Question:
I’m pretty sure you owned or maybe still own Pepsi and T. Rowe Price. I haven’t heard much from either in a while. What is your outlook on these two? Are they buys at their current prices?
Answer:
Yes, we deem both PepsiCo, Inc. (NYSE: PEP) and T. Rowe Price Group, Inc. (NASDAQ: TROW) as solid long-term buys. We believe both are high quality Large-Cap plays. T. Rowe is in the financial business, mostly focused on equities, which are doing well. Bond funds have come under pressure lately, so T. Rowe is in a relatively good position compared to the competition. We find the financial services holding company to be well run with well-run portfolios.
Pepsi is not red-hot right now, but it is still doing well, with volume and pricing up in the most recent quarter. The company is doing well vs. its competitor The Coca-Cola Company (NYSE: KO). It pays a 2.8% dividend, which is above the market average.
Question:
I’m retired and would like to downsize, but my home needs repairs. Should I get a reverse mortgage to fix it up?
Answer:
Generally, we think of reverse mortgages as an option for seniors who want to stay in their home while freeing up some of the home’s value for living expenses.
We recommend talking to your realtor about the improvements you want to make. It is easy to watch the home shows on television and be led to believe a $50,000 remodel will double the home’s selling price. We do not recommend buying into that. Some improvements may make your home more marketable, but depending on the market and location, you may be better off selling it as is.
If you do obtain a reverse mortgage and use the proceeds for home improvements, check your loan documents for any fees that you will be charged, if you pay the loan off before the entire amount was paid to you. You will also want to weigh your estimated debt after repairs against the home’s value. If a reverse mortgage doesn’t work for your situation, you may want to consider a home equity line of credit. However, if you do not sell right away, you will be required to make payments on the amount borrowed with a home equity line of credit.
Question:
I would like your opinion on Cisco Systems and Potash Corporation. Would you recommend either of these stocks for a long-term purchase?
Answer:
We recommend both Cisco Systems (NASDAQ: CSCO) and Potash Corp (NYSE: POT) as good long-term holdings. Cisco recently had a less-than-stellar quarter, but the technology company is still on pace to do well for the year. The move of computer systems to the cloud and global expansion has helped the company. The stock also pays a dividend of nearly 3%.
Potash Corp. is a very cyclical stock and not for the faint of heart. The company recently had a cartel of potash suppliers pull out, which hurt the stock in the market. However, we feel this presents a good buying opportunity. The company has years of potash reserves, which is essential to agriculture. BHP Billiton Ltd. (NYSE: BHP) has also recently made investments in potash. We view BHP, however, as more of a pure play on commodities, which makes the stock more volatile. We like Potash Corp. as a solid long-term play, as population growth in emerging markets leads to an increased demand for food.
Question:
I own a graphics and sign shop. My child was in an accident, and now I have large medical bills to pay. Can I borrow money from my wholly owned business? I think I’d feel better owing my business than a hospital or collection agency.
Answer:
You can borrow money from your wholly owned business. You need to put it in writing. You will need to create a note, charge an interest rate, create an amortization schedule and make payments on the loan. You do not want the loan to be recharacterized by the IRS as compensation or a dividend, which changes the nature of the money coming to you. This results in an unanticipated tax bill. You should consult your tax adviser to help structure your loan so that it will pass muster, if there were an audit.
Question:
My investment club recently recommended LKQ and Molex. I wasn’t at the last meeting so I have no idea what was said in favor of these two. They both look like they’re at their 52-week highs, so any reason to consider these two a buy?
Answer:
LKQ Corporation (NYSE: LKQ) is an interesting business. It provides used replacement parts for cars and light trucks across the United States and Europe. It operates salvage yards, which is the source of the parts. The salvage yard market has not been penetrated yet, and LKQ has room to grow. The company does not meet our financial criteria, but it has earnings per share growth of 20%. The company is fairly priced at 32 times earnings. If you own it, it should be OK to hold. However, we do not recommend buying at this time.
Molex Incorporated (NASDAQ: MOLX) is a mutual fund of electronic parts that distributes more than 100,000 parts to various industries, including Telecommunications, Technology, Industrials and Automotive. We feel this should be a good play recovering from recession. The company is volatile with a beta of 1.25. The company pays a solid 3.3% dividend, which is expected to grow at 8.5%. We feel the company is fully valued, so we recommend waiting for a better price. One drawback to the company is that Apple, Inc. (NASDAQ: AAPL) accounts for 14% of Molex’s revenues, so this could be considered a play on Apple.
At Henssler Financial we believe you should Live Ready, which includes understanding your investments. If you have questions regarding your 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.
