEVA) for years, and believe it provides great exposure to generic drugs. We sold the company because management could not get control of its growth estimates. With the communication problems coming from management, we felt it was time to sell. The company is still a good long-term generic play, but if you seek higher growth, you may want to consider Celegene Corporation (NASDAQ: CELG), as we find it more consistent.
As for defense stocks, we suggest that you avoid them considering the sequestration. It is not likely that President Obama will increase defense spending. We suggest taking profits. Both Lockeed Martin Corp. (NYSE: LMT) and Northrop Grumman Corp. (NYSE: NOC) are selling close to their highs. We believe both are good companies, and they both pay a good dividend. However, with the budget cuts, these could be under pressure.
Question:
I read an article that one of the most basic resources — water — produced one of the greatest investment returns last year, and is set to climb higher in 2013. How can I track/invest in the ISE Water Index, and would this be a good investment?
Answer:
First Trust ISE Water Index Fund (NYSEARCA: FIW) is an exchange-traded fund that tracks the ISE Water Index. The index contains stocks that derive a substantial portion of their revenues from water industries. When you dig into the holdings of the ETF, you find companies like Emerson Electric (NYSE: EMR). The ETF holds about 60% industrial stocks and 20% utilities.
We warn investors that investing in themes, such as water, because it could take a very long time to payoff. It is tricky to invest in such specific sectors, and it is difficult to get a pure play into water. Investors should be better served considering diversified companies with an exposure to water. Companies like General Electric (NYSE: GE) and Pentair Ltd. (NYSE: PNR) have exposure to filtration products.
At Henssler Financial we believe you should Live Ready, which includes understanding the fundamentals of your investments. If you have questions regarding your stock holdings, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
Disclosures
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
