Question:
I wanted to bring back a blast from your past: Diebold. Has the company righted itself? Or is NCR Corp. a better bet?
Answer:
Diebold, Inc. (NYSE: DBD), a self-service delivery solutions provider for the banking industry, ran into trouble a few years ago when they wouldn’t issue financial statements. As a result, several acquisition deals fell apart. We sold Diebold at that time. NCR Corp. (NYSE: NCR) provides similar solutions to the banking, retail, hospitality and gaming and entertainment industries.
From a banking perspective, financial institutions are going through an infrastructure shift. There will be fewer branches and customers will begin seeing more technology like virtual tellers. One of the risks to both Diebold and NCR is what can be done by consumers on their mobile phones, such as depositing checks and transferring funds.
Of the two, NCR is cheaper, selling at 10 times earnings vs. 20 times earnings for Diebold. NCR is also growing at a faster rate. Neither company is poised as an obvious buy in our opinion.
Question:
I signed up for Social Security in May. They sent me a letter stating that I had money in a profit-sharing plan with the company that I used to work for many years ago. Unfortunately, the company is no longer in business. What can I do to try and recover the money?
Answer:
When a company-sponsored retirement plan closes, the plan makes every attempt to find investors to resolve their accounts. When money is unclaimed, it is reported to the state as missing money, a process called escheatment. You may be able to track down your money through the National Registry of Unclaimed Retirement Benefits at unclaimedretirementbenefits.com. You may also try MissingMoney.com. Surprisingly, unclaimed retirement accounts are common.
When you are able to locate your account balance, remember if you take a payout, the income will be taxable in the year you receive the check. To avoid triggering a taxable event, consider having the money rolled into your IRA.
Question:
My wife wants to take money out of our joint account and invest in other things in her name only. What should I do?
Answer:
We believe it is OK for a married couple to have separate investment accounts. Regardless, it is still marital property if you live in an equitable distribution state, which Georgia is. Marital property generally includes property that was acquired during the marriage, regardless of how it is titled.
Ideally, a couple should share the same investment goals, but often differ on how best to achieve those goals. You may be risk averse while your wife may be more aggressive in her investment choices. If this is the case, you may consider dividing the responsibilities between short-term and long-term goals, letting the more aggressive investor focus on long-term investments that may be able to withstand greater risk. Otherwise, a financial adviser may be able to help you find a middle-ground strategy that both you and your wife will be happy with.
Question:
What is duration, and why should I pay attention to it?
Answer:
From an academic point of view, bond prices typically move in the opposite direction of yield. So when the yield of a bond increases, the price of the bond is going down. Duration takes into account the present value of all the expected future payments. The average duration is going to be less than the maturity. However, duration can be a bit confusing as the calculation involves a bond’s price sensitivity to market yield.
So, to the question of why should you care: The longer the duration the more interest rate sensitive the bond is. That’s the definition that most people should worry about because it’s volatility. If the Fed chooses to raise interest rates 1%, it will adversely affect a fixed-income instrument with a long duration. Likewise, it won’t do much for a bond that is due in 90 days. Duration is useful for individuals when you look at bond funds. If you are considering two mid-term bond funds, look at the duration. One may be nine years, while the other five years. You are going to be exposed to more risk with a nine-year duration than you are with a five-year duration fund. When looking at volatility, typically the rule of thumb is that you can multiply the changes in interest rate by the duration of the bond. If interest rates increase or decline by 1% and you have a five year duration, the bond’s value should fall or increase by 5%.
Question:
We saw an article about three Amazon-proof retailers and I wanted to get your opinion: Williams-Sonoma, Nordstrom and The Home Depot. I know we’ve heard you say WSM was outrageously priced and BBBY was better.
Answer:
Fewer and fewer brick-and-mortar stores are safe from Internet shopping. Of the three, we would say The Home Depot, Inc. (NYSE: HD) would be the most safe, as most consumers will not likely go online to buy shrubs or lumber. Small and large appliances, house wares, and clothing can all be purchased online, often at better prices.
Both Williams-Sonoma (NYSE: WSM) and Nordstrom, Inc. (NYSE: JWN) have robust online presence. What has become a boon for consumers is Nordstrom Rack outlet stores, which allows the stores to move merchandise out of their main stores to maintain a current inventory.
In our opinion, Bed Bath & Beyond (NASDAQ: BBBY) made a good purchase in Cost Plus World Market, as the store specializes in several unique products that would be difficult to track down online.
Question:
About 20 yrs. ago, Gene advised listeners that due to an aging population, Healthcare would be a good sector choice. Since then, Vanguard Health Care (VGHCX) has outperformed the Vanguard Index 500. However, the operating P/E ratios are now very different. Health=32. S&P500=19. Are the demographics that caused Healthcare’s success still in place? Will the health care goose continue to lay the golden eggs, or is she getting tired? The Vanguard Health Care Fund represents 15% of my equity portfolio.
Answer:
Healthcare as a whole is selling for 17 times earnings. Perhaps some biotechnology companies are selling for more.
We believe Obamacare will affect the Healthcare sector in the years to come. Margins will contract, but volume will increase. We see a trend of doctors retiring earlier and medical school attendance at lows. Additionally, maintaining an individual practice has been increasing in cost. We believe we will see more limitations being placed on drug companies and pharmacies with Obamacare. the argument for enacting the legislation is if everyone has health care, the price of care will go down, and health care becoming a smaller portion of our gross domestic product. We do not believe Healthcare will grow as fast over the next 20 years. However, we also see no signs that investors should bail today.
If you have questions regarding your investments the experts at Henssler Financial will be glad to help:
- Experts Request Form
- Email: experts@henssler.com
- Phone: 770-429-9166.
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.
